LUBA GROU The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. Our financial statements are prepared inU.S. dollars and in accordance withU.S. GAAP.
Special Note Regarding Forward Looking Statements
In addition to historical information, this report contains forward-looking statements. We use words such as "believe," "expect," "anticipate," "project," "target," "plan," "optimistic," "intend," "aim," "will" or similar expressions which are intended to identify forward-looking statements. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with theSEC . These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events. Overview
We were incorporated onMarch 19, 2013 under the name "Sunrise Tours, Inc. " under the laws of the state ofNevada . We originally intended to develop and offer special services, including 3D virtual tours for companies that would like to promote their venues on the Internet and through electronic media. OnJanuary 20, 2016 , we filed a Certificate of Amendment with the Secretary ofState of Nevada and changed our corporate name to "Luboa Group, Inc. " Concurrent with the name change, we changed our business focus to developing specialized agricultural products and acarbon emission trading platform inAsia . However, since inception, we have not engaged in active business operations and have not generated significant amount of revenue. OnApril 1, 2019 , we entered into a share exchange agreement withBangtong International , aRepublic of Seychelles company and holders of all outstanding capital stock ofBangtong International , pursuant to which onJune 21, 2019 , we acquired 100% of the outstanding capital stock ofBangtong International , and in exchange, we issued to the former shareholders ofBangtong International an aggregate of 100,000,000 shares of the Company's common stock. As a result,Bangtong International became our wholly-owned subsidiary and the former shareholders ofBangtong International became the holders of approximately 89.6% of our issued and outstanding capital stock on a fully-diluted basis. On the same date, Mr.Feng Jiang resigned from his positions as the President, CEO, CFO, Treasurer, Secretary and Chairman of the Board of Directors of the Company. Mr.Xianyi Hao was appointed as our new President, CEO, CFO, Treasurer, Secretary and Chairman of the Board of Directors. As a result of this transaction, we ceased to be a shell company and through our subsidiaries and affiliated entities, we are currently engaged in the business of e-commerce. We have officially launched our e-commerce platform in second half of 2019, Ingtona (????), but the active users are minimum. We have not yet commenced planned operations to any significant measure. Our operations to date have been devoted primarily to start-up, development and operational activities, which include:
? Formation of our subsidiaries;
? Development of our business plan;
? Research on marketing channels/strategies for our planned business; and
? The development of our franchise business.
1
The accompanying financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Since late January, the COVID-19 pandemic has significantly reduced customer visits and spending in our offline stores and delayed the full launch and normal operations of our e-commerce platform. Although the Chinese government has lifted quarantines and lockdowns since late March, various restrictions and the fear of new outbreaks continue to limit the recovery of our business and customer demand for our products and services. The Company incurred net loss of$183,750 , net cash used in operating activities was$137,450 , and shareholders' deficit was$943,085 during the six months
endedJune 30, 2020 .
The ability to continue as a going concern is dependent upon the Company's profit generating operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. Therefore, there is substantial doubt about the ability of the entity to continue as a going concern within one year after the date that the financial statements are issued. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern. The Company expects to finance operations primarily through capital contributions from the shareholders. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Results of Operations
Comparison of Three Months Ended
The following table sets forth key components of our results of operations
during the three months ended
Three months ended Three months ended
June 30, 2020 June 30, 2019 Change
Revenue
Franchise revenue $ 6,876 $ - $ 6,876
Sale of products 233 - 233
Total revenue 7,109 - 7,109
Cost of revenue:
Franchise expenses (972 ) - (972 )
Cost of goods sold (128 ) - (128 )
Total cost of revenue (1,100 ) - (1,100 )
Gross profit 6,009 - 6,009
Other (expenses)income (6 ) 439 (445 )
General and administrative expense (71,474 ) (583,746 ) 512,272
Net loss (65,471 ) $ (583,307 ) $ 517,836
Revenue
We are developing our e-commerce platform which will serve consumers through our
retail website that enables third-party sellers to sell their products on the
online marketplace. Our platform was launched in the second half of 2019 and we
expect to start generating revenues from our e-commerce business during the 2020
fiscal year. However, we did not generate any revenues from our e-commerce
platform as we did not sell any products on the platform during the three months
period ended June 30, 2020 and 2019. The Company also started the offline adult
products franchise business in fall 2019 and we generated revenue of $6,876 for
franchise revenue and $233 for selling products in our vending machines during
the three months period ended June 30, 2020 .
