GUSHEN, INC. As used herein and except as otherwise noted, the term "Company", "it(s)",
"our", "us", "we" and "GSHN" shall mean
The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this report. Certain statements in this report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words "may," "will," "should," "anticipate," "estimate," "plan," "potential," "project," "continuing," "ongoing," "expects," "management believes," "we believe," "we intend," or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. Overview OnJuly 30, 2021 ,Gushen, Inc. , aNevada corporation ("GSHN" or the "Company"),Dyckmanst Limited , a company organized under the laws of theBritish Virgin Islands ("Dyckmanst Limited "), and all shareholders ofDyckmanst Limited immediately prior to the closing (collectively, the "Dyckmanst Limited Shareholders", each, a "Dyckmanst Limited Shareholder") entered into a share exchange agreement (the "Share Exchange Agreement"), pursuant to which the Company acquired 100% of the issued and outstanding equity securities ofDyckmanst Limited in exchange for 381,600,000 shares of common stock, par value$0.0001 per share (the "Common Stock") of the Company (the "Share Exchange"). Immediately prior to the closing of the Share Exchange, two existing holders of aggregated 30,000,000 shares of Series A preferred stock of the Company, par value$0.0001 per share (the "Preferred Stock") delivered 29,000,000 shares of Preferred Stock to the Company for cancellation ("the "Cancellation of Certain Preferred Stock"), each Preferred Stock is convertible into 10 shares of Common Stock. As a result, immediately following the closing of the Share Exchange, there are 410,618,750 shares of Common Stock issued and outstanding and 1,000,000 shares of Preferred Stock issued and outstanding.Dyckmanst Limited Shareholders collectively control 90.72% voting power of the Company on as converted basis, with respect to all of the shares of common stock and preferred stock, voting as a single class, with each share of common stock entitles to 1 vote and each share of preferred stock entitles to 10 votes. The Share Exchange Agreement is incorporated by reference from the current reports on Form 8-K filed with the theSecurities and Exchange Commission onAugust 6, 2021 . Immediately prior to entering into the Share Exchange Agreement withDyckmanst Limited and shareholders ofDyckmanst Limited , we were a shell company with no significant asset or operation, we have never generated any revenue, and during the period fromNovember 2017 throughMarch 2020 , we were dormant. As a result of the Share Exchange, we operate through our PRC affiliated entity,Beijing Zhuoxun Century Culture Communication Co., Ltd. ("Zhuoxun Beijing"), located inBeijing, China .Dyckmanst Limited does not have any substantive operations other than holdingEdeshler Limited , aHong Kong company, which in return holdingBeijing Fengyuan Zhihui Education Technology Co., Ltd. (Fengyuan Beijing),who controls Zhuoxun Beijing through certain contractual arrangements. 17
As a holding company with no material operations of our own, we conduct our operations inChina through our contractual arrangements datedFebruary 5, 2021 , which also known as VIE Agreements, with Zhuoxun Beijing, a variable interest entity, or "VIE", and its subsidiaries. Neither we nor our subsidiaries own any equity interests in VIE. The VIE Agreements are designed to provide FengyuanBeijing , our wholly-owned subsidiary (the "WFOE"), with the power, rights, and obligations equivalent in all material respects to those it would possess as the principal equity holder of Zhuoxun Beijing, including absolute control rights and the rights to the assets, property, and revenue of Zhuoxun Beijing. This VIE structure is used to replicate foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in the telecommunications sector. As a result of our direct ownership in Fengyuan Beijing and the VIE Agreements, we are regarded as the primary beneficiary of our VIE. The VIE Agreements are incorporated by reference from the current reports on Form 8-K filed with the theSecurities and Exchange Commission onAugust 6 , 2021.ZhuoxunBeijing provides family education resources to promote all-around education onsite in local communities organized by their regional collaborative education agency and offer parents easy access to a wide variety of courses online through our application.
Zhuoxun Beijing delivers onsite educational services through our nationwide
physical network of regional collaborative education agency. Zhuoxun Beijing
onsite educational services include programs such as individual development,
youth leadership development, and parenting schools, enabling in-person guidance
and interactions in classes. Zhuoxun Beijing has developed long-term business
relationships with around 18 regional education agencies around the country,
whom Zhuoxun Beijing provides systematic training and management for to ensure
to deliver high-quality and uniformed educational service system.
