SHENGDA NETWORK TECHNOLOGY, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements."
Cautionary Note Concerning Factors That May Affect Future Results
This Annual Report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may also make forward-looking statements in other reports filed with theSecurities and Exchange Commission , in materials delivered to shareholders and in press releases. In addition, the Company's representatives may from time to time make oral forward-looking statements. Forward-looking statements relate to future events and typically address the Company's expected future business and financial performance. Words such as "plan," "expect," "aim," "believe," "project," "target," "anticipate," "intend," "estimate," "should," "could," "forecast" and other words and terms of similar meaning, typically identify such forward-looking statements. In particular, these include, among others, statements relating to:
? the Company's strategy for growth, future revenues, earnings, cash flow, uses
of cash and other measures of financial performance, and market position,
? worldwide economic, political, and capital markets conditions, such as
interest rates, foreign currency exchange rates, financial conditions of our
suppliers and customers, and natural and other disasters or climate change
affecting the operations of the Company or our suppliers and customers,
? new business opportunities, product development, and future performance or
results of current or anticipated products,
? the scope, nature or impact of acquisition, strategic alliance and divestiture
activities,
? the outcome of contingencies, such as legal and regulatory proceedings,
? future levels of indebtedness, common stock repurchases and capital spending,
? future availability of and access to credit markets, ? asset impairments, ? tax liabilities, 10 ? information technology security, and
? the effects of changes in tax (including the newly enacted Tax Cuts and Jobs
Act), environmental and other laws and regulations in
other countries in which we operate.
Overview
We were incorporated on March 14, 2018 , in the State of Nevada . On March 30,
2020 , we filed an amendment to our Articles of Incorporation changing our name
to "Shengda Network Technology, Inc. "
On April 20, 2020 , we purchased 100% of the shares of Peaker International Trade
Group Limited (Hong Kong ) ("Peaker") for a total purchase price of US$1,330 .
This purchase was made through our wholly owned subsidiary Jingmao Webmall,
Inc. , incorporated in the Cayman Islands on August 11, 2020 . Peaker presently
owns 100% of Zhejiang Jingmai Electronic Commerce Ltd. , which is located in
Zhejiang province, China . Thereafter, on May 15, 2020 , Peaker incorporated in
China a 100%-owned subsidiary, Zhejiang Jingmai Electronic Commerce Ltd. (China )
("Jingmai Electronic") which is intended to serve as an operating company in
China for our activities in China .
Jingmai Electronic has begun to supply goods to various social e-commerce
platforms and merchants. Social e-commerce refers to the process of engaging
customers at every point of their buying journey. Jingmai Electronic is designed
to provide high-quality supply chain resources and is quicky moving into live
broadcast management services in order to provide sustainable development for
the Company. Jingmai Electronic, and its subsidiaries, also intend to provide
comprehensive services, such as supply chain management and live broadcasting
resources to TikTok and other social e-commerce platforms.
On
?
? Zhejiang Jingmai e-commerce Co., Ltd.;
?
The interest in all of these subsidiaries was acquired for no consideration.
Description of Our Business The Company's principal business, through Jingmai Electronic, is providing an e-commerce portal (similar to Amazon or Wish) for the sale of products. We purchase goods according to market demand, directly from manufacturers that we have standing relationships with. The goods we source include, but are not limited to, electronic products, daily consumer goods such as shampoo and toothpaste, and various other items. We then sell the goods we purchase, as well as products from other reliable merchants, to our various customers. Our Company is similar to a wholesaler in that our customers purchase goods from us bulk. We aim to effectively organize suppliers, manufacturers and distributors in order to minimize the costs of the whole supply chain system and offer competitive prices. Our Company does not warehouse or store any of the good we purchase. If the manufacturer we purchase from is not able to ship the goods directly to our customers, then our Company manages the logistics and arranges for a third-party shipping company. Our Company actively cooperates with other listed or state-owned enterprises. We currently have a commodity purchase contract withKunming Pharmaceutical Group . We also engage with companies whose products we feel are of good quality and that also need new channels, specifically social e-commerce. We cooperate with these companies so that they can expand their sales and supplies by offering our products and services on their sites. 11
Restatement of Correction of an Error
As of and for the years endedJune 30, 2021 , the Company had sales, accounts receivable and loan balances with a customer. In preparing the financial statements, management failed to identify and disclose the fact that the customer being a related party to the Company within the definition of ASC 850. The Company also failed to disclose this fact to the auditors of the Company.
Management has identified a material weakness in understanding and knowledge of US GAAP.
This Amendment No. 1 ("Amendment No. 1") to the Annual Report on Form 10-K/A
amends the Annual Report on Form 10-K of Shengda Network Technology, Inc. for
the fiscal year ended June 30, 2021 , as filed with the Securities and Exchange
Commission ("SEC") on September 28, 2021 (the "Original Filing"). In the
Original Filing, Management concluded that Statements for the periods beginning
with the first quarter of 2021 through the third quarter of 2022 (collectively,
the "Affected Periods") should be restated due to the missing disclosure ofthe related party transactions. Results of Operations
Fiscal Year Ended
The following table summarizes the results of our operations during the fiscal
years ended
Percentage
Increase Increase
Line Item 6/30/2022 6/30/2021 (Decrease) (Decrease)
(Restated)
Revenue $ 3,957,283 $ 9,489,187 $ (5,531,904 ) (58.3 )%
Operating expenses 458,211 4,020,368 (3,562,157 ) (88.6 )%
Other income, net 4,621,153 20,049 4,601,104 22949.3 %
Net income (loss) 4,324,608 (2,716,347 ) 7,040,955 259.2 %
Basic and Diluted Net Income (Loss)
per common share 0.31 (0.23 ) 0.54 31.8 %
During the year ended June 30, 2022 , we had revenues of $3,957,283 , compared to
revenues of $9,489,187 for the year ended June 30, 2021 , a decrease of
$5,531,904 (58.3%) due to the Company's transformation and the continued impact
of the global Covid-19 pandemic as well as the return of bad debt provisions.
