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    HJGP   US41044P1066

HANJIAO GROUP, INC.

(HJGP)
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HANJIAO GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/12/2021 | 12:54pm EST
The following discussion and analysis of our Company's financial condition and
results of operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes included elsewhere in
the report. This discussion contains forward-looking statements that involve
risks and uncertainties. Actual results and the timing of selected events could
differ materially from those anticipated in these forward-looking statements as
a result of various factors. See "Cautionary Note Concerning Forward-Looking
Statements" on page 2.



The description of our business included in this quarterly report is summary in
nature and only includes material developments that have occurred since the
latest full description. The full discussion of the history and general
development of our business is included in "Item 1. Description of Business"
section of the Company's Annual Report on Form 10-K filed with the SEC on March
31, 2021, which section is incorporated by reference.



Unless otherwise noted, all currency figures quoted as "U.S. dollars", "dollars"
or "US$" refer to the legal currency of the United States. References to
"Chinese Yuan" or "Renminbi ("RMB")" are to the Chinese Yuan, the legal currency
of the People's Republic of China ("PRC" or "China"). Throughout this report,
assets and liabilities of the Company's subsidiaries are translated into U.S.
dollars using the exchange rate on the balance sheet date. Revenue and expenses
are translated at average rates prevailing during the period. The gains and
losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders' equity.



Hanjiao Group, Inc. ("HJGP") is a holding company that, through its subsidiaries
and variable interest entity (collectively, the "Company" or "we") is engaged in
the business of selling healthcare and other related products to the middle-aged
and elderly market segments in the PRC through our online to offline (O2O)
platform. Our O2O platform integrates our e-commerce platform with physical
outlets to connect consumers and merchants in a dynamic marketplace. Our
platform not only offers users the convenience of making online purchases, but
also provides users the possibility to purchase and receive products at offline
service centers. Currently, our core product categories include nutritional
supplements, cosmetics, smart home products (such as smart watches) and home
appliances (such as water filters and air purifiers). We have developed several
branch offices with outlets across the PRC with approximately 160,000 users.



We conduct business primarily through our variable interest entity, Beijing
Yingjun Technology Co., Ltd. (formerly known as Beijing Luji Technology Co.,
Ltd.) ("Beijing VIE") that was formed in Beijing, China on March 27, 2007. HJPG
does not have a direct equity ownership interest in Beijing VIE but relies on a
series of contractual arrangements, or variable interest entity (VIE) agreements
("VIE Agreements"), through Beijing Hanze Management Consulting Co. Ltd.
(formerly known as Beijing Hongtao Management Consulting Co., Ltd.) ("Beijing
Hanze"), to control and receive substantially all of the economic risks and
benefits of Beijing VIE's business in the PRC in which foreign investment is
restricted or prohibited. The VIE agreements are designed to mimic direct
ownership of Beijing VIE and allow the financial conditions and results of
operations of Beijing VIE to be consolidated with the financial statements of
HJPG. A fuller discussion of the VIE agreements is included in the section
entitled "Contractual Agreements between Beijing Hanze, Beijing VIE and Beijing
VIE Shareholders."



The VIE Agreements also provide HJGP, through its subsidiaries including Beijing
Hanze, with an exclusive option to purchase all or part of the equity interests
in Beijing VIE when and to the extent permitted by PRC law. HJGP's management
concluded that Beijing VIE and its subsidiaries are variable interest entities
of HJPG and Beijing Hanze is the primary beneficiary of Beijing VIE and its
subsidiaries. As such, the financial statements of the Beijing VIE and its
subsidiaries are included in the unaudited condensed consolidated financial
statements of HJGP. References to the Company's financial condition, results of
operations and the like in this report refer to the financial condition and
results of operations of HJPG, its subsidiaries and Beijing VIE and its
subsidiaries on a consolidated basis.





  27





Our corporate organizational chart is below:



                               [[Image Removed]]



     (1)  HanJiao International Holding Limited. ("HJ" or "HanJiao") was
          incorporated on July 5, 2018 in the British Virgin Islands.

(2) LuJi Technology International Holding Limited ("Luji Technology") was

incorporated on July 5, 2018 in the British Virgin Islands and is wholly

owned by HJ.

