Maitong Sunshine Cultural Development Co., Ltd 10-Q

Item 1. Financial Statements. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES Page Consolidated Balance Sheets as of December 31, 2024 (Unaudited) and September 30, 2024 F-1 Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended December 31, 2024 and 2023 (Unaudited) F-2 Consolidated Statements of Changes in Shareholders’ Deficit for the Three Months Ended December 31, 2024 and 2023 (Unaudited) F-3 Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2024 and 2023 (Unaudited) F-4 Notes to Consolidated Financial Statements (Unaudited) F-5 – F-16 1 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (EXPRESSED IN US DOLLARS) As of December 31, As of September 30, 2024 2024 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 1,022,727 $ 698,307 Receivable from payment collection service institution 574 - Prepayments 42,684 44,352 Other receivables 685 713 Total current assets 1,066,670 743,372 Property and equipment, net 2,404 2,803 Right-of-use assets 32,189 6,159 Total assets $ 1,101,263 $ 752,334 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities: Accounts payable $ 5,739 $ 8,991 Advance from customers 292,308 461,946 Accrued expenses 19,737 77,696 Due to related parties 491,323 200,481 Other payables 3,942 3,086 Income tax payable 105,354 1,724 Operating lease liabilities, current 32,189 6,159 Total current liabilities 950,592 760,083 Total liabilities 950,592 760,083 Equity (Deficit): Preferred stock; $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding at December 31, 2024 and September 30, 2024 - - Common stock; $ 0.001 par value, 150,000,000 shares authorized; 60,000,000 shares issued and outstanding at December 31, 2024 and September 30, 2024 60,000 60,000 Additional paid-in capital - - Retained Earnings (Accumulated deficit) 95,681 ( 71,312 ) Accumulated other comprehensive income (loss) ( 5,010 ) 3,563 Total stockholders’ equity (deficit) 150,671 ( 7,749 ) Total liabilities and equity (deficit) $ 1,101,263 $ 752,334 The accompanying notes are an integral part of these consolidated financial statements. F- 1 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (INCOME) (UNAUDITED) (EXPRESSED IN US DOLLARS) For the Three Months Ended December 31, 2024 2023 Revenue $ 1,022,155 $ 123,970 Cost of revenue 642,347 75,839 Gross profit 379,808 48,131 Selling, general and administrative expenses 105,915 100,433 Income from operations 273,893 ( 52,302 ) Other income (expense) - ( 107 ) Income before provision for income taxes 273,893 ( 52,409 ) Provision for income taxes 106,900 85 Net income $ 166,993 $ ( 52,494 ) Comprehensive income: Net income $ 166,993 $ ( 52,494 ) Foreign currency translation adjustment ( 8,573 ) 32 Comprehensive income $ 158,420 $ ( 52,462 ) Basic and diluted eaming per share $ 0.0028 $ ( 0.0013 ) Weighted average number of shares outstanding 60,000,000 40,708,696 The accompanying notes are an integral part of these consolidated financial statements F- 2 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIT) (UNAUDITED) (EXPRESSED IN US DOLLARS, EXCEPT SHARES) Common stock Additional Capital stock Accumulated Other Total Stockholders’ Number of Shares Amount Paid-in Capital subscription receivable Accumulated Deficit Comprehensive Loss Equity (Deficit) Balance at September 30, 2023 60,000,000 $ 60,000 $ - $ ( 60,000 ) $ ( 40,502 ) $ ( 12 ) $ ( 40,514 ) Capital subscription received - - - 60,000 - - 60,000 Net loss - - - - ( 52,494 ) - ( 52,494 ) Foreign currency translation adjustment - - - - - 32 32 Balance at December 31, 2023 60,000,000 $ 60,000 $ - $ - $ ( 92,996 ) $ 20 $ ( 32,976 ) Common stock Additional Capital stock Retained Earnings Accumulated Other Total Stockholders’ Number of Shares Amount Paid-in Capital Subscription Receivable (Accumulated Deficit) Comprehensive Income (Loss) Equity (Deficit) Balance at September 30, 2024 60,000,000 $ 60,000 $ - $ - $ ( 71,312 ) $ 3,563 $ ( 7,749 ) Capital subscription received - - - - - - - Net profit - - - - 166,993 - 166,993 Foreign currency translation adjustment - - - - - ( 8,573 ) ( 8,573 ) Balance at December 31, 2024 60,000,000 $ 60,000 $ - $ - $ 95,681 $ ( 5,010 ) $ 150,671 The accompanying notes are an integral part of these condensed consolidated financial statements F- 3 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (EXPRESSED IN US DOLLARS) For the Three Months Ended December 31, 2024 2023 Cash Flows from Operating Activities Income before provision for income taxes $ 273,893 $ ( 52,409 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 295 105 Operating lease expense 8,930 8,703 Interest expense 93 305 Changes in operating assets and liabilities: Prepayments ( 22 ) - Receivable from payment collection service institution ( 583 ) - Accounts payable ( 2,945 ) - Customer deposits ( 153,915 ) - Other receivable - 1,155 Accrued expenses ( 57,361 ) ( 4,584 ) Lease payment ( 9,023 ) ( 