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.) |
(Address of principal executive offices)
+ 86-139-4977-8662
(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 | ||
| None | 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 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
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
GUSHEN, INC.
CONTENTS
i
PART I: FINANCIAL INFORMATION
Item 1. - Financial Statements
GUSHEN, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars)
| June 30, 2021 | September 30, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other monetary funds | ||||||||
| Prepayment | ||||||||
| Other Receivables | ||||||||
| Due from related parties | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Other long-term assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets | ||||||||
| Deferred tax asset | ||||||||
| Total non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Contract liability | ||||||||
| Amount due to related parties | ||||||||
| Payroll payable | ||||||||
| Tax payable | ||||||||
| Other payable | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, par value $ | ||||||||
| Common stock, Par Value $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive gain (loss) | ( | ) | ||||||
| Non-controlling interest | ( | ) | ||||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
1
GUSHEN, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(In U.S. dollars)
(UNAUDITED)
| For The Three Months Ended June 30, | For The Nine Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses, net | ||||||||||||||||
| INCOME FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER EXPENSE, NET | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Other income | ||||||||||||||||
| Other expense | ( | ) | ( | ) | - | |||||||||||
| Total Other Income, net | ||||||||||||||||
| NET LOSS BEFORE TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit | - | |||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interests | ( | ) | ( | ) | - | |||||||||||
| NET LOSS ATTRIBUTE TO THE COMPANY’S SHAREHOLDERS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER COMPREHENSIVE INCOME | ||||||||||||||||
| Foreign currency translation income | ( | ) | ||||||||||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted earnings(loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
2
GUSHEN, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED June 30, 2021 and 2020
(In U.S. dollars)
(UNAUDITED)
| Preferred Stock | Common Stock | Additional Paid-in | Statutory | Retained | Accumulated other comprehensive | Non- controlling | Total Stockholders’ | |||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | reserves | Earnings | income (loss) | interests | Equity | |||||||||||||||||||||||||||||||
| Balance at September 30, 2019 | - | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||||||||||||||||||
| Insurance of preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Statutory | Retained | Accumulated other comprehensive | Non- controlling | Total Stockholders’ | |||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | reserves | Earnings | income (loss) | interests | Equity | |||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Insurance of preferred shares as reduction of notes payable — related party | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
3
GUSHEN, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
(UNAUDITED)
| For The Nine Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Charge-offs of provision for inventory | ( | ) | ||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ||||||||
| Advances to suppliers | ( | ) | ( | ) | ||||
| Due from related party | ( | ) | ||||||
| Deferred tax asset | ( | ) | - | |||||
| Inventory | ( | ) | ||||||
| Other long-term assets | ( | ) | ||||||
| Tax payables | ( | ) | ( | ) | ||||
| Other payables | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Contract liability | ( | ) | ( | ) | ||||
| Payroll payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| EFFECT OF EXCHANGE RATE ON CASH | ||||||||
| CASH AT BEGINNING OF PERIOD | $ | $ | ||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid during the periods for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
4
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
(UNAUDITED)
| 1. | ORGANIZATION AND BUSINESS |
Gushen, Inc., a Nevada corporation ( “we”, “us” or “the Company”) was incorporated under the laws of the State of Nevada on March 9, 2015.
Reverse Merger
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”), which closed on the same date.
Pursuant to which the Company acquired
The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Merger.
Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because Dyckmanst’s former stockholders received the greater portion of the voting rights in the combined entity and Dyckmanst’s senior management represents all of the senior management of the combined entity, the Merger was accounted for as a recapitalization effected by a share exchange, wherein Dyckmanst is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Dyckmanst, its wholly-owned subsidiaries and VIE, Beijing Zhuoxun Century Culture Communication Co., Ltd. (“Zhuoxun Beijing”), have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the Company’s consolidated financial statements are those of Dyckmanst, its wholly-owned subsidiaries and VIE and are recorded at their historical cost basis.
Dyckmanst Limited, via the PRC affiliated entity Zhuoxun Beijing, engages in providing family education resources to promote all-around education onsite in local communities organized by its regional collaborative education agency and offering parents easy access to a wide variety of courses online through the application
In February 2021, Fengyuan Beijing, Zhuoxun Beijing, and the shareholders of Zhuoxun Beijing entered into a series of contractual agreements for Zhuoxun Beijing to qualify as variable interest entity or VIE (the “VIE Agreements”). The VIE Agreements are as follows:
Consulting Service Agreement
Pursuant to the terms of the 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 10 years subject to any extension requested by Fengyuan Beijing unless terminated by Fengyuan Beijing unilaterally prior to the expiration.
The foregoing summary of the Consulting Service Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Consulting Service Agreement, which is filed as Exhibit 10.1 to this Form 8-K.
Business Operation Agreement
Pursuant to the terms of the 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 10 years or longer upon the request of Fengyuan Beijing prior to the expiration thereof. The Business Operation Agreement might be terminated earlier by Fengyuan Beijing with a 30-day written notice.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
The foregoing summary of the Business Operation Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Business Operation Agreement, which is filed as Exhibit 10.2 to this Form 8-K.
Proxy Agreement
Pursuant to the terms of the 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.
The foregoing summary of the Proxy Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the Proxy Agreements, which are filed as Exhibit 10.3 to this Form 8-K.
Equity Disposal Agreement
Pursuant to the terms of the 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.
The foregoing summary of the Equity Disposal Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Equity Disposal Agreement, which is filed as Exhibit 10.4 to this Form 8-K.
Equity Pledge Agreement
Pursuant to the terms of the 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.
The accompanying 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 Zhuoxun Education Technology Co., Ltd. | ● | ||||
| ● | |||||
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
The following combined financial information of the Group’s VIEs as of June30, 2021 and September 30, 2020 and for the nine months ended June 30, 2021 and 2020 included in the accompanying consolidated financial statements of the Group was as follows:
| At June 30, 2021 | At September 30, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other monetary funds | ||||||||
| Prepayment | ||||||||
| Other receivables | ||||||||
| Intercompany receivables | ||||||||
| Due from related parties | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Other long-term assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible Assets | ||||||||
| Deferred tax asset | ||||||||
| Total non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Advance from Customers | ||||||||
| Amount due to related parties | ||||||||
| Payroll Payable | ||||||||
| Tax payable | ||||||||
| Other payable | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| For The Three Months Ended | For The Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUE | ||||||||||||||||
| Training Revenue | $ | $ | $ | $ | ||||||||||||
| Mobile Phone Revenue | ||||||||||||||||
| Other Revenue | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
| NET (LOSS) INCOME | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| For The Nine Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)
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.
COVID-19 Outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
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 offline training course service primarily includes assigning instructors, providing offline classes and presenting training materials to the course participants who attend the classes. The series of tasks as discussed above are interrelated and are not separable or distinct as the clients cannot benefit from the standalone task.
The Company’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.
China Good Student Project Revenue
The Company’s Chinese Good Student Project includes assisting in both promoting the program and organizing activities for the course participants. Those tasks are not separable and the course participants cannot benefit from the standalone task as defined under ASC 606-10-25-19.
Thus, there is only one performance obligation with respect to the China Good Student Project service.
Mobile Phone Revenue
The Company’s sales contracts of anti-addiction mobile phone device provide that the Company provides multiple delivery of the product specified in the contracts. The contacts identify the quantity, product model, product type and unit price of the product that will be sold to our customers. The contracts allow the customers to place separate orders within the credit limit as specified in the contracts. The delivery is based on the quantity the customers order. The Company’s customers can benefit from the mobile phone devices everytime it delivers to them. Therefore, the delivery of the products is separately identifiable and distinct.
Hence, there are multiple performance obligations in each of the sale contracts of anti-addiction mobile phone device.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
Practical expedients and exemption
The company has not occurred 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.
Revenue by major product line
| For Three Months Ended June 30, | For Nine Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Training Revenue | $ | $ | $ | $ | ||||||||||||
| Mobile Phone 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 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”). The Company’s subsidiary and VIEs with operations in PRC uses 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 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 | ||
| June 30, 2021 | RMB | |
| September 30, 2020 | RMB | |
| Income statement and cash flows items | ||
| For the nine months ended June 30, 2021 | RMB | |
| For the nine months ended June 30, 2020 | RMB |
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
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.
Accounts Receivable, Net
The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.
