Our audited and unaudited financial statements are stated in
Overview
We conduct our operations through our two consolidated subsidiaries,Hainan Cangbao Tianxia Cultural Relic Co., Ltd. ("Hainan Cangbao") andCangbao Tianxia (Shanghai) Cultural Relic Co. ,Ltd.("Shanghai Cangbao"). These two subsidiaries were incorporated onMay 30, 2018 andJune 28, 2019 respectively, in PRC, as domestic Chinese limited liability corporations. We commenced our operations inMarch 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.
The Company's fiscal year end is
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.
Critical Accounting Policies
Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. Our financial statements reflect the selection and application of accounting policies that require management to make significant estimates and judgments. We believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our financial statements included elsewhere in this report. Basis of Presentation
Our financial statements are prepared in accordance with generally accepted
accounting principles in
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the Company has incurred a net loss of$4,154,500 for the nine months endedMarch 31, 2021 . As ofMarch 31, 2021 , the Company had an accumulated deficit of$28,659,486 , working capital deficit of$9,722,469 .
The Company plans to continue its expansion and investments, which will require continued improvements in revenue and net income.
Results of Operations
Results of Operations for the three months ended
The following table sets forth key components of Company's results of operations for the three months endedMarch 31, 2021 and 2020. The discussion following the table addresses these results. For Three Months Ended March 31, 2021 2020 Fluctuation % Net revenues$ (727,957 ) 490,345 (1,218,302 ) (248.5 )% Cost of revenues 11,697 (478,926 ) 490,623 102.4 % Gross margin (739,654 ) 969,271 (1,708,925 ) (176.3 )%
Operating expenses 1,028,992 (490,604 ) 1,519,596 309.7 % Loss (income) from operations (1,768,646 ) 1,459,875
(3,228,521 ) (221.2 )% Interest income 21,145 21,145 N/A Interest expense - (3,556 ) (3,556 ) (100 )%
Other income (expense) 121 (35,489 ) 35,610 100.3 % Provision for income taxes expense 25 (6,289 )
6,314 100.4 % Net (loss) income (1,747,405 ) 1,427,119 (3,174,524 ) (222.4 )% 24
Revenues. For the three months endedMarch 31,2021 and 2020, we had revenue of$(727,957) and$490,345 respectively, representing a decrease of$1,218,302 or 248.5%, which were derived from service package sales for the members and the sales and leasing income from multimedia tablets. The significant decrease in revenue was due to there were adjustments of revenue for the prior periods for the three months endedMarch 31, 2021 . Cost of Revenue. For the three months endedMarch 31, 2021 and 2020, we had cost of revenue of$11,697 and$(478,926) respectively, representing an increase of$490,623 or 102.4%. The cost of revenue represents costs of maintaining our platform such as network service artwork merchandise and souvenirs sent to members and cost of multimedia tablets. The increase in cost was mainly due to the Company has adjustment in the prior period. Gross Margin. We generated gross profit of$(739,654) and$969,271 for the three months endedMarch 31, 2021 and 2020, with a gross margin of 101.6% and 197.7% respectively. Operating expenses. The total operating expenses was$1,028,992 and$(490,604) for the three months endedMarch 31, 2021 and 2020, representing a increase of$1,519,596 or 309.7%. The increase was mainly due to market expansion.
(Loss) income from Operations. For the three months ended
Net (loss) income. For the three months endedMarch 31, 2021 and 2020, we had net (loss) income of$(1,747,405) and$1,427,119 respectively, representing a decrease of$3,174,524 or 222.4%. The decrease in net loss was mainly due to the decrease in sales revenues.
