GUSHEN, INC Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-Q)

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As used herein and unless otherwise specified, the term “Company”, “this(ies)”, “our”, “we”, “us” and “GSHN” means Gushen, Inc.a Nevada company and its consolidated subsidiary, as the case may be.




 The following discussion of our financial condition and results of operations
should be read in conjunction with our audited consolidated financial statements
and the notes to those consolidated financial statements appearing elsewhere in
this report.



Certain statements in this report constitute forward-looking statements. These
forward-looking statements include statements, which involve risks and
uncertainties, regarding, among other things, (a) our projected sales,
profitability, and cash flows, (b) our growth strategy, (c) anticipated trends
in our industry, (d) our future financing plans, and (e) our anticipated needs
for, and use of, working capital. They are generally identifiable by use of the
words "may," "will," "should," "anticipate," "estimate," "plan," "potential,"
"project," "continuing," "ongoing," "expects," "management believes," "we
believe," "we intend," or the negative of these words or other variations on
these words or comparable terminology. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this filing will in fact occur. You should not place undue reliance
on these forward-looking statements.



The forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which the statements are made or to reflect the
occurrence of unanticipated events.



Overview



On July 30, 2021, Gushen, Inc., a Nevada corporation ("GSHN" or the "Company"),
Dyckmanst Limited, a company organized under the laws of the British Virgin
Islands ("Dyckmanst Limited"), and all shareholders of Dyckmanst Limited
immediately prior to the closing (collectively, the "Dyckmanst Limited
Shareholders", each, a "Dyckmanst Limited Shareholder") entered into a share
exchange agreement (the "Share Exchange Agreement"), pursuant to which the
Company acquired 100% of the issued and outstanding equity securities of
Dyckmanst Limited in exchange for 381,600,000 shares of common stock, par value
$0.0001 per share (the "Common Stock") of the Company (the "Share Exchange").
Immediately prior to the closing of the Share Exchange, two existing holders of
aggregated 30,000,000 shares of Series A preferred stock of the Company, par
value $0.0001 per share (the "Preferred Stock") delivered 29,000,000 shares of
Preferred Stock to the Company for cancellation ("the "Cancellation of Certain
Preferred Stock"), each Preferred Stock is convertible into 10 shares of Common
Stock. As a result, immediately following the closing of the Share Exchange,
there are 410,618,750 shares of Common Stock issued and outstanding and
1,000,000 shares of Preferred Stock issued and outstanding. Dyckmanst Limited
Shareholders collectively control 90.72% voting power of the Company on as
converted basis, with respect to all of the shares of Common Stock and Preferred
Stock, voting as a single class, with each share of Common Stock entitles to 1
vote and each share of Preferred Stock entitles to 10 votes. The Share Exchange
Agreement is incorporated by reference from the Current Report on Form 8-K/A
filed with the Securities and Exchange Commission (the "SEC") on August 6, 2021.



Immediately prior to entering into the Share Exchange Agreement with Dyckmanst
Limited and shareholders of Dyckmanst Limited, we were a shell company with no
significant asset or operation, we have never generated any revenue, and during
the period from November 2017 through March 2020, we were dormant. As a result
of the Share Exchange, we operate through a PRC affiliated entity, Beijing
Zhuoxun Century Culture Communication Co., Ltd. ("Zhuoxun Beijing"), located in
Beijing, China. Dyckmanst Limited does not have any substantive operations other
than holding Edeshler Limited, a Hong Kong company, which in return holding
Beijing Fengyuan Zhihui Education Technology Co., Ltd. (Fengyuan Beijing), which
controls Zhuoxun Beijing through certain contractual arrangements.



