LONGDUODUO COMPANY LIMITED The following discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted inthe United States . The preparation of such financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. On an ongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates.
Application of Critical Accounting Policies
The discussion and analysis of the Company's financial condition and results of operations is based upon its condensed consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. In connection with the preparation of our financial statements for the three months endedDecember 31, 2022 , there was no accounting estimate made which was (a) subject to a high degree of uncertainty and (b) material to our results. Results of Operations
The following table shows key components of the unaudited results of operations
during the three and six months ended
For the Three Months Ended
December 31, Change
2022 (Unaudited) 2021 (Unaudited) $ %
Total revenue $ 64,194 $ 925,512 $ (861,318 ) (93 )%
Cost of revenue 25,801 307,209 (281,408 ) (92 )%
Gross Profit 38,393 618,303 (579,910 ) (94 )%
Total operating expenses 215,082 919,538 (704,456 ) (77 )%
Loss from operations (176,689 ) (301,235 ) 124,546 (41 )%
Other income (expense), net 529 (2,050 ) 2,579 (126 )%
Loss before income taxes (176,160 ) (303,285 ) 127,125 (42 )%
Income tax - 228 (228 ) (100 )%
Net Loss $ (176,160 ) $ (303,513 ) $ 127,353 (42 )%
2
During the three months ended December 31, 2022 , our revenue was $64,194 , and
was attributable to the sale of healthcare services and healthcare products,
primarily derived from sales of "Immunological Ozonated Autohemotherapy",
"Meridian-regulating and Consciousness-restoring Iatrotechnics", "Assay", "PRP"
and other healthcare services. As of December 31, 2022 , we operate through five
entities: Longduoduo Health Technology, Tianju, Qingguo, Rongbin and Chengheng,
which are established in Ordos, Ulanqab, Huhhot, Baotou and Ordos, respectively,
the four of largest cities in Inner Mongolia of China . During the three months
ended December 31, 2022 , our revenue decreased $861,318 (or 93%) compare to same
period of last year, mainly the operations of five operating entities were
almost completely stagnation, due to COVID-19 in October and November of 2022.
Cost of revenue mainly consists of our cost for third-party healthcare service
providers who perform healthcare services for our customers and the cost of
purchasing products. During the three ended December 31, 2022 , our cost of
revenue was $25,801 , with the result that our gross profit was $38,393 , a gross
margin of 59%. Gross margin at that level was sufficient to operate profitably.
However, we incurred a substantial net loss because the Company incurred
significant marketing expense to in connection with establishing its brand as a
new company. The Company will continue to invest heavily in advertising and
promotion expenses in the near future as it continues to establish and expand
its brand and products and services.
Operating expenses consist primarily of advertising and promotion expenses,
salaries and benefits, office expenses, professional fees and depreciation and
amortization. Our operating expenses during the three months ended December 31,
2022 decreased by $704,456 , primarily attributable to:
?
ended
ended
decrease of marketing service fee, which is calculated by revenue paid from the
company.
?
31, 2022, compared to
The decrease in our labor costs was primarily caused by the COVID-19 described
above.
?
compared to
decrease in office expenses was also primarily caused by the COVID-19 described
above. As described above, our net loss for the three months endedDecember 31, 2022 were$176,160 , compared to a net loss of$303,513 for the three months endedDecember 31, 2021 .
