Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments

On January 20, 2026, our Board of Directors and the holders of approximately 85.4% of our issued and outstanding shares of Common Stock as of such date executed written consents approving a one for ten (1-for-10) reverse split of our outstanding shares of Common Stock and the related amendment to the Company's certificate of incorporation (the "Reverse Split").

As of the date of this Report, the Reverse Split has not been effected for trading purposes. The Reverse Split has resulted in (i) the reduction of our total issued and outstanding shares of Common Stock from 400,000,000 shares, with a par value of $0.0001 each, to 40,000,000 shares, with a par value of $0.001 each; and (ii) the reduction of our authorized shares of Common Stock from 1,000,000,000 shares to 100,000,000 shares.

Overview of the Business

Due to global health issues and the COVID-19 pandemic, people have increased their health and nutrition consciousness. We believe preventive care is the most effective investment in health.

To promote awareness of preventive care among the people in the PRC, we developed and launched our mobile platform, King Eagle Mall, in July 2020, an online platform, Kun Zhi Jian, in October 2022, and Kun Zhi Jian Mini Program in November 2023.

The Company is a health and wellness company transitioning from offline retail and equipment-based services to a physician group-centric digital healthcare platform. In 2025, it launched the "Physician Group" strategy to integrate medical resources and build a digital healthcare ecosystem, resulting in short-term financial pressure on its legacy equipment-services segment during the transition.

King Eagle Mall

King Eagle Mall is a mobile social e-commerce platform launched in July 2020 that promotes preventive health care products and services. It adopts the S2B2C business model and integrates many major health care products and services. We focus on health-related products and services. King Eagle Mall's products are divided into two sectors: self-operated products and selected products which promote preventive health care. Our team screens and examines products that are and will be offered both by us and by affiliated merchants. Our major products include health care products such as dietary supplements, nutritional health foods, beauty cosmeceuticals, and other categories of health foods (for instance, milk powder, dried fruits) for supporting the cardiovascular system and bone joint health. We also offer collagen peptides, probiotics, and health foods for improving blood circulation and vein health, as well as household products that can promote and improve a healthier lifestyle for our members. We receive customer orders and may arrange fulfillment through our merchants who are responsible for delivery or we may fulfill customer orders through our outsourced networks. As of March 31, 2026, King Eagle Mall had approximately 9,477 members.

We also operate customer service centers with whom our members can communicate directly for any assistance related to product purchases, suggestions for health care products and services, and delivery logistics.

Kun Zhi Jian and Kun Zhi Jian Mini Program

In October 2022, we introduced and implemented an online platform, Kun Zhi Jian. In its initial phase of operation, we focused on selling a thermal therapy cabin to wholesalers. Currently, we promote and sell physiotherapy equipment products and our own brand, as well as other popular brands, of preventive health care related products. In November 2023 we also launched the Kun Zhi Jian Mini Program, which is composed of three main areas: physiotherapy cabin, a customer service center, and an online shopping mall (Kun Zhi Jian). Kun Zhi Jian and Kun Zhi Jian Mini Program are designed to enable health-related products to be sold by us and by third parties. We coordinate with local health service providers and leverage their health care expertise and technology to provide health screening and consulting services to our customers and members at the Kun Zhi Jian customer service center. Based on their health condition, we provide nutritional consulting services and offer suggestions for our preventive health care products. As of March 31, 2026, our online platform had approximately 9,240 members.

Contractual Arrangements

While we do not have any equity interest in our consolidated affiliated entities, King Eagle (Tianjin) and its subsidiaries, we have been and are expected to continue to be dependent on them to operate our business as long as there is limitation or prohibition in the interpretation and application by local governments of regulations concerning foreign investments in companies such as our consolidated affiliated entities. We rely on our consolidated affiliated entities to maintain or renew their respective qualifications, licenses, or permits necessary for our business in China. We believe that under the variable interest equity ("VIE") Agreements, we have substantial control over our consolidated affiliated entities and their respective shareholders to renew, revise, or enter into new contractual arrangements prior to the expiration of the current arrangements on terms that would enable us to continue to operate our business in China after the expiration of the current arrangements, or pursuant to certain amendments and changes of the current applicable PRC laws, regulations, and rules, on terms that would enable us to continue to operate our business in China legally. While we currently do not anticipate any changes to PRC laws in the near future that may impact our ability to carry out our business in China, no assurances can be made in this regard.

