The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand CAT9 Group, Inc., our operations and our present business environment. MD&A is provided as a supplement to-and should be read in conjunction with-our consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q. The audited financial statements for our fiscal year ended December 31, 2019 filed with the Securities Exchange Commission on Form 10-K on April 27, 2020 and Form 10-K/A May 11, 2020 should be read in conjunction with the discussion below. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these unaudited financial statements.

We were incorporated in the State of Delaware on January 26, 2015 and on February 6, 2015 as ANDES 4, Inc.; we filed our registration statement on Form 10 to register with the U.S Securities and Exchange Commission (the "SEC") as a public company. We were organized as a vehicle to explore and acquire a target company or business that sought to find value with perceived advantages of being a publicly held corporation.

On July 31, 2015, the sole officer of ANDES 4, Inc., entered into a Share Purchase Agreement ("SPA") with Chongqing Field Industrial Company Ltd ("CQFI") whereby the sole officer then resigned and sold his entire position on August 12, 2015. On May 2, 2016, the Company issued 6,000,000 shares of common stock to its President, CEO and Chairman, Wenfa "Simon" Sun and 4,000,000 shares of common stock to its CFO, Meihong "Sanya" Qian via employment agreements, further, on May 3, 2016, CQFI consented to a redemption of its 10,000,000 shares held in the Company, with the redemption, the control over the Company was transferred to Wenfa "Simon" Sun and Meihong "Sanya" Qian.

On December 27, 2016, the Company entered into a merger agreement (the "Merger") via CAT9 Group, Inc., CAT9 Holdings, a company organized under the laws of the Cayman Islands, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK") and its wholly-owned subsidiary, Chongqing Field Industrial Company Ltd. ("CQFI").

On December 26, 2017, the Company filed its Form S-1 with the SEC and became effective on April 4, 2018. The Company was issued the trading symbol "CATN" by Financial Industry Regulatory Authority ("FINRA") and began trading on the Over-the-Counter market pink venue, owned by OTC Markets Group Inc.





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On December 7, 2018, our President, CEO and Chairman, Wenfa "Simon" Sun gifted 20,000,000 shares of his personal common stock in our Company to Guofu Industry Development Ltd in a private transaction fully disclosed on Form 13D. These shares represented approximately 19.6% of the shares in CAT9 Group, Inc.

On August 23, 2019, our President, CEO and Chairman, Wenfa "Simon" Sun acquired 10,000,000 shares of common stock held by our former CFO, Meihong "Sanya" Qian who resigned on May 14, 2019. The acquisition of these common shares was done as a privately negotiated transaction and post-purchase, Wenfa "Simon" Sun held 78.3% of CAT9 Group, Inc.

On April 7, 2020, the Company's largest distributor of its products which it received 90% of its revenues doing business under the trade names Zhongjun Jilian (Shanghai) Tech Development Co., Ltd., Shanghai Hanan E-business Co., Lt., and Nanjing Hemu E-business Co., Ltd. ceased all operations. Due to this event, the Company has uncollectible accounts receivables in the amount of 3,299,612.55 RMB which it does not believe is recoverable.

The result of this event will likely place a significant limitation on our sales and revenues for the near future as we seek new distributor relationships for our products.

We also continue to face uncertainty operating under the conditions of COVID-19, the novel coronavirus which began in Wuhan, China. During the first quarter of 2020, China placed several areas under mandatory quarantine which during this period our employees and staff worked from home. As China is slowly relaxing its quarantine measures, there has been additional quarantine lockdowns as COVID-19 infections have been found in other parts of the country. We cannot make any assurances that COVID-19 will not reappear with new infections and to the extent that COVID-19, or another virus appears, we may encounter prolonged operational lockdown measures that would disrupt our business operations.





Results of Operations

Three months ended March 31, 2020 compared to the three months ended March 31, 2019





Sales Revenue

Sales revenue for the three months ended March 31, 2020, was $1,054,015, compared to $333,251 for the three months ended March 31, 2019, an increase of $720,764.During the second quarter of 2019 the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.

Cost of Goods Sold

Cost of goods sold for the three months ended March 31, 2020, was $509,592, compared to $186,413 for the three months ended March 31, 2019, an,increase of 323,179 or 173.4%. The increase in cost of goods is directly related to the increase in sales.





Operating Expenses

Professional fees were $57,790 for the three months ended March 31, 2020, compared to $19,555 for the three months ended March 31, 2019, an increase of $38,235 or 195.5%. Professional fees consist mostly of legal and audit expense.

Consulting expense was $106,398 for the three months ended March 31, 2020, compared to $34,590 for the three months ended March 31, 2019, an increase of $71,808 or 207.6%.Consulting expense has increased due to decreased use of consulting for business management and intellectual property.

Selling, general and administrative expense ("SG&A") was $643,897 for the three months ended March 31, 2020, compared to $250,189 for the three months ended March 31, 2019, an increase of $393,708 or 157.4%. The increase is the result of the overall increase in operations including salaries and wages, rent, freight and marketing expense.





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Net Loss

Net loss for the three months ended March 31, 2020, was $276,295, compared to$158,182 for the three months ended March 31, 2019. The increase in net loss is the result of our increased SG&A expense.

Liquidity and Capital Resources

During the three months ended March 31, 2020, we used $159,817 of cash in operating activities compared to $116,654 used for operating activities in the prior period.

During the three months ended March 31, 2020, we used $0 for investing activities compared to $579 for the purchase of property and equipment in the prior period.

During the three months ended March 31, 2020, we received $141,124 from financing activities compared to $95,877 received in the prior period.

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