UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No.
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(Exact name of registrant as specified in its charter) |
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State or other jurisdiction of Incorporation or organization |
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(IRS Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
N/A
(Former name former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
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Trading Symbol(s) |
Name of each exchange on which registered |
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None |
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 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 shorter period that the registrant as 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, or 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.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 is a shell company (as defined in Rule 12b-2 of the Act).
Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:
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Outstanding as of September 22, 2025 |
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Common Stock, $0.001 |
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TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
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ARCULUS SYSTEM CO., LTD. |
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BALANCE SHEETS |
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JUNE 30, 2025 AND SEPTEMBER 30, 2024 |
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ASSETS |
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(Unaudited) |
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(Audited) |
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June 30, 2025 |
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September 30, 2024 |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Total assets |
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$ |
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$ |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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Accrued payroll and payroll taxes payable |
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Due to related parties |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS' EQUITY |
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Common stock, $
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Preferred stock, $
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Additional paid-in capital |
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Accumulated deficit |
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(
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Total stockholders' deficit |
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(
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(
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited financial statements.
| F-1 |
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| Table of Contents |
ARCULUS SYSTEM CO., LTD.
STATEMENT OF OPERATIONS
(Unaudited)
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Three Months Ended June 30, |
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Nine Months Ended June 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Selling, general and administrative expenses |
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Total operating expenses |
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(Loss) from operations before provision for income tax |
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(
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(
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(
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Other income (expense) |
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Loss from disposal |
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(
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Provision for income tax benefit (expense) |
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Net income (loss) |
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(
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(
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(
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(
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Weighted average common shares outstanding – basic and diluted |
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Net (loss) per common share – basic and diluted |
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$ |
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$ |
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$ |
(
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$ |
(
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The accompanying notes are an integral part of these financial statements.
| F-2 |
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| Table of Contents |
ARCULUS SYSTEM CO., LTD.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE AND NINE MONTHS ENDED JUNE 30, 2025
(UNAUDITED)
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For the Three Months Ended June 30, 2025 |
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance, March 31, 2025 |
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(
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Net (loss) |
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- |
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(
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(
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Balance, June 30, 2025 |
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(
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(
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For the Three Months Ended June 30, 2024 |
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance, March 31, 2024 |
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(
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Forgiveness of loan from shareholder in exchange for contribution |
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- |
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Net (loss) |
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- |
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(
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(
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Balance, June 30, 2024 |
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(
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(
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For the Nine Months Ended June 30, 2025 |
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance, September 30, 2024 |
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(
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(
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Net loss |
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- |
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(
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(164,867 | ) |
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Balance, June 30, 2025 |
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(
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(
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For the Nine Months Ended June 30, 2024 |
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance, September 30, 2023 |
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(
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(
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Forgiveness of loan from shareholder in exchange for contribution |
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- |
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Net loss |
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- |
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(
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Balance, June 30, 2024 |
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(
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(
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The accompanying notes are an integral part of these financial statements.
| F-3 |
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| Table of Contents |
ARCULUS SYSTEM CO., LTD.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2025 AND 2024
(UNAUDITED)
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For the Nine Months Ended June 30, |
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2025 |
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2024 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization expense |
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Net loss on disposal of fixed assets |
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Increase (decrease) in current liabilities: |
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Accounts payable |
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Net cash used in operating activities |
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(
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(
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds of amounts due to related parties |
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Net cash provided by financing activities |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
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$ |
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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
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Conversion of shareholder loan to additional paid-in capital |
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$ |
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The accompanying notes are an integral part of these unaudited financial statements.
| F-4 |
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| Table of Contents |
ARCULUS SYSTEM CO., LTD.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2025
(UNAUDITED)
Note 1 – ORGANIZATION AND NATURE OF BUSINESS
ARCULUS SYSTEM CO., LTD. (the “Company”) is a corporation established under the corporation laws in the State of Nevada on October 4, 2019.
The Company has adopted September 30 as its fiscal year end.
Effective on February 15, 2024, the Company changed its address to 4695 MacArthur Court, 11th Floor, Newport Beach, CA 92660.
The Company intends to deliver a robust suite of Electronic Design Automation (EDA) tools and integrated circuit (IC) design services, which will include high-quality system-on-chip (SoC) design capabilities such as intellectual property (IP) design, optimization, integration, and verification, enabling customers to accelerate development cycles and achieve efficient commercial outcomes.
Note 2 – GOING CONCERN
The accompanying financial statements have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The Company has accumulated losses from inception to June 30, 2025, of $
In order to continue as a going concern, the Company will need, among other things, additional capital resources, which management believes to be approximately $
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), as issued by the Financial Accounting Standards Board (“FASB”). These financial statements reflect all adjustments considered necessary by management, consisting of normal recurring accruals, for a fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented.
