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    HJGP   US41044P1066

HANJIAO GROUP, INC.

(HJGP)
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HANJIAO : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/20/2020 | 01:07pm EDT
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.


Impact of COVID-19 on our business




The outbreak of COVID-19 that started in late January 2020 in the PRC had
negatively affected our business. In March 2020, the World Health Organization
declared COVID-19 as a pandemic and 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 the Company's
business operations and its workforce are concentrated in China, the Company's
business, results of operations, and financial condition for the first half of
2020 have been adversely affected. Management believes that COVID-19 could have
a material impact on its financial results for the year 2020 and could cause the
potential impairment of certain assets. To mitigate the overall financial impact
of COVID-19 on the Company's business, management has worked closely with its
service centers to enhance their marketing and promotion activities during the
third quarter of 2020 that were designed to generate sales in the third and
fourth quarters of 2020.



Overview



Hanjiao Group, Inc., known formerly as AS Capital, Inc. ("ASIN") and 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 its online to
offline platform. We conduct business primarily through our variable interest
entity ("VIE"), Beijing Luji Technology Co., Ltd. ("Beijing Luji") that was
formed in Beijing, China on March 27, 2007.



Beijing Luji operates its "Fozgo" branded online to offline ("O2O") E-commerce
marketplace. The 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 the possibility to purchase and receive products and services
offline. Currently, our core product categories include sales of home appliances
(such as water purifiers and air purifiers), health foods and cosmetics
products. As of September 30, 2020, Beijing Luji has 178 branch offices with
outlets across the PRC with approximately 159,000 users. In 2018, it was granted
with hi-tech enterprise status in the PRC.







  32






History


We were incorporated on June 15, 2006 under the laws of the State of Nevada as
Jupiter Resources, Inc. 75,000,000 shares of stock was authorized all as common
stock with a par value $0.001 and no other classes of stock were authorized. On
March 25, 2009, the articles were amended to authorize an addition of 10 million
preferred shares making a total of 85,000,000 shares authorized (75M common, 10M
preferred). On April 30, 2009 the Company filed an amendment to change the name
of the corporation to Rineon Group, Inc. On May 14, 2009, the board of directors
of the Company authorized a change in the fiscal year end of the Company from
May 31 to December 31.


From inception to November 1, 2018, the date of the filing of the Company's Form
15, the Company attempted unsuccessfully to enter into business combinations
with various target companies. There was no business activity between the filing
of the Form 15 and prior to August 9, 2018. The Company had Exchange Act
disclosure requirements from January 11, 2008 to November 10, 2010. The Company
has no knowledge or records related to the assets referenced above and therefor
there is some level of uncertainty in the above descriptions.



Prior Company management was unresponsive to shareholders and had refused to
respond to requests to meet statutory requirements to get current with the
secretary of state and the Securities and Exchange Commission's filing
requirements. Accordingly, on August 9, 2018, XTC, Inc. was appointed to serve
as the custodian of the Company in a shareholder filed action with the Eighth
Judicial District Court in Clark County, Nevada and was instructed to revive the
company. XTC, Inc. was a shareholder of record as shown in the court documents
of 500 common shares attached as Exhibit 99.1 to this Quarterly Report. XTC
acquired its 500 common shares on June 14, 2018 in the open market at a price of
$0.05 per share.



On September 25, 2018, the Company filed a Certificate of Designation whereby
the following preferred shares were designated and the rights, privileges and
designations of the Series A and C Convertible Preferred Stock were amended
and
restated.


· The number of Series A Convertible Preferred was increased from 36,000

           to 1,000,000.
       ·   3,000,000 shares of Series B Convertible Preferred Stock were created
           with no voting rights, and conversion rights of 1000:1, with the
           restriction that holders cannot convert to hold more the 4.95% of
           issued and outstanding common stock.

· 1,000,000 shares of Series C Convertible Preferred Stock were created

           with each Series C having 100,000 votes per share, with 1:1 conversion
           rights.