The adoption of the new revenue standards did not change the Company’s historical accounting methods for its accounts receivable.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and intangible assets.
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 |
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 general and administrative expenses in the 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 o 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. No impairment has been recorded by the Company as of March 31, 2021 and September 30, 2020.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
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 June 30, 2021, and September 30, 2020, 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.
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.
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, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying condensed consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.
As of June 30, 2021 and September 30, 2020, the Company had no investments in financial instruments.
Restricted assets
The Company’s PRC subsidiary and VIE 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. The Company’s PRC subsidiary
and its VIE 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
Recently Adopted Accounting Standards
Adoption of ASC Topic 606, “Revenue from Contracts with Customers”
In May 2014, the Financial Accounting Standards Board (FASB) issued Topic 606, which supersedes the revenue recognition requirements in Topic 605. The Company adopted Topic 606 as of the inception date.
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
Adoption of ASC Topic 842, “Leases”
In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases.
The Company adopted ASC Topic 842 using the modified retrospective transition method effective the inception date. There was no cumulative effect of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date. See Note 2 “Leases” above for further details.
Accounting Pronouncements Issued But Not Yet Adopted
Financial Instruments. In June 2016, the FASB issued Accounting Standards Update No. 2016-13,“Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements.
Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard will be effective for King Eagle beginning September 30, 2021. We are currently evaluating the impact of the standard on our consolidated financial statements.
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. | PREPAYMENTS |
Prepayments consist of the following:
| June 30, 2021 | September 30, 2020 | |||||||
| Prepaid marketing fee | $ | $ | ||||||
| Prepaid service fee | ||||||||
| Prepaid rent | ||||||||
| Prepaid other expense | ||||||||
| $ | $ | |||||||
| 4. | OTHER RECEIVABLES |
Other receivables consist of the following:
Amount due from agents is mainly the payment collected by the agents from the trainees on behalf of the Company. Agents provide various services to facilitate the in-person training seminars scheduled by the Company.
| June 30, 2021 | September 30, 2020 | |||||||
| Amount due from agents | $ | - | $ | |||||
| Amount due from third parties | ||||||||
| Amount due from employees | ||||||||
| Deposit & guarantee | ||||||||
| Others | ||||||||
| $ | $ | |||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| $ | $ | |||||||
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
The following table sets forth the movement of allowance for doubtful accounts:
| June 30, 2021 | September 30, 2020 | |||||||
| Beginning | $ | $ | ||||||
| Exchange rate difference | ||||||||
| Balance | $ | $ | ||||||
| 5. | INVENTORY |
The company’s sole inventory is the anti-addiction cell phone which has primarily four functions including anti-addiction, myopia prevention, security, and study assistance, for the purpose of managing elementary and middle school students.
June 30, 2021 | September 30, 2020 | |||||||
| Cost | $ | $ | ||||||
| Less: provision for inventory | ( | ) | ||||||
| Net amount | $ | $ | ||||||
The following table sets forth the movement of provision for the inventory:
June 30, 2021 | September 30, 2020 | |||||||
| Beginning | $ | $ | ||||||
| Additions | ||||||||
| Charge-offs | ( | ) | ||||||
| Exchange rate difference | ||||||||
| Balance | $ | $ | ||||||
| 6. | OTHER LONG-TERM ASSETS |
Other long-term assets consist of the following:
The prepaid marketing fees are mainly for the two-year marketing service provided by different agents which the Company has signed contracts with.
| June 30, 2021 | September 30, 2020 | |||||||
| Prepaid marketing fee | $ | $ | ||||||
| Prepaid service fee | ||||||||
| Deferred IPO cost | ||||||||
| Loan receivable | ||||||||
| $ | $ | |||||||
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
| 7. | PROPERTY, PLANT AND EQUIPMENT, NET |
Property, plant and equipment, net consist of the following:
| June 30, 2021 | September 30, 2020 | |||||||
| Office and computer equipment | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expenses charged to the statements
of operations for the three months ended June 30, 2021 and 2020 were $
| 8. | INTANGIBLE ASSETS, NET |
Intangible assets, net, consist of the following:
| June 30, 2021 | September 30, 2020 | |||||||
| Software | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization charged to the statements of operations
for the three months ended June 30, 2021 and 2020 were $
| 9. | ACCOUNTS PAYABLE |
Accounts payable consist of the following:
| June 30, 2021 | September 30, 2020 | |||||||
| Amount due to agents | $ | $ | ||||||
| Amount due to other service providers | ||||||||
| Amount due to supplier of anti-addiction cellphone | ||||||||
| Amount due to lecturers | ||||||||
| $ | $ | |||||||
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2021
(In U.S. dollars)
| 10. | BALANCES WITH RELATED PARTIES |
| Note | June 30, 2021 | September 30, 2020 | ||||||||||
| Due from related parties | ||||||||||||
| Yulong Yi | (a) | $ | $ | |||||||||
| Ru Zhang | (b) | |||||||||||
| Shaowei Peng | (c) | |||||||||||
| $ | $ | |||||||||||
| Due to related parties | ||||||||||||
| Yulong Yi | $ | $ | ||||||||||
| Ru Zhang | ||||||||||||
| $ | $ | |||||||||||
| (a) | ||
| (b) | ||
| (c) |
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.
| 11. | 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.
PRC Tax
The Company is subject to corporate income tax
(“CIT”) at
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 Three Months Ended June 30, | For The Nine Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| 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 benefit | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE30, 2021
(In U.S. dollars)
Deferred tax assets
The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and liability as of June 30, 2021 and September 30, 2020 are presented below:
| June 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| Deferred tax asset: | ||||||||
| Bad debt provision | ||||||||
| Inventory provision | ||||||||
| Tax loss carryforward | $ | $ | ||||||
| Deferred tax liability: | ||||||||
| Depreciation | $ | $ | ||||||
| Net amount | ||||||||
Management believes that it is more likely than not that the Company will not realize these potential tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance was provided against the full amount of the potential tax benefits.
Taxes payable
Taxes payable consisted of the following:
| June 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| VAT tax payable | $ | $ | ||||||
| Company income tax payable | ||||||||
| Individual income tax payable | ||||||||
| Other taxes payable | ||||||||
| Totals | $ | $ | ||||||
| 12. | 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 nine months ended June 30, 2021 and 2020,
the Company contributed a total of $
| 13. | SUBSEQUENT EVENT |
On July 30, 2021,
16
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”, “we” and “GSHN” shall mean Gushen, 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 audited consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this report.
Certain statements in this report constitute forward-looking statements. 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
On July 30, 2021, Gushen, Inc., a Nevada corporation (“GSHN” or the “Company”), 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 100% of the issued and outstanding equity securities of Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) of the Company (the “Share Exchange”). Immediately prior to the closing of the Share Exchange, two existing holders of aggregated 30,000,000 shares of Series A preferred stock of the Company, par value $0.0001 per share (the “Preferred Stock”) delivered 29,000,000 shares of Preferred Stock to the Company for cancellation (“the “Cancellation of Certain Preferred Stock”), each Preferred Stock is convertible into 10 shares of Common Stock. As a result, immediately following the closing of the Share Exchange, there are 410,618,750 shares of Common Stock issued and outstanding and 1,000,000 shares of Preferred Stock issued and outstanding. Dyckmanst Limited Shareholders collectively control 90.72% voting power of the Company on as converted basis, with respect to all of the shares of common stock and preferred stock, voting as a single class, with each share of common stock entitles to 1 vote and each share of preferred stock entitles to 10 votes. The Share Exchange Agreement is incorporated by reference from the current reports on Form 8-K filed with the the Securities and Exchange Commission on August 6, 2021.
Immediately prior to entering into the Share Exchange Agreement with Dyckmanst Limited and shareholders of Dyckmanst Limited, we were a shell company with no significant asset or operation, we have never generated any revenue, and during the period from November 2017 through March 2020, we were dormant. As a result of the Share Exchange, we operate through our PRC affiliated entity, Beijing Zhuoxun Century Culture Communication Co., Ltd. (“Zhuoxun Beijing”), located in Beijing, China. Dyckmanst Limited does not have any substantive operations other than holding Edeshler Limited, a Hong Kong company, which in return holding Beijing Fengyuan Zhihui Education Technology Co., Ltd. (Fengyuan Beijing), who controls Zhuoxun Beijing through certain contractual arrangements.