(3) Inooka Holding Ltd. was established on July 18, 2018 in Hong Kong and is

wholly owned by Luji Technology.

(4) Beijing Hanze Management Consulting Co., Ltd. (fka Beijing Hongtao

Management Consulting Co., Ltd., currently "Beijing Hanze"), a Wholly

Foreign-Owned Enterprise ("WFOE"), was established in the PRC on October

11, 2018 and is a wholly owned subsidiary of Inooka Holding Ltd. It

currently provides consulting and technical services to Beijing Yingjun

Technology Co., Ltd. (fka Beijing Luji Technology Co., Ltd., currently

"Beijing VIE").

(5) Beijing VIE was established in the PRC on March 27, 2007. It is engaged

in the business of selling goods in China. Beijing Hanze controls

Beijing VIE via various variable interest contractual arrangements ("VIE

agreements") to realize its economic benefits. Currently, the

shareholders of Beijing VIE are Ms. Tian Xiangyang, Mr. Tian Zhihai, Mr.

Liu Zexian, Ms. Gao Xuewei and Ms. Li Chunduo, together the "Beijing VIE

Shareholders".

(6) Guoyi Investment Fund Management (Beijing) Co., Ltd. ("Beijing Guoyi")

was formed on February 19, 2016, and is wholly owned by Beijing VIE.

Beijing Guoyi has no business activity as of the date of this Quarterly

Report.

(7) On March 15, 2019, Beijing VIE executed a Share Purchase Agreement with

Rongcheng Health Group Co., Ltd. and acquired a 44% equity interest in

Rongcheng Tianrun Taxus Co., Ltd. ("Rongcheng Tianrun") for RMB

79,830,000 (approximately $12.3 million). Rongcheng Tianrun is organized

          and registered in the PRC, and it is engaged primarily in the
          cultivation and marketing of Taxus, a type of medicinal plant.






  28





Contractual Agreements between Beijing Hanze, Beijing VIE and Beijing VIE Shareholders




We do not have a direct equity ownership interest in Beijing VIE but rely on a
series of contractual arrangements, the VIE Agreements, to control and receive
the economic benefits of Beijing VIE's business. We rely on contractual
arrangements with our variable interest entities to operate our business in the
PRC and other businesses in which foreign investment is restricted or
prohibited.



Beijing Hanze, Beijing VIE, and its shareholders entered into the VIE Agreements
on May 15, 2019. The VIE agreements are designed to provide Beijing Hanze with
the power, rights and obligations equivalent in all material respects to those
it would possess as the sole equity holder of Beijing VIE, including absolute
control rights and the rights to the assets, property and revenue of Beijing
VIE. Each of the VIE Agreements is described in detail below.



Exclusive Consulting and Services Agreement




Pursuant to the Exclusive Consulting and Service Agreement signed on May 15,
2019, between Beijing Hanze and Beijing VIE, Beijing Hanze agrees to provide
various services exclusively to Beijing VIE including development and research
services for business-related software, pre-job and on-the-job training
services, technology development and transfer services, public relations
services, market research and consulting services, short and medium-term market
development and planning services, various technical support services,
consulting services related to business compliance, organization and planning
services related to marketing and membership activities. For services rendered
to Beijing VIE by Beijing Hanze under this agreement, Beijing Hanze is entitled
to collect 100% of the net income of Beijing VIE.



The Exclusive Consulting and Services Agreement shall remain in effect for ten
years from the date of signing unless it is terminated by Beijing Hanze in
advance or upon the mutual agreement of both parties. Beijing VIE may terminate
the agreement subject to payment of all service fees for completed services and
compensation to Beijing Hanze for losses. Prior to the termination of this
agreement, the parties may extend the term of this agreement in accordance with
the requirements of Beijing Hanze.



The foregoing description of the Exclusive Consulting and Services Agreement is
qualified in its entirety by reference to the Consulting and Services Agreement,
an English translation of which is filed as Exhibit 10.1 to this Quarterly
Report and incorporated herein by reference.



