NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2021
(UNAUDITED)
NOTE
1. DESCRIPTION OF THE BUSINESS AND ORGANIZATION
Kun
Peng International Limited (“the Company”, “KPIL”, “CXKJ”, “we”, “us”, “our”),
a Nevada corporation (formerly known as CX Network Group, Inc.), through its subsidiaries and VIE, currently engages in the sale of health
care and health related household products through its online platform, King Eagle Mall.
Reverse
Merger
On
May 17, 2021, the Company entered into a share exchange agreement (“Share Exchange Agreement”) with (i) Kun Peng International
Holding Limited (“KP International”), a limited liability company incorporated in British Virgin Islands on April 20, 2021,
and (ii) the five members of KP International to acquire all the issued and outstanding capital stock of KP International in exchange
for the issuance to those members of an aggregate of 34,158,391 shares of our common stock (“Reverse Acquisition”). Pursuant
to the terms of the Exchange Agreement, and as a condition to the completion of the transactions contemplated by the Share Exchange Agreement,
the Company also agreed to enter into an agreement with Wenhai Xia (“the Stockholder”), to cancel an aggregate of 15,535,309
shares of the Company’s Common Stock owned by the Stockholder. The Reverse Acquisition was closed on May 17, 2021.
For
accounting purpose, the transaction with KP International was treated as a reverse acquisition and KP International is deemed to be the
acquirer and the Company as the acquired party. Consequently, the assets and liabilities and the historical operations that will be reflected
in the accompanying consolidated financial statements prior to the Reverse Acquisition will be those of KP International and its consolidated
subsidiaries and will be recorded at the historical cost basis of KP International, and the accompanying consolidated financial statements
after consummation of the reverse acquisition will include the assets and liabilities of KP International and its subsidiaries and VIE,
historical operations of KP International and its subsidiaries and VIE, and operations of the Company from the Closing Date of the Reverse
Acquisition. The accompanying consolidated financial statements share and per share information has been retroactively adjusted to reflect
the exchanged shares in the Acquisition. The equity structure of the Company was retrospectively adjusted under ASC Topic 805-40. As
of December 31, 2021, there were 40,000,000 shares issued and outstanding.
Authorized
Shares and Name Change
Effective
as of September 9, 2021, the Company’s Articles of Incorporation were amended to change the name of the Company from CX Network
Group, Inc. to Kun Peng International Ltd. (“KPIL”) and to increase the Company’s authorized capital to 210,000,000
authorized shares of Capital Stock with 200,000,000 designated as $0.0001 par value Common Stock, and 10,000,000 designated as $0.0001
par value Preferred Stock.
Kun
Peng International Holding Limited
Kun
Peng International Holding Limited (“KP International”) was incorporated in the British Virgin Islands on April 20, 2021.
KP International is a holding company and entered into a Bought and Sold Note with Kunpeng (China) Industrial Development Company Limited
(“KP Industrial”), incorporated in Hong Kong on August 11, 2017, at a cash consideration of $0.129 (HK$1) on May 3, 2021.
After the ownership transfer, it became a sole shareholder of KP Industrial.
Kunpeng
(China) Industrial Development Company Limited
Kunpeng
(China) Industrial Development Company Limited (“KP Industrial”) was incorporated as a limited liability company in Hong
Kong under the name of Jing Jin Ji Investment Group Co., Limited (“Jing Jin Ji”) on August 11, 2017. The share capital of
KP Industrial is 10,000 ordinary shares at $1,292 (HKD10,000) and was wholly owned by an individual. On November 9, 2018, Jing Jin Ji
changed its name to “Kunpeng (China) Industrial Development Company Limited” and filed a Certificate of Change of Name with
the Hong Kong Company Registry on the same day. Although it was incorporated in 2017, it did not commence operations until July 2020
as it focused on exploring business opportunities in its initial phrase and developing our online mobile application, King Eagle Mall,
through its subsidiary, King Eagle (China) Co., Ltd. It became a wholly owned subsidiary of KP International on May 3, 2021.
Kun
Peng (Hong Kong) Industrial Development Limited
Kun
Peng (Hong Kong) Industrial Development Limited (“KP (Hong Kong)”) was incorporated as a limited liability company in Hong
Kong on June 21, 2021. It is a holding company and is wholly owned by Kun Peng International Holding Limited. The share capital of this
entity upon formation is $0.13 (HK$1).
King
Eagle (China) Co., Ltd.
King
Eagle (China) Co., Ltd. (“King Eagle (China)”) was incorporated as a limited liability company in Beijing Economic Technological
Development Zone in the People’s Republic of China (“the PRC”) on March 20, 2019 with a registered capital of approximately
$15 million (RMB100 million). King Eagle (China) was a wholly owned subsidiary of KP Industrial at the time of establishment. KP Industrial
transferred its approximately $2.2 million (RMB 15 million) or 15% to Guoxin Ruilian Group Co., Ltd., a limited liability company incorporated
in Beijing, the PRC, on November 2, 2020.
On
March 26, 2021, Guoxin Ruilian Group Co., Ltd entered into equity transfer agreements with KP Industrial and Guoxin Zhengye. Both Guoxin
Ruilian Group Co., Ltd and Guoxin Zhengye are wholly owned by a common shareholder, Guoxin United Holdings Group Co., Ltd. Under the
agreements, Guoxin Ruilian Group Co., Ltd agreed to transfer its 8% of its ownership in King Eagle (China) to Guoxin Zhengye and the
remaining 7% ownership in King Eagle (China) to KP Industrial on April 20, 2021. After the transfer, KP Industrial and Guoxin Zhengye
became the 92% and 8% shareholders of King Eagle (China), respectively.
Some
of the business engaged in by King Eagle (Tianjin) is restricted or prohibited for foreign investment under PRC regulations. As such,
King Eagle (China) has entered into the VIE Agreements with King Eagle (Tianjin) and their shareholders. We do not own any equity interests
in King Eagle (Tianjin), but control and receive the economic benefits of their respective business operations through the VIE Agreements.
