Our audited and unaudited financial statements are stated in United States
Dollars and are prepared in accordance with accounting principles generally
accepted in the United States ("U.S. GAAP").
Overview
We conduct our operations through our two consolidated subsidiaries, Hainan
Cangbao Tianxia Cultural Relic Co., Ltd. ("Hainan Cangbao") and Cangbao Tianxia
(Shanghai) Cultural Relic Co.,Ltd.("Shanghai Cangbao"). These two subsidiaries
were incorporated on May 30, 2018 and June 28, 2019 respectively, in PRC, as
domestic Chinese limited liability corporations.
We commenced our operations in March 2019, and we intend to make a cultural
service platform dedicated to creating industry standards for art investment and
creating a model of online art exchanges and transactions, which allows
collectors, artists, art dealers and owners to access a much larger art trading
market, allowing them to engage with a wide range of collectibles or artwork
investors.
Currently we facilitate trading by individual customers of all kinds of
collectibles, artworks and commodities on our online platforms, which create two
source of income: (1) membership fee income by offering different service
packages for members; (2) transaction commission, charging from both the buyer
and the seller a commission based on the artwork trading amount upon
successfully facilitating artworks transaction.
Cang Bao Tian Xia International Art Trade Center, Inc. has administrative
offices located at Unit 609, Shengda Plaza, No. 61 Guoxing Ave Meilan District,
Haikou, Hainan Province, China 570203.
The Company's fiscal year end is June 30.
Recent Developments
Early in January, 2020, we launched a new application, which enables our
customers to communicate and list artworks to trade. We are currently working
with a third-party technology company to design a tablet, which will have
multiple built-in applications to facilitate membership enrollment and artworks
trade. The tablet is now generating advertisement revenue for the Company.
Results of Operations
Results of Operations for the three months ended September 30, 2020 and 2019
The following table sets forth key components of Company's results of operations
for the three months ended September 30, 2020 and 2019. The discussion following
the table addresses these results.
For Three Months Ended September 30,
2020 2019 Fluctuation %
Net revenues $ 330,402 1,099,379 (768,977 ) -70 %
Cost of
revenues 105,050 697,332 (592,282 ) -85 %
Gross margin 225,352 402,047 (176,695 ) -44 %
Selling expense 754,614 824,207 (69,593 ) -8 %
General and
administrative 719,382 605,911 123,5 21 %
Interest income 367 395 (28 ) -7 %
Interest
expense (172 ) - (172 ) N/A
Other income
(expense) 1,757 68 1,689 2484 %
Provision for
income taxes
expense - 40,461 (40,461 ) -100 %
Net loss (1,246,692 ) (1,027,609 ) (189,310 ) 18 %
Revenues. For the three months ended September 30,2020 and 2019, we had revenue
of $330,402 and $1,099,379, respectively, representing a decrease of $768,977,
or 70%, which were derived from service package sales for the members. We have
not generated revenue from transaction commission and sales of multifunction
demonstration machine since the beginning of operation in March 2019. The
significant decrease in revenue was due to the COVID-19 outbreak for the three
months ended September 30, 2020.
22
--------------------------------------------------------------------------------
Cost of Revenue. For the three months ended September 30, 2020 and 2019, we had
cost of revenue of $105,050 and $697,332 respectively, representing a decrease
of $592,282, or 85%. The cost of revenue represents costs of maintaining our
platform such as network service. and artwork merchandise and souvenirs sent to
member. The decrease in cost was the result of the decrease in revenue.
Gross Margin. We generated gross profit of $225,352 and $402,047 for the three
months ended September 30, 2020 and 2019, with a gross margin of 68% and 37%
respectively.
Operating expenses. For the three months ended September 30, 2020 and 2019, we
had selling expenses of $754,614 and $824,207 respectively, which includes
marketing and advertising costs related to the operations and development of the
platform. For the three months ended September 30, 2020 and 2019, we had general
and administrative expenses of $719,382 and $605,911, respectively which mainly
consist of salaries and related employee benefits, office expenses, professional
service fees, depreciation expenses, rent, and related costs. The total
operating expenses was $1,473,996 and $1,430,119 for the three months ended
September 30, 2020 and 2019, representing a slight increase of $43,876 or 4%.
The operating expenses remained stable though the significant decrease in
revenue.
Loss from Operations. For the three months ended September 30, 2020 and 2019, we
had loss from operations of $1,248,644 and $1,028,072, respectively,
representing an increase in loss of $220,571, or 22%.
Net loss. For the three months ended September 30, 2020 and 2019, we had net
loss of $1,246,692 and $1,068,070 respectively, representing an increase of
$178,624, or 17%. The increase in net loss was mainly due to the decrease in
sales revenues.
Liquidity and Capital Resources
Working Capital Deficit. As of September 30, 2020 and June 30 2020, the Company
had working capital deficit of $5,987,309 and $4,658,908 respectively.
Cash Flows. The following is a summary of the Company's cash flows from
operating, investing and financing activities:
Three Months Three Months
Ended September Ended September
30, 2020 30, 2019
Net cash used in operating activities $ (2,078,215 ) $ (1,478,238 )
Net cash used in investing activities - 3,989
Net cash provided by financing activities 8,005 9,220
Net change in cash and cash equivalents $ (2,072,210 ) $ (1,466,539 )
Operating Activities.
Net cash used in operating activities for the three months ended September 30,
2020 was primarily the result of the net loss of $1,246,692, the increase of
$1,593,168 in advance to suppliers, decrease of $904,279 in account payable,
partly offset by the increase of $1,612,968 in advance from customer, and the
depreciation of $24,294 for the three months ended September 30, 2020.
Net cash used in operating activities for the three months ended September 30,
2019 was primarily the result of the net loss of $1,068,070, the increase of
$1,009,365 in advance to suppliers, decrease of $3,083,927 in advance from
customer, partly offset by the increase of $3,099,744 in account payable, and
the depreciation of $23,313 for the three months ended September 30, 2019.
Investing Activities.
There are no investing activities for the three months ended September 30, 2020.
Net cash provided by investing activities was $2,479 for the three months ended
September 30, 2019. Net cash provided by investing activities mainly reflect
disposal of intangible assets of $6,468, offset by purchase of intangible assets
of $3,989.
23
--------------------------------------------------------------------------------
Financing Activities.
Net cash provided by financing activities was $8,005 and $9,220 for the three
months ended September 30, 2020 and 2019, respectively, both of which referred
to the proceeds from related parties.
Off-Balance Sheet Arrangements
As of September 30, 2020 and June 30, 2020, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K
promulgated under the Securities Act of 1934.
Contractual Obligations and Commitments
As of September 30, 2020 and June 30, 2020, we did not have any contractual
obligations.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial
statements for the three months ended September 30, 2020 and 2019, and are
included elsewhere in this report.
© Edgar Online, source Glimpses