COVID-19 Update
In early January of 2020, a novel coronavirus ("COVID-19") outbreak took place
in Wuhan, China. Subsequently, it has spread rapidly to Asia and other parts of
the world. The COVID-19 outbreak has resulted in widespread economic disruptions
in China, as well as stringent government measures by the Chinese government to
contain its transmissions including quarantines, travel restrictions, and
temporary closures of non-essential businesses in China and elsewhere. The
outbreak in China mainly occurred in the first quarter of 2020, and it gradually
stabilized and business activities started to resume under the guidance and
support of the government since late second quarter of 2020.
As of December 31, 2020, the COVID-19 outbreak in China appears to be generally
under control and business activities have recovered on the whole. In addition,
we resumed contacting potential customers as of June 2020, and the
aforementioned negative impact has been further mitigated since the third
quarter of 2020, when the outbreak became more stabilized in China and other
regions in the world. However, sporadic cases continue to be found during the
first half year of 2021 in China. For example, a new Delta variant of COVID-19
had been found in certain cities in China in the second quarter of 2021, which
may cause another outbreak, thus increasing risks and possible further
disruption to businesses. Therefore, certain of our consulting services were
suspended from April 2021 to August 2021. We have resumed these consulting
businesses from August 2021 in order to maintain diversified services for our
customers.
As of December 31, 2021 and September 30, 2022, the COVID-19 pandemic continues
to be dynamic, and near-term challenges across the economy remain. Although
vaccines are now being distributed and administered across many parts of the
world, new variants of the virus have emerged and may continue to emerge that
have shown to be more contagious. We continue to adhere to applicable
governmental and commercial restrictions and to work to mitigate the impact of
COVID-19 on our employees, customers, communities, liquidity and financial
position. The extent to which the COVID-19 outbreak may impact the company's
business, operations and financial results from this point forward will depend
on numerous evolving factors that the company cannot accurately predict. Those
factors include the following: the duration and scope of the pandemic;
governmental, business and individuals' actions in response to the pandemic in
the future; and any other further development of the COVID-19 outbreak.
Substantially all of our revenues and operations are concentrated in China.
Consequently, our results of operations and financial performances have been
affected since 2020 and into the third quarter of 2022. Due to the government
measures taken to contain COVID-19, the offline activities of our PRC subsidiary
were restricted from late January to May 2020, resulting in cancellations or
postponements of the marketing efforts of our customers. In addition, due to
widespread economic disruptions during the outbreak, demand for our consulting
services by small and medium-sized enterprises were also adversely affected.
Specifically, as a result of government mandated closures of non-essential
business in China, many of our customers' business were suspended while others
permanently closed their businesses. From December 22, 2021 to January 24, 2022,
Xi'an city, the PRC, went into lockdown following a coronavirus outbreak that
officials attributed to the delta variant. From April 16, 2022 to April 19,
2022, the city was under temporary controls of social activities after reporting
more than 40 infections in half month. This affected mainly our digital
marketing consulting services in 2020, 2021 and early of 2022.
Overview
EUBG is a holding company for its operating subsidiaries. Our PRC subsidiary's
operations in China are the primary operations of the Company. While
substantially all of our operations are located in China, we currently do not,
and we do not plan to use variable interest entities to execute our business
plan or to conduct our China-based operations. However, because our operations
are in China and our major shareholders are located in China, there is always a
risk that the Chinese government may in the future seek to affect operations of
any company with any level of operations in China, including its ability to
offer securities to investors, list its securities on a U.S. or other foreign
exchange, conduct its business or accept foreign investment. If any or all of
the foregoing were to occur, it could, in turn, result in a material change in
the Company's operations and/or the value of its common stock and/or
significantly limit or completely hinder its ability to offer or continue to
offer securities to investors and cause the value of such securities to
significantly decline or be worthless.
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Recent Developments
For our digital training related services, we worked with Beida Jade Bird
Vocational Education ("Jade Bird") which was an authorized licensee of China
National Personal Talent Training Network ("CNPTTN"), a PRC regulatory agency
for the talent training. Jade Bird was in charge of its training courses, and
the Company was authorised by Jade Bird as its sole training related
administrator of the training courses, limited to coordinate the digital
training related services to individual clients who were interested in
conducting live-broadcasting business through social medias. The Company
provided training related services, to these individual clients who subscribed
courses, in arranging the examination, following up certificate issuance
processes, addressing clients' concerns, etc. On March 22, 2022, the PRC
subsidiary learned that Jade Bird suspended its service after receiving a notice
from CNPTTN that until further notice CNPTTN has suspended all recruitment
services using its CNPTTN's name. As a result of CNPTTN's suspension, the PRC
subsidiary has also suspended its digital training related services with Jade
Bird from March 22, 2022 until further notice. For the nine months ended
September 30, 2022 and 2021, the digital training related services with Jade
Bird represented 9% and 0% of our total revenue, or $267,874 and $0,
respectively. For the three months ended September 30, 2022 and 2021, the
digital training related services with Jade Bird were nil. As of the date of
this filing, there is no further notice from CNPTTN and the service is still
being suspended.
