| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Preparation and Principles of Consolidation The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities Exchange Commission
(“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2024 and 2023 are
not necessarily indicative of the results that may be expected for the full year. The information included in this interim report should
be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial
statements and notes thereto included in Golden Sun’s annual financial statements for the fiscal year ended September 30, 2023
filed with the SEC on February 8, 2024. The
unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany
transactions and balances are eliminated upon consolidation. Emerging
Growth Company Status The
Company is an “emerging growth company,” as defined in Section2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further,
Section102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used. Non-controlling
interests Non-controlling
interest represents the portion of the net assets of subsidiaries attributable to interests that are not owned or controlled by the Company.
The non-controlling interest is presented in the consolidated balance sheets, separately from equity attributable to the shareholders
of the Company. Non-controlling interest’s operating results are presented on the face of the consolidated statements of income
and comprehensive income as an allocation of the total income for the year between non-controlling shareholders and the shareholders
of the Company. As of March 31, 2024 and September 30, 2023, non-controlling interests represented non-controlling shareholders’
proportionate share of the equity interests in Hongkou School, Xianjin Technology, Fuyouyuan and Shanghai Jinheyu. Uses
of estimates In
preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date
of the consolidated financial statements. Although these estimates are based on our knowledge of current events and actions we may undertake
in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment
in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result. Significant
estimates required to be made by management include, but are not limited to, determinations of the useful lives and valuation of long-lived
assets, valuation of inventories, estimates of allowances for doubtful accounts, contract assets, commission payables, refund liabilities,
revenue recognition, and valuation allowance for deferred tax assets. Cash and
cash equivalents Cash
and cash equivalents comprises cash at banks and on hand,
which is unrestricted as to withdrawal and use. Fair
value of financial instruments ASC
825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize
the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as
follows:
● Level
1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in
active markets.
● Level
2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets,
quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable
and inputs derived from or corroborated by observable market data.
● Level
3 — inputs to the valuation methodology are unobservable. Unless
otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, Accounts
receivable, prepayments and other current assets, accounts payable, deferred revenue, accrued liabilities, due to related parties,
short term bank loans and taxes payable, approximates their recorded values due to their short-term maturities. The Company
determined that the carrying value of the long-term liabilities approximated their present value as the interest rates applied
reflect the current quoted market yield for comparable financial instruments. Accounts
receivable, net Accounts
receivables are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company
determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. In June
2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and
not accounted for at fair value through net income. The Company adopted this guidance effective October 1, 2022.The Company establishes
a provision for doubtful receivables based on management’s best estimates of specific losses on individual exposures, as well as
a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding
charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written-off against
the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31,
2024, accounts receivable aging within 3 months amounted to $46,320, aging between 4 months to 6 months amounted to $133,602, aging between
7 months to 12 months amounted to $28,233, aging over one year amounted to $27,700. For the six months ended March 31, 2024 and 2023,
$12,729 and $13,901 was written off against accounts receivable, respectively. Allowance for uncollectible balances amounted to $13,606
and $13,465 as of March 31, 2024 and September 30, 2023, respectively. Inventories The
Company values its inventories at the lower of cost, determined on a first-in first out basis, or net realizable value. The Company reviews
its inventories periodically to determine if any markdown is necessary for potential obsolescence or if a write-down is necessary if
the carrying value exceeds net realizable value. There is no inventory write down was recorded for the
six months ended March 31, 2024 and 2023, respectively. All inventories are from Shanghai Jinheyu as of March 31, 2024. As of March 31,
2024 and September 30, 2023, inventories consisted of the following:
March 31, September 30,
Raw materials $ 119,535 $ 153,851
Finished goods 314,676 -
Inventories $ 434,211 $ 153,851 Prepayment
and other assets Prepayment
and other assets primarily consist of prepaid rents, prepaid service fee, advances to vendors for purchasing goods or services that have
not been received or provided, loans to third-parties, security deposits, advances to employees, and prepayment for acquisition. Prepayment
and other assets are classified as either current or non-current based on the terms of the respective agreements. These advances are
unsecured and are reviewed periodically to determine whether their carrying value has become impaired. The Company considers the assets
to be impaired if the collectability of the advance becomes doubtful. The Company uses the aging method to estimate the allowance for
uncollectible balances. The allowance is also based on management’s best estimate of specific losses on individual exposures, as
well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized may differ from management’s
estimate of credit worthiness and the economic environment. Other receivables are written off against the allowances only after exhaustive
collection efforts. For the six months ended March 31, 2024 and 2023, there was no written off against other receivables, respectively.
