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$9,422,708 for the nine months endedMarch 31, 2022 . As ofMarch 31, 2022 , the Company had an accumulated deficit of$42,922,131 , working capital deficit of$26,848,961 ; its net cash used in operating activities for the nine months endedMarch 31, 2022 was$6,052,839 . 24
The Company plans to continue its expansion and investments, which will require continued improvements in revenue and net income.
Results of Operations
Results of Operations for the three months ended
The following table sets forth key components of Company's results of operations for the three months endedMarch 31, 2022 and 2021. The discussion following the table addresses these results. For Three Months Ended March 31, 2022 2021 Fluctuation % Net revenues$ 1,401,979 $ (727,957 ) 2,129,936 (292.6 )% Cost of revenues 1,735,905 11,697 1,724,208 14,740.6 % Gross profit (333,926 ) (739,654 ) 405,728 (54.9 )% Operating expenses 731,712 1,028,992 (297,280 ) (28.9 )% Loss from operations (1,065,638 ) (1,768,646 ) 703,008 (39.7 )% Interest income 611 21,145 (20,534 ) (97.1 )% Interest expense - - - N/A Other expense 4 121 (117 ) (96.7 )%
Provision for income taxes expense - 25
(25 ) (100.0 )%
Net loss (1,065,023 ) (1,747,405 ) 682,382 (39.1 )%
Revenues. For the three months endedMarch 31,2022 and 2021, we had revenue of$1,401,979 and$(727,957) respectively, representing an increase of$2,129,936 or 292.6%, which were derived from service package sales for the members and the sales and leasing income from multimedia tablets. The significant increase in revenue was due to there were increase in revenue from service package and leasing income from multimedia tablets. Cost of Revenue. For the three months endedMarch 31, 2022 and 2021, we had cost of revenue of$1,735,905 and$11,697 respectively, representing an increase of$1,724,208 or 14,740.6%. The cost of revenue represents costs of merchandise and souvenirs sent to members and cost of multimedia tablets. The increase in cost was mainly due to increase in the leasing expenses of multimedia tablets. Gross Profit. We generated gross profit of$(333,926) and$(739,654) for the three months endedMarch 31, 2022 and 2021, with a gross margin of (23.8)%
and 101.6% respectively. Operating expenses. The total operating expenses was$731,712 and$1,028,992 for the three months endedMarch 31, 2022 and 2021, representing an decrease of$297,280 or 28.9%. The decrease was mainly due to the reduction of market development costs. Loss from Operations. For the three months endedMarch 31, 2022 and 2021, we had loss from operations of$1,065,638 and$1,768,646 respectively, representing an decrease in loss of$703,008 or 39.7 %. Net loss. For the three months endedMarch 31, 2022 and 2021, we had net loss of$1,065,023 and$1,747,405 respectively, representing an decrease of$682,382 or 39.1%. The decrease was mainly due to increase in revenue. 25
Results of Operations for the nine months ended
The following table sets forth key components of Company's results of operations for the nine months endedMarch 31, 2022 and 2021. The discussion following the table addresses these results. For Nine Months Ended March 31, 2022 2021 Fluctuation % Net revenues$ 1,408,228 $ 578,845 829,383 143.3 % Cost of revenues 3,406,217 624,119 2,782,098 445.8 % Gross profit (1,997,989 ) (45,274 ) (1,952,715 ) 4,313.1 % Operating expenses 7,406,247 4,134,199 3,272,048 79.1 % Loss from operations (9,404,236 ) (4,179,473 ) (5,224,763 ) 125.0 % Interest income 1,730 23,412 (21,682 ) (92.6 )% Interest expense - - - N/A Other expense (income) (20,094 ) 3,359 (23,453 ) (698.2 )%
Provision for income taxes expense 108 1,798
(1,690 ) (94.0 )%
Net loss (9,422,708 ) (4,154,500 ) (5,268,208 ) 126.8 %
Revenues. For the nine months ended December 31,2022 and 2021, we had revenue of
$1,408,228 and $578,845 respectively, representing an increase of $829,383 or
143.3%, which were derived from service package sales for the members and the
sales and leasing income from multimedia tablets. The significant increase in
revenue was due to there were increase in revenue from multimedia tablets.
Cost of Revenue. For the nine months ended March 31, 2022 and 2021, we had cost
of revenue of $3,406,217 and $624,119 respectively, representing an increase of
$2,782,098 or 445.8%. 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 $(1,997,989) and $(45,274) for the
nine months ended March 31, 2022 and 2021, with a gross margin of (141.9)%and (7.8)% respectively. Operating expenses. The total operating expenses was$7,406,247 and$4,134,199 for the nine months endedMarch 31, 2022 and 2021, representing an increase of$3,272,048 or 79.1%. The increase was mainly due to market expansion. Loss from Operations. For the nine months endedMarch 31, 2022 and 2021, we had loss from operations of$9,404,236 and$4,179,473 respectively, representing an increase in loss of$5,224,763 or 125.0%. Net loss. For the nine months endedMarch 31, 2022 and 2021, we had net loss of$9,422,708 and$4,154,500 respectively, representing an increase of$5,268,208 or 126.8%. The increase was mainly due to market expansion. 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:
Nine Months Nine Months
Ended Ended
March 31 , March 31,
2022 2021
Net cash (used in) provided by operating activities
- 12,657
Net cash provided by financing activities 4,948,540
25,590
Effect of exchange rate change on cash 11,633
415,016
Net change in cash and cash equivalents $ (1,092,666
)$ 4,185,356 Operating Activities. Net cash used in operating activities was approximately$6.1 million for the nine months endedMarch 31, 2022 , as compared to approximately$3.7 million net cash provided by operating activities for the nine months endedMarch 31, 2021 . Net cash used in operating activities was mainly due to the increase of approximately$2.0 million of prepayments, and the increase of approximately$5.0 million of customer deposits, and the increase of approximately$0.2 million of other payables and accrued liabilities. Investing Activities.
There are no investing activities for the nine months ended
Financing Activities. Net cash provided by financing activities was approximately$4.9 million for the nine months endedMarch 31, 2022 , as compared to approximately$25,590 net cash provided by financing activities for the six months endedMarch 31, 2021 . 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 nine months endedMarch 31, 2022 and 2021, and are included elsewhere in this report. 27
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