Gushen, Inc - Annual Report: 2021 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One) 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission file number 001-38474

Gushen, Inc.

(Exact name of registrant as specified in its charter)

Room 513, 5^th Floor, No. 5 Haying Road,

Fengtai District, Beijing, China

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: +8613949778662

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☒ No ☐

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $80,094,651.88. This value is calculated by reference to the closing price of $2.7601 as of March 31, 2021, the last trading day of the registrant’s most recently completed second quarter ended on March 31, 2021, and 29,018,750 shares of common stock outstanding (excluding 10,000,000 shares of preferred stock held by the controlling shareholder) as of March 31, 2021.

As of September 30, 2021, there were 410,618,750 shares of the registrant’s common stock outstanding and 10,000,000 shares of preferred stock understanding.

DOCUMENTS INCORPORATED BY REFERENCE

N/A

Table of Contents

PART I

Item 1. Business.

Overview

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

The Company was originally set up as a holding company operating through its wholly owned subsidiary, Gushen Holding Limited, to provide managerial and IT support to start-ups as well as SME (small and medium enterprises) in Hong Kong and Malaysia to assist them in their early stages of operations as they expand and grow their own company. On August 5, 2016, the Company acquired a Hong Kong company, Gushen Credit Limited, with a money lender license registered according to Cap163 Money Lenders Ordinance of Hong Kong. Due to the keen competition and high rental expense in Hong Kong, on April 27, 2017, the Company decided to dispose of the asset for a consideration of $105,000 and ceased the business in Hong Kong. Thereafter, the Company did not open for business or generate any revenue from November 2017 to March 2020, making it dormant.

On March 27, 2020, as a result of a custodianship in Clark County, Nevada, Custodian Ventures, LLC was appointed custodian of Gushen Inc. David Lazar, a private investor and managing member of Custodian Ventures, LLC (together with David Lazar, the “Custodian”), was appointed as the Company’s Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer and Chairman of the Board of Directors. The Custodian was tasked to solicit investment on behalf of the Company.

On December 9, 2020, the Company, Custodian, and certain investors (“Purchasers”) entered into a Stock Purchase Agreement (the “SPA”), pursuant to which the Purchasers acquired 30 million shares of Series A preferred stock (the “Preferred A Shares”), each convertible into 10 shares of Common Stock, from Custodian for an aggregate purchase price of $525,000. In connection with the SPA, the Company, Custodian, and Gushen Holding Limited entered into a spin-off agreement, pursuant to which the Custodian acquired all issued and outstanding stock of Gushen Holdings Limited at a minimal purchase price of $1. Thereafter, the Company no longer retains any interest in Gushen Holding Limited.

On July 30, 2021, the Company and Dyckmanst Limited, a British Virgin Islands company (“Dyckmanst Limited”), and all shareholders of Dyckmanst Limited entered into a share exchange agreement (the “Share Exchange Agreement”), 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, shareholders of Dyckmanst Limited 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.

As a result of the Share exchange, the Company assumes the business of Dyckmanst Limited. Through certain overseas subsidiaries and contractual arrangements, the Company is able to consolidate the financial results of Beijing Zhuoxin Education Technology Co., Ltd. (“Zhuoxun Beijing”) and its subsidiaries in accordance with US GAAP as the primary beneficiary. Zhuoxun Beijing is a PRC company that provides family education resources to promote all-around education onsite in local communities organized by our regional collaborative education agency and offer parents easy access to a wide variety of courses online through our application. 

The foregoing summary of the Share Exchange Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Share Exchange Agreement, which were filed as Exhibit 2.1 to the Form 8-K/A filed on August 6, 2021.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.

In assessing the Company’s liquidity, the Company monitors and analyzes its cash and cash equivalents and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. As of September 30, 2021, the Company’s current liabilities exceeded the current assets by $5,373,363, its accumulated deficit was $423,276 and the Company has incurred losses during the fiscal year ended September 30, 2021 and 2020. None of the Company’s stockholders, officers or directors, or third parties, are under any obligation to advance us funds, or to invest in us. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.

These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Organizational Structure

The Company is a holding company organized in Nevada in March 2015. As of the date of this annual report, the Company has the following wholly owned subsidiaries: (i) Dyckmanst Limited, an entity formed under the laws of British Virgin Islands, (ii) Edeshler Limited (“Edeshler Limited”), an entity formed under the laws of Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong” or “HK”) and a wholly owned subsidiary of Edeshler Limited, (iii) Beijing Fengyuan Zhihui Education Technology Co., Ltd. (“Fengyuan Beijing”), an entity formed under the laws of People’s Republic of China (“PRC”) as a wholly foreign owned enterprise and a wholly owned subsidiary of Edescher Limited.

In addition, Fengyuan Beijing has entered into a series of contractual arrangement (the “VIE Agreements”) with Zhuoxun Beijing, which is commonly known a variable interest entity (“VIE”), an entity formed under the laws of PRC, pursuant to which Fengyuan Beijing and the Company are able to consolidate the financial results of Zhuoxun Beijing and its subsidiaries in accordance with US GAAP as the primary beneficiary. The VIE Agreements executed in February 2021 include (i) a Consulting Service Agreement, (ii) a Busieness Operation Agreement, (iii) a Proxy Agreement, (iv) an Equity Disposal Agreement and (v) an Equity Pledge Agreement. Although Fengyuan Beijing does not own the equity interests of Zhuoxun Beijing, Mr. Yulong Yi (“Mr. Yi”), our chairman, chief executive officer, president, treasurer, and a significant stockholder, is also a director of Zhuoxun Beijing and controls all decision-making for Zhuoxun Beijing along with our other significant stockholder, Mr. Shaowei Peng (“Mr. Peng”), who has the ability to control Zhuoxun Beijing’s technology matters. In addition, Zhuoxun Beijing’s equity at risk is not sufficient to permit it to operate without additional subordinated financial support from Mr. Yi.

This chart reflects our organizational structure as of September 30, 2021:

Edeshler Limited was established in Hong Kong on January 9, 2019 and operates as a holding company for our shares in Fengyuan Beijing.

Fengyuan Beijing was established in PRC on June 16, 2019 and operates as our onshore holding company in PRC and a party to the VIE Agreements.

Zhuoxun Beijing was established in PRC on August 22, 2013 and operates as the VIE under the VIE Agreements. Zhuoxun Beijing provides family education resources to promote all-around education onsite in local communities organized by our regional collaborative education agency and offer parents easy access to a wide variety of courses online through our application. 