No allowance for doubtful accounts was recorded as of March 31, 2024 and September 30, 2023, respectively. Property
and equipment, net Property
and equipment are recorded at cost less accumulated depreciation. Depreciation is provided in the amounts sufficient to depreciate the
cost of the related assets over their useful lives using the straight-line method, as follows:
Useful life
Office Equipment 3-5 years
Leasehold Improvement 3-5 years Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures
for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated
statements of income and other comprehensive income in other income or expenses. Impairment
of long-lived assets Long-lived
assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions
that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life
is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the
carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and
their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets,
the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.
No impairment charge was recognized for the six months ended March 31, 2024 and 2023, respectively. Revenue
recognition The
Company generates revenues primarily from tuitions fees and other fees collected from services provided. Revenue is recognized when the
price is fixed or determinable, persuasive evidence of the arrangement exists, the service is performed or the product is delivered and
collectability of the resulting receivable is reasonably assured. The
Company has adopted ASC 606, “Revenue from Contracts with Customers” and all subsequent ASUs that modified ASC 606, using
the modified retrospective approach for the year ended September 30, 2019 and has elected to apply it retrospectively for the year ended
September 30, 2018. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue
and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity
to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects
to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. This new guidance
provides a five-step analysis in determining when and how revenue is recognized. Under the new guidance, revenue is recognized when a
customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity
expects to receive in exchange for those goods or services. In addition, the new guidance requires disclosure of the nature, amount,
timing and uncertainty of revenue and cash flows arising from contracts with customers. The
Company’s continuing operations currently generated its revenue from the following main sources: Tutorial
services The
Company offers various off-campus small-group foreign language tutoring programs. Each contract of tutorial service programs represents
a series of distinct services, which is delivery of various courses. The services have substantially the same pattern of transfer to
the students, as such, they are considered as a single performance obligation, which is satisfied proportionately based on a straight-line
basis over the program term as students simultaneously receive and consume the benefits of these services throughout the program term.
The Company is the principal in providing tutorial services as it controls such services before the services are transferred to the customer.
The program fees are generally collected in advance and are initially recorded as deferred revenue. Generally, the Company approves refunds
for any remaining classes to students who decide to withdraw from a course within the predetermined period in the contract. The refund
is equal to and limited to the amount related to the undelivered classes. The Company estimates and records refund liability for the
portion the Company does not expect to be entitled based on historical refund ratio on a portfolio basis using the expected value method. E-commerce
services The
Company provides promotional services to merchants on e-commerce platform and collects commissions on the sales of goods traded through
e-commerce platforms based on the commission rate specified in the contract. The company does not control the products sold on e-commerce
platforms. Revenue from commissions service is recognized at point in time. Commission income is recognized when customers purchase goods
through e-commerce platforms. Logistic,
consulting services and others The
Company provides services to schools, including but not limited to catering and logistic service. Logistic revenue is recognized on a
straight-line basis over the period, as customers simultaneously receive and consume the benefits of the services. Catering revenue is
recognized at point of sale. The
Company also provides consulting services to related-party kindergartens. According to the contracts signed with each of the three kindergartens,
the Company provides a range of educational management and consulting services, including branding, safety management, teacher training,
supervision and evaluation on teachers, rating guidance services, to the kindergartens during the contract periods. The intended contractual
benefit to the kindergartens of the management and consulting services is to enable the kindergartens’ smooth and effective operations.