                                       18





As a holding company with no material operations of our own, we have reached
contractual arrangements dated February 5, 2021, which also known as VIE
Agreements, with Zhuoxun Beijing, a variable interest entity, or "VIE", and its
subsidiaries. Neither we nor our subsidiaries own any equity interests in VIE.
The VIE Agreements are designed to provide Fengyuan Beijing, our wholly-owned
subsidiary, with the power, rights, and obligations equivalent in all material
respects to those it would possess as the principal equity holder of Zhuoxun
Beijing, including absolute control rights and the rights to the assets,
property, and revenue of Zhuoxun Beijing. This VIE structure is used to
replicate foreign investment in Chinese-based companies where Chinese law
prohibits direct foreign investment in the telecommunications sector. As a
result of the direct ownership in Fengyuan Beijing and the VIE Agreements, we
are regarded as the primary beneficiary of the VIE. The VIE Agreements are
incorporated by reference from the Current Report on Form 8-K filed with the SEC
on August 6, 2021. Zhuoxun Beijing provides family education resources to
promote all-around education onsite in local communities organized by their
regional collaborative education agency and offer parents easy access to a wide
variety of courses online through Zhouxun Beijing's application.



Zhuoxun Beijing delivers onsite educational services through its nationwide
physical network of regional collaborative education agency. Zhuoxun Beijing
onsite educational services include programs such as individual development,
youth leadership development, and parenting schools, enabling in-person guidance
and interactions in classes. Zhuoxun Beijing has developed long-term business
relationships with around 18 regional education agencies around the country,
whom Zhuoxun Beijing provides systematic training and management for to ensure
to deliver high-quality and uniformed educational service system.



Zhuoxun Beijing provides online education through their mobile application,
Wisdom Lighthouse ("????") (formerly known as ZhuoXun App) , which is geared
towards Chinese parents designed to help them acquire different family education
resources. Zhuoxun Beijing's products provide two sets of curricula: "Good
Parenting" ("????") and "Wise Parents" ("????"). "Good Parenting", focused on
child development, provides courses including EQ training, learning habits,
learning ability, parents-children communication, stages of puberty, etc. to
promote children's mental and psychological health. "Wise Parents" introduces
general strategies of family education to parents to help them better understand
and support children's growth and needs, whereby courses such as traditional
family values, improvement of parents' qualifications, psychological analysis
are provided. Through Zhuoxun Beijing's mobile application, Zhuoxun Beijing's
users can, based on their own interest and needs, select courses that suitable
for them and obtain valuable knowledge and skills provided by Zhuoxun Beijing's
courses. Zhuoxun Beijing's users on mobile platform can use iPhone, Android,
iPad and other tablets to review the courses anywhere and anytime. As of the
date hereof, Zhuoxun Beijing has around 40,000 active users on the Wisdom
Lighthouse app.



Zhuoxun Beijing's online family education mobile platform monetizes through
in-app purchases. Zhuoxun Beijing provides one free trial class of each course
for all the users. The remaining classes are available for purchase. Users are
able to view the first class for free before determining if to purchase the
remaining classes.



Zhuoxun Beijing's product Zhuoxun Anti-Addiction Cellphone ("Zhuoxun Cellphone")
is an intelligent terminal device. Zhuoxun Beijing's cooperate with Dami Zhilian
Information Technology Group Co., Ltd, a technology company that develops and
produces smartphones ("Dami Zhilian"). Zhuoxun Beijing's gives their design
requirements to Dami Zhilian, who customizes and produces Zhuoxun Cellphone for
us. Zhuoxun Beijing doesnot own any intellectual property in connection with
Zhuoxun Cellphones. Zhuoxun Beijing sell Zhuoxun Cellphones through regional
collaborative education agency. Zhuoxun Cellphone has primarily four functions
including anti-addiction, myopia prevention, security, and study assistance, for
the purpose of managing elementary and middle school students. Parents are able
to personalize and monitor children's use of Zhuoxun Cellphone by setting screen
auto-lock, monitoring internet surfing, monitoring mobile application usage,
monitoring physical locations, etc.



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Significant Accounting Policies and Estimates



Basis of Presentation


The Company’s financial statements have been prepared in accordance with generally accepted accounting principles. United States (“we GAAP”).




Use of Estimates



The preparation of these consolidated 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 on-going 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 consolidated financial
statements.