Beijing Zhuoxin Education Technology Co., Ltd. (Zhuoxin Beijing) was established in PRC on December 24, 2020. Zhuoxun Beijing owns 70% of equity interests in Zhuoxin Beijing, with the remaining 30% belonging to Guoxinzhengye Company Management Co., Ltd., a subsidiary of CITIC Group Corporation Ltd., a major PRC state-owned investment company. Zhuoxin Beijing is primarily engaged in establishing facilities to, among the others, provide family education consulting services, sell and rent book, organize book clubs, and sell educational electronic devices.

Business Model

Zhuoxun Beijing and its subsidiaries, or collectively as Zhuoxun Beijing, provide family education resources to promote all-around education onsite in local communities organized by their regional collaborative education agency and offer parents easy access to a wide variety of courses online through our application.

Zhuoxun Beijing delivers onsite educational services through its nationwide physical network of regional collaborative education agency. Its onsite educational services include programs such as individual development, youth leadership development, and parenting schools, enabling in-person guidance and interactions in classes. It has developed long-term business relationships with around 18 regional education agencies around the country, for whom it provide systematic training and management to ensure to deliver high-quality and uniformed educational service system.

Zhuoxun Beijing provides online education through its mobile application, “Wisdom Lighthouse” App (Formerly known as “Zhuoxun APP”), which is geared towards Chinese parents designed to help them acquire different family education resources. Its products provide two sets of curricula: “Good Parenting” (“教子有方”) and “Wise Parents” (“智慧父母”). “Good Parenting”, focused on child development, provides courses including EQ training, learning habits, learning ability, parents-children communication, stages of puberty, etc. to promote children’s mental and psychological health. “Wise Parents” introduces general strategies of family education to parents to help them better understand and support children’s growth and needs, whereby courses such as traditional family values, improvement of parents’ qualifications, psychological analysis are provided. Through its mobile application, Zhuoxun Beijing’s users can, based on their own interest and needs, select courses that suitable for them and obtain valuable knowledge and skills provided by our courses. Our users on mobile platform can use iPhone, Android, iPad and other tablets to review the courses anywhere and anytime.

Zhuoxun Beijing’s online family education mobile platform monetizes through in-app purchases. Its provides one free trial class of each course for all the users. The remaining classes are available for purchase. Users are able to view the first class for free before determining if to purchase the remaining classes.

Its product Zhuoxun Anti-Addiction Cellphone (“Zhuoxun Cellphone”) is an intelligent terminal device. It cooperates with Dami Zhilian Information Technology Group Co., Ltd, a technology company that develops and produces smartphones (“Dami Zhilian”). Zhuoxun Beijing give its design requirements to Dami Zhilian, who customizes and produces Zhuoxun Cellphone for Zhuoxun Beijing. It does not own any intellectual property in connection with Zhuoxun Cellphones. It sells Zhuoxun Cellphones through regional collaborative education agency. Zhuoxun Cellphone has primarily four functions including anti-addiction, myopia prevention, security, and study assistance, for the purpose of managing elementary and middle school students. Parents are able to personalize and monitor children’s use of Zhuoxun Cellphone by setting screen auto-lock, monitoring internet surfing, monitoring mobile application usage, monitoring physical locations, etc.

Industry Focus

Zhuoxun Beijing’s primary business is in the family education industry, integrated with online and onsite classes, which it believes fulfills increasing needs for parents to enhance their family education. In China, many educational companies for students aged from 3 to 16 years old currently offer K-12 education and interest classes, emphasizing on helping students on their K-12 school study or providing professional courses to develop students’ after-class interest. Its family educational services offer well-designed courses for both parents and students, focusing on children’s all-around development and parenting methods, with a goal to enable effective and efficient communications among children and parents, to promote science-based parenting methods, and to assist with children’s full skill growth.

Family education industry in China is still at early stage, though it has experienced significant growth in recent years. The Chinese government issued the Guiding Opinions of on Strengthening Family Education in 2015, which proposes to continuously strengthen the work of family education, further clarifies the main responsibilities of parents in family education, stresses schools’ important role in family education, and accelerates the formation of a social support network for family education. The Chinese government has pledged greater support and guidance. According to the Five-Year Outline on the Promotion of Family Education (2016-2020) released in November 2016, “parent schools” will be established in 90 percent of kindergartens, primary and middle schools in cities, and in 80 percent of rural schools by 2020. Meanwhile, with the increasing income of the Chinese families, According to Frost & Sullivan, the education industry is expected to value approximately RMB 11 trillion by 2024. Additionally, the non-degree education industry income in China was approximately RMB 1.72 trillion in 2018 and is expected to increase to RMB 3.57 trillion at a compound growth rate of 10% by 2024. Further, the online education industry in China is expected to value approximately RMB 843.5 billion by 2024 at a compound growth rate of 34.4% by 2024 since 2018.

Zhuxun Beijing provides online family education through onsite educational activities and mobile application.

Product Offering

Onsite Educational Activities

Zhuoxun Beijing delivers onsite educational services to both parents and children. It has developed long term collaboration relationships with 18 regional collaborative education agencies, who are responsible for organizing, management and logistics while we provide classes. As of the date hereof, it has onsite educational activities in 30 cities, including but not limited to, Luoyang, Hohhot, Luohe, Yinchuan, Changde, Ruzhou, Xinxiang, Zhoukou, Sanmenxia, Lingbao, Zhengzhou and Chengdu.

From March 2019 to April 2019, it, together with another educational service provider, Beijing Kuaile Maitian Information Technology Co., Ltd., launched a short-term project, “China Good Student Project” in five cities in China, to improve the English ability of children aged around 10 years old by providing a series of English interactive games.

Zhuoxun Beijing’s onsite educational services include individual development, youth leadership development programs, and parenting schools, where parents and students are able to receive in-person guidance and enjoy interactions in classes.

Wisdom Lighthouse (“智慧灯塔”) Application (Formerly known as “ZhuoXun App”)

Zhuoxun Beijing’s online family educational services offer parents a convenient platform to access to courses. Users of its mobile applications are encouraged to become registered members. A registered member can, among others, track their study records, participate in discussion in the designated sections and post their study takeaways. It offers first class for each course for free. After taking first class, users can decide whether to purchase the whole course. As of September 30, 2021, it had around [34] thousand high frequency users in Widsom Lighthouse App.

Courses available through Widsom Lighthouse App include but are not limited to the followings:

“Good Parenting” (“教子有方”). Zhuoxun Beijing provides courses by age in four groups: 3 to 6 years old, 7 to 9 years old, 10 to 12 years old, and 13 to 16 years old. The courses are designed based on the difference in child development and behaviors between different aged groups, providing courses including EQ training, learning habits, learning ability, communication between children and parents, stages of puberty, etc.

“Wise Parents” (“智慧父母”). Under Wise Parents, there are mainly four types of courses: Classics of Chinese Studies, Occupation Promotion, Family Culture and Value, and Psychological Analysis. It introduces general strategies of family education for parents to understand and analyze children’s growth and maturing regularity.