Zhuoxun Beijing provides online education through their mobile application,
ZhuoXun App ("??"), which is geared towards Chinese parents designed to help
them acquire different family education resources. Zhuoxun Beijing's products
provide two sets of curricula: "Good Parenting" ("????") and "Wise Parents"
("????"). "Good Parenting", focused on child development, provides courses
including EQ training, learning habits, learning ability, parents-children
communication, stages of puberty, etc. to promote children's mental and
psychological health. "Wise Parents" introduces general strategies of family
education to parents to help them better understand and support children's
growth and needs, whereby courses such as traditional family values, improvement
of parents' qualifications, psychological analysis are provided. Through Zhuoxun
Beijing's mobile application, Zhuoxun Beijing's users can, based on their own
interest and needs, select courses that suitable for them and obtain valuable
knowledge and skills provided by Zhuoxun Beijing's courses. Zhuoxun Beijing's
users on mobile platform can use iPhone, Android, iPad and other tablets to
review the courses anywhere and anytime. As of the date hereof, Zhuoxun
Beijing's has around 1.52 million registered users in ZhuoXun App.
Zhuoxun Beijing's online family education mobile platform monetizes through
in-app purchases. Zhuoxun Beijing provides one free trial class of each course
for all the users. The remaining classes are available for purchase. Users are
able to view the first class for free before determining if to purchase the
remaining classes.
Zhuoxun Beijing's product Zhuoxun Anti-Addiction Cellphone ("Zhuoxun Cellphone")
is an intelligent terminal device. Zhuoxun Beijing's cooperate with Dami Zhilian
Information Technology Group Co., Ltd , a technology company that develops and
produces smartphones ("Dami Zhilian"). Zhuoxun Beijing's gives their design
requirements to Dami Zhilian, who customizes and produces Zhuoxun Cellphone for
us. Zhuoxun Beijing doesnot own any intellectual property in connection with
Zhuoxun Cellphones. Zhuoxun Beijing sell Zhuoxun Cellphones through regional
collaborative education agency. Zhuoxun Cellphone has primarily four functions
including anti-addiction, myopia prevention, security, and study assistance, for
the purpose of managing elementary and middle school students. Parents are able
to personalize and monitor children's use of Zhuoxun Cellphone by setting screen
auto-lock, monitoring internet surfing, monitoring mobile application usage,
monitoring physical locations, etc.
18
Critical Accounting Policies and Estimates
Basis of Presentation
The financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in
Use of Estimates The preparation of these consolidated financial statements in conformity withU.S. GAAP requires management of the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Identified below are the accounting policies that reflect the Company's most significant estimates and judgments, and those that the Company believes are the most critical to fully understanding and evaluating its consolidated financial statements. COVID-19 Outbreak
InMarch 2020 theWorld Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time. Revenue Recognition The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation. Revenues are recognized when control of the promised goods or services is transferred to our customers, which may occur at a point in time or over time depending on the terms and conditions of the agreement, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Company identified the following performance obligations for each type of contract:
Training Revenue The Company's onsite training course service primarily includes assigning instructors, providing onsite classes and presenting training materials to the course participantswho attend the classes. The series of tasks as discussed above are interrelated and are not separable or distinct as the customers cannot benefit from the standalone task.
The Company's online training course service primarily includes courseware or videos which are already published on the website. Other than providing the access, there are no bundle or multiple separable and distinct tasks.
According to ASC 606-10-25-19, there is one performance obligation for the training course service.
China Good Student Project Revenue
TheCompany's Chinese Good Student Project includes assisting in both promoting the program and organizing activities for the course participants. Those tasks are not separable and the course participants cannot benefit from the standalone task as defined under ASC 606-10-25-19. Thus, there is only one performance obligation with respect to theChina Good Student Project service. 19 Mobile Phone Revenue
The Company's sales contracts of anti-addiction mobile phone device provide that the Company provides multiple delivery of the product specified in the contracts. The contacts identify the quantity, product model, product type and unit price of the product that will be sold to our customers. The contracts allow the customers to place separate orders within the credit limit as specified in the contracts. The delivery is based on the quantity of customers' order. The Company's customers can benefit from the mobile phone devices every time it delivers to them. Therefore, the delivery of the products is separately identifiable and distinct.
Hence, there are multiple performance obligations in each of the sale contracts of anti-addiction mobile phone device.
Practical expedients and exemption
The company has not occurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
Other service income is earned when services have been rendered.
Income Taxes
We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. We apply ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.