On September 25, 2018, the Company issued 964,000 shares of Series A Convertible
Preferred shares to XRC, LLC at $0.001 per share and 1,000,000 shares of Series
C Convertible Preferred shares at $0.001 per share to XRC, LLC, a company
controlled by Chris Lotito, in exchange for paying the costs to revive the
Company with the State of Nevada, giving it voting control.



On September 28, 2018, a shareholders meeting was held wherein the shareholders
gave the board authority to reorganize the Company, including making possible a
name change, and/or engaging in a reverse stock split. In addition, the Series A
shareholders voted to approve a reverse split of the Series A Convertible
Preferred and to authorize a new designation.



On October 1, 2018, the Company made filings with the Nevada Secretary of State
to change our name to "AS Capital, Inc." and approve a 1 for 10 reverse stock
split for the Common stock and a 1 for 1,000 reverse of the Series A Convertible
Preferred, with conversion rights of 1 common share for every 12,000 shares of
Series A Convertible Preferred Stock held. As a result, the number of issued and
outstanding Series A Convertible Preferred Stock was reduced to 1,000 shares.



On December 6, 2018, the Court granted an Order discharging the custodian and approved all actions taken by the custodian.







  33






Change in Control



On June 4, 2019, ASIN, a Nevada corporation, XRC, LLC, a Colorado limited
liability company ("XRC") and Gao Xue Ran ("Purchaser") entered into a Stock
Purchase Agreement (the "SPA"), pursuant to which the Purchaser agreed to
purchase from XRC 11,000,000 shares of common stock of the Company, par value
$0.001, and 964 shares of Series A Convertible Preferred Stock of the Company,
par value $0.001 (collectively, the "Shares"), for aggregate consideration of
$410,000 in accordance with the terms and conditions of the SPA. XRC was the
controlling shareholder of the Company. The acquisition of the Shares was
consummated on July 18, 2019, and the Shares were ultimately purchased by the
following three individuals using their own personal funds:



                                                          Percentage of
                                                              Issued
                                                               and
Name                    No. of Shares                      Outstanding        Consideration Paid
Gao Xue Ran             8,581,063 of Common Stock;                76.61%                  319,840
                        964 shares of Series A
                        Preferred Stock                                      $
Zhang Yan Hua           1,935,633 of Common Stock                 17.28%     $             72,146
Cheung Kwok Chiu Kris   483,304 of Common Stock                    4.31%     $             18,014




Upon the consummation of the sale of the Shares, Chris Lotito, our Chief
Executive Officer and sole director, and John Karatzaferis, our President,
resigned from all of their positions with the Company, effective July 18, 2019.
Their resignations were not due to any dispute or disagreement with the Company
on any matter relating to the Company's operations, policies or practices.



Concurrently with such resignations, Gao Xue Ran was appointed to serve as the
Chief Executive Officer, Chief Financial Officer, President, Secretary and sole
Director of the Company. Ms. Gao served in her positions without compensation.



Acquisition of HanJiao International Holding Limited




On August 6, 2020, ASIN and HanJiao International Holding Limited ("HanJiao")
consummated a Share Exchange Agreement (the "Share Exchange Transaction"). In
connection with the Share Exchange Transaction, ASIN issued 86,000,000 shares of
its common stock to acquire all the equity shares of HanJiao. Upon the
completion of the Share Exchange Transaction, the shareholders of HanJiao own
approximately 88.5% of the common stock of ASIN. In connection with the Share
Exchange Transaction, effective August 6, 2020, the following individuals were
appointed to serve in the capacities set forth next to their names until his or
her successor(s) shall be duly elected or appointed, unless he or she resigns,
is removed from office or is otherwise disqualified from serving as an executive
officer or director of the Company:



Name               Positions
Tian Xiangyang     Chief Executive Officer, Director and Chairperson of the Board
                   of Director
Shan Yonghua       Chief Financial Officer, and Director
Tian Zhihai        Chief Operating Officer and Director
Yin Jianen         Secretary and Director
Wang Jirui         Director




Upon the consummation of the Share Exchange Transaction, Gao Xue Ran resigned
from all of her positions with the Company, effective August 6, 2020. Her
resignation was not due to any dispute or disagreement with the Company on any
matter relating to the Company's operations, policies or practices.



