Maitong Sunshine Cultural Development Co., Ltd 10-K

Item 7. 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 consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K, 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. The analysis set forth below is provided pursuant to applicable SEC regulations and is not intended to serve as a basis for projections of future events. See “Cautionary Statement Regarding Forward Looking Statements” above. Results of Operations for the Years Ended September 30, 2025 and September 30, 2024 The following table shows key components of the results of operations during the years ended September 30, 2025 and September 30, 2024: For the Years Ended September 30, 2025 2024 Revenue $ 1,380,218 $ 804,887 Cost of revenue 812,515 439,260 Gross Profit 567,703 365,627 Selling, general and administrative expenses 480,913 388,580 Profit (loss) from operations 86,790 (22,953 ) Other income (expense) (49 ) (108 ) Profit (loss) before provision for income taxes 86,741 (23,061 ) Provision for income taxes 107,970 7,749 Net loss $ (21,229 ) $ (30,810 ) For the fiscal year ended September 30, 2025, our revenue amounted to US$1,380,218. All revenue was generated by our subsidiary, Tongzhilian, which engaged throughout the year in cultural tourism services, product sales, and information technology services. For the fiscal year ended September 30, 2025, Tongzhilian’s revenue primarily derived from two business segments: tourism services and product sales. Among these, the product sales business contributed 77% of the Company’s total revenue. The cost of revenue for the fiscal year amounted to $812,515, mainly consisting of procurement costs associated with product sales. The company achieved a gross profit margin of 41% in fiscal year 2025, which was largely attributable to the sustained contribution from the product sales project newly launched in fiscal year 2025. 27 Operating expenses for the 2025 fiscal year consisted primarily of salaries and benefits, office expenses, professional fees, and rentals and leases. The $480,913 in operating expenses during fiscal year 2025 and $388,580 during fiscal year 2024 were primarily attributable to: ● $117,113 and $142,401 in professional fees and related expenses incurred in the fiscal year 2025 and fiscal year 2024 respectively, as a result of our status as a reporting company in the United States; and ● $197,498 and $155,533 in salaries and benefits incurred in fiscal year 2025 and fiscal year 2024 respectively; and ● $130,359 and $53,559 in office expenses incurred in fiscal year 2025 and fiscal year 2024 respectively; and ● $34,265 and $35,330 in rentals and lease fees incurred in fiscal year 2025 and fiscal year 2024 respectively. Our net loss for the fiscal year 2025 was $21,229, compared to a net loss of $30,810 for the fiscal year 2024. Liquidity and Capital Resources On September 30, 2024, the Company had $698,307 in cash and cash equivalents. During the year ended September 30, 2024, Ms. Huang satisfied her note by contributing $60,000 cash to the Company and loaned an additional $190,855. As of September 30, 2024, the Company had received during the 2024 fiscal year advance payments by customers totalling $461,946, which allowed the Company to accumulate a cash balance of $698,307 as of September 30, 2024. All these factors led to an increase in the Company’s working capital by $58,633 to a deficit of $16,711. As of September 30, 2025, the Company's cash and cash equivalents totaled $4,432. During the fiscal year ended on that date, the Company made advance payments to suppliers totaling $296,054, experienced a net decrease of $426,656 in customer prepayments, and saw a decrease of $8,392 in loans received from Ms. Huang Fang. These cash flow movements resulted in a reduction of the Company’s cash balance to $4,432 by the end of the period. Collectively, these factors led to a decrease of $14,087 in the Company’s working capital, resulting in a negative working capital balance of -$30,798 at the end of the period. 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 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. 28 Cash Flows The following table summarizes our cash flows for the fiscal year ended September 30, 2025 and for the fiscal year ended September 30, 2024. For the Years Ended September 30, 2025 2024 Net cash (used in) / provided by operating activities $ (674,758 ) $ 436,701 Net cash (used in) investing activities - (3,724 ) Net cash provided by financing activities 63,264 248,400 Effect of exchange rate fluctuation on cash and cash equivalents (13,445 ) 16,930 Net increase in cash and restricted cash (624,939 ) 698,307 Cash and cash equivalents, beginning of year 698,307 - Cash and restricted cash, end of year $ 73,368 $ 698,307 For the fiscal year ended September 30, 2025, the Company generated a net cash outflow of $674,758 from operating activities. The primary contributing factors include: the gradual redemption of prepaid deposits collected under the membership program launched in the 2024 fiscal year for corresponding services during this period, as well as increased prepayments made to suppliers in the current fiscal year. Together, these factors resulted in a net decrease of $435,848 in customer prepayments and a net increase of $297,775 in supplier prepayments. For the fiscal year ended September 30, 2024, our operations provided net cash of $436,701. The primary factor contributing to this increase in cash was a membership program we initiated during the year, in which we offered members discounts on tours in exchange for their deposit of funds to be applied to future tours. The result of this program was our accumulation of $461,946 in customer prepayments during the fiscal year. For the fiscal year ended September 30, 2024, our investing activities resulted in a net cash outflow of $3,724. primarily due to the acquisition of fixed assets. Trends, Events and Uncertainties 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. 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 annual report. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Not applicable. 29