Business Operation Agreement


Pursuant to the Business Operation Agreement signed on May 15, 2019, by and
among the Beijing VIE Shareholders, Beijing VIE and Beijing Hanze. Beijing VIE
agrees not to conduct any transactions that may materially affect its assets,
business, personnel, obligations, rights or company operations, without the
prior written consent of Beijing Hanze. Beijing Hanze agrees to provide advice
to Beijing VIE from time to time regarding the appointment and dismissal of
employees, daily management and financial management systems. Beijing VIE and
Beijing VIE Shareholders also agreed to appoint designees of Beijing Hanze to
serve as Board of directors and on the senior management team of the Beijing
VIE. In connection with this agreement, the Beijing VIE Shareholders executed a
Power of Attorney at Annex 1 of the Business Operation Agreement in which the
Beijing VIE shareholders shall irrevocably authorize the designated personnel of
Beijing Hanze to exercise their shareholders' rights on their behalf, including
voting rights at the shareholders' meeting in the name of the shareholders. The
Beijing VIE Shareholders further agree that they will replace the person
authorized in the above Power of Attorney at any time upon Beijing Hanze's
request. The Business Operation Agreement shall remain in effect for ten years
from the date of signing unless earlier terminated by Beijing Hanze by
delivering 30 days prior written notice or upon the mutual agreement of all
parties. Beijing VIE and the Beijing VIE Shareholders do not have the right to
terminate the agreement unilaterally. Upon the termination of any agreement
between Beijing Hanze and Beijing VIE, Beijing Hanze shall be entitled to
terminate all agreements between such parties.



The foregoing description of the Business Operation Agreement is qualified in its entirety by reference to the Business Operation Agreement, an English translation of which is filed as Exhibit 10.2 to this Quarterly Report and incorporated herein by reference.



Equity Disposal Agreement



Pursuant to the Equity Disposal Agreement signed on May 15, 2019, by and among
the Beijing VIE Shareholders, Beijing VIE and Beijing Hanze, the Beijing VIE
Shareholders granted to Beijing Hanze an exclusive option right to purchase all
of their equity interests in Beijing VIE to secure the execution of the Equity
Pledge Agreement in which the details are set out below. Under the terms of this
agreement, Beijing Hanze has an exclusive right to purchase, to the extent
permitted under the PRC law, at any time, all or any part of the equity
interests of the Beijing VIE Shareholders in Beijing VIE or an option to
transfer the equity interests in Beijing VIE to any third party designated by
Beijing Hanze. The option price shall be the minimum permitted by the laws and
regulations of the PRC. The Equity Disposal Agreement has a term of ten years
from the date of signing, and it may be renewed at Beijing Hanze's discretion.



The foregoing description of the Equity Disposal Agreement is qualified in its
entirety by reference to the Equity Disposal Agreement, an English translation
of which is filed as Exhibit 10.3 to this Quarterly Report and incorporated
herein by reference.







  29






Equity Pledge Agreement



Pursuant to the Equity Pledge Agreement signed on May 15, 2019, by and among the
Beijing VIE Shareholders and Beijing Hanze, the Beijing VIE Shareholders pledged
all of their equity interests in Beijing VIE to Beijing Hanze to guarantee the
performance of Beijing VIE's obligations under the Exclusive Consulting and
Services Agreement, the Equity Disposal Agreement and the Business Operation
Agreement.  Under the terms of the agreement, in the event that Beijing VIE or
its shareholders breach their respective contractual obligations under the
Exclusive Consulting and Services Agreement, the Equity Disposal Agreement and
the Business Operation Agreement, or upon occurrence of any event of default as
set forth in the Equity Pledge Agreement, Beijing Hanze shall be entitled to
exercise its rights under this agreement, subject to certain cure periods. The
Beijing VIE Shareholders further agree not to dispose of the pledged equity
interests or take any actions that would prejudice Beijing Hanze's interest.



The Equity Pledge Agreement shall be effective until Beijing VIE and the Beijing
VIE Shareholders have performed all of their obligations under the Exclusive
Consulting and Services Agreement, the Equity Disposal Agreement and the
Business Operations Agreement and the written approval of Beijing Hanze has
been
obtained.



The foregoing description of the Equity Pledge Agreement is qualified in its
entirety by reference to the Equity Pledge Agreement, an English translation of
which is filed as Exhibit 10.4 to this Quarterly Report and incorporated herein
by reference.



