UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2023
Commission File
Number:
No. 33 Lingxiang Road, Wujin District
Changzhou City, Jiangsu Province
People’s Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
Explanatory Note
On August 23, 2023, Jin Medical International Ltd. (the “Company”) reported its financial results for the six months ended March 31, 2023. The Company hereby furnishes the following documents as exhibits to this report: “Unaudited Financial Results and Statements of Jin Medical International Ltd. for the Six (6) Months Ended March 31, 2023”; and “Operating and Financial Review and Prospects”.
1
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Unaudited Financial Results and Statements of Jin Medical International Ltd. for the Six (6) Months Ended March 31, 2023 | |
| 99.2 | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | |
| 101 | Interactive Data Files (formatted as Inline XBRL) | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| JIN MEDICAL INTERNATIONAL LTD. | ||
| Date: August 23, 2023 | By: |
/s/ Erqi Wang |
| Name: | Erqi Wang | |
| Title: | Chief Executive Officer | |
3
Exhibit 99.1
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
TABLE OF CONTENTS
JIN MEDICAL INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31 | September 30 | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventories | ||||||||
| Due from related parties | ||||||||
| Prepaid expenses and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property, plant and equipment, net | ||||||||
| Land use right, net | ||||||||
| Deferred tax assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term bank loan | $ | $ | - | |||||
| Accounts payable | ||||||||
| Accrued liabilities and other payables | ||||||||
| Deferred revenue | ||||||||
| Deferred revenue - a related party | - | |||||||
| Taxes payable | ||||||||
| Due to a related party | - | |||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
JIN MEDICAL INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| For the Six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| REVENUE | ||||||||
| Revenue - third party | $ | $ | ||||||
| Revenue - related party | ||||||||
| Total revenue | ||||||||
| COST OF REVENUE AND RELATED TAX | ||||||||
| Cost of revenue | ||||||||
| Business and sales related tax | ||||||||
| Total cost of revenue and related tax | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Total operating expenses | ||||||||
| INCOME FROM OPERATIONS | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income, net | ||||||||
| Foreign exchange gain (loss) | ( | ) | ||||||
| Other income, net | ||||||||
| Total other income, net | ||||||||
| INCOME BEFORE INCOME TAX PROVISION | ||||||||
| PROVISION FOR INCOME TAXES | ||||||||
| NET INCOME | ||||||||
| Foreign currency translation gain | ||||||||
| TOTAL COMPREHENSIVE INCOME | $ | $ | ||||||
| $ | $ | |||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
JIN MEDICAL INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2023 AND 2022
| Additional | Accumulated Other | |||||||||||||||||||||||||||
| Ordinary Shares* | Paid in | Statutory | Retained | Comprehensive | ||||||||||||||||||||||||
| Shares | Amount | Capital | Reserves | Earnings | Income (Loss) | Total | ||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | - | - | - | - | ||||||||||||||||||||||||
| Statutory reserve | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation gain | ||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Issuance of ordinary shares in initial public offerings, gross | ||||||||||||||||||||||||||||
| Cost directly related to the initial public offering | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income | - | - | - | - | - | |||||||||||||||||||||||
| Statutory reserve | - | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation gain | - | |||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
JIN MEDICAL INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposition of property and equipment | ||||||||
| Provision for doubtful accounts | ||||||||
| Deferred tax provision (benefits) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Accounts receivable - related parties | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Advance to suppliers, net - a related party | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities and other payables | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Deferred revenue - a related party | ||||||||
| Taxes payable | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Payments for short-term investments | ( | ) | ( | ) | ||||
| Redemption of short-term investments | ||||||||
| Repayment of (payments of) advances made to related parties | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Gross proceeds from initial public offerings | ||||||||
| Direct costs disbursed from initial public offerings proceeds | ( | ) | ||||||
| Proceeds from short-term bank loan | ||||||||
| Repayment of amount due to related parties | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure information: | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Deferred IPO cost offset with additional paid-in capital | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
JIN MEDICAL INTERNATIONAL LTD. (“Jin Med” or the “Company”) was established under the laws of the Cayman Islands on January 14, 2020 as a holding company.
Jin Med owns
Erhua Medical Technology (Changzhou) Co., Ltd.
(“Erhua Med”) was formed on September 24, 2020, as a Wholly Foreign-Owned Enterprise (“WFOE”) in the People’s
Republic of China (“PRC”). Zhongjin HK owns
Jin Med, Zhongjin HK and Erhua Med are currently not engaging in any active business operations and merely acting as holding companies.
Changzhou Zhongjin Medical Equipment Co., Ltd. (“Changzhou Zhongjin”) was incorporated on January 26, 2006 in accordance with PRC laws. Changzhou Zhongjin has two wholly-owned subsidiaries, Zhongjin Medical Equipment Taizhou Co., Ltd. (“Taizhou Zhongjin”), incorporated on June 17, 2013, and Changzhou Zhongjin Jing’ao Trading Co., Ltd (“Zhongjin Jing’ao”), incorporated on December 18, 2014 in accordance with PRC laws. Changzhou Zhongjin, Taizhou Zhongjin and Zhongjin Jing’ao are collectively referred to as the “Zhongjin Operating Companies” below.
The Company, through its wholly-owned subsidiaries and entities controlled through contractual arrangements, is primarily engaged in the design, development, manufacturing and sales of wheelchair and other living aids products to be used by people with disabilities or impaired mobility. The Company’s products are sold to distributors in both China and in the overseas markets.
Reorganization
A reorganization of the legal structure of the Company (“Reorganization”) was completed on November 26, 2020. The Reorganization involved the incorporation of Jin Med, Zhongjin HK and Erhua Med, and signing of certain contractual arrangements (collectively, the “VIE Agreements”) between Zhongjin Technology, the shareholders of Changzhou Zhongjin and Changzhou Zhongjin. Consequently, the Company became the ultimate holding company of Zhongjin HK, Erhua Med, and through the contractual arrangements, WFOE, or Erhua Med, became the primary beneficiary of the Variable Interest Entity (“VIE”), Changzhou Zhongjin, and its subsidiaries. Pursuant to the VIE Agreements, Erhua Med has gained effective control over Changzhou Zhongjin. Therefore, Changzhou Zhongjin should be treated as a VIE under the Statements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 Consolidation. Since Taizhou Zhongjin and Zhongjin Jing’ao are wholly-owned subsidiaries of Changzhou Zhongjin, they are further referenced as VIE’s subsidiaries.
F-6
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (continued)
The Company, together with its wholly owned subsidiaries, the VIE and the VIE’s subsidiaries, are effectively controlled by the same shareholders before and after the Reorganization and therefore the Reorganization is considered as a recapitalization of entities under common control. The consolidation of the Company, its subsidiaries, the VIE and the VIE’s subsidiaries has been accounted for at historical cost.
| Name of Entity | Date of Incorporation |
Place of Incorporation |
% of Ownership |
Principal Activities | ||||
| Jin Med | ||||||||
| Zhongjin HK | ||||||||
| Erhua Med | ||||||||
| Changzhou Zhongjin | ||||||||
| Taizhou Zhongjin | ||||||||
| Zhongjin Jing’ao |
F-7
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (continued)
The VIE contractual arrangements
The Company’s main operating entities, Changzhou Zhongjin and its subsidiaries Taizhou Zhongjin and Zhongjin Jing’ao (or the “Zhongjin Operating Companies” as referred above), are controlled through contractual arrangements in lieu of direct equity ownership by the Company.
A VIE is an entity which has a total equity investment that is insufficient to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary of, and must consolidate, the VIE, because it met the condition under the accounting principles generally accepted in the United States of America (“U.S. GAAP”) to consolidate the VIE.
Erhua Med, is deemed to have a controlling financial interest in and be the primary beneficiary of the Zhongjin Operating Companies because it has both of the following characteristics:
| ● | The power to direct activities of the Zhongjin Operating Companies that most significantly impact such entities’ economic performance, and |
| ● | The right to receive benefits from, the Zhongjin Operating Companies that could potentially be significant to such entities. |
Pursuant to these contractual arrangements, the Zhongjin Operating Companies shall pay service fees equal to all of their net profits after tax payments to Erhua Med. At the same time, Erhua Med has the right to receive substantially all of their economic benefits for accounting purposes. Such contractual arrangements are designed so that the operations of the Zhongjin Operating Companies are solely for the benefit of Erhua Med and ultimately, the Company, and therefore the Company must consolidate the Zhongjin Operating Companies under U.S. GAAP.
Risks associated with the VIE structure
The Company believes that the contractual arrangements with the VIE and the shareholders of the VIE are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
| ● | revoke the business and operating licenses of the Company’s PRC subsidiary and VIE; |
| ● | discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE; |
| ● | limit the Company’s business expansion in China by way of entering into contractual arrangements; |
| ● | impose fines or other requirements with which the Company’s PRC subsidiary and VIE may not be able to comply; |
| ● | require the Company or the Company’s PRC subsidiary and VIE to restructure the relevant ownership structure or operations; or |
| ● | restrict or prohibit the Company’s use of the proceeds from public offering to finance the Company’s business and operations in China. |
F-8
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (continued)
The Company’s ability to conduct its businesses may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. In such case, the Company may not be able to consolidate the VIE and the VIE’s subsidiaries in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and its shareholders and it may lose the ability to receive economic benefits from the VIE and the VIE’s subsidiaries for accounting purposes under U.S. GAAP. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and the VIE and the VIE’s subsidiaries.
The Company, Zhongjin HK and Erhua Med are essentially
holding companies and do not have active operations as of March 31, 2023 and September 30, 2022. As a result, total assets and liabilities
presented on the unaudited condensed consolidated balance sheets and revenue, expenses, and net income presented on the unaudited condensed
consolidated statement of comprehensive income as well as the cash flows from operating, investing and financing activities presented
on the unaudited condensed consolidated statement of cash flows are substantially the financial position, operation results and cash flows
of the VIE and the VIE’s subsidiaries. The Company has not provided any financial support to the VIE and the VIE’s subsidiaries
during the six months ended March 31, 2023 and 2022. Additionally, pursuant to the VIE Agreements, Erhua Med has the right to receive
service fees equal to the VIE’s net profits after tax payments. None of these fees were paid to Erhua Med as of March 31, 2023.
Accordingly, as of March 31, 2023 and September 30, 2022, Erhua Med had $
| March 31, 2023 | September 30, 2022 | |||||||
| Current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net revenue | $ | $ | ||||||
| Net income | $ | $ | ||||||
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | $ | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| Net cash provided by (used in) financing activities | $ | $ | ( | ) | ||||
F-9
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (continued)
Initial Public Offering
On March 30, 2023, the Company closed its initial
public offering (the “Offering”) of
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the Company’s unaudited condensed consolidated financial statement. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes for the years ended September 30, 2022 and 2021 included in the Company’s Registration Statement on Form 424B4.The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, and entities it controlled through VIE agreements. All inter-company balances and transactions are eliminated upon consolidation.
Uses of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and inventories, useful lives of property, plant and equipment and land use right, the recoverability of long-lived assets, and realization of deferred tax assets. Actual results could differ from those estimates.
Cash
Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains most of its bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. As of March 31, 2023 and September 30, 2022, the Company does not have any cash equivalents.
F-10
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Short-term investment
The Company’s short-term investments consist
of wealth management financial products purchased from PRC banks or financial institution with maturities within one year. The banks or
financial institution invest the Company’s funds in certain financial instruments including money market funds, bonds or mutual
funds, with rates of return on these investments ranging from
The Company had short-term investments of $
Accounts receivable, net
Accounts receivable are presented net of allowance for doubtful accounts.
The Company determines the adequacy of reserves
for doubtful accounts based on individual account analysis and historical collection trend. The Company establishes a provision for doubtful
receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s
best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections. Actual amounts received
may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off
against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March
31, 2023 and September 30, 2022, allowance for doubtful accounts amounted to $
Inventories
Inventories are stated at lower of cost or net realizable value using the weighted average method. Costs include the cost of raw materials, freight, direct labor and related production overhead. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Write-down is recorded when future estimated net realizable value is less than cost, which is recorded in cost of revenue in the unaudited condensed consolidated statements of comprehensive income. The Company periodically evaluates inventories against their net realizable value, and reduces the carrying value of those inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and future demand of each type of inventories.
F-11
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. |
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, short-term investments, accounts receivable, due from related parties, short-term bank loan, accounts payable, due to related parties, accrued liabilities and other payable, and taxes payable, approximate the fair value of the respective assets and liabilities as of March 31, 2023 and September 30, 2022 based upon the short-term nature of the assets and liabilities.
Leases
On October 1, 2022, the Company adopted ASC 842, Leases. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Therefore, no adjustments to opening retained earnings were necessary. The Company leases administrative office and dome, which is classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with an initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
At the commencement date, the Company recognizes
the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease.
The ROU asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct
costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment
annually. The Company also established a capitalization threshold of $
F-12
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment, net
| Useful life | ||
| Property and buildings | ||
| Leasehold improvement | ||
| Machinery and equipment | ||
| Automobiles | ||
| Office and electric equipment |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of comprehensive income.
Land use rights, net
Under the PRC law, all land in the PRC is owned
by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels
of land for specified periods of time. Land use rights are stated at cost less accumulated amortization.
| Useful life | ||
| Land use rights |
Impairment of long-lived assets
Long-lived assets with finite lives, primarily property, plant and equipment and land use right are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no impairments of these assets as of March 31, 2023 and September 30, 2022.
F-13
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition
The Company generates its revenues primarily through sales of its products and recognizes revenue in accordance with ASC 606. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue.
In accordance to ASC 606, the Company recognizes revenue when it transfers goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products on a gross basis as the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual goods to customers, and there is no other separately identifiable promises in the contracts. The Company’s revenue streams are recognized at a point in time when the control of goods is transferred to customer, which generally occurs at delivery. The Company’s products are sold with no right of return and the Company does not provide other credits or sales incentive to customers. Revenue is reported net of all value added taxes (“VAT”).
The Company generally offers 10 years warranty for the frame of its wheelchairs, and one year warranty for other parts of wheelchairs, except for “wear items”, i.e. those parts that wear out, such as tires or brake pads, which are covered under a warranty for six months. Historically, warranty costs incurred was immaterial, and the warranty costs for the six months ended March 31, 2023 and 2022 were both $.
Contract Assets and Liabilities
Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. The Company did not have contract assets as of March 31, 2023 and September 30, 2022. Contract liabilities are recognized for contracts where payment has been received in advance of delivery of the products. The contract liability balance can vary significantly depending on the timing when cash is received and when shipment or delivery occurs. As of March 31, 2023 and September 30, 2022, other than deferred revenue, the Company had no other contract liabilities or deferred contract costs recorded on its unaudited condensed consolidated balance sheets, and the Company had no material incremental costs for obtaining a contract. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred.
F-14
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Disaggregation of Revenues
The Company disaggregates its revenue from contracts by product types and geographic areas, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the six months ended March 31, 2023 and 2022 are as the following:
Revenue recognition (continued)
Geographic information
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| China domestic market | $ | $ | ||||||
| Overseas market | ||||||||
| Total revenue | $ | $ | ||||||
Revenue by product categories
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Wheelchair | $ | $ | ||||||
| Wheelchair components and others | ||||||||
| Total revenue | $ | $ | ||||||
Research and development expenses
In connection with the design and development
of wheelchair and other living aids products, the Company expense all internal research costs as incurred, which primarily comprise employee
costs, internal and external costs related to execution of studies, manufacturing costs, facility costs of the research center, and amortization
of land use right, depreciation for property, plant and equipment used in the research and development activities. For the six months
ended March 31, 2023 and 2022, research and development expenses were $
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
F-15
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized
is the largest amount of tax benefit that is greater than
The Company’s subsidiary, VIE and VIE’s subsidiaries in China are subject to the income tax laws of the PRC. No income was generated outside the PRC for the six months ended March 31, 2023 and 2022. As of March 31, 2023, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
Value added tax (“VAT”)
Sales revenue is reported net of VAT. The VAT
is based on gross sales price and VAT rates range up to
Warrant accounting
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent interim period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of comprehensive loss.
As the warrants issued upon the initial public offering meet the criteria for equity classification under ASC 815, therefore, the warrants are classified as equity.
F-16
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants), using the treasury stock method, as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted EPS, the treasury stock method assumes that outstanding potential common shares are exercised and the proceeds are used to purchase common share at the average market price during the period. Potential common shares may have a dilutive effect under the treasury stock method only when the average market price of the common share during the period exceeds the exercise price of the potential common shares. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of March 31, 2023 and September 30, 2022, there were no dilutive shares.
Risks and uncertainties
The main operation of the Company is located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.
In December 2019, a novel strain of coronavirus
(COVID-19) was first reported in Wuhan, China and then spread globally. On March 11, 2020, the World Health Organization categorized COVID-19
as a global pandemic. Due to a resurgence of the COVID-19 pandemic in March 2022 (“2022 Outbreak”) in China, there
have been delays in the purchase of raw material supplies and delivery of products to domestic customers in China on a timely basis as
a consequence of travel restrictions. Shipments and customer clearance for overseas sales were also delayed due to the stricter border
control protocols. Although the situation has eased since mid-May 2022, the number of orders placed by the customers were affected
as the business of those customers were negatively impacted by the 2022 Outbreak. Therefore, the 2022 Outbreak negatively affected the
Company’s business operations and financial results for the year ended September 30, 2022. In early December 2022, China announced
a nationwide loosening of its zero-covid policy, and most of the travel restrictions and quarantine requirements were lifted since December
2022. Although there were significant surges of COVID-19 cases in many cities in China after
the lifting of these restrictions, the spread of the COVID-19 was slowed down and it was
successfully under control since January 2023, and the Company’s business operations have been recovered to the level prior to the
COVID-19 pandemic. Our revenue and net income (excluding the impact of foreign currency translation) increased by
F-17
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Risks and uncertainties (continued)
Additionally, since February, 2022, the global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. The Company’s operation has not been impacted by the ongoing military conflict, however, due to the significant uncertainties around the further development of the conflict, the potential additional sanctions and other volatilities that could be brought to the global market, it is impossible to predict the extent to which the Company’s operation and business may be impacted.
Foreign currency translation
The functional currency for Jin Med is U.S Dollar (“US$”). Zhongjin HK uses Hong Kong dollar as its functional currency. However, Jin Med and Zhongjin HK currently only serve as holding companies and do not have active operation as of the date of this report. The Company’s functional currency for its PRC subsidiaries is the Chinese Yuan (“RMB”). The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency of U.S. Dollars (“US$”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from foreign currency transactions are reflected in the results of operations.