The promised services in each of the consulting service contracts are combined and accounted as a single performance obligation, as the
promised services are considered as a significant integrated service. The consulting services are continuously provided and the kindergartens
simultaneously receive and consume the benefits of these services throughout the service period each month. The revenue is recognized
over time during the service period. The
Company designs and executes marketing activities for its customers and revenue is recognized at point in time when customer accepts
the services. In
the six months ended March 31, 2024, the Company started to sell consumables and recognizes revenue at a point in time when control of
the products is transferred to the customer. Practical
expedient The
Company has applied the new revenue standard requirements to a portfolio of contracts (or performance obligations) with similar characteristics
for transactions where it is expected that the effects on the financial statements of applying the revenue recognition guidance to the
portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that
portfolio. Therefore, the Company elects the portfolio approach in applying the new revenue guidance. Disaggregation
of revenue Revenues
from tutorial service and logistic and consulting services are recognized over time, based on a straight-line basis as the Company’s
customers including students and schools as well as kindergartens simultaneously receive the Company’s services throughout the
service periods. Revenues attributable to canteen foods and most educational materials are recognized at point in time when control of
the promised goods are transferred to the customers. As the Company’s long-lived assets are all located in Yangtze River Delta,
which is a triangle-shaped megalopolis comprising areas of Shanghai, southern Jiangsu province and northern Zhejiang province and substantially
all of the Company’s revenues are derived from this area, no geographical disaggregation is presented. For the six months ended
March 31, 2024 and 2023, the disaggregation of revenue by major revenue stream and time of the revenue recognition is as follows:
For the six months ended
2024 2023
Category of Revenue:
Tutorial services $ 3,428,931 $ 3,017,545
E-commerce services 4,458 -
Logistic, consulting services and others 274,547 509,053
Total $ 3,707,936 $ 3,526,598
For the six months ended
2024 2023
Timing of Revenue Recognition:
Services transferred over time $ 3,486,635 $ 3,317,594
Goods transferred at a point in time 221,301 209,004
Total $ 3,707,936 $ 3,526,598 Contract
assets In
accordance with ASC340-40-25-1, an entity shall recognize as an asset the incremental costs of obtaining a contract with a customer if
the entity expects to recover those costs. Entities sometimes incur costs to obtain a contract that otherwise would not have been incurred.
Entities also may incur costs to fulfill a contract before a good or service is provided to a customer. The revenue standard provides
guidance on costs to obtain and fulfill a contract that should be recognized as assets. Costs that are recognized as assets are amortized
over the period that the related goods or services transfer to the customer, and are periodically reviewed for impairment. Only incremental
costs should be recognized as assets. Incremental costs of obtaining a contract are those costs that the entity would not have incurred
if the contract had not been obtained. As
of March 31, 2024, in order to develop non-English foreign language tutorial service for middle school students, the Company incurred
total of approximately $2.6 million (RMB18.6 million) commission type fee and administration costs paid to agents and schools to facilitate
the related contracts with students for the tutorial service period, generally for 3 to 31 months tutorial service periods. The Company
will not incur such costs if the Company does not enter into the tutorial service contracts with the students, as a result, the cost
of approximately $2.6 million (RMB18.6 million) is considered as the incremental costs of obtaining contracts and shall be capitalized
and amortize over tutorial service period. For the six months ended March 31, 2024 and 2023, the Company amortized related amount of
$173,125 and $408,490 into selling expense, respectively. As of March 31, 2024 and September 30, 2023, the contract assets amounted to
$448,187 and $423,532, respectively. Contract
liability Contract
liabilities are presented as deferred revenue in the consolidated balance sheets, which mainly represents payment received from
students in advance of completion of performance obligations under a contract. The balance of deferred revenue is recognized as
revenue upon the completion of performance obligations. As of March 31, 2024 and September 30, 2023, the balance of deferred revenue
amounted to $2,751,584 and $3,988,699, respectively. Substantially all of which will be recognized as revenue during the
Company’s following fiscal year. Refund
liability Refund
liability mainly relates to the estimated refunds that are expected to be provided to students if they decide they no longer want to
take the courses. Refund liability estimates are based on historical refund ratio on a portfolio basis using the expected value method.
As of March 31, 2024 and September 30, 2023, refund liability amounted to $250,556 and $333,030, respectively. Cost
of revenues Cost
of revenues mainly consists of renumeration to instructors and tutors, rental expenses for office space and learning centers, canteen
foods and teaching materials used in the provision of educational services. Government
subsidies Government
subsidies are recognized when there is a reasonable assurance that the Company will comply with the conditions attach thereto and the
grant will be received. Government grant for the purpose of giving immediate financial support to the Company with no future related
costs or obligation is recognized in the Company’s consolidated statements of comprehensive income when received. For the six months
ended March 31, 2024 and 2023, the government subsidies income amounted to $278 and $860,079, respectively, and was included in other
income of the unaudited condensed consolidated statements of (loss) income and comprehensive (loss) income. Advertising
expenditures Advertising
expenditures are expensed as incurred for the periods presented. Advertising expenditures have been included as part of selling and marketing
expenses. For the six months ended March 31, 2024 and 2023, the advertising expenses amounted to $116,853 and $149,379, respectively. Operating
leases The
Company adopted Topic 842 on October 1, 2022 using the modified retrospective transition approach. The Company has operating lease contracts
for office space. The Company determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets
on its consolidated balance sheets at lease commencement. The Company measures its lease liabilities based on the present value of the
total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental
borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease
payments over the term of the lease. The Company estimates its incremental borrowing rate based on an analysis of weighted average interest
rate of its own bank loans. The Company measures right-of-use assets based on the corresponding lease liability adjusted for payments
made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing
lease expense when the lessor makes the underlying asset available to the Company. For
leases with lease term less than one year (short-term leases), the Company records operating lease expense in its consolidated statements
of operations on a straight-line basis over the lease term and record variable lease payments as incurred. Value
added tax (“VAT”) Revenue
represents the invoiced value of goods and services, net of VAT. The VAT is based on gross sales price and VAT rates range up to 13%,
depending on the type of products sold or service provided. Entities that are VAT general taxpayers are allowed to offset qualified input
VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable.