The VIE Agreements enable us to provide King Eagle (Tianjin) with consulting services on an exclusive basis, in exchange for all of its
annual profits, if any. In addition, we are able to appoint its senior executives and approve all matters requiring approval of its shareholders.
The VIE Agreements are comprised of a Consulting Service Agreement, Business Operation Agreement, Proxy Agreement, Equity Disposal Agreement,
and Equity Pledge Agreement.
Under
current Chinese laws and regulations, the Company believes that the VIE Agreements are not subject to any government approval. The shareholders
of King Eagle (Tianjin) were required to register with SAFE when they established offshore vehicles to hold KP International, and such
SAFE registration was effected on May 14, 2021. These shareholders of King Eagle (Tianjin) will have to register their equity pledge
arrangement as required under the Equity Pledge Agreement with King Eagle (China). The Company faces uncertainty with respect to future
actions by the PRC government that could significantly affect King Eagle (Tianjin)’s financial performance and the enforceability
of the VIE Agreements.
King
Eagle (Tianjin) Technology Co., Ltd.
King
Eagle (Tianjin) Technology Co., Ltd. (“King Eagle (Tianjin)”) was incorporated as a limited liability company in Tianjin
Pilot Free Trade Zone in the People’s Republic of China on September 2, 2020, with a registered capital of approximately $1.5 million
(RMB 10 million). It is owned by multiple individuals: (i) Chengyuan Li, 40.5%, (ii) Xiujin Wang, 10.5%, (iii) Jinjing Zhang, 6%,(iv)
Wanfeng Hu, 6%, (v) Cuilian Liu, 6%. (vi) Zhizhong Wang. 6%. (vii) Zhandong Fan, 5%, (viii) Yanlu Li, 5%, (ix) Yuanyuan Zhang, 5%, (x_)
Xiangyi Mao, 5%, and (xi) Hui Teng, 5%). Those shareholders also indirectly own KP International through three British Virgin Islands
entities: Kunpeng Tech Limited, Kunpeng TJ Limited, and Kun Peng XJ Limited. Additionally, out of these stakeholders, three of them are
currently directors and executives of KP International, which includes: Chenyuan Li, Director, Yuanyuan Zhang, Chief Financial Officer,
and Yanlu Li, Vice President, and a former executive Xiangyi Mao.
Kun
Peng Tian Yu Health Technology (Tianjin) Co., Ltd.
Kun
Peng Tian Yu Health Technology Co., Ltd. (“KP Tian Yu”) was incorporated as a limited liability company in Tianjin Pilot
Free Trade Zone in the People’s Republic of China on August 10, 2021 with a registered capital of $5 million. It’s wholly
owned by KP (Hong Kong).
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable
to quarterly financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United
States of America for complete financial statements. Quarterly results are not necessarily indicative of results for a full year. In
the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of
operations and cash flows for the quarterly periods have been included.
These
condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements
and notes thereto for the year ended September 30, 2021 included in the Form 10-K/A filed with the SEC on February 8, 2022.
The
condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United
States of America. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized
when earned, and expenses and losses are recognized when incurred. The condensed consolidated financial statements are expressed in U.S.
dollars.
Basis
of Consolidation
The
condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and variable interest entity
(“VIE”). All significant intercompany transactions and balances within the Company have been eliminated upon consolidation.
Use
of Estimates and Assumptions
The
preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires management
to make estimate and assumptions that impact the presented amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the presented amounts of revenues and expenses during the period. Actual results
may differ from those estimates. Significant estimates during the three months ended December 31, 2021 and 2020 include the collectability
of receivables, the useful lives of long-lived assets and intangibles, assumptions used in assessing impairment of long-lived assets,
valuation of accruals for expenses and tax due.
Going
Concern
The
accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America which contemplate continuation of the Company as a going concern basis. The going-concern basis assures
that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed on the financial statements.
The Company’s ability to continue as a going concern depends on the liquidation of its current assets and business developments.
In assessing the Company’s liquidity, the Company monitors and analyzes its cash and cash equivalents and its operating and capital
expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital
expenditure obligations. For the three months ended December 31, 2021, although the Company generated cash inflows from operating activities
of $679,690 and a net income of $337,858, it incurred a negative working capital of $1,895,085. Moreover, as the COVID-19 outbreak continues,
there is a delay in the progress of construction and approval for the construction permit of smart kiosk due to the lockdown of the affected
areas in the PRC and the closure of the government agencies in the PRC. These conditions raise substantial doubt about the ability of
the Company to continue as a going concern.
The
Company continues to monitor its operations to help refine the Company’s financial liquidity. Options under consideration in the
review process include, but not limited to, increase of sales on its online business, reduction of overhead costs, fund advance from
the Company’s stockholders and directors, or financing through issuance of shares. During the first quarter of 2022, the Company
focused on increasing its revenue through its online platform and slimming its overhead costs. For example, we reduced the compensation
and benefits of our executives, decreased office supplies expense, trimmed staff meeting expense and terminated the lease arrangements
of employee accommodations. Additionally, the Company obtained a fund advance of approximately $0.8 million from one of the shareholders
of King Eagle (Tianjin) to meet its working capital requirements.
In
order to continue as a going concern for the next 12 months, the Company continues to focus on increasing its revenue through the sale
of health care products on its online platform, King Eagle Mall, streamlining its overhead costs or obtaining a financing from its stockholders
or directors. However, the Company cannot provide any assurance that it will be able to increase revenue, that it will be able to successfully
implement its business plan, or that financing that will be available to it on commercially acceptable terms, if at all. The financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. The directors
will continue to support the group by providing adequate financial assistance to enable the group to continue its business operations
for the foreseeable future.
