UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM
For the quarterly period ended
For the transition period from ____________to____________
Commission File No.
(Exact name of the issuer as specified in its charter)
| (State or Other Jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.) |
Victoria,
(Address of Principal Executive Offices)
+(
(Registrant Telephone Number)
The Registrant does not have any securities registered pursuant to Section 12(b) of the Exchange Act.
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.
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).
Indicate by check mark whether the Registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o |
| Smaller reporting company | |
| Emerging Growth company |
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. o
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
| 1 |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:
| Common Capital Voting Stock, $0.000001 par value per share | shares | |
| Class | Outstanding as of November 14, 2023 |
REFERENCES
In this Quarterly Report, references to the “Registrant,” “Arem Pacific Corporation,” “Arem,” the “Company,” “we,” “our,” “us” and words of similar import, refer to Arem Pacific Corporation, a Delaware corporation, which is the Registrant, and our wholly-owned subsidiaries, Arem Pacific Corporation, an Arizona corporation (“Arem Pacific Arizona”), formed on July 11, 2007; and Sanyi Group Pty. Ltd., an entity organized on September 28, 2005, under the Corporations Act of 2001 of Australia (“Sanyi Group”).
FORWARD LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Quarterly Report completely, and it should be read and considered with all other historical reports and registration statements filed by us with the United States Securities and Exchange Commission (the “SEC”), including, but not limited to the risk factors outlined in our comprehensive 10-K Annual Report referenced below in the “Explanatory Note,” which are contained in Part I, Item 1A. Risk Factors, thereof. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
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Arem Pacific Corporation
FORM 10-Q
September 30, 2023
INDEX
| Page No. | |
| PART I – FINANCIAL INFORMATION | |
| Item 1. Financial Statements & Footnotes | 3 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4. Controls and Procedures | 20 |
| PART II – OTHER INFORMATION | |
| Item 1. Legal Proceedings | 23 |
| Item 1A. Risk Factors | 23 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. Defaults Upon Senior Securities | 23 |
| Item 4. Mine Safety Disclosures | 23 |
| Item 5. Other Information | 23 |
| Item 6. Exhibits | 24 |
| SIGNATURES | 25 |
PART I - FINANCIAL STATEMENTS
September 30, 2023
Table of Contents
| 3 |
Arem Pacific Corporation
Condensed Consolidated Balance Sheets
As of September 30, 2023 | As of June 30, 2023 | ||||||||||
| Note | (Unaudited) | (Audited) | |||||||||
| US$ | US$ | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | 4 | ||||||||||
| Other assets | 5 | ||||||||||
| Other receivables | 6 | ||||||||||
| Total current assets | |||||||||||
| Plant and equipment, net | 7 | ||||||||||
| Right-of-use asset | 8 | ||||||||||
| Total non-current assets | |||||||||||
| Total assets | |||||||||||
| Liabilities and Stockholders’ Deficit | |||||||||||
| Liabilities | |||||||||||
| Accrued and other liabilities | 9 | ||||||||||
| Borrowings | 10 | ||||||||||
| Lease liability | 8 | ||||||||||
| Total current liabilities | |||||||||||
| Lease liability | 8 | ||||||||||
| Total non-current liability | |||||||||||
| Total liabilities | |||||||||||
| Capital commitments | 14 | ||||||||||
| Contingencies | 15 | ||||||||||
| Stockholders’ deficit | |||||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding as of September 30, 2023, and June 30, 2023, respectively | 11 | ||||||||||
| Additional paid in capital | |||||||||||
| Other comprehensive loss | 12 | ( | ) | ( | ) | ||||||
| Accumulated losses | ( | ) | ( | ) | |||||||
| Total Stockholders’ deficit | ( | ) | ( | ) | |||||||
| Total liabilities and Stockholders’ deficit | |||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
Arem Pacific Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended September 30 | |||||||||||
| Note | 2023 | 2022 | |||||||||
| US$ | US$ | ||||||||||
| Revenue | |||||||||||
| Operating expenses | |||||||||||
| Payroll and employee related expense | |||||||||||
