Our audited and unaudited financial statements are stated in United States Dollars and are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").

Overview

We conduct our operations through our two consolidated subsidiaries, Hainan Cangbao Tianxia Cultural Relic Co., Ltd. ("Hainan Cangbao") and Cangbao Tianxia (Shanghai) Cultural Relic Co.,Ltd.("Shanghai Cangbao"). These two subsidiaries were incorporated on May 30, 2018 and June 28, 2019 respectively, in PRC, as domestic Chinese limited liability corporations.

We commenced our operations in March 2019, and we intend to make a cultural service platform dedicated to creating industry standards for art investment and creating a model of online art exchanges and transactions, which allows collectors, artists, art dealers and owners to access a much larger art trading market, allowing them to engage with a wide range of collectibles or artwork investors.

Currently we facilitate trading by individual customers of all kinds of collectibles, artworks and commodities on our online platforms, which create two source of income: (1) membership fee income by offering different service packages for members; (2) transaction commission, charging from both the buyer and the seller a commission based on the artwork trading amount upon successfully facilitating artworks transaction.

Cang Bao Tian Xia International Art Trade Center, Inc. has administrative offices located at Unit 609, Shengda Plaza, No. 61 Guoxing Ave Meilan District, Haikou, Hainan Province, China 570203.

The Company's fiscal year end is June 30.

Recent Developments

Early in January, 2020, we launched a new application, which enables our customers to communicate and list artworks to trade. We are currently working with a third-party technology company to design a tablet, which will have multiple built-in applications to facilitate membership enrollment and artworks trade. The tablet is now generating advertisement revenue for the Company.





Results of Operations

Results of Operations for the three months ended September 30, 2020 and 2019

The following table sets forth key components of Company's results of operations for the three months ended September 30, 2020 and 2019. The discussion following the table addresses these results.




                     For Three Months Ended September 30,
                         2020                     2019             Fluctuation          %
Net revenues      $          330,402                1,099,379          (768,977 )          -70 %
Cost of
revenues                     105,050                  697,332          (592,282 )          -85 %
Gross margin                 225,352                  402,047          (176,695 )          -44 %
Selling expense              754,614                  824,207           (69,593 )           -8 %
General and
administrative               719,382                  605,911             123,5             21 %
Interest income                  367                      395               (28 )           -7 %
Interest
expense                         (172 )                      -              (172 )          N/A
Other income
(expense)                      1,757                       68             1,689           2484 %
Provision for
income taxes
expense                            -                   40,461           (40,461 )         -100 %
Net loss                  (1,246,692 )             (1,027,609 )        (189,310 )           18 %

Revenues. For the three months ended September 30,2020 and 2019, we had revenue of $330,402 and $1,099,379, respectively, representing a decrease of $768,977, or 70%, which were derived from service package sales for the members. We have not generated revenue from transaction commission and sales of multifunction demonstration machine since the beginning of operation in March 2019. The significant decrease in revenue was due to the COVID-19 outbreak for the three months ended September 30, 2020.






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Cost of Revenue. For the three months ended September 30, 2020 and 2019, we had cost of revenue of $105,050 and $697,332 respectively, representing a decrease of $592,282, or 85%. The cost of revenue represents costs of maintaining our platform such as network service. and artwork merchandise and souvenirs sent to member. The decrease in cost was the result of the decrease in revenue.

Gross Margin. We generated gross profit of $225,352 and $402,047 for the three months ended September 30, 2020 and 2019, with a gross margin of 68% and 37% respectively.

Operating expenses. For the three months ended September 30, 2020 and 2019, we had selling expenses of $754,614 and $824,207 respectively, which includes marketing and advertising costs related to the operations and development of the platform. For the three months ended September 30, 2020 and 2019, we had general and administrative expenses of $719,382 and $605,911, respectively which mainly consist of salaries and related employee benefits, office expenses, professional service fees, depreciation expenses, rent, and related costs. The total operating expenses was $1,473,996 and $1,430,119 for the three months ended September 30, 2020 and 2019, representing a slight increase of $43,876 or 4%. The operating expenses remained stable though the significant decrease in revenue.

Loss from Operations. For the three months ended September 30, 2020 and 2019, we had loss from operations of $1,248,644 and $1,028,072, respectively, representing an increase in loss of $220,571, or 22%.

Net loss. For the three months ended September 30, 2020 and 2019, we had net loss of $1,246,692 and $1,068,070 respectively, representing an increase of $178,624, or 17%. The increase in net loss was mainly due to the decrease in sales revenues.

Liquidity and Capital Resources

Working Capital Deficit. As of September 30, 2020 and June 30 2020, the Company had working capital deficit of $5,987,309 and $4,658,908 respectively.

Cash Flows. The following is a summary of the Company's cash flows from operating, investing and financing activities:




                                                    Three Months        Three Months
                                                   Ended September     Ended September
                                                      30, 2020            30, 2019
Net cash used in operating activities              $    (2,078,215 )   $    (1,478,238 )
Net cash used in investing activities                            -               3,989
Net cash provided by financing activities                    8,005               9,220
Net change in cash and cash equivalents            $    (2,072,210 )   $    (1,466,539 )



Operating Activities.

Net cash used in operating activities for the three months ended September 30, 2020 was primarily the result of the net loss of $1,246,692, the increase of $1,593,168 in advance to suppliers, decrease of $904,279 in account payable, partly offset by the increase of $1,612,968 in advance from customer, and the depreciation of $24,294 for the three months ended September 30, 2020.

Net cash used in operating activities for the three months ended September 30, 2019 was primarily the result of the net loss of $1,068,070, the increase of $1,009,365 in advance to suppliers, decrease of $3,083,927 in advance from customer, partly offset by the increase of $3,099,744 in account payable, and the depreciation of $23,313 for the three months ended September 30, 2019.

Investing Activities.

There are no investing activities for the three months ended September 30, 2020. Net cash provided by investing activities was $2,479 for the three months ended September 30, 2019. Net cash provided by investing activities mainly reflect disposal of intangible assets of $6,468, offset by purchase of intangible assets of $3,989.






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Financing Activities.

Net cash provided by financing activities was $8,005 and $9,220 for the three months ended September 30, 2020 and 2019, respectively, both of which referred to the proceeds from related parties.

Off-Balance Sheet Arrangements

As of September 30, 2020 and June 30, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

Contractual Obligations and Commitments

As of September 30, 2020 and June 30, 2020, we did not have any contractual obligations.




Critical Accounting Policies

Our significant accounting policies are described in the notes to our financial statements for the three months ended September 30, 2020 and 2019, and are included elsewhere in this report.

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