CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	September 30,			June 30,
	2020			2020

ASSETS
Current assets
Cash and cash equivalents	$	724,219		$	2,715,689
Account receivable - related parties		29,453			—
Inventory		223,771			225,634
Advance to suppliers		4,249,025			2,495,337
Advance to suppliers - related parties		43,296			69,355
Prepayment and other current assets, net		30,376			42,841
Total current assets		5,300,140			5,548,856
Non-current assets
Property, plant and equipment, net		10,775			11,706
Intangible assets		312,238			322,557
Operating lease right of use asset, net		562,508			638,023
Total non-current assets		885,521			972,286
Total Assets	$	6,185,661		$	6,521,142

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expense	$	5,009,095		$	5,710,519
Advance from customers		5,657,960			3,857,871
Due to related party		88,384			53,543
Operating lease liabilities - current		532,010			585,831
Total current liabilities		11,287,449			10,207,764
Non-current liabilities
Operating lease liabilities - noncurrent		245,344			235,811
Total liabilities		11,532,793			10,443,575

Commitments & contingencies		—			—

Shareholders' equity
Series A Preferred Stock, 10,000,000 shares authorized at $0.001 per share: 9,920,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively		9,920			9,920
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 110,319,245 shares issued and outstanding as of September 30, 2020 and June 30, 2020, respectively		110,319			110,319
Additional paid-in capital		26,560,258			26,560,258
Shares Subscription Receivable		(6,125,418	)		(6,125,418	)
Accumulated deficit		(25,784,467	)		(24,537,775	)
Statutory reserves		—			—
Accumulated other comprehensive income		(117,744	)		60,263
Total shareholders' equity		(5,347,132	)		(3,922,433	)
Total Liabilities and Shareholders' Equity	$	6,185,661		$	6,521,142

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

CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 and 2019

(UNAUDITED)


	Common Stock				Preferred Stock Series A				Additional Paid-in		Shares Subscription			Accumulated			Accumulated other Comprehensive
	Shares		Amount		Shares		Amount		Capital		Receivable			Deficit			Income			Total
Balance at June 30, 2020		110,319,245	$	110,319		9,920,000	$	9,920	$	26,560,258	$	(6,125,418	)	$	(24,537,775	)	$	60,263		$	(3,922,433	)
Net Loss															(1,246,692	)					(1,246,692	)
Foreign Currency Translation Adjustment																		(178,007	)		(178,007	)
Balance at September 30, 2020		110,319,245	$	110,319		9,920,000	$	9,920	$	26,560,258	$	(6,125,418	)	$	(25,784,467	)	$	(117,744	)	$	(5,347,132	)


Balance at June 30, 2019		110,319,245	$	110,319		9,920,000	$	9,920	$	20,434,840	$	—		$	(21,989,245	)	$	1,855		$	(1,432,311	)
Net Loss															(1,068,070	)					(1,068,069	)
Foreign Currency Translation Adjustment																		82,357			82,357
Balance at September 30, 2019		110,319,245	$	110,319		9,920,000	$	9,920	$	20,434,840	$	—		$	(23,057,315	)	$	84,212		$	(2,418,023	)

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

these financial statements.

CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For Three Months Ended September 30,
	2020			2019
Cash flows from operating activities
Net Loss	$	(1,246,692	)	$	(1,068,070	)
Adjustments to reconcile net loss to net cash from operations:
Depreciation and amortization		24,294			23,313
Changes in assets and liabilities:
Account receivable		(28,895	)		—
Account receivable - related party		13,930			(16,852	)
Inventory		10,777			89,717
Due from related party		27,973			—
Advance to suppliers		(1,593,168	)		(1,009,365	)
Account payable		(904,279	)		3,099,744
Account payable - related party		—			173,337
Advance from customer		1,612,968			(3,083,927	)
Tax payable		(13,913	)		284,485
Wages Payable		4,341			24,061
Operating lease liabilities		14,577			—
Other payables		(128	)		5,319
Net cash used in operating activities	$	(2,078,215	)	$	(1,478,238	)