On May 15, 2021, King Eagle (China) and the shareholders of King Eagle (Tianjin) entered into a series of contractual agreements for King Eagle (Tianjin) to qualify as a variable interest entity or VIE (the "VIE Agreements"). On June 10, 2025, King Eagle (China) Co., Ltd. ("King Eagle China"), King Eagle (Tianjin) Technology Co., Ltd. ("King Eagle Tianjin"), and the shareholders of King Eagle Tianjin (the "Original Shareholders") entered into an agreement (the "Termination Agreement") to terminate certain previous agreements consisting of a Business Operation Agreement, a Proxy Agreement, an Equity Disposal Agreement, and an Equity Pledge Agreement (the "Original VIE Agreements"). The Original VIE Agreements, along with an Exclusive Consultation and Service Agreement, which was amended on March 1, 2024, established King Eagle (Tianjin) as a variable interest entity and allowed King Eagle China to control and receive the economic benefits of King Eagle Tianjin's business operations. The Original VIE Agreements were terminated due to the transfers by one of the Original Shareholders of his equity interests in King Eagle Tianjin.

On June 10, 2025, King Eagle China, King Eagle (Tianjin), and the shareholders of King Eagle (Tianjin), including the transferees of the Original Shareholder who transferred his equity interests, entered into new VIE Agreements (the "New VIE Agreements") consisting of a Business Operation Agreement, an Agency Agreement, an Equity Disposal Agreement, and an Equity Pledge Agreement. The originally executed Exclusive Consultation and Service Agreement, as amended, remains in effect. The New VIE Agreements, along with the Exclusive Consultation and Service Agreement, continue King Eagle Tianjin's status as a variable interest entity and allow King Eagle China to control and receive the economic benefits of King Eagle Tianjin's business operations.

For more information regarding these contractual arrangements, see Note 3 to our unaudited condensed consolidated financial statements as of and for the six months ended March 31, 2026 - "Variable Interest Entities - "VIE" Agreements." The Termination Agreement and the New VIE Agreements were filed as Exhibits 99.1 through 99.5 to our Current Report on Form 8-K, which was filed with the Securities and Exchange Commission on July 3, 2025.

Recent Regulatory Developments in China

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 their KPIL shares. Such SAFE registration was effected on May 14, 2021. These shareholders of King Eagle (Tianjin) were also required to register their equity pledge arrangement by the Equity Pledge Agreement with King Eagle (China). However, 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.

On July 6, 2021, the PRC government issued the Opinions on Strictly Cracking Down on Illegal Securities Activities, calling for: (i) tightening oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulations to specify responsibilities of overseas listed Chinese companies with respect to data security and information security; (ii) enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and (iii) extraterritorial application of China's securities laws. As the Opinions on Strictly Cracking Down on Illegal Securities Activities were recently issued, there is great uncertainty with respect to the interpretation and implementation thereof. We will closely monitor further developments.

In addition, on July 10, 2021, the Cyberspace Administration of China (the "CAC") issued the Measures for Cybersecurity Review, or the Measures, which proposed to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million users. On January 4, 2022, the CAC issued the New Measures for Cybersecurity Review (the "New Measures"), which amended the Measures for Cybersecurity Review (Draft Revisions) released on July 10, 2021. As our VIE has less than one million customers, we believe that the Measures are not applicable to us in current form. The PRC government is increasingly focused on data security, recently launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies and prohibiting these apps from registering new users during the review period. There are great uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations regarding data and privacy security. We may be required to change our data and other business practices and be subject to regulatory investigations, penalties, increased cost of operations, or declines in issuer growth or engagement as a result of these laws and policies.

Based on our understanding of currently applicable PRC laws and regulations, the Company and its PRC subsidiary and VIE: (i) are not currently required to obtain permissions from any PRC authorities to operate or to issue securities to foreign investors; (ii) are not subject to permission requirements from the China Securities Regulatory Commission (the "CSRC"), the Cyberspace Administration of China (the "CAC") or any other entity that is required to approve their operations; and (iii) have not been denied any permissions by any PRC authorities.