Segment and Related Information
We operate as a single reportable segment "provision of consulting, sourcing and
marketing services in China".
Results of Operations and Financial Condition
Results of Operations for the three months ended September 30, 2022 as compared
to the three months ended September 30, 2021
The following table represents our unaudited condensed consolidated statement of
operations for the three months ended September 30, 2022 and 2021.
Three months ended
September 30,
2022 2021
Revenue $ 801,784 $ 1,622,471
Cost of revenue (140,009 ) (870,967 )
Gross profit 661,775 751,504
Selling expenses (10,043 ) (54,921 )
General and administrative expenses (423,931 ) (326,090 )
Total other (expenses) income, net (124,016 ) 38,847
Income before income tax 103,785 409,340
Income tax expense (135,784 ) (201,789 )
Net (loss) income $ (31,999 ) $ 207,551
Revenue and cost of revenue
During the three months ended September 30, 2022, we generated revenue of
$801,784 compared to $1,622,471 for the three months ended September 30, 2021,
representing a decrease of $820,687 or 50.6% as compared with the prior period.
For the three months ended September 30, 2022, our revenue from consultancy
services and sourcing and marketing services were $699,257 and $102,527,
respectively; while revenue for the three months ended September 30, 2021 were
$1,554,834 and $67,637, respectively; Cost of revenue was $140,009 for the three
months ended September 30, 2022 compared to $870,967 for the three months ended
September 30, 2021. The decrease of cost of revenue for the three months ended
September 30, 2022 was mainly due to our senior management no longer directly
involved in performing the services but focused on management work. Therefore,
less direct senior management costs were incurred in the consultancy services
and souring and marketing service.
3
Selling expenses
During the three months ended September 30, 2022, we incurred $10,043 selling
expenses compared to $54,921 for the three months ended September 30, 2021,
representing a decrease of $44,878 or 81.7% as compared with the prior period.
The decrease of selling expenses was mainly due to the tightening of
entertainment policies during the period and no staff costs were incurred in
selling activities.
General and administrative expenses
During the three months ended September 30, 2022, we incurred $423,931 general
and administrative expenses compared to $326,090 for the three months ended
September 30, 2021, representing a decrease of $97,841 or 30.0% as compared with
the prior period. The increase for the three months ended September 30, 2022 was
mainly due to more audit fees and professional fees charged by the professional
parties. Our general and administrative expenses consisted mainly of audit fees,
professional fees, payroll expenses and consultancy fees.
Total other (expenses) income, net
During the three months ended September 30, 2022, we incurred net other expense
of $124,016 compared to net other income of $38,847 for the three months ended
September 30, 2021. The difference of $162,863 was mainly due to exchange loss
of $135,842 resulting from the exchange rate appreciation of HKD against RMB for
the three months ended September 30, 2022. Our net other (expense) income mainly
consisted of bank interest income, exchange rate differences and certain sundry
incomes.
Income tax expense
During the three months ended September 30, 2022, we incurred income tax expense
of $135,784 compared to income tax expense of $201,789 for the three months
ended September 30, 2021, representing a difference of $66,005 or 32.7% as
compared with the prior period. The income tax expenses were charged in China
and Hong Kong.
For the three months ended September 30, 2022, our income tax expenses comprised
of current tax expenses and deferred tax expense of $127,727 and $8,057,
respectively, compared to current tax expenses and deferred tax expense of
$154,082 and $47,707 for the three months ended September 30, 2021.
Net (loss) income
As a result of the above, we resulted a net loss of $31,999 and generated a new
income of $207,551 for the three months ended September 30, 2022 and 2021,
respectively.
Results of Operations for the nine months ended September 30, 2022 as compared
to the nine months ended September 30, 2021
The following table represents our unaudited condensed consolidated statement of
operations for the nine months ended September 30, 2022 and 2021.