COVID-19
Outbreak
The
ongoing and evolving COVID-19 pandemic continues to spread throughout the world and outbreak prompted governments and business to take
a widespread of quarantines, lockdowns, site closures. It has negatively impacted the global economy, workforces, customers, and created
significant volatility and disruption of economic activities.
During
the first quarter of 2022, the restrictions, quarantines and closures remained in certain affected areas and government agencies in the
PRC. The approval process of our applications for the construction permits of smart kiosks was delayed by the local governmental agencies
and the construction project of smart kiosks was also postponed. The Company continues to focus its business through its online platform,
King Eagle Mall, to mitigate the adverse impacts by COVID-19 and follows up closely with the local governmental agencies for the application
for the construction permits of smart kiosks. In fact, the pandemic increased the overall public health consciousness in the PRC and
the Company experienced a significant growth in its average monthly online sale revenue by $1.4 million or 755.2% from $0.2 million for
the three months ended December 31, 2020 to $1.6 million for the three months ended December 31, 2021.
The
Company does not expect that the coronavirus COVID-19 will have a material adverse effect on its online business or financial results
at this time. Still, it is not possible to predict the unanticipated consequence of the pandemic on our future business performance and
liquidity due to the severity of global situation of COVID-19. The Company continues to monitor and assess the evolving situation closely
and evaluate its potential exposure.
Earnings
(loss) Per Share
Basic
income (loss) per share is computed by dividing net income (loss) attributable to the holders of ordinary shares by the weighted average
number of ordinary shares outstanding during the year. Diluted income (loss) per share is calculated by dividing net income (loss) attributable
to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average
number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. However, ordinary share equivalents
are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive,
such as in a period in which a net loss is recorded.
Cash
and Cash Equivalents
We
consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain
with various financial institutions in PRC. As of December 31, 2021 and September 30, 2021, cash balances held in PRC banks are uninsured.
We have not experienced any losses in bank accounts and believes we are not exposed to any risks on our cash in bank accounts.
Revenue
Recognition
Revenue
is comprised of sales of goods and represents the amount of consideration the Company is entitled to upon the transfer of goods. Revenue
was recorded on a gross basis, net of surcharges and value added tax (“VAT”) of gross sales. The Company recorded revenue
on a gross basis because the Company is the primary obligor of the sales arrangements has latitude in establishing prices, has discretion
in suppliers’ selection and assumes credit risks on receivables on gross sales from customers.
Deferred
Revenue
Deferred
revenue results from transactions where the Company has received the payments from the customers but revenue recognition criteria under
the five-step model of ASC Topic 606 have yet to be met. Once all revenue recognition criteria have been satisfied, the revenues will
be recognized upon the transfer of risk and rewards to the customers in the consolidated statement of operations.
Lease
The
Company adopted ASC Topic 842 using the modified retrospective transition method on July 1, 2020. There was no cumulative effect of initially
applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date nor revision of the balances
in comparative periods. As a result of the adoption, the Company recognized a lease liability and right-of-use asset for each of the
existing lease arrangement.
Recently
Adopted Accounting Standards
Income
Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which
modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard was effective for KPIL after
September 30, 2021. The Company evaluated that this new guidance does not have significant impact on its unaudited condensed consolidated
financial statements.
Accounting
Pronouncements Issued But Not Yet Adopted
Financial
Instruments. In June 2016, the FASB issued Accounting Standards Update No. 2016-13,”Financial Instruments - Credit Losses (Topic
326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and
the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those
fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial
Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the
effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years
beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard
in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13
on its consolidated financial statements.
In
the period from January 2022 through February 2022, the FASB has not issued additional accounting standards updates.
NOTE
3 - VARIABLE INTEREST ENTITIES “VIE” ARRANGEMENTS
On
May 15, 2021, King Eagle (China) entered into a series of contractual arrangements with King Eagle (Tianjin) and its shareholders. As
a result of the contractual arrangements, the Company classified King Eagle (Tianjin) as a Variable Interest Entity “VIE”.
King
Eagle (Tianjin) Technology Co., Ltd. (“King Eagle (Tianjin)”) was incorporated as a limited liability company in Tianjin
Pilot Free Trade Zone in the People’s Republic of China on September 2, 2020, with a registered capital of approximately $1.5 million
(RMB 10 million). It is owned by multiple individuals: (i) Chengyuan Li, 40.5%, (ii) Xiujin Wang, 10.5%, (iii) Jinjing Zhang, 6%,(iv)
Wanfeng Hu, 6%, (v) Cuilian Liu, 6%. (vi) Zhizhong Wang. 6%. (vii) Zhandong Fan, 5%, (viii) Yanlu Li, 5%, (ix) Yuanyuan Zhang, 5%, (x)
Xiangyi Mao, 5%, and (xi) Hui Teng, 5%). Those shareholders also indirectly own KP International through three British Virgin Islands
entities: Kunpeng Tech Limited, Kunpeng TJ Limited, and Kun Peng XJ Limited. Additionally, out of these stakeholders, three of them are
currently directors and executives of KP International, which includes: Chenyuan Li, Director, Yuanyuan Zhang, Chief Financial Officer,
and Yanlu Li, Vice President, and a former executive Xiangyi Mao.