Because we are not a PRC operating company but a Nevada holding company with
operations conducted through our variable interest entity based in the PRC, our
investors may never directly hold equity interests in our variable interest
entity. This structure presents unique risks as we will be dependent upon
contributions from our subsidiaries and VIE to finance our cash flow needs.
Further, in light of the recent statements and regulatory actions by the PRC
government, such as the promulgation of regulations prohibiting foreign
ownership of Chinese companies operating in certain industries, which are
constantly evolving, and anti-monopoly concerns, we may be subject to the risks
of uncertainty of any future actions of the PRC government in this regard
including the risk that the PRC government could disallow our holding company
structure, which may result in a material change in our operations, including
our ability to continue our existing holding company structure, carry on our
current business, accept foreign investments, and offer or continue to offer
securities to our investors. These adverse actions could value the value of our
common stock to significantly decline or become worthless. We may also be
subject to penalties and sanctions imposed by the PRC regulatory agencies,
including the Chinese Securities Regulatory Commission, if we fail to comply
with such rules and regulations, which could adversely affect the ability of the
Company's securities to continue to trade on the Over-the-Counter Bulletin
Board, which may cause the value of our securities to significantly decline
or
become worthless.



There may be prominent risks associated with our operations being in the PRC.
For example, as a U.S.-listed PRC public company, we may face heightened
scrutiny, criticism and negative publicity, which could result in a material
change in our operations and the value of our common stock. It could also
significantly limit or completely hinder our ability to offer or continue to
offer securities to investors and cause the value of such securities to
significantly decline or be worthless. Additionally, changes in Chinese internal
regulatory mandates, such as the M&A rules, Anti-Monopoly Law, and the soon to
be effective Data Security Law, may target the Company's corporate structure and
impact our ability to conduct business in the PRC, accept foreign investments,
or list on an U.S. or other foreign exchange.



Agency Agreement


Pursuant to the Agency Agreement signed on May 15, 2019, among the Beijing VIE
Shareholders and Beijing Hanze, the Beijing VIE Shareholders granted Beijing
Hanze an irrevocable license for the longest period permitted under law the
right to exercise the voting rights of the Beijing VIE Shareholders in
accordance with the laws of the PRC and the Articles of Association of Beijing
VIE. During the term of this Agreement, none of the Beijing VIE Shareholders
shall be entitled to transfer its interest in Beijing VIE to any third party
other than entities or individuals designated by Beijing Hanze. This Agency
Agreement shall be irrevocable and continuously valid from the date of execution
of this Agency Agreement, and it can be terminated at Beijing Hanze's
discretion.



The foregoing description of the Agency Agreement is qualified in its entirety
by reference to the Agency Agreement, an English translation of which is filed
as Exhibit 10.5 to this Quarterly Report and incorporated herein by reference.



Impact of COVID-19 on our business and the business of Beijing VIE




The outbreak of COVID-19 that started in late January 2020 in the PRC has
negatively affected Beijing VIE's business and consequently, the revenues and
operating results that we are able to receive through our VIE agreements. In
March 2020, the World Health Organization declared COVID-19 as a pandemic which
has resulted in quarantines, travel restrictions, and the temporary closure of
stores and business facilities in China and the U.S. in the subsequent months.
Given the rapidly expanding nature of the COVID-19 pandemic, and because
substantially all of Beijing VIE's business operations and its workforce are
concentrated in China, the business, results of operations, and financial
condition for year 2020 and the nine months ended September 30, 2021, of Beijing
VIE and, consequently, the Company have been adversely affected. For the nine
months ended September 30, 2021, the Company had a net loss of approximately
$5.3 million. At September 30, 2021, the Company has a significant working
capital deficiency of approximately $25.2 million, and a shareholders' deficit
of approximately $10.7 million. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.







  30






To mitigate the overall financial impact of COVID-19 on the business of Beijing
VIE and its subsidiaries, management introduced cost containment and staff
reduction measures, revised product selection and incentive programs and worked
with Beijing VIE's service centers continuously to enhance their marketing and
promotion activities. While we cannot predict future disruptions to Beijing VIE
and the Company which may occur due to the spread of COVID-19 and its variants,
management believes that COVID-19 will continue to have a material impact on the
financial results of both Beijing VIE and the Company for the balance of 2021,
and could cause potential impairment of certain assets. Accordingly, we expect
to continue implementing cost containment measures, work closely with Beijing
VIE's service centers with offline, online and virtual marketing and promotion
activities, as well as actively recruit key sales members and obtain product and
service collaborations for the benefit of Beijing VIE in the foreseeable future.
We continue to monitor the status of the pandemic and will adjust our business
strategies accordingly. Based on the most recent sales and cash flows
projections for Beijing VIE and its subsidiaries, we believe that Beijing VIE
and its subsidiaries could generate sufficient operating cash flows over the
next 12 months to continue as a going concern.