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
| For the Six Months Ended March 31, |
For the Year Ended September 30, | |||||
| 2023 | 2022 | 2022 | ||||
| Period-end spot rate | US$ |
US$ |
US$ | |||
| Average rate | US$ |
US$ |
US$ | |||
Comprehensive income
Comprehensive income consists of two components, net income and other comprehensive income. The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income in the unaudited condensed consolidated statements of comprehensive income.
Statement of cash flows
In accordance with ASC 230, “Statement of Cash Flows”, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
F-18
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred initial public offering (‘IPO’) costs
The Company complies with the requirement of the
ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering
costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related
to the intended IPO. Deferred offering costs was charged to shareholders’ equity upon the completion of the IPO. As of March 31,
2023 and September 30, 2022, deferred IPO costs were $ and $
Employee benefit expenses
The Company’s subsidiary, VIE and VIE’s
subsidiaries in the PRC participate in a government-mandated employer social insurance plan pursuant to which certain social security
benefits, work-related injury benefits, maternity leave insurance, medical insurance, unemployment benefit and housing fund are provided
to eligible full-time employees. The relevant labor regulations require the Company’s subsidiaries in the PRC to pay the local labor
and social welfare authorities monthly contributions based on the applicable benchmarks and rates stipulated by the local government.
The contributions to the plan are expensed as incurred. Employee social security and welfare benefits included as expenses in the unaudited
condensed consolidated statements of comprehensive income amounted to $
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” (“ASU 2019-10”). ASU 2019-10 (i) provides a framework to stagger effective dates for future major accounting standards and (ii) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for certain new standards on the following topics in the FASB Accounting Standards Codification (ASC): (a) Derivatives and Hedging (ASC 815) – now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021; (b) Leases (ASC 842) - now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021; (c) Financial Instruments — Credit Losses (ASC 326) - now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years; and (d) Intangibles — Goodwill and Other (ASC 350) - now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company plans to adopt this guidance effective October 1, 2023 and the adoption of this ASU is not expected to have a material impact on its consolidated financial statements.
F-19
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 — ACCOUNTS RECEIVABLE, NET
| Third Parties | March 31, 2023 | September 30, 2022 | ||||||
| Accounts receivable - third-party customers | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable – third-party customers, net | $ | $ | ||||||
The Company’s accounts receivable primarily includes balances due from customers when the Company’s wheelchair and living aids products have been sold and delivered to customers, the Company’s contracted performance obligations have been satisfied, amount billed and the Company has an unconditional right to payment, which has not been collected as of the balance sheet dates.
For accounts receivable from third-party customers,
approximately
| March 31, 2023 | September 30, 2022 | |||||||
| Beginning balance | $ | $ | ||||||
| Additions | ||||||||
| Less: write-off | ( | ) | ||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
NOTE 4 — INVENTORIES
| March 31, 2023 | September 30, 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-progress | ||||||||
| Finished goods | ||||||||
| Inventories | $ | $ | ||||||
F-20
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
| March 31, 2023 | September 30, 2022 | |||||||
| Other receivable (1) | $ | $ | ||||||
| Advance to suppliers (2) | ||||||||
| Deferred initial public offering costs | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| (1) |
| (2) |
NOTE 6 — PROPERTY, PLANT AND EQUIPMENT, NET
| March 31, 2023 | September 30, 2022 | |||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Automobiles | ||||||||
| Office and electric equipment | ||||||||
| Leasehold improvements | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation expense was $
In connection with the Company’s bank borrowings
from Bank of Jiangsu, Changzhou Zhongjin pledged a building of
F-21
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — LAND USE RIGHT, NET
| March 31, 2023 | September 30, 2022 | |||||||
| Land use rights | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Land use right, net | $ | $ | ||||||
Amortization expense was $
In connection with the Company’s bank borrowings
from Bank of Jiangsu, Changzhou Zhongjin pledged land use right of
| Years ending March 31, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| $ | ||||
NOTE 8 — SHORT-TERM BANK LOAN
On March 31, 2023, Changzhou Zhongjin signed a
loan agreement with Bank of Jiangsu to borrow RMB
In connection with the above-mentioned borrowings
with Bank of Jiangsu, Changzhou Zhongjin signed a maximum pledge agreement with Bank of Jiangsu and agreed to pledge a building property
of
F-22
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 — RELATED PARTY TRANSACTIONS
| a. | Accounts receivable - related parties |
| Name | Related party relationship | March 31, 2023 | September 30, 2022 | |||||||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. | $ | $ | ||||||||
| Zhongjin Hongkang Medical Technology (Shanghai) Co., Ltd. | ||||||||||
| Zhongjin Jingau Rehabilitation Equipment (Beijing) Co. Ltd. | ||||||||||
| Zhongjiankanglu Industrial Development (Shanghai) Co., Ltd. | ||||||||||
| Subtotal | ||||||||||
| Less: allowance for doubtful accounts | ||||||||||
| Total accounts receivable, net - related parties | $ | $ | ||||||||
For accounts receivable due from related parties,
approximately
| b. | Due from related parties |
| Name | Related party relationship | March 31, 2023 | September 30, 2022 | |||||||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. (“Zhongjin Kanglu”) (1) | $ | $ | ||||||||
| Huaniaoyuan Catering Management (Changzhou) Co. Ltd. | ||||||||||
| Other | ||||||||||
| Total due from related parties | $ | $ | ||||||||
| (1) |
Advances due from related parties were non-interest
bearing and due upon demand. Approximately
F-23
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 — RELATED PARTY TRANSACTIONS (continued)
| c. | Deferred revenue – a related party |
| Name | Related party relationship | March 31, 2023 | September 30, 2022 | |||||||
| Jin Med Medical (Korea) Co., Ltd. | $ | $ | ||||||||
| Total deferred revenue – a related party | $ | $ | ||||||||
| d. | Due to a related party |
| Name | Related party relationship | March 31, 2023 | September 30, 2022 | |||||||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. | $ | $ | ||||||||
| Total due to a related party | $ | $ | ||||||||
The balance due to a related party was mainly comprised of advances from entities controlled by the Company’s CEO and used for working capital during the Company’s normal course of business. These advances are non-interest bearing and due on demand.
| e. | Revenue from related parties |
| For the Six Months Ended March 31, | ||||||||||
| Name | Related party relationship | 2023 | 2022 | |||||||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. | $ | $ | ||||||||
| Zhongjiankanglu Industrial Development (Shanghai) Co., Ltd. | ||||||||||
| Zhongjin Jingau Rehabilitation Equipment (Beijing) Co. Ltd. | ||||||||||
| Total revenue from related parties | $ | $ | ||||||||
| f. | Loan guarantee provided by related parties |
In connection with the Company’s bank borrowings from Bank of Jiangsu, the Company’s major shareholder, Mr. Erqi Wang and Changzhou Zhongjian Kanglu Information Technology Co., Ltd. provided credit guarantee and signed pledge agreements (see Note 8).
F-24
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES
| (a) | Corporate Income Taxes (“CIT”) |
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.
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, no Cayman Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.
Hong Kong
Zhongjin HK is subject to Hong Kong profits tax
at a rate of
PRC
Erhua Med, Changzhou Zhongjin, Taizhou Zhongjin
and Zhongjin Jing’ao are incorporated in the PRC, and are subject to the PRC Enterprise Income Tax. Under the Enterprise Income
Tax (“EIT”) Law of PRC, domestic enterprises and Foreign Investment Enterprises (“FIE”) are subject to a unified
EIT grants preferential tax treatment to High
and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate
of
In addition, based on the EIT Law of PRC, and
according to the Announcement on Issues Related to the Implementation of Inclusive Income Tax Reduction and Exemption Policy for Small
and Low Profit Enterprises issued by the State Administration of Taxation on January 18, 2019 and April 2, 2021, once an enterprise meets
certain requirements and is identified as a small-scale minimal profit enterprise, the portion of its taxable income not more than RMB
F-25
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES (continued)
| (a) | Corporate Income Taxes (“CIT”) (continued) |
EIT is typically governed by the local tax authority
in the PRC. Each local tax authority at times may grant tax holidays to local enterprises as a way to encourage entrepreneurship and stimulate
local economy.
| For the Six Months Ended March 31 | ||||||||
| 2023 | 2022 | |||||||
| Current tax provision | ||||||||
| BVI | $ | $ | ||||||
| Hong Kong | ||||||||
| PRC | ||||||||
| Deferred tax provision (benefit) | ||||||||
| BVI | ||||||||
| Hong Kong | ||||||||
| PRC | ( | ) | ||||||
| ( | ) | |||||||
| Income tax provision | $ | $ | ||||||
| March 31, 2023 | September 30, 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry-forwards | $ | $ | ||||||
| Inventory reserve | ||||||||
| Allowance for doubtful accounts | ||||||||
| Total | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets | $ | $ | ||||||
| March 31, 2023 | September 30, 2022 | |||||||
| Beginning balance | $ | $ | ||||||
| Current year addition | ||||||||
| Exchange difference | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
F-26
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES (continued)
| (a) | Corporate Income Taxes (“CIT”) (continued) |
The Company periodically evaluates the likelihood
of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the
extent it believes a portion will not be realized. Management considers new evidence, both positive and negative, that could affect the
Company’s future realization of deferred tax assets including its recent cumulative earnings experience, expectation of future income,
the carry forward periods available for tax reporting purposes and other relevant factors. The Company determined that it is more likely
than not its deferred tax assets could not be realized due to uncertainty on future earnings in Zhongjin Jing’ao. The Company provided
a
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| China Income tax statutory rate | % | % | ||||||
| Effect of PRC tax holiday | ( | )% | ( | )% | ||||
| Permanent difference | % | % | ||||||
| Research and development tax credit | ( | )% | ( | )% | ||||
| Change in valuation allowance | % | ( | )% | |||||
| Effective tax rate | % | % | ||||||
The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. As of March 31, 2023, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
| (b) | Taxes payable |
| March 31, 2023 | September 30, 2022 | |||||||
| Income tax payable | $ | $ | ||||||
| Value added tax payable | ||||||||
| Other taxes payable | ||||||||
| Total taxes payable | $ | $ | ||||||
F-27
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — CONCENTRATIONS
A majority of the Company’s revenue and expense transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB may require certain supporting documentation in order to effect the remittance.
As of March 31, 2023 and September 30, 2022, $
For the six months ended March 31, 2023 and 2022,
one customer accounted for approximately
As of March 31, 2023, one customer accounted for
For the six months ended March 31, 2023 and 2022,
no supplier accounted for more than
As of March 31, 2023, no supplier accounted for
more than
NOTE 12 — SHAREHOLDERS’ EQUITY
Ordinary Shares
Jin Med was established under the laws of the
Cayman Islands on January 14, 2020. The authorized number of ordinary shares was
On October 28, 2022, the current existing shareholders
of the Company surrendered
Initial Public Offering
On March 30, 2023, the Company closed its initial
public offering (the “Offering”) of
F-28
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — SHAREHOLDERS’ EQUITY (continued)
Statutory reserve and restricted net assets
The Company’s PRC subsidiary, VIE and VIE’s subsidiaries 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 is required to make appropriations
to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory
surplus reserve are required to be at least
Relevant PRC laws and regulations restrict the
Company’s PRC subsidiary, VIE and VIE’s subsidiaries from transferring a portion of their net assets, equivalent to their
statutory reserves and their share capital, to the Company’s shareholders in the form of loans, advances or cash dividends. Only
PRC entities’ accumulated profits may be distributed as dividends to the Company’s shareholders without the consent of a third
party. As of March 31, 2023 and September 30, 2022, the restricted amounts as determined pursuant to PRC statutory laws totaled $
NOTE 13 — COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company’s management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate to have a material adverse impact on the Company’s unaudited condensed consolidated financial position, results of operations and cash flows. The Company currently does not have any material legal proceedings.
F-29
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 — SEGMENT REPORTING
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
The management of the Company concludes that it
has only
NOTE 15 — SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before these financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2023, up through August 23, 2023, when the Company issued the unaudited condensed consolidated financial statements.
F-30
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of the financial condition and results of operations is based upon and should be read in conjunction with the unaudited financial results and statements of Jin Medical International Ltd. (the “Company,” “we,” “our,” or “us”) for the six (6) months ended March 31, 2023, furnished as Exhibit 99.1. to this report.
Overview
Jin Medical International Ltd. through the China-based VIE, Changzhou Zhongjin, and its subsidiaries, design and manufacture wheelchairs and living aids products for people with disabilities, the elderly, and people recovering from injury. Our business focuses primarily on wheelchairs. Currently, our living aids products are only sold to a few selected customers to test the markets for these products. The majority of our products are sold to dealers in Japan and China, while a small number of our products are also sold to dealers located in other regions including the United States, Canada, Australia, Korea, Israel, Singapore, and others.
Key Financial Performance Indicators
We consider a variety of financial and operating measures in assessing the performance of our business. The key financial performance measures we use are revenue, gross profit and gross margin, operating expenses, and operating income. Our review of these indicators facilitates timely evaluation of the performance of our business and effective communication of results and key decisions, allowing our business to respond promptly to competitive market conditions and different demands and preferences from our customers. The key measures that we use to evaluate the performance of our business are set forth below and are discussed in greater details under “A. Operating Results”.
Revenue
Our revenue is derived primarily from sales of wheelchairs and wheelchair components and living aids products. We rely to a significant extent on our network of dealers to sell our products to end customers. We distribute approximately 98% of our products through qualified dealers. Our revenue is therefore affected by our ability to establish new relationships and maintain relationships with existing dealers. In addition, revenue is also impacted by competition, current economic conditions, pricing, inflation, and fluctuations in foreign currencies.
Gross Profit and Gross Margin
Gross profit is the difference between revenue and cost of revenue. Our cost of revenue consists of raw materials, direct labor and other related production overhead. Raw materials account for the largest portion of our cost of revenue. Supplies and prices of our various raw materials can be affected by worldwide supply and demand factors, as well as other factors beyond our control such as financial market trends. We purchase, directly and indirectly through third-party suppliers, significant amounts of aluminum, steel, plastics, titanium alloys, as well as other commodity-sensitive raw materials annually. In particular, in past years, steel and aluminum prices have experienced volatility which has been unforeseen and unexpected. Raw material price fluctuations may adversely affect our operating results and profitability. From time to time, we purchase and store steel, iron, aluminum, and other raw materials up to 3 months in advance to provide economic buffers regarding portions of our pricing and supply. Due to the impact of Covid-19, some of our wheelchair components, such as tires, we had places orders up to 6 months in advance from suppliers in Taiwan and Japan since October 2021. However, the orders from these suppliers have returned to 3 months for delivery since February 2023. For the majority of our raw material purchases we do not typically enter into any fixed-price contracts and may not be able to accurately anticipate future raw material prices for those inputs.
Over the past years, we have invested significant time and energy to achieve cost reduction and productivity improvement in our supply chain. We have focused on reducing raw materials costs through increased volume buying, direct purchasing, and price negotiations. In addition, we achieve manufacturing efficiency by standardizing and optimizing certain procedures across our production cycle such as procurement, engineering and product development, manufacturing, dealer management, and pricing. On the other hand, labor is a primary component in the cost of operating our business. Increased labor costs due to competition, increased minimum wage or employee benefits costs, or otherwise, would adversely impact our operating expenses. And our success also depends on our ability to attract, motivate, and retain qualified employees, including senior management and technically competent employees, to keep pace with our growth strategy.
Gross margin is gross profit divided by revenue. Gross margin is a measure used by management to indicate whether we are selling our products at an appropriate gross profit. Our gross margin is impacted by our product mix and availability, as some new or high-end products generally provide higher gross margins. Gross margin is also impacted by prices of our products. We consider many factors such as cost of revenue increases and competitive pricing strategies. We have historically been able to launch new products with higher prices, and these new products can reflect market trends and are designed to meet customer new demand. To achieve this, we seek to maintain continued focus on our R&D efforts that we believe will enhance our existing market positions and allow us to compete into new, attractive, wheelchair and other living aids products categories.
Operating Expenses
Our operating expenses consist of selling expenses, general and administrative expenses and research and development expenses.
Our selling expenses primarily include salaries and welfare benefit expenses paid to our sales personnel, advertising expenses to increase our brand awareness, shipping and delivery expenses, expenses incurred for export and custom clearance, our business travel, meals and other sales promotion and marketing activities related expenses. Our selling expenses accounted for 2.1% and 2.4% of our total revenue for the fiscal years ended September 30, 2022 and 2021, respectively. Our selling expenses accounted for 2.0% and 2.1% of our total revenue for the six months ended March 31, 2023 and 2022, respectively. We expect that our overall selling expenses, including but not limited to, advertising expenses, brand promotion expenses and salaries, will continue to increase in the foreseeable future if our business further grows.
Our general and administrative expenses primarily consist of employee salaries, welfare and insurance expenses, depreciation, bad debt reserve expenses, inspection and maintenance expenses, office supply and utility expenses, business travel and meal expenses and professional service expenses. General and administrative expenses were 9.2% and 8.1% of our revenue for the fiscal years ended September 30, 2022 and 2021, respectively. General and administrative expenses were 9.0% and 10.8% of our revenue for the six months ended March 31, 2023 and 2022, respectively. We expect our general and administrative expenses, including, but not limited to, salaries and business consulting expenses, to continue to increase in the foreseeable future, as we plan to hire additional personnel and incur additional expenses in connection with the expansion of our business operations. We expect our professional fees for legal, audit, and advisory services to increase as we became a public company upon the completion of initial public offering.
Our research and development expenses primarily consist of salaries, welfare and insurance expenses paid to our employees involved in the research and development activities, materials and supplies used in the development and testing new wheelchair and living aids products, depreciation and other miscellaneous expenses. Research and development expenses were 9.9% and 7.5% of our revenue for the fiscal years ended September 30, 2022 and 2021, respectively. Research and development expenses were 6.2% and 9.4% of our revenue for the six months ended March 31, 2023 and 2022, respectively. The decrease is primarily attributable to the decreased research and development activities towards products development, as some of the research and development projects have completed during the six months ended March 31, 2023. However, upon the completion of our initial public offering, we have launched new research and development projects, and will continue to develop new products and diversify our product offerings to satisfy customer demand, we expect our research and development expenses to increase in the foreseeable future.
2
Operating Income
Operating income is the difference between gross profit and operating expenses. Operating income excludes interest expenses, other income (expenses), and income tax expenses. We use operating income as an indicator of the productivity of our business and our ability to manage expenses.