Since late January, the COVID-19 pandemic has significantly reduced customer
visits and spending in our offline stores and delayed the full launch and normal
operations of our e-commerce platform. Although the Chinese government has
lifted quarantines and lockdowns since late March, various restrictions and the
fear of new outbreaks continue to limit the recovery of our business and
customer demand for our products and services.
Cost of revenue
Cost of revenue was $1,100 for the three months ended June 30, 2020 which was
mainly comprised of the franchise expenses amounted $972 and cost of products
sold by the vending machines in offline adult products stores amounted $128 .
During the three months ended June 30, 2019 , as we did not earn any revenue, we
did not incur any cost of revenue.
2
Gross profit and gross margin
Gross profit for the three months ended June 30, 2020 was $6,009 . As a result of
no revenue and cost of revenue being realized, gross profit was $nil for the
three months ended June 30, 2019 .
General and administrative expense
Our general and administrative expense consists primarily of salary expense, travelling expenses, as well as consultancy fees. Our general and administrative expenses decreased by$512,272 to$71,474 for the three months endedJune 30, 2020 from 2019. Such decrease incurred was mainly because we engaged consultants to provide consulting services in connection with the Reverse Acquisition for the three months endedJune 30, 2019 . Net loss
As a result of the cumulative effect of the factors described above, our net
loss decreased by
Comparison of Six Months Ended
The following table sets forth key components of our results of operations
during the six months ended
Six months ended Six months ended
June 30, 2020 June 30, 2019 Change
Revenue
Franchise revenue $ 6,876 $ - 6,876
Sale of products 1,024 - 1,024
Total revenue 7,900 - 7,900
Cost of revenue:
Franchise expenses (972 ) - (972 )
Cost of goods sold (512 ) - (512 )
Total cost of revenue (1,484 ) - (1,484 )
Gross profit 6,416 - $ 6,416
Other income 1,608 966 642
General and administrative expense (191,774 ) (1,237,366 ) 1,045,592
Net loss $ (183,750 ) $ (1,236,400 ) $ 1,052,650
Revenue
We are developing our e-commerce platform which will serve consumers through our
retail website that enables third-party sellers to sell their products on the
online marketplace. Our platform was launched in the second half of 2019 and we
expect to start generating revenues from our e-commerce business during the 2020
fiscal year. However, we did not generate any revenues from our e-commerce
platform as we did not sell any products on the platform during the six months
period ended June 30, 2020 and 2019. The Company also started the offline adult
products franchise business in fall 2019 and we generated revenue of $6,876 for
franchise revenue and $1,024 for selling products in our vending machines during
the six months period ended June 30, 2020 .
Since late January, the COVID-19 pandemic has significantly reduced customer
visits and spending in our offline stores and delayed the full launch and normal
operations of our e-commerce platform. Although the Chinese government has
lifted quarantines and lockdowns since late March, various restrictions and the
fear of new outbreaks continue to limit the recovery of our business and
customer demand for our products and services.
Cost of revenue
Cost of revenue was$1,484 for the six months endedJune 30, 2020 which was mainly comprised of the franchise expenses amounted$972 and cost of products sold by the vending machines in offline adult products stores amounted$512 . During the three months endedJune 30, 2019 , as we did not earn any revenue, we did not incur any cost of revenue. 3 Gross profit and gross margin
Gross profit for the six months endedJune 30, 2020 was$6,416 . As a result of no revenue and cost of revenue being realized, gross profit was $nil for the six months endedJune 30, 2019 .
General and administrative expense
Our general and administrative expense consists primarily of salary expense, travelling expenses, as well as consultancy fees. Our general and administrative expenses decreased by$1,045,592 to$191,774 for the six months endedJune 30, 2020 from the same period of 2019. Such decrease incurred was mainly because we engaged consultants to provide consulting services in connection with the Reverse Acquisition for the six months endedJune 30, 2019 . Net loss
As a result of the cumulative effect of the factors described above, our net
loss decreased by
Liquidity and Capital Resources
Working capital: June 30, 2020 June 30, 2019
Total current assets
1,360,340
Working capital deficiency
4
As ofJune 30, 2020 , we had cash and cash equivalents of$33,207 . To date, we have financed our operations primarily through contributions by owners and borrowings from related parties. The following table provides detailed information about our net cash flows for the six months endedJune 30, 2020 and 2019:
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