Live classes. Zhuoxun Beijing frequently holds live classes presented by professionals, experts, or lecturers from different industries on different topics. During the live classes, users are able to actively interact with the speakers and discuss with other viewers.

“Life Wisdom Bank”. It is divided into self-improvement, excellent team and business, finance to provide additional auxiliary methods for parents’ growth, help parents become learning parents, and improve parents’ cultivation and life and work skills.

Sales and Marketing

Zhuoxun Beijing engages in a variety of marketing activities, integrating onsite and online methods, intended to introduce its products and services to prospective users. For onsite marketing, it (i) primarily works with regional education agencies in different areas where the regional education agencies are responsible for organizing, management, promotion and logistics and it is responsible for providing courses; (ii) promote family education by conferences, salons, lectures, free classes to raise people’s awareness of the significance of family education and promote its services; and (iii) benefit from its current users’ referrals by ensuring their use experience. For online marketing, Zhuoxun Beijing holds live broadcasting and carry out promotion events. It also holds various online community marketing activities on WeChat, a Chinese multi-purpose messaging and social media application to attract new users. It has held activities such as “VIP Membership Experience”, “Invite New Users to Get Your Rewards”, “Happy Spring Festival”, and “Large Turntable” and exchange of course points for in-kind prizes.

It has built up long-term business relationships with regional education agencies in different cities. As of September 30, 2021, we have engaged with 18 service providers, 5 of which have worked with us for more than 3 years. These agencies are widely distributed in different regions of China, including Provinces of Henan, Sichuan, Hunan and Ningxia.

Zhuoxun Beijing formulates marketing strategies, introduce teachers and lecturers, and provide systematic training to regional education agencies. Regional education agencies, strictly pursuant to its guidance, conduct marketing to sign up new customers, organize educational activities, and provide customer services before, during, and after classes, so as to ensure the high-quality of our educational services. All the activities conducted by the regional education agencies are using Zhuoxun Beijing’s logo and visual identity system to create its brand influence.

Customer Base

The main customers of Zhuoxun Beijing’s family educational services are its registered users who are parents interested in learning more about marriage, parent-child relationships, children’s habit formation, and children’s healthy growth. The majority of the customers have income at the middle to upper level in their local regions and are willing to invest in self-improvement and family education.

As of September 30, 2021, Wisdom Lighthouse App has about 34,000high frequency users.

Technology

Zhuoxun Beijing’s internal product teams are focused on the development and maintenance of product in addition to building and managing our software and hardware infrastructure. It intends to continue investing in the development of new products, such as mobile applications, and enhancing the efficiency and functionality of its existing products and infrastructure.

In addition to building and managing our software and hardware infrastructure, the product team also focuses on product development and maintenance. Zhuoxun Beijing intends to invest in the development of new products, such as course selection options, which helps students to find courses, assists institutions to recruit students and facilitates transactions between students and institutions by creating a fair and transparent localized third-party matching trading platform. Course selection is also beneficial to provide more choices and solutions for our diversified family education services. It also improves the efficiency and function of existing products and infrastructure.

Intellectual Property

Zhuoxun Beijing has registered the following intellectual property under the name of Zhuoxun Beijing:

Copyrights: In China, the term of copyrights related to published software is from the date of the publishing to December 31 of the 50th year of the publishing.

Trademarks: In China, the term of a registered trademark is 10 years. The owner can apply extension with the trademark office within six months before or after the expiration. The review process of a trademark application usually takes about one year in China.

Trademarks	Registered Area	Trademark Number	Category Description	Term	Registering Authority
	China	37832169	Category 9	2020/4/7-2030/4/6	Trademark Office of The State Administration for Industry & Commerce of the People’s Republic of China (the “Trademark Office”)
	China	37818362	Category 16	2020/5/28-2030/5/27	Trademark Office
	China	37819610	Category 35	2020/4/14-2030/4/13	Trademark Office
	China	47571347	Category 9	2021/3/7-2031/3/6	Trademark Office
	China	47549318	Category 16	2021/3/7-2031/3/6	Trademark Office
	China	47554839	Category 35	2021/3/7-2031/3/6	Trademark Office
	China	47571429	Category 41	2021/3/7-2031/3/6	Trademark Office
	China	38881941	Category 9	2020/8/28-2030/8/27	Trademark Office
	China	38871734	Category 16	2020/6/21-2030/6/20	Trademark Office
	China	38892456	Category 41	2020/8/28-2030/8/27	Trademark Office
	China	36092361	Category 9	2019/9/21-2029/9/20	Trademark Office
	China	32139796	Category 35	2019/12/14-2029/12/13	Trademark Office
	China	32830528	Category 41	2020/4/14-2030/4/13	Trademark Office
	China	18990205	Category 42	2017/2/28-2027/2/27	Trademark Office
	China	32138964	Category 9	2019/12/14-2029/12/13	Trademark Office
	China	37816447	Category 9	2019/12/14-2029/12/13	Trademark Office
	China	37806792	Category 16	2019/12/21-2029/12/20	Trademark Office
	China	37823110	Category 35	2019/12/21-2029/12/20	Trademark Office
	China	37819581	Category 41	2019/12/14-2029/12/13	Trademark Office
	China	37811174	Category 9	2019/12/28-2029/12/27	Trademark Office
	China	37832156	Category 16	2019/12/28-2029/12/27	Trademark Office
	China	37816846A	Category 35	2020/2/7-2030/2/6	Trademark Office
	China	37832166	Category 41	2020/1/14-2030/1/13	Trademark Office
	China	45269917	Category 9	2020/12/21-2030/12/20	Trademark Office
	China	45248201	Category 41	2020/12/21-2030/12/20	Trademark Office
	China	45373919	Category 9	2020/11/28-2030/11/27	Trademark Office
					Trademark Office
	China	45382746	Category 41	2020/11/28-2030/11/27	Trademark Office

Domains: In China, the registration of domains can be extended by annual renewal or periodic renewal by paying the annual or periodic registration fee. If renewal registration fee is not paid timely, the domain will become available to the public. Zhuoxun Beijing has effectively maintained the following domains:

Competition

Zhuoxun Beijing operates in a highly competitive environment. It believes the primary competitive factors in providing family educational services are high-quality, systemization, reputation, recognized lecturers, and accessibility. Family education industry is still at the early stage in China, where Zhuoxun Beijing believes there is no dominating company yet. Zhuoxun Beijing competes with a number of large and small companies, including integrated online virtue education platforms and onsite educational service companies.