Our reporting currency is theU.S. dollar. Our local currency, the Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period being reported upon, and assets and liabilities are translated at the unified exchange rate as quoted by OANDA on the balance sheet date. Translation adjustments resulting from this process are included in other comprehensive income (loss). For the three months endedDecember 31, 2022 and 2021, foreign currency translation adjustments of$(41,600) and$(9,240) , respectively, 3 For the Six Months Ended December 31, Change 2022 2021 (Unaudited) (Unaudited) $ % Total revenue$ 479,757 $ 1,678,279 $ (1,198,522 ) (71 )% Cost of revenue 181,264 525,690 (344,426 ) (66 )% Gross Profit 298,493 1,152,589 (854,096 ) (74 )% Total operating expenses 790,616 8,414,184 (7,623,568 ) (91 )% Loss from operations (492,123 ) (7,261,595 ) 6,769,472 (93 )% Other income (expense), net 531 (2,834 ) 3,365 (119 )% Loss before income taxes (491,592 ) (7,264,429 ) 6,772,837 (93 )% Income tax - 228 (228 ) (100 )% Net Loss$ (491,592 ) $ (7,264,657 ) $ 6,773,065 (93 )%
During the six months endedDecember 31, 2022 , our revenue was $$479,757 , and was attributable to the sale of healthcare services and healthcare products, primarily derived from sales of "Immunological Ozonated Autohemotherapy", "Meridian-regulating and Consciousness-restoring Iatrotechnics", "Assay", "PRP" and other healthcare services. As ofDecember 31, 2022 , we operate through five entities: Longduoduo Health Technology, Tianju, Qingguo, Rongbin and Chengheng, which are established in Ordos, Ulanqab, Huhhot,Baotou and Ordos, respectively, the four of largest cities inInner Mongolia ofChina . During the three and six months endedDecember 31, 2022 , our revenue decreased 1,198,522 (or 71%) compare to same period of last year, mainly the operations of five operating entities were almost completely stagnation, due to COVID-19 in October and November
of 2022. Cost of revenue mainly consists of our cost for third-party healthcare service providers who perform healthcare services for our customers and the cost of purchasing products. During the six months endedDecember 31, 2022 , our cost of revenue was$181,264 , with the result that our gross profit was$298,493 , a gross margin of 62%, respectively. Gross margin at that level was sufficient to operate profitably. However, we incurred a substantial net loss because the Company incurred significant marketing expense to in connection with establishing its brand as a new company. The Company will continue to invest heavily in advertising and promotion expenses in the near future as it continues to establish and expand its brand and products and services. Operating expenses consist primarily of advertising and promotion expenses, salaries and benefits, office expenses, professional fees and depreciation and amortization. Our operating expenses during the six months endedDecember 31, 2022 decreased by$7,623,568 , primarily attributable to:
?
ended
ended
that on
exchanged for 114,579,853 common shares of
to 32 sales agents for service compensation expense of
?
2022, compared to
decrease in our labor costs was primarily caused by the COVID-19 described
above.
?
compared to
decrease was mainly attributable to the fact that on
HK issued a total of 600 shares, which were exchanged for 18,000,000 common
shares of
Ltd. for service compensation expense of$914,400 .
As described above, our net loss for the six months endedDecember 31, 2022 were$491,592 , compared to a net loss of$7,264,657 for the six months endedDecember 31, 2021 .
Our reporting currency is theU.S. dollar. Our local currency, the Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period being reported upon, and assets and liabilities are translated at the unified exchange rate as quoted by OANDA on the balance sheet date. Translation adjustments resulting from this process are included in other comprehensive income (loss). For the six months endedDecember 31, 2022 and 2021, foreign currency translation adjustments of$22,357 and$(9,614) , respectively, have been reported as other comprehensive income in the consolidated statement of operations and comprehensive income
(loss).