A. Operating Results
Comparison of Results of Operations for the Six Months Ended March 31, 2023 and 2022
The following table summarizes the results of our operations during the six months ended March 31, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
| For the six months ended March 31, | Variance | |||||||||||||||
| 2023 | 2022 | Amount | % | |||||||||||||
| Revenue | $ | 10,253,163 | $ | 9,467,621 | $ | 785,542 | 8.3 | % | ||||||||
| Cost of revenue and related tax | 6,722,290 | 6,335,099 | 387,191 | 6.1 | % | |||||||||||
| Gross profit | 3,530,873 | 3,132,522 | 398,351 | 12.7 | % | |||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling expenses | 206,194 | 201,740 | 4,454 | 2.2 | % | |||||||||||
| General and administrative expenses | 922,188 | 1,021,717 | (99,529 | ) | (9.7 | )% | ||||||||||
| Research and development expenses | 631,034 | 892,524 | (261,490 | ) | (29.3 | )% | ||||||||||
| Total operating expenses | 1,759,416 | 2,115,981 | (356,565 | ) | (16.9 | )% | ||||||||||
| INCOME FROM OPERATIONS | 1,771,457 | 1,016,541 | 754,916 | 74.3 | % | |||||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
| Interest income, net | 94,571 | 69,795 | 24,776 | 35.5 | % | |||||||||||
| Foreign exchange gain (loss) | (63,253 | ) | 60,461 | (123,714 | ) | (204.6 | )% | |||||||||
| Other income, net | 167,625 | 129,475 | 38,150 | 29.5 | % | |||||||||||
| Total other income, net | 198,943 | 259,731 | (60,788 | ) | (23.4 | )% | ||||||||||
| INCOME BEFORE INCOME TAX PROVISION | 1,970,400 | 1,276,272 | 694,128 | 54.4 | % | |||||||||||
| INCOME TAX PROVISION | 204,053 | 50,408 | 153,645 | 304.8 | % | |||||||||||
| NET INCOME | $ | 1,766,347 | $ | 1,225,864 | $ | 540,483 | 44.1 | % | ||||||||
Revenues
We generate revenue primarily from wheelchair products and wheelchair components and living aids products sold in Japan, China and other countries. Our wheelchair products consist primarily of manual wheelchairs. Our other products consist of wheelchair components and living aids products such as shared healthcare products and related infrastructures, oxygen concentrators, bath aids and rehabilitative devices. Total revenue increased by $785,542, or 8.3%, from $9,467,621 for the six months ended March 31, 2022 to $10,253,163 for the six months ended March 31, 2023.
3
The following table sets forth the breakdown of our revenue for the six months ended March 31, 2023 and 2022, respectively:
| For the six months ended March 31, | ||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||
| Amount | Amount | Amount | % | |||||||||||||
| Wheelchair | $ | 8,381,323 | $ | 7,949,623 | $ | 431,700 | 5.4 | % | ||||||||
| Wheelchair components and other products | 1,871,840 | 1,517,998 | 353,842 | 23.3 | % | |||||||||||
| Total revenue | $ | 10,253,163 | $ | 9,467,621 | $ | 785,542 | 8.3 | % | ||||||||
Revenue from wheelchair products accounted for 81.7% and 84.0% of our total revenue for the six months ended March 31, 2023 and 2022, respectively. Revenue from wheelchair products increased by $431,700, or 5.4%, from $7,949,623 for the six months ended March 31, 2022 to $8,381,323 for the six months ended March 31, 2023. The increase in revenue from wheelchair products is mainly due to the recovery of our business operations from the COVID-19 pandemic during the six months ended March 31, 2023. In early December 2022, China announced a nationwide loosening of its zero-covid policy, and most of the travel restrictions and quarantine requirements were lifted since December 2022. Although there were significant surges of COVID-19 cases in many cities in China after the lifting of these restrictions, the spread of the COVID-19 was slowed down and it was successfully under control since January 2023, and our business operations have gradually recovered to the level prior to the COVID-19 pandemic which caused an increase in revenue from wheelchair products. The increase was partially offset by the depreciation of RMB against U.S. dollars. The average translation rate for the six months ended March 31, 2023 and 2022 was at RMB 1=US$0.1433 and RMB 1=US$0.1570, respectively, resulting in a decrease of 8.7%.
Revenue from wheelchair components and other products accounted for 18.3% and 16.0% of our total revenue for the six months ended March 31, 2023 and 2022, respectively. Revenue from wheelchair components and other products increased by $353,842, or 23.3%, from $1,517,998 for the six months ended March 31, 2022 to $1,871,840 for the six months ended March 31, 2023. The increase was mainly due to the increased revenue from other products during the six months ended March 31, 2023. Due to the rapid growth of sharing economy in China in recent years, shared wheelchairs and other healthcare products have been mushroomed in the hospitals in China. Previously, we only sold shared wheelchairs to our customers, however, with the increasing demands from our customers, we developed our own shared wheelchair related infrastructures and other shared healthcare products, and started to sell them to our customers during the six months ended March 31, 2023. Meanwhile, the increase was also due to more sales orders of wheelchair components, such as chair stakes, bed stakes and trundles, we received during the six months ended March 31, 2023. The increase was partially offset by the depreciation of RMB against U.S. dollar as mentioned above.
Cost of Revenues and Related Tax
Our cost of revenues and related tax primarily consists of inventory costs (raw materials, labor, packaging cost, depreciation and amortization, third-party products purchase price, freight costs and overhead) and business tax. Cost of revenues and related tax generally changes as our production costs change, which are affected by factors including the market price of raw materials, labor productivity, etc. Our overall cost of revenue and related tax increased by $387,191 or 6.1%, from $6,335,099 for the six months ended March 31, 2022 to $6,722,290 for the six months ended March 31, 2023.
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The following table sets forth the breakdown of our cost of revenue and related tax for the six months ended March 31, 2023 and 2022, respectively:
| For the six months ended March 31, | ||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||
| Amount | Amount | Amount | % | |||||||||||||
| Wheelchair | $ | 5,628,285 | $ | 5,446,096 | $ | 182,189 | 3.3 | % | ||||||||
| Wheelchair components and others | 1,094,005 | 889,003 | 205,002 | 23.1 | % | |||||||||||
| Total cost of revenue and related tax | $ | 6,722,290 | 6,335,099 | 387,191 | 6.1 | % | ||||||||||
Cost of revenue and related tax from wheelchair products increased by $182,189, or 3.3%, from $5,446,096 for the six months ended March 31, 2022 to $5,628,285 for the six months ended March 31, 2023. The increase in cost of revenue and related tax from wheelchair products was in line with the increase in revenue from wheelchair products.
Cost of revenue and related tax from wheelchair components and other products increased by $205,002, or 23.1%, from $889,003 for the six months ended March 31, 2022 to $1,094,005 for the six months ended March 31, 2023. The increase in cost of revenue and related tax from wheelchair components and others products was in line with the increase in revenue from wheelchair components and others products.
Gross profit
Our gross profit increased by $398,351, or 12.7%, from $3,132,522 for the six months ended March 31, 2022 to $3,530,873 for the six months ended March 31, 2023. The increase was mainly attributable to the increased gross profit from wheelchair products and wheelchair components and others. Our gross margin remained relatively stable with a slighted increase of 1.3 percentage points from 33.1% for the six months ended March 31, 2022 to 34.4%for the six months ended March 31, 2023.
The following table sets forth the breakdown of our gross profit for the six months ended March 31, 2023 and 2022, respectively:
| For the six months ended March 31, | Variance | |||||||||||||||||||||||
| 2023 | Margin % | 2022 | Margin % | Amount | % | |||||||||||||||||||
| Wheelchair | $ | 2,753,038 | 32.8 | % | $ | 2,503,527 | 31.5 | % | $ | 249,511 | 10.0 | % | ||||||||||||
| Wheelchair components and others | 777,835 | 41.6 | % | 628,995 | 41.4 | % | 148,840 | 23.7 | % | |||||||||||||||
| Total Gross Profit and Margin % | $ | 3,530,873 | 34.4 | % | $ | 3,132,522 | 33.1 | % | $ | 398,351 | 12.7 | % | ||||||||||||
The gross profit of wheelchair products increased by $249,511, or 10.0%, from $2,503,527 for the six months ended March 31, 2022 to $2,753,038 for the six months ended March 31, 2023, which was in line with the increase in revenue from wheelchair products. The gross margin remained relatively stable with a slighted increase by 1.3% from 31.5% for the six months ended March 31, 2022 to 32.8% for the six months ended March 31, 2023. The increase was mainly due to the decreased cost per unit as a result of the overall increased production quantity after we recovered from the COVID-19 pandemic during the six months ended March 31, 2023 as compared to the same period last year.
The gross profit of wheelchair components and other products increased by $148,840, or 23.7%, from $628,995 for the six months ended March 31, 2022 to $777,835 for the six months ended March 31, 2023, which was in line with the increase in revenue from wheelchair components and other products. The gross margin of wheelchair components and other products remained stable with a slighted increase by 0.2% from 41.4% for the six months ended March 31, 2022 to 41.6% for the six months ended March 31, 2023.
5
Operating expenses
The following table sets forth the breakdown of our operating expenses for the six months ended March 31, 2023 and 2022, respectively:
| For the six months ended March 31, | ||||||||||||||||||||||||
| 2023 | 2022 | Variance | ||||||||||||||||||||||
| Amount | % of revenue | Amount | % of revenue | Amount | % | |||||||||||||||||||
| Total revenue | $ | 10,253,163 | 100.0 | % | $ | 9,467,621 | 100.0 | % | $ | 785,542 | 8.3 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Selling expenses | 206,194 | 2.0 | % | 201,740 | 2.1 | % | 4,454 | 2.2 | % | |||||||||||||||
| General and administrative expenses | 922,188 | 9.0 | % | 1,021,717 | 10.8 | % | (99,529 | ) | (9.7 | )% | ||||||||||||||
| Research and development expenses | 631,034 | 6.2 | % | 892,524 | 9.4 | % | (261,490 | ) | (29.3 | )% | ||||||||||||||
| Total operating expenses | $ | 1,759,416 | 17.2 | % | $ | 2,115,981 | 22.3 | % | $ | (356,565 | ) | (16.9 | )% | |||||||||||
Selling expenses
Our selling expenses primarily include salaries and welfare benefit expenses paid to our sales personnel, advertising expenses to increase our brand awareness, shipping and delivery expenses, expenses incurred for export and custom clearance, our business travel, meals and other sales promotion and marketing activities related expenses.
Our selling expenses remained relatively stable with a slight increase by $4,454, or 2.2%, from $201,740 for the six months ended March 31, 2022 to $206,194 for the six months ended March 31, 2023. The increase was mainly due to the increased shipping, export and custom clearance fees which is in line with the increased revenue during the six months ended March 31, 2023. However, the increase was partially offset by the decreased promotion and exhibition, as well as the depreciation of RMB against U.S. dollar as mentioned above. As a percentage of revenues, our selling expenses accounted for 2.0% and 2.1% of our total revenue for the six months ended March 31, 2023 and 2022, respectively.
General and administrative expenses
Our general and administrative expenses primarily consist of employee salaries, welfare and insurance expenses, depreciation, bad debt reserve expenses, inspection and maintenance expenses, office supply and utility expenses, business travel and meals expenses and professional service expenses.
Our general and administrative expenses decreased by $99,529, or 9.7%, from $1,021,717 for the six months ended March 31, 2022 to $922,188 for the six months ended March 31, 2023. Our general and administrative expenses (excluding the impact of foreign currency translation) remained relatively stable with a slight decrease by 1.0% for the six months ended March 31, 2023 as compared to the same period last year. However, the decrease was also exacerbated by the depreciation of the RMB against U.S. dollars of 8.7%, as mentioned above. As a percentage of revenues, our general and administrative expenses accounted for 9.0% and 10.8% of our total revenue for the six months ended March 31, 2023 and 2022, respectively.
6
Research and development expenses
Our research and development expenses primarily consist of salaries, welfare and insurance expenses paid to our employees involved in the research and development activities, materials and supplies used in the development and testing new wheelchair products, depreciation and other miscellaneous expenses.
Our research and development expenses decreased by $261,490, or, 29.3%, from $892,524 for the six months ended March 31, 2022 to $631,034 for the six months ended March 31, 2023. The decrease is primarily attributable to the decreased research and development activities towards products development, causing a decrease in staff costs and cost related to materials and supplies used, as well as a decrease in designing and outsourcing expenses, as some of the research and development projects have completed during the six months ended March 31, 2023. The decrease was also due to the depreciation of RMB against U.S. dollar as mentioned above. As a percentage of revenues, research and development expenses accounted for 6.2% and 9.4% of our total revenue for the six months ended March 31, 2023 and 2022, respectively.
Other income (expenses)
Our other income (expenses) primarily includes interest expenses incurred on our short-term bank loans, interest income from our short-term investments, foreign exchange transaction gain (loss), government subsidies and others.
Our net interest income was $94,571 for the six months ended March 31, 2023 as compared to net interest income of $69,795 for the six months ended March 31, 2022. The increase in interest income was primarily due to the increased interest income due to more short-term investments we invested as well as increased cash deposited in banks during the six months ended March 31, 2023.
Our foreign exchange transaction loss was $63,253 for the six months ended March 31, 2023, as compared to a foreign exchange transaction gain of $60,461 for the six months ended March 31, 2022, primarily due to the significant fluctuation in foreign exchange rate on our accounts receivables that denominated in foreign currencies such as U.S. dollars and Japanese Yen during the six months ended March 31, 2023.
Our net other income was $167,625 for the six months ended March 31, 2023 as compared to $129,475 for the six months ended March 31, 2022. The increase was mainly due to the increased government subsidies we received during the six months ended March 31, 2023.
Provision for income taxes
Our provision for income taxes was $204,053 for the six months ended March 31, 2023, an increase of $153,645, or 304.8%, from $50,408 for the six months ended March 31, 2022, primarily due to our increased taxable income of Changzhou Zhongjin. Our effective income tax rate increased by 6.5% from 3.9% in the six months ended March 31, 2022 to 10.4% in the six months ended March 31, 2023, primarily due to the decreased research and development tax credit that we were eligible to use to deduct from our taxable income, as we incurred lower research and development expenses in the six months ended March 31, 2023 as compared to the same period last year.
Net income
As a result of the foregoing, we reported a net income of $1,766,347 for the six months ended March 31, 2023, representing a $540,483, or 44.1% increase from a net income of $1,225,864 for the six months ended March 31, 2022.
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B. Liquidity and Capital Resources
On March 30, 2023, we closed our initial public offering (the “Offering”) of 1,000,000 ordinary shares, par value $0.001 per share (the “Ordinary Shares”), at a public offering price of $8.00 per share for total gross proceeds of $8.0 million before deducting underwriting discounts and offering expenses. Net proceeds of our Offering were approximately $6.8 million. In addition, we granted the representative of the underwriters a 45-day option to purchase up to an additional 150,000 Ordinary Shares at the public offering price. On April 6, 2023, the representative of the underwriters partially exercised the over-allotment option to purchase an additional 47,355 Ordinary Shares at the Offering price of $8.00 per share for total gross proceeds of $378,840 before deducting underwriting discounts and commissions. Our Ordinary Shares commenced trading under the symbol “ZJYL” on the Nasdaq Capital Market on March 28, 2023.
Substantially all of our operations are conducted in China and all of our revenue, expenses, cash are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control procedures imposed by the PRC government authorities may restrict the ability of our PRC operating entities to transfer their net assets to us through loans, advances or cash dividends. See Risk Factors - Government control in currency conversion may adversely affect our financial condition, our ability to remit dividends, and the value of your investment. Furthermore, as an offshore holding company with PRC entities, we may only transfer funds to or finance our PRC operating entities by means of loans or capital contributions. Any capital contributions or loans that we make to our PRC operating entities, including from the proceeds of this offering, are subject to PRC regulations and approvals. See Risk Factors - PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from using proceeds from this offering and/or future financing activities to make loans or additional capital contributions to our PRC operating entities. Please refer to these two risk factors in our registration statement on Form 424B4 for the fiscal year ended September 30, 2022, particularly under the caption “RISK FACTORS”.
As of March 31, 2023, we had $8,684,188 in cash as compared to $4,792,632 as of September 30, 2022, and $4,696,503 in short-term investments as compared to $2,276,158 as of September 30, 2022. We also had $4,161,282 in accounts receivable as compared to $4,084,349 as of September 30, 2022. Our accounts receivable primarily include balances due from third party customers and related parties for our wheelchair and wheelchair component products sold and delivered to third party customers and related parties. As of the date of this report, approximately 88.8%, or $3.4 million of our net accounts receivable balance due from third parties as of March 31, 2023 have been collected. We expect to collect the remaining balance by September 30, 2023. Meanwhile, 72.1%, or $0.2 million of our outstanding balance due from the related parties as of March 31, 2023 have been collected, and the remaining balance is expected to be collected by September 30, 2023. Collected accounts receivable will be used as working capital in our operations. As of March 31, 2023, we had approximately $1.5 million in a short-term bank loan.
As of March 31, 2023, our working capital balance was approximately $21.6 million. In assessing our liquidity, management monitors and analyzes our cash on-hand, our ability to generate sufficient revenue in the future, and our operating and capital expenditure commitments. We believe that our current cash and cash flows provided by operating activities, borrowings from banks, as well as the proceeds we received from the Offering will be sufficient to meet our working capital needs in the foreseeable future. However, if we were to experience an adverse operating environment or incur unanticipated capital expenditures, or if we decided to accelerate our growth, then additional financing may be required. Our capital expenditures, including infrastructure to support ongoing operational initiatives have been and will continue to be significant. We cannot guarantee, however, that additional financing, if required, would be available at all or on favorable terms. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders.
In the coming years, we will be looking to financing sources, such as additional bank loans and equity financing, to meet our cash needs. While facing uncertainties in regards to the size and timing of capital raises, we are confident that we can continue to meet operational needs mainly by utilizing cash flows generated from our operating activities and shareholder working capital funding, as necessary.
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Cash Flows
Six Months ended March 31, 2023 and 2022
The following table sets forth summary of our cash flows for the periods indicated:
| For the six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | 2,743,493 | $ | (51,274 | ) | |||
| Net cash used in investing activities | (7,073,829 | ) | (40,816 | ) | ||||
| Net cash provided by (used in) financing activities | 8,099,888 | (6,468 | ) | |||||
| Effect of exchange rate change on cash | 122,004 | 68,353 | ||||||
| Net increase (decrease) in cash | 3,891,556 | (30,205 | ) | |||||
| Cash, beginning of period | 4,792,632 | 3,672,260 | ||||||
| Cash, end of period | $ | 8,684,188 | $ | 3,642,055 | ||||
Operating Activities
Net cash provided by operating activities was $2,743,493 for the six months ended March 31, 2023, mainly derived from a net income of $1,766,347 for the period, and net changes in our operating assets and liabilities, which mainly included a decrease in inventories of $447,024 and an increase in accounts payable of $348,579 during the six months ended March 31, 2023.