The
VIE Agreements are as follows:
| (1) |
Consulting
Service Agreement |
| (2) |
Business
Operation Agreement |
| (3) |
Proxy
Agreement |
| (4) |
Equity
Disposal Agreement |
| (5) |
Equity
Pledge Agreement |
Consulting
Service Agreement
Pursuant
to the terms of certain Exclusive Consulting Service Agreement dated May 15, 2021, between King Eagle (China) and King Eagle (Tianjin)
(the “Consulting Service Agreement”), King Eagle (China) is the exclusive consulting service provider to King Eagle
(Tianjin) to provide business-related software research and development services; design, installation, and testing services; network
equipment support, upgrade, maintenance, monitor, and problem-solving services; employees technical training services; technology development
and sublicensing services; public relations services; market investigation, research, and consultation services; short to medium term
marketing plan-making services; compliance consultation services; marketing events and membership related activities organizing services;
intellectual property permits; equipment and rental services; and business-related management consulting services. Pursuant to the Consulting
Service Agreement, the service fee is the remaining amount after King Eagle (Tianjin)’s profit before tax in the corresponding
year deducts King Eagle (Tianjin)’s losses, if any, in the previous year, the necessary costs, expenses, taxes, and fees incurred
in the corresponding year, and the withdraws of the statutory provident fund. King Eagle (Tianjin)agreed not to transfer its rights and
obligations under the Consulting Service Agreement to any third party without prior written consent from King Eagle (China). In addition,
King Eagle (China) may transfer its rights and obligations under the Consulting Service Agreement to King Eagle (China)’s affiliates
without King Eagle (Tianjin)’s consent, but King Eagle (China) shall notify King Eagle (Tianjin) of such transfer. This Agreement
is valid for a term of 10 years subject to any extension requested by King Eagle (China) unless terminated by King Eagle (China) unilaterally
prior to the expiration.
Business
Operation Agreement
Pursuant
to the terms of certain Business Operation Agreement dated on May 15, 2021, among King Eagle (China), King Eagle (Tianjin)and the shareholders
of King Eagle (Tianjin) (the “Business Operation Agreement”), King Eagle (Tianjin) has agreed to subject the operations
and management of its business to the control of King Eagle (China). According to the Business Operation Agreement, King Eagle (Tianjin)
is not allowed to conduct any transactions that has substantial impact upon its operations, assets, rights, obligations and personnel
without the King Eagle (China)’s written approval. The shareholders of King Eagle (Tianjin) and King Eagle (Tianjin) will take
King Eagle (China) ‘s advice on appointment or dismissal of directors, employment of King Eagle (Tianjin)’s employees, regular
operation, and financial management of King Eagle (Tianjin). The shareholders of King Eagle (Tianjin) have agreed to transfer any dividends,
distributions or any other profits that they receive as the shareholders of King Eagle (Tianjin) to King Eagle (China) without consideration.
The Business Operation Agreement is valid for a term of 10 years or longer upon the request of King Eagle (China) prior to the expiration
thereof. The Business Operation Agreement might be terminated earlier by King Eagle (China) with a 30-day written notice.
Proxy
Agreement
Pursuant
to the terms of the Proxy Agreement dated on May 15, 2021, among King Eagle (China), and the shareholders of King Eagle (Tianjin) (the
“Proxy Agreement”), the shareholders of King Eagle (Tianjin) have entrusted their vote rights as King Eagle (Tianjin)’s
shareholders to King Eagle (China) for the longest duration permitted by PRC law. The Proxy Agreement can be terminated by mutual consents
of King Eagle (Tianjin) Shareholders and King Eagle (China) or upon a 30-day notice of King Eagle (China).
Equity
Disposal Agreement
Pursuant
to the terms of the Equity Disposal Agreement dated on May 15, 2021, among King Eagle (China), King Eagle (Tianjin), and the shareholders
of King Eagle (Tianjin) (the “Equity Disposal Agreement”), the shareholders of King Eagle (Tianjin) granted King Eagle
(China) or its designees an irrevocable and exclusive purchase option (the “Option”) to purchase King Eagle (Tianjin)’s
all or partial equity interests and/or assets at the lowest purchase price permitted by PRC laws and regulations. The option is exercisable
at any time at King Eagle (China)’s discretion in full or in part, to the extent permitted by PRC law. The shareholders of King
Eagle (Tianjin) agreed to give King Eagle (Tianjin) the total amount of the exercise price as a gift, or in other methods upon King Eagle
(China)’s written consent to transfer the exercise price to King Eagle (Tianjin). The Equity Disposal Agreement is valid for a
term of 10 years or longer upon the request of King Eagle (China).
Equity
Pledge Agreement
Pursuant
to the terms of certain Equity Pledge Agreement dated on May 15, 2021, among King Eagle (China) and the shareholders of King Eagle (Tianjin)
(the “Pledge Agreement”), the shareholders of King Eagle (Tianjin) pledged all of their equity interests in King Eagle
(Tianjin)to King Eagle (China), including the proceeds thereof, to guarantee King Eagle (Tianjin)’s performance of its obligations
under the Business Operation Agreement, the Consulting Service Agreement and Equity Disposal Agreement (each, a “Agreement”,
collectively, the “Agreements”). If King Eagle (Tianjin) or its shareholders breach its respective contractual obligations
under any Agreement, or cause to occur one of the events regards as an event of default under any Agreement, King Eagle (China), as pledgee,
will be entitled to certain rights, including the right to dispose of the pledged equity interest in King Eagle (Tianjin). During the
term of the Pledge Agreement, the pledged equity interests cannot be transferred without King Eagle (China)’s prior written consent.
The Pledge Agreements is valid until all the obligations due under the Agreements have been fulfilled.
A
VIE is an entity that has either a total equity investment that is insufficient to permit the entity 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
and must consolidate the VIE. King Eagle (China) is deemed to have a controlling financial interest and be the primary beneficiary of
King Eagle (Tianjin) because it has both of the following characteristics:
| |
(1) |
The
power to direct activities at King Eagle (Tianjin) that most significantly impact such entity’s economic performance, and |
| |
|
|
| |
(2) |
The
obligation to absorb losses of, and the right to receive benefits from, King Eagle (Tianjin) that could potentially be significant
to such entity. |
Pursuant
to the Contractual Arrangements, King Eagle (Tianjin) pays service fees equal to all of its net profit after tax payments to King Eagle
(China). At the same time, to King Eagle (China) is obligated to absorb all of their losses. The Contractual Arrangements are designed
so that King Eagle (Tianjin) operates to the benefit of King Eagle (China) and ultimately the Company.