Operating expenses totaled $458,211 for the year ended June 30, 2022 , compared
to $4,020,368 for the year ended June 30, 2021 , a decrease of $3,562,157
(88.6%). This decrease was attributable to the Company's profits from business
activities and the receivable recovered. Other income, net totaled $4,324,608
for the year ended June 30, 2022 , compared to $20,049 for the year ended June
30, 2021 , an increase of $4,601,104 , or 22949.3%. This increase was attributable
to increased interest income and recovery of uncollectible accounts.
We recorded net income of $4,324,608 for the fiscal year ended June 30, 2022 as
compared to a net loss of $2,716,347 for the fiscal year ended June 30, 2021 .
This increase was due to interest income and recovery of uncollectible accounts.
12
Liquidity and Capital Resources
Liquidity and Capital Resources for the year endedJune 30, 2022 compared to the year endedJune 30, 2021 For the Years Ended June 30 2022 2021 Summary of Cash Flows: Net cash provided by (used in) provided by operating activities$ (8,066,026 ) $ (2,562,524 ) Net cash provided by (used in) investing activities 8,365,090 (8,443,822 ) Net cash provided by financing activities -
6,232,225
Foreign exchange rate fluctuations gain (loss) (37,211 )
646,728
Net increase (decrease) in cash 261,853
(4,127,393 ) Cash - Beginning of Year 143,933 4,271,326 Cash - End of Year$ 405,786 $ 143,933 To the extent we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences, and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. No assurance can be given that sources of financing will be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures or may be required to reduce the scope of our planned service development and marketing efforts, any of which could have a negative impact on our business and operating results. In addition, insufficient funding may have a material adverse effect on our financial condition, which could require us to: ? Curtail our operations significantly, or
? Seek arrangements with strategic partners or other parties that may require us
to relinquish significant rights to technology platform and correlated
services, or
? Explore other strategic alternatives including a merger or sale of our
Company.
Operating Activities
For the year ended June 30, 2022 , net cash used in operating activities of
$8,066,026 was primarily a result of income of $4,324,608 , depreciation and
amortization of $19,165 , provision for uncollectible receivables of $12,780 , and
an increase in operating assets and liabilities of $2,444,313 due to a decrease
in accounts receivable of $1,709,284 , no increase or decrease in prepaid
expenses, a decrease in accounts payable of $389,562 , a decrease in advance to
suppliers of approximately $10 million , an increase in accrued expenses and
other payables of $213,551 , and a decrease in advances and deposits of $30,982 .
For the year ended June 30, 2021 , net cash used in operating activities of
$2,562,524 was primarily a result of a loss of $2,716,347 , depreciation and
amortization of $12,871 , provision for uncollectible receivables of $3,749,348 ,
and an increase in operating assets and liabilities of $3,608,396 due to an
increase in accounts receivable of $4,177,743 , a decrease in prepaid expense of
$4,325 , an increase in accounts payable of $467,573 , an increase in accrued
expenses and other payables of $68,577 , an increase in advances and deposits of
$30,202 , and a decrease in other payables to a related party of $1,330 .
Investing Activities
Net cash provided by investing activities for the year ended
Net cash used in investing activities for the year ended
13 Financing Activities
Net cash provided by financing activities for the year ended
Net cash provided by financing activities for the year endedJune 30, 2021 , was$6,232,225 , which consisted of cash received of$2,000 from proceeds from the sale of preferred stock to a related party and 6,230,225 from proceeds from the sale of our common stock.
Future Capital Requirements
Our current available cash and equivalents are sufficient to satisfy our liquidity requirements. Our capital requirements for the fiscal year endingJune 30, 2023 , will depend on numerous factors, including management's evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company. Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations. The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations. Inflation The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments. Going Concern The accompanying financial statements were prepared on a going concern basis. The Company recorded a net income of$4,324,608 for the year endedJune 30, 2022 ; excluding the recovery of bad debt from net income during the year endedJune 30, 2022 , the Company had a net income from operations of$491,068 . The Company had cash flows from operating activities of negative$8,066,026 for the year endedJune 30, 2022 . These matters raise substantial doubt about our ability to continue as a going concern for a period of one year from the date of this filing. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Our management plans to provide for our capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, we will have sufficient funds to execute our business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management believes the Company's cash on hand will be sufficient to fund all of our obligations and commitments for the next twelve months. Historically, we have depended on equity and debt capital raises to provide us with working capital as required. There is no guarantee, however, that such funding will be available in the future and there can be no assurance that our stockholders, or any of them, will continue making loans or advances to us in the future. 14
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities. Seasonality
Our operating results are not affected by seasonality.
Inflation Our business and operating results as reported have not been affected in any material way by inflation. However, the Company is aware that global inflation is increasing, and it expects that inflation will affect the Company during fiscal year endingJune 2023 , though it cannot predict at this point in what ways.
Critical Accounting Policies
TheSEC issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, theSEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates.
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