COVID-19 Outbreak


In March 2020, the World Health Organization declared coronavirus COVID-19 a
global pandemic. The COVID-19 pandemic has negatively impacted the global
economy, workforces, customers, and created significant volatility and
disruption of financial markets. It has also disrupted the normal operations of
many businesses, including ours or Zhuoxun Beijing's. This outbreak could
decrease spending, adversely affect demand for our or Zhuoxun Beijing's services
and harm our or Zhuoxun Beijing's business and results of operations. Zhuoxun
Beijing's main business would continue to be affected by China's anti-epidemic
measures such as restrictions on public gatherings in the COVID-19 pandemic. It
is not possible for us to predict the duration or magnitude of the adverse
results of the outbreak and its effects on Zhuoxun Beijing's business or results
of operations at this time.



Revenue Recognition



Zhuoxun Beijing recognizes revenues when its customer obtains control of
promised goods or services, in an amount that reflects the consideration which
Zhuoxun Beijing expects to receive in exchange for those goods or services.
Zhuoxun Beijing recognizes revenues following the five-step model prescribed
under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify
the performance obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligations in the
contract; and (v) recognize revenues when (or as) it satisfies the performance
obligation.



Revenues are recognized when control of the promised goods or services is
transferred to its customers, which may occur at a point in time or over time
depending on the terms and conditions of the agreement, in an amount that
reflects the consideration we expect to be entitled to in exchange for those
goods or services.


Zhuoxun Beijing has identified the following performance obligations for each type of contract:




Training Revenue



Zhuoxun Beijing's onsite training course service primarily includes assigning
instructors, providing onsite classes and presenting training materials to the
course participants who attend the classes. The series of tasks as discussed
above are interrelated and are not separable or distinct as the customers cannot
benefit from the standalone task.



Zhuoxun Beijing's online training course service primarily includes courseware
or videos which are already published on the website. Other than providing the
access, there are no bundle or multiple separable and distinct tasks.



According to ASC 606-10-25-19, there is an obligation of result for the training course service.



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Mobile Phone Revenue



Zhuoxun Beijing's sales contracts of anti-addiction mobile phone device provide
that it provides multiple delivery of the product specified in the contracts.
The contacts identify the quantity, product model, product type and unit price
of the product that will be sold to Zhuoxun Beijing's customers. The contracts
allow the customers to place separate orders within the credit limit as
specified in the contracts. The delivery is based on the quantity of customers'
order. Zhuoxun Beijing's customers can benefit from the mobile phone devices
every time it delivers to them. Therefore, the delivery of the products is
separately identifiable and distinct.



Thus, there are multiple performance obligations in each of the anti-addiction mobile telephone device sales contracts.

Practical expedients and exemption




Zhuoxun Beijing has not occurred any costs to obtain contracts, and does not
disclose the value of unsatisfied performance obligations for contracts with an
original expected length of one year or less.



Other service income is earned when the services have been rendered.



Income Taxes


We account for income taxes using the liability method. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial reporting and tax bases of assets and liabilities using
enacted tax rates that will be in effect in the period in which the differences
are expected to reverse. The Company records a valuation allowance against
deferred tax assets if, based on the weight of available evidence, it is
more-likely-than-not that some portion, or all, of the deferred tax assets will
not be realized. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.



We apply ASC 740, Accounting for Income Taxes, to account for uncertainty in
income taxes and the evaluation of a tax position is a two-step process. The
first step is to determine whether it is more likely than not that a tax
position will be sustained upon examination, including the resolution of any
related appeals or litigation based on the technical merits of that position.
The second step is to measure a tax position that meets the more-likely-than-not
threshold to determine the amount of benefit to be recognized in the financial
statements. A tax position is measured at the largest amount of benefit that is
greater than 50 percent likelihood of being realized upon ultimate settlement.
Tax positions that previously failed to meet the more-likely-than-not
recognition threshold should be recognized in the first subsequent period in
which the threshold is met. Previously recognized tax positions that no longer
meet the more-likely-than-not criteria should be de-recognized in the first
subsequent financial reporting period in which the threshold is no longer met.