| Amortization on right-of-use assets | |||||||||||
| General and administrative expenses | |||||||||||
| Total operating expenses | |||||||||||
| Income from operations | |||||||||||
| Interest expenses | ( | ) | ( | ) | |||||||
| Other income | |||||||||||
| Interest income | |||||||||||
| Total other (expenses)/income | ( | ) | |||||||||
| Income from continuing operations before income tax expenses | |||||||||||
| Income tax expense | 13 | ||||||||||
| Net income after income tax expense for the period | |||||||||||
| Other comprehensive loss | |||||||||||
| Exchange differences arising on translation of foreign operations | ( | ) | ( | ) | |||||||
| Other comprehensive loss | ( | ) | ( | ) | |||||||
| Total comprehensive income for the period | |||||||||||
| Net income per share | |||||||||||
| Basic and diluted | |||||||||||
| Weighted average number of common stock outstanding | |||||||||||
| Basic and diluted | |||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
Arem Pacific Corporation
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
| Common Stock | |||||||||||||||
| Shares | Amount | Additional Paid in Capital | Other Comprehensive Loss | Accumulated Losses | Total Deficit | ||||||||||
| US$ | US$ | US$ | US$ | US$ | |||||||||||
| Balance as of June 30, 2023 | ( | ) | ( | ) | ( | ) | |||||||||
| Income after income tax expense for the period | — | ||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ||||||||||
| Total comprehensive income for the period | — | ( | ) | ||||||||||||
| Balance as of September 30, 2023 | ( | ) | ( | ) | ( | ) | |||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
Arem Pacific Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended September 30 | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Cash flows from operating activities: | ||||||||
| Profit before tax | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Amortization of right-of-use asset | ||||||||
| Net changes in operating assets and liabilities: | ||||||||
| (Increase)/decrease in other receivables | ( | ) | ||||||
| (Decrease)/increase in accrued and other liabilities | ( | ) | ||||||
| Net cash generated by operating activities | ||||||||
| Cash flows from financing activity | ||||||||
| Repayment of lease liability | ( | ) | ( | ) | ||||
| Net cash used in financing activity | ( | ) | ( | ) | ||||
| Net (decrease)/increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of period | ||||||||
| Exchange difference on translation of foreign operations | ||||||||
| Cash and cash equivalents at the end of period | ||||||||
| Supplemental cash flow information | ||||||||
| Interest income | ||||||||
| Supplemental non-cash flows information | ||||||||
| Lease liability arising from obtaining right-of-use asset | ( | ) | ( | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1 Nature of Operations
Our current corporate structure is depicted below:
|
Arem Pacific Corporation (a Delaware corporation) |
| 100% owned |
|
Arem Pacific Corporation (an Arizona corporation) |
| 100% owned |
|
Sanyi Group Pty. Ltd. an Australian corporation |
Arem Pacific Corporation (Delaware), sometimes referred to as the “Company” below, has been focusing its business on the operation of an Oriental holistic health wellness center located in Australia (Victoria) through its wholly-owned subsidiary Sanyi Group Pty. Ltd. (“Sanyi Group”). Sanyi Group operates one wellness center in Victoria, Australia.
Unless the context indicates otherwise, the term “Group” as used herein includes the Company and Sanyi Group.
1.2 Basis of Accounting
The accompanying consolidated financial statements include the accounts of our wholly-owned subsidiary Sanyi Group Pty Ltd which is a company domiciled in Australia. These consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (“GAAP”) and Regulation S-X published by the U.S. Securities and Exchange Commission (the “SEC”). All intercompany accounts and transactions have been eliminated. The Group has evaluated events or transactions through the date of issuance of this report in conjunction with the preparation of these consolidated financial statements. All amounts presented are in US dollars, unless otherwise noted.
The consolidated financial statements, except for cash flow information, have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The amounts presented in the consolidated financial statements have been rounded to the nearest dollar.