Cash flows from investing activities
Purchases of property, plant and equipment		—			(3,989	)
Disposal (Acquisition) of intangible assets		—			6,468
Net cash used in investing activities	$	—		$	2,479

Cash flows from financing activities
Proceeds from (Repayment to) related parties		8,005			9,220
Net cash provided by financing activities	$	8,005		$	9,220

Net change in cash and cash equivalents		(2,070,210	)		(1,466,539	)

Effect of foreign exchange rate changes on cash and cash equivalents		78,740			(150,979	)

Cash and cash equivalents, beginning		2,715,689			4,677,454

Cash and cash equivalents, end	$	724,219		$	3,059,936
		—			—
Supplemental cash flow information
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	40,461

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

~~ZHONGCHAI MACHINERY, INC.~~

On July 26, 2011, the Company held a Special Meeting of Shareholders. At the Special Meeting, the Company’s shareholders approved the termination the Company’s periodic reporting obligations under the Exchange Act, thereby foregoing many of the expenses associates with operating as a public company subject to SEC reporting obligations. Three days later, the Company terminated its registration with the Securities and Exchange Commission. Following such termination, the Company became dormant.

On July 27, 2011, the Company approved a 1-for-120 reverse stock split of its then outstanding shares of the Company’s Common Stock.

On May 11, 2018, the Eighth Judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for Zhongchai Machinery, Inc., proper notice having been given to the officers and directors of Zhongchai Machinery, Inc. There was no opposition.

On May 16, 2018, the Company filed a Certificate of Revival with the State of Nevada, appointing David Lazar as President, Secretary, Treasurer and sole Director. On June 19, 2018, the Company issued 3,096,200 shares of common stock to David Lazar, at par value of $0.001, for services valued at $3,096.20, and issued 10,000,000 shares of Series A Preferred Stock to David Lazar, at par value of $0.001, for services valued at $4,000,000.

On December 28, 2018, a change of control of the Company took place. Mr. Xingtao Zhou acquired all 10,000,000 shares of Series A Preferred Stock previously owned by Mr. Lazar; and Mr. Zhou and Yaqin Fu acquired, respectively, 2,432,351 and 663,849 common shares previously owned by Mr. Lazar, who resigned as an officer and director and appointed Mr. Zhou as a director, CEO and CFO, and appointed Ms. Fu’s husband, Liang Tan, as a director.

On January 8, 2019, by majority consent of its principal shareholders, the Company changed its corporate name in Nevada from Zhongchai Machinery, Inc. to Cang Bao Tian Xia International Art Trade Center, Inc., its current name; and shortly thereafter, the Company’s trading symbol was changed to TXCB.

On July 27, 2020 (the “Closing Date”), Cang Bao entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among (i) Cang Bao, (ii) Zhi Yuan Limited, a Cayman Islands company (“Cayman Company”), and (iii) the three beneficial shareholders of Cayman Company (each, a “Cayman Company Shareholder” and collectively, the “Cayman Company Shareholders”)

Pursuant to the terms of the Exchange Agreement, the Cayman Company Shareholders agreed to sell to Cang Bao, and Cang Bao agreed to purchase, all shares of Cayman Company held by them, which shares represent 100% of the issued and outstanding shares of Cayman Company. In exchange, Cang Bao agreed to issue to the Cayman Company Shareholders an aggregate of 75,000,000 shares of common stock, representing approximately 67.98% of Cang Bao’s total issued and outstanding common stock (the “Share Exchange”).

Our directors approved the Exchange Agreement and the transactions contemplated thereby. Simultaneously, the directors of Cayman Company also approved the Exchange Agreement and the transactions contemplated thereby. The Share Exchange closed on July 27, 2020. Both Yaqin Fu, who is the wife of one of Cang Bao’s directors, and Mr. Xingtao Zhou, Cang Bao’s President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board and principal shareholder, were Cayman Company Shareholders who exchanged their Cayman Company shares for shares of Cang Bao. After giving effect to the Share Exchange, Mr. Zhou owns 59,839,271 shares of Cang Bao’s common stock, which represents 54.24% of its outstanding common stock, and 100% of its issued and outstanding preferred shares.

