NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

(UNAUDITED)

Gushen, Inc., a Nevada corporation ( “we”, “us” or “the Company”) was incorporated under the laws of the State of Nevada on March 9, 2015.

Reverse Merger

On July 30, 2021, the Company and Dyckmanst Limited, a company organized under the laws of the British Virgin Islands (“Dyckmanst Limited”), and all shareholders of Dyckmanst Limited immediately prior to the closing (collectively, the “Dyckmanst Limited Shareholders”, each, a “Dyckmanst Limited Shareholder”) entered into a share exchange agreement (the “Share Exchange Agreement”), which closed on the same date. Pursuant to which the Company acquired 100% of the issued and outstanding equity securities of Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) of the Company (the “Share Exchange”). Immediately prior to the closing of the Share Exchange, two existing holders of aggregated 30,000,000 shares of Series A preferred stock of the Company, par value $0.0001 per share (the “Preferred Stock”) delivered 29,000,000 shares of Preferred Stock to the Company for cancellation (“the “Cancellation of Certain Preferred Stock”), each Preferred Stock is convertible into 10 shares of Common Stock. As a result, immediately following the closing of the Share Exchange, there are 410,618,750 shares of Common Stock issued and outstanding and 1,000,000 shares of Preferred Stock issued and outstanding. Dyckmanst Limited Shareholders collectively control 90.72% voting power of the Company on as converted basis, with respect to all of the shares of common stock and preferred stock, voting as a single class, with each share of common stock entitles to 1 vote and each share of preferred stock entitles to 10 votes.

The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Merger.

Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because Dyckmanst’s former stockholders received the greater portion of the voting rights in the combined entity and Dyckmanst’s senior management represents all of the senior management of the combined entity, the Merger was accounted for as a recapitalization effected by a share exchange, wherein Dyckmanst is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Dyckmanst, its wholly-owned subsidiaries and VIE, Beijing Zhuoxun Century Culture Communication Co., Ltd. (“Zhuoxun Beijing”), have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the Company’s consolidated financial statements are those of Dyckmanst, its wholly-owned subsidiaries and VIE and are recorded at their historical cost basis.

Dyckmanst Limited, via the PRC affiliated entity Zhuoxun Beijing, engages in providing family education resources to promote all-around education onsite in local communities organized by its regional collaborative education agency and offering parents easy access to a wide variety of courses online through the application

In February 2021, Fengyuan Beijing, Zhuoxun Beijing, and the shareholders of Zhuoxun Beijing entered into a series of contractual agreements for Zhuoxun Beijing to qualify as variable interest entity or VIE (the “VIE Agreements”). The VIE Agreements are as follows:

Consulting Service Agreement

Pursuant to the terms of the Exclusive Consulting and Service Agreement dated February 5, 2021, between Fengyuan Beijing and Zhuoxun Beijing (the “Consulting Service Agreement”), Fengyuan Beijing is the exclusive consulting and service provider to Zhuoxun Beijing to provide business-related software research and development services; design, installation, and testing services; network equipment support, upgrade, maintenance, monitor, and problem-solving services; employees training services; technology development and sublicensing services; public relations services; market investigation, research, and consultation services; short to medium term marketing plan-making services; compliance consultation services; marketing events and membership related activities planning and organizing services; intellectual property permits; equipment and rental services; and business-related management consulting services. Pursuant to the Consulting Service Agreement, the service fee is the remaining amount after Zhuoxun Beijing’s profit before tax in the corresponding year deducts Zhuoxun Beijing’s losses, if any, in the previous year, the necessary costs, expenses, taxes, and fees incurred in the corresponding year, and the withdraws of the statutory provident fund. Zhuoxun Beijing agreed not to transfer its rights and obligations under the Consulting Service Agreement to any third party without prior written consent from Fengyuan Beijing. In addition, Fengyuan Beijing may transfer its rights and obligations under the Consulting Service Agreement to Fengyuan Beijing’s affiliates without Zhuoxun Beijing’s consent, but Fengyuan Beijing shall notify Zhuoxun Beijing of such transfer. This Agreement is valid for a term of 10 years subject to any extension requested by Fengyuan Beijing unless terminated by Fengyuan Beijing unilaterally prior to the expiration.