1.3 Going Concern Basis
These consolidated financial statements have been
prepared on a going concern basis, which assumes the Group will continue its operations in the foreseeable future and that the Group will
be able to realize its assets and discharge its liabilities in the normal course of operations. The Group had net current liabilities
as of September 30, 2023 of US$
The Group believes that there are reasonable grounds to support the fact that it will be able to pay its debts as and when they become due and payable. In forming this opinion, the Group has considered the following factors:
| (i) | As of September 30, 2023, US$ |
| (ii) | The Group has received a Letter of Support from Xin Jin, in which he offers to provide continuing financial support to Sanyi Group to enable it to cover its liabilities as and when they become due and payable for a period of not less than twelve (12) months from the date of the financial statements. The loan of $ |
If the Group is unable to continue as a going concern, it may be required to realize its assets and extinguish its liabilities outside of the ordinary course of business, and at amounts different from those stated in the consolidated financial statements. The consolidated financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.
| 8 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
1.4 Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
1.5 Foreign Currency Translation
The functional currency of our foreign subsidiary is its local currency. Assets and liabilities of the foreign subsidiary are translated into U.S. dollars at period-end exchange rates, stockholders’ equity is translated at the historical rates and the consolidated statement of operations and cash flows are translated at average exchange rates during the reporting periods. Resulting translation adjustments are recorded in accumulated other comprehensive income, a separate component of stockholders’ equity. A component of accumulated other comprehensive income will be released into income when the Group executes a partial or complete sale of an investment in a foreign subsidiary or a group of assets of a foreign subsidiary considered a business and/or when the Group no longer holds a controlling financial interest in a foreign subsidiary or group of assets of a foreign subsidiary considered a business.
Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) and realized (upon settlement of the transactions) and reported under other general expenses in the consolidated statement of operations.
1.6 Cash and Cash Equivalents and Concentration of Credit Risk
The Group considers all highly liquid short-term investments with original maturities of three months or less at the date of acquisition to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.
The Group's financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held in several Australian bank accounts and time deposit accounts. The Group regularly assesses the level of credit risk we are exposed to and whether there are better ways of managing credit risk. The Group invests its cash and cash equivalents with reputable financial institutions. The Group has not incurred any losses related to these deposits.
1.7 Other Receivables
Other receivables represent amounts that the Group has paid in advance of receiving benefits or services. Other receivables include tax recoverable from the Australian Taxation Office and prepayments. Prepayments are recognized as an expense over the general contractual period.
1.8 Plant and Equipment
Plant and equipment are recorded at cost. Costs of renewal and improvements that substantially extend the useful lives of assets are capitalized. Maintenance and repair costs are expensed when incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as detailed below:
| Furniture and fittings | ||
| Office equipment | ||
| Computers | ||
| Motor vehicles | ||
| Plant and equipment | ||
| Lease improvements |
Derecognition
An item of plant and equipment is derecognized upon disposal or when no further economic benefits are expected from its use or disposal.
| 9 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
1.9 Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
As lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities representing the obligations to make lease payments and right-of-use assets representing the right to use the underlying leased assets.
Right-of-use assets
The Group recognizes right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. The accounting policy for impairment is disclosed in Key Judgements.
Lease liability
At the commencement date of the lease, the Group recognizes lease liability measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
1.10 Payables
Other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise they are presented as non-current liabilities.
Other payable are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method.
1.11 Provisions
Provisions are recognized when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.
| 10 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
1.12 Loans and Borrowings
All loans and borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
The Group’s current liabilities include a loan from a significant shareholder which is not interest bearing. The shareholder has provided a letter of support to Sanyi Group, which states that the loan to the Group will not be recalled without giving at least thirteen (13) months’ notice. This loan is not evidenced by a promissory note.
Loans are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve (12) months after the reporting date.
1.13 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable after taking into account any discounts.
The Group derives revenue primarily through the provision of therapeutic health services from its Oriental holistic health centers. Revenue is recognized when persuasive evidence of an arrangement exists, the services have been rendered to customers, the pricing is fixed or determinable and collection is reasonably assured. This is generally based on the completion of services provided to the customers at the Oriental holistic health centers and settlement of the transactions either by cash or credit card payments.
Interest revenue is recognized using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument. Dividend revenue is recognized when the right to receive a dividend has been established.