Results of Operations for the nine months ended
The following table sets forth key components of Company's results of operations for the nine months endedMarch 31, 2021 and 2020. The discussion following the table addresses these results. For Nine Months Ended March 31, 2021 2020 Fluctuation % Net revenues$ 578,845 2,406,047 (1,827,202 ) (75.9 )% Cost of revenues 624,119 835,080 (210,961 ) (25.3 )% Gross margin (45,274 ) 1,570,967 (1,616,241 ) (102.9 )%
Operating expenses 4,134,199 2,255,795 1,878,404 83.3 % Loss (income) from operations (4,179,473 ) (684,828 )
(3,494,645 ) 510.3 % Interest income 23,412 1,582 21,830 1,379.9 % Interest expense - (92 ) 92 (100.0 )% Other income (expense) 3,359 (35,238 ) 38,597 109.5 %
Provision for income taxes expense 1,798 2,748
(950 ) 34.6 % Net loss (4,154,500 ) (721,324 ) (3,433,176 ) 476.0 %
Revenues. For the nine months endedMarch 31,2021 and 2020, we had revenue of$578,845 and$2,406,047 respectively, representing a decrease of$1,827,202 or 75.9%, which were derived from service package sales for the members and the sales and leasing income from multimedia tablets. The significant decrease in revenue was due to the decrease in demand for our multimedia tablets for the nine months endedMarch 31, 2021 . Cost of Revenue. For the nine months endedMarch 31, 2021 and 2020, we had cost of revenue of$624,119 and$835,080 respectively, representing a decrease of$210,961 , or 25.3%. The cost of revenue represents costs of maintaining our platform such as network service artwork merchandise and souvenirs sent to members and cost of multimedia tablets. The decrease in cost was the result
of the decrease in revenue.
Gross Margin. We generated gross profit of negative of
25 Operating expenses. The total operating expenses was$4,134,199 and$2,255,795 for the nine months endedMarch 31, 2021 and 2020, representing an increase of$1,878,404 or 83.3%. The increase was mainly due to market expansion. Loss from Operations. For the nine months endedMarch 31, 2021 and 2020, we had loss from operations of$4,179,473 and$684,828 respectively, representing an increase in loss of$3,494,645 or 510.3%. Net loss. For the nine months endedMarch 31, 2021 and 2020, we had net loss of$4,179,473 and$721,324 respectively, representing an increase of$3,433,176 , or 476.0%. The increase in net loss was mainly due to the decrease in sales revenues.
Liquidity and Capital Resources
Working Capital Deficit. As of
Cash Flows. The following is a summary of the Company's cash flows from operating, investing and financing activities:
Nine Months Nine Months Ended EndedMarch 31 ,March 31, 2021 2020
Net cash provided by (used in) operating activities
$ (1,450,932 ) Net cash provided by investing activities 12,657
12,291
Net cash provided by financing activities 25,590
8,702
Effect of exchange rate change on cash 415,016 (12,432 ) Net change in cash and cash equivalents$ 4,185,356
$ (1,442,371 ) Operating Activities. Net cash provided by operating activities was approximately$3.7 million for the nine months endedMarch 31, 2021 , as compared to approximately$1.5 million net cash used in operating activities for the nine months endedMarch 31, 2020 . Net cash provided by operating activities was mainly due to the decrease of approximately$5.2 million accounts payable, the increase of approximately$4.4 million of prepayments, and the increase of approximately$18.4 million of customer deposits, and the increase of approximately$1.2 million of inventories. Investing Activities.
There are no investing activities for the nine months endedMarch 31, 2021 . Net cash provided by investing activities was$12,657 for the nine months endedMarch 31, 2021 . Net cash provided by investing activities mainly reflect disposal of intangible assets of$ 12,657 , offset by purchases of intangible assets of$0 . Financing Activities. Net cash provided by financing activities was$25,590 and$8,702 for the nine months endedMarch 31, 2021 and 2020, respectively, both of which referred to the proceeds from related parties.
Off-Balance Sheet Arrangements
As of
Contractual Obligations and Commitments
As of
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial statements for the nine months endedMarch 31, 2021 and 2020, and are included elsewhere in this report. 26
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