The Company’s financial statements are presented in U.S. dollars, which is the Company’s functional and reporting currency. All amounts are stated in U.S. dollars unless otherwise indicated.
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. GAAP, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
The results for the three and nine months ended June 30, 2025 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended September 30, 2024, filed with the Securities and Exchange Commission.
The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2025 and for the related periods presented.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
| F-5 |
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| Table of Contents |
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the provisions of Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation , which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employees based on the grant date fair value of those awards.
As of June 30, 2025, the Company has not adopted a stock option or equity incentive plan and has not granted any stock-based compensation awards. Accordingly, no stock-based compensation expense has been recognized in the accompanying financial statements for the period then ended.
Use of Estimates
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. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual events and results could differ from those assumptions and estimates.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to difference between financial statements carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company utilizes the Financial Accounting Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes to account for the uncertainty in income taxes. Topic 740 for Income Tax clarifies the accounting for uncertainty in income taxes by prescribing rules for reconciliation, measurement and classification in financial statements of tax positions taken or expected to be in a tax return. Further, it prescribes a two-step process for the financial statement measurement and recognition of a tax position. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is a greater than 50 percent likelihood of being realized upon ultimate settlement. This topic also provides guidance on the accounting for related interest and penalties, financial statement calculation and disclosure. The Company’s policy is that any interest or penalties related to uncertain tax positions are recognized in income tax expense when incurred. The Company has no uncertain tax positions or related interest and penalties requiring accrual as of June 30, 2025.
New Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to have a material impact on our financial position, operations or cash flows. The Company continues to monitor proposed and issued accounting standards to assess any potential impact on future financial reporting, in accordance with ASC 105, Generally Accepted Accounting Principles .
Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2025.
The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash and related party loans payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximately fair value.
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Basic and Diluted Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal.
Note 4 – CAPITAL STOCK
The Company is authorized to issue up to
Transactions involving the issuance, repurchase, or retirement of common stock are recorded as changes in equity in accordance with ASC 505-Equity. The par value of issued shares is recorded in common stock, with any consideration received in excess of par value recorded in additional paid-in capital.
As of June 30, 2025, the Company had
The Company is authorized to issue
As of June 30, 2025, the Company had no preferred shares issued or outstanding.
Note 5 – RELATED PARTY TRANSACTIONS
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such a time that the Company can support its operations or attain adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by officers, directors, or shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
During the period ended June 30, 2025, our CEO provided a short-term advance to the Company to cover operating expenses and maintain adequate liquidity. As of June 30, 2025, the total outstanding balance of shareholder advances classified as short-term related party loans was $
The Company has evaluated these transactions in accordance with ASC 850, Related Party Disclosures, and determined that disclosure is required due to the related party nature, absence of formal lending terms, and their significance to the Company’s financial condition and operations.
Management has assessed the classification of these advances and, due to their lack of a formal repayment schedule and demand feature, has appropriately presented the balance as current liabilities in the accompanying balance sheet.
Note 6 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events in accordance with ASC 855, Subsequent Events, through August 22, 2025, the date the financial statements were available to be issued. Management has considered both recognized and non-recognized subsequent events that occurred after the balance sheet date but prior to the issuance date of the financial statements.
During the subsequent event evaluation period, the Company received additional financial support from existing shareholders in the form of unsecured, short-term advances to support working capital needs. The advances are non-interest-bearing payable on demand. The shareholder provided the following six advances: $
These advances are classified as subsequent events that did not require adjustment to the financial statements as of June 30, 2025, but are disclosed herein as non-recognized subsequent events due to their relevance to users of the financial statements and potential impact on future liquidity.
Management continues to monitor the Company’s financial position and will evaluate the classification of such transactions in future reporting periods.
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Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this Quarterly Report. Our unaudited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
As used in this quarterly report, the terms “we,” “us,” “our,” or “the Company,” mean Arculus System Co., Ltd., unless otherwise indicated.
All dollar amounts refer to US dollars unless otherwise indicated.
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Overview
Arculus System Co., Ltd. (the “Company,” “we,” “our,” or “us”) is a development-stage company incorporated on October 4, 2019, in the State of Nevada under the name Azzurro Solutions Corp. and established a fiscal year end of September. On February 20, 2025, we changed our name to arculus system, and, on March 5, 2025, we amended and restated our articles of incorporation and changed our name to Arculus System Co., Ltd. and authorized 75,000,000 preferred shares. Subsequent to the change of control, our new management and majority shareholders have changed our business to deliver a robust suite of Electronic Design Automation (EDA) tools and integrated circuit (IC) design services.