9,008 ) Income tax payable ( 1,681 ) - Other payables 990 2,442 Net cash provided by (used in) operating activities 58,671 ( 53,291 ) Cash Flows from Investing Activities Purchase of fixed assets - ( 3,717 ) Net cash (used in) investing activities - ( 3,717 ) Cash Flows from Financing Activities Proceeds from subscription - 60,000 Loans from related parties 297,665 37,822 Net cash provided by financing activities 297,665 97,822 Effect of exchange rate fluctuation on cash and cash equivalents ( 31,916 ) 721 Net increase in cash and cash equivalents 324,420 41,535 Cash and cash equivalents, beginning of year 698,307 - Cash and cash equivalents, end of year $ 1,022,727 $ 41,535 Supplemental disclosure of cash flow information Cash paid for income taxes $ 1,681 $ 85 Cash paid for interest expense $ 93 $ 305 Supplemental disclosure of non-cash activities Right-of-use assets and related lease liabilities $ 32,189 $ 33,135 The accompanying notes are an integral part of these consolidated financial statements. F- 4 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Maitong Sunshine Cultural Development Co., Limited (“MGSD”, together as a group with its subsidiaries referred to as “Maitong Sunshine”, “Company”, “us” or “we”) was incorporated in the State of Nevada on October 26, 2023. MGSD through its operating subsidiary Tongzhilian, which has headquarters in Beijing, China, has provided cultural tourism (including Education Tours and Family Tours). During the recent fiscal quarter Tongzhilian also initiated the sale of gift products, Chinese cultural and creative products, as well as a hotel reservation service. MGSD plans to market arts expositions in the future. The Company currently has 12 full-time employees. MGSD’s subsidiaries includes: Maitong Sunshine Cultural Development Co., Limited (Samoa) (“MGSD Samoa”), initially named Oriental Culture Development Co., Limited, was established on September 7, 2023 under the laws of Samoa. On November 27, 2023, MGSD issued 60,000,000 shares of its common stock to the original shareholders of MGSD Samoa, in exchange for 100 % of the outstanding shares of MGSD Samoa (the “Share Exchange”). Maitong Sunshine Cultural Development Co., Limited (Hong Kong) (“MGSD HK”), initially named Oriental Culture Development Co., Limited, was established on September 13, 2023 under the laws of Hong Kong. MGSD Samoa holds a 100 % interest in MGSD HK. Beijing Tongzhilian Cultural Development Co., Limited (“Tongzhilian”) is a privately held Limited Company that was approved on September 13, 2023 and registered on October 11, 2023 in Beijing, China. MGSD HK holds a 100 % interest in Tongzhilian. The transactions summarized above are treated in our financial statements as a corporate restructuring (reorganization) of entities under common control, as each of the four entities has at all times been under the control of Ms. Huang Fang. Therefore, in accordance with ASC 805-50-45-5, the current capital structure has been retroactively presented in prior periods as if such structure existed at that time and the entities under common control are presented on a combined basis for all periods. Since all of the subsidiaries were under common control for all periods presented, the results of these subsidiaries are included in the Company’s financial statements for all periods. F- 5 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of presentation The accompanying consolidated financial statements are expressed in U.S. Dollars and have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). B. Principles of consolidation The consolidated financial statements include the accounts of MGSD and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100 % of assets, liabilities, and net income or loss of these subsidiaries. MGSD’s subsidiaries as of December 31, 2024 and 2023 are listed as follows: Name Place of Incorporation Attributable equity interest % Authorized capital Maitong Sunshine Cultural Development Co., Limited Samoa 100 USD 1,000,000 Maitong Sunshine Cultural Development Co., Limited Hong Kong 100 HKD 10,000 Beijing Tongzhilian Cultural Development Co., Ltd China 100 HKD 1,000,000 C. Use of estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from these estimates. D. Functional currency and foreign currency translation An entity’s functional currency is the currency of the primary economic environment in which it operates. Normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determining the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. Based on that assessment, the functional currency of the Company is the Chinese Renminbi (“RMB’). The functional currency of MGSD HK is the Hong Kong Dollar and the functional currency of MGSD Samoa and MGSD is the United States dollar (“US Dollars” or “$”). The reporting currency of these consolidated financial statements is in US Dollars. The financial statements of MGSD’s subsidiaries, which