Foreign currency and foreign currency conversion




The functional currency of the Company is the United States dollar ("US
dollar"). Fengyuan Beijing, Zhuoxun Beijing and Zhuoxun Beijing's subsidiaries,
all of which are based in PRC, use the local currency, the Chinese Yuan ("RMB"),
as their functional currencies. An entity's functional currency is the currency
of the primary economic environment in which it operates, normally that is the
currency of the environment in which the entity primarily generates and expends
cash. Management's judgment is essential to determine the functional currency by
assessing various indicators, such as cash flows, sales price and market,
expenses, financing and inter-company transactions and arrangements.



Foreign currency transactions denominated in currencies other than the
functional currency are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
re-measured at the applicable rates of exchange in effect at that date. Gains
and losses resulting from foreign currency re-measurement are included in the
statements of comprehensive loss.



The consolidated financial statements are presented in U.S. dollars. Assets and
liabilities are translated into U.S. dollars at the current exchange rate in
effect at the balance sheet date, and revenues and expenses are translated at
the average of the exchange rates in effect during the reporting period.
Stockholders' equity accounts are translated using the historical exchange rates
at the date the entry to stockholders' equity was recorded, except for the
change in retained earnings during the period, which is translated using the
historical exchange rates used to translate each period's income statement.
Differences resulting from translating functional currencies to the reporting
currency are recorded in accumulated other comprehensive income in the
consolidated balance sheets.



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Converting amounts from RMB to we dollars was made at the following exchange rates:




Balance sheet items, except for equity accounts
December 31, 2021                                   RMB6.3726 to $1
September 30, 2021                                  RMB6.4567 to $1

Income statement and cash flow items For the three months ended December 31, 2021 RMB6.3914 at $1
For the three months ended December 31, 2020 RMB6.6235 at $1




Cash and Cash Equivalents


Cash and cash equivalents include cash in hand and at the bank and highly liquid investments, which are not subject to any restriction on withdrawal or use and whose initial maturities are less than or equal to one year at the time of the ‘purchase.



Accounts Receivable, Net



The carrying value of accounts receivable is reduced by an allowance that
reflects the Company's best estimate of the amounts that will not be collected.
The Company makes estimations of the collectability of accounts receivable. Many
factors are considered in estimating the general allowance, including reviewing
delinquent accounts receivable, performing an aging analysis and a customer
credit analysis, and analyzing historical bad debt records and current economic
trends.


The adoption of the new revenue standards has not changed the Company’s historical accounting policies for its accounts receivable.



Long-Lived Assets


Long-lived assets mainly consist of property, plant and equipment and intangible assets.

Fixed assets




Property, plant and equipment are recorded at cost less accumulated depreciation
and accumulated impairment. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.



                                Estimated useful lives (years)
Office and computer equipment                 5
Lease improvement                             3



Maintenance and repair expenditures are expensed as incurred.




The gain or loss on the disposal of property, plant and equipment is the
difference between the net sales proceeds and the lower of the carrying value or
fair value less cost to the relevant assets and is recognized in general and
administrative expenses in the consolidated statements of comprehensive loss.



Intangible Assets



Intangible assets mainly comprise domain names and trademarks. Intangible assets
are recorded at cost less accumulated amortization with no residual value.
Amortization of intangible assets o is computed using the straight-line method
over their estimated useful lives.



The estimated useful lives of the Company's intangible assets are listed below:



           Estimated useful lives (years)
Software                       10





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Impairment of long-lived assets




In accordance with ASC 360-10-35, the Company reviews the carrying values of
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. Based on
the existence of one or more indicators of impairment, the Company measures any
impairment of long-lived assets using the projected discounted cash flow method
at the asset group level. The estimation of future cash flows requires
significant management judgment based on the Company's historical results and
anticipated results and is subject to many factors. The discount rate that is
commensurate with the risk inherent in the Company's business model is
determined by its management. An impairment loss would be recorded if the
Company determined that the carrying value of long-lived assets may not be
recoverable. The impairment to be recognized is measured by the amount by which
the carrying values of the assets exceed the fair value of the assets. No
impairment has been recorded by the Company as of December 31, 2021 and
September 30, 2021.