As a result of the Share Exchange, Cayman Company became a wholly owned subsidiary of Cang Bao Tian Xia International Art Trade Center, Inc.and Cang Bao Tian Xia International Art Trade Center, Inc. is its public holding company. After giving effect to the Share Exchange, the Company acquired 100% of the assets and operations of Cayman Company and its subsidiaries, the business and operations of which now constitutes the Company’s primary business and operations. After giving effect to the Share Exchange, Cang Bao Tian Xia International Art Trade Center, Inc. own 100% of the issued and outstanding shares of capital stock of Cayman Company. Cayman Company is a holding company that owns Cangyun (Hong Kong) Limited (“Hong Kong Company”), which in turn owns and controls Shanghai Cangyun Management Consulting Co., Ltd. (“Management Consulting”), which has entered into contractual agreements to control Hainan Cangbao Tianxia Cultural Relic Co., Ltd. (“Hainan”) and Cangbao Tianxia (Shanghai) Cultural Relic Co., Ltd. (“Tianxia Cultural Relic,” and together with Hainan, the “Target Companies” or “VIEs”).

The Exchange Agreement contains customary representations, warranties, covenants and conditions for a transaction of this type for the benefit of the parties.

For federal income tax purposes, it is intended that the Share Exchange qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). However, we did not obtain any tax opinion and there can be no assurance that our intent that the Share Exchange qualify as a reorganization under the provisions of Section 368(a) of the Code is correct. Cayman Company is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Cayman Company have been brought forward at their book value and no goodwill has been recognized. As a result of the acquisition of all the issued and outstanding shares of Cayman Company, the Company have now assumed Cayman Company’s business operations as its own.

The Share Exchange was accounted as a business combination under common control, in which all of the combining entities or businesses are ultimately controlled by the same party or parties, both before and after the business combination, and that control is not transitory. The business combination under common control of accounting is based on the historical consolidated financial statements of Cang Bao and Cayman Company. In accordance with ASC 805-50-45-5, for transactions between entities under common control, financial statements and financial information presented for prior periods have been retroactively adjusted to furnish comparative information. The financial statements are presented retrospectively, as though the Share Exchange Agreement between Cang Bao and Cayman Company occurred at the beginning of the first period presented.

Zhi Yuan Limited (“Zhi Yuan”) was incorporated on April 15, 2019 under the laws of the Cayman Islands as a holding company. On May 22, 2019, ZhiYuan incorporated a wholly owned subsidiary Cang Yun (Hong Kong) Limited (“Cang Yun HK”) in Hong Kong. On July 30, 2019, Cang Yun HK incorporated a wholly foreign owned enterprise (“WFOE”) Shanghai Cangyun Management Consulting Co., Ltd. (“Shanghai Cangyun”) in Shanghai, China.

On August 8, 2019, Shanghai Cangyun entered into a series of Variable Interest Entity (“VIE”) agreements with the owners of Hainan Cangbao Tianxia Cultural Relic Co., Ltd. (“Hainan Cangbao”) and Cangbao Tianxia (Shanghai) Cultural Relic Co., Ltd. (“Shanghai Cangbao”). Pursuant to the VIE agreements, Hainan Cangbao and Shanghai Cangbao became Shanghai Cangyun’s contractually controlled affiliate. The purpose and effect of the VIE Agreements is to provide Shanghai Cangyun with all management control and net profits earned by Hainan Cangbao and Shanghai Cangbao. Hainan Cangbao was incorporated on May 30, 2018 and Shanghai Cangbao was incorporated on June 28, 2019. The entities operate an online and offline cultural exchange service platform, through which dedicated to create industry standards for art investment and creating a model of online art exchanges and transactions, which allows collectors, artists, art dealers and owners to access a much larger art trading market, allowing them to engage with a wide range of collectibles or artwork investors. Upon executing a series of VIE agreements, Hainan Cangbao and Shanghai Cangbao are considered Variable Interest entities (“VIE”) and Shanghai Cangbao is the primary beneficiary. Accordingly, Hainan Cangbao and Shanghai Cangbao are consolidated under the guidance of FASB Accounting Standards Codification (“ASC”) 810, Consolidation.