Zhuoxun Beijing believes its ability to compete depends upon many factors both within and beyond its control, including the following:

Government Regulations

Zhuoxun Beijing’s business is regulated by diverse and evolving laws and governmental authorities in China. It is subject to laws and regulations related to Internet communications, privacy, consumer protection, security and data protection, intellectual property rights, commerce, taxation, entertainment, recruiting and advertising. These laws and regulations are becoming more prevalent, and new laws and regulations are under consideration by the Chinese governments. Any failure by it to comply with existing laws and regulations may subject it to liabilities. New laws and regulations governing such matters could be enacted or amendments may be made to existing regulations at any time that could adversely impact our services. Plus, legal uncertainties surrounding Chinese government regulations could increase Zhuoxun Beijing’s costs of doing business, require it to revise its services, prevent it from delivering its services over the Internet or slow the growth of the Internet, any of which could materially adversely affect its business, financial condition and results of operations.

Item 1A. Risk Factors.

The following are factors that could have a significant impact on our operations and financial results and could cause actual results or outcomes to differ materially from those discussed in any forward-looking statements.

Risks Related to Our Business and Our Industry

Our onsite business could be affected by the spread of COVID-19.

If there is new COVID-19 cases discovered inside the mainland border, the PRC government would impose strict regulations about social distancing or prohibitions on social gatherings, making it very hard for us to develop offline meetings and courses.

However, on the other hand, this could be a good opportunity for our online educational services. Because students are not allowed to go to school while there are still new cases of COVID-19, they have more time to study at home. Thus, there is a bigger possibility that they will use Zhuoxun Beijing’s online courses and other online educational services.

China’s regulatory requirements or changes in off-campus training institutions may affect our business operations and prospects.

In May 2021, the 19th meeting of the Central Committee for Comprehensive Promotion of Reform has reviewed the Opinions on Further Reducing the Burden of Homework and Off-campus Training for Students in Compulsory Education, which emphasized to promote the implementation of “Double Reduction” work for education authorities. Additionally, some other regulations in relation to reducing the burden of off-campus training for children and enhancement of management of off-campus training institutions that serve primary and secondary school students have been circulated earlier.  On June 15, 2021, the Department of Off-campus Education and Training Supervision under the Ministry of Education was established. According to the introduction on the official website of Ministry of Education, the Department of Off-campus Education and Training Supervision is responsible for off-campus education and training management for primary and middle school students (including kindergarten children). It also formulates norms and management policies of off-campus education and training, organize and implement the comprehensive management of off-campus education and training, and guide the comprehensive law enforcement of off-campus education and training.

In July 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council formally issued the Double Reduction Opinions. According to the Double Reduction Opinions, regulatory authorities will fully regulate off-campus training behavior. The Double Reduction Opinions clarified some administrative measures. One is to insist on strict approval of institutions, the second is to prohibit capitalization operations, the third is to establish a training content filing and supervision system, the fourth is to strictly control the opening hours of discipline training institutions, and the fifth is to incorporate subject fees into government guidance prices. In response to new situations and new problems in the management of off-campus training institutions, the administration may further improve relevant laws, regulations and systems. For non-disciplinary training institutions, the Double Reduction Opinions require all regions to distinguish their types as sports, culture and art, science and technology, etc., and clarify the corresponding competent departments to set standards and strictly approve. The General Office of the Ministry of Education issued a notice later, which further clarifies the subject and non-disciplinary scope of off-campus training during the compulsory education stage. Apart from what have been clarified in the Double Reduction Opinions, there also remains uncertainty as to, among others, what strict measures would be imposed on off-campus training institutions, how these regulations would be interpreted and implemented, and whether they would apply to our current business. If we are required to be in compliance with those stricter regulatory requirements, we may not be able to meet such regulatory requirements in a timely manner or at all, additional costs, adverse operational or financial impacts on our business may incur when meeting these requirements, and, which may adversely affect our business, financial condition and operating results.

We are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations.

We are subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. These laws apply not only to third-party transactions, but also to transfers of information between us, our WFOE (Fengyuan Beijing), the VIE (Zhouxun Beijing), and the VIE’s subsidiary, and among us, our WFOE, our VIE, and our VIE’s subsidiary, and other parties with which we have commercial relations with. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.

Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China, or the CAC. Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. On July 10, 2021, the CAC publicly issued the Measures for Cybersecurity Censorship (Revised Draft for Comments) aiming to, upon its enactment, replace the existing Measures for Cybersecurity Censorship. The draft measures extend the scope of cybersecurity reviews to data processing operators engaging in data processing activities that affect or may affect national security, including listing in a foreign country. If the enacted version of the draft measures mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all. Zhuoxun Beijing offers a mobile application in China, and it could be subject to cybersecurity review in the future. During such review, it may be required to suspend new user registration in China and experience other disruptions to its operations. Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial resources.

Furthermore, if we or Zhuoxun Beijing were found to be in violation of applicable laws and regulations in China during such review, we or Zhuoxun Beijing could be subject to administrative penalties, such as warnings, fines, or service suspension. Therefore, cybersecurity review could materially and adversely affect our or or Zhuoxun Beijing’s business, financial condition, and results of operations.

In addition, the PRC Data Security Law, which was promulgated by the Standing Committee of the National People’s Congress on June 10, 2021 and took effect on September 1, 2021, requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for data security. As the Data Security Law was recently promulgated and has not yet taken effect, we may be required to make further adjustments to our business practices to comply with this law. After the Data Security Law takes effect, if our or or Zhuoxun Beijing’s data processing activities were found to be not in compliance with this law, we or Zhuoxun Beijing could be ordered to make corrections, and under certain serious circumstances, such as severe data divulgence, we or or Zhuoxun Beijing could be subject to penalties, including the revocation of our business licenses or other permits. As there remain uncertainties regarding the further interpretation and implementation of those laws and regulations, we cannot assure you that we or Zhuoxun Beijing will be compliant such new regulations in all respects, and we or Zhuoxun Beijing may be ordered to rectify and terminate any actions that are deemed illegal by the regulatory authorities and become subject to fines and other sanctions. As a result, Zhuoxun Beijing may be required to suspend relevant businesses, shut down website, take down operating applications, or face other penalties, which may materially and adversely affect our or Zhuoxun Beijing’s business, financial condition, and results of operations.