Effective October 20, 2020, ASIN changed its name from AS Capital, Inc. to Hanjiao Group, Inc.







  34






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. In our unaudited condensed
consolidated financial statements for the three and nine months ended September
30, 2020, it has included a note about our ability to continue as a going
concern due to consecutive quarterly losses from operations in 2020 as a result
of COVID-19. Business closures in the PRC and limitations on business operations
arising from COVID-19 has significantly disrupted Beijing Luji's ability to
generate revenues and cash flow during the nine months of 2020.



Comparison for the Three Months Ended September 30, 2020 and 2019

The following table sets forth certain financial data for the three months ended September 30, 2020 and 2019 (in thousands):




                               For the Three Months Ended September 30,               Percentage
                                  2020                           2019                   Change
                         Dollars            %           Dollars           %               %
Revenues               $       81.7          100.0     $  8,031.8          100.0            (99.0 )
Cost of revenues             (407.8 )       (499.1 )       (827.2 )        (10.3 )          (50.7 )
Gross (loss) profit          (326.1 )       (399.1 )      7,204.6           89.7           (104.5 )

General and
administrative
expenses                      758.7          928.6        2,226.2           27.7            (65.9 )
Selling expenses            1,291.6        1,580.9        1,426.4           17.8             (9.5 )
Finance income, net            (3.5 )         (4.3 )        (14.0 )         (0.2 )          (75.0 )
Total operating
expenses                    2,046.8        2,505.3        3,638.6           45.3            (43.7 )

Operating (loss)
income                     (2,372.9 )     (2,904.4 )      3,566.0           44.4           (166.5 )

Other expenses, net          (712.6 )       (872.2 )       (671.6 )         (8.4 )            6.1

Total other
expenses, net                (712.6 )       (872.2 )       (671.6 )         (8.4 )            6.1
(Loss) income before
provision for income
taxes                      (3,085.5 )     (3,776.6 )      2,894.4           36.0           (206.6 )
Provision for income
taxes                             -              -          361.6            4.5           (100.0 )
Net (loss) income      $   (3,085.5 )     (3,776.6 )   $  2,532.8           31.5           (221.8 )

Foreign currency
translation
adjustment                     23.3           28.5         (454.8 )         (5.7 )         (105.1 )

Comprehensive (loss)
income                 $   (3,062.2 )     (3,748.1 )   $    2,078           25.9           (247.4 )








  35






Revenues: Revenues were approximately $82,000 and approximately $8.0 million for
the three months ended September 30, 2020 and 2019 respectively. The decrease in
revenues of approximately $8.0 million or 99.0% is due primarily to business
interruptions arising from COVID-19. During the three months ended September 30,
2020 and 2019, all revenues were generated in the PRC. During the period of
three months ended September 30, 2020, revenues were mainly attributable to the
sales of home appliances, smart watches, health foods, and cosmetics products,
representing 36.8%, 19.1%, 12.0%, and 1.75% of revenues, respectively. During to
the same period of 2019, the revenues were mainly attributable to the sales of
health foods, home appliances and cosmetics products, representing 83.2%, 13.2%
and 0.27% of revenues, respectively. During the three months ended September30,
2020 and 2019, no customers accounted for 10% or more of total revenues.



Cost of revenues: Cost of revenues consists primarily of the cost of merchandise
sold, delivery cost, service fees, sales incentives and commissions that are
directly attributable to the sale of certain designated products. Cost of
revenues of approximately $408,000 for the three months ended September 30, 2020
consisted of provision for slow-moving inventory of approximately $263,000. The
decrease in cost of revenues of approximately $419,000 or 50.7% from the
comparable period of 2019 was due mainly to decrease in product sales as a
result of COVID-19.



There were two suppliers that accounted for more than 10% of total purchases,
for the three months ended September 30, 2020 and 2019, respectively. One
supplier (Shandong Kangqi Wood Industry Co. Ltd.) accounted for 75%, and the
other (Suzhou Jianli Space Health Technology Co. Ltd.) accounted for 19% for the
three months ended September 30, 2020. One supplier (Harbin Xinyue Technology
Co. Ltd.) accounted for 73%, and the other (Zhongji Technology Services Co.
Ltd.) accounted for 12% for the three months ended September 30, 2019.



