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.




Critical Accounting Policies




Management's discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with US GAAP. Our financial statements reflect the
selection and application of accounting policies that require management to make
significant estimates and judgments. We believe the following critical
accounting policies used in the preparation of our financial statements require
significant judgments and estimates. For additional information relating to
these and other accounting policies, see Note 2 to our financial statements
included elsewhere in this report.



Basis of Presentation

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.





Going Concern




The accompanying unaudited condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern; however,
the Company has incurred a net loss of $4,755,207 for the three months ended
September 30, 2021. As of September 30, 2021, the Company had an accumulated
deficit of $38,254,630, working capital deficit of $21,757,037.

The Company plans to continue its expansion and investments, which will require continued improvements in revenue and net income.









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Results of Operations

Results of Operations for the three months ended September 30, 2021 and 2020





The following table sets forth key components of Company's results of operations
for the three months ended September 30, 2021 and 2020. The discussion following
the table addresses these results.



                                           For Three Months Ended
                                                September 30,
                                            2021             2020         Fluctuation          %
Net revenues                            $      5,117     $     70,570          (65,453 )        (92.7 )%
Cost of revenues                             835,857           40,746          795,111        1,951.4 %
Gross margin                                (830,740 )         29,824         (860,564 )     (2,885.5 )%
Operating expenses                         3,905,754        1,394,923        2,510,831          180.0 %
Loss from operations                      (4,736,494 )     (1,365,099 )     (3,371,395 )        247.0 %
Interest income                                1,371            1,244              127           10.2 %
Interest expense                                   -              (11 )             11           (100 )%
Other expense                                (19,977 )       (110,951 )         90,974          (82.0 )%

Provision for income taxes expense               107                -      

       107            N/A
Net loss                                  (4,755,207 )     (1,474,817 )     (3,280,390 )        222.4 %




Revenues. For the three months ended September 30,2021 and 2020, we had revenue
of $5,117 and $70,570 respectively, representing a decrease of $65,453 or 92.7%,
which were derived from service package sales for the members and the sales and
leasing income from multimedia tablets. The significant decrease in revenue was
due to there were decrease in revenue from service package.



Cost of Revenue. For the three months ended September 30, 2021 and 2020, we had
cost of revenue of $835,857 and $40,746 respectively, representing an increase
of $795,111 or 1,951.4%. The cost of revenue represents costs of maintaining our
platform such as network service artwork merchandise and souvenirs sent to
members and cost of multimedia tablets. The increase in cost was mainly due to
increase in platform maintenance expenses, such as service charges for cloud
computing, items prepared as gifts for the member, and related expenses as well
as the leasing expenses of multimedia tablets.

Gross Margin. We generated gross profit of $ (830,740) and $ 29,824 for the three months ended September 30, 2021 and 2020, with a gross margin of (16,234.9)% and 42.3% respectively.





Operating expenses.  The total operating expenses was $3,905,754 and $1,394,923
for the three months ended September 30, 2021 and 2020, representing an increase
of $2,510,831 or 180.0%. The increase was mainly due to market expansion.



Loss from Operations. For the three months ended September 30, 2021 and 2020, we
had loss from operations of $4,736,494 and $1,365,099 respectively, representing
an increase in loss of $3,371,395 or 247.0 %.

Net loss. For the three months ended September 30, 2021 and 2020, we had net loss of $4,755,207 and $1,474,817 respectively, representing an increase of $3,280,390 or 222.4%. The increase was mainly due to market expansion and decrease in revenue.





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Liquidity and Capital Resources

Working Capital Deficit. As of September 30, 2021 and June 30, 2021, the Company a working capital deficit of $21,757,037 and a working capital deficit of $17,113,370, respectively.

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





                                                                Three
                                                               Months
                                                                Ended        Three Months
                                                              September          Ended
                                                                 30,         September 30,
                                                                2021             2020

Net cash used in operating activities                        $  (163,008 )   $  (1,785,171 )
Net cash used in investing activities                                  -           (18,030 )
Net cash provided by financing activities                         18,310

8,005


Effect of exchange rate change on cash                            (4,354 )        (192,816 )
Net change in cash and cash equivalents                      $  (149,052 )
 $  (1,988,012 )




Operating Activities.



Net cash used in operating activities was approximately $0.2 million for the
three months ended September 30, 2021, as compared to approximately $1.8 million
net cash used in operating activities for the three months ended September 30,
2020. Net cash used in operating activities was mainly due to the decrease of
approximately $0.7 million of other receivable - related party, the increase of
approximately $0.4 million of prepayments, and the increase of approximately
$4.4 million of customer deposits, and the increase of approximately $0.1
million of inventories.



Investing Activities.




There are no investing activities for the three months ended September 30, 2021.
Net cash used in investing activities was $18,030 for the three months ended
September 30, 2020.



Financing Activities.



Net cash provided by financing activities was $18,310 and $8,005 for the three
months ended September 30, 2021 and 2020, respectively, both of which referred
to the proceeds from related parties.

Off-Balance Sheet Arrangements

As of September 30, 2021 and June 30, 2021, 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, 2021 and June 30, 2021, 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, 2021 and 2020, and are included elsewhere in this report.

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