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Form 10-Q Longduoduo Co Ltd For: Sep 30

November 30, 2022 6:21 AM EST

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from_____________ to____________

 

Commission File Number: 333-260951

 

LONGDUODUO COMPANY LIMITED

(Exact name of registrant as specified in its charter)

 

Nevada   37-2018431
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)

 

419, Floor 4, Comprehensive Building,

Second Light Hospital, Ordos Street,

Yuquan District, Hohhot,

Inner Mongolia,

China

Office: +86 (0472) 510 4980

(Address, including zip code, and telephone number, including area code,

of Registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol   Name of Each Exchange on Which Registered
None   None   Not Applicable

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer 
Non-accelerated filer     Smaller reporting company 
    Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-2 of the Act). Yes ☐ No 

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ☐ No ☐

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of the date of filing of this report, there were outstanding 300,000,000 shares of the issuer’s common stock, par value $0.001 per share. 

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
  PART I—FINANCIAL INFORMATION 1
Item 1 Financial Statements. 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 2
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 5
Item 4. Controls and Procedures. 6
    7
  PART II—OTHER INFORMATION  
Item 1. Legal Proceedings. 7
Item 1A. Risk Factors 7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 7
Item 3. Defaults Upon Senior Securities. 7
Item 4. Mine Safety Disclosure 7
Item 5. Other Information. 7
Item 6. Exhibits. 8

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES

 

  Page
   
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES  
   
Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and June 30, 2022 F-1
   
Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended September 30, 2022 and 2021 (Unaudited) F-2
   
Consolidated Statements of Changes in Deficit for the Three Months Ended September 30, 2022 and 2021 (Unaudited) F-3
   
Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2022 and 2021 (Unaudited) F-4
   
Notes to Consolidated Financial Statements (Unaudited) F-5 – F-15

 

1

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   September 30,
2022
   June 30,
2022
 
   (Unaudited)     
Assets        
Current Assets:        
Cash and cash equivalents  $456,769   $356,672 
Other receivables   17,448    30,787 
Prepayments   13,707    33,837 
Inventories   1,662    3,032 
Total current assets   489,586    424,328 
Property and equipment, net   132,844    109,233 
Intangible asset, net   5,312    - 
Right-of-use assets   70,773    77,106 
Total assets  $698,515   $610,667 
           
Liabilities and Deficit          
Current Liabilities:          
Accounts payable  $13,930   $40,812 
Deferred revenue   813,441    788,649 
Accrued expenses   96,828    125,954 
Due to related parties   70,682    74,558 
Loan from third party   171,522    143,333 
Security deposits   460,691    329,180 
Other payables   301,545    90,162 
Operating lease liabilities, current   33,868    34,928 
Other current liabilities   2,792    2,444 
Total current liabilities   1,965,299    1,630,020 
Operating lease liabilities, less current portion   7,030    2,986 
Total liabilities   1,972,329    1,633,006 
           
Deficit:          
Preferred stock; $0.001 par value, 30,000,000 shares authorized, no shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively   
-
    
-
 
Common stock; $0.001 par value, 500,000,000 shares authorized; 300,000,000 and 300,000,000 shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively   300,000    300,000 
Additional paid-in capital   6,592,234    6,592,234 
Accumulated deficit   (8,126,639)   (7,845,991)
Accumulated other comprehensive loss   82,162    24,971 
Total stockholders’ deficit   (1,152,243)   (928,786)
Non-controlling interest   (121,571)   (93,553)
Total deficit   (1,273,814)   (1,022,339)
Total liabilities and deficit  $698,515   $610,667 

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

F-1

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   For the Three Months
Ended September 30,
 
   2022   2021 
         
Revenues:        
Service revenue  $408,496   $752,767 
Product revenue   5,669    
-
 
Other revenue   1,398    
-
 
Total revenues, net   415,563    752,767 
Cost of revenue          
Cost of service   155,188    218,481 
Cost of product   275    
-
 
Total cost of revenues   155,463    218,481 
Gross profit   260,100    534,286 
           
Selling, general and administrative expenses   575,534    7,494,646 
Loss from operations   (315,434)   (6,960,360)
Other income (expense), net   2    (784)
Loss before provision for income taxes   (315,432)   (6,961,144)
Provision for income taxes   
-
    
-
 
Net loss   (315,432)   (6,961,144)
Less: net loss attributable to non-controlling interests   (34,784)   (26,297)
Net loss attributable to common stockholders  $(280,648)  $(6,934,847)
           
Comprehensive loss:          
Net loss  $(315,432)  $(6,961,144)
Foreign currency translation adjustment   63,957    (374)
Comprehensive loss   (251,475)   (6,961,518)
Less: comprehensive loss attributable to non-controlling interests   (28,018)   (26,348)
Comprehensive loss attributable to the common stockholders  $(223,457)  $(6,935,170)
           
Basic and diluted loss per share
  $(0.001)  $(0.042)
Weighted average number of shares outstanding
   300,000,000    164,420,147 