Cash Transfers Within our Organization

As between the Company and its subsidiaries, cash will generally be transferred by means of capital contributions and/or interest-free intercompany loans. Cash to be transferred or settled between the Company and its subsidiaries, on the one hand, and the consolidated VIE and its subsidiaries, on the other hand, will typically be transferred through payments for fees under our contractual arrangements with the VIE, expense reimbursements, or intercompany borrowings between the Company or one of its subsidiaries and the consolidated VIE. Any such loans will be interest-free, unsecured and payable on demand. For more information regarding these contractual arrangements, see Note 3 to our unaudited condensed consolidated financial statements as of and for the six months ended March 31, 2026 - "Variable Interest Entities - "VIE" Agreements." The enforceability and treatment of the intercompany agreements within our organization, including intercompany borrowings and the contractual arrangements with our VIE, have not been tested in court. To the extent cash and/or assets in the business are in the PRC and/or Hong Kong or our PRC and/or Hong Kong entities, such funds and/or assets may not be available to fund operations or for other use outside of the PRC and/or Hong Kong due to interventions in or the imposition of restrictions and limitations imposed by the PRC government on the ability of the Company or its subsidiaries to transfer cash and/or assets. There are no tax consequences for intercompany borrowings or the payment for intercompany services, except for the standard value added taxes and/or income taxes for the revenues and/or profits generated from such services.

The proceeds of any transactions within our organization, including with the VIE and its subsidiaries, are eliminated in our consolidated financial statements. For more details, please refer to the principles of consolidation set forth in the notes to our unaudited condensed consolidated financial statements as of and for the six months ended March 31, 2026 included in this Report.

As of the date of this Quarterly Report, there have been no distributions or dividends by any of our direct or indirect subsidiaries to the Company. The Company has not declared any dividends or made any distributions to its shareholders, and we do not anticipate declaring a dividend in the foreseeable future. No assets other than cash are transferred within our organization. For more details, please refer to the principles of consolidation set forth in the notes to our Condensed Consolidated Financial Statements for the three months ended March 31, 2026 included in this report.

Financial Operations Overview

Results of Operations for the three months ended March 31, 2025 and 2026

		Three Months Ended March 31,
		2026								2025
		Amount				% of revenue				Amount				% of revenue
Revenues		$	22,452				100.0			$	609,285				100
Cost of revenues			80,691				359.4				98,605				16.2
Gross profit			(58,239	)			(259.4	)			510,680				83.8
Operating expenses:
General and administrative expenses			214,801				956.7				312,614				51.3
Selling expense			115,055				512.4				512,908				84.2
Total operating expenses			329,856				1,469.2				825,522				135.5
Loss from operations			(388,095	)			(1,728.6	)			(314,842	)			(51.7	)
Other income (expense)			(5,460	)			(24.3	)			121,965				20.0
Loss before income taxes			(393,555	)			(1,752.9	)			(192,877	)			(31.7	)
Income tax expense			-				-				-				-
Net loss		$	(393,555	)			(1752.9	)		$	(192,877	)			(31.7	)

Revenues

For the three months ended March 31, 2026 and 2025, revenues amounted to $22,452 and $609,285 respectively.

The following table presents revenues disaggregated by customer type for the three months ended March 31, 2026 and 2025:

		Three Months Ended March 31,
		2026				2025
Retail product sales		$	6,549			$	152,671
Equipment-based service revenue			15,903				456,614
Total		$	22,452			$	609,285

We recognize our revenue on a gross basis, net of sub-charges and value-added tax ("VAT") on gross sales.

In addition to revenue from retail sales, we have equipment-based service revenue, generated through providing cards for online medical consultation services and selling prepaid cards to our customers for use with card-operated health screening equipment located at the Kun Zhi Jian Customer Service Center.

We recognize equipment-based service revenue upon the completion of medical consultation services and consuming the prepaid cards.