Net cash used in operating activities was $51,274 for the six months ended March 31, 2022, mainly derived from a net income of $1,225,864 for the period, and net changes in our operating assets and liabilities, which mainly included a decrease in accounts receivable due from third parties of $1,020,725 as we have enhanced our procedure on the collection of accounts receivable balances due from third parties, a decrease in accounts payable of $1,114,051, an increase in inventories of $1,155,446, due to the delay in delivery of our products which was resulted from the travel restriction caused in resurgence of COVID-19 in March 2022, as well as a decrease in deferred revenue of $681,591 during the six months ended March 31, 2022.
Investing Activities
Net cash used in investing activities amounted to $7,073,829 for the six months ended March 31, 2023, and primarily included the payments for short-term investments of $3,152,600 and advances made to related parties of $4,760,469.
Net cash used in investing activities amounted to $40,816 for the six months ended March 31, 2022, and primarily included the payments for short-term investments of $4,239,000, which were partially offset by the redemption of short-term investments of $3,796,902 and repayment of advances made to related parties of $415,410.
Financing Activities
Net cash provided by financing activities amounted to $8,099,888 for the six months ended March 31, 2023, which included the proceeds from short-term bank loan of $1,433,000 and gross proceeds from initial public offerings of $8,000,000, which was partially offset by direct costs disbursed from initial public offerings proceeds of $1,212,779.
Net cash used in financing activities amounted to $6,468 for the six months ended March 31, 2022, which included repayment of amount due to related parties of $6,468.
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Contractual obligations
As of March 31, 2023, our contractual obligations were as follows:
| Contractual obligations | Total | Less than 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | Thereafter | |||||||||||||||||||||
| Future lease payments (1) | $ | 17,779 | $ | 15,375 | $ | 175 | $ | 175 | $ | 175 | $ | 175 | $ | 1,704 | ||||||||||||||
| Short-term bank loan (2) | 1,456,000 | 1,456,000 | - | - | - | - | - | |||||||||||||||||||||
| Total | $ | 1,473,779 | $ | 1,471,375 | $ | 175 | $ | 175 | $ | 175 | $ | 175 | $ | 1,704 | ||||||||||||||
| (1) | We lease offices and employee dormitories. As of March 31, 2023, our future lease payments totaled $17,779. |
| (2) | Represents the outstanding principal balance of short-term loan from bank. |
Trend Information
Other than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of March 31, 2023 and September 30, 2022.
Inflation
Inflation does not materially affect our business or the results of our operations.
Seasonality
We have not experienced, and do not expect to experience, any seasonal fluctuations in our results of operations for either our wheelchair business or living aids products business.
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Key Factors that Affect Our Results of Operations
We believe the following key factors may affect our financial condition and results of operations:
Our Ability to Attract Additional Dealers and Expand our Dealer Network
We sell our products through a network of qualified dealers, many of whom also sell products of our competitors. Our business is therefore affected by our ability to establish new relationships and maintain relationships with existing dealers. The geographic coverage of our dealers and their individual business conditions can affect the ability of our dealers to sell our products to end customers. One major dealer and its subsidiaries represented 78.0%, 82.1%, 80.5% and 83.2% of our revenue for the six months ended March 31, 2023 and 2022, and for the fiscal years 2022 and 2021, respectively. There may be consolidation and changes in the dealership landscape over time which could affect the performance of our existing dealers. Thus, if we are unable to secure business relationship with our existing dealers or recruit more reputable and qualified dealers, our results of operations may be adversely and materially impacted. If we are unable to renew our contracts with our largest dealer or re-negotiate an agreement under the same or more advantageous terms, our sales and results of operations could be adversely affected. Therefore, the success of our business in the future depends on our efforts to expand our distribution network and attract new dealers in both existing and new markets. The success in expanding our distribution network will depend upon many factors, including our ability to form relationships with, and manage an increasing number of, dealers and optimize our network of dealers. If our marketing efforts fail to convince dealers to accept our products, we may find it difficult to maintain the existing level of sales or to increase such sales. Furthermore, in new markets we may fail to anticipate competitive conditions that are different from those in our existing markets. Should this happen, our net revenues would decline and our growth prospectus would be severely impaired.
Our Ability to Increase Awareness of Our Brands and Develop Customer Loyalty
Our portfolio of both wheelchairs and living aids products is comprised of quality products. Our brands are integral to our sales and marketing efforts. We believe that maintaining and enhancing our brand name recognition in a cost-effective manner is critical to achieving widespread acceptance of our current and future products and is an important element in our effort to increase our customer base. Successful promotion of our brand names will depend largely on our marketing efforts and ability to provide reliable and quality products at competitive prices. Brand promotion activities may not necessarily yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur in marketing activities. If we fail to successfully promote and maintain our brands, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract new customers or retain our existing customers, in which case our business, operating results and financial condition, would be materially adversely affected.
Our Ability to Control Costs and Expenses and Improve Our Operating Efficiency
Our business growth is dependent on our ability to attract and retain qualified and productive employees, identify business opportunities, secure new contracts with customers and our ability to control costs and expenses to improve our operating efficiency. Our inventory costs (including raw materials, direct labor and related production overhead) have a direct impact on our profitability. The raw materials used in the manufacturing of our products are subject to price volatility and inflationary pressures. Our success is dependent, in part, on our ability to reduce our exposure to increase in those costs through a variety of ways, while maintaining and improving margins and market share. Raw materials price increases may offset our productivity gains and price increases and may adversely impact our financial results. In addition, our staffing costs (including payroll and employee benefit expenses) and operating expenses also have a direct impact on our profitability. Our ability to drive the productivity of our staff and enhance our operating efficiency affects our profitability. To the extent that the costs we are required to pay to our suppliers and our staff exceed our estimates, our profits may be impaired. If we fail to implement initiatives to control costs and improve our operating efficiency over time, our profitability will be negatively impacted.
11
Our Ability to Compete Successfully
The wheelchair and living aids markets are developing rapidly, and related technology trends are constantly evolving. This results in the frequent introduction of new products and services, relatively short product design cycles and significant price competition. We have competitors in China and Japan that manufacture products similar to ours. Some of our current or potential competitors may have significantly greater financial resources and expertise in research and development, manufacturing, product testing, obtaining regulatory approvals and marketing approved products than we do, which could result in our competitors establishing a strong market position before our new products are able to enter the market. Additionally, technologies developed by our competitors may render our product uneconomical or obsolete. If we do not compete effectively, our operating results could be harmed.
A Severe or Prolonged Slowdown in the Global or Chinese Economy Could Materially and Adversely Affect Our Business and Our Financial Condition
The growth of the Chinese economy has been slowing down since 2012 and this slowdown may continue in the future. There is considerable uncertainty over trade conflicts between the United States and China and the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. The withdrawal of these expansionary monetary and fiscal policies could lead to a contraction. There continue to be concerns over unrest and terrorist threats in the Middle East, Europe, and Africa, which have resulted in volatility in oil and other markets. There are also concerns about the relationships between China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. The eruption of armed conflict could adversely affect global or Chinese discretionary spending, either of which could have a material and adverse effect on our business, results of operation in financial condition. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy would likely materially and adversely affect our business, results of operations and financial condition. In addition, continued turbulence in the international markets may adversely affect our ability to access capital markets to meet liquidity needs.
COVID-19 Impact
Our business has been adversely affected by the COVID-19 pandemic. The World Health Organization declared the COVID-19 a pandemic on March 11, 2020, after the virus speeded from China to other countries around the world.
Due to a resurgence of the COVID-19 pandemic in March 2022 (“2022 Outbreak”) in China, there have been delays in the purchase of raw material supplies and delivery of products to domestic customers in China on a timely basis as a consequence of travel restrictions. Shipments and customer clearance for overseas sales were also delayed due to the stricter border control protocols. Although the situation has eased since mid-May 2022, the number of orders placed by the customers were affected as the business of those customers were negatively impacted by the 2022 Outbreak. In early December 2022, China announced a nationwide loosening of its zero-covid policy, and most of the travel restrictions and quarantine requirements were lifted since December 2022. Although there were significant surges of COVID-19 cases in many cities in China after the lifting of these restrictions, the spread of the COVID-19 was slowed down and it was successfully under control since January 2023, and the Company’s business operations have been recovered to the level prior to the COVID-19 pandemic. Therefore, our revenue and net income (excluding the impact of foreign currency translation) increased by 18.7% and 57.9%, respectively. However, the increase was partially offset by the depreciation of the RMB against U.S. dollars of 8.7%, which caused an increase in revenue and net income by 12.7% and 44.1%, respectively, during the six months ended March 31, 2023 as compared to the same period last year. Although, the spread of the COVID-19 appears to be under control as of the date of this report, the extent of the future impact of COVID-19 is still highly uncertain and cannot be predicted, and we may have to scale back again in the future. If this pandemic persists, commercial activities throughout the world could be further curtailed with decreased consumer spending, business operation disruptions, interrupted supply chains, difficulties in travel, and reduced workforces. As such, the extent to which the COVID-19 pandemic may impact our operations and financial results in the long-run will depend on its further developments in China and worldwide, which we cannot predict with a reasonable degree of certainty.
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E. Critical Accounting Estimates
We prepare our unaudited condensed consolidated financial statements and consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future based on available information, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
When reading our unaudited condensed consolidated financial statements and consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following: (i) revenue recognition; (ii) income taxes and (iii) fair value measurements. See “Note 2—Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements and consolidated financial statements for the disclosure of these accounting policies. We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.
Impairment of long-lived assets
We evaluate our long-lived assets, including property, plant and equipment and land use right for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, we evaluate the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, we recognize an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered through the related future net cash flows, we did not recognize any impairment loss on long-lived assets for the years ended September 30, 2022 and 2021, and for the six months ended March 31, 2023 and 2022.
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Allowance for doubtful accounts
We determine the adequacy of reserves for doubtful accounts based on general and individual account analysis and historical collection trend. We establish general and specific allowance when there is objective evidence that we may not be able to collect amounts due. The allowance is based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Our allowance for accounts receivable as of March 31, 2023, September 30, 2022 and September 30, 2021 amounted to $185,289, $114,486 and $96,688, respectively.
Income taxes
We are required to make estimates and apply our judgements in determining the provision for income tax expenses for financial reporting purpose based on tax laws in various jurisdictions in which we operate. In calculating the effective income tax rate, we make estimates and judgements, including the calculation of tax credits and the timing differences of recognition of income and expenses between financial reporting and tax reporting. These estimates and judgements may result in adjustments of pre-tax income amount filed with local tax authorities in accordance with relevant local tax rules and regulations in various tax jurisdictions. Although we believe that our estimates and judgments are reasonable, actual results may be materially different from the estimated amounts. Changes in these estimates and judgements may result in material increase or decrease in our provision for income tax expenses.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry forwards. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. When we determine and quantify the valuation allowances, we consider such factors as projected future taxable income, the availability of tax planning strategies, the historical taxable income/losses in prior years, and future reversals of existing taxable temporary differences. The assumptions used in determining projected future taxable income require significant judgment. Actual operating results in future years could differ from our current assumptions, judgments and estimates. Changes in these estimates and assumptions may materially affect the tax position measurement and financial statement recognition. If, in the future, we determine that we would not be able to realize our recorded deferred tax assets, an increase in the valuation allowance would decrease our earnings in the period in which such a determination is made. As of March 31, 2023, September 30, 2022 and September 30, 2021, we recorded deferred tax assets of $200,006, $259,460 and $196,350, net of valuation allowance of $15,735, $14,248 and $13,636, respectively.
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Document And Entity Information |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Document Information Line Items | |
| Entity Registrant Name | JIN MEDICAL INTERNATIONAL LTD. |
| Document Type | 6-K |
| Current Fiscal Year End Date | --09-30 |
| Amendment Flag | false |
| Entity Central Index Key | 0001837821 |
| Document Period End Date | Mar. 31, 2023 |
| Document Fiscal Year Focus | 2023 |
| Document Fiscal Period Focus | Q2 |
| Entity File Number | 001-41661 |
Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Mar. 31, 2023 |
Sep. 30, 2022 |
||
|---|---|---|---|---|
| Statement of Financial Position [Abstract] | ||||
| Ordinary shares, par value (in Dollars per share) | [1] | $ 0.001 | $ 0.001 | |
| Ordinary shares, shares authorized | [1] | 50,000,000 | 50,000,000 | |
| Ordinary shares, shares issued | [1] | 7,750,000 | 6,750,000 | |
| Ordinary shares, shares outstanding | [1] | 7,750,000 | 6,750,000 | |
| ||||
Unaudited Condensed Consolidated Statements of Comprehensive Income - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
| REVENUE | ||||
| Revenue - third party | $ 9,890,292 | $ 9,061,177 | ||
| Revenue - related party | 362,871 | 406,444 | ||
| Total revenue | 10,253,163 | 9,467,621 | ||
| COST OF REVENUE AND RELATED TAX | ||||
| Cost of revenue | 6,620,447 | 6,255,785 | ||
| Business and sales related tax | 101,843 | 79,314 | ||
| Total cost of revenue and related tax | 6,722,290 | 6,335,099 | ||
| GROSS PROFIT | 3,530,873 | 3,132,522 | ||
| OPERATING EXPENSES | ||||
| Selling expenses | 206,194 | 201,740 | ||
| General and administrative expenses | 922,188 | 1,021,717 | ||
| Research and development expenses | 631,034 | 892,524 | ||
| Total operating expenses | 1,759,416 | 2,115,981 | ||
| INCOME FROM OPERATIONS | 1,771,457 | 1,016,541 | ||
| OTHER INCOME (EXPENSE) | ||||
| Interest income, net | 94,571 | 69,795 | ||
| Foreign exchange gain (loss) | (63,253) | 60,461 | ||
| Other income, net | 167,625 | 129,475 | ||
| Total other income, net | 198,943 | 259,731 | ||
| INCOME BEFORE INCOME TAX PROVISION | 1,970,400 | 1,276,272 | ||
| PROVISION FOR INCOME TAXES | 204,053 | 50,408 | ||
| NET INCOME | 1,766,347 | 1,225,864 | ||
| Foreign currency translation gain | 570,160 | 268,280 | ||
| TOTAL COMPREHENSIVE INCOME | $ 2,336,507 | $ 1,494,144 | ||
| Earnings per common share - basic (in Dollars per share) | $ 0.26 | $ 0.18 | ||
| Weighted average shares - basic (in Shares) | [1] | 6,760,989 | 6,750,000 | |
| ||||
Unaudited Condensed Consolidated Statements of Comprehensive Income (Parentheticals) - $ / shares |
6 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
| Income Statement [Abstract] | ||||
| Earnings per common share - diluted | $ 0.26 | $ 0.18 | ||
| Weighted average shares - diluted | [1] | 6,760,989 | 6,750,000 | |
| ||||
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity - USD ($) |
Ordinary Shares |
Additional Paid in Capital |
Statutory Reserves |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total |
|||
|---|---|---|---|---|---|---|---|---|---|
| Balance at Sep. 30, 2021 | $ 6,750 | $ 79,810 | $ 1,466,920 | $ 11,886,818 | $ 588,587 | $ 14,028,885 | |||
| Balance (in Shares) at Sep. 30, 2021 | [1] | 6,750,000 | |||||||
| Net income | 1,225,864 | 1,225,864 | |||||||
| Statutory reserve | [1] | 195,417 | (195,417) | ||||||
| Statutory reserve (in Shares) | |||||||||
| Foreign currency translation gain | [1] | 268,280 | 268,280 | ||||||
| Foreign currency translation gain (in Shares) | |||||||||
| Balance at Mar. 31, 2022 | $ 6,750 | [1] | 79,810 | 1,662,337 | 12,917,265 | 856,867 | 15,523,029 | ||
| Balance (in Shares) at Mar. 31, 2022 | [1] | 6,750,000 | |||||||
| Balance at Sep. 30, 2021 | $ 6,750 | 79,810 | 1,466,920 | 11,886,818 | 588,587 | 14,028,885 | |||
| Balance (in Shares) at Sep. 30, 2021 | [1] | 6,750,000 | |||||||
| Balance at Sep. 30, 2022 | $ 6,750 | [1] | 79,810 | 1,651,422 | 14,408,843 | (911,134) | 15,235,691 | ||
| Balance (in Shares) at Sep. 30, 2022 | [1] | 6,750,000 | |||||||
| Issuance of ordinary shares in initial public offerings, gross | $ 1,000 | [1] | 7,999,000 | 8,000,000 | |||||
| Issuance of ordinary shares in initial public offerings, gross (in Shares) | [1] | 1,000,000 | |||||||
| Cost directly related to the initial public offering | [1] | (2,025,679) | (2,025,679) | ||||||
| Net income | 1,766,347 | 1,766,347 | |||||||
| Statutory reserve | [1] | 176,550 | (176,550) | ||||||
| Foreign currency translation gain | [1] | 570,160 | 570,160 | ||||||
| Balance at Mar. 31, 2023 | $ 7,750 | [1] | $ 6,053,131 | $ 1,827,972 | $ 15,998,640 | $ (340,974) | $ 23,546,519 | ||
| Balance (in Shares) at Mar. 31, 2023 | [1] | 7,750,000 | |||||||
| |||||||||
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Cash flows from operating activities: | ||
| Net income | $ 1,766,347 | $ 1,225,864 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 114,465 | 145,695 |
| Loss on disposition of property and equipment | 523 | |
| Provision for doubtful accounts | 171,522 | 27,913 |
| Deferred tax provision (benefits) | 68,561 | (133,896) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | (75,355) | 1,020,725 |
| Accounts receivable - related parties | (28,932) | 65,931 |
| Inventories | 447,024 | (918,838) |
| Advance to suppliers, net - a related party | (13,171) | |
| Prepaid expenses and other current assets | 47,501 | 213,913 |
| Accounts payable | 348,579 | (1,114,051) |
| Accrued liabilities and other payables | (29,199) | (179,547) |
| Deferred revenue | (293,968) | (681,591) |
| Deferred revenue - a related party | 122,795 | |
| Taxes payable | 83,630 | 289,779 |
| Net cash provided by (used in) operating activities | 2,743,493 | (51,274) |
| Cash flows from investing activities: | ||
| Additions to property, plant and equipment | (11,014) | (14,128) |
| Proceeds from disposal of property and equipment | 100 | |
| Payments for short-term investments | (3,152,600) | (4,239,000) |
| Redemption of short-term investments | 850,154 | 3,796,902 |
| Repayment of (payments of) advances made to related parties | (4,760,469) | 415,410 |
| Net cash used in investing activities | (7,073,829) | (40,816) |
| Cash flows from financing activities: | ||
| Gross proceeds from initial public offerings | 8,000,000 | |
| Direct costs disbursed from initial public offerings proceeds | (1,212,779) | |
| Proceeds from short-term bank loan | 1,433,000 | |
| Repayment of amount due to related parties | (120,333) | (6,468) |
| Net cash provided by (used in) financing activities | 8,099,888 | (6,468) |
| Effect of exchange rate changes on cash | 122,004 | 68,353 |
| Net increase (decrease) in cash | 3,891,556 | (30,205) |
| Cash, beginning of period | 4,792,632 | 3,672,260 |
| Cash, end of period | 8,684,188 | 3,642,055 |
| Supplemental disclosure information: | ||
| Cash paid for income tax | 13,115 | 28,415 |
| Deferred IPO cost offset with additional paid-in capital | $ 812,900 | |
Organization and Business Description |
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| Organization and Business Description [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ORGANIZATION AND BUSINESS DESCRIPTION | NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
JIN MEDICAL INTERNATIONAL LTD. (“Jin Med” or the “Company”) was established under the laws of the Cayman Islands on January 14, 2020 as a holding company.