Recently, there has been an increasing focus on ensuring that mobile apps comply with privacy regulations. The Announcement of Launching Special Crackdown Against Illegal Collection and Use of Personal Information by Mobile Apps was issued with effect on January 23, 2019 and commenced coordinated efforts among the CAC, the PRC Ministry of Industry and Information Technology, or the MIIT, the PRC Ministry of Public Security, and the SAMR to combat the illegal collection and use of personal information by mobile apps throughout China. On October 31, 2019, the MIIT issued the Notice on the Special Rectification of Mobile Apps Infringing Users’ Rights and Interests, pursuant to which application providers were required to promptly rectify issues that the MIIT designated as infringing application users’ rights such as collecting personal information in violation of PRC regulations and setting obstacles for user account deactivation. In July 2020, the MIIT issued the Notice on Conducting Special Rectification Actions in Depth Against the Infringement upon Users’ Rights and Interests by Applications, to rectify the following issues: (i) illegal collection and use of personal information of users by an application and a software development kit, (ii) setting up obstacles and frequently harassing users, (iii) cheating and misleading users, and (iv) inadequate implementation of application distribution platforms’ responsibilities. Pursuant to the notice, by the end of August 2020, the management system for the national application technical testing platform will be put into use, and by December 10, 2020, the testing of 400,000 mainstream applications must be completed. If any of our mobile apps are not in compliance with these regulations, we could be subject to penalties, including revocation of our business licenses and permits.

Zhuoxun Beijing has not been subject to any penalties from the competent governmental authorities for its collection or storage of data. Any failure to comply with applicable cybersecurity, privacy, and data protection laws and regulations could result in proceedings against us or Zhuoxun Beijing by government authorities or others, including notification for rectification, confiscation of illegal earnings, fines, or other penalties and legal liabilities against us, which could materially and adversely affect our business, financial condition, and results of operations. In addition, compliance with the current and future strict legal requirements could be expensive, and may place restrictions on our or Zhuoxun Beijing’s business operations and the manner in which or Zhuoxun Beijing interacts with its users. Any negative publicity on or Zhuoxun Beijing’s mobile application’s safety or privacy protection mechanism and policy could harm our public image and reputation and materially and adversely affect our or Zhuoxun Beijing’s business, financial condition, and results of operations.

RISKS RELATING TO OUR CORPORATE STRUCTURE

If the PRC government finds that the contractual arrangement that establishes our corporate structure for operating our business does not comply with applicable PRC laws and regulations, we could be subject to severe penalties.

Foreign ownership in entities that provision of value-added telecommunication services, with a few exceptions, is subject to restrictions under current PRC laws and regulations. Specifically, foreign ownership of an internet information service provider may not exceed 50%, and the major foreign investor is required to have a record of good performance and operating experience in managing value-added telecommunications business. Furthermore, Radio and TV program production also fall within prohibited industries for foreign investors according to PRC laws and regulations.

The Company and its non-PRC subsidiaries are foreign enterprises and Fengyuan Beijing is a wholly owned foreign enterprise (“WFOE”) under PRC law, and therefore cannot receive a license to provide internet information service or engage in Radio or TV program production in China. To comply with PRC laws and regulations, we, through Fengyuan Beijing, entered into a series of VIE Agreements with the VIE, Zhuoxun Beijing, and its subsidiaries, who engages in such activities in China. 

If our or Zhuoxun Beijing’s ownership structure and contractual arrangements are found to be in violation of any PRC laws or regulations, or if we or Zhuoxun Beijing are found to be required but failed to obtain any of the permits or approvals for our mobile apps development business, the relevant PRC regulatory authorities, including, among others, the Cyberspace Administration of China or the CAC, which regulates the mobile app service industry in China, Ministry of Commerce of PRC, or the MOFCOM, which regulates the foreign investment in China would have broad discretion in imposing fines or punishments upon us for such violations against us or Zhuoxun Beijing, including revocation of licenses, confiscation, blocking of websites or apps, blocking of transactions, imposition of fines and penalties, revocation of preferential tax treatment, requiring restructuring and restrictions on use of proceeds.

As of the date hereof, similar ownership structure and contractual arrangements have been used by many China-based companies listed overseas, including a number of internet companies listed in the United States. To our knowledge, none of the fines or punishments listed above has been imposed on any of these public companies. However, we cannot assure you that such fines or punishments will not be imposed on us or any other companies in the future. If any of the above fines or punishments is imposed on us, our business, financial condition and results of operations could be materially and adversely affected.

We rely on contractual arrangements with Zhuoxun Beijing and its shareholders for our operations in China, which may not be as effective in providing control as direct ownership.

We have relied and expect to continue to rely on the contractual arrangements with Zhuoxun Beijing and its shareholders to receive financial benefits from the operations of Zhuoxun Beijing. However, these contractual arrangements may not be as effective as direct equity ownership in providing us with control over Zhuoxun Beijing. Any failure by our affiliated entities, Zhuoxun Beijing and the shareholders of Zhuoxun Beijing, to perform their obligations under the contractual arrangements would have a material adverse effect on the consolidated financial position and consolidated financial performance of our company. 

If the imposition of government actions causes us to lose our right to receive substantially all the economic benefits and residual returns from our affiliated entities and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of our affiliated entities.

The VIE or the holding company may be subject to approval or other requirement from PRC authorities in connection with this offering, and, if required, we cannot assure you that we will be able to obtain such approval or satisfy such requirement. If we failed to obtain such approval or satisfy such requirement, we may not be able to continue listing on U.S. exchange, continue to offer securities to investors, or materially affect the interest of the investors and the value of our Class A Ordinary Shares may decrease or become worthless.

We also face risks relating to our corporate structure. Investors in our common shares are not purchasing equity interests in the VIE domiciled in China or in our PRC subsidiaries but instead are purchasing equity interests in a Nevada holding company. You may never directly hold equity interests in Fengyuan Beijing or Zhuoxun Beijing. If the PRC government deems that our contractual arrangements with Zhuoxun Beijing do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. PRC regulatory authorities could disallow this structure, which would materially adversely affect our operations and the value of our common shares, and could cause the value of such securities to significantly decline or become worthless.

Because we rely on the VIE Arrangements for our revenue, the termination of these agreements would severely and detrimentally affect our continuing business viability under our current corporate structure.

We are a holding company and are the primary financial beneficiary of the VIE, Zhuoxun Beijing. Zhuoxun Beijing may terminate the VIE Arrangements for any or no reason at all. Because neither we, nor our subsidiaries, own equity interests of Zhuoxun Beijing, the termination of the VIE Arrangements would sever our ability to receive payments from Zhuoxun Beijing under our current holding company structure. While we are currently not aware of any event or reason that may cause the VIE Arrangements to terminate, we cannot assure you that such an event or reason will not occur in the future. In the event that the VIE Arrangements are terminated, this would have a severe and detrimental effect on our continuing business viability under our current corporate structure, which, in turn, may affect the value of your investment.

Our current corporate structure and business operations may be affected by the newly enacted Foreign Investment Law.

On March 15, 2019, the NPC approved the Foreign Investment Law, which took effect on January 1, 2020. Since it is relatively new, uncertainties exist in relation to its interpretation and implementation. The Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled through VIE Arrangements would be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under definition of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws, administrative regulations or the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for VIE Arrangements as a form of foreign investment. Therefore, there can be no assurance that our arrangement with the VIE through VIE Arrangements will not be deemed as foreign investment in the future.