Cang Bao Tian Xia International Art Trade Center, Inc. and its consolidated subsidiaries and VIE are collectively referred to herein as the “Company” unless specific reference is made to an entity.

~~The Company’s consolidated financial statements include the accounts of its controlled subsidiaries. All intercompany balances and transactions are eliminated in consolidation.~~

The accompanying ~~unaudited~~ consolidated financial statements have been prepared in ~~accordance~~conformity with generally accepted accounting principles (“GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). This basis of accounting differs in certain material respects from that used for ~~complete financial statements. Interim results are not necessarily indicative of results for a full year. In~~ the ~~opinion of management, all adjustments considered necessary for a fair presentation~~preparation of the ~~financial position~~books of Hainan Cangbao and Shanghai Cangbao, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC (“PRC GAAP”), the accounting standards used in the places of their domicile. The accompanying consolidated financial statements reflect necessary adjustments not recorded in the books of Hainan Cangbao and Shanghai Cangbao to present them in conformity with U.S. GAAP.

Principals of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly and majority owned subsidiaries, and consolidated VIE and its subsidiaries for which the Company is the primary beneficiary.

All transactions and balances among the Company, its subsidiaries and consolidated VIE have been eliminated upon consolidation.

The accompanying consolidated financial statements of Cang Bao Tian Xia International Art Trade Center, Inc. reflect the activities of the following entities:


Name	Background	Ownership
Cang Bao Tian Xia International Art Trade Center, Inc.(“Cang Bao”)	· A holding company · A Nevada company

Zhi Yuan Limited (“Zhi Yuan”)	· A Cayman Island company · Incorporated on April 15, 2019	100% owned by Cang Bao

Cang Yun (Hong Kong) Limited (“Cang Yun HK”)	· A Hong Kong company · Incorporated on May 22, 2019 · A holding company	100% owned by Zhi Yuan

Shanghai Cangyun Management Consulting Co., Ltd. (“Shanghai Cangyun”)	· A PRC company and deemed a wholly foreign owned enterprise · Incorporated on July 30, 2019 · Subscribed capital of $10,000 · A holding company	100% owned by Cang Yun HK

Hainan Cangbao Tianxia Cultural Relic Co., Ltd. (“Hainan Cangbao”)	· A PRC limited liability company · Incorporated on May 30, 2018 · Subscribed capital of $1,454,491 (RMB 10,000,000) · Operate online and offline cultural exchange service platform	VIE of Shanghai Cangyun WFOE

Cangbao Tianxia (Shanghai) Cultural Relic Co., Ltd. (“Shanghai Cangbao”)	· A PRC limited liability company · Incorporated on May 30, 2018 · Subscribed capital of $4,799,821 (RMB 33,000,000) · Operate online and offline cultural exchange service platform	VIE of Shanghai Cangyun WFO

VIE Agreements with Shanghai Cangyun

Under the laws and regulations of the PRC, foreign persons and foreign companies are restricted from investing directly in certain businesses within the PRC. As such, Hainan Cangbao and Shanghai Cangbao are controlled through VIE Arrangements in lieu of direct equity ownership. Such VIE arrangements consist of a series of four agreements (collectively, the “VIE Arrangements”), which were signed on August 8, 2019. The significant terms of the VIE Arrangements are as follows:

Exclusive Management Consultation Service Agreement

Pursuant to the Exclusive Management Consultation Service Agreement between Management Consulting and Hainan Cangbao Tianxia Cultural Relic Co., Ltd. and Cangbao Tianxia (Shanghai) Cultural Relic Co. (the “Target Companies” or “VIEs”), dated August 8, 2019, Management Consulting has the exclusive right to provide consultation and services to the Target Companies in the areas of funding, human resources, technology and intellectual property rights. For such services, the Target Companies have agreed to pay service fees in the amount of 100% of their net income and also have the obligation to absorb 100% of their own losses. Management Consulting exclusively owns any intellectual property rights arising from the performance of this Management Consultation Service Agreement. The Management Consultation Service Agreement terminates at the same time as the Equity Pledge Agreement, described in the next paragraph.