Jin Med owns 100% equity interest of Zhongjin International Limited (“Zhongjin HK”), an entity incorporated on February 25, 2020 in accordance with the laws and regulations in Hong Kong.
Erhua Medical Technology (Changzhou) Co., Ltd. (“Erhua Med”) was formed on September 24, 2020, as a Wholly Foreign-Owned Enterprise (“WFOE”) in the People’s Republic of China (“PRC”). Zhongjin HK owns 100% equity interest of Erhua Med.
Jin Med, Zhongjin HK and Erhua Med are currently not engaging in any active business operations and merely acting as holding companies.
Changzhou Zhongjin Medical Equipment Co., Ltd. (“Changzhou Zhongjin”) was incorporated on January 26, 2006 in accordance with PRC laws. Changzhou Zhongjin has two wholly-owned subsidiaries, Zhongjin Medical Equipment Taizhou Co., Ltd. (“Taizhou Zhongjin”), incorporated on June 17, 2013, and Changzhou Zhongjin Jing’ao Trading Co., Ltd (“Zhongjin Jing’ao”), incorporated on December 18, 2014 in accordance with PRC laws. Changzhou Zhongjin, Taizhou Zhongjin and Zhongjin Jing’ao are collectively referred to as the “Zhongjin Operating Companies” below.
The Company, through its wholly-owned subsidiaries and entities controlled through contractual arrangements, is primarily engaged in the design, development, manufacturing and sales of wheelchair and other living aids products to be used by people with disabilities or impaired mobility. The Company’s products are sold to distributors in both China and in the overseas markets.
Reorganization
A reorganization of the legal structure of the Company (“Reorganization”) was completed on November 26, 2020. The Reorganization involved the incorporation of Jin Med, Zhongjin HK and Erhua Med, and signing of certain contractual arrangements (collectively, the “VIE Agreements”) between Zhongjin Technology, the shareholders of Changzhou Zhongjin and Changzhou Zhongjin. Consequently, the Company became the ultimate holding company of Zhongjin HK, Erhua Med, and through the contractual arrangements, WFOE, or Erhua Med, became the primary beneficiary of the Variable Interest Entity (“VIE”), Changzhou Zhongjin, and its subsidiaries. Pursuant to the VIE Agreements, Erhua Med has gained effective control over Changzhou Zhongjin. Therefore, Changzhou Zhongjin should be treated as a VIE under the Statements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 Consolidation. Since Taizhou Zhongjin and Zhongjin Jing’ao are wholly-owned subsidiaries of Changzhou Zhongjin, they are further referenced as VIE’s subsidiaries.
The Company, together with its wholly owned subsidiaries, the VIE and the VIE’s subsidiaries, are effectively controlled by the same shareholders before and after the Reorganization and therefore the Reorganization is considered as a recapitalization of entities under common control. The consolidation of the Company, its subsidiaries, the VIE and the VIE’s subsidiaries has been accounted for at historical cost.
The unaudited condensed consolidated financial statements of the Company include the following entities:
The VIE contractual arrangements
The Company’s main operating entities, Changzhou Zhongjin and its subsidiaries Taizhou Zhongjin and Zhongjin Jing’ao (or the “Zhongjin Operating Companies” as referred above), are controlled through contractual arrangements in lieu of direct equity ownership by the Company.
A VIE is an entity which has a total equity investment that is insufficient to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary of, and must consolidate, the VIE, because it met the condition under the accounting principles generally accepted in the United States of America (“U.S. GAAP”) to consolidate the VIE.
Erhua Med, is deemed to have a controlling financial interest in and be the primary beneficiary of the Zhongjin Operating Companies because it has both of the following characteristics:
Pursuant to these contractual arrangements, the Zhongjin Operating Companies shall pay service fees equal to all of their net profits after tax payments to Erhua Med. At the same time, Erhua Med has the right to receive substantially all of their economic benefits for accounting purposes. Such contractual arrangements are designed so that the operations of the Zhongjin Operating Companies are solely for the benefit of Erhua Med and ultimately, the Company, and therefore the Company must consolidate the Zhongjin Operating Companies under U.S. GAAP.
Risks associated with the VIE structure
The Company believes that the contractual arrangements with the VIE and the shareholders of the VIE are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
The Company’s ability to conduct its businesses may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. In such case, the Company may not be able to consolidate the VIE and the VIE’s subsidiaries in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and its shareholders and it may lose the ability to receive economic benefits from the VIE and the VIE’s subsidiaries for accounting purposes under U.S. GAAP. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and the VIE and the VIE’s subsidiaries.
The Company, Zhongjin HK and Erhua Med are essentially holding companies and do not have active operations as of March 31, 2023 and September 30, 2022. As a result, total assets and liabilities presented on the unaudited condensed consolidated balance sheets and revenue, expenses, and net income presented on the unaudited condensed consolidated statement of comprehensive income as well as the cash flows from operating, investing and financing activities presented on the unaudited condensed consolidated statement of cash flows are substantially the financial position, operation results and cash flows of the VIE and the VIE’s subsidiaries. The Company has not provided any financial support to the VIE and the VIE’s subsidiaries during the six months ended March 31, 2023 and 2022. Additionally, pursuant to the VIE Agreements, Erhua Med has the right to receive service fees equal to the VIE’s net profits after tax payments. None of these fees were paid to Erhua Med as of March 31, 2023. Accordingly, as of March 31, 2023 and September 30, 2022, Erhua Med had $6,455,936 and $4,501,169 consulting fee receivables due from the VIE and the VIE’s subsidiaries, respectively. These receivables were fully eliminated upon the consolidation.
The following financial statement amounts and balances of the VIE and VIE’s subsidiaries were included in the accompanying unaudited condensed consolidated financial statements after elimination of intercompany transactions and balances:
Initial Public Offering
On March 30, 2023, the Company closed its initial public offering (the “Offering”) of 1,000,000 ordinary shares (the “Ordinary Shares”) at a public offering price of $ 8.00 per share. In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 150,000 Ordinary Shares at the public offering price, less underwriting discounts, to cover over-allotment, if any. On April 6, 2023, the underwriter partially exercised the over-allotment option to purchase an additional 47,355 ordinary shares. The Company’s Ordinary Shares began trading on the Nasdaq Capital Market under the symbol “ZJYL” on March 28, 2023. |
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Summary of Significant Accounting Policies |
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| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the Company’s unaudited condensed consolidated financial statement. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes for the years ended September 30, 2022 and 2021 included in the Company’s Registration Statement on Form 424B4.The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, and entities it controlled through VIE agreements. All inter-company balances and transactions are eliminated upon consolidation.
Uses of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and inventories, useful lives of property, plant and equipment and land use right, the recoverability of long-lived assets, and realization of deferred tax assets. Actual results could differ from those estimates.
Cash
Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains most of its bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. As of March 31, 2023 and September 30, 2022, the Company does not have any cash equivalents.
Short-term investment
The Company’s short-term investments consist of wealth management financial products purchased from PRC banks or financial institution with maturities within one year. The banks or financial institution invest the Company’s funds in certain financial instruments including money market funds, bonds or mutual funds, with rates of return on these investments ranging from 3.4% to 7.0% per annum. The carrying values of the Company’s short-term investments approximate fair value because of their short-term maturities. The interest earned is recognized in the unaudited condensed consolidated statements of comprehensive income over the contractual term of these investments.
The Company had short-term investments of $4,696,503 and $2,276,158 as of March 31, 2023 and September 30, 2022, respectively. The Company recorded interest income of $69,840 and $53,516 for the six months ended March 31, 2023 and 2022, respectively.
Accounts receivable, net
Accounts receivable are presented net of allowance for doubtful accounts.
The Company determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trend. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31, 2023 and September 30, 2022, allowance for doubtful accounts amounted to $185,289 and $114,486 respectively.
Inventories
Inventories are stated at lower of cost or net realizable value using the weighted average method. Costs include the cost of raw materials, freight, direct labor and related production overhead. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Write-down is recorded when future estimated net realizable value is less than cost, which is recorded in cost of revenue in the unaudited condensed consolidated statements of comprehensive income. The Company periodically evaluates inventories against their net realizable value, and reduces the carrying value of those inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and future demand of each type of inventories.
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, short-term investments, accounts receivable, due from related parties, short-term bank loan, accounts payable, due to related parties, accrued liabilities and other payable, and taxes payable, approximate the fair value of the respective assets and liabilities as of March 31, 2023 and September 30, 2022 based upon the short-term nature of the assets and liabilities.
Leases
On October 1, 2022, the Company adopted ASC 842, Leases. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Therefore, no adjustments to opening retained earnings were necessary. The Company leases administrative office and dome, which is classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with an initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The ROU asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment annually. The Company also established a capitalization threshold of $10,000 for lease to be recognized as ROU and lease liability. As the amount of the Company’s ROU and lease liability are both below the threshold, no ROU nor lease liability is recorded on the Company’s unaudited condensed consolidated balance sheets as of March 31, 2023.
Property, plant and equipment, net
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is provided using the straight-line method over their expected useful lives, as follows:
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of comprehensive income.
Land use rights, net
Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. Land use rights are stated at cost less accumulated amortization. Land use rights are amortized using the straight-line method with the following estimated useful lives:
Impairment of long-lived assets
Long-lived assets with finite lives, primarily property, plant and equipment and land use right are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no impairments of these assets as of March 31, 2023 and September 30, 2022.
Revenue recognition
The Company generates its revenues primarily through sales of its products and recognizes revenue in accordance with ASC 606. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue.
In accordance to ASC 606, the Company recognizes revenue when it transfers goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products on a gross basis as the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual goods to customers, and there is no other separately identifiable promises in the contracts. The Company’s revenue streams are recognized at a point in time when the control of goods is transferred to customer, which generally occurs at delivery. The Company’s products are sold with no right of return and the Company does not provide other credits or sales incentive to customers. Revenue is reported net of all value added taxes (“VAT”).
The Company generally offers 10 years warranty for the frame of its wheelchairs, and one year warranty for other parts of wheelchairs, except for “wear items”, i.e. those parts that wear out, such as tires or brake pads, which are covered under a warranty for six months. Historically, warranty costs incurred was immaterial, and the warranty costs for the six months ended March 31, 2023 and 2022 were both $.
Contract Assets and Liabilities
Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. The Company did not have contract assets as of March 31, 2023 and September 30, 2022. Contract liabilities are recognized for contracts where payment has been received in advance of delivery of the products. The contract liability balance can vary significantly depending on the timing when cash is received and when shipment or delivery occurs. As of March 31, 2023 and September 30, 2022, other than deferred revenue, the Company had no other contract liabilities or deferred contract costs recorded on its unaudited condensed consolidated balance sheets, and the Company had no material incremental costs for obtaining a contract. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred.
Disaggregation of Revenues
The Company disaggregates its revenue from contracts by product types and geographic areas, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the six months ended March 31, 2023 and 2022 are as the following:
Geographic information
The summary of the Company’s total revenues by geographic market for the six months ended March 31, 2023 and 2022 was as follows:
Revenue by product categories
The summary of the Company’s total revenues by product categories for the six months ended March 31, 2023 and 2022 was as follows:
Research and development expenses
In connection with the design and development of wheelchair and other living aids products, the Company expense all internal research costs as incurred, which primarily comprise employee costs, internal and external costs related to execution of studies, manufacturing costs, facility costs of the research center, and amortization of land use right, depreciation for property, plant and equipment used in the research and development activities. For the six months ended March 31, 2023 and 2022, research and development expenses were $631,034 and $892,524, respectively.
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the six months ended March 31, 2023 and 2022. The Company does not believe there was any uncertain tax provision at March 31, 2023 and September 30, 2022.
The Company’s subsidiary, VIE and VIE’s subsidiaries in China are subject to the income tax laws of the PRC. No income was generated outside the PRC for the six months ended March 31, 2023 and 2022. As of March 31, 2023, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
Value added tax (“VAT”)
Sales revenue is reported net of VAT. The VAT is based on gross sales price and VAT rates range up to 13% in the six months ended March 31, 2023 and 2022, depending on the type of products sold. The VAT may be offset by VAT paid by the Company on purchased raw materials and other materials included in the cost of producing or acquiring its finished products. The Company recorded a VAT payable or receivable net of payments in the accompanying unaudited condensed consolidated financial statements. For domestic sales of wheelchairs, VAT is exempted. Further, when exporting goods, the exporter is entitled to some or all of the refunds of the VAT paid or assessed when the Company completes all the required tax filing procedures. All of the VAT returns filed for the Company have been and remain subject to examination by the tax authorities for five years from the date of filing. VAT tax refunds associated with export sales amounted to $526,779 and $537,225 for the six months ended March 31, 2023 and 2022, respectively.
Warrant accounting
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent interim period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of comprehensive loss.
As the warrants issued upon the initial public offering meet the criteria for equity classification under ASC 815, therefore, the warrants are classified as equity.
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants), using the treasury stock method, as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted EPS, the treasury stock method assumes that outstanding potential common shares are exercised and the proceeds are used to purchase common share at the average market price during the period. Potential common shares may have a dilutive effect under the treasury stock method only when the average market price of the common share during the period exceeds the exercise price of the potential common shares. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of March 31, 2023 and September 30, 2022, there were no dilutive shares.
Risks and uncertainties
The main operation of the Company is located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.
In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, China and then spread globally. On March 11, 2020, the World Health Organization categorized COVID-19 as a global pandemic. Due to a resurgence of the COVID-19 pandemic in March 2022 (“2022 Outbreak”) in China, there have been delays in the purchase of raw material supplies and delivery of products to domestic customers in China on a timely basis as a consequence of travel restrictions. Shipments and customer clearance for overseas sales were also delayed due to the stricter border control protocols. Although the situation has eased since mid-May 2022, the number of orders placed by the customers were affected as the business of those customers were negatively impacted by the 2022 Outbreak. Therefore, the 2022 Outbreak negatively affected the Company’s business operations and financial results for the year ended September 30, 2022. In early December 2022, China announced a nationwide loosening of its zero-covid policy, and most of the travel restrictions and quarantine requirements were lifted since December 2022. Although there were significant surges of COVID-19 cases in many cities in China after the lifting of these restrictions, the spread of the COVID-19 was slowed down and it was successfully under control since January 2023, and the Company’s business operations have been recovered to the level prior to the COVID-19 pandemic. Our revenue and net income (excluding the impact of foreign currency translation) increased by 18.7% and 57.9% in terms of RMB, respectively. However, the increase was partially offset by the depreciation of the RMB against U.S. dollars of 8.7%, which caused an increase in revenue and net income by 12.7% and 44.1% in terms of USD, respectively, during the six months ended March 31, 2023 as compared to the same period last year. Due to the dynamic nature of the circumstances and the uncertainty around the potential resurgence of COVID-19 cases in China, the continual spread of the virus globally especially in Japan, the Company’s major international market, and the instability of local and global government policies and restrictions, the COVID-19 impact over the Company’s business in the future cannot be reasonably estimated at this time. If COVID-19 cases resurge in the area the Company conducted its business and local governments implemented new restrictions in the effort to contain the spread or certain other foreign governments such as Japan imposed new import restrictions, it is expected the Company’s business will be negatively impacted.
Additionally, since February, 2022, the global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. The Company’s operation has not been impacted by the ongoing military conflict, however, due to the significant uncertainties around the further development of the conflict, the potential additional sanctions and other volatilities that could be brought to the global market, it is impossible to predict the extent to which the Company’s operation and business may be impacted.
Foreign currency translation
The functional currency for Jin Med is U.S Dollar (“US$”). Zhongjin HK uses Hong Kong dollar as its functional currency. However, Jin Med and Zhongjin HK currently only serve as holding companies and do not have active operation as of the date of this report. The Company’s functional currency for its PRC subsidiaries is the Chinese Yuan (“RMB”). The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency of U.S. Dollars (“US$”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from foreign currency transactions are reflected in the results of operations.
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
Comprehensive income
Comprehensive income consists of two components, net income and other comprehensive income. The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income in the unaudited condensed consolidated statements of comprehensive income.
Statement of cash flows
In accordance with ASC 230, “Statement of Cash Flows”, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets. Deferred initial public offering (‘IPO’) costs
The Company complies with the requirement of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the intended IPO. Deferred offering costs was charged to shareholders’ equity upon the completion of the IPO. As of March 31, 2023 and September 30, 2022, deferred IPO costs were $ and $701,396, respectively.
Employee benefit expenses
The Company’s subsidiary, VIE and VIE’s subsidiaries in the PRC participate in a government-mandated employer social insurance plan pursuant to which certain social security benefits, work-related injury benefits, maternity leave insurance, medical insurance, unemployment benefit and housing fund are provided to eligible full-time employees. The relevant labor regulations require the Company’s subsidiaries in the PRC to pay the local labor and social welfare authorities monthly contributions based on the applicable benchmarks and rates stipulated by the local government. The contributions to the plan are expensed as incurred. Employee social security and welfare benefits included as expenses in the unaudited condensed consolidated statements of comprehensive income amounted to $162,598 and $178,802 for the six months ended March 31, 2023 and 2022, respectively.