Gross (Loss) Profit. Gross loss for the three months ended September 30, 2020 of
approximately $326,000 was attributed mainly to the provision for slowing-moving
inventory of approximately $263,000. Gross profit for the three months ended
September 30, 2019 of approximately $7.2 million was attributed mainly to
revenues of approximately $8.0 million.



General and Administrative Expenses. General and administrative expenses ("G&A
expenses") consist primarily of costs in salary and benefits for our general
administrative and management staff, facilities costs, depreciation expenses,
professional fees, audit fees, and other miscellaneous expenses incurred in
connection with general operations. G&A expenses decreased 65.9% or
approximately $1.5 million from approximately $2.2 million for the three months
ended September 30, 2019 was due primarily to the decrease in advisory fees,
salary 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 by 9.4% or approximately $134,000 to approximately
$1.3 million in the three months ended September 30, 2020 from approximately
$1.4 million in the same period of 2019. The decrease was due mainly to the
impact of COVID-19 as certain marketing and other promotional activities had
been postponed in 2020.



Finance Income, net. Total net financial income was approximately $3,000 and
$14,000 for the three months ended September 30, 2020, and 2019, respectively.
The decrease was due mainly to lower interest form bank and related bank
products in the three months period ended September 30, 2020.



Operating (Loss) Income. Operating loss was approximately $2.4 million for the
three months ended September 30, 2020, compared to approximately $3.6 million of
operating income for the same period of 2019. The decrease in operating income
in 2020 was due primary to the significant decline in revenues in 2020 due
to
the impact of COVID-19.







  36






Total Other Expenses, net. Other expenses consist mainly of estimated tax
penalties and charitable contributions. Total net other expenses were
approximately $713,000 for the three months ended September 30, 2020, compared
to approximately $672,000 for the same period of 2019. The increase in total net
other expenses was due primary to increase in estimated tax penalty, net of
income from equity investment in 2020.



Provision for Income Taxes. No provision for income taxes was recorded for the
three months ended September 30, 2020 since the Company reported a pre-tax loss
of approximately $3.1 million in 2020, as compared to approximately $362,000 of
income tax provision for the same period of 2019 when the Company reported a
pre-tax income of approximately $2.9 million.



Net (Loss) Income. As a result of the factors described above, net loss was approximately $3.1 million for the three months ended September 30, 2020, a decrease of approximately $5.6 million from approximately $2.5 million of net income for the same period of 2019.




Comprehensive Loss (Income). Comprehensive loss was approximately $3.1 million
for the three months ended September 30, 2020, as compared to other
comprehensive income of approximately $2.1 million for the three months ended
September 30, 2019.


Comparison for the Nine Months Ended September 30, 2020 and 2019

The following table sets forth certain financial data for the nine months ended September30, 2020 and 2019 (in thousands):




                                       For the Nine Months Ended September 30,                Percentage
                                          2020                          2019                    Change
                                 Dollars           %            Dollars           %               %
Revenues                       $     210.2          100.0     $  59,089.9         100.0             (99.6 )
Cost of revenues                    (613.1 )       (291.7 )     (38,115.5 )       (64.5 )           (98.4 )
Gross (loss) profit                 (402.9 )       (191.7 )      20,974.4          35.5            (101.9 )

General and administrative
expenses                           2,746.0        1,306.4         6,402.3          10.8             (57.1 )
Selling expenses                   4,950.0        2,354.9         3,057.4           5.2              61.9
Finance (income) expenses,
net                                (173.6)          (82.6 )          81.1           0.1            (314.1 )
Total operating expenses           7,522.4        3,578,7         9,540.8          16.1             (21.2 )

Operating (loss) income           (7,925.3 )     (3,770.4 )      11,433.6  
       19.3            (169.3 )

Other expenses, net               (3,481.6 )     (1,656.3 )      (1,832.9 )        (3.1 )            90.0
Total other expenses, net         (3,481.6 )     (1,656.3 )      (1,832.9 )        (3.1 )            90.0