Equity Pledge Agreement

Pursuant to those Equity Pledge Agreement dated August 8, 2019, among Management Consulting, the Target Companies, the Target Companies’ shareholders, who are our CEO Mr. Zhou, Yaqin Fu (the wife of Liang Tan, a director of the Company), and Wei Wang (collectively, the “Pledgors”), each of three persons pledged all of their equity interests in the Target Companies to Management Consulting to guarantee the Target Companies’ performance of relevant obligations and indebtedness under the Management Consultation Service Agreement and the other control agreements (collectively, the “Control Agreements”). If the Pledgors breach their obligations under the Control Agreements, Management Consulting, as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interests in order to recover the damages associated with such breaches. The Pledgors’ obligations shall be continuously valid until all of the Pledgors are no longer shareholders of the Target Companies, or until the satisfaction of all of the Pledgors’ obligations under the Control Agreements.

Call Option Agreement

Pursuant to the Call Option Agreement among Management Consulting, the Target Companies and the Pledgors, dated August 8, 2019, Management Consulting has the exclusive right to require that the Pledgors fulfill and complete all approval and registration procedures required under PRC laws for Management Consulting to purchase, or designate one or more persons to purchase, such shareholders’ equity interests in the Target Companies , in one or multiple transactions, at any time or from time to time, at Management Consulting’s sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The Equity Option Agreements shall remain effective until all the equity interests in the Target Companies owned by the Pledgors have been legally transferred to Management Consulting or its designee(s).

Proxy Agreement

Pursuant to the Proxy Agreement among Management Consulting, the Pledgors and the Target Companies, dated August 8, 2019, the Pledgors irrevocably appointed Management Consulting or Management Consulting’s designee to exercise all of their rights as a shareholder of the Target Companies, including but not limited to the power to exercise all such shareholder’s voting rights with respect to all matters to be discussed and voted in shareholder meetings of the Target Companies. The Proxy Agreement remains effective until all equity interests in the Target Companies owned by the Pledgors have been legally transferred to Management Consulting or its designee(s).

Based on the foregoing VIE Arrangements, Shanghai Cangyun deemed to have effective control over Hainan Cangbao and Shanghai Cangbao, which enables Shanghai Cangyun to receive all of their expected residual returns and absorb the expected losses of the VIE, and Shanghai Cangyun is deemed the primary beneficiary of Hainan Cangbao and Shanghai Cangbao.

The reorganization through VIE above are accounted as a transaction of entities under common control for accounting purposes where the shareholder of Hainan Cangbao and Shanghai Cangbao are the controlling shareholder of Cang Bao before and after the reorganization. Accordingly, the accompanying consolidated financial statements have been prepared as if the current corporate structure had been in existence throughout the periods presented.

The significant carrying amount and classification of the assets and liabilities of VIEs as of September 30, 2020 and June 30, 2020 as follows:


	September 30,		June 30,
	2020		2020

ASSETS
Current assets
Cash and cash equivalents	$	724,219		2,715,689
Account receivable - related parties		29,453		—
Inventory		223,771		225,634
Advance to suppliers		4,249,025		2,495,337
Advance to suppliers - related parties		43,296		69,355
Due from related party		19,765		41,502
Prepayment and other current assets, net		30,375		42,840
Total current assets of VIEs		5,314,805		5,590,358
Non-current assets
Property, plant and equipment, net		10,775		11,706
Intangible assets		312,238		322,556
Operating lease right of use asset, net		562,508		638,024
Total non-current assets of VIEs		885,521		972,286
Total Assets of VIEs	$	6,200,325		6,562,644