The foregoing summary of the Consulting Service Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Consulting Service Agreement, which is filed as Exhibit 10.1 to this Form 8-K.

Business Operation Agreement

Pursuant to the terms of the Business Operation Agreement dated February 5, 2021, among Fengyuan Beijing, Zhuoxun Beijing and the shareholders of Zhuoxun Beijing (the “Business Operation Agreement”), Zhuoxun Beijing has agreed to subject the operations and management of its business to the control of Fengyuan Beijing. According to the Business Operation Agreement, Zhuoxun Beijing is not allowed to conduct any transactions that has substantial impact upon its operations, assets, rights, obligations and personnel without the Fengyuan Beijing’s written approval. The shareholders of Zhuoxun Beijing and Zhuoxun Beijing will take Fengyuan Beijing’s advice on appointment or dismissal of directors, employment of Zhuoxun Beijing’s employees, regular operation, and financial management of Zhuoxun Beijing. The shareholders of Zhuoxun Beijing have agreed to transfer any dividends, distributions or any other profits that they receive as the shareholders of Zhuoxun Beijing to Fengyuan Beijing without consideration. The Business Operation Agreement is valid for a term of 10 years or longer upon the request of Fengyuan Beijing prior to the expiration thereof. The Business Operation Agreement might be terminated earlier by Fengyuan Beijing with a 30-day written notice.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

The foregoing summary of the Business Operation Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Business Operation Agreement, which is filed as Exhibit 10.2 to this Form 8-K.

Proxy Agreement

Pursuant to the terms of the Proxy Agreements dated February 5, 2021, among Fengyuan Beijing, and the shareholders of Zhuoxun Beijing (each, the “Proxy Agreement”, collectively, the “Proxy Agreements”), each shareholder of Zhuoxun Beijing has irrevocably entrusted his/her shareholder rights as Zhuoxun Beijing’s shareholder to Fengyuan Beijing, including but not limited to, proposing the shareholder meeting, accepting any notices with regard to the convening of shareholder meeting and any other procedures, conducting voting rights, and selling or transferring the shares held by such shareholder, for 10 years or earlier if the Business Operation Agreement was terminated for any reasons.

The foregoing summary of the Proxy Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the Proxy Agreements, which are filed as Exhibit 10.3 to this Form 8-K.

Equity Disposal Agreement

Pursuant to the terms of the Equity Disposal Agreement dated February 5, 2021, among Fengyuan Beijing, Zhuoxun Beijing, and the shareholders of Zhuoxun Beijing (the “Equity Disposal Agreement”), the shareholders of Zhuoxun Beijing granted Fengyuan Beijing or its designees an irrevocable and exclusive purchase option (the “Option”) to purchase Zhuoxun Beijing’s all or partial equity interests and/or assets at the lowest purchase price permitted by PRC laws and regulations. The option is exercisable at any time at Fengyuan Beijing’s discretion in full or in part, to the extent permitted by PRC law. The shareholders of Zhuoxun Beijing agreed to give Zhuoxun Beijing the total amount of the exercise price as a gift, or in other methods upon Fengyuan Beijing’s written consent to transfer the exercise price to Zhuoxun Beijing. The Equity Disposal Agreement is valid for a term of 10 years or longer upon the request of Fengyuan Beijing.

The foregoing summary of the Equity Disposal Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Equity Disposal Agreement, which is filed as Exhibit 10.4 to this Form 8-K.

Equity Pledge Agreement

Pursuant to the terms of the Equity Pledge Agreement dated February 5, 2021, among Fengyuan Beijing and the shareholders of Zhuoxun Beijing (the “Pledge Agreement”), the shareholders of Zhuoxun Beijing pledged all of their equity interests in Zhuoxun Beijing to Fengyuan Beijing, including the proceeds thereof, to guarantee Zhuoxun Beijing’s performance of its obligations under the Business Operation Agreement, the Consulting Service Agreement and the Equity Disposal Agreement (each, a “Agreement”, collectively, the “Agreements”). If Zhuoxun Beijing or its shareholders breach its respective contractual obligations under any Agreements, or cause to occur one of the events regards as an event of default under any Agreements, Fengyuan Beijing, as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interest in Zhuoxun Beijing. During the term of the Pledge Agreement, the pledged equity interests cannot be transferred without Fengyuan Beijing’s prior written consent. The Pledge Agreements is valid until all the obligations due under the Agreements have been fulfilled.