Based
on the foregoing VIE Agreements, King Eagle (China) has effective 100% fully control of King Eagle (Tianjin), which enables King Eagle
(China) to receive all of their expected residual returns and absorb the expected losses of the VIE. Accordingly, the Company consolidates
the accounts of King Eagle (Tianjin) and its subsidiaries for the periods presented herein, in accordance with Accounting Standards Codification,
or ASC, 810-10, Consolidation.
Accordingly,
the accounts of the King Eagle (Tianjin) are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation.
In addition, their financial positions and results of operations are included in the Company’s financial statements.
The
Company consolidated its VIE as of December 31, 2021 and September 30, 2021. The carrying amounts and classification of the VIE’s
assets and liabilities included in the consolidated balance sheets are as follows:
SCHEDULE OF VIE’S ASSETS AND LIABILITIES INCLUDED IN THE CONSOLIDATED BALANCE SHEETS
| | |
December 31, | | |
September 30, | |
| | |
2021 | | |
2021 | |
| | |
| | |
| |
| Current assets | |
$ | 4,521,676 | | |
$ | 3,712,560 | |
| Noncurrent assets | |
| 118,873 | | |
| 145,935 | |
| Total assets | |
| 4,640,549 | | |
| 3,858,495 | |
| Total liabilities | |
| 4,851,924 | | |
| 4,525,808 | |
| Net liabilities | |
$ | (211,375 | ) | |
$ | (667,313 | ) |
The
VIE’s liabilities consisted of the following as of December 31, 2021 and September 30, 2021:
| | |
December 31, | | |
September 30, | |
| | |
2021 | | |
2021 | |
| | |
| | |
| |
| Current liabilities | |
| | | |
| | |
| Trade and other payable | |
$ | 728,027 | | |
$ | 1,024,064 | |
| Amount due to a related party | |
| 765,858 | | |
| - | |
| Deferred revenue | |
| 3,006,489 | | |
| 3,122,705 | |
| Payroll payable | |
| 6,880 | | |
| 14,802 | |
| Tax payable | |
| 225,797 | | |
| 218,301 | |
| Operating lease obligations-current portion | |
| 81,933 | | |
| 92,807 | |
| Total current liabilities | |
| 4,814,984 | | |
| 4,472,679 | |
| Total noncurrent liabilities | |
| - | | |
| - | |
| Operating lease obligations-net of current portion | |
| 36,940 | | |
| 53,129 | |
| Total noncurrent liabilities | |
| 36,940 | | |
| 53,129 | |
| Total liabilities | |
$ | 4,851,924 | | |
$ | 4,525,808 | |
The
operating results of the VIE were as follows:
| | |
For the three months ended December 31, | |
| | |
2021 | | |
2020 | |
| | |
| | |
| |
| Revenue | |
$ | 4,669,408 | | |
$ | 545,961 | |
| Gross profit | |
| 3,962,730 | | |
| 452,112 | |
| Income (loss) from operations | |
| 437,856 | | |
| (180,564 | ) |
| Other income | |
| 19,034 | | |
| 21 | |
| Net income (loss) | |
$ | 456,890 | | |
$ | (180,543 | ) |
NOTE
4 - ADVANCE AND PREPAYMENTS
Prepayments
consisted of the following:
SCHEDULE OF PREPAYMENTS
| | |
2021 | |
2021 |
| | |
December 31, | |
September 30, |
| | |
2021 | |
2021 |
| Prepaid service
fee(1) | |
$ | 344,636 | | |
$ | 349,019 | |
| Prepaid rent and building management and utilities | |
| 80,092 | | |
| 85,474 | |
| Prepaid supplies(2) | |
| 109,996 | | |
| 78,248 | |
| Prepaid system maintenance services | |
| 3,434 | | |
| 5,209 | |
| Prepaid income tax | |
| 5,617 | | |
| 5,689 | |
| Prepaid professional services(3) | |
| 30,306 | | |
| 148,708 | |
| Prepaid others | |
| 3,294 | | |
| 15,301 | |
| Total prepayments | |
$ | 577,375 | | |
$ | 687,648 | |
| (1) | | Prepaid service
fee was paid to Guoxin Star Network Co., Ltd (“Guoxin”) by our VIE, King Eagle (Tianjin). It represents prepayments for operation
fee and the usage of the Smart Kiosk which are still under construction and development. Both parties are entitled to exercise the Force
Majeure Clause of the contract signed between both parties. As such, this prepaid service fee may or may not be recoverable. Nevertheless,
an impairment of this prepayment is not necessary because both parties have expressed the intention to progress with the construction
of the Smart Kiosks, and thereafter, with the operation of the same as soon as the circumstances allow. |
| (2) | | As of December
31, 2021, and September 30, 2021, the Company had prepared the supplies of $109,996 and $78,248, respectively. The prepayment will be
recognized in cost of goods sold in its unaudited condensed consolidated statement of operations and comprehensive loss when the corresponding
deferred revenue is recognized. |
| (3) | | As of December
31, 2021, the ending balance of prepaid professional services included a prepayment $20,095, to a third party for marketing campaign
and another prepayment, $10,211, for the legal service fee for our PRC entities. The legal service fee will be amortized to general and
administrative expenses using the straight-line method, over the service period of January and February 2022. As of September 30, 2021,
we remitted a payment in advance, $138,367, to a third-party vendor who initially planned to assist us to launch a marketing campaign
in 2022 but such event was cancelled. We received a full refund from the vendor on December 14, 2021. The remaining balance, $10,341,
is related to the monthly fee for the legal service for our PRC entities. Such legal service fee was amortized, to general and administrative
expenses using the straight-line method, over the service period of October and November 2021. |
These
amounts are expected to be recoverable within twelve (12) months.