4
Liquidity and Capital Resources
As ofDecember 31, 2022 , the Company had$118,274 in cash and cash equivalents. On the same date, we had a working capital deficit of$1,640,032 , primarily because we had received$805,748 from customers as prepayment for future services and products but used the majority of the deposited sums to pay ongoing expenses and had only$9,160 in prepayments on ourDecember 31, 2022 balance sheet. Going forward, we will strive to achieve a better balance of customer deposits and prepayments; but we will achieve that better balance only when profits from operations and funds from financing are adequate to support the expansion effort that will be necessary for successful operations. We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from a public offering and/or debt financing. We expectZhang Liang , our President, to continue to provide support in the future, if needed. However, we can provide no assurances that we will be able to generate sufficient cash flows from operations and/or obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Cash Flows
The following unaudited table summarizes our cash flows for the six months ended
For the Six Months Ended
December 31, Change
2022 2021
(Unaudited) (Unaudited)
Net cash (used in) provided by operating
activities $ (337,707 ) $ 151,340 $ (489,047 )
Net cash used in investing activities (54,238 ) (107,666 ) 53,428
Net cash provided by financing activities 166,227 31,094 135,133
Effect of exchange rate fluctuation on cash and
cash equivalents (12,680 ) 4,977 (17,657 )
Net (decrease) increase in cash and cash
equivalents (238,398 ) 79,745 (318,143 )
Cash and cash equivalents, beginning of period 356,672 273,116 83,556
Cash and cash equivalents, ending of period $ 118,274 $ 352,861$ (234,587 )
For the six months endedDecember 31, 2022 , we had cash used in operating activities of$337,707 , compared to$151,340 provided by operating activities for the six months endedDecember 31, 2021 . Cash provided by operations during the six months endedDecember 31, 2022 was primarily due to the net loss, offset by the increased deposits received.
Net cash used in investing activities for the six months endedDecember 31, 2022 was$54,238 , compared to$107,666 for the six months endedDecember 31, 2021 . The cash was used for the purchase of fixed assets and office decoration.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the six months endedDecember 31, 2022 was$166,227 , compared to$31,094 for the six months endedDecember 31, 2021 was due to the proceeds from loan from a third party. 5
Trends, Events and Uncertainties
There is substantial doubt about our ability to continue as a going concern as a result of our lack of significant revenues and recurring losses. If we are unable to generate significant revenue or secure additional financing, we may be required to cease or curtail our operations. The COVID-19 pandemic has had a significant adverse impact and created many uncertainties related to our business, and we expect that it will continue to do so. The Company is experiencing challenges in sales, which have increased the Company's financial uncertainty. Our future business outlook and expectations are very uncertain due to the impact of the COVID-19 pandemic and are very difficult to quantify. It is difficult to assess or predict the impact of this unprecedented event on our business, financial results or financial condition. Factors that will impact the extent to which the COVID-19 pandemic affects our business, financial results and financial condition include: the duration, spread and severity of the pandemic; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the pandemic; and how quickly and to what extent normal economic and operating conditions can resume, including whether any future outbreaks interrupt the economic recovery. TheU.S. government, including theSEC , has made statements and taken actions that have led to changes in relations between theU.S. andChina , and will impact companies with connections tothe United States orChina . Those actions by theU.S. government included imposing several rounds of tariffs affecting certain products manufactured inChina and imposing sanctions and restrictions in relation toChina . Actions by theSEC included issuing statements indicating that it would make enhanced review of companies with significantChina -based operations. It is unknown whether and to what extent new legislation, executive orders, tariffs, laws or regulations will be adopted, or the effect that any such actions would have onU.S. -domiciled companies with significant connections toChina , our industry or on us. Any unfavorable government policies on cross-border relations, including increased scrutiny on companies with significantChina -based operations, capital controls or tariffs, may affect our ability to raise capital and the market price of our shares. If any new legislation, executive orders, tariffs, laws and/or regulations are implemented, if existing trade agreements are renegotiated or if theU.S. or Chinese governments take retaliatory actions due to the recentU.S. -China tensions, such changes could have an adverse effect on our business, financial condition and results of operations, our ability to raise capital and the market price of our shares. Changes inUnited States andChina relations and/or regulations may adversely impact our business, our operating results, our ability to raise capital and the market price of our shares.
Other than the factors listed above we do not know of any trends, events or uncertainties that have had or are reasonably expected to have a material impact on our net sales or revenues or income from continuing operations.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
Recent Accounting Pronouncements
There were no recent accounting pronouncements that we expect to have a material effect on the Company's financial position or results of operations. Please refer to Note 2 of our consolidated financial statements included in this annual report.
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