17
As a holding company with no material operations of our own, we conduct our operations in China through our contractual arrangements dated February 5, 2021, which also known as VIE Agreements, with Zhuoxun Beijing, a variable interest entity, or “VIE”, and its subsidiaries. Neither we nor our subsidiaries own any equity interests in VIE. The VIE Agreements are designed to provide Fengyuan Beijing, our wholly-owned subsidiary (the “WFOE”), with the power, rights, and obligations equivalent in all material respects to those it would possess as the principal equity holder of Zhuoxun Beijing, including absolute control rights and the rights to the assets, property, and revenue of Zhuoxun Beijing. This VIE structure is used to replicate foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in the telecommunications sector. As a result of our direct ownership in Fengyuan Beijing and the VIE Agreements, we are regarded as the primary beneficiary of our VIE. The VIE Agreements are incorporated by reference from the current reports on Form 8-K filed with the the Securities and Exchange Commission on August 6, 2021.Zhuoxun Beijing provides family education resources to promote all-around education onsite in local communities organized by their regional collaborative education agency and offer parents easy access to a wide variety of courses online through our application.
Zhuoxun Beijing delivers onsite educational services through our nationwide physical network of regional collaborative education agency. Zhuoxun Beijing 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 around 18 regional education agencies around the country, whom Zhuoxun Beijing provides systematic training and management for to ensure to deliver high-quality and uniformed educational service system.
Zhuoxun Beijing provides online education through their mobile application, ZhuoXun App (“卓训”), which is geared towards Chinese parents designed to help them acquire different family education resources. 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 EQ training, learning habits, learning ability, parents-children communication, stages of puberty, etc. to promote children’s mental and psychological health. “Wise Parents” introduces general strategies of family education to parents to help them better understand and support children’s growth and needs, whereby courses such as traditional family values, improvement of parents’ qualifications, 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 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’s has around 1.52 million registered users in ZhuoXun 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. Zhuoxun Beijing’s cooperate with Dami Zhilian Information Technology Group Co., Ltd, a technology company that develops and produces smartphones (“Dami Zhilian”). Zhuoxun Beijing’s gives their design requirements to Dami Zhilian, who customizes and produces Zhuoxun Cellphone for us. Zhuoxun Beijing doesnot own any intellectual property in connection with Zhuoxun Cellphones. Zhuoxun Beijing sell Zhuoxun Cellphones through regional collaborative education agency. 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 children’s use of Zhuoxun Cellphone by setting screen auto-lock, monitoring internet surfing, monitoring mobile application usage, monitoring physical locations, etc.
18
Critical Accounting Policies and Estimates
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)
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.
COVID-19 Outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
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 onsite training course service primarily includes assigning instructors, providing onsite classes and presenting training materials to the course participants who attend the classes. The series of tasks as discussed above are interrelated and are not separable or distinct as the customers cannot benefit from the standalone task.
The Company’s online training course service primarily includes courseware 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.
China Good Student Project Revenue
The Company’s Chinese Good Student Project includes assisting in both promoting the program and organizing activities for the course participants. Those tasks are not separable and the course participants cannot benefit from the standalone task as defined under ASC 606-10-25-19.
Thus, there is only one performance obligation with respect to the China Good Student Project service.
19
Mobile Phone Revenue
The Company’s sales contracts of anti-addiction mobile phone device provide that the Company provides multiple delivery of the product specified in the contracts. The contacts identify the quantity, product model, product type and unit price of the product that will be sold to our customers. The contracts allow the customers to place separate orders within the credit limit as specified in the contracts. The delivery is based on the quantity of customers’ order. The Company’s customers can benefit from the mobile phone devices every time it delivers to them. Therefore, the delivery of the products is separately identifiable and distinct.
Hence, there are multiple performance obligations in each of the sale contracts of anti-addiction mobile phone device.
Practical expedients and exemption
The company has not occurred 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”). The Company’s subsidiary and VIEs with operations in PRC uses 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 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.
20
Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates:
| Balance sheet items, except for equity accounts | ||
| September 30, 2020 | RMB6.8013 to $1 | |
| September 30, 2019 | RMB7.1360 to $1 | |
| Income statement and cash flows items | ||
| For the year ended September 30, 2020 | RMB7.0061 to $1 | |
| For the year ended September 30, 2019 | RMB6.8750 to $1 |
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 year or less when purchased.
Accounts Receivable, Net
The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.
The adoption of the new revenue standards did not change the Company’s historical accounting methods for its accounts receivable.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and intangible assets.
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 | 5 | |
| Lease improvement | 3 |
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 the relevant assets and is recognized in general and administrative expenses in the 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 o 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 | 10 | |||
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. No impairment has been recorded by the Company as of September 30, 2020 and 2019.
21
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 September 30, 2020 and 2019, 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
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.
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, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.
As of September 30, 2020 and 2019, the Company had no investments in financial instruments
Restricted assets
The Company’s PRC subsidiary and VIE 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. The Company’s PRC subsidiary and its VIE are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.
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.
22
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
Adoption of ASC Topic 606, “Revenue from Contracts with Customers”
In May 2014, the Financial Accounting Standards Board (FASB) issued Topic 606, which supersedes the revenue recognition requirements in Topic 605. The Company adopted Topic 606 as of the inception date.
Adoption of ASC Topic 842, “Leases”
In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases.
The Company adopted ASC Topic 842 using the modified retrospective transition method effective the inception date. There was no cumulative effect of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date. See Note 2 “Leases” above for further details.
Accounting Pronouncements Issued But Not Yet Adopted
Financial Instruments. In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements.
Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard will be effective for King Eagle beginning September 30, 2021. We are currently evaluating the impact of the standard on our consolidated financial statements.
Financial Operations Overview
Comparison of Three Months Ended June 30, 2021 and 2020
The following table sets forth key components of our results of operations during the three months ended June 30, 2021 and 2020, both in dollars and as a percentage of our revenue.
| Three Months Ended June 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | |||||||||||||
| Revenue | $ | 33,369 | 100.00 | $ | 833,767 | 100.00 | ||||||||||
| Cost of revenue | (13,122 | ) | (39.32 | ) | (189,563 | ) | (22.74 | ) | ||||||||
| Gross profit | 20,247 | 60.68 | 644,204 | 77.26 | ||||||||||||
| Selling expenses | (1,746,126 | ) | (5,232.78 | ) | (827,554 | ) | (99.25 | ) | ||||||||
| General and administrative expenses | (363,517 | ) | (110.51 | ) | (240,342 | ) | (110.51 | ) | ||||||||
| Loss from operations | (2,089,396 | ) | (513.39 | ) | (423,692 | ) | (513.39 | ) | ||||||||
| Other income | 5,748 | 17.23 | 12,933 | 1.55 | ||||||||||||
| Net loss before income taxes | (2,083,648 | ) | (6,244.26 | ) | (410,759 | ) | (49.27 | ) | ||||||||
| Income tax benefit | 408,431 | 1,223.98 | 0 | - | ||||||||||||
| Net loss | $ | (1,675,217 | ) | (5,020.28 | ) | $ | (410,759 | ) | (49.27 | ) | ||||||
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Revenue.
The Company’s revenue was decreased $800,398 from $33,369 to $833,767 during the three months ended June 30, 2021 compared with the same period 2020. Due to the Corona virus 19, the Company stop the offline training during the months ended March 31, 2021.
Cost of revenue.
Our cost of revenue was $13,122 and $189,563 for the three months ended June 30, 2021 and 2020, respectively. The decrease was in line with the decrease of revenue.
Gross profit and gross margin.
Our gross profit was $20,247 for the three months ended June 30, 2021, compared with a gross profit of $644,204 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 39.32% for the three months ended June 30, 2021, compared to a gross profit of 22.74% for the same period last year.
Selling expenses.
Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as advertising fee, marketing fees. Our selling expenses increased by $918,572 to $1,746,126 for the three months ended June 30, 2021, compared to $827.554 for the same period in 2020. We adjust the strategy by reducing our own selling employees and raising more marketing fee to local agents for attracting more customers.
| Three Months ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 267,956 | 15.35 | 269,586 | 32.58 | (1,630 | ) | (0.60 | ) | ||||||||||||||||
| Advertising Fees | 58,033 | 3.32 | (75 | ) | (0.01 | ) | 58,108 | 679.35 | ||||||||||||||||
| Conference Fees | 40,868 | 2.34 | 6,599 | 0.8 | 34,269 | 519.31 | ||||||||||||||||||
| Marketing fee | 560,282 | 32.09 | 229,100 | 27.68 | 331,182 | 85.67 | ||||||||||||||||||
| Service fee | 761,628 | 43.62 | 179,322 | 21.67 | 582,306 | 324.73 | ||||||||||||||||||
| Others | 57,359 | 3.28 | 143,022 | 17.28 | (85,663 | ) | (59.89 | ) | ||||||||||||||||
| Total Selling Expense | $ | 1,746,126 | 100 | $ | 827,554 | 100 | $ | 918,572 | 25.98 | |||||||||||||||
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 increased by $123,176 to $363,517 for the three months ended June 30, 2021, compared to $240,341 for the same period in 2020. We hired more staff for organization managements and reduce the professional service by third parties.
| Three Months ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 228,578 | 62.87 | 129,052 | 53.70 | 99,526 | 77.12 | ||||||||||||||||||
| Depreciation and amortization | 27,735 | 7.63 | 14,104 | 5.87 | 13,631 | 96.65 | ||||||||||||||||||
| Rent | 22,097 | 6.08 | 50,582 | 21.05 | (28,485 | ) | (56.31 | ) | ||||||||||||||||
| Profession fee | 60,329 | 16.60 | (81,524 | ) | (33.92 | ) | 141,853 | (174.00 | ) | |||||||||||||||
| Others | 24,778 | 6.82 | 128,127 | 53.30 | (103,349 | ) | (80.66 | ) | ||||||||||||||||
| Total G&A Expenses | $ | 363,517 | 100 | $ | 240,341 | 100 | $ | 123,176 | 51.25 | |||||||||||||||
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Income tax benefit.
Our Income tax benefit was $408,431 for the three months ended June 30, 2021, compared to nil for the same period last year.
Net loss.
As a result of the cumulative effect of the factors described above, our net loss was $1,675,217 and $410,759 for the three months ended June 30, 2021 and 2020, respectively.
Comparison of Nine Months Ended June 30, 2021 and 2020
The following table sets forth key components of our results of operations during the nine months ended June 30, 2021 and 2020, both in dollars and as a percentage of our revenue.
| Nine Months Ended June 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | |||||||||||||
| Revenue | $ | 1,314,172 | 100.00 | $ | 6,169,179 | 100.00 | ||||||||||
| Cost of revenue | (856,255 | ) | (65.16 | ) | (2,858,623 | ) | (46.34 | ) | ||||||||
| Gross profit | 457,917 | 34.84 | 3,310,556 | 53.66 | ||||||||||||
| Selling expenses | (5,752,580 | ) | (437.73 | ) | (4,566,424 | ) | (74.02 | ) | ||||||||
| General and administrative expenses | (1,452,230 | ) | (110.51 | ) | (1,358,998 | ) | (22.03 | ) | ||||||||
| Loss from operations | (6,746,893 | ) | (513.39 | ) | (2,614,866 | ) | (42.39 | ) | ||||||||
| Other income | 25,955 | 1.98 | 25,671 | 0.42 | ||||||||||||
| Net loss before income taxes | (6,720,938 | ) | (511.42 | ) | (2,589,195 | ) | (41.97 | ) | ||||||||
| Income tax benefit | 483,283 | 36.77 | - | - | ||||||||||||
| Net loss | $ | (6,237,655 | ) | (474.65 | ) | $ | (2,589,195 | ) | (41.97 | ) | ||||||
Revenue.
The Company’s revenue was decreased $4,855,007 from $6,169,179 to $1,314,172 during the nine months ended June 30, 2021 compared with the same period 2020. Due to the Corona virus 19, the Company stop the offline training during the months ended March 31, 2021.
Cost of revenue.
Our cost of revenue was $856,255 and $2,858,623 for the nine months ended June 30, 2021 and 2020, respectively. The decrease was in line with the decrease of revenue.
Gross profit and gross margin.
Our gross profit was $457,917 for the nine months ended June 30, 2021, compared with a gross profit of $3,310,556 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 34.84% for the nine months ended June 30, 2021, compared to a gross profit of 53.66% for the same period last year.
25
Selling expenses.
Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as advertising fee, marketing fees. Our selling expenses increased by $1,186,156 to $5,752,580 for the nine months ended June 30, 2021, compared to $4,566,424 for the same period in 2020. We adjust the strategy by reducing our own selling employees and raising more marketing fee to local agents for attracting more customers.
| Nine Months ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 1,082,666 | 18.82 | 1,334,852 | 29.23 | (252,186 | ) | (18.89 | ) | ||||||||||||||||
| Advertising Fees | 166,157 | 2.89 | 21,320 | 0.47 | 144,837 | 679.35 | ||||||||||||||||||
| Conference Fees | 93,188 | 1.62 | 137,962 | 3.02 | (44,774 | ) | (32.45 | ) | ||||||||||||||||
| Marketing fee | 1,419,594 | 24.68 | 764,561 | 16.74 | 655,033 | 85.67 | ||||||||||||||||||
| Service fee | 2,625,111 | 45.63 | 1,742,936 | 38.17 | 882,175 | 50.61 | ||||||||||||||||||
| Others | 365,864 | 6.36 | 564,793 | 12.37 | (198,929 | ) | (35.22 | ) | ||||||||||||||||
| Total Selling Expense | $ | 5,752,580 | 100 | $ | 4,566,424 | 100 | $ | 1,186,156 | 25.98 | |||||||||||||||
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 increased by $93,232 to $1,452,230 for the nine months ended June 30, 2021, compared to $1,358,998 for the same period in 2020. We hired more staff for organization managements and reduce the professional service by third parties.
| Nine Months ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 | Fluctuation | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and welfare | 729,380 | 50.23 | 347,888 | 25.60 | 381,492 | 109.66 | ||||||||||||||||||
| Depreciation and amortization | 82,729 | 5.70 | 42,120 | 3.10 | 40,609 | 96.41 | ||||||||||||||||||
| Rent | 83,418 | 5.74 | 112,946 | 8.31 | (29,528 | ) | (26.14 | ) | ||||||||||||||||
| Profession fee | 320,122 | 22.04 | 578,191 | 42.54 | (258,069 | ) | (44.63 | ) | ||||||||||||||||
| Others | 236,581 | 16.29 | 277,853 | 20.45 | (41,272 | ) | 14.85 | |||||||||||||||||
| Total G&A Expenses | $ | 1,452,230 | 100.00 | $ | 1,358,998 | 100.00 | $ | 93,232 | 6.86 | |||||||||||||||
Income tax benefit.
Our Income tax benefit was $483,283 for the nine months ended June 30, 2021, compared to nil for the same period last year.
Net loss.
As a result of the cumulative effect of the factors described above, our net loss was $6,237,655 and $2,589,195 for the nine months ended June 30, 2021 and 2020, respectively.
26
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods indicated:
| Nine Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | (3,488,115 | ) | $ | (3,863,678 | ) | ||
| Net cash used in investing activities | (79,289 | ) | (15,734 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | (3,567,404 | ) | (3,879,412 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 346,602 | 116,951 | ||||||
| Cash and cash equivalents at the beginning of period | 7,134,106 | 10,338,433 | ||||||
| Cash and cash equivalents at the end of period | $ | 3,913,303 | $ | 6,575,972 | ||||
As of June 30, 2021 we had cash and cash equivalents of $3,913,303. 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 $3,488,115 for the nine months ended June 30, 2021, as compared to $3,863,678 net cash used in operating activities for the nine months ended June 30, 2020. The net cash provided by operating activities for the nine months ended June 30, 2021 was mainly due to our net loss of $6,237,655, an increase in other payables of $1,239,466, partially offset by the decrease in other receivable of $1,923,731. The net cash provided by operating activities for the nine months ended June 30, 2020 was mainly due to our net loss of $2,589,194, increase in advances to suppliers of $1,747,281, partially offset by the decrease in other receivable of $3,447,954.
Investing Activities
Net cash used in investing activities was $79,289 for the nine months ended June 30, 2021, as compared to $15,734 for the nine months ended June 30, 2020. The net cash used in investing activities for the nine months ended June 30, 2021 and 2020 was mainly attributable to purchase of property, plant and equipment.
Off-Balance Sheet Arrangements
As of June 30, 2021 and September 30, 2020, 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.