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

F-2

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT

(UNAUDITED)

 

   Common stock   Additional      

Accumulated

Other

   Total   Non-     
   Number of
Shares
   Amount   Paid-in
Capital
   Accumulated
Deficit
   Comprehensive
Loss
   Stockholder’
Deficit
   controlling
Interest
   Total
Deficit
 
Balance at June 30, 2021   164,420,147   $164,420   $(163,714)  $(328,626)  $(6,282)  $(334,202)  $(50,845)  $(385,047)
Net loss   -    
-
    
-
    (6,934,847)   
-
    (6,934,847)   (26,297)   (6,961,144)
Stock-based compensation   -    
-
    6,739,128    
-
    
-
    6,739,128    
-
    6,739,128 
Shares issued for lease payment   -    
-
    106,680    
-
    
-
    106,680    
-
    106,680 
Shares issued for the payment of purchasing furniture   -    
-
    15,240    
-
    
-
    15,240    
-
    15,240 
Shares issued for cash   -    
-
    30,480    
-
    
-
    30,480    
-
    30,480 
Foreign currency translation adjustment   -    
-
    
-
    
-
    (323)   (323)   (51)   (374)
Balance at September 30, 2021   164,420,147   $164,420   $6,727,814   $(7,263,473)  $(6,605)  $(377,844)  $(77,193)  $(455,037)

 

   Common stock   Additional      

Accumulated

Other

   Total   Non-     
   Number of
Shares
   Amount   Paid-in
Capital
   Accumulated
Deficit
   Comprehensive
Loss
   Stockholder’
Deficit
   controlling
Interest
   Total
Deficit
 
Balance at June 30, 2022   300,000,000   $300,000   $6,592,234   $(7,845,991)  $24,971   $(928,786)  $(93,553)  $(1,022,339)
Net loss   -    
-
    
-
    (280,648)   
-
    (280,648)   (34,784)   (315,432)
Foreign currency translation adjustment   -    
-
    
-
    
-
    57,191    57,191    6,766    63,957 
Balance at September 30, 2022   300,000,000   $300,000   $6,592,234   $(8,126,639)  $82,162   $(1,152,243)  $(121,571)  $(1,273,814)

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-3

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the Three Months
Ended September 30,
 
   2022   2021 
Cash Flows from Operating Activities        
Net loss  $(315,432)  $(6,961,144)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   18,290    8,659 
Amortization   325    
-
 
Operating lease expense   23,373    19,705 
Stock compensation expense   
-
    6,739,128 
Changes in operating assets and liabilities:          
Other receivables   15,620    (34,668)
Prepayments   18,864    (41,552)
Inventories   1,035    
-
 
Due from related parties   (34,390)   183,390 
Accounts payable   (25,457)   (52,016)
Deposits received   73,581    85,910 
Accrued expenses   (29,680)   (13,103)
Due to related parties   28,899    50,848 
Security deposits   156,605    
-
 
Other payables   225,101    (95,136)
Payment of operating lease liabilities   (16,069)   (6,182)
Other current liabilities   509    1,158 
Net cash provided by (used in) operating activities   141,174    (115,003)
           
Cash Flows from Investing Activities          
Purchase of property, plant and equipment   (49,447)   (107,027)
Purchase of intangible asset   (5,843)   
-
 
Net cash used in investing activities   (55,290)   (107,027)
           
Cash Flows from Financing Activities          
Shares issued for cash   
-
    30,909 
Proceeds from short-term borrowing from third party   37,981    
-
 
Net cash provided by financing activities   37,981    30,909 
           
Effect of exchange rate fluctuation on cash and cash equivalents   (23,768)   (379)
Net increase (decrease) in cash and cash equivalents   100,097    (191,500)
           
Cash and cash equivalents, beginning of period   356,672    273,116 
Cash and cash equivalents, end of period  $456,769   $81,616 
           
Supplemental Non-Cash Investing and Financing Activities          
Share issuance for lease payment  $
-
   $106,680 
Share issuance in exchange for equipment  $
-
   $15,240 
Right-of-use assets obtained in exchange for new operating lease liabilities  $
-
   $70,914 
           
Supplemental disclosure of cash flow information          
Cash paid for income taxes  $
-
   $11,355 
Cash paid for interest expense  $
-
   $
-
 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

 

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Longduoduo Company Limited (“Longduoduo”, together as a group with Longduoduo’s subsidiaries was referred to the “Company” or “we”) was incorporated in the State of Nevada on October 25, 2021. The Company provides comprehensive and high-quality preventive healthcare solutions including a wide range of preventive healthcare services, including disease screening healthcare treatment, healthcare products and other services through a network of third-party healthcare service providers.

 

Longduoduo’s subsidiaries include: 

 

  Longduoduo Company Limited (Hong Kong) (“Longduoduo HK”), which was established on July 26, 2021 under the laws of Hong Kong. On October 26, 2021, Longduoduo issued 300,000,000 shares of its common stock to the original shareholders of Longduoduo HK, in exchange for 100% of the outstanding shares of Longduoduo HK (the “Share Exchange”).