Credit risk


Financial instruments that potentially subject the Company to a significant
concentration of credit risk consist primarily of cash and cash equivalents. As
of December 31, 2021 and 2020, substantially all of the Company's cash and cash
equivalents were held by major financial institutions located in the PRC, which
management believes are of high credit quality.



For the credit risk related to trade accounts receivable, the Company performs
ongoing credit evaluations of its customers and, if necessary, maintains
reserves for potential credit losses. Historically, such losses have been within
management's expectations.



Segments



The Company evaluates a reporting unit by first identifying its operating
segments, and then evaluates each operating segment to determine if it includes
one or more components that constitute a business. If there are components
within an operating segment that meets the definition of a business, the Company
evaluates those components to determine if they must be aggregated into one or
more reporting units. If applicable, when determining if it is appropriate to
aggregate different operating segments, the Company determines if the segments
are economically similar and, if so, the operating segments are aggregated. The
Company has only one major reportable segment in the periods presented.



Fair value of financial instruments

U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in
the valuation methodologies in measuring the fair value of financial
instruments. This hierarchy also requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. The three-tier fair value hierarchy is:



Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – include other directly or indirectly observable market inputs

Level 3 – unobservable entries that are supported by little or no market activity




The carrying value of the Company's financial instruments, including cash and
cash equivalents, accounts and other receivables, other current assets, accounts
and other payables, and other short-term liabilities approximate their fair
value due to their short maturities.



In accordance with ASC 825, for investments in financial instruments with a
variable interest rate indexed to performance of underlying assets, the Company
elected the fair value method at the date of initial recognition and carried
these investments at fair value. Changes in the fair value are reflected in the
accompanying consolidated statements of operations and comprehensive loss as
other income (expense). To estimate fair value, the Company refers to the quoted
rate of return provided by banks at the end of each period using the discounted
cash flow method. The Company classifies the valuation techniques that use these
inputs as Level 2 of fair value measurements.



From December 31, 2021 and 2020, the Company had no investments in financial instruments.




Restricted assets



Fengyuan Beijing, Zhuoxun Beijing and Zhuoxun Beijing's subsidiaries are
restricted in their ability to transfer a portion of their net assets to the
Company. The payment of dividends by entities organized in China is subject to
limitations, procedures and formalities. Regulations in the PRC currently permit
payment of dividends only out of accumulated profits as determined in accordance
with accounting standards and regulations in China. Fengyuan Beijing, Zhuoxun
Beijing and Zhuoxun Beijing's subsidiaries are also required to set aside at
least 10% of its after-tax profit based on PRC accounting standards each year to
its statutory reserves account until the accumulative amount of such reserves
reaches 50% of its respective registered capital. The aforementioned reserves
can only be used for specific purposes and are not distributable as cash
dividends.



In addition, the Company's operations are conducted and revenues are generated
in China, and all of the Company's revenues earned and currency received are
denominated in RMB. RMB is subject to the foreign exchange control regulation in
China, and, as a result, the Company may be unable to distribute any dividends
outside of China due to PRC foreign exchange control regulations that restrict
the Company's ability to convert RMB into U.S. dollars.



                                       23




Recent accounting pronouncements

Recently Adopted Accounting Standards

Adoption of ASC Topic 606, “Customer Contract Revenue”




In May 2014, the Financial Accounting Standards Board (FASB) issued Topic 606,
which supersedes the revenue recognition requirements in Topic 605. The Company
adopted Topic 606 as of the inception date.



Adoption of CSA Topic 842, “Leases”

In February 2016the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the lease requirements in ASC Topic 840, Leases.




The Company adopted ASC Topic 842 using the modified retrospective transition
method effective the inception date. There was no cumulative effect of initially
applying ASC Topic 842 that required an adjustment to the opening retained
earnings on the adoption date. See Note 2 "Leases" above for further details.