NOTE
5 - OTHER RECEIVABLES
Other
receivables included the following:
SCHEDULE OF OTHER RECEIVABLES
| | |
December 31, | | |
September 30, | |
| | |
2021 | | |
2021 | |
| Rental deposits | |
$ | 90,722 | | |
$ | 93,583 | |
| Advance to employees | |
| 61,269 | | |
| 30,241 | |
| Others | |
| 69 | | |
| - | |
| Total other receivables, net | |
$ | 152,060 | | |
$ | 123,824 | |
Advance
to employees represents funds provided to our officers and employees for the business expenses, such as travel, parking, gasoline, membership,
meals, that are anticipated to be incurred by our officers and employees on behalf of the Company. Advances to employees are required
to be repaid by cash within a year or employees are required to submit expense receipts for business expenses within three months.
NOTE
6 - PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following:
SCHEDULE OF
PROPERTY AND EQUIPMENT
| | |
December 31, | | |
September 30, | |
| | |
2021 | | |
2021 | |
| Leasehold improvements | |
$ | 29,510 | | |
$ | 29,886 | |
| Furniture and fixtures | |
| 9,414 | | |
| 9,534 | |
| Computer equipment | |
| 43,707 | | |
| 43,452 | |
| Office equipment | |
| 1,613 | | |
| 1,633 | |
| Computer software | |
| 18,327 | | |
| 11,971 | |
| Subtotal | |
| 102,571 | | |
| 96,476 | |
| Less: accumulated depreciation | |
| (36,673 | ) | |
| (27,751 | ) |
| Total property and equipment, net | |
$ | 65,898 | | |
$ | 68,725 | |
The
depreciation expense was $9,464 and $5,473 for the three months ended December 31, 2021 and 2020, respectively.
NOTE
7 – INTANGIBLE ASSETS
SCHEDULE
OF INTANGIBLE ASSET
| | |
December 31, | | |
September 30, | |
| | |
2021 | | |
2021 | |
| Trademarks | |
$ | 2,669 | | |
$ | 2,703 | |
| Subtotal | |
| 2,669 | | |
| 2,703 | |
| Less: accumulated amortization | |
| (200 | ) | |
| (135 | ) |
| Total intangible assets, net | |
$ | 2,469 | | |
$ | 2,568 | |
Intangible
assets consist of the Company’s trademarks of King Eagle Mall with the useful life of ten years.
Amortization
expense was $68 and nil for the three months ended December 31, 2021 and 2020, respectively.
NOTE
8 – DEFERRED REVENUE
SCHEDULE
OF DEFERRED REVENUE
| | |
December 31, | | |
September 30, | |
| | |
2021 | | |
2021 | |
| Advance payments from customers | |
$ | 3,006,489 | | |
$ | 3,122,705 | |
| Total deferred revenue | |
$ | 3,006,489 | | |
$ | 3,122,705 | |
Deferred
revenue resulted from transactions where the Company received the advanced payments from the customers but revenue recognition criteria
under the five-step model have yet to be met. As of December 31, 2021 and September 30, 2021, the Company had a total deferred revenue
of $3,006,489 and $3,122,705, respectively. Once the five-step model criteria have been satisfied, revenues will be recognized upon the
transfer of risk and rewards to the customers.
NOTE
9 - RELATED PARTY BALANCES AND TRANSACTIONS
Amounts
due to related parties are payables arising from transactions between the Company and a related parties, such as payments of operating
expenses by such related party on behalf of our entities in PRC and funding to meet working capital requirements. The payables owed to
the related party are interest free, unsecured, and repayable on demand.
Amounts
due to related parties consisted of the following:
SCHEDULE
OF AMOUNTS DUE TO RELATED PARTIES
| | |
| |
| |
December 31, | | |
September 30, | |
| Name of related party | |
Relationship | |
Nature of transactions | |
2021 | | |
2021 | |
| | |
| |
| |
| | |
| |
| Mr. Yihe Pang | |
Director | |
Payments made to the lessors on behalf of King Eagle (China). The balance was paid off in December 2021. | |
$ | - | | |
$ | 39,629 | |
| Ms. Xiujin Wang | |
One of the shareholders of King Eagle (Tianjin) | |
Operational support to King Eagle (Tianjin) to meet its working capital requirement. | |
| 765,858 | | |
| - | |
| | |
| |
| |
| | | |
| | |
| Total | |
| |
| |
$ | 765,858 | | |
$ | 39,629 | |
NOTE
10 - EQUITY
Effective
as of September 9, 2021, the Company’s Articles of Incorporation were amended to increase the Company’s authorized capital
to 210,000,000 authorized shares of Capital Stock with 200,000,000 designated as $0.0001 par value Common Stock, and 10,000,000 designated
as $0.0001 par value Preferred Stock.
Preferred
stock
The
Company’s authorized shares of preferred stock were 10,000,000 shares, with a par value of $0.0001, which may be issued in series
and with such voting powers, designations, preferences, limitations, restrictions, and relative rights as the Board of Directors shall
determine in its sole discretion shall remain authorized. No shares of preferred stock were issued and outstanding as of December 31,
2021 and September 30, 2021.
Common
stock
The
Company’s authorized shares of common stock were 200,000,000 shares, with a par value of $0.0001. The issued and outstanding shares
of common stock were 40,000,000 as of December 31, 2021 and September 30, 2021, respectively.
Reverse
acquisition
On
May 17, 2021, the Company entered into a share exchange agreement (“Share Exchange Agreement”) with (i) Kun Peng International
Holding Limited (“KP International”), a limited liability company incorporated in British Virgin Islands on April 20, 2021,
and (ii) the five members of KP International to acquire all the issued and outstanding capital stock of KP International in exchange
for the issuance to those members of an aggregate of 34,158,391 shares of our common stock (“Reverse Acquisition”). Pursuant
to the terms of the Exchange Agreement, and as a condition to the completion of the transactions contemplated by the Share Exchange Agreement,
the Company also agreed to enter into an agreement with Wenhai Xia (“the Stockholder”), to cancel an aggregate of 15,535,309
shares of the Company’s Common Stock owned by the Stockholder. The Reverse Acquisition was completed on May 17, 2021.