 

  Longduoduo Health Technology Company Limited (“Longduoduo Health Technology”), a privately held Limited Company registered in Inner Mongolia, China on August 20, 2020. On August 16, 2021, Longduoduo HK acquired 100% of the ownership of Longduoduo Health Technology from the original shareholders of Longduoduo Health Technology.

 

  Inner Mongolia Qingguo Health Consulting Company Limited (“Qingguo”), a privately held Limited Company registered in Inner Mongolia, China on June 18, 2020. On September 8, 2020, Longduoduo Health Technology acquired 90% of the ownership of Qingguo from the original shareholders of Qingguo.

 

  Inner Mongolia Rongbin Health Consulting Company Limited (“Rongbin”), a privately held Limited Company registered in Inner Mongolia, China. On March 18, 2021. Longduoduo Health Technology controlled 80% of the ownership of Rongbin since established.

 

  Inner Mongolia Chengheng Health Consulting Company Limited (“Chengheng”), a privately held Limited Company registered in Inner Mongolia, China on April 9, 2021. Longduoduo Health Technology controlled 80% of the ownership of Chengheng since established.

 

  Inner Mongolia Tianju Health Consulting Company Limited (“Tianju”), a privately held Limited Company registered in Inner Mongolia, China on July 5, 2021. Longduoduo Health Technology has controlled 51% of Tianju since inception.

 

The transactions summarized above are treated in the Company’s financial statements as a corporate restructuring (reorganization) of entities under common control, as each of the seven entities have at all times been under the control of Mr. Zhang Liang. Therefore, in accordance with ASC 805-50-45-5, the current capital structure has been retroactively presented in prior periods as if such structure existed at that time, and the entities under common control are presented on a combined basis for all periods. Since all of the subsidiaries were under common control for all periods presented, the results of these subsidiaries are included in the Company’s financial statements for all periods presented. 

 

F-5

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A. Going concern

 

Management has determined there is substantial doubt about the Company’s ability to continue as a going concern as a result of lack of significant revenues and recurring losses. If the Company is unable to generate significant revenue or secure additional financing, it may be required to cease or curtail its operations. The accompanying consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

The Company’s operations have been financed primarily by advances and loans from related parties. Zhang Liang, the president, chairman of the board, director and a shareholder of Longduoduo, will provide support in the future if needed.

 

Management intends to expand product offerings and increase the Company’s customers, so as to have a stable base for competition. In this manner, Management hopes to generate sufficient operating cash inflow to support its future operations and development of the Company in addition to capital raised from shareholders’ support. 

 

B. Basis of presentation

 

The accompanying consolidated financial statements are expressed in U.S. Dollars and have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

C. Principles of consolidation

 

The consolidated financial statements include the accounts of Longduoduo and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of these subsidiaries.

 

Longduoduo’s subsidiaries as of September 30, 2022 are listed as follows:

 

Name   Place of
Incorporation
  Attributable equity
interest %
    Authorized capital  
Longduoduo Company Limited   Hong Kong     100       HK$10,000  
Longduoduo Health Technology Company Limited   China     100       0  
Inner Mongolia Qingguo Health Consulting Company Limited   China     90       0  
Inner Mongolia Rongbin Health Consulting Company Limited   China     80       0  
Inner Mongolia Chengheng Health Consulting Company Limited   China     80       0  
Inner Mongolia Tianju Health Consulting Company Limited   China     51       0  

 

D. Use of estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the inventory valuation allowance and the treatment of the shares issued. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates.

 

E. Functional currency and foreign currency translation

 

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. The functional currency of the Company is the Chinese Renminbi (“RMB’), except the functional currency of Longduoduo HK is the Hong Kong Dollar and the functional currency of Longduoduo is the United States dollar (“US Dollars” or “$”). The reporting currency of these consolidated financial statements is in US Dollars.

 

F-6

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

The financial statements of Longduoduo’s subsidiaries, which are prepared using the RMB, are translated into the Company’s reporting currency, the US Dollar. Assets and liabilities are translated using the exchange rate at each reporting period end date. Revenue and expenses are translated using weighted average rates prevailing during each reporting period, and stockholders’ equity (deficit) is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income or expense.

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Foreign currency exchange gains and losses resulting from these transactions are included in operations.

 

The exchange rates used for foreign currency translation are as follows:

 

       

For the Three Months
Ended September 30,

        2022   2021  
        (USD to RMB/USD to
HKD)
  (USD to RMB/USD to
HKD)
 
Assets and liabilities   period end exchange rate   7.1128/7.8499     6.4580/7.7867  
Revenue and expenses   period weighted average   6.8456/7.8480     6.4706/7.7779  

 

 

F. Concentration of credit risk

 

The Company maintains cash in state-owned banks in China. In China, the insurance coverage of each bank is RMB500,000 (approximately USD$70,000). As of September 30, 2022 and June 30, 2022, the Company had $163,626 and $93,510 cash in excess of the insured amount, respectively.