Critical Accounting Principles
The preparation of consolidated financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. We have not identified any critical accounting policies.
27
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to a smaller reporting company.
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 Comprehensive Annual Report on Form 10-K (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 Securities and Exchange Commission (“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.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Our Company has been dormant since November 2017. As a result our management did not conduct an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021, and September 31, 2020 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). without such an evaluation, our management concluded that we did not maintain effective internal control over financial reporting as of June 30, 2021, based on the COSO framework criteria, as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the PCAOB were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; (4) complete lack of management of the company from November 2017 until January 31, 2021; and (5) lack of disclosure controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of June 30, 2021.
Management believes that the material weaknesses set forth above did not have an effect on our financial results because the activity during this period was nominal. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside Directors on our Board of Directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
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.
28
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 1a. Risk Factors
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 30, 2021, the Company issued 381,600,000 shares of Common Stock to the former shareholders of Dyckmanst Limited in exchange of 100% equity interest in Dyckmanst Limited pursuant to the Share Exchange Agreement.
The shares issued to the former shareholders of Dyckmanst Limited by the Company are issued pursuant to the exemption from registration available under Section 4(a)(2) of the Securities Act of 1933, as amended and Rule 506 and/or Regulation S promulgated thereunder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| * | filed herewith |
29
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.
| Gushen, Inc. | ||
| (Registrant) | ||
| Date: August 23, 2021 | By: | /s/ Yulong Yi |
| Yulong Yi | ||
|
President, Chief Executive Officer, (Principal Executive Officer and Financial Officer) | ||
30
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO EXCHANGE ACT RULE 13A-14(A),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Yulong Yi, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2021 of Gushen, Inc. | |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4 | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5 | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: | |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 23, 2021 | By: | /s/ Yulong Yi |
|
Yulong Yi Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO EXCHANGE ACT RULE 13A-14(A),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Yulong Yi, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2021 of Gushen, Inc. | |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4 | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5 | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: | |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
| Date: August 23, 2021 | By: | /s/ Yulong Yi |
|
Yulong Yi Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Yulong Yi, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
| 1. |
The Quarterly Report on Form 10-Q of Gushen, Inc. (the “Company”) for the period ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and
| |
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 23, 2021 | By: | /s/ Yulong Yi |
| Yulong Yi | ||
|
Chief Executive Officer (Principal Executive Officer) |
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Yulong Yi, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
| 1. |
The Quarterly Report on Form 10-Q of Gushen, Inc. (the “Company”) for the period ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and
| |
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 23, 2021 | By: | /s/ Yulong Yi |
| Yulong Yi | ||
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.
Interim Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 200,000,000 | 200,000,000 |
| Preferred stock, shares issued | 30,000,000 | 10,000,000 |
| Preferred stock, shares outstanding | 30,000,000 | 10,000,000 |
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 600,000,000 | 600,000,000 |
| Common stock, shares issued | 29,018,750 | 29,018,750 |
| Common stock, shares outstanding | 29,018,750 | 29,018,750 |
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| REVENUE | $ 33,369 | $ 833,767 | $ 1,314,172 | $ 6,169,179 |
| COST OF REVENUE | (13,122) | (189,563) | (856,255) | (2,858,623) |
| GROSS PROFIT | 20,247 | 644,204 | 457,917 | 3,310,556 |
| OPERATING EXPENSES | ||||
| Selling expenses | 1,746,126 | 827,554 | 5,752,580 | 4,566,424 |
| General and administrative expenses | 363,517 | 240,341 | 1,452,230 | 1,358,998 |
| Total Operating Expenses, net | 2,109,643 | 1,067,895 | 7,204,810 | 5,925,422 |
| INCOME FROM OPERATIONS | (2,089,396) | (423,691) | (6,746,893) | (2,614,866) |
| OTHER EXPENSE, NET | ||||
| Interest expense | 3,476 | 5,877 | 18,447 | 18,615 |
| Other income | 2,320 | 7,056 | 17,403 | 7,056 |
| Other expense | (48) | (9,895) | ||
| Total Other Income, net | 5,748 | 12,933 | 25,955 | 25,671 |
| NET LOSS BEFORE TAXES | (2,083,648) | (410,758) | (6,720,938) | (2,589,195) |
| Income tax benefit | 408,431 | 483,283 | ||
| NET LOSS | (1,675,217) | (410,758) | (6,237,655) | (2,589,195) |
| Less: Net loss attributable to non-controlling interests | (784) | (871) | ||
| NET LOSS ATTRIBUTE TO THE COMPANY’S SHAREHOLDERS | (1,674,433) | (410,758) | (6,236,784) | (2,589,195) |
| OTHER COMPREHENSIVE INCOME | ||||
| Foreign currency translation income | 50,471 | (15,721) | 325,395 | 974,319 |
| COMPREHENSIVE LOSS | $ (1,623,962) | $ (426,479) | $ (5,911,389) | $ (1,614,876) |
| Basic and diluted earnings(loss) per common share (in Dollars per share) | $ (0.06) | $ (0.01) | $ (0.20) | $ (0.06) |
| Weighted average number of shares outstanding (in Shares) | 29,018,750 | 29,018,750 | 29,018,750 | 29,018,750 |
Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($) |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Statutory reserves |
Retained Earnings |
Accumulated other comprehensive income (loss) |
Non- controlling interests |
Total |
|---|---|---|---|---|---|---|---|---|
| Balance at Sep. 30, 2019 | $ 2,902 | $ 78,758 | $ 1,545 | $ 10,354,462 | $ (540,546) | $ 9,897,121 | ||
| Balance (in Shares) at Sep. 30, 2019 | 29,018,750 | |||||||
| Net loss | (2,589,195) | (2,589,195) | ||||||
| Foreign currency translation adjustment | 974,319 | 974,319 | ||||||
| Insurance of preferred stock | $ 1,000 | (1,000) | ||||||
| Insurance of preferred stock (in Shares) | 10,000,000 | |||||||
| Balance at Jun. 30, 2020 | $ 1,000 | $ 2,902 | 77,758 | 1,545 | 7,765,267 | 433,773 | 8,282,245 | |
| Balance (in Shares) at Jun. 30, 2020 | 10,000,000 | 29,018,750 | ||||||
| Balance at Sep. 30, 2020 | $ 1,000 | $ 2,902 | 77,758 | 1,545 | 7,306,289 | (145,325) | 7,245,169 | |
| Balance (in Shares) at Sep. 30, 2020 | 10,000,000 | 29,018,750 | ||||||
| Net loss | (6,236,784) | (871) | (6,237,655) | |||||
| Foreign currency translation adjustment | $ 325,395 | $ (9) | $ 325,386 | |||||
| Issuance of preferred shares as reduction of notes payable – related party (in Shares) | 2,000 | (2,000) | ||||||
| Issuance of preferred shares as reduction of notes payable – related party (in Shares) | 20,000,000 | |||||||
| Balance at Jun. 30, 2021 | $ 3,000 | $ 2,902 | $ 75,758 | $ 1,545 | $ 1,069,505 | $ 180,070 | $ (880) | $ 1,331,900 |
| Balance (in Shares) at Jun. 30, 2021 | 30,000,000 | 29,018,750 |
Organization and Business |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ORGANIZATION AND BUSINESS |
Gushen, Inc., a Nevada corporation ( “we”, “us” or “the Company”) was incorporated under the laws of the State of Nevada on March 9, 2015.
Reverse Merger
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”), which closed on the same date. Pursuant to which the Company acquired 100% of the issued and outstanding equity securities of Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) of the Company (the “Share Exchange”). Immediately prior to the closing of the Share Exchange, two existing holders of aggregated 30,000,000 shares of Series A preferred stock of the Company, par value $0.0001 per share (the “Preferred Stock”) delivered 29,000,000 shares of Preferred Stock to the Company for cancellation (“the “Cancellation of Certain Preferred Stock”), each Preferred Stock is convertible into 10 shares of Common Stock. As a result, immediately following the closing of the Share Exchange, there are 410,618,750 shares of Common Stock issued and outstanding and 1,000,000 shares of Preferred Stock issued and outstanding. Dyckmanst Limited Shareholders collectively control 90.72% voting power of the Company on as converted basis, with respect to all of the shares of common stock and preferred stock, voting as a single class, with each share of common stock entitles to 1 vote and each share of preferred stock entitles to 10 votes.
The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Merger.
Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because Dyckmanst’s former stockholders received the greater portion of the voting rights in the combined entity and Dyckmanst’s senior management represents all of the senior management of the combined entity, the Merger was accounted for as a recapitalization effected by a share exchange, wherein Dyckmanst is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Dyckmanst, its wholly-owned subsidiaries and VIE, Beijing Zhuoxun Century Culture Communication Co., Ltd. (“Zhuoxun Beijing”), have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the Company’s consolidated financial statements are those of Dyckmanst, its wholly-owned subsidiaries and VIE and are recorded at their historical cost basis.
Dyckmanst Limited, via the PRC affiliated entity Zhuoxun Beijing, engages in providing family education resources to promote all-around education onsite in local communities organized by its regional collaborative education agency and offering parents easy access to a wide variety of courses online through the application
In February 2021, Fengyuan Beijing, Zhuoxun Beijing, and the shareholders of Zhuoxun Beijing entered into a series of contractual agreements for Zhuoxun Beijing to qualify as variable interest entity or VIE (the “VIE Agreements”). The VIE Agreements are as follows:
Consulting Service Agreement
Pursuant to the terms of the 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 10 years subject to any extension requested by Fengyuan Beijing unless terminated by Fengyuan Beijing unilaterally prior to the expiration.
The foregoing summary of the Consulting Service Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Consulting Service Agreement, which is filed as Exhibit 10.1 to this Form 8-K.
Business Operation Agreement
Pursuant to the terms of the 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 10 years or longer upon the request of Fengyuan Beijing prior to the expiration thereof. The Business Operation Agreement might be terminated earlier by Fengyuan Beijing with a 30-day written notice. The foregoing summary of the Business Operation Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Business Operation Agreement, which is filed as Exhibit 10.2 to this Form 8-K.
Proxy Agreement
Pursuant to the terms of the 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.
The foregoing summary of the Proxy Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the Proxy Agreements, which are filed as Exhibit 10.3 to this Form 8-K.
Equity Disposal Agreement
Pursuant to the terms of the 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.
The foregoing summary of the Equity Disposal Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Equity Disposal Agreement, which is filed as Exhibit 10.4 to this Form 8-K.
Equity Pledge Agreement
Pursuant to the terms of the 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.
The accompanying consolidated financial statements reflect the activities of each of the following entities:
The following combined financial information of the Group’s VIEs as of June30, 2021 and September 30, 2020 and for the nine months ended June 30, 2021 and 2020 included in the accompanying consolidated financial statements of the Group was as follows:
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Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)
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.
COVID-19 Outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
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 offline training course service primarily includes assigning instructors, providing offline classes and presenting training materials to the course participants who attend the classes. The series of tasks as discussed above are interrelated and are not separable or distinct as the clients cannot benefit from the standalone task.
The Company’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.
China Good Student Project Revenue
The Company’s Chinese Good Student Project includes assisting in both promoting the program and organizing activities for the course participants. Those tasks are not separable and the course participants cannot benefit from the standalone task as defined under ASC 606-10-25-19.
Thus, there is only one performance obligation with respect to the China Good Student Project service.
Mobile Phone Revenue
The Company’s sales contracts of anti-addiction mobile phone device provide that the Company provides multiple delivery of the product specified in the contracts. The contacts identify the quantity, product model, product type and unit price of the product that will be sold to our customers. The contracts allow the customers to place separate orders within the credit limit as specified in the contracts. The delivery is based on the quantity the customers order. The Company’s customers can benefit from the mobile phone devices everytime it delivers to them. Therefore, the delivery of the products is separately identifiable and distinct.
Hence, there are multiple performance obligations in each of the sale contracts of anti-addiction mobile phone device. Practical expedients and exemption
The company has not occurred 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.
Revenue by major product line
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”). The Company’s subsidiary and VIEs with operations in PRC uses 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 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:
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.
Accounts Receivable, Net
The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.
The adoption of the new revenue standards did not change the Company’s historical accounting methods for its accounts receivable.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and intangible assets.
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.
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 general and administrative expenses in the 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 o 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:
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. No impairment has been recorded by the Company as of March 31, 2021 and September 30, 2020.
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 June 30, 2021, and September 30, 2020, 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.
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.
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, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying condensed consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.
As of June 30, 2021 and September 30, 2020, the Company had no investments in financial instruments.
Restricted assets
The Company’s PRC subsidiary and VIE 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. The Company’s PRC subsidiary and its VIE are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.
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
Recently Adopted Accounting Standards
Adoption of ASC Topic 606, “Revenue from Contracts with Customers”
In May 2014, the Financial Accounting Standards Board (FASB) issued Topic 606, which supersedes the revenue recognition requirements in Topic 605. The Company adopted Topic 606 as of the inception date. Adoption of ASC Topic 842, “Leases”
In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases.
The Company adopted ASC Topic 842 using the modified retrospective transition method effective the inception date. There was no cumulative effect of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date. See Note 2 “Leases” above for further details.
Accounting Pronouncements Issued But Not Yet Adopted
Financial Instruments. In June 2016, the FASB issued Accounting Standards Update No. 2016-13,“Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements.
Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard will be effective for King Eagle beginning September 30, 2021. We are currently evaluating the impact of the standard on our consolidated financial statements.
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. |
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Prepayments |
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| Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PREPAYMENTS |
Prepayments consist of the following:
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Other Receivables |
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| Disclosure Text Block Supplement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER RECEIVABLES |
Other receivables consist of the following:
Amount due from agents is mainly the payment collected by the agents from the trainees on behalf of the Company. Agents provide various services to facilitate the in-person training seminars scheduled by the Company.
The following table sets forth the movement of allowance for doubtful accounts:
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Inventory |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY |
The company’s sole inventory is the anti-addiction cell phone which has primarily four functions including anti-addiction, myopia prevention, security, and study assistance, for the purpose of managing elementary and middle school students.
The following table sets forth the movement of provision for the inventory:
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Other Long-Term Assets |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER LONG-TERM ASSETS |
Other long-term assets consist of the following:
The prepaid marketing fees are mainly for the two-year marketing service provided by different agents which the Company has signed contracts with.
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Property, Plant and Equipment, Net |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY, PLANT AND EQUIPMENT, NET |
Property, plant and equipment, net consist of the following:
Depreciation expenses charged to the statements of operations for the three months ended June 30, 2021 and 2020 were $30,785 and $12,223, and for the nine months ended June 30, 2021 and 2020 were $80,534 and $37,868, respectively. |
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Intangible Assets, Net |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS, NET |
Intangible assets, net, consist of the following:
Amortization charged to the statements of operations for the three months ended June 30, 2021 and 2020 were $2,661 and $1,881, and for the nine months ended June 30, 2021 and 2020 were $7,906 and $4,252, respectively. |
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Accounts Payable |
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| ACCOUNTS PAYABLE |
Accounts payable consist of the following:
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Balances with Related Parties |
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| BALANCES WITH RELATED PARTIES |
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. |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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.
PRC Tax
The Company is subject to corporate income tax (“CIT”) at 25% for the nine months ended June 30, 2021 and 2020.
A reconciliation of the income tax benefit determined at the statutory income tax rate to the Company’s income taxes is as follows:
Deferred tax assets
The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and liability as of June 30, 2021 and September 30, 2020 are presented below:
Management believes that it is more likely than not that the Company will not realize these potential tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance was provided against the full amount of the potential tax benefits.
Taxes payable
Taxes payable consisted of the following:
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China Contribution Plan |
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| Retirement Benefits [Abstract] | ||||
| 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 nine months ended June 30, 2021 and 2020, the Company contributed a total of $420,111 and $168,225, respectively, to these funds. |
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| Subsequent Events [Abstract] | ||||
| SUBSEQUENT EVENTS |
On July 30, 2021, Gushen, Inc., (“GSHN”) and 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 GSHN acquired 100% of the issued and outstanding equity securities of Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) of GSHN (the “Share Exchange”). As a result, immediately following the closing of the Share Exchange, Dyckmanst Limited Shareholders collectively control 381,600,000 voting power of GSHN. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)
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| Use of Estimates | 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.
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| COVID-19 Outbreak | COVID-19 Outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
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| Revenue Recognition | 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 offline training course service primarily includes assigning instructors, providing offline classes and presenting training materials to the course participants who attend the classes. The series of tasks as discussed above are interrelated and are not separable or distinct as the clients cannot benefit from the standalone task.
