Forward-Looking Statements
You should read this discussion together with the Financial Statements, related
Notes and other financial information included elsewhere in this Form 10-Q. The
following discussion contains assumptions, estimates and other forward-looking
statements that involve a number of risks and uncertainties. These risks could
cause our actual results to differ materially from those anticipated in these
forward-looking statements. All references to "we," "us," "our" and the
"Company" refer to Shengda Network Technology Inc., a Nevada corporation, and
its consolidated subsidiaries unless the context requires otherwise.
Overview
Shengda Network Technology, Inc., formerly known as Soltrest, Inc., was
incorporated on March 14, 2018 under the laws of the State of Nevada. On March
30, 2020, the Company filed an amendment to its Articles of Incorporation
changing its name to Shengda Network Technology, Inc. (the "Company").
On April 20, 2020, we purchased 100% of the shares of Peaker International Trade
Group Limited, ("Peaker"), located in Hong Kong, for a total purchase price of
US$1,330. Thereafter, on May 15, 2020, Peaker incorporated its wholly-owned
subsidiary, Zhejiang Jingmai Electronic Commerce Ltd., ("Jingmai Electronic")
located in Zhejiang province, China, which serves as the operating company for
our activities in China.
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 with Kunming 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
Target Market and Clients/Potential Clients
Our current target market is China, where we engage in e-commerce services. In
recent years, with the rapid rise of social e-commerce, the Company began to
diversify. Our sales channels have gradually changed from offline to online and
from a single product sales business into a more comprehensive business of
supply chain management.
Other Events
In April 2022, Jingmai Electronic incorporated three (3) wholly owned
subsidiaries. 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.
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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.
Covid-19 Pandemic
On March 11, 2020, the World Health Organization characterized COVID-19 as a
pandemic. The Company is currently monitoring the outbreak of COVID-19 and the
related business and travel restrictions and changes to behavior intended to
reduce its spread.
While the Company's operations are principally located outside the United
States, we utilize various consultants located in the United States, we
participate in a global supply chain, and the existence of a worldwide pandemic,
the fear associated with COVID-19, or any, pandemic, and the reactions of
governments around the world in response to COVID-19, or any, pandemic, to
regulate the flow of labor and products and impede the travel of personnel, may
impact our ability to conduct normal business operations, which could adversely
affect our results of operations and liquidity. Disruptions to our supply chain
and business operations, or to our suppliers' or customers' supply chains and
business operations, could include disruptions from the closure of supplier and
manufacturer facilities, interruptions in the supply of raw materials and
components, personnel absences, or restrictions on the shipment of our or our
suppliers' or customers' products, any of which could have adverse ripple
effects on our manufacturing output and delivery schedule. Any of these
uncertainties could have a material adverse effect on our business, financial
condition or results of operations.
Results of Operations
Three months ended March 31, 2022 compared to the three months ended March 31,
2021
Revenue and Cost of Sales
Total revenues for the three months ended March 31, 2022 were $1,412,849
compared to $765,616 during the three months ended March 31, 2021. This increase
was mainly due to some relief of the COVID-19 pandemic in China during the first
quarter of 2022.
Operating expenses
Operating expenses were $1,078,606 for the three months ended March 31, 2022,
compared to $53,669 during the three months ended March 31, 2021. This increase
was due to the Company's increased products supply to clients who are in the
online live broadcasting business and the corresponding increased personnel.
Net Income
As a result of the forgoing, the net income for the three months ended March 31,
2021 was $2,771,749 as compared to net income of $45,207 for same period ended
March 31, 2021. This increase was due to interest income.
Comparison of Results of Operations for the nine months ended March 31, 2022 and
2021
Revenue
Total revenues for the nine months ended March 31, 2021 were $2,759,820 compared
to $8,499,788 during the nine months ended March 31, 2021. This decrease was due
to the impact of the pandemic and the transition of the Company supplying
products to clients in the internet live broadcasting business and e-commerce
platforms, which caused reduced offline sales.
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Operating expenses
Operating expenses were $1,210,298 for the nine months ended March 31, 2022,
compared to $148,509 during the nine months ended March 31, 2021. This increase
was due to increased labor costs and expenditures required for revenue channel
expansion.
Net Income
As a result of the forgoing, the net income for the period ended March 31, 2022
was $2,754,473 compared to net income of $1,025,050 for same period ended March
31, 2021. This decrease was due to the Company's shift from offline sales to
online sales.
Liquidity and Capital Resources
As of March 31, 2022, we had $43,636 in cash and cash equivalents.
As of March 31, 2022, we had total assets of $11,805,580, working capital of
$5,195,811 and an accumulated stockholders' equity of $11,515,861. As of June
30, 2021, we had total assets of $9,234,996, working capital of $8,482,903 and
an accumulated stockholders' equity of $8,554,224
We believe that our Company's cash on hand will be sufficient to fund all
Company obligations and commitments for the next twelve months.
Off-Balance Sheet Arrangements.
None.
Critical Accounting Policies
The Securities and Exchange Commission 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, the
Securities and Exchange Commission 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. Due to the fact
that the Company does not have any operating business, we do not believe that we
do not have any such critical accounting policies.
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