Company: KPEA
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010699
Chunk: 26

Company: Kun Peng International Ltd.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 26
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 the consolidated statement of operations. We anticipated the majority of the revenue
will be recognized in the fiscal year 2025. Management agreed that the amount received is non-refundable; however, this term is not bound
by any agreement. Thus, the customers may have the rights to challenge and demand the advances to be refunded under relevant Commercial
Laws or regulations.

Lease

Under ASC Topic 842, the Company
determines if an arrangement is a lease at inception. Lease assets and liabilities are recognized at the present value of the future lease
payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s
incremental borrowing rate based on the information available at the lease commencement date. The Company generally uses the base, non-cancelable
lease term in calculating the right-of-use assets and lease liabilities.

The Company may recognize the
lease payments in the condensed consolidated statements of operation on a straight-line basis over the lease terms and variable lease
payments in the periods in which the obligations for those payments are incurred, if any. The lease payments under the lease arrangements
are fixed.

The Company elected the package
of practical expedients which allow the Company to carryforward its historical lease classification, its assessment on whether a contract
is or contains a lease, and its initial direct costs for any lease that exists prior to adoption of the new standard.

The Company also elected to apply
the short-term lease exception for lease arrangements with a lease term of 12 months or less at commencement. Lease terms used to compute
the present value of lease payments do not include any option to extend, renew, or terminate the lease that the Company is not reasonably
certain to exercise upon the lease inception. Accordingly, operating lease right-of-use assets and liabilities do not include leases with
a lease term of 12 months or less.

Research and Development Expenses

Research and development (“R&D”)
expenses are all costs associated with the original development and design of the product as well as any intellectual property (“IP”) generated
during the development phase, including patents and copyrights. Research and development expenses are included in the overall operating
expenses and reflected as a separate line item on the consolidated statement of operations.

We purchase the consumer preventive
health food and health related household products sold on our platforms from our suppliers and we did not develop, design, or manufacture
those products. Moreover, although we have built our online platform and mobile commerce in-house, the compensation costs for our