We generated $586,833 or 96.3%, lower revenue for the three month period ended March 31, 2026 compared to the same period in 2025 due to a sharp decrease in equipment-based services. Our equipment-based service revenue decreased by $440,711 or 96.5% and retail product sales dropped by $146,122 or 95.7%, as compared to the three months ended March 31, 2025 as a result of the deregistration of King Eagle (Huai'an) and Kun Zhi Jian (Huai'an) in 2025, as well as economic uncertainty and a downward trend in consumption.

Cost of revenue

We disaggregated our cost of revenue for the three months ended March 31, 2026 and 2025 as follows:

		Three Months Ended March 31,
		2026				2025
Retail product sales		$	18,320			$	21,049
Equipment-based service revenue			62,371				77,556
Total		$	80,691			$	98,605

Our cost of revenue for the three months ended March 31, 2026 was $80,691, a $17,914 or 18.2% decrease over our cost of revenue for the three months ended March 31, 2025 of $98,605. Our cost of revenue primarily consisted of the purchase of consumer health care and health related household products from our suppliers and payments related to maintaining health screening equipment. We made our retail product sales through our King Eagle Mall, Kun Zhi Jian and our Kun Zhi Jian Mini Program. We also offered equipment-based services through the Kun Zhi Jian Mini Program. We pay an equipment-based service fee that includes a prepaid card activation fee and a technical support fee.

Gross profit

		Three Months Ended March 31,
		2026				2025
Retail product sales		$	(11,771	)		$	131,622
Equipment-based service revenue			(46,468	)			379,058
Total		$	(58,239	)		$	510,680

For the three months ended March 31, 2026 our overall gross loss and margin were $58,239, or 259.4%, whereas for the three months ended March 31, 2025, our overall gross profit and margin were $510,680 or 83.8%.

The decrease in our gross profit and margin for our retail business for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily due to deregistration of King Eagle (Huai'an) and Kun Zhi Jian (Huai'an) in 2025, market instability and weakened consumer confidence. The gross loss for our equipment-based services for the three months ended March 31, 2026 was $46,468 mainly due to the Company's strategic transformation from a store-centric retail and equipment-based service model to a physician group-centric digital healthcare ecosystem, which led to a corresponding drop in the financial performance of the business.

Operating expenses

Our operating expenses consist of general and administrative expenses and selling expenses. For the three months ended March 31, 2026 and 2025, our total operating expenses were $329,856 and $825,522, respectively. The decrease in operating expenses for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to a decrease of $97,813 in general and administrative expenses and a decrease of $397,853 in selling expenses.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2026 and 2025 were $214,801 and $312,614, respectively. Our general and administrative expenses for the three months ended March 31, 2026 and 2025 were comprised of the following:

		Three Months Ended March 31,
		2026				2025
Employee compensation and benefits		$	110,012			$	139,257
Office rent and building management			26,820				51,185
Office supplies and meetings			2,280				2,315
Professional service fees			50,653				54,686
Travel, transportation, and gasoline			17,214				25,078
Meals and entertainment			20				3,725
Depreciation and amortization			96				21,999
Business registration and organizational fees			3,043				-
Others			4,663				14,369
Total		$	214,801			$	312,614

The decrease in general and administrative expenses during the three months ended March 31, 2026 by $97,813 or 31.3%, was chiefly due to a decrease in employee compensation and benefits of $29,245, a decrease in office rent and building management of $24,365, and a decrease in depreciation and amoritization of $21,903, as well as a decrease in traveling fees of $7,864. These expenses declined as a result of our having three fewer subsidiaries in the three-month period ended March 31, 2026 than in the same period in 2025.

Selling expense

Selling expenses for the three months ended March 31, 2026 and 2025 were $115,055 and $512,908, respectively. Our selling expenses for the three months ended March 31, 2026 and 2025 were comprised of the following:

		Three Months Ended March 31,
		2026				2025
Service agents		$	23,970			$	333,816
Employee compensation and benefits			49,511				71,517
Rental for equipment			-				46,437
Office supplies and meetings			28,054				30,984
Travel, transportation, and gasoline			2,576				8,640
Meals and entertainment			2,085				658
Depreciation and amortization			8,859				16,963
Advertising			-				3,893
Total		$	115,055			$	512,908

The $397,853 or 77.6% decrease in selling expense was primarily due to decreases in service agent costs of $309,846, employee compensation and benefits of $22,006, and equipment rental of $46,437. Service agent costs, employee compensation and benefits, and expenses for office supplies and meetings declined as a result of our having fewer subsidiaries during the period ended March 31, 2026. Equipment rental was recognized as a cost of revenue instead of a selling expense during the period ended March 31, 2026.