For
accounting purpose, the transaction with KP International was treated as a reverse acquisition and KP International is deemed to be the
acquirer and the Company as the acquired party. Consequently, the assets and liabilities and the historical operations that will be reflected
in the accompanying consolidated financial statements prior to the Reverse Acquisition will be those of KP International and its consolidated
subsidiaries and will be recorded at the historical cost basis of KP International, and the accompanying unaudited condensed consolidated
financial statements after consummation of the reverse acquisition will include the assets and liabilities of KP International and its
subsidiaries and VIE, historical operations of KP International and its subsidiaries and VIE, and operations of the Company from the
Closing Date of the Reverse Acquisition. The accompanying unaudited condensed consolidated financial statements share and per share information
has been retroactively adjusted to reflect the exchanged shares in the Acquisition. The equity structure of the Company was retrospectively
adjusted under ASC Topic 805-40.
As
of December 31, 2021, there were 40,000,000 shares of common stock issued and outstanding.
Restricted
net assets:
Our
ability to pay dividends is primarily dependent on us receiving distributions of funds from its subsidiary or VIE. Relevant PRC statutory
laws and regulations permit payments of dividends by only out of its retained earnings, if any, as determined in accordance with PRC
accounting standards and regulations and after it has met the PRC requirements for appropriation to statutory reserves. Share capital
of the PRC subsidiary and VIE included in the Company’s consolidated net assets are also non-distributable for dividend purposes.
The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ
from those reflected in the statutory financial statements of King Eagle (China), the foreign-invested enterprise, King Eagle (Tianjin),
the VIE and KP Tian Yu. The Company is required to set aside at least 10% of their after-tax profits each year, if any, to fund certain
statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, the Company may allocate a portion
of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion.
The statutory reserve funds and the discretionary funds are not distributable as cash dividends.
As
a result of the foregoing restrictions, King Eagle (China), King Eagle (Tianjin) and KP Tian Yu are restricted in their ability to transfer
their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict these two entities from transferring
funds to the Company in the form of dividends, loans and advances. As of December 31, 2021 and September 30, 2021, the Company had negative
net assets which included common stock, additional paid-in capital, accumulated deficit and foreign exchange translation adjustment of
its subsidiaries in BVI, Hong Kong and the PRC and the VIE that are included in the Company’s consolidated financial statements.
As of December 31, 2021, King Eagle (China), King Eagle (Tianjin) and KP Tian Yu incurred negative net assets which amounted to $1,094,230,
$211,374 and $nil, respectively. As of September 30, 2021, King Eagle (China), King Eagle (Tianjin) and KP Tian Yu incurred negative
net assets which amounted to $1,039,840, $667,313 and nil, respectively. Accordingly, the Company did not accrue statutory reserve funds
as of December 31, 2021 and September 30, 2021.
NOTE
11- INCOME TAXES
The
Company accounts for income taxes pursuant to the accounting standards that requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the
expected future tax benefit to be derived from tax losses and tax credit carryforwards. Additionally, the accounting standards require
the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company and its subsidiaries
file separate income tax returns.
United
States
Kun
Peng International Ltd is incorporated in the State of Nevada and is subject to the United States federal income tax. No provision for
income taxes in the U.S. has been made as the Company has no U.S. taxable income for the three months ended December 31, 2021 and 2020.
British
Virgin Islands
KP
International is a holding corporation organized as an International Business Company under the laws of the British Virgin Islands (“BVI”),
and its principal operating subsidiaries are organized under the laws of Hong Kong and the laws of the PRC. KP International and its
subsidiaries are not subject to income taxes in the BVI.
Hong
Kong
The
two-tier profits tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”)
of Hong Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for
the first $0.26 million (HKD 2 million) of assessable profits of a corporation will be subject to the lowered tax rate, 8.25% while the
remaining assessable profits will be subject to the legacy tax rate, 16.5%. The Ordinance only allows one entity within a group of “connected
entities” is eligible for the two-tier tax rate benefit. An entity is a connected entity of another entity if (1) one of them has
control over the other; (2) both of them are under the control (more than 50% of the issued share capital) of the same entity; (3) in
the case of the first entity being a natural person carrying on a sole proprietorship business-the other entity is the same person carrying
on another sole proprietorship business.
Since
KP Industrial and KP (Hong Kong) are wholly owned and under the control of KP International, these entities are connected entities. Under
the Ordinance, it is an entity’s election to nominate the entity that will be subject to the two-tier profits tax rates on its
profits tax return. The election is irrevocable. The Company elected KP (Hong Kong) to be subject to the two-tier profits tax rates.
KP Industrial and KP (Hong Kong) did not earn any income that was derived in Hong Kong for three months ended December 31, 2021 and 2020
and, therefore, KP Industrial and KP (Hong Kong) were not subject to Hong Kong profits tax for the periods reported.
Since
the two-tier profit tax rates regime is tentative, we applied the original profits tax rate, 16.5%, for the calculation of deferred taxes
for our subsidiaries in Hong Kong.
PRC
The
PRC’s statutory income tax rate is 25%. The Company’s subsidiary and VIE registered in PRC are subject to income tax rate
of 25%, unless otherwise specified.