Accounting pronouncements issued but not yet adopted




Financial Instruments. In June 2016, the FASB issued Accounting Standards Update
No. 2016-13, "Financial Instruments - Credit Losses (Topic 326)" ("ASU
2016-13"). ASU 2016-13 revises the methodology for measuring credit losses on
financial instruments and the timing of when such losses are recorded.
Originally, ASU 2016-13 was effective for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2019, with early
adoption permitted. In November 2019, FASB issued ASU 2019-10, "Financial
Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815),
and Leases (Topic 842)." This ASU defers the effective date of ASU 2016-13 for
public companies that are considered smaller reporting companies as defined by
the SEC to fiscal years beginning after December 15, 2022, including interim
periods within those fiscal years. The Company is planning to adopt this
standard in the first quarter of fiscal 2023.The Company is currently evaluating
the potential effects of adopting the provisions of ASU No. 2016-13 on its
consolidated financial statements.



In October 2020, the FASB issued ASU 2020-10, Codification Improvements. This
update ensures all disclosure guidance that requires or provides an option for
an entity to provide notes to the financial statements is included in the
Disclosure Section (Section 50) of the Codification. This update also provides
various codification improvements in which the original guidance was unclear.
This update becomes effective for annual periods beginning after December 15,
2020 and early adoption is permitted for any annual or interim period for which
financial statements have not been issued. The Company does not expect the
adoption of this new standard will have a material impact on its financial
condition or results of operations.



Results of Operations


Comparison of the three months ended December 31, 2021 and 2020

The following table shows the key elements of our operating results during the three months ended December 31, 2021 and 2020, both in dollars and as a percentage of our revenue.




                                                          Three Months Ended December 31,
                                                      2021                              2020
                                                                 %                                %
                                              Amount        of Revenue         Amount         of Revenue
Revenue                                    $     96,178          100.00     $  1,261,472           100.00
Cost of revenue                                 (61,293 )        (63.73 )       (761,279 )         (60.35 )
Gross profit                                     34,885           36.27          500,193            39.65
Selling expenses                             (1,004,444 )     (1,044.36 )     (2,082,843 )        (165.11 )
General and administrative expenses            (392,175 )       (407.76 )  
    (502,006 )         (39.80 )
Loss from operations                         (1,361,734 )     (1,415.85 )     (2,084,656 )        (165.26 )
Other income                                      1,280            1.33           12,231             0.97
Net loss before income taxes                 (1,360,454 )     (1,414.52 )  
  (2,072,425 )        (164.29 )
Income tax benefit                                    -               -                -                -
Net loss                                   $ (1,360,454 )     (1,414.52 )   $ (2,072,425 )        (164.29 )




Revenue.



The Company's revenue was decreased $1,165,294 from $1,261,472 to $96,178 during
the three months ended December 31, 2021 compared with the same period in 2020.
Due to the COVID-19 pandemic and restriction policy imposed by the government,
the Company stopped offering the offline training since the months ended March
31, 2021. The offline training resumed during second half of 2021 but the
classes were limited due to the impact from the ongoing COVID-19 pandemic.
Consequently, the revenue during the three months ended December 31, 2021 was
significantly less than the same period in 2020.



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Cost of revenue.



Our cost of revenue was $61,293 and $761,279 for the three months ended December
31, 2021 and 2020, respectively. The decrease was in line with the decrease
of
revenue.


Gross profit and gross margin.

Our gross margin was $34,885 for the three months ended December 31, 2021compared to a gross profit of 500 $193 for the same period in 2020. Gross profit as a percentage of revenue (gross margin) was 36.27% for the quarter ended December 31, 2021against a gross margin of 39.65% for the same period in 2020.




Selling expenses.



Our selling expenses consist primarily of compensation and benefits to our
expense related to the revenue, such as advertising fee, marketing fees. Our
selling expenses decreased by $1,078,399 to $1,004,444 for the three months
ended December 31, 2021, compared to $2,082,843 for the same period in 2020. We
adjusted the strategy by reducing our own selling employees.