The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited” from foreign investment in the Special Administrative Measures (Negative List) for Foreign Investment Access that was jointly promulgated by MOFCOM and the NDRC and took effect in July 2020. The Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities. If the VIE Arrangements are deemed as foreign investment in the future, and any business of our consolidated VIE is “restricted” or “prohibited” from foreign investment under the “negative list” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, the VIE Arrangements that allow us to receive financial benefits from the VIE may be deemed as invalid and illegal, and we may be required to unwind such VIE Arrangements and/or restructure our business operations, any of which may have a material adverse effect on our business operation.

RISKS RELATING TO DOING BUSINESS IN CHINA

Changes in the PRC’s political, economic or social conditions or government policies may have an adverse impact on our business and operations.

Substantially all of Zhuoxun Beijing and its subsidiaries’ assets and operations are located in China. Accordingly, its business, financial condition, results of operations and prospects may be influenced to a significant degree by economic, political and social conditions in China generally.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the political, economic and governmental policies and measures of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect Zhuoxun Beijing’s business and operating results, lead to reduction in demand for its services and adversely affect its competitive position. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on Zhuoxun Beijing. For example, its financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.

The PRC legal system is based on written laws and statutes. Previous court decisions are encouraged to be used for reference but it remains unclear to what extent the prior court decision may impact the current court ruling as the encouragement policy is new and there is limited judicial practice in this regard. Since 1979, the PRC government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, as the PRC legal system continues to evolve rapidly, the interpretation and enforcement of these laws, regulations and rules involves significant uncertainty and different degrees of inconsistency. In addition, the PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, Zhuoxun Beijing may not be aware of its violation of any of these policies and rules until sometime after the violation. Such unpredictability towards its contractual, property (including intellectual property) and procedural rights could adversely affect its business and impede its ability to continue operations. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

Various legislative and regulatory developments related to U.S.-listed China-based companies due to lack of PCAOB inspection and other developments due to political tensions between the United States and China may have a material adverse impact on our listing and trading in the U.S. and the trading prices of our shares.

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. On December 2, 2021, the SEC finalized rules implementing the submission and disclosure requirements in the HFCAAct. The HFCA Act states that if the SEC determines that an issuer’s audit reports issued by a registered public accounting firm have not been subject to inspection by the PCAOB for two consecutive years beginning in 2021, the SEC shall prohibit such issuer’s securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States. As of now, we believe our auditor is subject to PCAOB inspection, however, if in the future, for any reason, our auditor fails to deliver its workpaper located in China to PCAOB or PCAOB is unable to conduction inspection without the approval of the PRC authorities, our common stock may be delisted from a national securities exchange in the U.S or de-registered from the over-the-counter market pursuant to the HFCA Act.

In addition, political tensions between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive orders issued by U.S. President Donald J. Trump in August 2020 that prohibit certain transactions with certain Chinese companies and their applications. Rising political tensions could reduce levels of trades, investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations. Furthermore, there have been recent media reports on deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. If any such deliberations were to materialize, the resulting legislation may have material and adverse impact on the stock performance of China-based issuers listed in the United States.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

All land in China is owned by the State. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a certain period no more than 50 years. This period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations. We do not own or have not been granted land use rights to any property in China or any other countries. We rent our office space through a lease which we believe is adequate and suitable for our current operations.

We have the property set forth in the table below.

Item 3. Legal Proceedings.

We are not currently involved in any material legal proceedings other than ordinary routine litigation incidental to the business , to which we or any of our subsidiaries is a party or of which any of our property is the sbuject. From time-to-time we are, and we anticipate that we will be, involved in legal proceedings, claims, and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve any such matters could have a material adverse effect on our financial statements. We could be forced to incur material expenses with respect to these legal proceedings, and in the event that there is an outcome in any that is adverse to us, our financial position and prospects could be harmed.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Common Stock is not traded on any exchange but is currently available for trading in the over-the-counter market and is quoted on the OTC Pink Sheets operated by the OTC Markets Group, Inc. under the symbol “GSHN” Trading in stocks quoted on these markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects.

Over the counter securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, these securities transactions are conducted through a telephone and computer network connecting dealers in stocks. Over the counter issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of our Common Stock. As a result of these rules, investors may find it difficult to sell their shares.

Holders

As of September 30, 2021, we had 410,618,750 shares of our Common Stock par value, $0.0001 issued and outstanding. There were 60 beneficial owners of our Common Stock.

Transfer Agent and Registrar

The transfer agent for our capital stock is Globex Transfer, LLC, with an address at 780 Deltona Blvd., Suite 202 Deltona, FL 32725 and telephone number is +1 (813) 344-4490.

Penny Stock Regulations

The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit the investors’ ability to buy and sell our stock.

Dividend Policy

Any future determination as to the declaration and payment of dividends on shares of our Common Stock will be made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions to declare or pay dividends on our shares of Common Stock. In addition, we currently have no plans to pay such dividends. Our board of directors currently intends to retain all earnings for use in the business for the foreseeable future.

Equity Compensation Plan Information

Currently, there is no equity compensation plan in place.

Unregistered Sales of Equity Securities

On July 30, 2021, pursuant to the terms of the Share Exchange Agreement, the Company issued an aggregate of 381,600,000 shares of its Common Stock to former shareholders of Dyckmanst Limited upon the closing of the Share Exchange. All of the securities issued pursuant to the Share Exchange Agreement were offered and issued in reliance upon the exemption from registration pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation S promulgated thereunder.

Purchases of Equity Securities by the Registrant and Affiliated Purchasers

We have not repurchased any shares of our common stock during the fiscal year ended September 30, 2021.

Item 6. [Reserved]. 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing.

Certain statements in this report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Company Overview

Gushen, Inc., or GSHN, owns 100% of the issued and outstanding capital stock of Dyckmanst Limited, which was incorporated on December 21, 2018 under the law of British Virgin Islands. Dyckmanst Limited is a holding company holding all of the outstanding equity of 100% Edeshler Limited, or Edeshler HK, since January 9, 2019. Edeshler HK is a holding company holding all of the outstanding equity of Beijing Fengyuan Zhihui Education Technology Co., Ltd., or Fengyuan Beijing. Fengyuan Beijing was incorporated on June 17, 2019 in China as a wholly foreign owned enterprise. Fengyuan Beijing operates through its subsidiary, Zhuoxun Beijing. Zhuoxun Beijing was incorporated on August 22, 2013 in China and is engaged to provide family education resources to promote all-around education onsite in local communities organized by our regional collaborative education agency and offer parents easy access to a wide variety of courses online through our application. On December 24, 2020, Zhuoxun Beijing and Guoxinzhengye Company Management Co., Ltd. (“Guoxinzhengye”) entered into a certain join venture agreement to establish Beijing Zhuoxin Education Technology Co., Ltd. (Zhuoxun Beijing: 70% equity interest, Guoxinzhengye: 30% equity interest) (“Zhouxin Beijing”). Zhuoxin Beijing is primarily engaged in establishing facilities to, among the others, provide family education consulting services, sell and rent book, organize book clubs, and sell educational electronic devices.