We now specialize in the development of high-performance chip design front-end development software tools and solutions. As a developer in the EDA field, we are dedicated to pioneering breakthroughs aimed at assisting IC chip design enterprises in addressing the formidable challenges and critical issues encountered during innovation and development processes and intend to become a trusted key partner in the industry.
Our flagship EDA tool is the Architecture Compiler, which represents our most advanced technology. This powerful solution simplifies SoC architecture design by optimizing software and hardware co-design, seamlessly integrating components, and enhancing overall performance. With the Architecture Compiler, we enable customers to build efficient and robust IC designs, laying a solid foundation for success.
We have developed iPROfiler, an advanced SoC performance analysis tool driven by artificial intelligence and designed for SoC. iPROfiler plays a crucial role in facilitating collaboration and comprehensive analysis among SoC design teams, software teams, and hardware teams. By leveraging its capabilities, customers can unleash the full potential of their SoC designs, achieving exceptional performance and functionality. It also serves as an important sign-off tool, ensuring smooth coordination between front-end and back-end design teams.
Customers are at the core of everything we do, and we strive to build strong partnerships by deeply understanding their goals and challenges. With our extensive experience and the powerful capabilities of our EDA tools, we prepared to tackle the most demanding and intricate problems brought about by IC design.
Our products will include high-quality system-on-chip (SoC) design capabilities such as intellectual property (IP) design, optimization, integration, and verification, enabling customers to accelerate development cycles and achieve efficient commercial outcomes.
As of the date of this filing, we have not commenced principal revenue-generating operations and have generated limited revenues since inception. Our operations have been limited to organizational activities, administrative functions, and preparation for future service offerings.
As of June 30, 2025, we had an accumulated deficit of $345,481. Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Results of Operation
For the three months ended June 30, 2025 compared to the three months ended June 30, 2024
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Three months ended June 30, 2025 |
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Three months ended June 30, 2024 |
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Nine months ended June 30, 2025 |
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Nine months ended June 30, 2024 |
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Revenues |
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Cost of goods sold |
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Operating Expenses |
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Net Loss |
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(103,049 | ) |
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(4,785 | ) |
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(164,867 | ) |
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(19,634 | ) |
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Three Months Ended June 30, 2025
Revenue
We did not incur any revenues for the three months ended June 30, 2025 or June 30, 2024.
Cost of Goods Sold
We did not incur any cost of goods sold for the three months ended June 30, 2025 or June 30, 2024.
Operating Expenses and Net Loss
Operating expenses increased $98,264, or 2054%, to $103,049 for the three months ended June 30, 2025 compared to $4,785 for the three months ended June 30, 2024. The increase is due to general and administrative expenses and professional fees incurred related to corporate overhead, and financial and administrative contracted services, such as legal and accounting. Our net loss consisted solely of our operating expenses.
Nine Months Ended June 30, 2025
Revenue
We did not incur any revenues for the nine months ended June 30, 2025 or June 30, 2024.
Cost of Goods Sold
We did not incur any cost of goods sold for the nine months ended June 30, 2025 or June 30, 2024.
Operating Expenses and Net Loss
Operating expenses increased $147,066, or 826%, to $164,867 for the nine months ended June 30, 2025 compared to $17,801 for the nine months ended June 30, 2024. The increase is due to general and administrative expenses and professional fees incurred related to corporate overhead, and financial and administrative contracted services, such as legal and accounting. Our net loss consisted solely of our operating expenses.
Liquidity and Capital Resources
As of June 30, 2025, we had current assets of $2,310 and a working capital deficit of $256,127, consisting primarily of accounts payable, accrued payroll and payroll taxes and related party advances. We have relied primarily on short-term, non-interest-bearing, related party advances to fund our operations. We believe we will require $500,000 in working capital to cover our operating expenses over the next twelve months.
Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Our total assets were $2,310 for the quarter ended June 30, 2025, compared to $3,145 for the quarter ended September 30, 2024.
Our current and total liabilities were $258,437 for the quarter ended June 30, 2025, compared to $94,405 for the quarter ended September 30, 2024.
Our stockholders’ deficit was $256,127 for the quarter ended June 30, 2025, compared to $91,260 for the quarter ended September 30, 2024.
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Cash Flows from Operating Activities
Net cash used in operating activities increased $103,929, or 800%, to $116,915 for the nine months ended June 30, 2025, compared to $12,986 for the nine months ended June 30, 2024. The increase in cash used was primarily due to an increase in net loss of $164,867, offset by $0 in depreciation and amortization expense, and $47,952 in accounts payable and accrued liabilities.