Nine months ended
September 30,
2022 2021
Revenue $ 2,851,656 $ 4,479,415
Cost of revenue (565,820 ) (1,289,739 )
Gross profit 2,285,836 3,189,676
Selling expenses (34,957 ) (224,935 )
General and administrative expenses (1,066,604 ) (905,391 )
Total other income, net 35,905 108,941
Income before income tax 1,220,180 2,168,291
Income tax expense (595,156 ) (872,063 )
Net income $ 625,024 $ 1,296,228
4
Revenue and cost of revenue
During the nine months ended September 30, 2022, we generated revenue of
$2,851,656 compared to $4,479,415 for the nine months ended September 30, 2021,
representing a decrease of $1,627,759 or 36.3% as compared with the prior
period. The decrease was mainly due to our consultancy services income,
generated from clients who engaged in online courses business, dropped by
$2,405,874 as compared with last period. This was because the end customers
became more patience and cautious in choosing online courses. We continued to
seek for different business opportunities to stabilize our income streams.
During the nine months ended September 30, 2022, we generated $267,874 from our
new digital training related services and $911,733 from our consultancy services
to a customer who engaged in live streaming business. However, these new income
streams only compensated a part of the revenue reduction in current period. As
of the date of this filing, the digital training related services with Jade Bird
remain suspended. Therefore, we expected the new revenue will not be available
to compensate the revenue reduction until further notice. Cost of revenue was
$565,820 for the nine months ended September 30, 2022 compared to $1,289,739 for
the nine months ended September 30, 2021. For the nine months ended September
30, 2022, the cost of revenue mainly represented the staff costs for our
consulting services and the agency fees for our digital training related
services.
Selling expenses
During the nine months ended September 30, 2022, we incurred $34,957 selling
expenses compared to $224,935 for the nine months ended September 30, 2021,
representing a decrease of $189,978 or 84.5% as compared with the prior period.
The decrease of selling expenses was mainly due to the tightening of
entertainment policies during the period and the staff costs incurred in selling
activities were dropped by $116,244 or 87.2% for the nine months ended September
30, 2022.
General and administrative expenses
During the nine months ended September 30, 2022, we incurred $1,066,604 general
and administrative expenses compared to $905,391 for the nine months ended
September 30, 2021, representing an increase of $161,213 or 17.8% as compared
with the prior period. The increase for the nine months ended September 30, 2022
was mainly due to more audit fees and professional fees charged by the
professional parties. Our general and administrative expenses consisted mainly
of audit fees, professional fees, payroll expenses and consultancy fees.
Total other income, net
During the nine months ended September 30, 2022, we generated net other income
of $35,905 compared to $108,941 for the nine months ended September 30, 2021.
The difference of $73,036 was mainly due to exchange loss of $107,920 resulting
from the exchange rate appreciation of HKD against RMB for the nine months ended
September 30, 2022. Our net other income mainly consisted of bank interest
income, exchange rate differences and certain sundry incomes.
Income tax expense
During the nine months ended September 30, 2022, we incurred income tax expense
of $595,156 compared to $872,063 for the nine months ended September 30, 2021,
representing a decrease of $276,907 or 31.8% as compared with the prior period.
The income tax expenses were charged in China and Hong Kong.
For the nine months ended September 30, 2022, our income tax expenses comprised
of current tax expenses and deferred tax expenses of $463,206 and $131,950,
respectively, compared to current tax expenses and deferred tax expenses of
$675,592 and $196,471 for the nine months ended September 30, 2021.
5
Net income
As a result of the above, we generated a net income of $625,024 and $1,296,228
for the nine months ended September 30, 2022 and 2021, respectively.
Liquidity and Capital Resources
Working Capital
September 30, December 31,
2022 2021
Cash and cash equivalents $ 6,330,431 $ 7,649,129
Total current assets 7,642,634 7,772,994
Total assets 7,938,452 8,201,140
Total liabilities 917,573 1,439,526
Retained earnings (accumulated deficit) 267,621 (357,403 )
Total equity $ 7,020,879 $ 6,761,614
Cash flow
The following table sets forth a summary of our cash flows for the periods
indicated:
Nine months ended
September 30,
2022 2021
Net cash generated from operating activities $ 44,094 621,854
Net cash (used in) generated from investing activities (1,070,140 ) 3,279,315
Net cash used in financing activities (3,490 ) (60,869 )
Effect of exchange rate changes on cash and cash equivalents (289,162 ) 37,171
Cash and cash equivalents, beginning of period
7,649,129 3,846,470
Cash and cash equivalents, end of period $ 6,330,431 $ 7,723,941Cash generated from operating activities
Net cash generated from operating activities for the nine months ended September
30, 2022 was $44,094, as compared to net cash generated from operating
activities of $621,854 for the nine months ended September 30, 2021,
representing a decrease of $577,760 or 92.9% as compared with the prior period.