 

During the three months ended September 30, 2022 and 2021, no customer generated more than 10% of revenue.

 

During the three months ended September 30, 2022 and 2021, the Company had four and three major suppliers that accounted for over 10% of its total cost of revenue, respectively.

 

   For the Three Months Ended
September 30,
 
   2022   2021 
   Cost of
revenue
   Percentage of Cost of
revenue
   Cost of
revenue
   Percentage of Cost of
revenue
 
                 
                 
A  $46,250    30%  $88,884    41%
B   35,391    23%   66,434    31%
C   31,876    21%   43,635    20%
D   29,721    19%   11,721    5%

 

G. Cash and cash equivalents

 

Cash consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. All highly liquid investments with original stated maturity of three months or less are classified as cash and cash equivalents. Cash equivalents approximate or equal fair value due to their short-term nature. The Company’s cash and cash equivalents consist of cash on hand and cash in bank as of September 30, 2022 and June 30, 2022.

 

F-7

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

H. Property and equipment

 

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations when incurred, while additions and betterments are capitalized. Depreciation is recorded on a straight-line basis over the useful lives of the assets. When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated from those accounts and any gain or loss is reflected in income.

 

The Company capitalizes certain costs associated with the acquisition of software. Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s expected useful life.

 

The estimated useful lives for property and equipment categories are as follows:

 

Office equipment and furniture   3 years
Leasehold Improvements   1-5 years

 

I. Intangible Assets

 

Intangible assets consist of software. Intangible assets are initially recognized at their respective acquisition costs. All of the Company’s intangible assets have been determined to have finite useful lives and are, therefore, amortized using the straight-line method over their estimated useful lives:

 

Software   3 years

 

J. Fair value measurements

 

The Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 820, Fair Value Measurements (“ASC 820”), for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value for the assets and liabilities required or permitted to be recorded, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2: Quoted prices, other than those in Level 1, in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability,

 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

There were no transfers between level 1, level 2 or level 3 measurements for the three months ended September 30, 2022 and 2021.

 

Financial assets and liabilities of the Company are primarily comprised of cash and cash equivalents, prepayments, other receivables, inventories, due from related parties, accounts payable, deferred revenue, accrued expenses, due to related parties, loan from third party, security deposits, other current liabilities, operating lease liabilities and other payables. As of September 30, 2022 and June 30, 2022, the carrying values of these financial instruments approximated their fair values due to the short-term maturity of these instruments.

 

F-8

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

K. Segment information and geographic data

 

The Company is operating in one segment in accordance with the accounting guidance in FASB ASC Topic 280, Segment Reporting. The company’s revenues are from customers in People’s Republic of China (“PRC”). All assets of the Company are located in the PRC.

 

L. Revenue recognition

 

The Company adopted FASB ASC Section 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sales of products and services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

 

The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow to the entity, and specific criteria have been met for each of the Company’s activities as described below.

 

Service and Product Revenue

 

The Company sells healthcare package, including healthcare consulting services and healthcare products. Customers may purchase healthcare services package, or healthcare services combined with nutritional products. Currently all sales of products are bundled with healthcare services. The combination of services and products are generally capable of being distinct and accounted for as separate performance obligations. For the sale of healthcare package that includes services and products, the Company allocates revenues based on their relative selling prices.

 

The Company sells healthcare service package to a customer which represents the rights to services purchased by the Company. The delivery of healthcare service package to a customer represents a separate performance obligation. The Company’s policy is to recognize the service revenue when service is provided, at that time the sold healthcare service package, ownership and risk of loss have been transferred to the customer. Accordingly, revenue is recognized at the point in time when the service is provided. Service revenue is recognized when the healthcare service package has been delivered to the customer as no remaining performance obligation after the delivery of healthcare service package.

 

Management regularly reviews the sales return and allowance based on historical experience. Any subsequent sales return and cancellations are recognized upon notification from the customers. The amount of sales return allowance for the sale of healthcare service package amounted to $4,542 and $4,817 as of September 30, 2022 and June 30, 2022, respectively. Management’s estimated sales return were 1.12% and 0%, respectively, of the total service revenue for the three months ended September 30, 2022 and 2021.

 

Product revenue mainly resulted from the sale of healthcare and nutritional products, including Collagen peptide, Calcium tablet and other products. The Company recognized revenue when the product has been delivered, ownership and risk of loss have been transferred to the customer. The Company accepts returns in case of the products are well packaged and can be resold. Management regularly reviews the sales return and allowance based on historical experience. The amount of sales return allowance for the sale of healthcare products amounted to $876 and $997 as of September 30, 2022 and June 30, 2022, respectively. Management’s estimated sales return were 1.35% and 0%, respectively, of the total product revenue for the three months ended September 30, 2022 and 2021.

 

The Company typically collects fees before delivery of healthcare package. Amounts received from a customer before the delivery of healthcare package are recorded as deferred revenue on the Consolidated Balance Sheets.