Results of Operations



Our unaudited condensed consolidated financial statements have been prepared on
a going concern basis, which assumes that we will be able to continue to operate
in the future in the normal course of business. Our unaudited condensed
consolidated financial statements for the nine months ended September 30, 2021,
includes a note about our ability to continue as a going concern due to
significant loss from operations of Beijing VIE and subsidiaries since 2020 as a
result of COVID-19. Business closures in the PRC and limitations on business
operations arising from COVID-19 has significantly disrupted our ability to
generate revenues and cash flow during the three and nine months ended September
30, 2021.


Comparison for the Three Months Ended September 30, 2021 and 2020

The following table sets forth certain financial data for the three months ended September 30, 2021 and 2020:




                                       For the Three Months Ended September 30,                Percentage
                                         2021                            2020                    Change
                              (Unaudited)          %          (Unaudited)          %               %
Revenues                      $  1,052,323          100.0     $     81,669          100.0          1,188.5
Cost of revenues                  (506,218 )        (48.1 )       (407,798 )       (499.3 )           24.1
Gross profit (loss)                546,105           51.9         (326,129 )       (399.3 )         (267.5 )

General and administrative
expenses                           618,099           58.7          758,653          928.9            (18.5 )
Selling expenses                   452,822           43.0        1,291,611        1,581.5            (64.9 )
Finance expenses (income),
net                                 10,957            1.0           (3,468 )         (4.3 )         (415.9 )
Total operating expenses         1,081,878          102.8        2,046,796 
      2,506.2            (47.1 )

Operating loss                    (535,773 )        (50.9 )     (2,372,925 )     (2,905.5 )          (77.4 )

Other expenses, net               (801,002 )        (76.1 )       (796,320 )       (975.1 )            0.6
Income from equity
investment                               -              -           83,703          102.5           (100.0 )

Total other expenses, net (801,002 ) (76.1 ) (712,617 ) (872.6 )

           12.4

Loss before provision for
income taxes                    (1,336,775 )       (127.0 )     (3,085,542 )     (3,778.1 )          (56.7 )
Provision for income taxes               -              -                - 
            -                -

Net loss                      $ (1,336,775 )       (127.0 )   $ (3,085,542 )     (3,778.1 )          (56.7 )

Foreign currency
translation adjustment             (17,027 )         (1.6 )         23,318 
         28.6           (173.0 )

Comprehensive loss            $ (1,353,802 )       (128.6 )   $ (3,062,224 )     (3,749.6 )         (144.2 )






  31






Revenues. The increase in revenues of approximately $971,000 or 1,188.5% was due
primarily to business recovery from COVID-19 in 2021. For the three months ended
September 30, 2021 and 2020, all revenues were generated in the PRC; and no
customers accounted for 10% or more of total revenues. For the period of three
months ended September 31, 2021 and 2020, revenues were mainly attributable to
the sales of health foods, smart watches and cosmetics products.



Cost of Revenues.Cost of revenues consists primarily of the cost of merchandise
sold, sales incentives and commissions that are directly attributable to product
sales as well as allowance for slow-moving items and write off of expired
inventories. For the three months ended September 30, 2021 and 2020, cost of
revenues increased $98,420 or 24.1% compared to the same period in 2020 due
mainly to higher product sales in 2021. There were no suppliers that accounted
for more than 10% of purchase for the three months ended September 30, 2021
and 2020, respectively.



Gross Profit (Loss): Gross profit for the three months ended September 30, 2021
was approximately $546,000, while gross loss for the three months ended
September 30, 2020 was approximately $326,000. The improvement was due primarily
to the increase of revenues as a result of business recovery from COVID-19
in
2021.