The Company’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.
China Good Student Project Revenue
The Company’s Chinese Good Student Project includes assisting in both promoting the program and organizing activities for the course participants. Those tasks are not separable and the course participants cannot benefit from the standalone task as defined under ASC 606-10-25-19.
Thus, there is only one performance obligation with respect to the China Good Student Project service.
Mobile Phone Revenue
The Company’s sales contracts of anti-addiction mobile phone device provide that the Company provides multiple delivery of the product specified in the contracts. The contacts identify the quantity, product model, product type and unit price of the product that will be sold to our customers. The contracts allow the customers to place separate orders within the credit limit as specified in the contracts. The delivery is based on the quantity the customers order. The Company’s customers can benefit from the mobile phone devices everytime it delivers to them. Therefore, the delivery of the products is separately identifiable and distinct.
Hence, there are multiple performance obligations in each of the sale contracts of anti-addiction mobile phone device. Practical expedients and exemption
The company has not occurred 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.
Revenue by major product line
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| Income Taxes | 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.
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| Foreign Currency and Foreign Currency Translation | Foreign Currency and Foreign Currency Translation
The functional currency of the Company is the United States dollar (“US dollar”). The Company’s subsidiary and VIEs with operations in PRC uses 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 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:
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| Cash and Cash Equivalents | 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.
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| Other monetary funds | Other monetary funds
Other monetary funds consist of cash deposited in financial institutions other than banks.
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| Accounts Receivable, Net | Accounts Receivable, Net
The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.
The adoption of the new revenue standards did not change the Company’s historical accounting methods for its accounts receivable.
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| Long-Lived Assets | Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and intangible assets.
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.
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 general and administrative expenses in the 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 o 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:
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| Impairment of Long-lived Assets | 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. No impairment has been recorded by the Company as of March 31, 2021 and September 30, 2020.
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| Credit risk | 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 June 30, 2021, and September 30, 2020, 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.
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| Segments | 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.
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| Fair Value of Financial Instruments | 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, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying condensed consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.
As of June 30, 2021 and September 30, 2020, the Company had no investments in financial instruments.
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| Restricted assets | Restricted assets
The Company’s PRC subsidiary and VIE 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. The Company’s PRC subsidiary and its VIE are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.
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.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
Recently Adopted Accounting Standards
Adoption of ASC Topic 606, “Revenue from Contracts with Customers”
In May 2014, the Financial Accounting Standards Board (FASB) issued Topic 606, which supersedes the revenue recognition requirements in Topic 605. The Company adopted Topic 606 as of the inception date. Adoption of ASC Topic 842, “Leases”
In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases.
The Company adopted ASC Topic 842 using the modified retrospective transition method effective the inception date. There was no cumulative effect of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date. See Note 2 “Leases” above for further details.
Accounting Pronouncements Issued But Not Yet Adopted
Financial Instruments. In June 2016, the FASB issued Accounting Standards Update No. 2016-13,“Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements.
Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard will be effective for King Eagle beginning September 30, 2021. We are currently evaluating the impact of the standard on our consolidated financial statements.
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. |
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Organization and Business (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of ownership |
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| Schedule of consolidated financial statements |
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| Schedule of consolidated statements of operations |
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| Schedule of consolidated statements of cash flows |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Revenue by major product line |
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| Schedule of exchange rates |
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| Schedule of estimated useful lives of the assets |
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| Schedule of intangible assets |
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Prepayments (Tables) |
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| Schedule of prepayments |
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Other Receivables (Tables) |
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| Schedule of amount due from agents |
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| Schedule of allowance for doubtful accounts |
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Inventory (Tables) |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of company’s sole inventory |
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| Schedule of movement of provision for the inventory |
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Other Long-Term Assets (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of prepaid marketing fees |
|
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Property, Plant and Equipment, Net (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property, plant and equipment |
|
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Intangible Assets, Net (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible assets, net |
|
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Accounts Payable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accounts payable |
|
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Balances with Related Parties (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related Parties |
|
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Taxes (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of reconciliation of the income tax benefit |
|
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| Schedule of deferred tax asset and liability |
|
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| Schedule of taxes payable |
|
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Organization and Business (Details) |
Jul. 30, 2021
$ / shares
shares
|
|---|---|
| Organization and Business (Details) [Line Items] | |
| Ownership consideration percentage | 100.00% |
| Shares of common stock | 381,600,000 |
| Common stock per share (in Dollars per share) | $ / shares | $ 0.0001 |
| Common stock issued | 410,618,750 |
| Common stock outstanding | 410,618,750 |
| Preferred stock issued | 1,000,000 |
| Preferred stock outstanding | 1,000,000 |
| Voting power rate | 90.72% |
| Series A Preferred Stock [Member] | |
| Organization and Business (Details) [Line Items] | |
| Aggregate shares | 30,000,000 |
| Preferred stock per share (in Dollars per share) | $ / shares | $ 0.0001 |
| Preferred Stock shares for cancellation | 29,000,000 |
Organization and Business (Details) - Schedule of consolidated balance sheets - VIE [Member] - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 3,783,648 | $ 6,980,581 |
| Other monetary funds | 644 | 3,392 |
| Prepayment | 769,307 | 550,347 |
| Other receivables | 118,372 | 1,955,087 |
| Intercompany receivables | 189,074 | 179,444 |
| Due from related parties | 73,805 | 110,047 |
| Inventory | 417,395 | 435,803 |
| Total Current Assets | 5,352,245 | 10,214,701 |
| NON-CURRENT ASSETS | ||
| Other long-term assets | 3,816,881 | 5,342,843 |
| Property, plant and equipment, net | 253,119 | 241,421 |
| Intangible Assets | 75,866 | 79,580 |
| Deferred tax asset | 1,644,643 | 1,097,554 |
| Total non-Current Assets | 5,790,509 | 6,761,398 |
| TOTAL ASSETS | 11,142,754 | 16,076,099 |
| CURRENT LIABILITIES | ||
| Accounts payable | 2,828,520 | 2,211,443 |
| Advance from Customers | 221,069 | 1,212,958 |
| Amount due to related parties | 1 | 1 |
| Payroll Payable | 840,312 | 685,695 |
| Tax payable | 5,885,826 | 5,621,517 |
| Other payable | 4,038 | 303 |
| Total Current Liabilities | 9,779,766 | 9,731,917 |
