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 for the third quarter-ended September 30,
2021. The audited financial statements for our fiscal year ended December 31,
2020 filed with the Securities Exchange Commission on Form 10-K on March 30,
2021 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 September 30, 2021 compared to the three months ended
September 30, 2020
Sales Revenue
Sales revenue for the three months ended September 30, 2021, was $205,465
compared to $201,874 for the three months ended September 30, 2020, an increase
of $3,591or 1.78% Our revenue has increased in the current period due to new
customers obtained in the third quarter of 2021.
Cost of Goods Sold
Cost of goods sold for the three months ended September 30, 2021, was
$75,071 compared to $123,331 for the three months ended September 30, 2020, a
decrease of $48,260 or65%. The decrease in cost of goods is directly related to
the change of the exchange rate (6.9 RMB as of 9-30-2020, and 6.4RMBas of
9-30-2021), and the decreasing in cost of raw materials.
Operating Expenses
Professional fees were $4,730 for the three months ended September 30, 2021,
compared to $7,464 for the three months ended September 30, 2020, a decrease of
$2,734 or 57%. Professional fees consist mostly of legal and audit expenses.
Selling, general and administrative expense ("SG&A") was $368,013 for the three
months ended September 30, 2021, compared to $159,170 for the three months ended
September 30, 2020, an increase of $208,843 or 131%. The increase is the result
of the overall increase in marketing and promotional expenses.
Other income/expenses
We had total other expenses for the three months ended September 30, 2021 of
$17,523, compared to $2,904 in income for the three months ended September 30,
2020. The change was mainly due to increase in interest expense associated with
the financing.
Net Income/Loss
Net loss for the three months ended September 30, 2021, was $266,477, and
compared to a net loss of $91,155 for the three months ended September 30, 2020.
The change in the current period is primarily due to an increase of operating
expenses related to sales.
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Nine months ended September 30, 2021 compared to the nine months ended September
30, 2020
Sales Revenue
Sales revenue for the nine months ended September 30, 2021, was $1,156,584,
compared to $1,483,312 for the nine months ended September 30, 2020, a decrease
of $326,728 or 22%. We have experienced a decrease in revenue primarily due to
the largest distributor of our products ceasing all operations.
Cost of Goods Sold
Cost of goods sold for the nine months ended September 30, 2021, was $418,136,
compared to $729,789 for the nine months ended September 30, 2020, a decrease of
$311,653 or 42.7%. The decrease in cost of goods is directly related to the
decrease in sales.
Operating Expenses
Professional fees were $34,289 for the nine months ended September 30, 2021,
compared to $78,695 for the nine months ended September 30, 2020, a decrease of
$44,406 or 56%. Professional fees consist mostly of legal and audit expenses.
SG&A expense was $675,203 for the nine months ended September 30, 2021, compared
to $1,163,187 for the nine months ended September 30, 2020, a decrease of
$487,984 or 42%. In the prior period we had significant bad debt expense that we
did not incur in the current period.
Other income/expenses
We had total other expenses for the nine months ended September 30, 2021 of
$32,960, compared to $21,396 for the nine months ended September 30, 2020. The
increase in other expense was mainly due to increase in interest expense
associated with the financing.
Net Income/Loss
Net loss for the nine months ended September 30, 2021, was $34,117 compared to a
net loss of $633,020 for the nine months ended September 30, 2020. The change
from a net loss in the prior period to a net income in the current period is
primarily due to our decrease of operating expenses.
Liquidity and Capital Resources
During the nine months ended September 30, 2021, we received $391,072 of cash
from operating activities compared to $332,358 used by operating activities in
the prior period.
During the nine months ended September 30, 2021, we used $12,855 for investing
activities for the purchase of software in the prior period compared to $0 in
the prior period.
During the nine months ended September 30, 2021, we used $99,261 in financing
activities due to the repayment of loans compared to $144,650 received in the
prior period.
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CAT9 GROUP INC. 