Cash Flows from Investing Activities
There were no cash flows used in investing activities for the quarter ended June 30, 2025 or June 30, 2024.
Cash Flows from Financing Activities
Cash flows provided by financing activities increased $98,730, or 569%, to $116,080 for the nine months ended June 30, 2025, compared to $17,350 for the nine months ended June 30, 2024, which consisted of related party advances.
Going Concern
Our financial statements have been prepared assuming we will continue as a going concern. As disclosed in Note 2 to our financial statements, we had an accumulated deficit of $345,481 as of June 30, 2025, and limited operations, which raise substantial doubt about our ability to continue as a going concern. Our continued existence is dependent upon our ability to obtain additional funding and implement a business plan that generates sustainable revenues.
Off-Balance Sheet Arrangements
As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. We believe that we will require $500,000 in working capital to fund our needs over the next twelve months.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
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Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses, and related disclosures. The Company’s significant accounting policies are described in Note 3 to the financial statements. Management considers the following policies to be critical because they involve significant judgments and assumptions, and because different assumptions could materially affect the Company’s financial condition or results of operations.
Going Concern
Management evaluates our ability to continue as a going concern in accordance with ASC 205-40. This requires judgment in assessing projected cash flows, anticipated financing, and timing of expenditures. The estimate is significant because we have limited cash and no revenues, and small changes in the assumptions about fundraising success or operating expenses can materially affect whether we are able to continue operations. We prepare short- and medium-term cash flow forecasts, review the status of financing options, and evaluate our historical burn rates when making this judgment. As of June 30, 2025, we have not yet established an ongoing source of revenue and have incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management believes that without at least $500,000 in additional capital, we will not be able to implement our business plan or achieve commercial viability in the next 12 months.
Use of Estimates
The preparation of financial statements requires estimates such as the timing and collectability of liabilities, valuation allowances for deferred tax assets, and accruals for expenses. These estimates are significant because we have limited historical operating data and rely heavily on management’s assumptions. For example, accrued payroll and related taxes are based on management’s assessment of services performed and statutory obligations. Management evaluates these estimates by comparing them with subsequent actual results, consulting with legal and tax advisors, and updating assumptions quarterly.
Fair Value of Financial Instruments
The Company measures certain financial instruments at fair value in accordance with ASC 820, “Fair Value Measurement.” Because we have limited assets and liabilities, most financial instruments are carried at cost. However, related party advances are payable on demand and have no stated interest rate. We determine their fair value by considering the short-term nature of the obligations and the lack of market interest, concluding that carrying value approximates fair value. This judgment is significant because, if more formal debt terms were applied (e.g., interest-bearing notes), reported liabilities and expenses could differ materially.
Income Taxes and Deferred Tax Assets
Management evaluates the realizability of deferred tax assets arising from net operating losses. These judgments are significant because recognition depends on our ability to generate future taxable income, which is uncertain given our development stage. Management establishes a full valuation allowance because it is more likely than not that the deferred tax assets will not be realized. Each quarter, management reviews updated forecasts and industry developments to reassess this allowance.
Material Commitments
None.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment during the next twelve months.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company and not required to provide this information.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (CEO), is responsible for establishing and maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO, to allow timely decisions regarding required disclosure.
As of the end of the fiscal quarter ended June 30, 2025, management conducted an evaluation, under the supervision and with the participation of our CEO, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our CEO concluded that our disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in our internal control over financial reporting, as described below.
Management ’ s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in compliance with policies or procedures.
Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2025, using the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of that date, due to the following material weakness:
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Material Weakness Identified: We did not maintain an adequate segregation of duties or employ sufficient accounting personnel with appropriate experience in U.S. GAAP and SEC reporting requirements. This deficiency increased the risk of material misstatements in the financial reporting process. |
Remediation Plan
We are committed to improving our internal control environment. To remediate the identified material weakness, we plan to evaluate and enhance our internal control procedures and, as resources permit, hire additional qualified personnel or engage external consultants with relevant expertise in financial reporting and SEC compliance. We intend to enhance our internal control procedures in Q4 of 2025.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not subject to any legal proceedings and are unaware of any pending against us.
Item 1A. Risk Factors.
We are a smaller reporting company and not required to provide this information.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We did not issue any equity securities for the quarter ended June 30, 2025.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following documents are filed as part of this report:
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101.INS |
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Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Labels Linkbase Document. |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements 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.
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ARCULUS SYSTEM CO., LTD. |
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By: |
/s/ Jian-Meng Yang |
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Jian-Meng Yang |
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President, Chief Executive Officer, and Chief Financial Officer |
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Date: October 2, 2025 |
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