                                                   Three Months ended December 31,
                                 2021                            2020                      Fluctuation
                          Amount            %           Amount            %
           Amount            %
Salary and welfare          163,871         16.31         435,199         43.33         (271,328 )      (62.35 )
Advertising Fees                  -             -          49,312          4.91          (49,312 )     (100.00 )
Conference Fees               1,389          0.14          34,933          3.48          (33,544 )      (96.02 )
Marketing fee               172,577         17.18         536,628         53.43         (364,051 )      (67.84 )
Service fee                 575,289         57.27         952,497         94.83         (377,208 )      (39.60 )
Others                       91,318          9.09          74,274          7.39           17,044         22.95

Total selling costs $1,004,444 100.00 $2,082,843 207.36 ($1,078,399) (51.78 )

General and administrative expenses.




Our general and administrative expenses consist primarily of compensation and
benefits to our general management, finance and administrative staff,
professional fees and other expenses incurred in connection with general
operations. Our general and administrative expenses decreased by $109,831 to
$392,175 for the three months ended December 31, 2021, compared to $502,006 for
the same period in 2020. The company focused on controlling general and
administrative expenses.



                                                Three Months ended December 31,
                                2021                          2020                    Fluctuation
                         Amount           %          Amount           %           Amount           %
Salary and welfare        218,701         55.77       271,256         54.03        (52,555 )      (19.37 )
Depreciation and
amortization               11,968          3.05        27,309          5.44        (15,341 )      (56.18 )
Rent                       53,732         13.70        22,882          4.56         30,850        134.82
Profession fee             63,932         16.30       108,806         21.67        (44,874 )      (41.24 )
Others                     43,842         11.18        71,753         14.29        (27,911 )      (38.90 )
Total G&A Expenses      $ 392,175        100.00     $ 502,006        100.00     $ (109,831 )      (21.88 )




Income tax benefit.


Our tax benefit was nil for the three months ended December 31, 2021 and for the same period in 2020.



Net loss.



As a result of the cumulative effect of the factors described above, our net
loss was $1,360,454 and $2,072,425 for the three months ended December 31,
2021
and 2020, respectively.



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Cash and capital resources




The following table sets forth a summary of our cash flows for the periods
indicated:



                                                                    Three Months Ended
                                                                       December 31,
                                                                   2021            2020
Net cash used in operating activities                          $ (1,199,938 )   $  (686,281 )
Net cash used in investing activities                               (10,971 )             -
Net (decrease) increase in cash and cash equivalents             (1,210,909 )      (686,281 )
Effect of exchange rate changes on cash and cash equivalents         31,521

291,695

Cash and cash equivalents at the beginning of period              2,659,622

7,134,106

Cash and cash equivalents at the end of period                 $  1,480,234
    $ 6,739,520



From December 31, 2021we had cash and cash equivalents of $1,480,234. To date, we have funded our operations primarily through borrowings from our shareholders, related and unrelated parties.



Going Concern Uncertainties


The accompanying consolidated financial statements have been prepared on the assumption that we will continue as a going concern.

From December 31, 2021we had a working capital deficit of $ $6,616,933.




As of December 31, 2021, our cash balance was $1,479,378 and our current
liabilities exceeded current assets by $6,616,933 which together with continued
losses from operations raises substantial doubt about our ability to continue as
a going concern. The Company's operating results for future periods are subject
to uncertainties and it is uncertain if the management will be able to achieve
profitability and continued growth for the foreseeable future. If the management
is not able to increase revenue and manage operating expenses in line with
revenue forecasts, the Company may not be able to achieve profitability.



The Company's actions to improve operation efficiency, cost reduction, and
enhance core cash-generating business include the following: seeking advances
from the major shareholders, pursuing additional public and/or private issuance
of securities, and looking for strategic business partners to optimize our
operations.



We have reviewed whether there is substantial doubt about our ability to continue as a going concern due to our working capital deficit of $ $6,616,933accumulated deficit of $3,970,102 and net losses incurred during the three months ended December 31, 2021 and 2020.