Other income, net

Other income primarily included bank interest income, equity in net losses, and others. Our other income for the three months ended March 31, 2026 and 2025 was loss of $5,460 and gain of $121,965, respectively. We recognized a $27,789 gain on the return of equipment and $11,101 equity in net losses for the three month period ended March 31, 2026. We recognized a $147,579 gain on the disposal of a subsidiary and a $21,444 loss from share of profit from investment in associate for the three months ended March 31, 2025.

Income tax expense

For both of the three month periods ended March 31, 2026 and 2025, the income tax expense of the Company was nil. Due to the net loss before income tax for the three month periods ended December 31, 2026 and 2025, the Company recognized a full valuation recognition against its deferred tax assets, which mainly included net operating loss carry forwards, as management believed it is more likely than not that the Company will not realize its net operating loss carry forwards in the near future or before they expire.

Net loss

As a result of the factors discussed above, we posted a net loss in the amount of $393,555 for the three months ended March 31, 2026 compared to a net loss in the amount of $192,877 for the three months ended March 31, 2025.

Foreign currency translation adjustment

The functional currency of our operations in the PRC is Chinese Yuan or Renminbi ("RMB"), while the functional currency of our operation in Hong Kong is Hong Kong Dollars ("HKD"). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities; equity is translated at historical exchange rates; and average rates of exchange (for the period) are used for revenues and expenses and cash flows. Transaction gains and/or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. As a result of foreign currency translation, which is a noncash adjustment, we reported a foreign currency translation loss of $120,536 for the three months ended March 31, 2026 and a foreign currency translation loss of $41,427 for the three months ended March 31, 2025. This non-cash loss had the effect of decreasing our reported comprehensive loss for the three months ended March 31, 2026.

Comprehensive loss

We recognized a comprehensive loss of $514,091 for the three months ended March 31, 2026 compared to a comprehensive loss of $234,304 the same period in 2025.

Results of operations for the six months ended March 31, 2025 and 2026

		Six Months Ended March 31,
		2026								2025
		Amount				% of revenue				Amount				% of revenue
Revenues		$	197,276				100.0			$	965,804				100.0
Cost of revenues			194,554				98.6				154,288				16.0
Gross profit			2,722				1.4				811,516				84.0
Operating expenses:
General and administrative expenses			443,365				224.7				965,047				99.9
Selling expense			244,365				123.9				859,397				89.0
Total operating expenses			687,730				348.6				1,824,444				188.9
Loss from operations			(685,008	)			(347.2	)			(1,012,928	)			(104.9	)
Other income			25,876				13.1				169,044				17.5
Loss before income taxes			(659,132	)			(334.1	)			(843,884	)			(87.4	)
Income tax expense			-				-				-				-
Net loss		$	(659,132	)			(334.1	)		$	(843,884	)			(87.4	)

Revenues

For the six months ended March 31, 2026 and 2025, revenues amounted to $197,276 and $965,804, respectively.

The following tables present disaggregated revenues for the six months ended March 31, 2026 and 2025:

		Six Months Ended March 31,
		2026				2025
Retail product sales		$	139,658			$	231,128
Equipment-based service revenue			57,618				734,676
Total		$	197,276			$	965,804

We recognize our revenue on a gross basis, net of sub-charges and value-added tax ("VAT") on gross sales.

In addition to revenue from retail sales, we have equipment-based service revenue, generated through providing cards for online medical consultation services and selling prepaid cards to our customers for use with card-operated health screening equipment located at the Kun Zhi Jian Customer Service Center.

We recognize equipment-based service revenue upon the completion of medical consultation services and consuming the prepaid cards.