The decrease of operating cash flows was mainly resulted from a combination of
below operating activities changes:
Net income was $625,024 for the nine months ended September 30, 2022, as
compared to $1,296,228 for the nine months ended September 30, 2021. The
decrease of net income of $671,204 or 51.8% was mainly due to the reduction of
certain performance-based arrangement consultancy services during the period
which directly reduced our operating cash inflow.
Cash outflow of deferred tax was $33,117 for the nine months ended September 30,
2022, as compared to cash outflow of $319,660 for the nine months ended
September 30, 2021. The difference was mainly due to our PRC subsidiary
generated net profits of $1,435,498 and $1,666,990 respectively, for the nine
months ended September 30, 2022 and 2021; while the PRC subsidiary only
distributed dividends of $1,514,848 to our Hong Kong subsidiary in current
period, representing a significant decrease of $3,081,688 as compared with prior
period.
Cash outflow of trade receivables was $244,432 for the nine months ended
September 30, 2022, as compared to cash inflow of $95,800 for the nine months
ended September 30, 2021. The cash outflow of $244,432 for the nine months ended
September 30, 2022 was due to certain consultancy services income were not
settled by the customers before the end of period.
Cash outflow of trade payables was $111,527 for the nine months ended September
30, 2022 as compared to cash inflow of $431,690 for the nine months ended
September 30, 2021. As the Company launched the digital training related
services in September 2021, most of the service vendors were not settled before
September 30, 2021. It led to the cash inflow of $431,690 from trade payable for
the nine months ended September 30, 2021. Cash outflow of $111,527 was resulted
for the nine months ended September 30, 2022 because such service was suspended
since March 2022 and all the account payables were settled before September 30,
2022.
6
Cash outflow of other payables and accrued liabilities was $159,123 for the nine
months ended September 30, 2022, as compared to cash outflow of $284,226 for the
nine months ended September 30, 2021. The cash outflow for the nine months ended
September 30, 2022 and 2021 were due to the settlement of the accrued audit fee,
consultancy fee and professional fee during the periods. Larger cash outflow was
resulted in the nine months ended September 30, 2021 because the Company filed a
registration document during the period and settled the service fees with the
professional parties.
Cash inflow of tax payables was $106,699 for the nine months ended September 30,
2022, as compared to cash outflow of $445,713 for the nine months ended
September 30, 2021. The cash inflow of $106,699 for the nine months ended
September 30, 2022 was mainly due to the business reduction during the period
and we provided current income tax of $595,156 netting off with $369,878 income
tax paid during the period. The cash outflow of $445,713 for the nine months
ended September 30, 2021 was mainly due to the current income tax provision of
$675,592, netting off with $1,115,659 income tax paid during the prior period.
Cash outflow of contract liabilities was $208,106 for the nine months ended
September 30, 2022 because the digital training related services will Jade Bird
was suspended since March 2022 and all the outstanding contract liabilities were
refunded to the customers before September 30, 2022.
As we are continually to explore new business opportunities and new customers,
we expect to generate more cash inflows in the coming years. We continue to
monitor our level of operating expenses in order to maintain a positive cash
flow position.
Cash (used in) generated from investing activities
Net cash used in investing activities for the nine months ended September 30,
2022 was $1,070,140 as compared net cash of $3,279,315 generated from investing
activities for the nine months ended September 30, 2021. The net cash used in
investing activities for the nine months ended September 30, 2022 were mainly
due to loan receivables of $1,060,394 provided to two unrelated parties during
the period; while the net cash generated from investing activities for the nine
months ended September 30, 2021 was mainly due to the redemption of debt
products of $5,872,017 offset by the acquisition of debt products of $2,781,482.
Cash used in financing activities
For the nine months ended September 30, 2022, net cash used in financing
activities of $3,490 represented the repayment for the amount due to a director;
while the net cash used in of $60,869 for the nine months ended September 30,
2021 was mainly due to the repayment for the amount due to a director of
$128,751 offsetting by the advance from a director of $67,882 during the period.