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expense	$	4,993,095		5,694,519
Advance from customers		5,657,960		3,857,871
Operating lease liabilities - current		532,010		585,832
Total current liabilities of VIEs		11,183,065		10,138,221
Non-current liabilities
Operating lease liabilities - noncurrent		245,344		235,811
Total liabilities of VIEs	$	11,428,409	$	10,374,032

Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollar (“$”), which is the reporting currency of the Company. The functional currency of Cang Bao, Cayman Company and Hongkong Company is United States dollar. The functional currency of the Company’s subsidiaries and VIEs located in the PRC is Renminbi (“RMB”). For the entities whose functional currencies are RMB, results of operations and cash flows ~~for~~are translated at average exchange rates during the ~~interim periods have been included.~~

Zhongchai Machinery, Inc. (“Zhongchai”), a Nevada corporation, does business through its subsidiary, Zhongchai Holding (Hong Kong) Limited, a Hong Kong company (“Zhongchai Holding”), which in turn operates through Zhejiang ZhongChai Machinery Co., Ltd. (the “Zhongchai China”), a wholly owned subsidiary established under the laws of the People’s Republic of China (the “PRC” or “China”), Zhejiang Shengte Transmission Co., Ltd. (“Shengte”) a company established under the laws of the PRC and wholly owned by Zhongchai China, and Xinchang Xian Lisheng Machinery Co., Ltd. (“Lisheng”), a company established under the laws of the PRC and 60% owned by Zhongchai China. Through its wholly and partially owned operating subsidiaries, Zhongchai is currently engagedperformance obligations identified in the ~~manufacturing and sale~~contracts or agreements with customer upon the delivery of ~~drivetrain products, such as gears, transmission gearboxes, and drive axels in China.~~

~~Sales increased by $3,841,717~~multi-functional demonstration machine has completed.

The Company did not recognize any trading commission income or ~~120% to $7,044,067~~demonstration machine sales revenue for the three months ended ~~March 31, 2011 compared~~September 30, 2020 and 2019.

Advertising Expenses

Advertising costs, mainly including promotion expense for the APP launching, are expensed as incurred and the total amounts charged to ~~$3,202,350~~“selling and marketing expenses” in the consolidated statements of income and comprehensive income were $625,986 and $602,652 for the three months ended ~~March 31, 2010. Sales~~September 30, 2020 and 2019, respectively.

New Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In February 2020, the FASB issued ASU 2020-02, “Financial Instruments – Credit Losses (Topic 326) and Leases (topic 842) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (topic 842)”. This ASU provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses. This ASU is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The amendments in this Update modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the potential impacts of ASU 2018-13 on its consolidated financial statements.

In February 2016 the FASB issued ASU 2016-02, “Leases (Topic 842).” This standard amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which means that it will be effective for us in the first quarter of our fiscal year beginning January 1, 2019. Early adoption is permitted. This standard is required to be adopted using a modified retrospective approach.

The management has reviewed the accounting pronouncements and adopted the new standard on January 1, 2019 using the modified retrospective method of adoption. The transition method expedient which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, prior periods have not been restated. The adoption of this ASU resulted in the recording of additional lease assets and liabilities, each with no effect to opening balance of retained earnings.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material impact on its the consolidated financial position, statements of operations and cash flows.

NOTE 3 – GOING CONCERN

The Company’s financial statements as of September 30, 2020, been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues and cash flows sufficient to cover its operating costs and allow it to continue as a going concern. The Company has accumulated net loss of $25,784,467 as of September 30, 2020. These factors among others raise substantial doubt about the ability of the company to continue as a going concern for a reasonable period of time.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 – INVENTORY

Inventory consisted of the following:


	September 30,		June 30,
	2020		2020

Finished goods	$	223,771	$	225,634
Less: allowance for obsolete inventory		—		—
Total, net		223,771		225,634

Inventory consists of artwork merchandises and souvenir and multi-functional demonstration machine. Obsolete inventory amounted to $0 and $0 for the three months ended ~~March 31, 2011~~September 30, 2020 and 2019.