(Loss) income before
provision for income taxes       (11,406.9 )     (5,426.7 )       9,600.7          16.2            (218.8 )
Provision for income taxes               -              -         1,797.3  
        3.0            (100.0 )

Net (loss) income              $ (11,407.0 )     (5,426.7 )   $   7,803.4          13.2            (246.2 )

Foreign currency translation
adjustment                           (69.4 )        (33.0 )        (484.2 )        (0.8 )           (85.7 )

Comprehensive (loss) income    $ (11,476.3 )     (5,459.8 )   $   7,319.2  
       12.4            (256.8 )








  37






Revenues: Revenues were approximately $210,000 and approximately $59.1 million
for the nine months ended September 30, 2020, and 2019, respectively. The
decrease in revenues of approximately $58.9 million or 99.6% is due primarily to
business interruptions arising from COVID-19. During the nine months ended
September 30, 2020 and 2019, all revenues were generated in the PRC. During the
period of nine months ended September 30, 2020, revenues were mainly
attributable to the sales of home appliances, smart watches, health foods, and
cosmetics products, representing 21.6%, 39.5%, 12.3%, and 1.7% of revenues,
respectively. During to the same period of 2019, revenues were mainly
attributable to the sales of health food, home appliances and cosmetics
products, representing 69.4%, 17.5% and 11.9% of revenues, respectively. During
the nine months ended September 30, 2020 and 2019, no customers accounted for
10% or more of total revenues.



Cost of revenues: Cost of revenues consists primarily of the cost of merchandise
sold, delivery cost, service fees, sales incentives and commissions that are
directly attributable to the sale of certain designated products. Cost of
revenues of approximately $613,000 for the nine months ended September 30, 2020
consisted of provision for slow-moving inventory of approximately $450,000. The
decrease in cost of revenues of approximately $37.5 million or 98.4% from the
comparable period of 2019 was due mainly to decrease in product sales as a
result of COVID-19.



There were two suppliers that accounted for more than 10% of total purchases,
for the nine months ended September 30, 2020 and 2019, respectively. One
supplier (Baoqing Meilai Modern Agriculture Service Co. Ltd.) accounted for 62%,
and the other (Shandong Kangqi Wood Industry Co. Ltd.) accounted for 10% for the
nine months ended September 30, 2020. One supplier (Harbin Xinyue Technology Co.
Ltd.) accounted for 68%, and the other (Zhongji Technology Services Co. Ltd.)
accounted for 11% for the nine months ended September 30, 2019.



Gross (Loss) Profit. Gross loss for the nine months ended September 30, 2020 of
approximately $403,000 was attributed mainly to the provision for slowing-moving
inventory of approximately $450,000. Gross profit for the nine months ended
September 30, 2019 of approximately $21.0 million was attributed mainly to
revenues of approximately $59.1 million.



General and Administrative Expenses. General and administrative expenses ("G&A
expenses") consist primarily of costs in salary and benefits for our general
administrative and management staff, facilities costs, depreciation expenses,
professional fees, audit fees, and other miscellaneous expenses incurred in
connection with general operations. G&A expenses decreased 57.1% or
approximately $3.7 million from approximately $6.4 million for the nine months
ended September 30, 2019 was due primarily to the decrease in advisory fees,
salary 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 increased by 61.9% or approximately $1.9 million to
approximately $5.0 million in the nine months ended September 30, 2020 from
approximately $3.1 million in the same period of 2019. The increase was due
mainly to costs incurred in marketing and other promotional activities in 2020
designed to offset the negative impact of COVID-19.



Finance Income, net. Total net financial income and expense were approximately
$174,000 and $81,000 for the nine months ended September 30, 2020, and 2019,
respectively. The increase was due mainly to interest income earned in the nine
months period ended September 30, 2020.



Operating (loss) Income. Operating loss was approximately $7.9 million for the
nine months ended September 30, 2020, compared to approximately $11.4 million of
operating income for the same period of 2019. The decrease in operating income
in 2020 was due primary to the significant decline in revenues in 2020 due
to
the impact of COVID-19.