are prepared using the RMB, are translated into the Company’s reporting currency, the US Dollar. Assets and liabilities are translated using the exchange rate at each reporting period end date. Revenue and expenses are translated using weighted average rates prevailing during each reporting period, and stockholders’ equity (deficit) is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income or expense. F- 6 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Foreign currency exchange gains and losses resulting from these transactions are included in operations. The exchange rates used for foreign currency translation are as follows: For the Three Months Ended December 31, 2024 2023 (USD to RMB/ USD to HKD) (USD to RMB/ USD to HKD) Assets and liabilities period end exchange rate 7.2985 / 7.7658 7.0798 / 7.8085 Revenue and expenses period weighted average 7.1929 / 7.7744 7.2052 / 7.8138 E. Concentration of credit risk Financial instruments that potentially subject the Company to concentrations of credit risk are due from related parties and other receivables arising from its normal business activities. The carrying amounts of these financial instruments represent the maximum amount of loss due to credit risk. The deposits placed with financial institutions are not protected by statutory or commercial insurance. In the event of bankruptcy of one of these financial institutions, the Company may be unlikely to reclaim its deposits in full. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base. The majority of sales are cash receipt in advance. For those credit sales, the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. For the three months ended December 31, 2024, the company does not have a single customer that accounted for more than 10% of its total revenue. For the three months ended December 31, 2023, the Company had 5 major customers that each accounted for over 10% of its total revenue. For the Three Months Ended December 31, 2024 For the Three Months Ended December 31, 2023 Revenue Percentage of revenue Revenue Percentage of revenue Customer A $ - - $ 41,521 33 % Customer B - - 16,490 13 % Customer C - - 27,483 22 % Customer D - - 13,741 11 % Customer E - - 16,490 13 % F- 7 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) For the three months ended December 31, 2024 and 2023, the Company had 1 major supplier in each year that accounted for over 10% of its total cost of revenue. For the Three Months Ended December 31, 2024 For the Three Months Ended December 31, 2023 Cost of Revenue Percentage of Cost of revenue Cost of Revenue Percentage of Cost of revenue Supplier A - - $ 75,126 99 % Supplier B $ 448,120 70 % - - F. Fair value measurements The Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 820, Fair Value Measurements (“ASC 820”), for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined as the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value for the assets and liabilities required or permitted to be recorded, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices, other than those in Level 1, in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability, Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). There were no transfers between level 1, level 2 or level 3 measurements during the three months ended December 31, 2024 and 2023. F- 8 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial assets and liabilities of the Company are primarily comprised of cash, receivable from payment collection service institution, prepayments, other receivables, accounts payable, advance from customers, accrued expenses, other payables, income tax payable and due to related parties. As of December 31, 2024 and 2023, the carrying values of these financial instruments approximated their fair values due to the short-term maturity of these instruments. G. Segment information and geographic data The Company is operating in one segment in accordance with the accounting guidance in FASB ASC Topic 280, Segment Reporting . The company’s revenues are from customers in People’s Republic of China (“PRC”). Most assets of the Company are located in the PRC. H. Revenue recognition The Company adopted FASB ASC Section 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sales of products and services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue as each performance obligation is satisfied. The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow to the entity, and specific criteria have been met for each of the Company’s activities as described below. Service Revenue The Company provides cultural tourism services, small-scale training services and hotel reservation services. The Company’s policy is to recognize revenue at that time the services have been performed. Cost of service revenue consists primarily of the purchase cost, staff cost and other cost to fulfill a contract with a customer. Products sales revenue