We generated $768,528 or 79.6% lower revenue during the six months ended March 31, 2026 compared to the six months ended March 31, 2025 due to a substantially decrease in equipment-based services. Our equipment-based service revenue decreased by $677,058 or 92.2% and retail product sales dropped by $91,470 or 39.6% as compared to the six months ended March 31, 2025 as a result of the deregistration of King Eagle (Huai'an) and Kun Zhi Jian (Huai'an) in 2025, as well as economic uncertainty and a downward trend in consumption.

Cost of revenue

We disaggregated our cost of revenue for the six months ended March 31, 2026 and 2025 as follows:

		Six Months Ended March 31,
		2026				2025
Retail product sales		$	70,813			$	33,136
Equipment-based service revenue			123,741				121,152
Total		$	194,554			$	154,288

Our cost of revenue for the six months ended March 31, 2026 was $194,554, a $40,266 or 26.1% increase over our cost of revenue for the six months ended March 31, 2025 of $154,288. Our cost of revenue primarily consisted of the purchase of consumer health care and health related household products from our suppliers and payments related to maintaining health screening equipment. We made our retail product sales through our King Eagle Mall, Kun Zhi Jian, and our Kun Zhi Jian Mini Program. We also offered equipment-based services through the Kun Zhi Jian Mini Program. We pay an equipment-based service fee that includes a prepaid card activation fee and a technical support fee.

Gross profit

		Six Months Ended March 31,
		2026				2025
Retail product sales		$	68,845			$	197,992
Equipment-based service revenue			(66,123	)			613,524
Total		$	2,722			$	811,516

For the six months ended March 31, 2026 and 2025, our overall gross profit and margin was $2,722, or 1.4%, and $811,516, or 84.0%, respectively.

The decrease in our gross profit and margin for our retail business for the six months ended March 31, 2026 as compared to the six months ended March 31, 2025 was primarily due to market instability and weakened consumer confidence. The gross loss for our equipment-based services for the six months ended March 31, 2026 were $66,123, mainly due to the Company's strategic transformation from a store-centric retail and equipment-based service model to a physician group-centric digital healthcare ecosystem, which led to a corresponding drop in the financial performance of the business.

Operating expenses

Our operating expenses consist of general and administrative expenses and selling expenses. For the six months ended March 31, 2026 and 2025, our total operating expenses were $687,730 and $1,824,444, respectively. The decrease in operating expenses for the six months ended March 31, 2026 compared to the same period in 2025 was primarily due to a decrease of $521,682 in general and administrative expenses and a decrease of $615,032 in selling expenses.

General and administrative expenses

General and administrative expenses for the six months ended March 31, 2026 and 2025 were $443,365 and $965,047, respectively. Our general and administrative expenses for the six months ended March 31, 2026 and 2025 were comprised of the following:

		Six Months Ended March 31,
		2026				2025
Employee compensation and benefits			217,080			$	352,280
Office rent and building management			45,618				149,792
Office supplies and meetings			10,658				6,387
Professional service fees			95,297				334,081
Travel, transportation, and gasoline			36,970				35,262
Meals and entertainment			1,733				15,655
Depreciation and amortization			191				44,952
Business registration and organizational fees			26,408				-
Others			9,410				26,638
Total			443,365			$	965,047

The decrease in general and administrative expenses during the six months ended March 31, 2026 by $521,682 or 54.1% was chiefly due to a decrease in professional service fees of $238,784, a decrease in employee compensation and benefits of $135,200, and a decrease in office rent and building management of $104,174. These expenses declined as a result of our having three fewer subsidiaries in the six-month period ended March 31, 2026 than in the same period in 2025. In addition, depreciation and amortization dropped by $44,761 as a result of fewer subsidiaries in the six-month period ended March 31, 2026 than in the same period in 2025.