All revenue is stated net of the amount of goods and services tax.
1.14 Income Tax
Taxes payable is based on taxable profit for the period which excludes items of income or expense that are taxable or deductible in other periods. Taxable profit also excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted as of the balance sheet date.
Deferred income tax expense is calculated using the liability method in accordance with ASC 740 Income Taxes. Deferred tax assets and liabilities are classified as non-current in the balance sheet and are measured based on the difference between the carrying value of assets and liabilities for financial reporting and their tax basis when such differences are considered temporary in nature. Temporary differences related to intercompany profits are deferred using the buyer’s tax rate. Deferred tax assets are reviewed for recoverability every balance sheet date, and the amount probable of recovery is recognized.
Deferred income tax expense represents the change in deferred tax asset and liability balances during the periods discussed except for the deferred tax related to items recognized in other comprehensive income or resulting from a business combination or disposal. Changes resulting from amendments and revisions in tax laws and tax rates are recognized when the new tax laws or rates become effective or are substantively enacted. Uncertain tax positions are recognized in the financial statements based on management’s expectations.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they are related to income taxes levied by the same taxation authority, and when the Group intends to settle its current tax assets and liabilities on a net basis.
Deferred taxes are not provided on undistributed earnings of subsidiaries when the timing of the reversal of this temporary difference is controlled by the Group and is not expected to happen in the foreseeable future. This is applicable for the majority of the Group’s subsidiaries.
| 11 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
1.15 Goods and Services Tax (“GST”)
Revenues, expenses and assets are recognized net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (“ATO”).
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO, are presented as operating cash flows included in receipts from customers or payments to suppliers.
Basic earnings (loss) per common share is computed by dividing income or losses available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is computed similar to basic net income or losses per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and of the additional common shares were dilutive. Diluted earnings (loss) per common share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the periods discussed. Under the if–converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).
1.17 Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) is presented net of applicable income taxes in the accompanying consolidated statements of stockholders' equity and comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components of stockholders' equity instead of net income (loss).
2. Critical Accounting Estimates and Judgements
The sole Director evaluates estimates and judgements incorporated into the consolidated financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.
Key Estimates
| (i) | Useful lives |
The Group determines the estimated useful lives and related depreciation and amortization charges for its plant and equipment. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
| (ii) | Income tax |
The Group is subject to income tax in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
| 12 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
2. Critical Accounting Estimates and Judgements (Continued)
Key Estimates (Continued)
| (iii) | Fair value measure of shares issued |
The calculation of the fair value of shares issued requires significant estimates to be made in regard to several variables. The estimations made are subject to variability that may alter the overall fair value determined.
Key Judgements
| (i) | Provision for impairment of receivables |
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtors’ financial position.
| (ii) | Impairment |
The Group assessed that no indicators of impairment existed at the reporting date and as such no impairment testing was performed.
3. Segment Information
The consolidated entity operates predominantly in one industry and one geographical segment, those being Oriental holistic health services and Australia, respectively.
4. Cash and Cash Equivalents
Cash at the end of the financial periods as shown in the statement of cash flows is reconciled to items in the consolidated balance sheets as follows:
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Cash at bank | ||||||||
| Petty Cash | ||||||||
| Cash and Cash Equivalents | ||||||||
5. Other Assets
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Current | ||||||||
| Deposits paid | ||||||||
6. Other Receivables
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Current | ||||||||
| Prepayment | ||||||||
| Refundable from the Australian Taxation Office | ||||||||
| Other Receivables, Current | ||||||||
| 13 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
7. Plant and Equipment
Furniture and fittings | Office equipment | Computers | Motor Vehicles | Plant and equipment | Lease Improvements | Total | ||||||||||||||||||||||
| At cost | ||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | ||||||||||||||||||||||||||||
| Effect of foreign currency exchange difference | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance as of September 30, 2023 | ||||||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | ||||||||||||||||||||||||||||
| Effect of foreign currency exchange difference | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance as of September 30, 2023 | ||||||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||
| As of June 30, 2023 | ||||||||||||||||||||||||||||
| As of September 30, 2023 | ||||||||||||||||||||||||||||
8. LEASES
Group as a lessee
The Group has lease contract for land and building. The Group’s obligations under these leases are secured by the lessor’s title to the leased assets. The Group is restricted from assigning and subleasing the leased assets.