 

Cost of Revenues

 

Cost of service consists primarily of the cost of healthcare service package purchased from third party healthcare service providers to fulfil a contract with a customer, and no asset was recognized from the costs incurred to obtain or fulfil a contract with a customer.

 

Cost of products consists primarily of the cost of healthcare products purchased from suppliers. Cost of products is recognized when the product has been delivered to the customer.

 

M. Income taxes

 

The Company follows FASB ASC Section 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

F-9

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

ASC 740-10-30 requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under ASC 740-10-30, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met.

 

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or the deferred tax asset valuation allowance.

 

As a result of the implementation of ASC 740-10, the Company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10. The Company recognized no material adjustments to liabilities or shareholder’s equity as a result of the implementation.

 

N. Earnings (loss) per share

 

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings Per Share. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding during the period.

 

Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of contracts to issue common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. The computation of diluted EPS includes the estimated impact of the exercise of contracts to purchase common stock using the treasury stock method and the potential shares of converted common stock associated with the convertible debt using the if-converted method. Potential common shares that have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of September 30, 2022 and 2021, the Company was not party to any contract to issue shares.

 

O. Risks and uncertainties

 

In March 2020, the World Health Organization (“WHO”) declared the coronavirus (COVID 19), a global pandemic and public health emergency. The WHO has recommended containment and mitigation measures worldwide and domestically, self-isolation and shelter-in-place requirements have been or are being put in place. At this point, the Company cannot reasonably estimate the length or severity of this pandemic, or the extent to which this disruption may impact its financial statements and future results of operations. Our future business outlook and expectations are very uncertain due to the impact of the COVID-19 outbreak 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.

 

P. Recently adopted accounting pronouncements

 

We do not believe that any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of operations and cash flows.

 

F-10

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

NOTE 3. PREPAYMENTS

 

Prepayments primarily include prepayments for services, equipment, rent and property management fees. As of September 30, 2022 and June 30, 2022, prepayments were $13,707 and $33,837, respectively.

 

NOTE 4. PROPERTY AND EQUIPMENT

 

At September 30, 2022 and June 30, 2022, property and equipment, at cost, consisted of:

 

   September 30,   June 30, 
   2022   2022 
         
Office equipment and furniture  $138,922   $104,458 
Leasehold improvement   73,472    70,561 
Total   212,394    175,019 
Accumulated depreciation   79,550    65,786 
Total property and equipment, net  $132,844   $109,233 

 

The Company recorded depreciation expense of $18,290 for the three months ended September 30, 2022, of which $16,479 was recorded as operating expense and $1,811 was recorded as cost of revenue.

 

The Company recorded depreciation expense of $8,659 for the three months ended September 30, 2021, which was recorded as operating expense.

 

NOTE 5. LOAN FROM THIRD PARTY

 

The Company had advances from a third party, Jinrong Health Technology (Hainan) Co., Ltd. for working capital purpose. The loans are non-interest bearing and due on demand. As of September 30, 2022 and June 30, 2022, the outstanding loan balance was $171,522 and $143,333, respectively.

 

NOTE 6. RELATED PARTY TRANSACTIONS

 

Due to related parties

 

Due to related parties consists of the following:

 

Name of related parties  September 30,
2022
   June 30,
2022
 
Zhang Liang  $29,788   $5,353 
Zhou Hongxiao   40,894    69,205 
   $70,682   $74,558 

 

Zhang Liang is the President, Chairman of the Board, director and a shareholder of Longduoduo, and Zhou Hongxiao is the CEO of Longduoduo. These due to related parties were unsecured, repayable on demand, and bear no interest.

 

NOTE 7. INCOME TAXES

 

United States

 

Longduoduo is subject to the U.S. corporation tax rate of 21%.

 

Hong Kong

 

Longduoduo HK was incorporated in Hong Kong and is subject to Hong Kong profits tax. Longduoduo HK is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable statutory tax rate is 16.5%. The Company did not have any income (loss) subject to the Hong Kong profits tax.

 

F-11

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

China

 

Longduoduo Health Technology and subsidiaries are subject to a 25% standard enterprise income tax in the PRC. There was no provision for income taxes for the three months ended September 30, 2022 and 2021.

 

A reconciliation of income before income taxes for domestic and foreign locations for the three months ended September 30, 2022, and 2021 is as follows:

 

   For the Three Months Ended
September 30,
 
   2022   2021 
United States  $57,410   $21,806 
Foreign   258,022    6,939,338 
Loss before income taxes  $315,432   $6,961,144 

 

The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows:

 

   September 30,   September 30, 
   2022   2021 
Income tax (benefit) at USA statutory rate   (21)%   (21)%
U.S. valuation allowance   21%   21%
Income tax (benefit) at PRC statutory rate   (25)%   (25)%
PRC valuation allowance   25%   25%
Effective combined tax rate   (0)%   (0)%

  

The Company did not recognize deferred tax assets since it is not likely to realize such deferred taxes. The deferred tax would apply to Longduoduo in the U.S. and Longduoduo Health Technology and subsidiaries in China.