Future Capital Requirements
We believe that our ability to generate cash from operations are adequate to
fund working capital, capital spending and other cash needs for at least the
next 12 months. Our ability to generate adequate cash from operations in the
future, however, will depend on, among other things, our ability to successfully
implement our business strategies while continuing to tightly control our
expenses, and to manage the impact of changes to the PRC regulatory environment.
We can give no assurance that we will be able to successfully implement those
strategies and cost control initiatives, or successfully adjust to any changes
to PRC laws and regulations impacting our business. In addition, changes in our
operating plans, lower than anticipated sales, increased expenses, interest rate
increases, acquisitions or other events may cause us to seek additional debt or
equity financing in future periods. We can give no assurance that financing will
be available on acceptable terms or at all. Additional equity financing could be
dilutive to holders of the Company's common stock; debt financing, if available,
could impose additional cash payment obligations and additional covenants and
operating restrictions.
7
Contractual Obligations
We had the following contractual obligations and commercial commitments as of
September 30, 2022:
Less than 1-3 3-5 More than
Contractual Obligations Total 1 year years years 5 years
Lease 97,243 55,567 41,476 - -
TOTAL $ 97,243 $ 55,567 $ 41,476 $ - $ -
Off-Balance Sheet Arrangements
As of September 30, 2022 and December 31, 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.
Critical Accounting Policies
The preparation of condensed financial statements in conformity with accounting
principles generally accepted in the United States requires our management to
make assumptions, estimates and judgments that affect the amounts reported,
including the notes thereto, and related disclosures of commitments and
contingencies, if any. We have identified certain accounting policies that are
significant to the preparation of our financial statements. These accounting
policies are important for an understanding of our financial condition and
results of operation. Critical accounting policies are those that are most
important to the portrayal of our financial condition and results of operations
and require management's difficult, subjective, or complex judgment, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting
estimates are particularly sensitive because of their significance to financial
statements and because of the possibility that future events affecting the
estimate may differ significantly from management's current judgments. We
believe the following critical accounting policies involve the most significant
estimates and judgments used in the preparation of our financial statements.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States of America generally accepted
accounting principles ("U.S. GAAP") and applicable rules and regulations of the
Securities and Exchange Commission ("SEC") regarding interim financial
reporting. The unaudited condensed consolidated financial statements include the
financial statements of the Company and its subsidiaries. All significant
inter-company transactions and balances have been eliminated in consolidation.
8
The interim condensed consolidated financial information as of September 30,
2022 and for the three and nine months ended September 30, 2022 and 2021 have
been prepared without audit, pursuant to the rules and regulations of the SEC.
Certain information and footnote disclosures, which are normally included in
consolidated financial statements prepared in accordance with U.S. GAAP have
been condensed or omitted pursuant to such rules and regulations. The interim
condensed consolidated financial information should be read in conjunction with
the Financial Statements and the notes thereto, included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2021, previously
filed with the SEC on April 15, 2022.
During the nine months ended September 30, 2022, the Company experienced (and
continues to experience) adverse impacts of novel coronavirus (COVID-19) and the
related public health orders. The Company expects that the impact of the
COVID-19 outbreak on China and world economies will continue to have a material
adverse impact on the demand for the Company's business. Because of the
significant uncertainties surrounding the COVID-19 pandemic, the extent of the
business interruption and the related financial impact cannot be reasonably
estimated at this time.
Use of Estimates
The preparation of these financial statements in conformity with U.S. GAAP
requires management of the Company to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues, costs and expenses, and
related disclosures. On an ongoing basis, the Company evaluates its estimates
based 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. Actual results may differ from
these estimates under different assumptions or conditions. Identified below are
the accounting policies that reflect the Company's most significant estimates
and judgments, and those that the Company believes are the most critical to
fully understanding and evaluating its condensed consolidated financial
statements.
The COVID-19 pandemic has created and may continue to create significant
uncertainty in macroeconomic conditions, which may cause further business
slowdowns or shutdowns, depress demand for the Company's business, and adversely
impact its results of operations. During the nine months ended September 30,
2022, the Company faced increasing uncertainties around its estimates of revenue
collectability and accounts receivable credit losses. The Company expects
uncertainties around its key accounting estimates to continue to evolve
depending on the duration and degree of impact associated with
the COVID-19 pandemic. Its estimates may change as new events occur and
additional information emerges, and such changes are recognized or disclosed in
its condensed consolidated financial statements.
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ENTREPRENEUR UNIVERSE BRIGHT GROUP 