| (a) | Right-of-use assets |
| Shop lot | ||||
| US$ | ||||
| Cost | ||||
| Balance as of June 30, 2023 | ||||
| Effect of foreign currency exchange difference | ( | ) | ||
| Balance as of September 30, 2023 | ||||
| Accumulated amortization | ||||
| Balance as of June 30, 2023 | ||||
| Amortization | ||||
| Balance as of September 30, 2023 | ||||
| Net carrying amount | ||||
| As of June 30, 2023 | ||||
| As of September 30, 2023 | ||||
| 14 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
8. LEASES (Continued)
| (b) | Lease liabilities |
The carrying amounts of lease liabilities is as follows:
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Current | ||||||||
| Lease liabilities | ||||||||
| Non Current | ||||||||
| Lease liabilities | ||||||||
| Operating Lease Liabilities | ||||||||
9. Accrued and Other Liabilities
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Current | ||||||||
| Payroll liabilities | ||||||||
| Other payables | ||||||||
| Accrued and Other Liabilities | ||||||||
10. Borrowings
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Loan from related party | ||||||||
| Current | ||||||||
| Balance as of beginning of period/year | ||||||||
| Repayment | ||||||||
| Effect of foreign currency exchange difference | ( | ) | ( | ) | ||||
| Balance as of end of period/year | ||||||||
The loan balance above is an unsecured loan from Xin Jin, a significant shareholder and an officer of the Group and its sole Director. The loan is non-trade in nature, non-interest bearing and repayable on demand.
11. Share capital
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Issued and fully paid ordinary shares: | ||||||||
| At beginning / end of period/year | ||||||||
The holders of ordinary shares are entitled to receive dividends as and when declared by the Group. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.
12. Other Comprehensive Loss
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Foreign currency translation reserve | ( | ) | ( | ) | ||||
| 15 |
Arem Pacific Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For The Quarterly Period Ended September 30, 2023
13. Income Tax Expense
| September 30, 2023 | September 30, 2022 | |||||||
| US$ | US$ | |||||||
| (a) The components of tax expense comprise: | ||||||||
| Current tax | ||||||||
| - Australia | ||||||||
| - US | ||||||||
| Total | ||||||||
| (b) The following is a reconciliation of the Group’s total income tax expense to the (loss)/income before income taxes for the period/years ended: | ||||||||
| Profit before income tax provision | ||||||||
| Income tax computed at statutory tax rate | ||||||||
| Recoupment of prior year tax losses at previously brought to account | ( |
) | ( |
) | ||||
| Consolidated income tax expense | ||||||||
14. Capital Commitments
There was no capital expenditure as of September 30, 2023.
15. Contingencies
From time to time, the Group is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Group is a party for which management believes the ultimate outcome would have a material adverse effect on the Group’s financial position.
16. Related Party Transactions
| (a) | Parent entity |
The ultimate parent entity which exercises control over the Group is Arem Pacific Corporation.
| (b) | Subsidiary |
Sanyi Group is a wholly owned subsidiary of the Company and is incorporated in Australia.
| (c) | Outstanding balances with related parties |
The following balances are outstanding at reporting date in relation to transactions with related parties:
| September 30, 2023 | June 30, 2023 | |||||||
| US$ | US$ | |||||||
| Loan from related party | ||||||||
The loan balance above is an unsecured loan from Xin Jin, a significant shareholder and the CEO, CFO and the sole director of the Group. The loan is non-trade, non-interest bearing and repayable on demand.
17. Events After the Reporting Period
There has not arisen in the interval between the end of the financial period and the date of these financial statements any other item, transaction or event of a material and unusual nature likely, in the opinion of the Management of the Group, to affect significantly the operation of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
When used in this Quarterly Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. Persons reviewing this Quarterly Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed further below under “Trends and Uncertainties,” and include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.