 

As of September 30, 2022, Longduoduo Health Technology and its subsidiaries has total net operating loss carry forwards of approximately $1,215,835 in the PRC that expire through 2027. Due to the uncertainty of utilizing these carry forwards, the Company provided a 100% allowance on all deferred tax assets of approximately $303,959 and $238,921 related to its operations in the PRC as of September 30, 2022 and June 30, 2022, respectively. The PRC valuation allowance has increased by approximately $65,038 and $48,438 for the three months ended September 30, 2022, and 2021, respectively.

 

The Company has incurred losses from its United States operations during the three months ended September 30, 2022 of approximately $57,410. The Company’s United States operations consist solely of ownership of its foreign subsidiaries, and the losses arise from administration expenses. Accordingly, management provided a 100% valuation allowance of approximately $60,179 and $48,123 against the deferred tax assets related to the Company’s United States operations as of September 30, 2022 and June 30, 2022, respectively, because the deferred tax benefits of the net operating loss carry forwards in the United States are not likely to be utilized. The US valuation allowance has increased by approximately $12,056 and $4,579 for the three months ended September 30, 2022, and 2021, respectively.

 

The Company is subject to examination by the Internal Revenue Service (IRS) in the United States as well as by the taxing authorities in China, where the Company has significant business operations. The tax years under examination vary by jurisdiction. The table below presents the earliest tax year that remain subject to examination by major jurisdiction. 

 

    The year as of
U.S. Federal   June 30, 2021
China   June 30, 2020

 

F-12

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

NOTE 8. LEASE

 

Operating Lease Agreements – On March 31, 2021 the Company leased office space (approximately 1500 square meters) under non-cancellable operating lease agreement with a third party Wudun Qiqige, in Ordos. Under the terms of the agreement, the Company is committed to make a one-time lease payment of $106,680, or RMB 700,000, for the lease period from April 1, 2021 to March 31, 2023.

 

Operating Lease Agreements - On August 25, 2021 the Company leased a car under non-cancellable operating lease agreement with a third party, Zhengzhou Zhengdong New District Yijiu Rental Car. Under the terms of the agreement, the Company is committed to make total lease payments of $74,946, or RMB 480,000, committed to make lease payments of $3,123 per month for the lease period from August 25, 2021 to August 25, 2023.

 

Operating Lease Agreements - On July 2, 2022 the Company leased an office space under non-cancellable operating lease agreement with a third party, Xi Ling. Under the terms of the agreement, the Company is committed to make total lease payments of $21,912, or RMB 150,000, committed to make lease payments of $7,304 per year for the lease period from July 2, 2022 to July 2, 2025.

 

In April 2021, Qingguo entered into an operating cooperation agreement with Hohhot Aihua Traditional Chinese Medicine Hospital. Under the terms Qingguo is able to use its office space (approximately 700 square meters) free of charge during the period between April 1, 2021 to March 31, 2026. On May 27, 2022, both sides re-sign the agreement leased this office space under non-cancellable operating lease agreements. Under terms of the lease agreement, from May 27, 2022, Qingguo is committed to make lease payments of approximately $9,295 per year for 1 year.

 

Leases with an initial term of 12 months or less are not recorded on the balance sheet. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company did not combine lease and non-lease components.

 

Most leases do not include options to renew. The exercise of lease renewal options has to be agreed by the lessors. The depreciable life of assets and leasehold improvements are limited by the term of leases, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease expense is recognized on a straight-line basis over the term of the lease. Lease expense related to these noncancelable operating leases was $23,373 and $19,705 for the three months ended September 30, 2022 and 2021, respectively.

 

Balance sheet information related to the Company’s leases is presented below:

 

   September 30,
2022
   June 30,
2022
 
Assets        
Operating lease right of use assets  $70,773   $77,106 
Liabilities          
Operating lease liabilities – current  $33,868   $34,928 
Operating lease liabilities – non-current   7,030    2,986 
Total Operating lease liabilities  $40,898   $37,914 

 

The following provides details of the Company’s lease expenses:

 

  

For the
Three Months Ended
September 30,

 
   2022   2021 
Operating lease expenses  $23,373   $19,705 

 

F-13

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

Other information related to leases is presented below:

 

   For the
Three Months Ended
September 30,
 
   2022   2021 
Cash Paid for Amounts Included in Measurement of Liabilities:        
Operating cash flows used in operating leases  $16,069   $6,182 
Weighted Average Remaining Lease Term:          
Operating leases   

1.50 years

    1.90 years 
Weighted Average Discount Rate          
Operating leases   4.75%   4.75%

 

As most of the Company’s leases do not provide an implicit rate, the Company uses 1-5 years borrowing rate from bank of 4.75% based on the information available at commencement date in determining the present value of lease payments.