General and Administrative Expenses. General and administrative expenses ("G&A
expenses") consist primarily of salary and benefits for our general
administrative and management staff, facilities costs, depreciation expenses,
professional and audit fees, and other miscellaneous expenses incurred in
connection with general operations. G&A expenses decreased 18.5% or
approximately $145,000 to approximately $618,000 for the three months ended
September 30, 2021 from approximately $759,000 for the same period of 2020. The
decrease was due primarily to the decrease in advisory fees, salaries and
benefits.



Selling Expenses. Selling expenses consist mainly of payroll and benefits for
employees involved in the sales and distribution functions, meeting/event fees,
advertisement, and marketing and selling expenses that are related to events and
activities at the Company's service centers designed to promote product sales.
Selling expenses decreased 64.9% or approximately $839,000 to approximately
$452,000 for the three months ended September 30, 2021 from approximately $1.3
million for the same period of 2020. The decrease was due mainly to the
Company's cost containment plan and initiatives to scale back its marketing
expenses in 2021 as the PRC economy continues to recover from the COVID
pandemic. During the same period of 2020, the Company organized numerous events
designed to boost product sales in light of the negative impact of COVID-19
on
its business.


Finance Expenses (Income), net. Finance expenses consist mainly of service fees
related to the use of third-party online payment platforms, bank fees and
interest expenses related to borrowings; net of interest income from bank and
related bank products. Total net financial expenses were approximately $10,957
for the three months ended September 30, 2021, compared to approximately $3,500
of net finance income for the same period of 2020. The decrease was due mainly
to the related bank products income for the three months ended June 30, 2020.



Operating Loss. Compared to the same period of 2020, operating loss decreased by
approximately $1.8 million for the three months ended September 30, 2021. The
decrease was due mainly to the increase in gross profit.



Total Other Expenses, net. Total net other expenses was approximately $801,000
for the three months ended September 30, 2021, compared to approximately
$713,000 for the same period of 2020. The increase was due primary to late fee
related to unpaid VAT and enterprise income tax.



Provision for Income Taxes. No provision for income taxes was recorded for the
three months ended September 30, 2021 and 2020 since the Company reported
pre-tax loss of approximately $1.3 million and $3.1 million, respectively during
such period.


Net Loss. As a result of the factors described above, the Company reported net
loss of approximately $1.3 million and $3.1 million for the three months ended
September 30, 2021 and 2020, respectively.



Comprehensive Loss.Factoring in the impact of foreign currency translation adjustment, comprehensive loss was approximately $1.4 million and $3.1 million for the three months ended September 30, 2021 and 2020, respectively.





  32





Comparison for the nine months ended September 30, 2021 and 2020




The following table sets forth certain financial data for the nine months ended
September 30, 2021 and 2020.



                                        For the Nine Months Ended September 30,                 Percentage
                                         2021                             2020                    Change
                              (Unaudited)          %           (Unaudited)          %               %
Revenues                      $  1,630,559          100.0     $     210,172          100.0            675.8
Cost of revenues                (1,157,300 )        (71.0 )        (613,114 )       (291.7 )           88.8
Gross profit (loss)                473,259           29.0          (402,942 )       (191.7 )         (217.5 )

General and administrative
expenses                         1,931,899          118.5         2,746,034        1,306.6            (29.6 )
Selling expenses                 1,481,633           90.9         4,950,028        2,355.2            (70.1 )
Finance expenses (income),
net                                 28,132            1.7          (173,622 )        (82.6 )         (116.2 )
Total operating expenses         3,441,664          211.1         7,522,440
       3,579.2            (54.2 )

Operating loss                  (2,968,405 )       (182.0 )      (7,925,382 )     (3,770.9 )          (62.5 )

Other expenses, net             (2,348,908 )       (144.1 )      (3,565,325 )     (1,696.4 )          (34.1 )
Income (loss) from equity
investment                          (8,166           (0.5 )          83,703           39.8           (109.8 )

Total other expenses, net (2,357,074 ) (144.6 ) (3,481,622 ) (1,656.6 ) (32.3 )


Loss before provision for
income taxes                    (5,325,479 )       (326.6 )     (11,407,004 )     (5,427.5 )          (53.2 )
Provision for income taxes               -              -                 -
             -                -

Net loss                      $ (5,325,479 )       (326.6 )   $ (11,407,004 )     (5,427.5 )          (53.3 )

Foreign currency
translation adjustment             (33,119 )         (2.0 )         (69,355 )        (33.0 )          (52.2 )

Comprehensive loss            $ (5,358,598 )       (328.6 )   $ (11,476,359 )     (5,460.5 )          (53.2 )




Revenues: The increase of approximately $1.4 million or 675.8% was due primarily
to business recovery from COVID-19 in 2021. For the nine months ended September
30, 2021 and 2020, all revenues were generated in the PRC; and no customers
accounted for 10% or more of total revenues. For the period of nine months ended
September 31, 2021 and 2020, revenues were mainly attributable to the sales of
health foods, smart watches and cosmetics products.