NOTE 5 – INTANGIBLE ASSETS

Intangible assets consisted ~~mainly the sales of gears and transmission gearboxes in China. The increase in gear and transmission gearbox sales was attributable to the continued increasing~~ of the ~~Company’s production capabilities, increase sales~~following:


	September 30,			June 30,
	2020			2020

Membership management system	$	455,545		$	437,844
Accounting system		2,218			2,131
		457,763			439,975
Less: Accumulated amortization		(145,525	)		(117,418	)
Total, net	$	312,238		$	322,557

Amortization expense amounted to $22,917 and ~~an increased share of the market due to the recognition of the Company and its products.~~

~~Cost of sales was $5,128,888~~$22,581 for the three months ended September 30, 2020 and 2019, respectively.

The membership management system was acquired from Guangdong Cangbaotianxia Art Co., Ltd, a related party of the Company on March 31, ~~2011, increasing by $2,673,935, or 109%, from $2,454,953~~2019.

NOTE 6 – PROPERTY & EQUIPMENT

Property and equipment, net, is consisted of the following:


	September 30, 2020		June 30, 2020

Furniture and fixtures	$	17,369	$	16,694
		17,369		16,694
Less: Accumulate depreciation		6,594		4,988
Total, net	$	10,775	$	11,706

Depreciation expenses was $1,377 and $732 for the three months ended ~~March 31, 2010.~~ September 30, 2020 and 2019, respectively.

NOTE 7 – LEASE

The ~~gross profit margin was~~Company has operating leases for corporate offices and employees’ accommodation. These leases have remaining lease terms of 1 year to 3 years. The Company has elected to not recognize lease assets and liabilities for leases with a term less than twelve months.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term in PRC which is approximately ~~27%~~4.75%.

Operating lease expenses were $106,366 and $10,105 for the three months ended ~~March 31, 2011, compared~~September 30, 2020 and 2019, respectively.

The undiscounted future minimum lease payment schedule as follows:


As of September 30,
2021	$	421,812
2022		190,068
2023		—
Thereafter		—
Total	$	611,879

NOTE 8 – RELATED PARTY TRANSACTIONS

The related parties consisted of the following:


Name of related party		Nature of relationship
Mr. Xingtao Zhou		Majority shareholder of the Company
Mr. Wei Wang		Principal shareholder
Sichuan Cangbaotianxia Art Co., Ltd		A Company with significant influence
Guangdong Cangbaotianxia Art Co., Ltd		A Company with significant influence

Related party sale and Account receivable - related parties

During the three months ended September 30, 2020, the Company made sale of $29,453 to Guangdong Cangbaotianxia Art Co., Ltd. As of September 30, 2020 and June 30, 2020, the outstanding balance of account receivable - related parties was $29,453 and $0 respectively.

Advance to suppliers - related parties

During the three months ended September 30, 2020, the Company decreased a advance of $26,059 to Sichuan Cangbaotianxia Art Co., Ltd. As of September 30, 2020 and June 30, 2020, the outstanding balance of advance to suppliers - related parties was $43,296 and $69,355 respectively.

Due to related parties

During the three months ended September 30, 2020, the Company received $34,841 in advance from Mr. Xingtao Zhou. As of September 30, 2020 and June 30, 2020, the outstanding balance payable to Mr. Xingtao Zhou was $88,384 and $53,543 respectively. The amount is due on demand and non-interest bearing without any formal agreement.

NOTE 9 – EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of $.001 par value preferred shares. On June 19, 2018, the Company created 10,000,000 shares of Series A Preferred Stock, out of the 10,000,000 shares that were already authorized. On that same date, the Company issued 10,000,000 shares of the Series A preferred stock to Custodian Ventures LLC, the company controlled by David Lazar, Chief Executive Officer for services valued at $4,000,000.