 

Maturities of lease liabilities were as follows:

 

For the year ending June 30:    
Remainder of 2023  $28,118 
2024   7,030 
2025   7,030 
Total lease payments   42,178 
Less: imputed interest   1,280 
Total lease liabilities  $40,898 

 

Under the terms of the agreement, the Company was required to satisfy the lease payment obligation of $106,680, or RMB 700,000, by issuing the common stock of Longduoduo to the lessor. These shares have been issued during the year ended June 30, 2022 (see Note 10).

 

NOTE 9. CONTINGENCIES

 

Contingencies

 

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

 

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

 

The Company was not subject to any material loss contingency as of September 30, 2022 and June 30, 2022.

 

F-14

 

 

LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(UNAUDITED)

 

NOTE 10. STOCKHOLDERS’ DEFICIT

 

On July 26, 2021, Longduoduo HK issued a total of 600 shares, or equivalent to 18,000,000 common shares of Longduoduo upon the Share Exchange, to Eden Hall Global Capital Cp., Ltd. for service compensation expense of $914,400.

 

On July 26, 2021, Longduoduo HK issued a total of 3,822 shares, or equivalent to 114,579,853 common shares of Longduoduo upon the Share Exchange, to 32 sales agents for service compensation expense of $5,824,728.

 

On July 26, 2021, Longduoduo HK issued a total of 100 shares, or equivalent to 3,000,000 common shares of Longduoduo upon the Share Exchange, to Wudun Qiqige (see Note 8) for the lease payment of approximately $106,680, or RMB 700,000, for the payment of purchasing furniture of approximately $15,240, or RMB 100,000, and for cash of approximately $30,480, or RMB 200,000.

 

NOTE 11. BASIC AND DILUTED EARNINGS PER SHARE

 

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise of share-based awards, using the treasury stock method. The reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income from continuing operations is shown as follows:

follows:

 

   For the Three Months Ended September 30, 
   2022   2021 
Numerator:        
Net loss attributable to common stockholders  $(280,648)  $(6,934,847)
Denominator:          
Basic and diluted weighted-average number of shares outstanding
   300,000,000    164,420,147 
Net income per share:          
Basic and diluted
  $(0.001)  $(0.042)

 

NOTE 12. NON-CONTROLLING INTERESTS

 

Qingguo, Chengheng, Rongbin and Tianju are the Company’s majority-owned subsidiaries which are consolidated in the Company’s financial statements with non-controlling interests recognized. The Company holds 90%, 80%, 80% and 51% interest of Qingguo, Chengheng, Rongbin and Tianju as of September 30, 2022, respectively.

 

As of September 30, 2022 and June 30, 2022, the non-controlling interests in the consolidated balance sheet was ($121,571) and ($93,553), respectively.

 

For the three months ended September 30, 2022, the comprehensive loss attributable to common stockholders and non-controlling interests were $223,457 and $28,018, respectively.

 

For the three months ended September 30, 2021, the comprehensive loss attributable to common stockholders and non-controlling interests were $6,935,170 and $26,348, respectively.

 

NOTE 13. SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of September 30, 2022 have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”

 

F-15

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 in the 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 with United 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 ended September 30, 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 months ended September 30, 2022 and 2021: 

 

   For the Three Months Ended     
   September 30,   Change 
  

2022

(Unaudited)

  

2021

(Unaudited)

   $   % 
Total revenue  $415,563   $752,767   $(337,204)   (45)%
Cost of revenue   155,463    218,481    (63,018)   (29)%
Gross Profit   260,100    534,286    (274,186)   (51)%
Total operating expenses   575,534    7,494,646    (6,919,112)   (92)%
Loss from operations   (315,434)   (6,960,360)   6,644,926    (95)%
Other income (expense), net   2    (784)   786    (100)%
Loss before income taxes   (315,432)   (6,961,144)   6,645,712    (95)%
Income tax   -    -    -    n/a 
Net Loss  $(315,432)  $(6,961,144)  $6,645,712    (95)%

 

2

 

 

During the three months ended September 30, 2022, our revenue was $415,563, 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 September 30, 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.

 

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 months ended September 30, 2022, our cost of revenue was $155,463, with the result that our gross profit was $260,100, a gross margin of more than 63%. 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 September 30, 2022 decreased by $6,919,112, primarily attributable to:

 

  $223,219 in advertising and promotion expenses incurred during the three months ended September 30, 2022, compared to $6,173,902 recorded during the three months ended September 30, 2021. The decrease was primarily attributable to the fact that on July 26, 2021, Longduoduo HK issued a total of 3,822 shares, which was exchanged for 114,579,853 common shares of Longduoduo upon the Share Exchange, to 32 sales agents for service compensation expense of $5,824,728.

 

  $189,990 in salaries and benefits expenses in the three months ended September 30, 2022, compared to $133,135 during the three months ended September 30, 2021. The increase in our labor costs was primarily caused by the initiation of operations at our new operational entities and fully operations of established entities described above.

