Company: KPEA
Filing Date: 2025-01-14
Form Type: 10-K
Source: 0001493152-25-002124
Chunk: 412

Company: Kun Peng International Ltd.
Filing Date: 2025-01-14
Form: 10-K
Item: Item 1
Chunk 412
---
Regulatory
Overview - Legal and Operational Risks

The
Company is not a Chinese operating company but rather a Nevada holding company with no operations of its own. It conducts its
operations through its PRC subsidiary, King Eagle (China), which conducts its operations through contractual agreements with a
variable interest entity (“VIE”), King Eagle (Tianjin), and its subsidiaries (i) King Eagle (Beijing), incorporated on
December 1, 2022; (ii) King Eagle (Huai’an), incorporated on September 19, 2023; (iii) Kun Zhi Jian (Huai’an),
incorporated on October 26, 2023; (iv) Kun Zhi Jian (Shandong), incorporated on January 30, 2024; (v) Chengdu Wenjiang, incorporated
on February 1, 2024; (vi) Kun Pin Hui (Shandong), incorporated on April 7, 2024; and (vii) King
Eagle (Hangzhou), incorporated on July 18, 2024 and 95% owned by King Eagle VIE. Please see “-Corporate History and
Structure – Contractual Arrangements” below.

The
VIE structure involves unique risks to shareholders and investors. It is used to provide investors with contractual exposure to foreign
investment in China-based companies where Chinese law prohibits or restricts direct foreign investment in the operating companies. Due
to PRC legal restrictions on foreign ownership in certain businesses, we do not have any equity ownership of the VIE or its subsidiaries;
instead, we receive the economic benefits of the VIE’s business operations through certain contractual arrangements.

As
a result of such series of contractual arrangements, King Eagle (China) is the primary beneficiary of the VIE for accounting purposes
and the VIE is a PRC consolidated entity under U.S. GAAP. The Company consolidates the financial results of the VIE and its subsidiaries
in its consolidated financial statements in accordance with U.S. GAAP. Neither the Company nor its investors own any equity interest
in, have direct foreign investment in, or control through any such ownership of or investment in the VIE. As a result, investors in the
Company’s common stock are not purchasing an equity interest in the VIE or in its subsidiaries, but instead are purchasing an equity
interest in KPIL, the Nevada holding company. These contractual arrangements have not been tested in a court of law in the