Foreign Currency and Foreign Currency Translation
The functional currency of the Company isthe United States dollar ("US dollar"). The Company's subsidiary and VIEs with operations in PRC uses the local currency, the Chinese Yuan ("RMB"), as their functional currencies. An entity's functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management's judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of comprehensive loss. The consolidated financial statements are presented inU.S. dollars. Assets and liabilities are translated intoU.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders' equity accounts are translated using the historical exchange rates at the date the entry to stockholders' equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period's income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the consolidated balance sheets. 20
Translation of amounts from RMB into
Balance sheet items, except for equity accountsSeptember 30, 2020 RMB6.8013 to$1 September 30, 2019RMB7.1360 to$1 Income statement and cash flows items For the year endedSeptember 30, 2020 RMB7.0061 to$1 For the year endedSeptember 30, 2019 RMB6.8750 to$1 Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and at banks and highly liquid investments, which are unrestricted from withdrawal or use, and which have original maturities of year or less when purchased.
Accounts Receivable, Net The carrying value of accounts receivable is reduced by an allowance that reflects the Company's best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.
The adoption of the new revenue standards did not change the Company's historical accounting methods for its accounts receivable.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and intangible assets.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation
and accumulated impairment. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
Estimated useful lives (years)
Office and computer equipment 5
Lease improvement 3
Expenditure for maintenance and repairs is expensed as incurred.
The gain or loss on the disposal of property, plant and equipment is the
difference between the net sales proceeds and the lower of the carrying value or
fair value less cost to the relevant assets and is recognized in general and
administrative expenses in the consolidated statements of comprehensive loss.
Intangible Assets
Intangible assets mainly comprise domain names and trademarks. Intangible assets
are recorded at cost less accumulated amortization with no residual value.
Amortization of intangible assets o is computed using the straight-line method
over their estimated useful lives.
The estimated useful lives of the Company's intangible assets are listed below:
Estimated useful lives (years)
Software 10
Impairment of Long-lived Assets
In accordance with ASC 360-10-35, the Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant management judgment based on the Company's historical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in the Company's business model is determined by its management. An impairment loss would be recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized is measured by the amount by which the carrying values of the assets exceed the fair value of the assets. No impairment has been recorded by the Company as ofSeptember 30, 2020 and 2019. 21 Credit risk
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. As ofSeptember 30, 2020 and 2019, substantially all of the Company's cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality. For the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses. Historically, such losses have been within management's expectations Segments The Company evaluates a reporting unit by first identifying its operating segments, and then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meets the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The Company has only one major reportable segment in the periods presented.
Fair Value of Financial Instruments
U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financial instruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three-tier fair value hierarchy is:
Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - include other inputs that are directly or indirectly observable in the market place
Level 3 - unobservable inputs which are supported by little or no market activity
The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts and other receivables, other current assets, accounts and other payables, and other short-term liabilities approximate their fair value due to their short maturities. In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the accompanying consolidated statements of operations and comprehensive loss as other income (expense). To estimate fair value, the Company refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.
As of
Restricted assets The Company's PRC subsidiary and VIE are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized inChina is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations inChina . The Company's PRC subsidiary and its VIE are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. In addition, the Company's operations are conducted and revenues are generated inChina , and all of the Company's revenues earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation inChina , and, as a result, the Company may be unable to distribute any dividends outside ofChina due to PRC foreign exchange control regulations that restrict the Company's ability to convert RMB intoU.S. dollars. 22
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
Adoption of ASC Topic 606, "Revenue from Contracts with Customers"
InMay 2014 , theFinancial Accounting Standards Board (FASB) issued Topic 606, which supersedes the revenue recognition requirements in Topic 605. The Company adopted Topic 606 as of the inception date.
Adoption of ASC Topic 842, "Leases"
In
The Company adopted ASC Topic 842 using the modified retrospective transition method effective the inception date. There was no cumulative effect of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date. See Note 2 "Leases" above for further details.
Accounting Pronouncements Issued But Not Yet Adopted
Financial Instruments. InJune 2016 , the FASB issued Accounting Standards Update No. 2016-13, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2016-13"). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning afterDecember 15, 2019 , with early adoption permitted. InNovember 2019 , FASB issued ASU 2019-10, "Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)." This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by theSEC to fiscal years beginning afterDecember 15, 2022 , including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements. Income Taxes. InDecember 2019 , the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes. This standard will be effective forKing Eagle beginningSeptember 30, 2021 . We are currently evaluating the impact of the standard on our consolidated financial statements. Financial Operations Overview
Comparison of Three Months Ended
The following table sets forth key components of our results of operations
during the three months ended
Three Months Ended June 30,
2021 2020
% %
Amount of Revenue Amount of Revenue
Revenue $ 33,369 100.00 $ 833,767 100.00
Cost of revenue (13,122 ) (39.32 ) (189,563 ) (22.74 )
Gross profit 20,247 60.68 644,204 77.26
Selling expenses (1,746,126 ) (5,232.78 ) (827,554 ) (99.25 )General and administrative expenses (363,517 ) (110.51 )
(240,342 ) (110.51 ) Loss from operations (2,089,396 ) (513.39 ) (423,692 ) (513.39 ) Other income 5,748 17.23 12,933 1.55 Net loss before income taxes (2,083,648 ) (6,244.26 ) (410,759 ) (49.27 ) Income tax benefit 408,431 1,223.98 0 - Net loss$ (1,675,217 ) (5,020.28 )$ (410,759 ) (49.27 ) 23 Revenue. The Company's revenue was decreased$800,398 from$33,369 to$833,767 during the three months endedJune 30, 2021 compared with the same period 2020. Due to the Corona virus 19, the Company stop the offline training during the months endedMarch 31, 2021 . Cost of revenue.
