Maitong Sunshine Cultural Development Co., Ltd 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of such financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. On an ongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates. Application of Critical Accounting Policies The discussion and analysis of the Company’s financial condition and results of operations is based upon its condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. In connection with the preparation of our financial statements for the nine months ended June 30, 2024, there was no accounting estimate made which was (a) subject to a high degree of uncertainty and (b) material to our results. Results of Operations The following table summarizes our operating results for three and nine months ended June 30, 2024. For the Three Months Ended June 30, For the Nine Months Ended June 30, 2024 2024 Revenue $ 260,916 $ 525,872 Cost of revenue 90,569 252,319 Gross profit 170,347 273,553 Selling, general and administrative expenses 71,006 251,140 Income from operations 99,341 22,413 Other income(expense) - (107 ) Income before provision for income taxes 99,341 22,306 Provision for income taxes 5,662 6,029 Net income $ 93,679 $ 16,277 2 Three Months Ended June 30, 2024 Tongzhilian’s revenue was $260,916 during the three months ended June 30, 2024. The revenue was attributable to four tours developed by Tongzhilian in concert with our suppliers. We realized a gross profit of 65%, primarily a result of a cultural feature tour. Nevertheless, we will not have a predictable gross profit until we have sold a significant number of tours. Operating expenses for the three months ended June 30, 2024 consisted primarily of salaries and benefits, office expenses, professional fees and rentals and leases. Our $71,006 in operating expenses during this period were primarily attributable to: ● $12,663 in professional fees and related expenses incurred in connection with the Company’s administrative operations in the United States. ● $42,222 in salaries and benefits, For the reasons described above, our net income for the three months ended June 30, 2024 was $93,679. Nine Months Ended June 30, 2024 Tongzhilian’s revenue was $525,872 during the nine months ended June 30, 2024. Revenue was attributable to seven tours developed by Tongzhilian in concert with our suppliers. We realized a gross profit of 52%, The significant gross profit margin is attributed to a cultural feature tour developed by Tongzhilian in concert with our supplier, Hainan Jintongyuan. Five suppliers provide services for our tours. Tongzhilian sells tours both directly and through sales agents, with 54% of revenue being derived from two primary sales agents. For each tour we functioned as the principal, paying our agents a fixed percentage of the settlement price or a fixed quote, determining the price to external parties, and carrying responsibility for contract fulfillment. Tongzhilian exercises control over the sale price of tours it develops with our suppliers. Tongzhilian determines its varying gross profit margins based on the content of the travel products. For all these reasons, we record our revenue from the tours on a principal basis. Operating expenses for the nine months ended June 30, 2024 consisted primarily of salaries and benefits, office expenses, professional fees and rentals and leases. Our $251,140 in operating expenses during this period were primarily attributable to: ● $79,589 in professional fees and related expenses incurred as a result of our status as a reporting company in the United States. ● $113,996 in salaries and benefits, ● $29,828 in office expenses. ● $26,345 in rentals and leases. For the reasons described above, our net income for the nine months ended June 30, 2024 was $16,277. 3 Cash Flows The following unaudited table summarizes our cash flows for the nine months ended June 30, 2024. Nine Months Ended June 30, 2024 Net cash (used in) operating activities $ (45,141 ) Net cash (used in) Investing activities (3,719 ) Net cash provided by financing activities 226,294 Effect of exchange rate fluctuation on cash and cash equivalents (901 ) Net increase in cash and cash equivalents 176,533 Cash and cash equivalents, beginning of period - Cash and cash equivalents, end of period $ 176,533 During the nine months ended June 30, 2024, our operations used net cash of $45,141. Our use of cash exceeded our net income of $16,277 during the nine months period primarily because we increased Prepayments by $38,878. During the nine months ended June 30, 2024, our investing activities resulted in a net cash outflow of $3,719. primarily due to the acquisition of fixed assets. Our financing activities during the nine months ended June 30, 2024 generated $226,294, consisting of $60,000 contributed by Huang Fang to fund our shareholders’ subscriptions and $166,294 interest-free loan from Huang Fang and her affiliate entity. Trends, Events and Uncertainties The Company is expanding its product offerings to include more products. In addition, our marketing personnel are developing new customers with the intention of building a stable base of customers. In this manner, the Company hopes to increase sales to support the future operations and development of the Company. There is no guarantee that the Company’s new strategy will be successful. As of June 30, 2024, a stable customer base has not been established yet. The U.S. government, including the SEC, has made statements and taken actions that have led to changes in relations between the U.S. and China, and will impact companies with connections to the United States or China. Those actions by the U.S. government included imposing several rounds of tariffs affecting certain products manufactured in China and imposing sanctions and restrictions in relation to China. Actions by the SEC included issuing statements indicating that it would make enhanced review of companies with significant China-based operations. It is unknown whether and to what extent new legislation, executive orders, tariffs, laws or regulations will be adopted, or the effect that any such actions would have on U.S.-domiciled companies with significant connections to China, our industry or on us. Any unfavorable government policies on cross-border relations, including increased scrutiny on companies with significant China-based operations, capital controls or tariffs, may affect our ability to raise capital and the market price of our shares. If any new legislation, executive orders, tariffs, laws and/or regulations are implemented, if existing trade agreements are renegotiated or if the U.S. or Chinese governments take retaliatory actions due to the recent U.S.-China tensions, such changes could have an adverse effect on our business, financial condition and results of operations, our ability to raise capital and the market price of our shares. Changes in United States and China relations and/or regulations may adversely impact our business, our operating results, our ability to raise capital and the market price of our shares. Other than the factors listed above we do not know of any trends, events or uncertainties that have had or are reasonably expected to have a material impact on our net sales or revenues or income from continuing operations. 4 Recent Accounting Pronouncements There were no recent accounting pronouncements that we expect to have a material effect on the Company’s financial position or results of operations. Please refer to Note 2 of our condensed consolidated financial statements included in this quarterly report. Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not applicable.