VIE Agreements

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 was filed as Exhibit 10.1 to the Form 8-K/A filed on August 6, 2021.

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.

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 was filed as Exhibit 10.2 to the Form 8-K/A filed on August 6, 2021.

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 were filed as Exhibit 10.3 to the Form 8-K/A filed on August 6, 2021.

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 was filed as Exhibit 10.4 to the Form 8-K/A filed on August 6, 2021.

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.

The foregoing summary of the Equity Pledge Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the Equity Pledge Agreement, which was filed as Exhibit 10.5 to the Form 8-K/A filed on August 6, 2021.

Pursuant to the Share Exchange Agreement signed on July 30, 2021, GSHN acquired 100% of the issued and outstanding securities of Dyckmanst Limited in exchange for 381,600,000 shares of Common Stock, par value $0.0001 per share of GSHN. As a result of the Share Exchange, the business of Dyckmanst Limited becomes our business. As such, the following results of operations are focused on the operations of Dyckmanst Limited and exclude the operation of the Company prior to the Share Exchange.

Foreign Operations

All of Zhuoxun Beijing’s business operations are conducted in Mainland China as a VIE. Accordingly, its results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in the PRC. Operating in foreign countries involves substantial risk. For example, its business activities subject it to a number of Chinese laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and security requirements, labor laws, intellectual property laws, privacy laws, and anti-competition regulations, which have uncertainties. Any failure to comply with the PRC laws and regulations could subject it to fines and penalties, make it more difficult or impossible to do business in China and harm our reputation.

Operating in foreign countries also subjects us to risk from currency fluctuations. Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar denominated sales and operating expenses. The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of its foreign currency-denominated sales and earnings. This could either reduce the U.S. dollar value of Zhuoxun Beijing’s prices or, if it raises prices in the local currency, it could reduce the overall demand for its offerings. Either could adversely affect its revenue. Conversely, a rise in the price of local currencies relative to the U.S. dollar could adversely impact Zhuoxun Beijing’s profitability because increase its costs denominated in those currencies would increase, thus adversely affecting gross margins.

Critical Accounting Policies and Estimates

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. Our Main business would continue to be affected by China's anti-epidemic measures such as restrictions on public gatherings in the COVID-19 pandemic. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on Zhuoxun Beijing’s business or results of operations at this time.

Revenue Recognition

Zhuoxun Beijing recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which Zhuoxun Beijing expects to receive in exchange for those goods or services. Zhuoxun Beijing 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) it satisfies the performance obligation.

Revenues are recognized when control of the promised goods or services is transferred to its 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.

Zhuoxun Beijing identified the following performance obligations for each type of contract:

Training Revenue

Zhuoxun Beijing’s onsite training course service primarily includes assigning instructors, providing onsite 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 customers cannot benefit from the standalone task.

Zhuoxun Beijing’s online training course service primarily includes courseware 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.

Mobile Phone Revenue

Zhuoxun Beijing’s sales contracts of anti-addiction mobile phone device provide that it 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 of customers’ order. Zhuoxun Beijing’s customers can benefit from the mobile phone devices every time 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.

Practical expedients and exemption

Zhuoxun Beijing 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.

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:

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 year or less when purchased.

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 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 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 September 30, 2021 and 2020. 

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

Restricted assets

The Company’s PRC subsidiary and the 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 the 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.

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 is effective for beginning September 30, 2021. We are currently evaluating the impact of the standard on our consolidated financial statements.

RESULTS OF OPERATIONS OF DYCKMANST LIMITED 

Comparison of Year Ended September 30, 2021 and 2020

The following table sets forth key components of our results of operations during the year ended September 30, 2021 and 2020, both in dollars and as a percentage of our revenue.

Revenue.

The Company’s revenue was decreased $6,270,821 from $8,199,277 to $1,928,456 during the year ended September 30, 2021 compared with the fiscal year ended September 30, 2020. Due to the COVID-19, the Company forced to reduce the offline training from 2020 and stopped the offline courses from April 2021 to July 2021.

Cost of revenue. 

Our cost of revenue was $1,203,532 and $4,954,625 for the year ended September 30, 2021 and 2020, respectively. The decrease was in line with the decrease of revenue.

Gross profit and gross margin.

Our gross profit was $724,924 for the year ended September 30, 2021, compared with a gross profit of $3,244,652 for the year ended September 30, 2020. Gross profit as a percentage of revenue (gross margin) was 37.59% for the year ended September 30, 2021, compared to a gross profit of 39.57% for the year ended September 30,2020.

Selling expenses.

Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as advertising fee, marketing fees. Our selling expenses increased by $3,211,328 to $9,032,933 for the year ended September 30, 2021, compared to $5,821,605 for the year ended September 30, 2020. We adjust the strategy by reducing our own selling employees and raising more marketing fee to local agents for attracting more customers.

General and administrative expenses. 

Our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses increased by $425,321 to $1,963,374 for the year ended September 30, 2021, compared to $1,538,053 for the year ended September 30, 2020. We hired more staff for organization managements and reduce the professional service by third parties during the year ended September 31, 2021.

Income tax benefit. 

Our Income tax benefit was $760,013 for September 30, 2021, compared to income tax expense of $1,014,434 for the year ended September 30, 2020. The decrease was mainly due to net loss before income tax for the year ended September 30, 2021, compared to net income before income tax for the year ended September 30, 2021.

Net loss.

As a result of the effect of the cumulative factors described above, our net loss was $7,730,449 and $3,048,173 for the year ended September 30, 2021 and 2020, respectively.

Liquidity and Capital Resources

The following table sets forth a summary of our cash flows for the periods indicated:

As of September 30, 2021, we had cash and cash equivalents of $2,659,622. To date, we have financed our operations primarily through borrowings from our stockholders, related and unrelated parties.

Going Concern Uncertainties

The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern.

As of September 30, 2021, we had working capital deficit of $ $5,373,363.

As of September 30, 2021, our cash balance was $2,659,622 and our current liabilities exceed current assets by $5,373,363 which together with continued losses from operations raises substantial doubt about our ability to continue as a going concern. The Company’s operating results for future periods are subject to uncertainties and it is uncertain if the management will be able to achieve profitability and continued growth for the foreseeable future. If the management is not able to increase revenue and manage operating expenses in line with revenue forecasts, the Company may not be able to achieve profitability.