  38






Total Other Expenses, net. Other expenses consist mainly of estimated tax
penalties and charitable contributions. Total net other expenses were
approximately $3.5 million for the nine months ended September 30, 2020,
compared to approximately $1.8 million for the same period of 2019. The increase
in total net other expenses was due primary to donation to Binzhou Red Cross
Society for approximately $1.4 million and estimated tax penalties related to
unpaid VAT and income taxes of approximately $2.3 million.



Provision for Income Taxes. No provision for income taxes was recorded for the
nine months ended September 30, 2020, since the Company reported a pre-tax loss
of approximately $11.4 million in 2020, as compared to approximately $1.8
million of income tax provision for the same period of 2019 when the Company
reported pre-tax income of approximately $9.6 million.



Net (loss) Income. As a result of the factors described above, net loss was approximately $11.4 million for the nine months ended September 30, 2020, a decrease of approximately $19.2 million from approximately $7.8 million of net income for the same period of 2019.




Comprehensive Loss (Income). Comprehensive loss was approximately $11.4 million
for the nine months ended September 30, 2020, as compared to other comprehensive
income of approximately $7.3 million for the nine months ended September 30,
2019.


Liquidity and Capital Resources

As of September 30, 2020 and December 31, 2019, we had cash and cash equivalents of approximately $4.0 million and $28.9 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,
                                                           2020              2019
                                                        (Unaudited)       (Unaudited)

Net cash (used in) provided by operating activities $ (21,468,409 ) $ 26,099,723 Net cash (used in) investing activities

                $  (1,788,623 )   $ (11,658,276 )
Net cash (used in) financing activities                $  (1,724,779 )   $    (185,818 )
Effect of exchange rate changes on cash and cash
equivalents                                            $      30,376     $    (944,766 )
Net (decrease) increase in cash and cash equivalents   $ (24,951,435 )   $  13,310,863
Cash and cash equivalents at beginning of period       $  28,919,817     $  18,019,682
Cash and cash equivalents at end of period             $   3,968,382     $ 
31,330,545








  39





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




                            September 30,      December 31,
                                 2020              2019            Variation           %
                               (Unaudited)
Total Current Assets        $   12,997,021     $  31,095,695     $ (18,098,674 )       (58.2 )
Total Current Liabilities   $   29,043,499     $  32,496,887     $  (3,453,388 )       (10.6 )
Working Capital             $  (16,046,478 )   $  (1,401,192 )   $ (14,645,285 )     1,045.2



Working Capital. The deterioration in the Company's working capital was due mainly to the negative impact of COVID-19 as the Company experienced a significant decline in its revenues.




For the nine months ended September 30, 2020, cash used in operating activities
was approximately $21.5 million. For nine months ended September 30, 2019, cash
provided by operating activities was approximately $26.1 million. The key
factors attributing to the net cash outflows of approximately $21.5 million in
2020 include: net loss of approximately $11.4 million due mainly to drop in
revenues; increase in advance to suppliers and inventories of approximately $6.0
million and $1 million, respectively; and increase in estimated tax penalties of
approximately $2.4 million. The key reasons for the net cash flows from
operation of approximately $26.1 million in the same period of 2019 include: net
income of approximately $7.8 million; change in due from related parties, net of
approximately $10.5 million, and change in accrued expenses of approximately
$9.6 million.



Net cash used in investing activities was approximately $1.8 million for the
nine months ended September 30, 2020, as compared to net cash used in investing
activities of $11.7 million for the nine months ended September 30, 2019. The
change of approximately $10 million was due primary to net changes in (1)
purchases of property and equipment of approximately $1.8 million, and (2)
investment in equity investee of $11.6 million.



Net cash used in financing activities was approximately $1.7 million for the
nine months ended September 30, 2020, as compared to net cash used in financing
activities of approximately $0.2 million for the nine months ended September 30,
2019. The increase was due mainly to increase in dividends paid of approximately
$0.5 million, and (2) Repayment of loans of approximately $1.0 million.



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



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 in the past three years, 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.



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.







  41

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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 49,6 M 49,6 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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