 

  $99,958 in office expenses during the three months ended September 30, 2022, compared to $1,139,245 during the three months ended September 30, 2021. The decrease was mainly attributable to the fact that on July 26, 2021, Longduoduo HK issued a total of 600 shares, which were exchanged for 18,000,000 common shares of Longduoduo upon the Share Exchange, to Eden Hall Global Capital Cp., Ltd. for service compensation expense of $914,400.

 

As described above, our net loss for the three months ended September 30, 2022 was $315,432, compared to a net loss of $6,961,144 for the three months ended September 30, 2021.

 

Our reporting currency is the U.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 ended September 30, 2022 and 2021, foreign currency translation adjustments of $63,957 and $(374), respectively, have been reported as other comprehensive income in the consolidated statement of operations and comprehensive income (loss). 

 

3

 

 

Liquidity and Capital Resources

 

As of September 30, 2022, the Company had $456,769 in cash and cash equivalents. On the same date, we had a working capital deficit of $1,475,713, primarily because we had received $813,441 from customers as prepayment for future services and products but used the majority of the deposited sums to pay ongoing expenses and had only $13,707 in prepayments on our September 30, 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 expect Zhang 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 three months ended September 30, 2022 and 2021.

 

  

For the Three Months Ended

September 30,

   Change 
   2022   2021     
   (Unaudited)   (Unaudited)     
Net cash provided by (used in) operating activities  $141,174   $(115,003)  $256,177 
Net cash used in investing activities   (55,290)   (107,027)   51,737 
Net cash provided by financing activities   37,981    30,909    7,072 
Effect of exchange rate fluctuation on cash and cash equivalents   (23,768)   (379)   (23,389)
Net increase (decrease) in cash and cash equivalents   100,097    (191,500)   291,597 
Cash and cash equivalents, beginning of year   356,672    273,116    83,556 
Cash and cash equivalents, end of year  $456,769   $81,616   $375,153 

 

Net Cash Provided by (Used in) Operating Activities

 

For the three months ended September 30, 2022, we had cash provided by operating activities of $141,174, compared to $115,003 used in operating activities for the three months ended September 30, 2021. Cash provided by operations during the three months ended September 30, 2022 was primarily due to the net loss, offset by the increased deposits received.

  

Net Cash Used in Investing Activities

 

Net cash used in investing activities for the three months ended September 30, 2022 was $55,290, compared to $107,027 for the three months ended September 30, 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 three months ended September 30, 2022 was $37,981, compared to $30,909 for the three months ended September 30, 2021 was due to the proceeds from loan from a third party.

 

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.

 

4

 

 

The U.S. government, including the SEC, has made statements and taken actions that have led to changes in relations between the U.S. and China, and will impact companies with connections to the United States or China. Those actions by the U.S. government included imposing several rounds of tariffs affecting certain products manufactured in China and imposing sanctions and restrictions in relation to China. Actions by the SEC included issuing statements indicating that it would make enhanced review of companies with significant China-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 on U.S.-domiciled companies with significant connections to China, our industry or on us. Any unfavorable government policies on cross-border relations, including increased scrutiny on companies with significant China-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 the U.S. or Chinese governments take retaliatory actions due to the recent U.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 in United States and China 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.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

5

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management maintains disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that the material information required to be disclosed by us in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Under the supervision and with the participation of our management team, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2022. Based on this evaluation, we concluded that our disclosure controls and procedures have the following material weaknesses:

 

  The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system.

 

  Our internal financial staff lack expertise in identifying and addressing complex accounting issues under U.S. Generally Accepted Accounting Principles.

 

  Our Chief Financial Officer is not familiar with the accounting and reporting requirements of a U.S. public company.

 

  We have not developed sufficient documentation concerning our existing financial processes, risk assessment and internal controls.

 

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s system of disclosure controls and procedures was not effective as of September 30, 2022 for the purposes described in this paragraph.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

6

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

 

Item 1A. Risk Factors.

 

There have been no material changes from the risk factors included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022, as filed with the SEC on October 13, 2022.

 

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.

 

During the quarter ended September 30, 2022, the Company did not complete any unregistered sales of equity securities.

 

The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the quarter ended September 30, 2022.

 

Item 3. Defaults upon Senior Securities.

 

Not applicable

 

Item 4. Mine Safety Disclosure

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

7

 

 

Item 6. Exhibits

 

INDEX TO EXHIBITS

 

Exhibit No.   Description of Exhibit
31.1   Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

8

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

LONGDUODUO COMPANY LIMITED

 

Signature   Title   Date
         
/s/ Zhou Hongxiao   Chief Executive Officer   November 30, 2022
Zhou Hongxiao   (Principal Executive Officer)    
         
/s/ Kang Liping   Chief Financial Officer   November 30, 2022
Kang Liping   (Principal Financial and Accounting Officer)    

 

 

9

 

 

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ATTACHMENTS / EXHIBITS

CERTIFICATION

CERTIFICATION

CERTIFICATION

CERTIFICATION

XBRL SCHEMA FILE

XBRL CALCULATION FILE

XBRL DEFINITION FILE

XBRL LABEL FILE

XBRL PRESENTATION FILE

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