The Company’s actions to improve operation efficiency, cost reduction, and enhance core cash-generating business include the following: seeking advances from the major shareholders, pursuing additional public and/or private issuance of securities, and looking for strategic business partners to optimize our operations.

We have considered whether there is substantial doubt about our ability to continue as a going concern due to its working capital deficit of $ $5,373,363, accumulated deficit of $423,276 and net losses incurred during the fiscal year ended September 30, 2021 and 2020.

In evaluating if there is substantial doubt about our ability to continue as a going concern, we are trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and increasing more live steaming e-commerce events to bring up e-commerce revenue, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. We have certain plans to mitigate these adverse conditions and to increase the liquidity of the Company.

On an on-going basis, the Company will also receive financial support commitments from the Company’s related parties.

We have several actions to implement as mentioned above. However, if we are unable to obtain the necessary additional capital on a timely basis and on acceptable terms, we will be unable to implement our current plans for expansion, repay debt obligations or respond to competitive market pressures, which will have negative influence upon our business, prospects, financial condition and results of operations.

The negative operating results of cash flow and working capital for the year ended September 30, 2021 raise substantial doubt about our ability to continue as a going concern. Our continued operations are highly dependent upon our ability to increase revenues and if needed complete equity and/or debt financing.

We believe if we are unable to obtain our resources to fund operations, we may be required to delay, scale back or eliminate some or all of our planned operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

Operating Activities

Net cash used in operating activities was $4,749,894 for the year ended September 30, 2021, as compared to $3,575,235 net cash used in operating activities for the year ended September 30, 2020. The net cash provided by operating activities for the year ended September 30, 2021 was mainly due to our net loss of $9,915,038, an increase in amortization of prepaid expenses and impairment of other long-term assets of $4,791,804, and an increase in other receivable of $2,153,952, partially offset by the decrease in advance from customers of $1,098,628. The net cash provided by operating activities for the year ended September 30, 2020 was mainly due to our net loss of $3,048,173, an increase in tax payable of $646,229, partially offset by the increase in other receivable of $3,014,561 and increase in accruals and other payable of $1,120,565. 

Investing Activities

Net cash used in investing activities was $67,461 for the year ended September 30, 2021, as compared to $29,260 for the year ended September 30, 2020. The net cash used in investing activities for the year ended September 30, 2021 and 2020 was mainly attributable to purchase of property, plant and equipment.

Limited Operating History; Need for Additional Capital

There is limited historical financial information about the Company on which to base an evaluation of its performance. There is no guarantee on the continued success in its business operations. The business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, a narrow client base, limited sources of revenue, and possible cost overruns due to the price and cost [increase/decrease]s in supplies and services.

Without additional funding, management believes that the Company will not have sufficient funds to meet its obligations beyond one year after the date our condensed consolidated financial statements are issued. These conditions give rise to substantial doubt as to our ability to continue as a going concern.

The Company has been, and intend to continue, working toward identifying and obtaining new sources of financing. To date it has been dependent on related parties for its source of funding. No assurances can be given that it will be successful in obtaining additional financing in the future. Any future financing that it may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that it is able to obtain will likely include financial and other covenants that will restrict its flexibility. Any failure to comply with these covenants would have a negative impact on its business, prospects, financial condition, results of operations and cash flows.

If adequate funds are not available, it may be required to delay, scale back or eliminate portions of it or Zhuoxun Beijing’s operations or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect the Company’s ability to fund it or Zhuoxun Beijing’s continued operations and expansion efforts.

During the next 12 months, the Company expect to incur the same amount of expenses each month. However, as Zhuoxun Beijing works to expand its operations, it expects to incur significant research, marketing and development costs and expenses on Zhuoxun Beijing’s online service platforms that meet the constantly evolving industry standards and consumer demands.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Consolidated Financial Statements for the years ended September 30, 2020, and 2019. 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Gushen, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gushen, Inc., its subsidiaries, and its variables interest entities (collectively the “Company”) as of September 30, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for each of the years in the two-year period ended September 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred substantial losses, has a stockholders’ deficit, has a working capital deficit, net cash outflows from operating activities which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters are described in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The Company has recognized other long-terms assets on its consolidated balance sheets as of September 30, 2021. These assets which are material, are comprised primary of long-term marketing contracts and customer acquisition costs that are to be realized over a period time that is greater than one operating period. Long-lived assets are subject to impairment testing if the conditions exist that the future benefits derived from those assets do not reasonably support their carrying values. The amount of future benefit derived from such assets is subject to significant subjective estimation by management. Auditors are expected to test the reasonableness of management’s estimate which requires our subjective complex judgments; accordingly, these account balances and the related audit procedures carried out by the engagement team would qualify as a critical auditing matter. We addressed this matter by assessing management’s estimate by considering the qualitative and quantitative factors included in their estimate. The engagement independent reviewed the inputs in the estimate and considered if they are reasonable and supportable. The accounts that are affected by this critical audit matter are the aforementioned other long-terms assets and the related impairment expense on the Company’s statement of operations and comprehensive loss. The disclosures in Note 6 of the notes to the financial statements are also impacted by this critical auditing matter.

/s/ WWC, P.C.

WWC, P.C.

Certified Public Accountants

San Mateo, California

January 13, 2022

We have served as the Company’s auditor since April 30, 2021.

GUSHEN, INC.

CONSOLIDATED BALANCE SHEETS 

(In U.S. dollars except Number of Shares)

The accompanying notes are an integral part of these consolidated financial statements.

GUSHEN, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In U.S. dollars except Number of Shares)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

GUSHEN, INC.

 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(In U.S. dollars except Number of Shares)

The accompanying notes are an integral part of these consolidated financial statements.

GUSHEN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. dollars)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

GUSHEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except Number of Shares)

1. ORGANIZATION AND BUSINESS

Gushen, Inc. (the “Company”) was incorporated on March 9, 2015, in the state of Nevada.

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”), 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. 

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.

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.

GUSHEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except Number of Shares)

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 was filed as Exhibit 10.2 to the Form 8-K/A filed on August 6, 2021.

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 were filed as Exhibit 10.3 to the Form 8-K/A filed on August 6, 2021.

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 was filed as Exhibit 10.4 to the Form 8-K/A filed on August 6, 2021.

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.

GUSHEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except Number of Shares)

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

GUSHEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except Number of Shares)

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

GUSHEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except Number of Shares)

The following combined financial information of the Company and its subsidiaries as of for the year ended September 30, 2021 and 2020.

GUSHEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except Number of Shares)