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” (“ASU 2019-10”). ASU 2019-10 (i) provides a framework to stagger effective dates for future major accounting standards and (ii) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for certain new standards on the following topics in the FASB Accounting Standards Codification (ASC): (a) Derivatives and Hedging (ASC 815) – now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021; (b) Leases (ASC 842) - now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021; (c) Financial Instruments — Credit Losses (ASC 326) - now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years; and (d) Intangibles — Goodwill and Other (ASC 350) - now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company plans to adopt this guidance effective October 1, 2023 and the adoption of this ASU is not expected to have a material impact on its consolidated financial statements. |
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Accounts Receivable, Net |
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| ACCOUNTS RECEIVABLE, NET | NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consist of the following:
The Company’s accounts receivable primarily includes balances due from customers when the Company’s wheelchair and living aids products have been sold and delivered to customers, the Company’s contracted performance obligations have been satisfied, amount billed and the Company has an unconditional right to payment, which has not been collected as of the balance sheet dates.
For accounts receivable from third-party customers, approximately 88.8%, or $3.4 million of the March 31, 2023 balance have been subsequently collected. The remaining balance of approximately $0.5 million is expected to be collected before September 30, 2023.
Allowance for doubtful accounts movement is as follows:
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Inventories |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORIES | NOTE 4 — INVENTORIES
Inventories consisted of the following:
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Prepaid Expenses and Other Current Assets |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses and Other Current Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
| PREPAID EXPENSES AND OTHER CURRENT ASSETS | NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
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Property, Plant and Equipment, Net |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | NOTE 6 — PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consist of the following:
Depreciation expense was $111,964 and $142,954 for the six months ended March 31, 2023 and 2022, respectively.
In connection with the Company’s bank borrowings from Bank of Jiangsu, Changzhou Zhongjin pledged a building of 11,205.83 square meters with a carrying value of RMB 16.7 million (approximately $2.4 million) as collateral (see Note 8). |
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Land Use Right, Net |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Land Use Right, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LAND USE RIGHT, NET | NOTE 7 — LAND USE RIGHT, NET
Land use right, net, consisted of the following:
Amortization expense was $2,501 and $2,741 for the six months ended March 31, 2023 and 2022, respectively.
In connection with the Company’s bank borrowings from Bank of Jiangsu, Changzhou Zhongjin pledged land use right of 16,595.64 square meters with a carrying value of RMB 1.6 million (approximately $0.2 million) as collateral (see Note 8).
Estimated future amortization expense for land use rights is as follows:
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Short-Term Bank Loan |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Short-Term Bank Loan [Abstract] | |
| SHORT-TERM BANK LOAN | NOTE 8 — SHORT-TERM BANK LOAN
On March 31, 2023, Changzhou Zhongjin signed a loan agreement with Bank of Jiangsu to borrow RMB 10.0 million ($1,456,000) as working capital for one year, with a maturity date of March 28, 2024. The loan had a fixed interest rate of 3.65% per annum.
In connection with the above-mentioned borrowings with Bank of Jiangsu, Changzhou Zhongjin signed a maximum pledge agreement with Bank of Jiangsu and agreed to pledge a building property of 11,205.83 square meters with carrying value of RMB 16.7 million (approximately $2.4 million) and land use right of 16,595.64 square meters with carrying value of RMB 1.6 million (approximately $0.2 million) as collateral to guarantee loans that the Company may borrow from Bank of Jiangsu. In addition, a related party, the Company’s major shareholder Mr. Erqi Wang, signed a maximum guarantee agreement with Bank of Jiangsu to provide personal credit guarantees for loans that the Company may borrow from Bank of Jiangsu. Another related party, Changzhou Zhongjian Kanglu Information Technology Co., Ltd, also signed a maximum guarantee agreement with Bank of Jiangsu and a maximum pledge agreement with Bank of Jiangsu and agreed to pledge its properties with a value of RMB 33.0 million (approximately $4.8 million) as collateral to guarantee loans that the Company may borrow from Bank of Jiangsu. The short-term bank loan was fully repaid by the Company in May 2023. |
Related Party Transactions |
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| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS | NOTE 9 — RELATED PARTY TRANSACTIONS
Accounts receivable - related parties consists of the following:
For accounts receivable due from related parties, approximately 72.1%, or $0.2 million of the March 31, 2023 balances have been subsequently collected. The remaining balance is expected to be collected before September 30, 2023.
Due from related parties consists of the following:
Advances due from related parties were non-interest bearing and due upon demand. Approximately 98.6%, or $4.8 million of the March 31, 2023 balances have been subsequently collected. The remaining balance is expected to be collected before September 30, 2023.
Deferred revenue – a related party consists of the following:
Due to a related party consists of the following:
The balance due to a related party was mainly comprised of advances from entities controlled by the Company’s CEO and used for working capital during the Company’s normal course of business. These advances are non-interest bearing and due on demand.
Revenue from related parties consists of the following:
In connection with the Company’s bank borrowings from Bank of Jiangsu, the Company’s major shareholder, Mr. Erqi Wang and Changzhou Zhongjian Kanglu Information Technology Co., Ltd. provided credit guarantee and signed pledge agreements (see Note 8). |
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Taxes |
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| Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Taxes | NOTE 10 — TAXES
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.
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, no Cayman Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.
Hong Kong
Zhongjin HK is subject to Hong Kong profits tax at a rate of 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000. However, it did not generate any assessable profits arising in or derived from Hong Kong for the six months ended March 31, 2023 and 2022, and accordingly no provision for Hong Kong profits tax has been made in these periods.
PRC
Erhua Med, Changzhou Zhongjin, Taizhou Zhongjin and Zhongjin Jing’ao are incorporated in the PRC, and are subject to the PRC Enterprise Income Tax. Under the Enterprise Income Tax (“EIT”) Law of PRC, domestic enterprises and Foreign Investment Enterprises (“FIE”) are subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemptions may be granted on case-by-case basis.
EIT grants preferential tax treatment to High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years. Changzhou Zhongjin and Taizhou Zhongjin, the VIE and VIE’s main operating subsidiary in the PRC, were approved as HNTEs and are entitled to a reduced income tax rate of 15% beginning November 2018 and November 2019, respectively, which are valid for three years. In November 2021, Changzhou Zhongjin successfully renewed its HNTE certification with local government and continued to enjoy the reduced income tax rate of 15% for another three years through November 2024. In November 2022, Taizhou Zhongjin successfully renewed its HNTE certification with local government and continued to enjoy the reduced income tax rate of 15% for another three years through November 2025.
In addition, based on the EIT Law of PRC, and according to the Announcement on Issues Related to the Implementation of Inclusive Income Tax Reduction and Exemption Policy for Small and Low Profit Enterprises issued by the State Administration of Taxation on January 18, 2019 and April 2, 2021, once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the portion of its taxable income not more than RMB1 million is subject to a reduced rate of 5% (the rate was further reduced to 2.5% for the period from January 1, 2021 to December 31, 2022), and the portion between RMB1 million and RMB3 million is subject to a reduced rate of 10%. The policy is effective for the period from January 1, 2019 to December 31, 2022. According to the Announcement on Implementing the Preferential Income Tax Policies for Small-Scale Minimal Profit Enterprise on March 14, 2022 and March 26, 2023, the taxable income not more than RMB3 million is subject to a reduced rate of 5% during the period from January 1, 2023 to December 31, 2024. Zhongjin Jing’ao is qualified as a small-scale minimal profit enterprise for the six months ended March 31, 2023 and 2022. EIT is typically governed by the local tax authority in the PRC. Each local tax authority at times may grant tax holidays to local enterprises as a way to encourage entrepreneurship and stimulate local economy. The corporate income taxes for the six months ended March 31, 2023 and 2022 were reported at a reduced rate for both Changzhou Zhongjin and Taizhou Zhongjin for being approved as HNTEs and enjoying a reduced income tax rate at 15% instead of 25%, and Zhongjin Jing’ao is qualified as a small-scale minimal profit enterprise for a further reduced income tax rate of 2.5%. The impact of the tax holidays noted above decreased the Company’s income taxes by $195,135 and $149,628 for the six months ended March 31, 2023 and 2022, respectively. The effect of the tax holidays on net income per share (basic and diluted) was $0.03 and $0.02 for the six months ended March 31, 2023 and 2022, respectively.
The components of the income tax provision are as follows:
Deferred tax assets are composed of the following:
Movement of the valuation allowance:
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Management considers new evidence, both positive and negative, that could affect the Company’s future realization of deferred tax assets including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors. The Company determined that it is more likely than not its deferred tax assets could not be realized due to uncertainty on future earnings in Zhongjin Jing’ao. The Company provided a 100% allowance for its deferred tax assets of Zhongjin Jing’ao as of March 31, 2023.
The following table reconciles the China statutory rates to the Company’s effective tax rate for the six months ended March 31, 2023 and 2022:
The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. As of March 31, 2023, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
Taxes payable consist of the following:
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Concentrations |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Concentrations [Abstract] | |
| CONCENTRATIONS | NOTE 11 — CONCENTRATIONS
A majority of the Company’s revenue and expense transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB may require certain supporting documentation in order to effect the remittance.
As of March 31, 2023 and September 30, 2022, $6,787,221 and $ of the Company’s cash was deposited at financial institutions outside of PRC, and $1,890,435 and $4,785,389 of the Company’s cash was on deposit at financial institutions in the PRC. None of the Company cash deposited at financial institutions maintain insurance to cover bank deposits in the event of bank failure. However, the Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash on bank accounts. For the six months ended March 31, 2023 and 2022, the Company’s substantial assets were located in the PRC and all of the Company’s revenues were derived from its subsidiaries located in the PRC.
For the six months ended March 31, 2023 and 2022, one customer accounted for approximately 70.3% and 76.1% of the Company’s total revenue. Sales to the subsidiaries of this customer accounted for approximately 7.7% and 6.0% of the Company’s total revenue for the six months ended March 31, 2023 and 2022, respectively. In aggregate, sales to this customer and its subsidiaries represent approximately 78.0% and 82.1% of the Company’s total revenue for the six months ended March 31, 2023 and 2022, respectively.
As of March 31, 2023, one customer accounted for 69.1% of the accounts receivable balance. As of September 30, 2022, one customer accounted for 72.4% of the accounts receivable balance.
For the six months ended March 31, 2023 and 2022, no supplier accounted for more than 10% of the Company’s total purchases, respectively.
As of March 31, 2023, no supplier accounted for more than 10% of the accounts payable balance. As of September 30, 2022, one supplier accounted for 10.7% of the accounts payable balance. |
Shareholders' Equity |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Shareholder's Equity [Abstract} | |
| SHAREHOLDERS' EQUITY | NOTE 12 — SHAREHOLDERS’ EQUITY
Ordinary Shares
Jin Med was established under the laws of the Cayman Islands on January 14, 2020. The authorized number of ordinary shares was 50,000,000 shares with par value of US$0.001 per share and 20,000,000 shares were issued.
On October 28, 2022, the current existing shareholders of the Company surrendered 13,250,000 Ordinary Shares for no consideration. The shares and per share data are presented on a retrospective basis as if the share surrender made by the current existing shareholders of the Company had been in existence from the earliest period presented.
Initial Public Offering
On March 30, 2023, the Company closed its initial public offering (the “Offering”) of 1,000,000 ordinary shares (the “Ordinary Shares”) at a public offering price of $ 8.00 per share for total gross proceeds of $8,000,000 before deducting underwriting discounts and offering expenses. Net proceeds of the Company’s Offering were approximately $6.8 million. In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 150,000 Ordinary Shares at the public offering price, less underwriting discounts, to cover over-allotment, if any. On April 6, 2023, the underwriter partially exercised the over-allotment option to purchase an additional 47,355 ordinary shares for total gross proceeds of $378,840 before deducting underwriting discounts and commissions. As of May 14, 2023, the remaining options were expired. The Company’s Ordinary Shares began trading on the Nasdaq Capital Market under the symbol “ZJYL” on March 28, 2023.
Statutory reserve and restricted net assets
The Company’s PRC subsidiary, VIE and VIE’s subsidiaries 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 is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. The statutory reserve may be applied against prior year losses, if any, and may be used for general business expansion and production or increase in registered capital, but are not distributable as cash dividends.
Relevant PRC laws and regulations restrict the Company’s PRC subsidiary, VIE and VIE’s subsidiaries from transferring a portion of their net assets, equivalent to their statutory reserves and their share capital, to the Company’s shareholders in the form of loans, advances or cash dividends. Only PRC entities’ accumulated profits may be distributed as dividends to the Company’s shareholders without the consent of a third party. As of March 31, 2023 and September 30, 2022, the restricted amounts as determined pursuant to PRC statutory laws totaled $1,827,972 and $1,651,422, respectively, and total restricted net assets amounted to $1,914,531 and $1,737,982, respectively. |
Commitments and Contingencies |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 13 — COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company’s management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate to have a material adverse impact on the Company’s unaudited condensed consolidated financial position, results of operations and cash flows. The Company currently does not have any material legal proceedings. |
Segment Reporting |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Segment Reporting [Abstract] | |
| SEGMENT REPORTING | NOTE 14 — SEGMENT REPORTING
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
The management of the Company concludes that it has only one reporting segment. The Company designs and manufactures quality wheelchair and other living aids products. The Company’s products have similar economic characteristics with respect to raw materials, vendors, marketing and promotions, customers and methods of distribution. The Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company, rather than by product types or geographic area; hence the Company has only one reporting segment. |
Subsequent Events |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 15 — SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before these financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2023, up through August 23, 2023, when the Company issued the unaudited condensed consolidated financial statements. |
Accounting Policies, by Policy (Policies) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of consolidation | Basis of consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the Company’s unaudited condensed consolidated financial statement. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes for the years ended September 30, 2022 and 2021 included in the Company’s Registration Statement on Form 424B4.The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, and entities it controlled through VIE agreements. All inter-company balances and transactions are eliminated upon consolidation. |
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| Uses of estimates | Uses of estimates In preparing the unaudited condensed consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and inventories, useful lives of property, plant and equipment and land use right, the recoverability of long-lived assets, and realization of deferred tax assets. Actual results could differ from those estimates. |
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| Cash | Cash Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains most of its bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs. As of March 31, 2023 and September 30, 2022, the Company does not have any cash equivalents.
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| Short-term investment | Short-term investment The Company’s short-term investments consist of wealth management financial products purchased from PRC banks or financial institution with maturities within one year. The banks or financial institution invest the Company’s funds in certain financial instruments including money market funds, bonds or mutual funds, with rates of return on these investments ranging from 3.4% to 7.0% per annum. The carrying values of the Company’s short-term investments approximate fair value because of their short-term maturities. The interest earned is recognized in the unaudited condensed consolidated statements of comprehensive income over the contractual term of these investments. The Company had short-term investments of $4,696,503 and $2,276,158 as of March 31, 2023 and September 30, 2022, respectively. The Company recorded interest income of $69,840 and $53,516 for the six months ended March 31, 2023 and 2022, respectively. |
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| Accounts receivable, net | Accounts receivable, net Accounts receivable are presented net of allowance for doubtful accounts. The Company determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trend. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31, 2023 and September 30, 2022, allowance for doubtful accounts amounted to $185,289 and $114,486 respectively. |
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| Inventories | Inventories Inventories are stated at lower of cost or net realizable value using the weighted average method. Costs include the cost of raw materials, freight, direct labor and related production overhead. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Write-down is recorded when future estimated net realizable value is less than cost, which is recorded in cost of revenue in the unaudited condensed consolidated statements of comprehensive income. The Company periodically evaluates inventories against their net realizable value, and reduces the carrying value of those inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and future demand of each type of inventories.
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| Fair value of financial instruments | Fair value of financial instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, short-term investments, accounts receivable, due from related parties, short-term bank loan, accounts payable, due to related parties, accrued liabilities and other payable, and taxes payable, approximate the fair value of the respective assets and liabilities as of March 31, 2023 and September 30, 2022 based upon the short-term nature of the assets and liabilities. |
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| Leases | Leases On October 1, 2022, the Company adopted ASC 842, Leases. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Therefore, no adjustments to opening retained earnings were necessary. The Company leases administrative office and dome, which is classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with an initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The ROU asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment annually. The Company also established a capitalization threshold of $10,000 for lease to be recognized as ROU and lease liability. As the amount of the Company’s ROU and lease liability are both below the threshold, no ROU nor lease liability is recorded on the Company’s unaudited condensed consolidated balance sheets as of March 31, 2023.
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| Property, plant and equipment, net | Property, plant and equipment, net Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is provided using the straight-line method over their expected useful lives, as follows:
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of comprehensive income. |
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| Land use rights, net | Land use rights, net Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. Land use rights are stated at cost less accumulated amortization. Land use rights are amortized using the straight-line method with the following estimated useful lives:
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| Impairment of long-lived assets | Impairment of long-lived assets Long-lived assets with finite lives, primarily property, plant and equipment and land use right are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no impairments of these assets as of March 31, 2023 and September 30, 2022.
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| Revenue recognition | Revenue recognition The Company generates its revenues primarily through sales of its products and recognizes revenue in accordance with ASC 606. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. In accordance to ASC 606, the Company recognizes revenue when it transfers goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products on a gross basis as the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual goods to customers, and there is no other separately identifiable promises in the contracts. The Company’s revenue streams are recognized at a point in time when the control of goods is transferred to customer, which generally occurs at delivery. The Company’s products are sold with no right of return and the Company does not provide other credits or sales incentive to customers. Revenue is reported net of all value added taxes (“VAT”). The Company generally offers 10 years warranty for the frame of its wheelchairs, and one year warranty for other parts of wheelchairs, except for “wear items”, i.e. those parts that wear out, such as tires or brake pads, which are covered under a warranty for six months. Historically, warranty costs incurred was immaterial, and the warranty costs for the six months ended March 31, 2023 and 2022 were both $. Contract Assets and Liabilities Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. The Company did not have contract assets as of March 31, 2023 and September 30, 2022. Contract liabilities are recognized for contracts where payment has been received in advance of delivery of the products. The contract liability balance can vary significantly depending on the timing when cash is received and when shipment or delivery occurs. As of March 31, 2023 and September 30, 2022, other than deferred revenue, the Company had no other contract liabilities or deferred contract costs recorded on its unaudited condensed consolidated balance sheets, and the Company had no material incremental costs for obtaining a contract. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred.