Overview of Current and Planned Business Operations
Through Sanyi Group, we are engaged in providing wellness services that include acupressure/reflexology, massage therapy and cupping. We offer various types of massage therapy, such as Swedish, deep tissue and hot stone oil, among others, all as discussed in Item 1. Business, above. We primarily rely on our promotional activities and our shopping center location to attract new customers and maintain our current customers.
We have identified future partners from strategic cities in China to help us expand to the Chinese market for our wellness services in the major cities of China, including Guangzhou, Shenzhen, Fujian, Sichuan, Beijing, and Shanghai for fiscal year 2023, though these plans are subject to the uncertainties related to the coronavirus pandemic and are currently on hold.
Results of Operations
Comparison of the quarter ended September 30, 2023, to the quarter ended September 30, 2022
Revenue
For the three months ended September 30, 2023, we had revenue of US$80,877, compared to the three months ended September 30, 2022, with revenue of US$77,527, or an increase of US$3,350. There are not much changes compared to the previous year three months ended result as the business operation hour is same as previous year.
Payroll and employee related expense
For the three months ended September 30, 2023, our payroll and employee related expenses were US$28,930, compared to the three months ended September 30, 2022, with expenses of US$24,398, or an increase of US$4,532. The payroll and employee related expenses including superannuation contributions and employee membership fees. Hiring costs and staff amenities were also higher in 2023. The headcount on and off having increase or reduce due to weekend there would be more customer to serve,, the Group would hire part time staff.
Amortization Right-of-Use Asset
For the three months ended September 30, 2023, the amortization right-of-use assets increased by US$1,310 to US$16,587, compared to the three months ended September 31, 2022, with an increase of US$15,277. This increase was due to foreign exchange translation.
General and Administrative Expenses
For the three months ended September 30, 2023, general and administrative expenses increased by US$10,635 to US$18,395, compared to the three months ended September 30, 2022, with an increase of US$7,760. The increase in expenses resulted from consultant fees charged for customer surveys and staff training amounting to US$11,067. Staff training conduct when new part time staff join.
Operating Expenses
For the three months ended September 30, 2023, our operating expenses were US$63,912, compared to the three months ended September 30, 2021, with operating expenses of US$47,435. The increase in operating expenses resulted from consultant fees charged for customer surveys and staff training amounting to US$11,067.
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Net Income
For the three months ended September 30, 2023, we had net income after income tax of US$15,187, compared to the three months ended September 30, 2021, with net income after tax of US$35,441. The increase in general and administrative expenses and reduction in other income affected our profit during the three months ended September 30, 2023.
Liquidity and Capital Resources
On September 30, 2023, we had net current liabilities of US$60,049 (June 30, 2023 net current liabilities of US$76,323) and accumulated losses of US$178,099 (June 30, 2023 accumulated losses US$193,286), and of that date, the Group had shown a capital deficiency of US$30,546 (June 30, 2023 capital deficiency of US$45,092). We reported an after-tax profit of US$15,187 for the three months ended September 30, 2023 (September 30, 2022 after tax profit was US$35,441).
The Group has received a Letter of Support from Xin Jin, in which he offers to provide continuing financial support to Sanyi Group to enable it to cover its liabilities as and when they become due and payable for a period of not less than twelve (12) months from the date of the financial statements. The loan of $9,063 as of September 30, 2023, to Sanyi Group, will not be required to be paid without giving at least thirteen (13) months’ notice.
Summary of Significant Accounting Policies
The financial statements of the Group have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in U.S. dollars. The Group’s fiscal year end is June 30.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Foreign Currency Translation
The functional currency of our foreign subsidiary is its local currency. Assets and liabilities of the foreign subsidiary are translated into U.S. dollars at period-end exchange rates, stockholders’ equity is translated at the historical rates and the consolidated statement of operations and cash flows are translated at average exchange rates during the reporting periods. Resulting translation adjustments are recorded in accumulated other comprehensive income, a separate component of stockholders’ equity. A component of accumulated other comprehensive income will be released into income when the Group executes a partial or complete sale of an investment in a foreign subsidiary or a group of assets of a foreign subsidiary considered a business and/or when the Group no longer holds a controlling financial interest in a foreign subsidiary or group of assets of a foreign subsidiary considered a business.
Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) and realized (upon settlement of the transactions) and reported under other general expenses in the consolidated statement of operations.
Fair Value of Financial Instruments
The Group’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held in several Australian bank accounts and time deposit accounts. We regularly assess the level of credit risk we are exposed to and whether there are better ways of managing credit risk. We invest our cash and cash equivalents with reputable financial institutions. The Group has not incurred any losses related to these deposits.
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Group has adopted ASC 740-10-50 “Accounting for Income Taxes” as of its inception. Pursuant to the standard, the Group is required to compute tax asset benefits for initial years of operating losses carried forward.
| 18 |
Basic and Diluted Net Income (Loss) Per Share
The Group computes net income (loss) per share in accordance with ASC 260-10-4-5, “Earnings per Share.” The standard requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the periods discussed. Diluted EPS gives effect to all dilutive potential common shares outstanding during the periods discussed, including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
Recent accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and issued subsequent amendments within ASU 2021-01 and ASU 2022-06 (collectively, including ASU 2020-04, “ASC 848”) in January 2021 and December 2022 respectively. ASC 848 provides optional expedients and exceptions for applying U.S. GAAP on contract modifications and hedge accounting to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. These optional expedients and exceptions provided in ASC 848 are effective for us from January 1, 2020 through December 31, 2024. We have elected the optional expedients for certain existing interest rate swaps that are designated as cash flow hedges, which did not have a material impact on the financial position, results of operations and cash flows. We are evaluating the effects, the adoption of the new standard did not have a material impact on the Group’s consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which provides guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The amendments require an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination at the acquisition date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance is effective for us for the year ending June 30, 2024 and interim reporting periods during the year ending June 30, 2024. Early adoption is permitted. We are evaluating the effects, the adoption of the new standard did not have a material impact on the Group’s consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for us for the year ending June 30, 2025 and interim reporting periods during the year ending June 30, 2025. Early adoption is permitted. We are evaluating the effects, the adoption of the new standard did not have a material impact on the Group’s consolidated financial statements.
In September 2022, the FASB issued ASU 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”, which require a buyer in a supplier finance program disclose qualitative and quantitative information about the supplier finance program. The amendments do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The new guidance is required to be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which should be applied prospectively. This guidance is effective for us for the year ending June 30, 2024 and interim reporting periods during the year ending June 30, 2024. Early adoption is permitted. We are evaluating the effects, the adoption of the new standard did not have a material impact on the Group’s consolidated financial statements.
Off-Balance Sheet Arrangements
We had no Off-Balance Sheet arrangements during the three-month period ended September 30, 2023.
| 19 |
Critical Accounting Policies
Concentrations of Credit Risk
The Group’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held in several Australian bank accounts and time deposit accounts. The Group regularly assesses the level of credit risk we are exposed to and whether there are better ways of managing credit risk. The Group invests its cash and cash equivalents with reputable financial institutions. The Group has not incurred any losses related to these deposits.
Concentration of Major Customers
Our concentration of revenue from customers in our facility that is located in a shopping center in Victoria, Australia, makes it reasonably possible that we are vulnerable to the risk of a long-term adverse impact, especially with the current rise in variants of the coronavirus that have recently increased public exposure and the number of reported cases of this virus. As a result, governments and other authorities around the world continue to implement significant measures as deemed necessary to control the spread of the virus. While many of these restrictions have been lifted as the rates of Covid-19 infections have decreased or stabilized and as various vaccines have become more widely available, a resurgence of Covid-19 and the impact of variants of the virus that causes Covid-19 may result in the reinstatement of social distancing measures; business closures; lockdowns; restrictions on operations; quarantines and travel bans, among other restrictive measures. In addition, any government mandates that require Covid-19 vaccination or other employee behaviors may result in employee attrition at the Group or its suppliers or customers and may create difficulties in satisfying future employment and supply requirements.