Our cost of revenue was
Gross profit and gross margin.
Our gross profit was$20,247 for the three months endedJune 30, 2021 , compared with a gross profit of$644,204 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 39.32% for the three months endedJune 30, 2021 , compared to a gross profit of 22.74% for the same period last year. Selling expenses.
Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as advertising fee, marketing fees. Our selling expenses increased by$918,572 to$1,746,126 for the three months endedJune 30, 2021 , compared to$827.554 for the same period in 2020. We adjust the strategy by reducing our own selling employees and raising more marketing fee to local agents for attracting more customers. Three Months ended June 30, 2021 2020 Fluctuation Amount % Amount % Amount % Salary and welfare 267,956 15.35 269,586 32.58 (1,630 ) (0.60 ) Advertising Fees 58,033 3.32 (75 ) (0.01 ) 58,108 679.35 Conference Fees 40,868 2.34 6,599 0.8 34,269 519.31 Marketing fee 560,282 32.09 229,100 27.68 331,182 85.67 Service fee 761,628 43.62 179,322 21.67 582,306 324.73 Others 57,359 3.28 143,022 17.28 (85,663 ) (59.89 )
Total Selling Expense$ 1,746,126 100$ 827,554 100
$ 918,572 25.98
General and administrative expenses.
Our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses increased by$123,176 to$363,517 for the three months endedJune 30, 2021 , compared to$240,341 for the same period in 2020. We hired more staff for organization managements and reduce the professional service by third parties. Three Months ended June 30, 2021 2020 Fluctuation Amount % Amount % Amount % Salary and welfare 228,578 62.87 129,052 53.70 99,526 77.12 Depreciation and amortization 27,735 7.63 14,104 5.87 13,631 96.65 Rent 22,097 6.08 50,582 21.05 (28,485 ) (56.31 ) Profession fee 60,329 16.60 (81,524 ) (33.92 ) 141,853 (174.00 ) Others 24,778 6.82 128,127 53.30 (103,349 ) (80.66 ) Total G&A Expenses$ 363,517 100$ 240,341 100$ 123,176 51.25 24 Income tax benefit.
Our Income tax benefit was
Net loss. As a result of the cumulative effect of the factors described above, our net loss was$1,675,217 and$410,759 for the three months endedJune 30, 2021 and 2020, respectively.
Comparison of Nine Months Ended
The following table sets forth key components of our results of operations during the nine months endedJune 30, 2021 and 2020, both in dollars and as a percentage of our revenue. Nine Months Ended June 30, 2021 2020 % % Amount of Revenue Amount of Revenue Revenue$ 1,314,172 100.00$ 6,169,179 100.00 Cost of revenue (856,255 ) (65.16 ) (2,858,623 ) (46.34 ) Gross profit 457,917 34.84 3,310,556 53.66 Selling expenses (5,752,580 ) (437.73 ) (4,566,424 ) (74.02 )
General and administrative expenses (1,452,230 ) (110.51 )
(1,358,998 ) (22.03 ) Loss from operations (6,746,893 ) (513.39 ) (2,614,866 ) (42.39 ) Other income 25,955 1.98 25,671 0.42
Net loss before income taxes (6,720,938 ) (511.42 )
(2,589,195 ) (41.97 ) Income tax benefit 483,283 36.77 - - Net loss$ (6,237,655 ) (474.65 )$ (2,589,195 ) (41.97 ) Revenue. The Company's revenue was decreased$4,855,007 from$6,169,179 to$1,314,172 during the nine months endedJune 30, 2021 compared with the same period 2020. Due to the Corona virus 19, the Company stop the offline training during the months endedMarch 31, 2021 . Cost of revenue. Our cost of revenue was$856,255 and$2,858,623 for the nine months endedJune 30, 2021 and 2020, respectively. The decrease was in line with the decrease
of revenue.