Products sales revenue mainly includes sales of cultural and creative products and sales of gift products. The Company’s policy is to recognize the sales when the products, ownership and risk of loss have transferred to the purchasers, and collection of the sales proceeds, if not prepaid, is reasonably assured, all of which generally occur when the customer receives the products. Accordingly, revenue is recognized at the point in time when delivery is made. Cost of product sale consists primarily of the cost of product procurement, and other cost to fulfill a contract with a customer I. Income taxes The Company follows FASB ASC Section 740, Income Taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. ASC 740-10-30 requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under ASC 740-10-30, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. F- 9 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or the deferred tax asset valuation allowance. As a result of the implementation of ASC 740-10, the Company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10. The Company recognized no material adjustments to liabilities or shareholder’s equity as a result of the implementation. J. Earnings (loss) per share The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings Per Share . ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding during the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of contracts to issue ordinary common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. The computation of diluted EPS includes the estimated impact of the exercise of contracts to purchase common stock using the treasury stock method and the potential shares of converted common stock associated with the convertible debt using the if-converted method. Potential common shares that have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per share) are excluded from the calculation of diluted EPS. K. Leases In February 2016, the FASB issued ASU 2016-02–Leases (Topic 842), which increases transparency and comparability among organizations by recognizing right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU maintains a distinction between finance leases and operating leases, which is substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. Retaining this distinction allows the recognition, measurement and presentation of expenses and cash flows arising from a lease to remain similar to the previous accounting treatment. A lessee is permitted to make an accounting policy election by class of underlying asset to exclude from balance sheet recognition any lease assets and lease liabilities with a term of 12 months or less, and instead to recognize lease expense on a straight-line basis over the lease term. For both financing and operating leases, the ROU asset and lease liability is initially measured at the present value of the lease payments in the consolidated balance sheet. In July 2018, the FASB issued ASU 2018-11 which provides entities with the option to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if necessary. L. Cash As of December 31, 2024, cash consists of bank deposits and deposits in Alipay, which are unrestricted as to withdrawal and use. All highly liquid investments with original stated maturities of three months or less are classified as cash. M. Recently adopted accounting pronouncements We do not believe that any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows. F- 10 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 3. PREPAYMENTS At December 31, 2024 and September 30, 2024, prepayments consisted of: December 31, September 30, 2024 2024 Jinjiu International Consulting Services (Beijing) Co., Ltd $ 38,364 $ 39,915 Beijing Shuangjiang Huixin Trading Co., Ltd 748 4,018 Beijing Shengrui Minghua Tea Industry Co., Ltd - 279 Beijing Yiguanjia Health Technology Co., Ltd 316 140 Shenzhen Huayufeng Technology Co., Ltd 355 - Lundao Zhuyeqing Tea Industry (Beijing) Co., Ltd 297 - Dongguan Jiasheng Daily Plastic Products Co., Ltd 362 - PragerMetis 1,544 - Vstock Transfer 699 - Total Prepayments $ 42,684 $ 44,352 NOTE 4. OTHER RECEIVABLES At December 31, 2024 and September 30, 2024, other receivables consisted of: December 31, September 30, 2024 2024 Shanghai Ctrip International Travel Agency Co., Ltd $ 685 $ 713 Total other receivables $ 685 $ 713 NOTE 5. RECEIVABLE FROM PAYMENT COLLECTION SERVICE INSTIUTION Receivable from payment collection service institution consists of the following: December 31, 2024 September 30, 2024 UnionPay Business Co., Ltd. Beijing Branch $ 574 $ - Total $ 574 $ - As of December 31, 2024 the receivable from payment collection service institution amounted to $ 574 . NOTE 6. ACCOUNTS PAYABLE At December 31, 2024 and September 30, 2024, accounts payable consisted of the following: Name December 31, 2024 September 30, 2024 Hebei Bailu Business Hotel Co., Ltd $ 4,415 $ 8,991 Others 1,324 - Total $ 5,739 $ 8,991 F- 11 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 7. ADVANCE FROM CUSTOMERS At December 31, 2024 and September 30, 2024, advance from customers consisted of the following: Name December 31, 2024 September 30, 2024 Pre-collected member funds $ 292,308 $ 461,946 Total $ 292,308 $ 461,946 As of December 31, 2024 and September 30, 2024, advances from customers totaled $ 292,308 and 461,946 . The Company receives prepayments from customers who subscribe for a membership in the Company. These pre-collected member funds can be used by customers to offset purchases of the company’s products. NOTE 8. DUE TO RELATED PARTIES Due to related parties consists of the following: Name of related party December 31, 2024 September 30, 2024 Interest-free loan and payment of company expenses: Huang Fang $ 480,477 $ 190,855 Beijing Devoter Oriental Co., Ltd. 9,626 9,626 Shanghai Maitong Cultural Technology Co., Ltd 1,220 - Total $ 491,323 $ 200,481 As of December 31, 2024 and September 30, 2024, the Company owed Huang Fang a balance of $ 480,477 and $ 190,855 , which represented expenses paid on behalf of the Company and the interest-free loan she provided to the Company. As of December 31, 2024 and September 30, 2024, the Company had a balance of $ 9,626 and $ 9,626 due to Beijing Devoter Oriental Co., Ltd, which represented expenses paid on behalf of the Company. As of December 31, 2024, the Company had a balance of $ 1,220 due to Shanghai Maitong Cultural Technology Co., Ltd, which represented expenses paid on behalf of the Company. Huang Fang is the President, CEO, Chairwoman of the Board and a major shareholder of the Company. She is also the CEO and controlling shareholder of Beijing Devoter Oriental Co., Ltd and she is a major shareholder of Shanghai Maitong Cultural Technology Co., Ltd. NOTE 9. ACCRUED EXPENSES At December 31, 2024 and September 30, 2024, accrued expenses consisted of: December 31, September 30, 2024 2024 Audit fee $ 5,000 $ 60,000 Payroll payable 10,560 11,052 Social security payable 4,177 4,346 PragerMetis - 1,500 Vstock Transfer - 798 Total accrued expenses $ 19,737 $ 77,696 As of December 31, 2024 and September 30, 2024, the Company recorded payables to its auditor of $ 5,000 and $ 60,000 for services in connection with the audit of the Company’s financial statements for the quarter ended December 31, 2024 and the year ended September 30, 2024. As of December 31, 2024 and September 30, 2024, the Company recorded payroll payable of $ 10,560 and $ 11,052 . As of December 31, 2024, and September 30,2024, the Company recorded social security payable of $ 4,177 and 4,346 . F- 12 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 10. OTHER PAYABLES At December 31, 2024 and September 30, 2024, other payables consisted of: December 31, September 30, 2024 2024 Value added tax and surtax $ 3,942 $ 3,086 Total $ 3,942 $ 3,086 NOTE 11. LEASE On September 1, 2023, Huang Fang, the CEO of the holding company of Tongzhilian, arranged to lease an office for the soon-to-be-established company, and Tongzhilian signed and confirmed the agreement when it was officially established. Under the terms of the agreement, Tongzhilian leased office space (approximately 144 square meters) under an operating lease agreement with Devoter (Beijing) Technology Co., Ltd, and was committed to make lease payments of approximately $ 44,482 (RMB 324,506 ) for the period between September 1, 2023 and November 30, 2024. On October 9, 2024, Tongzhilian renewed the operating lease agreement for the period from December 1, 2024 to November 30, 2025. Under the terms of the agreement, Tongzhilian committed to make lease payments of approximately $ 36,000 (RMB 259,605 ) for that period. For the three months ended December 31, 2024 and 2023, the lease amortization expense was $ 8,930 and $ 8,703 , respectively. Huang Fang is the President, CEO, Chairwoman of the Board and a major shareholder of the Company. She is also the CEO and controlling shareholder of Beijing Devoter Oriental Co., Ltd, and Beijing Devoter Oriental Co., Ltd owns 85 % of the registered equity of Devoter (Beijing) Technology Co., Ltd. Devoter (Beijing) Technology Co., Ltd is a related party of Tongzhilian. As of December 31, 2024 and 2023, the Company had the following amounts recorded on the Company’s consolidated balance sheet: As of December 31, 2024 2023 Assets Right-of-use asset $ 32,189 $ 33,135 Total $ 32,189 $ 33,135 Liabilities Operating lease liability, current $ 32,189 $ 33,135 Operating lease liability, less current portion - - Total $ 32,189 $ 33,135 Future annual minimum lease payments for non-cancellable operating leases are as follows: Period Ending December 31, 2025 $ 26,677 Thereafter 5,929 Total 32,606 Less: imputed interest 417 Total $ 32,189 F- 13 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 12. INCOME TAXES United States MGSD is a Nevada corporation that is subject to