Effect of Recent Accounting Pronouncements
The Group has evaluated all recent accounting pronouncements and believes that none will have a significant effect on the Group’s financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not required.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of September 30, 2023, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2023.
| 20 |
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal controls over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records, which in reasonable detail, accurately and fairly reflect the transactions and disposition of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the SEC, our management assessed the effectiveness of our internal control over the financial reporting as of September 30, 2023, using criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our management concluded that our internal control over financial reporting was not effective as of September 30, 2023, and continue to be ineffective, due to the following material weaknesses:
| · | lack of sufficient accounting personnel qualified in US GAAP and SEC reporting; and |
| · | insufficient accounting staff, which results in a failure to segregate duties sufficiently to ensure a timely and proper preparation and review of the financial statements. |
We have taken steps to remediate the material weaknesses in our internal control over financial reporting practicable by:
| · | hiring additional internal staff familiar with US GAAP and SEC reporting. In the past couple of years, we have made offers to hire accounting personnel familiar with US GAAP and SEC reporting experience, but as of yet have been unable to hire a suitable candidate. We now plan to hire a professional recruitment agency to assist us in the identification and selection of appropriate candidates. |
| · | enhancing staff awareness of laws and regulations by conducting more trainings. |
| · | hiring sufficient staff to adequately segregate responsibilities and ensure timely preparation of financial statements; and providing training to our accounting personnel on US GAAP, SEC reporting and other regulatory requirements regarding the preparation of financial statements. Our financial personnel attended US GAAP and SEC reporting training sessions organized by an international accounting firm. We plan to hold similar US GAAP and SEC reporting training on a regular basis. |
Although we have increased the training provided to accounting personnel relating to US GAAP and SEC reporting to partially address the foregoing material weaknesses, we do not believe such weaknesses have been remediated, and we can provide no assurance that they will be remediated in a timely manner.
We believe that we are taking the steps necessary for remediation of the material weaknesses identified above, and we will continue to monitor the effectiveness of these steps and to make any changes that our management deems appropriate.
This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to satisfy these requirements by providing the management’s report only.
Changes in Internal Control Over Financial Reporting
With the exception of commencing the process of implementing the foregoing steps to resolve the weaknesses in our internal controls, there have been no changes in internal control over financial reporting during the fiscal quarter ended September 30, 2023.
| 21 |
Limitations on the Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Not required of smaller reporting companies like us; however, see Part I, Item 1A. Risk Factors, of our 10-K Annual Report for the fiscal year ended June 30, 2023 (see the caption “Explanatory Note” at the forepart of this Quarterly Report), which Annual Report can be accessed by Hyperlink in Part II, Item 6 hereof, for a list of “Risk Factors.”
Furthermore, our business operations could be impacted by the current world health crisis related to the Covid-19 pandemic. See the caption “COVID-19 PANDEMIC” at the forepart of our 10-K Annual Report for the fiscal year ended June 30, 2023, for additional information about the Covid-19 pandemic, including the world-wide declaration of the Covid-19 pandemic by the World Health Organization (“WHO”), and current information about the pandemic restrictions in Australia and China.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None; not applicable.
Item 3. Defaults upon Senior Securities
None; not applicable.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
None; not applicable.
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Item 6. Exhibits
|
Exhibit Number |
Description of Exhibit | Filing | ||
| 3(i) | Restated Certificate of Incorporation | Filed with our Annual Report for the year ended June 30, 2022, filed on November 21, 2022, and incorporated herein by reference. | ||
| 3(ii) | Amended and Restated Bylaws | Filed with our Annual Report for the year ended June 30, 2022, filed on November 21, 2022, and incorporated herein by reference. | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 101.INS | XBRL Instance Document | |||
| 101.SCH | XBRL Taxonomy Extension Schema | |||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | |||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | |||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
Exhibits incorporated by reference:
| 24 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Arem Pacific Corporation | ||||
| Date: | November 14, 2023 | By: | /s/ Xin Jin | |
| Xin Jin | ||||
| President, Chief Financial Officer and Sole Director | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Date: | November 14, 2023 | By: | /s/ Xin Jin | |
| Xin Jin | ||||
| President, Chief Financial Officer and Sole Director |
25