Disaggregation of Revenues The Company disaggregates its revenue from contracts by product types and geographic areas, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the six months ended March 31, 2023 and 2022 are as the following:
Geographic information The summary of the Company’s total revenues by geographic market for the six months ended March 31, 2023 and 2022 was as follows:
Revenue by product categories The summary of the Company’s total revenues by product categories for the six months ended March 31, 2023 and 2022 was as follows:
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| Research and development expenses | Research and development expenses In connection with the design and development of wheelchair and other living aids products, the Company expense all internal research costs as incurred, which primarily comprise employee costs, internal and external costs related to execution of studies, manufacturing costs, facility costs of the research center, and amortization of land use right, depreciation for property, plant and equipment used in the research and development activities. For the six months ended March 31, 2023 and 2022, research and development expenses were $631,034 and $892,524, respectively. |
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| Income taxes | Income taxes The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the six months ended March 31, 2023 and 2022. The Company does not believe there was any uncertain tax provision at March 31, 2023 and September 30, 2022. The Company’s subsidiary, VIE and VIE’s subsidiaries in China are subject to the income tax laws of the PRC. No income was generated outside the PRC for the six months ended March 31, 2023 and 2022. As of March 31, 2023, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities. |
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| Value added tax (“VAT”) | Value added tax (“VAT”) Sales revenue is reported net of VAT. The VAT is based on gross sales price and VAT rates range up to 13% in the six months ended March 31, 2023 and 2022, depending on the type of products sold. The VAT may be offset by VAT paid by the Company on purchased raw materials and other materials included in the cost of producing or acquiring its finished products. The Company recorded a VAT payable or receivable net of payments in the accompanying unaudited condensed consolidated financial statements. For domestic sales of wheelchairs, VAT is exempted. Further, when exporting goods, the exporter is entitled to some or all of the refunds of the VAT paid or assessed when the Company completes all the required tax filing procedures. All of the VAT returns filed for the Company have been and remain subject to examination by the tax authorities for five years from the date of filing. VAT tax refunds associated with export sales amounted to $526,779 and $537,225 for the six months ended March 31, 2023 and 2022, respectively. |
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| Warrant accounting | Warrant accounting The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent interim period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of comprehensive loss. As the warrants issued upon the initial public offering meet the criteria for equity classification under ASC 815, therefore, the warrants are classified as equity.
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| Earnings per share | Earnings per share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants), using the treasury stock method, as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted EPS, the treasury stock method assumes that outstanding potential common shares are exercised and the proceeds are used to purchase common share at the average market price during the period. Potential common shares may have a dilutive effect under the treasury stock method only when the average market price of the common share during the period exceeds the exercise price of the potential common shares. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of March 31, 2023 and September 30, 2022, there were no dilutive shares. |
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| Risks and uncertainties | Risks and uncertainties The main operation of the Company is located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results. The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations. In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, China and then spread globally. On March 11, 2020, the World Health Organization categorized COVID-19 as a global pandemic. Due to a resurgence of the COVID-19 pandemic in March 2022 (“2022 Outbreak”) in China, there have been delays in the purchase of raw material supplies and delivery of products to domestic customers in China on a timely basis as a consequence of travel restrictions. Shipments and customer clearance for overseas sales were also delayed due to the stricter border control protocols. Although the situation has eased since mid-May 2022, the number of orders placed by the customers were affected as the business of those customers were negatively impacted by the 2022 Outbreak. Therefore, the 2022 Outbreak negatively affected the Company’s business operations and financial results for the year ended September 30, 2022. In early December 2022, China announced a nationwide loosening of its zero-covid policy, and most of the travel restrictions and quarantine requirements were lifted since December 2022. Although there were significant surges of COVID-19 cases in many cities in China after the lifting of these restrictions, the spread of the COVID-19 was slowed down and it was successfully under control since January 2023, and the Company’s business operations have been recovered to the level prior to the COVID-19 pandemic. Our revenue and net income (excluding the impact of foreign currency translation) increased by 18.7% and 57.9% in terms of RMB, respectively. However, the increase was partially offset by the depreciation of the RMB against U.S. dollars of 8.7%, which caused an increase in revenue and net income by 12.7% and 44.1% in terms of USD, respectively, during the six months ended March 31, 2023 as compared to the same period last year. Due to the dynamic nature of the circumstances and the uncertainty around the potential resurgence of COVID-19 cases in China, the continual spread of the virus globally especially in Japan, the Company’s major international market, and the instability of local and global government policies and restrictions, the COVID-19 impact over the Company’s business in the future cannot be reasonably estimated at this time. If COVID-19 cases resurge in the area the Company conducted its business and local governments implemented new restrictions in the effort to contain the spread or certain other foreign governments such as Japan imposed new import restrictions, it is expected the Company’s business will be negatively impacted.
Additionally, since February, 2022, the global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. The Company’s operation has not been impacted by the ongoing military conflict, however, due to the significant uncertainties around the further development of the conflict, the potential additional sanctions and other volatilities that could be brought to the global market, it is impossible to predict the extent to which the Company’s operation and business may be impacted. |
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| Foreign currency translation | Foreign currency translation The functional currency for Jin Med is U.S Dollar (“US$”). Zhongjin HK uses Hong Kong dollar as its functional currency. However, Jin Med and Zhongjin HK currently only serve as holding companies and do not have active operation as of the date of this report. The Company’s functional currency for its PRC subsidiaries is the Chinese Yuan (“RMB”). The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency of U.S. Dollars (“US$”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from foreign currency transactions are reflected in the results of operations. The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation. The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
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| Comprehensive income | Comprehensive income Comprehensive income consists of two components, net income and other comprehensive income. The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income in the unaudited condensed consolidated statements of comprehensive income. |
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| Statement of cash flows | Statement of cash flows In accordance with ASC 230, “Statement of Cash Flows”, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets. |
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| Deferred initial public offering (‘IPO’) costs | Deferred initial public offering (‘IPO’) costs The Company complies with the requirement of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the intended IPO. Deferred offering costs was charged to shareholders’ equity upon the completion of the IPO. As of March 31, 2023 and September 30, 2022, deferred IPO costs were $ and $701,396, respectively. |
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| Employee benefit expenses | Employee benefit expenses The Company’s subsidiary, VIE and VIE’s subsidiaries in the PRC participate in a government-mandated employer social insurance plan pursuant to which certain social security benefits, work-related injury benefits, maternity leave insurance, medical insurance, unemployment benefit and housing fund are provided to eligible full-time employees. The relevant labor regulations require the Company’s subsidiaries in the PRC to pay the local labor and social welfare authorities monthly contributions based on the applicable benchmarks and rates stipulated by the local government. The contributions to the plan are expensed as incurred. Employee social security and welfare benefits included as expenses in the unaudited condensed consolidated statements of comprehensive income amounted to $162,598 and $178,802 for the six months ended March 31, 2023 and 2022, respectively. |
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| Recent accounting pronouncements | Recent accounting pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” (“ASU 2019-10”). ASU 2019-10 (i) provides a framework to stagger effective dates for future major accounting standards and (ii) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for certain new standards on the following topics in the FASB Accounting Standards Codification (ASC): (a) Derivatives and Hedging (ASC 815) – now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021; (b) Leases (ASC 842) - now effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021; (c) Financial Instruments — Credit Losses (ASC 326) - now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years; and (d) Intangibles — Goodwill and Other (ASC 350) - now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company plans to adopt this guidance effective October 1, 2023 and the adoption of this ASU is not expected to have a material impact on its consolidated financial statements. |
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Organization and Business Description (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Business Description [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Consolidated Financial Statements of the Companies | The unaudited condensed consolidated financial
statements of the Company include the following entities:
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| Schedule of Condensed Consolidated Financial Statements | The following financial statement amounts and
balances of the VIE and VIE’s subsidiaries were included in the accompanying unaudited condensed consolidated financial statements
after elimination of intercompany transactions and balances:
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| Schedule of Revenue |
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| Schedule of Cash Flow Statement |
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Summary of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment Useful Lives | Property, plant and equipment are stated at cost
less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is provided using the straight-line
method over their expected useful lives, as follows:
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| Schedule of Land use Rights are Amortized Useful Lives | Land use rights are amortized
using the straight-line method with the following estimated useful lives:
|
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| Schedule of Company’s Total Revenues by Geographic Market | The summary of the Company’s total revenues
by geographic market for the six months ended March 31, 2023 and 2022 was as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Company’s Total Revenues by Product Categories | The summary of the Company’s total revenues
by product categories for the six months ended March 31, 2023 and 2022 was as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Currency Exchange Rates | The following table outlines the currency exchange
rates that were used in creating the unaudited condensed consolidated financial statements in this report:
|
|||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts receivable | Accounts receivable, net consist of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Allowance for Doubtful Accounts | Allowance for doubtful accounts movement is as
follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories | Inventories consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses and Other Current Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property, Plant and Equipment, Net | Property, plant and equipment, net, consist of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land Use Right, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Land Use Right, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||
| Schedule of land Use Right, Net | Land use right, net, consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||
| Schedule of Estimated Future Amortization Expense for and Use Rights | Estimated future amortization expense for land
use rights is as follows:
|
||||||||||||||||||||||||||||||||||||||||
Related Party Transactions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Receivable - Related Parties | Accounts receivable - related parties consists
of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Due From Related Parties | Due from related parties consists of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Revenue | Deferred revenue – a related party consists of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Due to Related Parties | Due to a related party consists of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Revenue From Related Parties | Revenue from related parties consists of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Components of the Income Tax Provision | The components of the income tax provision are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Tax Assets | Deferred tax assets are composed of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Movement of the Valuation Allowance | Movement of the valuation allowance:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Effective Tax Rate | The following table reconciles the China statutory
rates to the Company’s effective tax rate for the six months ended March 31, 2023 and 2022:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Taxes Payable | Taxes payable consist of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Business Description (Details) - USD ($) |
6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Sep. 30, 2022 |
Apr. 06, 2023 |
Sep. 24, 2020 |
Feb. 25, 2020 |
|
| Organization and Business Description [Line Items] | ||||||
| Consulting fees receivables | $ 6,455,936 | $ 4,501,169 | ||||
| Proceeds from initial public offer | 8,000,000 | |||||
| IPO [Member] | ||||||
| Organization and Business Description [Line Items] | ||||||
| Proceeds from initial public offer | $ 1,000,000 | |||||
| Public offering price per share (in Dollars per share) | $ 8 | |||||
| Over-Allotment Option [Member] | ||||||
| Organization and Business Description [Line Items] | ||||||
| Additional shares to underwriters (in Shares) | 150,000 | 47,355 | ||||
| Zhongjin International Limited [Member] | ||||||
| Organization and Business Description [Line Items] | ||||||
| Equity interest percentage | 100.00% | |||||
| Erhua Med [Member] | ||||||
| Organization and Business Description [Line Items] | ||||||
| Equity interest percentage | 100.00% | |||||
Organization and Business Description (Details) - Schedule of Consolidated Financial Statements of the Companies |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Jin Med [Member] | |
| Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
| Date of Incorporation | Jan. 14, 2020 |
| Place of Incorporation | Cayman Island |
| % of Ownership | Parent |
| Principal Activities | Investment holding |
| Zhongjin HK [Member] | |
| Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
| Date of Incorporation | Feb. 25, 2020 |
| Place of Incorporation | Hong Kong |
| % of Ownership | 100% |
| Principal Activities | Investment holding |
| Erhua Med [Member] | |
| Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
| Date of Incorporation | Sep. 24, 2020 |
| Place of Incorporation | PRC |
| % of Ownership | 100% |
| Principal Activities | WFOE, Investment holding |
| Changzhou Zhongjin [Member] | |
| Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
| Date of Incorporation | Jan. 26, 2006 |
| Place of Incorporation | PRC |
| % of Ownership | VIE |
| Principal Activities | Design, development, manufacturing and sales of wheelchair and other mobility products |
| Taizhou Zhongjin [Member] | |
| Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
| Date of Incorporation | Jun. 17, 2013 |
| Place of Incorporation | PRC |
| % of Ownership | 100% controlled subsidiary of the VIE |
| Principal Activities | Design, development, manufacturing and sales of wheelchair and other mobility products |
| Zhongjin Jing’ao [Member] | |
| Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
| Date of Incorporation | Dec. 18, 2014 |
| Place of Incorporation | PRC |
| % of Ownership | 100% controlled subsidiary of the VIE |
| Principal Activities | Design, development, manufacturing and sales of wheelchair and other mobility products |
Organization and Business Description (Details) - Schedule of Condensed Consolidated Financial Statements - VIE [Member] - USD ($) |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Condensed Financial Statements, Captions [Line Items] | ||
| Current assets | $ 22,301,879 | $ 18,903,147 |
| Non-current assets | 1,933,397 | 2,036,387 |
| Total assets | 24,235,276 | 20,939,534 |
| Current liabilities | 7,475,978 | 5,703,843 |
| Non-current liabilities | ||
| Total liabilities | $ 7,475,978 | $ 5,703,843 |
Organization and Business Description (Details) - Schedule of Revenue - VIE [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Schedule of Company Revenue [Line Items] | ||
| Net revenue | $ 10,253,163 | $ 9,467,621 |
| Net income | $ 1,766,347 | $ 1,225,864 |
Organization and Business Description (Details) - Schedule of Cash Flow Statement - VIE [Member] - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Condensed Cash Flow Statements, Captions [Line Items] | ||
| Net cash provided by (used in) operating activities | $ 2,743,493 | $ (51,274) |
| Net cash used in investing activities | (7,073,829) | (40,816) |
| Net cash provided by (used in) financing activities | $ 1,312,667 | $ (6,468) |
Summary of Significant Accounting Policies (Details) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Sep. 30, 2022 |
|
| Summary of Significant Accounting Policies [Line Items] | |||
| Short-term investments | $ 4,696,503 | $ 2,276,158 | |
| Interest income | 69,840 | $ 53,516 | |
| Allowance for doubtful accounts | 185,289 | 114,486 | |
| Capitalization for lease | 10,000 | ||
| Warranty costs | |||
| Research and development expenses | $ 631,034 | $ 892,524 | |
| Tax benefit percentage | 50.00% | ||
| VAT rates | 13.00% | 13.00% | |
| VAT tax refunds | $ 526,779 | $ 537,225 | |
| Depreciation of the RMB rate | 8.70% | ||
| Comprehensive income | $ 162,598 | $ 178,802 | |
| IPO [Member] | |||
| Summary of Significant Accounting Policies [Line Items] | |||
| Deferred IPO cost | $ 701,396 | ||
| Minimum [Member] | |||
| Summary of Significant Accounting Policies [Line Items] | |||
| Investments ranging | 3.40% | ||
| Maximum [Member] | |||
| Summary of Significant Accounting Policies [Line Items] | |||
| Investments ranging | 7.00% | ||
| China, Yuan Renminbi | |||
| Summary of Significant Accounting Policies [Line Items] | |||
| Increase in revenue | 18.70% | ||
| Increase in net income | 57.90% | ||
| USD | |||
| Summary of Significant Accounting Policies [Line Items] | |||
| Increase in revenue | 12.70% | ||
| Increase in net income | 44.10% | ||
Summary of Significant Accounting Policies (Details) - Schedule of Property and Equipment Useful Lives |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Property and buildings [Member] | Minimum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 20 years |
| Property and buildings [Member] | Maximum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 25 years |
| Leasehold improvement [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Leasehold improvement | Lesser of useful life and lease term |