Based on these contractual arrangements, the Company consolidates the VIE in accordance with SEC Regulation S-X Rule 3A-02 and Accounting Standards Codification (“ASC”) topic 810 (“ASC 810”), Consolidation.

The accompanying consolidated financial statements reflect the activities of each of the following entities:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

The following combined financial information of the Group’s VIEs as of June30, 2021 and September 30, 2020 and for the nine months ended June 30, 2021 and 2020 included in the accompanying consolidated financial statements of the Group was as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Basis of Presentation

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) 

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, the Company evaluates its estimates based 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. Actual results may differ from these estimates under different assumptions or conditions. Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most critical to fully understanding and evaluating its consolidated financial statements.

COVID-19 Outbreak

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.

Revenue Recognition

The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation.

Revenues are recognized when control of the promised goods or services is transferred to our customers, which may occur at a point in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The Company identified the following performance obligations for each type of contract:

Training Revenue

The Company’s offline training course service primarily includes assigning instructors, providing offline classes and presenting training materials to the course participants who attend the classes. The series of tasks as discussed above are interrelated and are not separable or distinct as the clients cannot benefit from the standalone task.

The Company’s online training course service primarily includes coursewares or videos which are already published on the website. Other than providing the access, there are no bundle or multiple separable and distinct tasks.

According to ASC 606-10-25-19, there is one performance obligation for the training course service.

China Good Student Project Revenue

The Company’s Chinese Good Student Project includes assisting in both promoting the program and organizing activities for the course participants. Those tasks are not separable and the course participants cannot benefit from the standalone task as defined under ASC 606-10-25-19.

Thus, there is only one performance obligation with respect to the China Good Student Project service.

Mobile Phone Revenue

The Company’s sales contracts of anti-addiction mobile phone device provide that the Company provides multiple delivery of the product specified in the contracts. The contacts identify the quantity, product model, product type and unit price of the product that will be sold to our customers. The contracts allow the customers to place separate orders within the credit limit as specified in the contracts. The delivery is based on the quantity the customers order. The Company’s customers can benefit from the mobile phone devices everytime it delivers to them. Therefore, the delivery of the products is separately identifiable and distinct.

Hence, there are multiple performance obligations in each of the sale contracts of anti-addiction mobile phone device. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Practical expedients and exemption

The company has not occurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Other service income is earned when services have been rendered.

Revenue by major product line

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

We apply ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

Foreign Currency and Foreign Currency Translation

The functional currency of the Company is the United States dollar (“US dollar”). The Company’s subsidiary and VIEs with operations in PRC uses the local currency, the Chinese Yuan (“RMB”), as their functional currencies. 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 determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements.

Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of comprehensive loss.

The consolidated financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period’s income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the consolidated balance sheets.

Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and at banks and highly liquid investments, which are unrestricted from withdrawal or use, and which have original maturities of three months or less when purchased.

Other monetary funds

Other monetary funds consist of cash deposited in financial institutions other than banks.

Accounts Receivable, Net

The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.

The adoption of the new revenue standards did not change the Company’s historical accounting methods for its accounts receivable.

Long-Lived Assets

Long-lived assets consist primarily of property, plant and equipment and intangible assets.

Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Expenditure for maintenance and repairs is expensed as incurred.

The gain or loss on the disposal of property, plant and equipment is the difference between the net sales proceeds and the lower of the carrying value or fair value less cost to sell the relevant assets and is recognized in general and administrative expenses in the consolidated statements of comprehensive loss.

Intangible Assets

Intangible assets mainly comprise domain names and trademarks. Intangible assets are recorded at cost less accumulated amortization with no residual value. Amortization of intangible assets o is computed using the straight-line method over their estimated useful lives.

The estimated useful lives of the Company’s intangible assets are listed below:

Impairment of Long-lived Assets

In accordance with ASC 360-10-35, the Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant management judgment based on the Company’s historical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in the Company’s business model is determined by its management. An impairment loss would be recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized is measured by the amount by which the carrying values of the assets exceed the fair value of the assets. No impairment has been recorded by the Company as of March 31, 2021 and September 30, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. As of June 30, 2021, and September 30, 2020, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality.