All of the VAT returns filed by the Company’s subsidiaries in the PRC remain subject to examination by the tax authorities for
five years from the date of filing. Income
taxes The
Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized
when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial
statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized. An
uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on
examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of March 31, 2024
and September 30, 2023, there are $2,806,694 and $2,639,258 respectively of unrecognized tax benefits included in income tax payable
that if recognized would impact the effective tax rate. Penalties and interest incurred related to underpayment of income tax are classified
as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred for the
six months ended March 31, 2024 and 2023, respectively. All of the tax returns of the Company’s subsidiaries in the PRC remain
subject to examination by the tax authorities for five years from the date of filing. Employee
benefits Full-time
employees of the Company in the PRC participate in a government-mandated employer contribution social insurance plan pursuant to which
certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to eligible
full-time employees. Chinese labor regulations require that the Company make contributions to the government for these benefits based
on government prescribed percentage of the employee’s salaries. The contributions to the plan are expensed as incurred. Obligations
for contributions to employer contribution social insurance plans are recognized as employee benefit expenses in the period during which
services are rendered by employees. (Loss)
earnings per share The
Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires
companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common share outstanding
for the period. Diluted EPS presents the dilutive effect on a per-share basis of the potential Ordinary Shares (e.g., convertible securities,
options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential
Ordinary Shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded
from the calculation of diluted EPS. Share-based
compensation The
Company follows the provisions of ASC 718, “Compensation - Stock Compensation,” which establishes the accounting for employee
and non-employee share-based awards. For employee share-based awards, share-based compensation cost is measured at the grant date based
on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period
for the entire award. Foreign
currency translation The
functional currencies of the Company are the local currency of the county in which the subsidiaries operate. The Company’s financial
statements are reported using U.S. Dollars. The results of operations and the consolidated statements of cash flows denominated in foreign
currencies are translated at the average rates of exchange during the reporting period. Assets and liabilities denominated in foreign
currencies at the balance sheet date are translated at the applicable rates of exchange in effect on that date. The equity denominated
in the functional currencies is translated at the historical rates of exchange at the time of capital contributions. Because cash flows
are translated based on the average translation rates, amounts related to assets and liabilities reported on the consolidated statements
of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments
arising from the use of different exchange rates from period to period are included as a separate component in accumulated other comprehensive
income included in consolidated statements of changes in equity. Gains and losses from foreign currency transactions are included in
the consolidated statement of income and comprehensive income. Since
the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (“RMB”). The Company’s
consolidated financial statements have been translated into the reporting currency of U.S. Dollars (“US$”). The RMB is not
freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in the translation. The
following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
For
the six months For
the six months September
30,
Balance
sheet items, except for equity accounts US$1=RMB7.2203 US$1=RMB6.8676 US$1=RMB7.2960
Items
in the statements of income and cash flows US$1=RMB7.2064 US$1=RMB6.9761 US$1=RMB7.0533 Comprehensive
(loss) income Comprehensive
(loss) income consists of two components, net (loss) income and other comprehensive (loss) income. Other comprehensive (loss) income
refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of shareholders’ equity but are excluded
from net (loss) income. Other comprehensive (loss) income consists of foreign currency translation adjustment resulting from the Company
not using US$ as its functional currency. Concentrations
of risks (a)
Concentration of credit risk Assets
that potentially subject the Company to a significant concentration of credit risk primarily consist of cash a |
