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 three months ended December 31, 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 months ended December 31, 2024 and 2023. For the Three Months Ended December 31, 2024 2023 Change (Unaudited) (Unaudited) $ % Revenue $ 1,022,155 $ 123,970 $ 898,185 725 % Cost of revenue 642,347 75,839 566,508 747 % Gross Profit 379,808 48,131 331,677 689 % Selling, general and administrative expenses 105,915 100,433 5,482 5 % Income (lo ss) from operations 273,893 (52,302 ) 326,195 (624 )% Other income(expense) - (107 ) 107 (100 )% Income before provision for income taxes 273,893 (52,409 ) 326,302 (632 )% Provision for income taxes 106,900 85 106,815 125,665 % Net Income (Loss) $ 166,993 $ (52,494 ) $ 219,487 (418 )% 2 Tongzhilian’s revenue was $1,022,155 during the three months ended December 31, 2024. All our revenue was generated by our subsidiary Tongzhilian, which provided its cultural tourism services and product sales throughout the year, and added hotel reservation services during the first quarter of the 2025 fiscal year. Revenue during the three months ended December 31, 2024 increase by 725% compared to the operating revenue of $123,970 for the three months ended December 31, 2023. Recent revenue was primarily attributable to our sale of products, with 80% of our revenue, or $818,319, during the three months ended December 31, 2024, derived from such sales. The cost of revenue attributable to the sale of products was $515,842, which was our procurement cost for products sold. During the three months ended December 31, 2024, the remaining 20% of Tongzhilian’s revenue – i.e. $203,836 - arose from its sale of tourism services and hotel reservation services. The cost of service revenue was $126,505, primarily attributable to the costs associated with engaging tour suppliers. For the three months ended December 31, 2024, we realized a gross profit margin of 37%, as our gross profit amounted to $379,808. Operating expenses for the three months ended December 31, 2024 consisted primarily of salaries and benefits, office expenses and professional fees. Our $105,915 in operating expenses during this period were primarily attributable to: ● $18,582 in professional fees and related expenses incurred as a result of our status as a reporting company in the United States. ● $49,018 in salaries and benefits, ● $28,997 in office expenses. For the reasons described above, our net income for the three months ended December 31, 2024 was $166,993. Liquidity and Capital Resources On December 31, 2024, the Company had $1,022,727 in cash and cash equivalents, an increase of $324,420 during the three months then ended. The primary cause of the increase in our cash balance was an increase of $290,842 in the balance of our CEO’s loan to Tongzhilian. The loan from Huang Fang, our CEO, also increased our working capital from a deficit of $16,711 at September 30, 2024 to working capital of $116,078 at December 31, 2024. We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations plus additional funds sourced from a public offering and/or debt financing. In the near term, we expect Huang Fang, our President, to continue to provide support, if needed. We do not, however, have any formal agreement with Ms. Huang requiring her to provide financing to the Company nor any method of enforcing our expectation. Therefore, we can provide no assurances that we will be able to generate sufficient cash flows from operations and/or obtain additional financing on terms satisfactory to us, if at all. 3 Cash Flows The following unaudited table summarizes our cash flows for the three months ended December 31, 2024 and 2023. For the Years Ended December 31, Change 2024 2023 $ Net cash provided by (used in) operating activities $ 58,671 $ (53,291 ) $ 111,962 Net cash (used in) Investing activities - (3,717 ) 3,717 Net cash provided by financing activities 297,665 97,822 199,843 Effect of exchange rate fluctuation on cash and cash equivalents (31,916 ) 721 (32,637 ) Net increase in cash and cash equivalents 324,420 41,535 282,885 Cash and cash equivalents, beginning of period 698,307 - 698,307 Cash and cash equivalents, end of period $ 1,022,727 $ 41,535 $ 981,192 During the three months ended December 31, 2024, our operations provided net cash of $58,671. The primary factors contributing to this increase in cash was our net income for the quarter. These benefits were partially offset, however, by the effects of a membership program that we initiated during the last fiscal year, in which we offered members discounts on tours in exchange for their deposit of funds to be applied to future tours and product purchases. At September 30, 2024 the deposits totaled $461,946 and were recorded on our balance sheet at “Advances from Customers”. During the three months ended December 31, 2024, the balance of our Advances from Customers account fell by $153,915 as customers applied their deposits to the purchase of products. This use of prepayments to fund current sales resulted in a reduction in the cash provided by our operations during the three months ended December 31, 2024. Our financing activities during the three months ended December 31, 2024 generated $297,665. This represented additional interest-free loans made by our CEO, Huang Fang, and her affiliate entity. For the three months ended December 31, 2023, our financing activities generated $97,822, consisting of a $37,822 interest-free loan from Huang Fang and her affiliate entity and a $60,000 contributed by Huang Fang to fund our shareholders’ subscriptions. 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. 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.