U.S. federal tax and state tax. On December 31, 2017 the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal corporate income taxes on dividends from foreign subsidiaries; (4) providing modification to subpart F provisions and new taxes on certain foreign earnings such as Global Intangible Low-Taxed Income (GILTI). Except for the one-time transition tax, most of these provisions went into effect starting January 1, 2018. Samoa MGSD Samoa was incorporated in Samoa and, under the current laws of Samoa, is not subject to income tax. Hong Kong MGSD HK was incorporated in Hong Kong and is subject to Hong Kong profits tax. MGSD HK is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable statutory tax rate is 16.5 %. The Company did not have any income (loss) subject to the Hong Kong profits tax. China Tongzhilian is subject to a 25 % standard enterprise income tax in the PRC. There was $ 106,900 accrued for income taxes for the three months ended December 31, 2024. Due to the fact that Tongzhilian’s revenue exceeded the upper limit for small-scale taxpayers in this quarter, Tongzhilian has been converted to a general taxpayer. All income for the current tax year (from January 1, 2024, to December 31, 2024) is subject to a corporate income tax rate of 25 %. Therefore, the company had accrued an additionally corporate income tax for the period from January to September of 2024 at a rate of 25 %, amounting to $ 29,524 . A reconciliation before income taxes for domestic and foreign locations for the three months ended December 31, 2024 and 2023 is as follows: For the Three Months Ended December 31, 2024 2023 United States $ ( 34,558 ) $ ( 48,739 ) Foreign 308,451 ( 3,670 ) Before income taxes $ 273,893 $ ( 52,409 ) The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows: For the Three Months Ended December 31, 2024 2023 Income tax (benefit) at USA statutory rate 21 % 21 % U.S. valuation allowance ( 21 )% ( 21 )% Effective combined tax rate 0 % 0 % F- 14 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 12. INCOME TAXES (continued) The difference between the PRC statutory income tax rate and the PRC effective tax rate was as follows: For the Three Months Ended December 31, 2024 2023 Income tax (benefit) at PRC statutory rate 25 % 25 % PRC valuation allowance 0 % 1 % Tax preference 10 % ( 20 )% Effective combined tax rate 35 % 6 % The Company did not recognize deferred tax assets since it is not likely to incur taxes against which such deferred tax assets may be offset. The deferred tax would apply to MGSD in the U.S. and Tongzhilian in China. The Company incurred losses from its United States operations during the three months ended December 31 , 2024 and 2023 of $ 34,558 and $ 48,739 . The Company’s United States operations consist solely of ownership of its foreign subsidiaries, and the losses arise from administration expenses. Accordingly, management provided a 100 % valuation allowance of $ 48,635 against the deferred tax assets related to the Company’s United States operations as of December 31, 2024, because the deferred tax benefits of the net operating loss carry forwards in the United States are not likely to be utilized. The US valuation allowance has increased by $ 7,257 for the three months ended December 31, 2024. The Company is subject to examination by the Internal Revenue Service (IRS) in the United States as well as by the taxing authorities in China, where the firm has significant business operations. The tax years under examination vary by jurisdiction. The table below presents the earliest tax year that remain subject to examination by major jurisdiction. The year as of U.S. Federal September 30, 2023 China December 31, 2023 F- 15 MAITONG SUNSHINE CULTURAL DEVELOPMENT CO., LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2024 AND 2023 (UNAUDITED) (AMOUNTS IN US DOLLARS) NOTE 13. CONTINGENCIES Contingencies Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. The Company was not subject to any material loss contingency as of December 31, 2024. NOTE 14. BASIC AND DILUTED EARNINGS PER SHARE Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise of share-based awards, using the treasury stock method. The reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income from continuing operations is shown as follows: For the Three Months Ended December 31, 2024 2023 Numerator: Net income (loss) attributable to common stockholders $ 166,993 $ ( 52,494 ) Denominator: Basic and diluted weighted-average number of shares outstanding 60,000,000 40,708,696 Net income (loss) per share: Basic and diluted $ 0.0028 $ ( 0.0013 ) NOTE 15. SUBSEQUENT EVENTS Management has evaluated subsequent events through the date on which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of December 31, 2024 have been incorporated into these consolidated financial statements and there are no other subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.” F- 16