Income
tax expense was comprised of the following:
SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE BENEFIT
| | |
2021 | | |
2020 | |
| | |
For the three months ended December 31 | |
| | |
2021 | | |
2020 | |
| Current | |
$ | | | |
$ | | |
| Federal | |
| - | | |
| - | |
| State | |
| - | | |
| - | |
| Foreign | |
| - | | |
| - | |
| Total current | |
| - | | |
| - | |
| | |
| | | |
| | |
| Deferred | |
| | | |
| | |
| Federal | |
| - | | |
| - | |
| State | |
| - | | |
| - | |
| Foreign | |
| - | | |
| - | |
| Total deferred | |
| - | | |
| - | |
| | |
| | | |
| | |
| Total income tax expense | |
$ | - | | |
$ | - | |
A
reconciliation between the Company’s actual provision for income taxes and the provision at the statutory rate is as follow:
SCHEDULE OF RECONCILIATION OF PROVISION OF INCOME TAX
| | |
2021 | | |
2020 | |
| | |
For the three months ended
December 31, | |
| | |
2021 | | |
2020 | |
| Income (loss) before income tax expense | |
$ | 337,858 | | |
$ | (370,718 | ) |
| Computed tax expense (benefit) with statutory tax rate | |
| 21.0 | % | |
| 25.0 | % |
| Impact of different tax rates in other jurisdictions | |
| 4.6 | % | |
| 0.0 | % |
| Tax effect of non-deductible expenses | |
| 0.5 | % | |
| (0.8 | )% |
| Change in valuation allowance | |
| (26.1 | )% | |
| (24.2 | )% |
| Effective tax rate | |
| 0.0 | % | |
| 0.0 | % |
Uncertain
tax positions
The
Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business,
the Company is subject to examination by the respective jurisdictions, where applicable. The statute of limitations for the tax returns
varies by jurisdictions.
The
statute of limitations for the Internal Revenue Services to assess the income tax returns on a taxpayer expires three years from the
due date of the income tax return or the date on which it was filed, whichever is later.
In
accordance with the Hong Kong profits tax regulations, a tax assessment by the IRD may be initiated within six years after the relevant
year of assessment, but extendable to 10 years in the case of potential willful underpayment or evasion.
In
accordance with PRC Tax Administration Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five
years to assess underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not
clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities remain subject
to examination by the tax authorities based on the above.
As
of December 31, 2021 and September 30, 2021, the Company did not accrue any liability, interest or penalties related to uncertain tax
positions in the provision for income taxes in its consolidated financial statements. The Company does not expect that its assessment
regarding unrecognized tax positions will materially change over the next 12 months.
NOTE
12 - RIGHT-OF-USE ASSETS AND LEASE
The
Company has operating leases for its office facilities and employee accommodation. Leases with an initial term of 12 months or less are
not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The
following table provides a summary of leases as of December 31, 2021, and September 30, 3021:
SUMMARY OF OPERATING LEASE ASSETS AND LIABILITIES
| Assets/liabilities | |
Classification | |
December 31,
2021 | | |
September 30,
2021 | |
| Assets | |
| |
| | | |
| | |
| Operating lease right-of-use assets | |
Operating lease assets | |
$ | 196,366 | | |
$ | 282,466 | |
| | |
| |
| | | |
| | |
| Liabilities | |
| |
| | | |
| | |
| Current | |
| |
| | | |
| | |
| Operating lease liabilities - current | |
Current operating lease liabilities | |
$ | 159,426 | | |
$ | 229,337 | |
| | |
| |
| | | |
| | |
| Long-term | |
| |
| | | |
| | |
| Operating lease liabilities – net of current portion | |
Long-term operating lease liabilities | |
$ | 36,940 | | |
$ | 53,129 | |
| | |
| |
| | | |
| | |
| Total lease liabilities | |
| |
$ | 196,366 | | |
$ | 282,466 | |
The
operating lease expense for the three months ended December 31, 2021 and 2020 was as follows:
SUMMARY OF OPERATING LEASE EXPENSE
| | |
| |
For the three months ended
December 31, | |
| Lease Cost | |
Classification | |
2021 | | |
2020 | |
| Operating lease cost | |
General and administrative | |
$ | 80,915 | | |
$ | 86,483 | |
| Total lease cost | |
| |
$ | 80,915 | | |
$ | 86,483 | |
Maturities
of operating lease liabilities as of December 31, 2021 were as follow:
SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES
| Maturity of Lease Liabilities | |
Operating
Leases | |
| 2022 (remaining) | |
$ | 147,931 | |
| 2023 | |
| 53,610 | |
| Thereafter | |
| - | |
| Total lease payments | |
$ | 201,541 | |
| Less: interest | |
| (5,175 | ) |
| Present value of lease payments | |
$ | 196,366 | |
Supplemental
information related to operating leases was as follows:
SCHEDULE OF OPERATING LEASES
| | |
2021 | | |
2020 | |
| | |
For the three months ended
December 31, | |
| | |
2021 | | |
2020 | |
| Cash paid for amounts included in the measurement of lease liabilities | |
$ | 85,604 | | |
$ | 69,520 | |
| New operating lease assets obtained in exchange for operating lease liabilities | |
$ | - | | |
$ | - | |
| Weighted average remaining lease term | |
| 0.95 year | | |
| 1.4 years | |
| Weighted average discount rate | |
| 4.75 | % | |
| 4.75 | % |
The
amortization expense was $84,273 and $64,148 for the three months ended December 31, 2021 and 2020, respectively.
NOTE
13 - COMMITMENTS AND CONTINGENCIES
On
March 31, 2021, King Eagle (Tianjin) entered into a Cooperation Agreement with Guoxin Star Network Co., Ltd who assigned and franchised
the operation of 50 Smart Kiosks to King Eagle (Tianjin) for five years. Total franchise fee payable by King Eagle (Tianjin) to Guoxin
Star Network Co., Ltd is approximately $1.14 million (RMB 7,500,000). In April 2021, King Eagle (Tianjin) paid approximately $0.34 million
(RMB2,250,000) to Guoxin Star Network Co. Ltd. The remaining balance, approximately $0.8 million (RMB5,250,000), is payable upon the
completion of the implementation of Smart Kiosks. King Eagle (Tianjin) estimated that the implementation will be completed by the beginning
of the calendar year 2023.
NOTE
14 - SUBSEQUENT EVENT
As
of December 31, 2021, the Company evaluated and concluded that there are no subsequent events that have occurred that would require recognition
or disclosure in the financial statements other than as disclosed above.