Cost of Revenues: The increase in cost of revenues of approximately $544,000 or
88.8% was due mainly to the increase in product sales in 2021. One supplier
(Baoqing Meilai Modern Agricultural Service Co., Ltd.) accounted for 97% and 92%
of purchase for the nine months ended September 30, 2021 and 2020, respectively.



Gross Profit (Loss). Gross profit for the nine months ended September 30, 2021
was approximately $473,000, while gross loss for the nine months ended September
30, 2020 was approximately $403,000. The improvement in gross profit of
approximately $876,000 was due mainly to the increase in product sales in 2021.





  33






General and Administrative Expenses. General and administrative decreased by
29.6% or approximately $814,000 to approximately $1.9 million for the nine
months ended Jun 30, 2021 from approximately $2.7 million for the nine months
ended September 30, 2020. The decrease was due primarily mainly to the decrease
in advisory fees, salaries and benefits.



Selling Expenses. Selling expenses decreased by 70.1% or approximately $3.5
million to approximately $1.5 million for the nine months ended September 30,
2021 from approximately $5.0 million for the same period of 2020. The decrease
was due mainly to the Company's cost containment plan and initiatives to scale
back its marketing expenses in 2021 as the PRC economy continues to recover from
the COVID pandemic. During the same period of 2020, the Company organized
numerous events designed to boost product sales in light of the negative impact
of COVID-19 on its business.


Finance Expenses (Income), net. Finance expenses consist mainly of service fees
related to the use of third-party online payment platforms, bank fees and
interest expenses related to borrowings; net of interest income from bank and
related bank products. Total net finance expenses were approximately $28,000 for
the nine months ended September 30, 2021, compared to approximately $174,000 of
net finance income for the same period of 2020. The decrease was due mainly to
the related bank products income in the nine months ended September 30, 2020.



Operating Loss. Operating loss was approximately $3.0 million for the nine
months ended September 30, 2021, compared to approximately $7.9 million for the
same period of 2020. The decrease was due primary to increase of gross profit in
2021.


Total Other Expenses, net. The decrease in total net other expenses of approximately $1.2 million for the nine months ended September 30, 2021was due primary to a special donation to the Red Cross for the same period of 2020.

Provision for Income Taxes. No provision for income taxes was recorded for the
nine months ended September 30, 2021 and 2020 since the Company reported pre-tax
loss of approximately $5.3 million and $11.4 million, respectively during such
period.


Net Loss. As a result of the factors described above, the Company reported net
loss of approximately $5.3 million for the nine months ended September 30, 2021,
a decrease of approximately $6.1 million from approximately $11.4 million of net
loss for the same period of 2020.



Comprehensive Loss. Factoring in the impact of foreign currency translation adjustment, comprehensive loss was approximately $5.4 million for the nine months ended September 30, 2021, as compared to approximately $11.5 million for the nine months ended September 30, 2020.

Liquidity and Capital Resources




As of September 30, 2021 and December 31, 2020, we had cash, cash equivalents
and restricted cash of approximately $914,000 and $3.3 million, respectively.
The following table sets forth a summary of our cash flows for the periods
as
indicated:



                                                          For the nine months ended
                                                                September 30,
                                                           2021              2020
                                                        (Unaudited)       (Unaudited)
Net cash used in operating activities                  $  (2,159,012 )   $ (21,468,409 )
Net cash used in investing activities                  $    (196,680 )   $  (1,788,623 )
Net cash used in financing activities                  $           -     $  (1,724,779 )
Effect of exchange rate changes on cash, cash
equivalents and restricted cash                        $      12,869     $ 