| Machinery and equipment [Member] | Minimum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 5 years |
| Machinery and equipment [Member] | Maximum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 10 years |
| Automobiles [Member] | Minimum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 3 years |
| Automobiles [Member] | Maximum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 5 years |
| Office and electric equipment [Member] | Minimum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 3 years |
| Office and electric equipment [Member] | Maximum [Member] | |
| Public Utility, Property, Plant and Equipment [Line Items] | |
| Property, plant and equipment, gross | 5 years |
Summary of Significant Accounting Policies (Details) - Schedule of Land use Rights are Amortized Useful Lives |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Schedule of Land Use Rights are Amortized Using the Straight Line Method Estimated Useful Lives [Abstract] | |
| Land use rights | 46 years |
Summary of Significant Accounting Policies (Details) - Schedule of Company’s Total Revenues by Geographic Market - USD ($) |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Schedule of Total Revenues by Geographic Market [Line Items] | ||
| Revenue | $ 10,253,163 | $ 9,467,621 |
| China Domestic Market [Member] | ||
| Schedule of Total Revenues by Geographic Market [Line Items] | ||
| Revenue | 1,634,219 | 1,264,539 |
| Overseas Market [Member] | ||
| Schedule of Total Revenues by Geographic Market [Line Items] | ||
| Revenue | $ 8,618,944 | $ 8,203,082 |
Summary of Significant Accounting Policies (Details) - Schedule of Company’s Total Revenues by Product Categories - USD ($) |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||
| Total revenue | $ 10,253,163 | $ 9,467,621 |
| Wheelchair [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total revenue | 8,381,323 | 7,949,623 |
| Wheelchair components and others [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total revenue | $ 1,871,840 | $ 1,517,998 |
Summary of Significant Accounting Policies (Details) - Schedule of Currency Exchange Rates |
Mar. 31, 2023 |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|---|
| US [Member] | |||
| Schedule of Currency Exchange Rates [Line Items] | |||
| Period-end spot rate | 1 | 1 | 1 |
| Average rate | 0.01 | 0.01 | 0.01 |
| RMB [Member] | |||
| Schedule of Currency Exchange Rates [Line Items] | |||
| Period-end spot rate | 6.8681 | 7.1135 | 6.3431 |
| Average rate | 0.069784 | 0.065532 | 0.063712 |
Accounts Receivable, Net (Details) - Third-Party Customers [Member] - USD ($) $ in Millions |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Accounts Receivable Net [Line Items] | ||
| Account receivable percentage | 88.80% | |
| Accounts receivable | $ 3.4 | $ 0.5 |
Accounts Receivable, Net (Details) - Schedule of Accounts Receivable - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Schedule Of Accounts Receivable [Abstract] | ||
| Accounts receivable - third-party customers | $ 4,054,688 | $ 3,945,362 |
| Less: allowance for doubtful accounts | (185,289) | (114,486) |
| Accounts receivable – third-party customers, net | $ 3,869,399 | $ 3,830,876 |
Accounts Receivable, Net (Details) - Schedule of Allowance for Doubtful Accounts - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Schedule Of Allowance For Doubtful Accounts [Abstract] | ||
| Beginning balance | $ 114,486 | $ 96,688 |
| Additions | 171,522 | 28,943 |
| Less: write-off | (105,843) | |
| Foreign currency translation adjustments | 5,124 | (11,145) |
| Ending balance | $ 185,289 | $ 114,486 |
Inventories (Details) - Schedule of Inventories - USD ($) |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Schedule of Inventories [Abstract] | ||
| Raw materials | $ 3,022,440 | $ 3,274,744 |
| Work-in-progress | 2,003,823 | 1,399,074 |
| Finished goods | 1,483,086 | 2,050,597 |
| Inventories | $ 6,509,349 | $ 6,724,415 |
Prepaid Expenses and Other Current Assets (Details) - Schedule of Prepaid Expenses and Other Current Assets - USD ($) |
6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|||||
| Schedule of Prepaid Expenses and Other Current Assets [Abstract] | ||||||
| Other receivable | [1] | $ 74,122 | $ 131,449 | |||
| Advance to suppliers | [2] | 89,234 | 156,491 | |||
| Deferred initial public offering costs | 701,396 | |||||
| Prepaid expenses and other current assets | $ 163,356 | $ 989,336 | ||||
| ||||||
Property, Plant and Equipment, Net (Details) ¥ in Millions |
6 Months Ended | ||
|---|---|---|---|
|
Mar. 31, 2023
USD ($)
m²
|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2023
CNY (¥)
m²
|
|
| Property, Plant and Equipment, Net [Abstract] | |||
| Depreciation expense | $ | $ 111,964 | $ 142,954 | |
| Pledged building (in Square Meters) | m² | 11,205.83 | 11,205.83 | |
| Carrying value | $ 2,400,000 | ¥ 16.7 | |
Property, Plant and Equipment, Net (Details) - Schedule of Property, Plant and Equipment, Net - USD ($) |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Subtotal | $ 5,485,515 | $ 5,286,684 |
| Less: accumulated depreciation | (3,902,865) | (3,658,722) |
| Property, plant and equipment, net | 1,582,650 | 1,627,962 |
| Buildings [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Subtotal | 2,545,101 | 2,457,701 |
| Machinery and equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Subtotal | 1,871,011 | 1,801,904 |
| Automobiles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Subtotal | 168,633 | 162,842 |
| Office and electric equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Subtotal | 602,474 | 576,185 |
| Leasehold improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Subtotal | $ 298,296 | $ 288,052 |
Land Use Right, Net (Details) ¥ in Millions |
6 Months Ended | ||
|---|---|---|---|
|
Mar. 31, 2023
USD ($)
m²
|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2023
CNY (¥)
m²
|
|
| Land Use Right, Net [Line Items] | |||
| Amortization expense | $ | $ 2,501 | $ 2,741 | |
| land use right (in Square Meters) | 11,205.83 | 11,205.83 | |
| Carrying value | $ 200,000 | ¥ 1.6 | |
| Changzhou Zhongjin [Member] | |||
| Land Use Right, Net [Line Items] | |||
| land use right (in Square Meters) | 16,595.64 | 16,595.64 | |
Land Use Right, Net (Details) - Schedule of land Use Right, Net - USD ($) |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Land and Land Improvements [Abstract] | ||
| Land use rights | $ 233,828 | $ 225,798 |
| Less: accumulated amortization | (67,352) | (62,585) |
| Land use right, net | $ 166,476 | $ 163,213 |
Land Use Right, Net (Details) - Schedule of Estimated Future Amortization Expense for and Use Rights |
Mar. 31, 2023
USD ($)
|
|---|---|
| Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |
| 2024 | $ 5,083 |
| 2025 | 5,083 |
| 2026 | 5,083 |
| 2027 | 5,083 |
| 2028 | 5,083 |
| Thereafter | 141,061 |
| Total | $ 166,476 |
Short-Term Bank Loan (Details) - 6 months ended Mar. 31, 2023 ¥ in Millions |
USD ($)
m²
|
CNY (¥)
m²
|
|---|---|---|
| Short Term Bank Loan [Line Items] | ||
| Loan agreement | $ 1,456,000 | ¥ 10.0 |
| Working capital period | 1 year | |
| Maturity date | Mar. 28, 2024 | |
| Fixed interest rate | 3.65% | 3.65% |
| Building property | 11,205.83 | 11,205.83 |
| Carrying value | $ 2,400,000 | ¥ 16.7 |
| Properties value | $ 4,800,000 | ¥ 33.0 |
| Changzhou Zhongjin [Member] | ||
| Short Term Bank Loan [Line Items] | ||
| Building property | 16,595.64 | 16,595.64 |
| Carrying value | $ 200,000 | ¥ 1.6 |
| Changzhou Zhongjin [Member] | Bank of Jiangsu [Member] | ||
| Short Term Bank Loan [Line Items] | ||
| Building property | 11,205.83 | 11,205.83 |
Related Party Transactions (Details) ¥ in Millions |
6 Months Ended | |
|---|---|---|
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
CNY (¥)
|
|
| Related Party Transaction [Line Items] | ||
| Related party transaction, Rate | 72.10% | 72.10% |
| Related party transaction | $ 200,000 | |
| Related party transactions non-interest rate | 98.60% | 98.60% |
| Non-interest bearing amount | $ 4,800,000 | |
| Zhongjin Kanglu [Member] | ||
| Related Party Transaction [Line Items] | ||
| Related party transaction | 4,835,861 | |
| Related party transaction made to advance | 4,804,800 | |
| Zhongjin Kanglu [Member] | Business Combinations [Member] | ||
| Related Party Transaction [Line Items] | ||
| Related party transaction | $ 4,804,800 | ¥ 33.0 |
Related Party Transactions (Details) - Schedule of Accounts Receivable - Related Parties - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|||
| Related Party Transaction [Line Items] | ||||
| Subtotal | $ 291,883 | $ 253,473 | ||
| Less: allowance for doubtful accounts | ||||
| Total accounts receivable, net - related parties | $ 291,883 | 253,473 | ||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | [1] | An entity controlled by the CEO | ||
| Subtotal | $ 210,317 | 162,024 | ||
| Zhongjin Hongkang Medical Technology (Shanghai) Co., Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | An entity controlled by the CEO | |||
| Subtotal | $ 70,782 | 55,187 | ||
| Zhongjin Jingau Rehabilitation Equipment (Beijing) Co. Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | An entity controlled by the CEO | |||
| Subtotal | $ 1,520 | 1,468 | ||
| Zhongjiankanglu Industrial Development (Shanghai) Co., Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | An entity controlled by the CEO | |||
| Subtotal | $ 9,264 | $ 34,794 | ||
| ||||
Related Party Transactions (Details) - Schedule of Due From Related Parties - USD ($) |
6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|||
| Related Party Transaction [Line Items] | ||||
| Total due from related parties | $ 4,874,422 | $ 36,257 | ||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | [1] | An entity controlled by the CEO | ||
| Total due from related parties | [1] | $ 4,835,861 | ||
| Huaniaoyuan Catering Management (Changzhou) Co. Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | An entity controlled by the CEO | |||
| Total due from related parties | $ 31,628 | 33,285 | ||
| Other [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | Director of the Company | |||
| Total due from related parties | $ 6,933 | $ 2,972 | ||
| ||||
Related Party Transactions (Details) - Schedule of Deferred Revenue - USD ($) |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Related Party Transaction [Line Items] | ||
| Total deferred revenue | $ 124,766 | |
| Jin Med Medical (Korea) Co., Ltd. [Member] | ||
| Related Party Transaction [Line Items] | ||
| Related party relationship | An entity controlled by the CEO | |
| Total deferred revenue | $ 124,766 |
Related Party Transactions (Details) - Schedule of Due to Related Parties - USD ($) |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Related Party Transaction [Line Items] | ||
| Total due to related parties | $ 118,066 | |
| Changzhou Zhongjian Kanglu Technology Co., Ltd [Member] | ||
| Related Party Transaction [Line Items] | ||
| Related party relationship | An entity controlled by the CEO | |
| Total due to related parties | $ 118,066 |
Related Party Transactions (Details) - Schedule of Revenue From Related Parties - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||
| Related Party Transaction [Line Items] | ||||
| Total revenue from related parties | $ 362,871 | $ 406,444 | ||
| Jiangsu Zhongjin Kanglu Information Technology Co., Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | [1] | An entity controlled by the CEO | ||
| Total revenue from related parties | $ 333,106 | 387,200 | ||
| Zhongjiankanglu Industrial Development (Shanghai) Co., Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | An entity controlled by the CEO | |||
| Total revenue from related parties | $ 17,381 | 5,335 | ||
| Zhongjin Jingau Rehabilitation Equipment (Beijing) Co. Ltd. [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party relationship | An entity controlled by the CEO | |||
| Total revenue from related parties | $ 12,384 | $ 13,909 | ||
| ||||
Taxes (Details) $ / shares in Units, ¥ in Millions |
1 Months Ended | 6 Months Ended | 24 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2022 |
Nov. 30, 2021 |
Nov. 30, 2019 |
Nov. 30, 2018 |
Mar. 31, 2023
USD ($)
$ / shares
|
Mar. 31, 2023
CNY (¥)
|
Mar. 31, 2023
HKD ($)
|
Mar. 31, 2022
USD ($)
$ / shares
|
Dec. 31, 2024
CNY (¥)
|
Dec. 31, 2022
CNY (¥)
|
|
| Taxes [Line Items] | ||||||||||
| Assessable profits amount (in Dollars) | $ | $ 2,000,000 | |||||||||
| Income tax rate | 15.00% | 15.00% | 15.00% | 15.00% | 15.00% | 15.00% | 15.00% | |||
| Taxable income (in Yuan Renminbi) | ¥ 1 | |||||||||
| Enterprise Income Tax | 5.00% | 5.00% | 5.00% | 2.50% | ||||||
| Interest rate | 3.65% | 3.65% | 3.65% | |||||||
| Corporate income taxes, description | The corporate income taxes for the six months ended March 31, 2023 and 2022 were reported at a reduced rate for both Changzhou Zhongjin and Taizhou Zhongjin for being approved as HNTEs and enjoying a reduced income tax rate at 15% instead of 25%, and Zhongjin Jing’ao is qualified as a small-scale minimal profit enterprise for a further reduced income tax rate of 2.5%. The impact of the tax holidays noted above decreased the Company’s income taxes by $195,135 and $149,628 for the six months ended March 31, 2023 and 2022, respectively. The effect of the tax holidays on net income per share (basic and diluted) was $0.03 and $0.02 for the six months ended March 31, 2023 and 2022, respectively. | The corporate income taxes for the six months ended March 31, 2023 and 2022 were reported at a reduced rate for both Changzhou Zhongjin and Taizhou Zhongjin for being approved as HNTEs and enjoying a reduced income tax rate at 15% instead of 25%, and Zhongjin Jing’ao is qualified as a small-scale minimal profit enterprise for a further reduced income tax rate of 2.5%. The impact of the tax holidays noted above decreased the Company’s income taxes by $195,135 and $149,628 for the six months ended March 31, 2023 and 2022, respectively. The effect of the tax holidays on net income per share (basic and diluted) was $0.03 and $0.02 for the six months ended March 31, 2023 and 2022, respectively. | The corporate income taxes for the six months ended March 31, 2023 and 2022 were reported at a reduced rate for both Changzhou Zhongjin and Taizhou Zhongjin for being approved as HNTEs and enjoying a reduced income tax rate at 15% instead of 25%, and Zhongjin Jing’ao is qualified as a small-scale minimal profit enterprise for a further reduced income tax rate of 2.5%. The impact of the tax holidays noted above decreased the Company’s income taxes by $195,135 and $149,628 for the six months ended March 31, 2023 and 2022, respectively. The effect of the tax holidays on net income per share (basic and diluted) was $0.03 and $0.02 for the six months ended March 31, 2023 and 2022, respectively. | |||||||
| Income tax (in Dollars) | $ | $ 195,135 | $ 149,628 | ||||||||
| Tax holidays net income per share (in Dollars per share) | $ / shares | $ 0.03 | $ 0.02 | ||||||||
| Deferred tax assets percentage | 100.00% | 100.00% | 100.00% | |||||||
| Minimum [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Income tax rate | 2.50% | 2.50% | 2.50% | |||||||
| Portion amount (in Yuan Renminbi) | ¥ 1 | |||||||||
| Maximum [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Portion amount (in Yuan Renminbi) | ¥ 3 | |||||||||
| Enterprise Income Tax [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Income tax rate | 25.00% | 25.00% | 25.00% | |||||||
| Hong Kong [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Tax rate | 8.25% | 8.25% | 8.25% | |||||||
| Assessable profits amount (in Dollars) | $ | $ 2,000,000 | |||||||||
| Assessable profits percentage | 16.50% | 16.50% | 16.50% | |||||||
| Enterprise Income Tax [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Interest rate | 10.00% | |||||||||
| Changzhou Zhongjin [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Income tax rate | 15.00% | 15.00% | 15.00% | |||||||
| Taizhou Zhongjin [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Income tax rate | 25.00% | 25.00% | 25.00% | |||||||
| Forecast [Member] | Maximum [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Taxable income (in Yuan Renminbi) | ¥ 3 | |||||||||
| Zhongjin Jing’ao [Member] | Forecast [Member] | Enterprise Income Tax [Member] | ||||||||||
| Taxes [Line Items] | ||||||||||
| Income tax rate | 5.00% | |||||||||
Taxes (Details) - Schedule of Components of the Income Tax Provision - USD ($) |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Taxes (Details) - Schedule of Components of the Income Tax Provision [Line Items] | ||
| Current tax provision | $ 135,493 | $ 183,754 |
| Deferred tax benefit | 68,560 | (133,346) |
| Income tax provision | 204,053 | 50,408 |
| BVI [Member] | ||
| Taxes (Details) - Schedule of Components of the Income Tax Provision [Line Items] | ||
| Current tax provision | ||
| Deferred tax benefit | ||
| Hong Kong [Member] | ||
| Taxes (Details) - Schedule of Components of the Income Tax Provision [Line Items] | ||
| Current tax provision | ||
| Deferred tax benefit | ||
| PRC [Member] | ||
| Taxes (Details) - Schedule of Components of the Income Tax Provision [Line Items] | ||
| Current tax provision | 135,493 | 183,754 |
| Deferred tax benefit | $ 68,560 | $ (133,346) |
Taxes (Details) - Schedule of Deferred Tax Assets - USD ($) |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Deferred tax assets: | ||
| Net operating loss carry-forwards | $ 35,753 | $ 107,661 |
| Inventory reserve | 136,460 | 134,626 |
| Allowance for doubtful accounts | 27,793 | 17,173 |
| Total | 200,006 | 259,460 |
| Valuation allowance | (15,735) | (14,248) |
| Total deferred tax assets | $ 184,271 | $ 245,212 |
Taxes (Details) - Schedule of Movement of the Valuation Allowance - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
|
| Schedule of movement of the valuation allowance [Abstract] | ||
| Beginning balance | $ 14,248 | $ 13,636 |
| Current year addition | 965 | 2,022 |
| Exchange difference | 522 | (1,410) |
| Ending balance | $ 15,735 | $ 14,248 |
Taxes (Details) - Schedule of Effective Tax Rate |
6 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Schedule of effective tax rate [Abstract] | ||
| China Income tax statutory rate | 25.00% | 25.00% |
| Effect of PRC tax holiday | (9.90%) | (9.80%) |
| Permanent difference | 0.00% | 0.20% |
| Research and development tax credit | (4.80%) | (10.60%) |
| Change in valuation allowance | 0.10% | (0.90%) |
| Effective tax rate | 10.40% | 3.90% |
Taxes (Details) - Schedule of Taxes Payable - USD ($) |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Schedule of taxes payable [Abstract] | ||
| Income tax payable | $ 289,427 | $ 170,887 |
| Value added tax payable | 38,055 | 52,474 |
| Other taxes payable | 14,403 | 24,729 |
| Total taxes payable | $ 341,885 | $ 248,090 |
Concentrations (Details) - USD ($) |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Sep. 30, 2022 |
|
| Concentrations [Line Items] | |||
| Cash deposit at financial institutions outside (in Dollars) | $ 6,787,221 | ||
| Cash deposit at financial institutions (in Dollars) | $ 1,890,435 | $ 4,785,389 | |
| Subsidiaries [Member] | |||
| Concentrations [Line Items] | |||
| Total revenue percentage | 7.70% | 6.00% | |
| Customer One [Member] | |||
| Concentrations [Line Items] | |||
| Total revenue percentage | 70.30% | 76.10% | |
| Accounts Receivable [Member] | |||
| Concentrations [Line Items] | |||
| Concentration risk percentage | 69.10% | 72.40% | |
| Supplier Concentration Risk [Member] | |||
| Concentrations [Line Items] | |||
| Concentration risk percentage | 10.00% | 10.00% | |
| Accounts Payable [Member] | |||
| Concentrations [Line Items] | |||
| Concentration risk percentage | 10.00% | 10.70% | |
| Sales [Member] | Customer [Member] | |||
| Concentrations [Line Items] | |||
| Aggregate sales percentage | 78.00% | 82.10% | |
Shareholders' Equity (Details) - USD ($) |
6 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Apr. 06, 2023 |
Mar. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Oct. 28, 2022 |
Jan. 14, 2020 |
|||||
| Shareholders' Equity (Details) [Line Items] | ||||||||||
| Common stock shares authorized (in Shares) | 50,000,000 | [1] | 50,000,000 | [1] | 50,000,000 | |||||
| Common stock value per share (in Dollars per share) | $ 0.001 | [1] | $ 0.001 | [1] | $ 0.001 | |||||
| Shares issued (in Shares) | 20,000,000 | |||||||||
| Surrendered of ordinary shares (in Shares) | 13,250,000 | |||||||||
| Ordinary shares issued (in Shares) | 150,000 | |||||||||
| Public offering price (in Dollars per share) | $ 8 | |||||||||
| Total gross proceeds | $ 8,000,000 | |||||||||
| Net proceeds | $ 6,800,000 | |||||||||
| Granted underwriters option purchase period | 45 days | |||||||||
| Statutory surplus percentage | 10.00% | |||||||||
| Reserve is equal percentage | 50.00% | |||||||||
| Restricted amounts | $ 1,827,972 | $ 1,651,422 | ||||||||
| Restricted net assets | $ 1,914,531 | $ 1,737,982 | ||||||||
| Initial Public Offering [Member] | ||||||||||
| Shareholders' Equity (Details) [Line Items] | ||||||||||
| Ordinary shares issued (in Shares) | 1,000,000 | |||||||||
| Subsequent Event [Member] | ||||||||||
| Shareholders' Equity (Details) [Line Items] | ||||||||||
| Total gross proceeds | $ 378,840 | |||||||||
| Subsequent Event [Member] | Over-Allotment Option [Member] | ||||||||||
| Shareholders' Equity (Details) [Line Items] | ||||||||||
| Ordinary shares issued (in Shares) | 47,355 | |||||||||
| ||||||||||
Segment Reporting (Details) |
6 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Segment Reporting (Details) [Line Items] | |
| Reporting segment | 1 |
| Chief Executive Officer [Member] | |
| Segment Reporting (Details) [Line Items] | |
| Reporting segment | 1 |