Gross profit and gross margin.
Our gross profit was$457,917 for the nine months endedJune 30, 2021 , compared with a gross profit of$3,310,556 for the same period last year. Gross profit as a percentage of revenue (gross margin) was 34.84% for the nine months endedJune 30, 2021 , compared to a gross profit of 53.66% for the same period last year. 25 Selling expenses.
Our selling expenses consist primarily of compensation and benefits to our expense related to the revenue, such as advertising fee, marketing fees. Our selling expenses increased by$1,186,156 to$5,752,580 for the nine months endedJune 30, 2021 , compared to$4,566,424 for the same period in 2020. We adjust the strategy by reducing our own selling employees and raising more marketing fee to local agents for attracting more customers. Nine Months ended June 30, 2021 2020 Fluctuation Amount % Amount % Amount % Salary and welfare 1,082,666 18.82 1,334,852 29.23 (252,186 ) (18.89 ) Advertising Fees 166,157 2.89 21,320 0.47 144,837 679.35 Conference Fees 93,188 1.62 137,962 3.02 (44,774 ) (32.45 ) Marketing fee 1,419,594 24.68 764,561 16.74 655,033 85.67 Service fee 2,625,111 45.63 1,742,936 38.17 882,175 50.61 Others 365,864 6.36 564,793 12.37 (198,929 ) (35.22 )
Total Selling Expense$ 5,752,580 100$ 4,566,424
100$ 1,186,156 25.98
General and administrative expenses.
Our general and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional fees and other expenses incurred in connection with general operations. Our general and administrative expenses increased by$93,232 to$1,452,230 for the nine months endedJune 30, 2021 , compared to$1,358,998 for the same period in 2020. We hired more staff for organization managements and reduce the professional service by third parties. Nine Months ended June 30, 2021 2020 Fluctuation Amount % Amount % Amount % Salary and welfare 729,380 50.23 347,888 25.60 381,492 109.66 Depreciation and amortization 82,729 5.70 42,120 3.10 40,609 96.41 Rent 83,418 5.74 112,946 8.31 (29,528 ) (26.14 ) Profession fee 320,122 22.04 578,191 42.54 (258,069 ) (44.63 ) Others 236,581 16.29 277,853
20.45 (41,272 ) 14.85
Total G&A Expenses
Income tax benefit.
Our Income tax benefit was
Net loss. As a result of the cumulative effect of the factors described above, our net loss was$6,237,655 and$2,589,195 for the nine months endedJune 30, 2021
and
2020, respectively.
26
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods
indicated:
Nine Months Ended
June 30,
2021 2020Net cash used in operating activities$ (3,488,115 ) $ (3,863,678 ) Net cash used in investing activities (79,289 ) (15,734 ) Net (decrease) increase in cash and cash equivalents (3,567,404 ) (3,879,412 ) Effect of exchange rate changes on cash and cash equivalents 346,602
116,951
Cash and cash equivalents at the beginning of period 7,134,106
10,338,433
Cash and cash equivalents at the end of period$ 3,913,303
$ 6,575,972 As ofJune 30, 2021 we had cash and cash equivalents of$3,913,303 . To date, we have financed our operations primarily through borrowings from our stockholders, related and unrelated parties. Operating Activities Net cash used in operating activities was$3,488,115 for the nine months endedJune 30, 2021 , as compared to$3,863,678 net cash used in operating activities for the nine months endedJune 30, 2020 . The net cash provided by operating activities for the nine months endedJune 30, 2021 was mainly due to our net loss of$6,237,655 , an increase in other payables of$1,239,466 , partially offset by the decrease in other receivable of$1,923,731 . The net cash provided by operating activities for the nine months endedJune 30, 2020 was mainly due to our net loss of$2,589,194 , increase in advances to suppliers of$1,747,281 , partially offset by the decrease in other receivable of$3,447,954 . Investing Activities
Net cash used in investing activities was$79,289 for the nine months endedJune 30, 2021 , as compared to$15,734 for the nine months endedJune 30, 2020 . The net cash used in investing activities for the nine months endedJune 30, 2021 and 2020 was mainly attributable to purchase of property, plant and equipment.
Off-Balance Sheet Arrangements
As of
Critical Accounting Principles
The preparation of consolidated financial statements in accordance with US GAAP
requires the Company's management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results can, and in many cases will, differ from those estimates. We have
not identified any critical accounting policies.
27
© Edgar Online, source
