MGSD 10-K & 10-Q changes, risk factors and insider trading

Tongzhilian sells tours both directly and through sales agents, with 49% of our revenue during fiscal year 2024 being derived from two primary sales agents.The cost of revenue, $439,260 for the fiscal year ended September 30, 2024, was mostly attributable to the cost of tours charged by cooperating travel agencies. In addition, commencing in the fourth quarter of fiscal 2024, cost of revenue included the procurement cost for products sold. We realized a gross profit of 45% in fiscal 2024, primarily attributable to a cultural feature tour developed by Tongzhilian in concert with our suppliers, Hainan Jintongyuan and Heibei Bailu.

On September 7, 2023 our shareholders purchased the authorized shares of MGSD Samoa for $60,000. Our CEO, Huang Fang, funded the purchase by giving MGSD Samoa her personal promissory note in the amount of $60,000. Primarily as a result of that transaction, as of September 30, 2023, after incurring a loss of $40,502 since it was organized, the Company had $Nil in cash and cash equivalents and a working capital deficit of $75,344. The principal liabilities were $30,000 in accrued expenses payable to the Company’s auditor in connection with the Company’s preparation for registration as a reporting company in the United States and $34,830 representing the current portion of the Company’s operating lease obligation.

Our financing activities for the fiscal year ended September 30, 2024, generated $248,400, consisting of $60,000 contributed by Huang Fang to fund our shareholders’ subscriptions and a $188,400 interest-free loan from Huang Fang and her affiliate entity.

Tongzhilian’s revenue was $ 647 during the three months ended March 31, 2026. All of our revenue was generated by our subsidiary Tongzhilian, which engaged solely in product sales throughout the quarter.

Revenue during the three months ended March 31, 2026 decrease by 99% compared to the operating revenue of $71,892 for the three months ended March 31, 2025. Recent revenue was primarily attributable to our sale of products, with 100% of our revenue, or $647, during the three months ended March 31, 2026, derived from such sales. The cost of revenue attributable to the sale of products was $368, which was our procurement cost for products sold.

For the three months ended March 31, 2026, we realized a gross profit margin of 43%, as our gross profit amounted to $279.

In the three months ended March 31, 2026, our total revenue experienced a significant decline of 97% when compared to the operating revenue of $ 24,905 recorded in the three months ended December 31, 2025. This disparity can primarily be attributed to the domestic economic slowdown, shrinking household consumption and complicated international situations, which have driven pessimistic market expectations and conservative consumer spending.

As our core business, mid-to-high-end customized travel belongs to non-essential consumption, and has been greatly impacted with weakened customer willingness and fewer intended orders. The nearly 20-day Spring Festival holiday also reduced effective operation time and hindered business progress.

Meanwhile, due to limited manpower, we focused on in-depth service and loyalty improvement for existing prepaid members, and suspended new market and customer expansion. Affected by the overlapping impacts of external consumption weakness, long holidays and internal operational adjustments, our first-quarter performance declined notably.

Operating expenses for the three months ended March 31, 2026 consisted primarily of salaries and benefits, office expenses and rentals and leases and professional fees. Our $206,395 in operating expenses during this period were primarily attributable to:

For the reasons described above, our net loss for the three months ended March 31, 2026 was $206,116.

The following table summarizes our operating results for six months ended March 31, 2026 and 2025.

Tongzhilian’s revenue was $25,552 during the six months ended March 31, 2026. All our revenue was generated by our subsidiary Tongzhilian, which was solely derived from product sales throughout the period.

During the six-month period ending on March 31, 2026, the revenue decreased by 98% compared to the $1,094,047 in the six-month period ending on March 31, 2025. During the six-month period ending on March 31, 2026, all of our revenue (totaling $25,552) came from product sales. The sales cost related to these product sales was $13,174, which is the cost of purchasing the sold products.

Based on the above reasons, for the six-month period ending on March 31, 2026, our net loss was $326,289.00.

The Company had a working capital deficit of $(287,288) as of March 31, 2026. Included in total liabilities is $382,088 payable to our Chief Executive Officer and entities under her control. Excluding this related-party liability, the Company’s working capital as of March 31, 2026 would have been $94,800, consisting primarily of prepayments. Accordingly, the Company is able to finance its near-term operating activities, but will need additional capital infusion to support future growth.

We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations plus additional funds sourced from a public offering and/or debt financing. In the near term, we expect Huang Fang, our President, to continue to provide support, if needed. We do not, however, have any formal agreement with Ms. Huang requiring her to provide financing to the Company nor any method of enforcing our expectation. Therefore, we can provide no assurances that we will be able to generate sufficient cash flows from operations and/or obtain additional financing on terms satisfactory to us, if at all.

During the six months ended March 31, 2026, our operations used net cash of $121,816. The main reason for the net cash outflow in the operations is that prepayments increased by $208,541, partially offset by share-based compensation expenses of $79,920, resulting in a net cash outflow from operating activities.