Selling expenses

Our selling expenses for the six months ended March 31, 2026 and 2025, were $244,365 and $859,397, respectively. Our selling expenses for the six months ended March 31, 2026 and 2025 were comprised of the following:

		Six Months Ended March 31,
		2026				2025
Service agents		$	70,730			$	495,001
Employee compensation and benefits			94,168				146,466
Rental for equipment			-				101,387
Office supplies and meetings			30,651				54,109
Travel, transportation, and gasoline			14,268				14,183
Meals and entertainment			5,142				2,163
Depreciation and amortization			22,449				34,218
Advertising			6,957				11,870
Total		$	244,365			$	859,397

The $615,032 decrease was primarily due to a decrease in service fees of $424,271 and a $101,387 reduction in rental fees. In addition, employee benefits decreased by $52,298, office supplies and meeting expenses decreased by $23,458, and depreciation and amortization dropped by $11,769.

Other income, net

Other income primarily consisted of bank interest income, equity in net losses, and others. Our other income for the six months ended March 31, 2026 and 2025 was $25,876 and $169,044, respectively. We recognized a $27,789 gain on the return of equipment, $38,310 from gifts received by KP China and $19,911 equity in net losses for the six month period ended March 31, 2026. We recognized a $147,579 gain on the disposal of a subsidiary and a $21,444 loss from share of profit from investment in associate for the six months ended March 31, 2025.

Income tax expense

For the six months ended March 31, 2026 and 2025, the income tax expense of the Company was nil. Due to the net loss before income tax for the six month periods ended March 31, 2026 and 2025, the Company recognized a full valuation recognition against its deferred tax assets, which mainly included net operating loss carry forwards, as management believed it is more likely than not that the Company will not realize its net operating loss carry forwards in the near future or before they expire.

Net loss

As a result of the factors discussed above, the Company posted net losses in the amounts of $659,132 and $843,884 for the six months ended March 31, 2026 and 2025, respectively.

Foreign currency translation adjustment

The functional currency of our operations in the PRC is Chinese Yuan or Renminbi ("RMB"), while the functional currency of our operation in Hong Kong is Hong Kong Dollars ("HKD"). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities; equity is translated at historical exchange rates; and average rates of exchange (for the period) are used for revenues and expenses and cash flows. Transaction gains and/or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. As a result of foreign currency translation, which is a noncash adjustment, we reported a foreign currency translation loss of $271,451 and gain of $240,468 for the six months ended March 31, 2026 and 2025, respectively. This non-cash gain had the effect of increasing our reported comprehensive gain.

Comprehensive loss

The Company recognized comprehensive losses in the amounts of $930,583 and $603,416 for the six months ended March 31, 2026 and 2025, respectively.

Liquidity and capital resources

As of March 31, 2026 and September 30, 2025, we had cash and cash equivalents balances of $19,768 and $26,284, respectively.

The following table sets forth a summary of the Company's cash flows for the periods indicated:

		Six Months Ended
		March 31,
		2026				2025
Net cash provided by (used in) operating activities		$	33,479			$	(3,710	)
Net cash used in investing activities			-				(38,590	)
Net cash used in financing activities			(39,867	)			(8,734	)
Effect of exchange rate on cash			(128	)			(3,771	)
Net change in cash and cash equivalents			(6,516	)			(54,805	)
Cash and cash equivalents at beginning of period			26,284				82,184
Cash and cash equivalents at end of period		$	19,768				27,379

For the six months ended March 31, 2026, net cash provided by operating activities totaled $33,479. Operating cash inflow was mainly attributable to increases in amounts due to related parties of $435,171, amount due from a related party of $155,538, and other payables and accrual of $97,396, offset by our net loss of $659,132.

For the six months ended March 31, 2025, net cash used in operating activities totaled $3,710. Operating cash outflow was mainly attributable to our net loss of $843,884 and a decrease in amounts due to related parties of $2,458,960, partially offset by an increase in trade payables of $1,828,116 and other payable from third parties of $1,234,126.

Net cash used in investing activities totaled $nil during the six months ended March 31, 2026.

Net cash used in investing activities totaled $38,590 and was related to the purchase of property, plant, and equipment during the six months ended March 31, 2025.

Net cash used in financing activities totaled $39,867 and was related to the payment of finance lease liabilities of $35,585, and payment of bank borrowings of $4,282 during the six months ended March 31, 2026.

Net cash used in financing activities totaled $8,734 and was related to the payment of finance lease liabilities of $107,201, offset by proceeds from bank borrowings of $98,467 during the six months ended March 31, 2025.