| TOTAL LIABILITIES | $ 9,779,766 | $ 9,731,917 |
Organization and Business (Details) - Schedule of consolidated statements of operations - VIE [Member] - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| REVENUE | ||||
| Training Revenue | $ 33,050 | $ 833,090 | $ 1,312,870 | $ 6,126,086 |
| Mobile Phone Revenue | 299 | 677 | 299 | 43,093 |
| Other Revenue | 20 | 1,003 | ||
| Total revenues | 33,369 | 833,767 | 1,314,172 | 6,169,179 |
| NET (LOSS) INCOME | $ (1,675,137) | $ (410,733) | $ (6,206,893) | $ (2,589,170) |
Organization and Business (Details) - Schedule of consolidated statements of cash flows - VIE [Member] - USD ($) |
9 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Condensed Cash Flow Statements, Captions [Line Items] | ||
| Net cash used in operating activities | $ (3,488,115) | $ (3,863,678) |
| Net cash provided by (used in) investing activities | (79,289) | (15,734) |
| Net cash provided by financing activities | ||
Summary of Significant Accounting Policies (Details) |
9 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Accounting Policies [Abstract] | |
| After tax profit | 10.00% |
| Registered capital | 50.00% |
Summary of Significant Accounting Policies (Details) - Schedule of Revenue by major product line - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Condensed Income Statements, Captions [Line Items] | ||||
| Total Revenue | $ 33,369 | $ 833,767 | $ 1,314,172 | $ 6,169,179 |
| Training Revenue [Member] | ||||
| Condensed Income Statements, Captions [Line Items] | ||||
| Total Revenue | 33,050 | 833,090 | 1,312,870 | 6,126,086 |
| Mobile Phone Revenue [Member] | ||||
| Condensed Income Statements, Captions [Line Items] | ||||
| Total Revenue | 299 | 677 | 299 | 43,093 |
| Other Revenue [Member] | ||||
| Condensed Income Statements, Captions [Line Items] | ||||
| Total Revenue | $ 20 | $ 1,003 | ||
Summary of Significant Accounting Policies (Details) - Schedule of exchange rates - RMB [Member] |
9 Months Ended | ||
|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Sep. 30, 2020 |
|
| Balance sheet items, except for equity accounts | |||
| Balance sheet items, except for equity accounts | 6.4549 | 6.8013 | |
| Income statement and cash flows items | |||
| Income statement and cash flows items | 6.5204 | 7.0356 | |
Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives of the assets - Estimated useful lives [Member] |
9 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Office and computer equipment | 5 years |
| Lease improvement | 3 years |
Summary of Significant Accounting Policies (Details) - Schedule of intangible assets |
9 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Schedule of intangible assets [Abstract] | |
| Software | 10 years |
Prepayments (Details) - Schedule of prepayments - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Schedule of prepayments [Abstract] | ||
| Prepaid marketing fee | $ 192,370.30 | $ 94,017 |
| Prepaid service fee | 545,478.69 | 429,270 |
| Prepaid rent | 28,820.47 | 25,784 |
| Prepaid other expense | 2,637.56 | 1,276 |
| Total | $ 769,307.01 | $ 550,347 |
Other Receivables (Details) - Schedule of amount due from agents - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Schedule of amount due from agents [Abstract] | ||
| Amount due from agents | $ 1,819,653 | |
| Amount due from third parties | $ 364,221.71 | 390,779 |
| Amount due from employees | 37,294.01 | 38,502 |
| Deposit & guarantee | 36,981.56 | 3,169 |
| Others | 19,235.27 | 26,617 |
| Total | 457,732.55 | 2,278,720 |
| Less: allowance for doubtful accounts | (309,843.05) | (294,063) |
| Total | $ 147,889.50 | $ 1,984,657 |
Other Receivables (Details) - Schedule of allowance for doubtful accounts - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Sep. 30, 2020 |
|
| Schedule of allowance for doubtful accounts [Abstract] | ||
| Beginning | $ 294,063 | $ 280,271 |
| Exchange rate difference | 15,780 | 13,792 |
| Balance | $ 309,843 | $ 294,063 |
Inventory (Details) - Schedule of company’s sole inventory - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|---|---|---|---|
| Schedule of company’s sole inventory [Abstract] | |||
| Cost | $ 417,395 | $ 455,684 | |
| Less: provision for inventory | (19,881) | ||
| Net amount | $ 417,395 | $ 435,803 |
Inventory (Details) - Schedule of provision for the inventory - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Sep. 30, 2020 |
|
| Schedule of provision for the inventory [Abstract] | ||
| Beginning balance | $ 19,881 | |
| Additions | 19,300 | |
| Charge-offs | (20,737) | |
| Exchange rate difference | 856 | 581 |
| Ending balance | $ 19,881 |
Other Long-Term Assets (Details) - Schedule of prepaid marketing fees - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Sep. 30, 2020 |
|
| Schedule of prepaid marketing fees [Abstract] | ||
| Prepaid marketing fee | $ 3,273,425 | $ 4,701,067 |
| Prepaid service fee | 128,809 | 145,324 |
| Deferred IPO cost | 414,647 | 393,530 |
| Loan receivable | 102,922 | |
| Total | $ 3,816,881 | $ 5,342,843 |
Property, Plant and Equipment, Net (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation expenses | $ 30,785 | $ 12,223 | $ 80,534 | $ 37,868 |
Property, Plant and Equipment, Net (Details) - Schedule of property, plant and equipment - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Schedule of property, plant and equipment [Abstract] | ||
| Office and computer equipment | $ 523,466 | $ 420,791 |
| Less: Accumulated depreciation | (270,347) | (179,370) |
| Total | $ 253,119 | $ 241,421 |
Intangible Assets, Net (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization of Intangible Assets | $ 2,661 | $ 1,881 | $ 7,906 | $ 4,252 |
Intangible Assets, Net (Details) - Schedule of Intangible assets, net - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Sep. 30, 2020 |
|
| Schedule of Intangible assets, net [Abstract] | ||
| Software | $ 106,478 | $ 101,055 |
| Less: Accumulated amortization | (30,612) | (21,475) |
| Total | $ 75,866 | $ 79,580 |
Accounts Payable (Details) - Schedule of accounts payable - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Schedule of accounts payable [Abstract] | ||
| Amount due to agents | $ 1,319,879 | $ 1,116,751 |
| Amount due to other service providers | 1,481,808 | 1,069,226 |
| Amount due to supplier of anti-addiction cellphone | 20,914 | 19,849 |
| Amount due to lecturers | 5,918 | 5,617 |
| Total | $ 2,828,520 | $ 2,211,443 |
Balances with Related Parties (Details) |
9 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Related Party Transactions [Abstract] | |
| Voting rights percentage | 46.00% |
| Register capital percentage | 11.00% |
Balances with Related Parties (Details) - Schedule of related Parties - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
||||||
|---|---|---|---|---|---|---|---|---|
| Due from related parties | ||||||||
| Due from related parties | $ 73,806 | $ 110,047 | ||||||
| Due to related parties | ||||||||
| Due to related parties | 543 | 273 | ||||||
| Yulong Yi [Member] | ||||||||
| Due from related parties | ||||||||
| Due from related parties | [1] | 47,300 | 68,444 | |||||
| Due to related parties | ||||||||
| Due to related parties | 542 | 272 | ||||||
| Ru Zhang [Member] | ||||||||
| Due from related parties | ||||||||
| Due from related parties | [2] | 14,234 | 27,812 | |||||
| Due to related parties | ||||||||
| Due to related parties | 1 | 1 | ||||||
| Shaowei Peng [Member] | ||||||||
| Due from related parties | ||||||||
| Due from related parties | [3] | $ 12,272 | $ 13,792 | |||||
| ||||||||
Taxes (Details) |
9 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Income Tax Disclosure [Abstract] | ||
| Corporate income tax | 25.00% | 25.00% |
Taxes (Details) - Schedule of reconciliation of the income tax benefit - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Schedule of reconciliation of the income tax benefit [Abstract] | ||||
| Loss before income taxes | $ (2,083,649) | $ (410,758) | $ (6,720,939) | $ (2,589,195) |
| PRC statutory income tax rate | 25.00% | 25.00% | 25.00% | 25.00% |
| Income tax benefit computed at statutory corporate income tax rate | $ (520,912) | $ (102,690) | $ (1,680,235) | $ (647,299) |
| Reconciling items: | ||||
| Non-deductible expenses | 9,751 | 15,508 | 76,413 | 40,565 |
| Change in valuation allowance | 102,731 | 87,182 | 1,120,539 | 606,734 |
| Income tax benefit | $ (408,430) | $ (483,283) | ||
Taxes (Details) - Schedule of deferred tax asset and liability - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Deferred tax asset: | ||
| Bad debt provision | $ 77,461 | $ 73,516 |
| Inventory provision | 4,970 | |
| Tax loss carryforward | 1,578,221 | 1,029,544 |
| Deferred tax asset | 1,655,682 | 1,108,030 |
| Deferred tax liability: | ||
| Depreciation | 11,038 | 10,476 |
| Net amount | $ 1,644,643 | $ 1,097,554 |
Taxes (Details) - Schedule of taxes payable - USD ($) |
Jun. 30, 2021 |
Sep. 30, 2020 |
|---|---|---|
| Schedule of taxes payable [Abstract] | ||
| VAT tax payable | $ 1,378,604 | $ 1,333,537 |
| Company income tax payable | 2,110,685 | 2,010,179 |
| Individual income tax payable | 2,224,166 | 2,110,444 |
| Other taxes payable | 172,370 | 167,357 |
| Totals | $ 5,885,825 | $ 5,621,517 |
China Contribution Plan (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Retirement Benefits [Abstract] | ||
| Total contributed amount | $ 420,111 | $ 168,225 |
Subsequent Events (Details) |
1 Months Ended |
|---|---|
Jul. 30, 2021 | |
| Subsequent Event [Member] | |
| Subsequent Events (Details) [Line Items] | |
| Share exchange agreement, description | Gushen, Inc., (“GSHN”) and 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 GSHN acquired 100% of the issued and outstanding equity securities of Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) of GSHN (the “Share Exchange”). As a result, immediately following the closing of the Share Exchange, Dyckmanst Limited Shareholders collectively control 381,600,000 voting power of GSHN. |
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