30,376

Net decrease in cash, cash equivalents and
restricted cash                                        $  (2,342,823 )   $ (24,951,435 )
Cash, cash equivalents and restricted cash at
beginning of period                                    $   3,257,005     $ 

28,919,817

Cash, cash equivalents and restricted cash at end of
period                                                 $     914,182     $   3,968,382






  34





The following table sets forth a summary of our working capital deficiency:


                             September 30,      December 31,
                                  2021              2020           Variation          %
                              (Unaudited)
Total Current Assets         $    8,422,609     $  11,435,892     $ (3,013,283 )     (26.3 )
Total Current Liabilities    $   33,587,169     $  31,307,498     $  2,279,671         7.3
Working Capital Deficiency   $  (25,164,560 )   $ (19,871,606 )   $ (5,292,954 )      26.6



Working Capital Deficiency. The increase in our working capital deficiency was due mainly to net losses during the nine months ended September 30, 2021.




For the nine months ended September 30, 2021, cash used in operating activities
was approximately $2.2 million. For nine months ended September 30, 2020, cash
used in operating activities was approximately $21.5 million. The decrease in
cash outflow of approximately $19.3 million was due primary to decrease in net
loss of approximately $6.1 million, and increase in net cash inflow from changes
in advances to suppliers of approximately $186,000; inventories of approximately
$297,000; other payables and other current liabilities of approximately $2.5
million, partially offset by the decrease in tax payable of approximately
$208,000.



Net cash used in investing activities was approximately $197,000 and $1.8
million for the nine months ended September 30, 2021 and 2020, respectively. Net
cash used in investing activities for the nine months ended September 30, 2021
and 2020 was related to the purchases of property and equipment.



Net cash used in financing activities was $nil for the nine months ended September 30, 2021, as compared to net cash used in financing activities of approximately $1.7 million for the nine months ended September 30, 2020. The cash outflow for the nine months ended September 30, 2020 was due mainly to repayment of loans of approximately $1.0 million and dividends paid of approximately $723,000.

Off-Balance Sheet Arrangements




We have not entered into any financial guarantees or other commitments to
guarantee the payment obligations of any third parties. In addition, we have not
entered into any derivative contracts that are indexed to our own shares and
classified as shareholders' equity, or that are not reflected in our financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. Moreover, we do not have any variable
interest in an unconsolidated entity that provides financing, liquidity, market
risk or credit support to us or engages in leasing, hedging or research and
development services with us.



Critical Accounting Policies and Estimates




We prepare our financial statements in conformity with accounting principles
generally accepted by the United States of America ("U.S. GAAP"), which require
us to make judgments, estimates, and assumptions that affect our reported amount
of assets, liabilities, revenue, costs and expenses, and any related
disclosures. Although there were no material changes made to the accounting
estimates and assumptions since year 2020, we continually evaluate these
estimates and assumptions based on the most recently available information, our
own historical experience and various other assumptions that we believe to be
reasonable under the circumstances. Since the use of estimates is an integral
component of the financial reporting process, actual results could differ from
our expectations as a result of changes in our estimates.



We believe that our accounting policies involve a higher degree of judgment and
complexity in their application and require us to make significant accounting
estimates. Accordingly, the policies we believe are the most critical to
understanding and evaluating our consolidated financial condition and results of
operations are summarized in "Note 3 - Summary of Significant Accounting
Policies" in the notes to our unaudited condensed consolidated financial
statements.





  35





Recent Accounting Pronouncements




See "Note 3 - Summary of Significant Accounting Policies" in the notes to our
unaudited condensed consolidated financial statements for a discussion of recent
accounting pronouncements.



The Company believes that other recent accounting pronouncement will not have a
material effect on the Company's consolidated financial position, results of
operations and cash flows.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 0,68 M - -
Net income 2020 -15,0 M - -
Net cash 2020 1,68 M - -
P/E ratio 2020 -4,85x
Yield 2020 -
Capitalization 29,2 M 29,2 M -
EV / Sales 2019 -
EV / Sales 2020 105x
Nbr of Employees 43
Free-Float 13,5%
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Managers and Directors
Xiang Yang Tian Chairman & Chief Executive Officer
Yong Hua Shan Chief Financial Officer & Director
Zhi Hai Tian Chief Operating Officer, Secretary & Director
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