The effect of exchange rate change on cash for the six months ended March 31, 2026 totaled negative $128. The net change in cash for the period was a decrease of $6,516.

The effect of exchange rate change on cash for the six months ended March 31, 2025 totaled negative $3,771. The net change in cash for the period was a decrease of $54,805.

The following table sets forth a summary of changes in our working capital as of March 31, 2026 and September 30, 2025:

		March 31,				September 30,
		2026				2025
Current Assets		$	341,092				499,447
Current Liabilities			(9,680,156	)			(8,994,644	)
		$	(9,339,064	)		$	(8,495,197	)

We require cash of approximately $8.7 million within the next twelve months, primarily related to third-party vendor payables and related-party payables. As of March 31, 2026 and September 30, 2025, we had received customer advances in the amount of approximately $0.5 million and $0.3 million, respectively. We anticipate that the majority of the revenue will be recognized in fiscal year 2026. Management has agreed that the amount received is non-refundable. However, this term is not bound by any agreement. Therefore, the customers may have the right to challenge and demand the advances be refunded under relevant commercial laws or regulations.

In an effort to support and maintain our financial position and operations, to fulfill our contractual commitments, and to meet the demands from our customers for refund of their advance payments, the Company focused on increasing its revenue through its online platform. We are also actively seeking loans from banks. Simultaneously, our directors and stakeholders continue to support our operation financially. We believe that such measures will improve our liquidity in the next twelve months. If we are not able to increase revenue or obtain any financing, we may be unable to continue as a going concern.

Going Concern Consideration

The financial statements included in this Quarterly Report 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. The going-concern basis assumes 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. For the six months ended March 31, 2026, the Company incurred a substantial accumulated deficit of $9,697,116, a net loss of $659,132, and had negative working capital of $9,339,064. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

The Company keeps monitoring its operational activities with a view to enhancing its financial liquidity. Measures under evaluation include, but are not limited to, boosting sales via the Company's online channels, cutting operating expenses, obtaining financial advances from the Company's shareholders and directors, as well as securing financing through share issuances and bank borrowings. The Company has been concentrating on growing its revenue via its online platform and reducing its operational expenses. For example, it reduced lease payments and decreased its office supplies expense. To maintain its status as a going concern over the next 12 months, the Company is focusing on promoting and selling its own brand of preventive health care products to wholesalers, streamlining its overhead costs, and obtaining financing or capital funding from its stockholders or directors or through bank financing. Nevertheless, the Company provides no guarantee that it will achieve higher revenue, successfully execute its business strategies, or obtain financing on commercially reasonable terms, if such financing is available at all. The financial statements do not contain any adjustments that would reflect the potential future impact on the recoverability and classification of assets or the amounts and classification of liabilities that might arise if the Company is unable to continue as a going concern. The directors plan to continue supporting the Group by providing sufficient financial support to allow the Group to sustain its business operations in the foreseeable future.

Contractual Obligations and Other Commitments

We had the following contractual obligations and commercial commitments as of March 31, 2026

		Less Than 1 Year				1 to 3 Years				3 to 5 Years				More Than 5 Years				Total
Contractual Obligations:
Operating lease obligations		$	159,801			$	48,548			$	-			$	-			$	208,349
Finance lease obligations			-				-				-				-				-
Short-term borrowing			98,869				-				-				-				98,869
Total contractual obligations		$	258,670			$	48,548			$	-			$	-			$	307,218

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support, credit risk support, or other benefits.

Future Financings

We will continue to rely on loans from our directors and major shareholders and on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing to fund our operations and other activities, or if we are able, there is no guarantee that existing shareholders will not be substantially diluted.

Critical Accounting Policies

We regularly evaluate the accounting policies and estimates that we use to make budgetary and financial statement assumptions. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

See Note 2 to the financial statements included herewith and Note 2 to the financial statements in the Company's Form 10-K for the fiscal year ended September 30, 2025 previously filed with the SEC.

Recent Accounting Pronouncements

See Note 2 to the financial statements included herewith and Note 2 to the financial statements in the Company's Form 10-K for the fiscal year ended September 30, 2025 previously filed with the SEC.