In evaluating if there is substantial doubt about our ability to continue as a
going concern, we have certain plans to mitigate these adverse conditions and
increase the liquidity of the Company and are trying to alleviate the going
concern risk through (1) increasing cash generated from operations by
controlling operating expenses and increasing more live steaming e-commerce
events to bring up e-commerce revenue, (2) financing from domestic banks and
other financial institutions, and (3) equity or debt financing.



On an ongoing basis, the Company will also receive commitments of financial support from parties related to the Company.

Our continued operations are highly dependent upon our ability to increase
revenues and if needed complete equity and/or debt financing. However, if we are
unable to obtain the necessary additional capital on a timely basis and on
acceptable terms, we may be required to delay, scale back or eliminate some or
all of our planned operations and may be unable to repay debt obligations or
respond to competitive market pressures, which will have a material adverse
effect upon our business, prospects, financial condition and results of
operations. Under such circumstance, we may be required to delay, scale back or
eliminate some or all of our planned operations, which may have a material
adverse effect on our business, results of operations and ability to operate as
a going concern.



Operating Activities



Net cash used in operating activities was $1,199,938 for the three months ended
December 31, 2021, as compared to $686,281 net cash used in operating activities
for the three months ended December 31, 2020. The net cash provided by operating
activities for the three months ended December 31, 2021 was mainly due to our
net loss of $1,360,454, an increase in amortization of prepaid expenses of
$150,242, partially offset by the decrease in other receivable of $47,843. The
net cash provided by operating activities for the three months ended December
31, 2020 was mainly due to our net loss of $2,072,425, an increase in
amortization of prepaid expenses of $1,196,043, a decrease in other receivable
of $ 753,492, partially offset by payments to suppliers of $432,613.



                                       26





Investing Activities



Net cash used in investing activities was $10,971 for the three months ended
December 31, 2021, as compared to nil for the three months ended December 31,
2020. The net cash used in investing activities for the three months ended
December 31, 2021 was mainly attributable to purchase of property, plant and
equipment.


Off-balance sheet arrangements




As of December 31, 2021 and December 31, 2020, we did not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.



Critical Accounting Principles

The preparation of consolidated financial statements in accordance with US GAAP
requires the Company's management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results can, and in many cases will, differ from those estimates. We have
not identified any critical accounting policies.



limited operating history; Need of Additional capital




There is limited historical financial information about the Company on which to
base an evaluation of its performance. There is no guarantee on the continued
success in its business operations. The business is subject to risks inherent in
the establishment of a new business enterprise, including limited capital
resources, a narrow client base, limited sources of revenue, and possible cost
overruns due to the price and cost increases in supplies and services.



Without additional funding, management believes that the Company will not have
sufficient funds to meet its obligations beyond one year after the date our
condensed consolidated financial statements are issued. These conditions give
rise to substantial doubt as to our ability to continue as a going concern.



The Company has been, and intend to continue, working toward identifying and
obtaining new sources of financing. To date it has been dependent on related
parties for its source of funding. No assurances can be given that it will be
successful in obtaining additional financing in the future. Any future financing
that it may obtain may cause significant dilution to existing stockholders. Any
debt financing or other financing of securities senior to Common Stock that it
is able to obtain will likely include financial and other covenants that will
restrict its flexibility. Any failure to comply with these covenants would have
a negative impact on its business, prospects, financial condition, results
of
operations and cash flows.



If adequate funds are not available, it may be required to delay, scale back or
eliminate portions of it or Zhuoxun Beijing's operations or obtain funds through
arrangements with strategic partners or others that may require us to relinquish
rights to certain of our assets. Accordingly, the inability to obtain such
financing could result in a significant loss of ownership and/or control of our
assets and could also adversely affect the Company's ability to fund it or
Zhuoxun Beijing's continued operations and expansion efforts.



During the next 12 months, the Company expect to incur the same amount of
expenses each month. However, as Zhuoxun Beijing works to expand its operations,
it expects to incur significant research, marketing and development costs and
expenses on Zhuoxun Beijing's online service platforms that meet the constantly
evolving industry standards and consumer demands.

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