CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC. 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$8,357,685 for the six months endedDecember 31, 2021 . As ofDecember 31, 2021 , the Company had an accumulated deficit of$41,857,108 , working capital deficit of$25,699,370 .
The Company plans to continue its expansion and investments, which will require continued improvements in revenue and net income.
24 Results of Operations
Results of Operations for the three months ended
The following table sets forth key components of Company's results of operations for the three months endedDecember 31, 2021 and 2020. The discussion following the table addresses these results. For Three Months Ended December 31, 2021 2020 Fluctuation % Net revenues$ 1,132 $ 259,358 (258,226 ) (99.6 )% Cost of revenues 834,455 619,498 214,957 34.7 % Gross profit (833,323 ) (360,140 ) (473,183 ) 131.4 % Operating expenses 2,768,781 1,593,483 1,175,298 73.8 % Loss from operations (3,602,104 ) (1,953,623 ) (1,648,481 ) 84.4 % Interest income 23 1,034 (1,011 ) (97.8 )% Interest expense (275 ) - (275 ) N/A Other expense (121 ) (975 ) 854 (87.6 )%
Provision for income taxes expense 1 1,773
(1,772 ) (99.9 )%
Net loss (3,602,478 ) (1,955,337 ) (1,647,141 ) 84.2 %
Revenues. For the three months ended December 31,2021 and 2020, we had revenue
of $1,132 and $259,358 respectively, representing a decrease of $258,226 or
99.6%, 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 decrease in revenue from service package and
leasing income from multimedia tablets.
Cost of Revenue. For the three months ended December 31, 2021 and 2020, we had
cost of revenue of $834,455 and $619,498 respectively, representing an increase
of $214,957 or 34.7%. The cost of revenue represents costs of merchandise and
souvenirs sent to members and cost of multimedia tablets. The increase in cost
was mainly due to increase in the leasing expenses of multimedia tablets.
Gross Profit. We generated gross profit of
Operating expenses. The total operating expenses was$2,768,781 and$1,593,483 for the three months endedDecember 31, 2021 and 2020, representing an increase of$1,175,298 or 73.8%. The increase was mainly due to market expansion. Loss from Operations. For the three months endedDecember 31, 2021 and 2020, we had loss from operations of$3,602,104 and$1,953,623 respectively, representing an increase in loss of$1,648,481 or 84.4 %.
Net loss. For the three months ended
25
Results of Operations for the six months ended
The following table sets forth key components of Company's results of operations for the six months endedDecember 31, 2021 and 2020. The discussion following the table addresses these results. For Six Months Ended December 31, 2021 2020 Fluctuation % Net revenues$ 6,249 $ 329,928 (323,679 ) (98.1 )% Cost of revenues 1,670,312 660,244 1,010,068 153.0 % Gross profit (1,664,063 ) (330,316 ) (1,333,747 ) 403.8 % Operating expenses 6,674,535 2,988,406 3,686,129 123.3 % Loss from operations (8,338,598 ) (3,318,722 ) (5,019,876 ) 151.3 % Interest income 1,394 2,267 (873 ) (38.5 )% Interest expense (275 ) - (275 ) N/A Other income - 115 (115 ) (100.0 )% Other expense (20,098 ) (112,041 ) 91,943 (82.1 )%
Provision for income taxes expense 108 1,773
(1,665 ) (93.9 )%
Net loss (8,357,685 ) (3,430,154 ) (4,927,531 ) 143.7 %
Revenues. For the six months ended December 31,2021 and 2020, we had revenue of
$6,249 and $329,928 respectively, representing a decrease of $323,679 or 98.1%,
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 decrease in revenue from service package.
Cost of Revenue. For the six months ended December 31, 2021 and 2020, we had
cost of revenue of $1,670,312 and $660,244 respectively, representing an
increase of $1,010,068 or 153.0%. The cost of revenue represents costs of
merchandise and souvenirs sent to members and cost of multimedia tablets. The
increase in cost was mainly due to increase in the leasing expenses of
multimedia tablets.
Gross Profit. We generated gross profit of $(1,664,063) and $(330,316) for the
six months ended December 31, 2021 and 2020, with a gross margin of (26,629.3)%
and (100.1)% respectively.
Operating expenses. The total operating expenses was $6,674,535 and $2,988,406
for the six months ended December 31, 2021 and 2020, representing an increase of
$3,686,129 or 123.3 %. The increase was mainly due to market expansion.
Loss from Operations. For the six months ended December 31, 2021 and 2020, we
had loss from operations of $8,338,598 and $3,318,722 respectively, representing
an increase in loss of $5,019,876 or 151.3%.
Net loss. For the six months ended
26
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:
Six Months
Six Months Ended Ended
December 31 , December 31,
2021 2020
Net cash (used in) provided by operating activities
- (25,724 )
Net cash provided by financing activities 2,283,365 20,466
Effect of exchange rate change on cash 6,354 (498,869 )
Net change in cash and cash equivalents $ (1,067,072 ) $ 994,351
Operating Activities.
Net cash used in operating activities was approximately $3.4 million for the six
months ended December 31, 2021 , as compared to approximately $1.5 million net
cash provided by operating activities for the six months ended December 31,
2020 . Net cash used in operating activities was mainly due to the increase of
approximately $1.4 million of prepayments, and the increase of approximately
$5.9 million of customer deposits, the increase of approximately $1.8 million of
related party payables, and the increase of approximately $0.2 million of
inventories.
Investing Activities.
There are no investing activities for the six months ended
Financing Activities. Net cash provided by financing activities was approximately$2.3 million for the six months endedDecember 31, 2021 , as compared to approximately$0.02 million net cash provided by financing activities for the six months endedDecember 31, 2020 . The increase was mainly due to the increase in net proceeds from the related party.
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 six months endedDecember 31, 2021 and 2020, and are included elsewhere in this report. 27
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