For the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses. Historically, such losses have been within management’s expectations.

Segments

The Company evaluates a reporting unit by first identifying its operating segments, and then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meets the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The Company has only one major reportable segment in the periods presented.

Fair Value of Financial Instruments

U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financial instruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three-tier fair value hierarchy is:

Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – include other inputs that are directly or indirectly observable in the market place.

Level 3 – unobservable inputs which are supported by little or no market activity.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities.

In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying condensed consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.

As of June 30, 2021 and September 30, 2020, the Company had no investments in financial instruments.

Restricted assets

The Company’s PRC subsidiary and VIE are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The Company’s PRC subsidiary and its VIE are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

In addition, the Company’s operations are conducted and revenues are generated in China, and all of the Company’s revenues earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into U.S. dollars.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

In May 2014, the Financial Accounting Standards Board (FASB) issued Topic 606, which supersedes the revenue recognition requirements in Topic 605. The Company adopted Topic 606 as of the inception date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Adoption of ASC Topic 842, “Leases”

In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases.

The Company adopted ASC Topic 842 using the modified retrospective transition method effective the inception date. There was no cumulative effect of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date. See Note 2 “Leases” above for further details.

Accounting Pronouncements Issued But Not Yet Adopted

Financial Instruments. In June 2016, the FASB issued Accounting Standards Update No. 2016-13,“Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements.

Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard will be effective for King Eagle beginning September 30, 2021. We are currently evaluating the impact of the standard on our consolidated financial statements.

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial position, statements of operations and cash flows. 

Other receivables consist of the following:

Amount due from agents is mainly the payment collected by the agents from the trainees on behalf of the Company. Agents provide various services to facilitate the in-person training seminars scheduled by the Company.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

The following table sets forth the movement of allowance for doubtful accounts:

The company’s sole inventory is the anti-addiction cell phone which has primarily four functions including anti-addiction, myopia prevention, security, and study assistance, for the purpose of managing elementary and middle school students.

The following table sets forth the movement of provision for the inventory:

Other long-term assets consist of the following:

The prepaid marketing fees are mainly for the two-year marketing service provided by different agents which the Company has signed contracts with.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Depreciation expenses charged to the statements of operations for the three months ended June 30, 2021 and 2020 were $30,785 and $12,223, and for the nine months ended June 30, 2021 and 2020 were $80,534 and $37,868, respectively.

Amortization charged to the statements of operations for the three months ended June 30, 2021 and 2020 were $2,661 and $1,881, and for the nine months ended June 30, 2021 and 2020 were $7,906 and $4,252, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(In U.S. dollars)

Amount due from related parties are mainly cash in advance provided to the related parties by the Company. Amount due to related parties are mainly the out-of-pocket expenses incurred by the related parties for working purpose which are to be reimbursed by the Company.

All the above balances are due on demand, interest-free, unsecured and expected to be settled within one operating period.

Income tax

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

PRC Tax

The Company is subject to corporate income tax (“CIT”) at 25% for the nine months ended June 30, 2021 and 2020.

A reconciliation of the income tax benefit determined at the statutory income tax rate to the Company’s income taxes is as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE30, 2021

(In U.S. dollars)

Deferred tax assets

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and liability as of June 30, 2021 and September 30, 2020 are presented below:

Management believes that it is more likely than not that the Company will not realize these potential tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance was provided against the full amount of the potential tax benefits.

Taxes payable

Taxes payable consisted of the following: 

The Company participates in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond their monthly contributions. For the nine months ended June 30, 2021 and 2020, the Company contributed a total of $420,111 and $168,225, respectively, to these funds.

On July 30, 2021, Gushen, Inc., (“GSHN”) and Dyckmanst Limited, and all shareholders of Dyckmanst Limited immediately prior to the closing (collectively, the “ Dyckmanst Limited Shareholders”, each, a “Dyckmanst Limited Shareholder”) entered into a share exchange agreement (the “Share Exchange Agreement”), pursuant to which the GSHN acquired 100% of the issued and outstanding equity securities of Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) of GSHN (the “Share Exchange”). As a result, immediately following the closing of the Share Exchange, Dyckmanst Limited Shareholders collectively control 381,600,000 voting power of GSHN.