The following is a description of the material rights of our Series A Preferred Stock:

Each share of Series A Preferred Stock shall have a par value of $0.001 per share. The Series A Preferred Stock shall vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on a 1 for one basis. If the Company effects a stock split which either increases or decreases the number of shares of Common Stock outstanding and entitled to vote, the voting rights of the Series A shall not be subject to adjustment unless specifically authorized.

Each share of Series A Preferred Stock shall be convertible at a rate of $0.0000025 per share of Common Stock (“Conversion Ratio”), at the option of a Holder, at any time and from time to time, from and after the issuance of the Series A Preferred Stock.

Subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of shares of Series A Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, upon any payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the Common Stock of the Corporation, as and if declared by the Board of Directors, as if the Series A Preferred Stock had been converted into Common Stock. Subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the payment of any dividends on the any series or classes of stock of the Corporation shall be subject to any priority set forth in Paragraph (I)(c)(3) of Article FIFTH of the Articles of Incorporation, as such may from time to time be amended.

In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the price per share actually paid to the Corporation upon the initial issuance of the Series A Preferred Stock (each, the “the Original Issue Price”) for each share of Series A Preferred Stock then held by them, plus declared but unpaid dividends. Unless the Corporation can establish a different Original Issue Price in connection with a particular sale of Series A Preferred Stock, the Original issue price shall be $0.001 per share for the Series A Preferred Stock. If, upon the occurrence of any liquidation, dissolution or winding up of the Corporation, the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the each series of Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.

The Series A Preferred Stock shares are nonredeemable other than upon the mutual agreement of the Company and the holder of shares to be redeemed, and even in such case only to the extent permitted by this Certificate of Designation, the Corporation’s Articles of Incorporation and applicable law.

Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price of the Series A Preferred Stock by the Series A Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Series A Conversion Price per share shall be $0.0000025 for shares of Series A Preferred Stock.

Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the applicable Series A Conversion Price in effect for such share immediately upon the earlier of (i) except as provided below in Section 4(c), the Corporation’s sale of its Common Stock in a public offering pursuant to a registration statement under the Securities Act of 1933, as amended; (ii) a liquidation, dissolution or winding up of the Corporation as defined in section 2(c) above but subject to any liquidation preference required by section 2(a) above; or (iii) the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series A Preferred Stock.

The holder of each share of Series A Preferred Stock shall have the right to one vote for each share of Series A Preferred Stock, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights shall be rounded to the nearest whole number (with one-half being rounded upward).

On February 14, 2019, the Company issued 32,000,000 common shares to shareholders pursuant to the conversion of 80,000 shares of Series A Preferred Stock at a conversion price of $0.0000025 per common share.

As of September 30, 2020, 9,920,000 preferred shares remain outstanding, which are owned by Xingtao Zhou, CEO.

Common Stock

On June 19, 2018, the Company issued 3,096,200 shares of common stock issued at par value of $0.001, for services valued at $3,096 to Custodian Ventures, LLC, the company controlled by David Lazar.

Pursuant to the terms of the Exchange Agreement, the Cayman Company Shareholders agreed to sell to Cang Bao, and Cang Bao agreed to purchase, all shares of Cayman Company held by them, which shares represent 100% of the issued and outstanding shares of Cayman Company. In exchange, Cang Bao agreed to issue to the Cayman Company Shareholders an aggregate of 75,000,000 shares of common stock, representing approximately ~~23%~~67.98% of Cang Bao’s total issued and outstanding common stock (the “Share Exchange”).

As of September 30, 2020, 110,319,245 common shares are issued and outstanding with a par value of 0.001.

Registered Capital of Subsidiaries

Shanghai Cangyun has subscribed capital of $10,000 which are not yet paid up by its shareholders. The subscribed capital is due for payment on July 30, 2039.

Hainan Cangbao has subscribed capital of $1,415,416 (RMB10,000,000) which are not yet paid up by its shareholders. The subscribed capital is due for payment on May 30, 2038.

Shanghai Cangbao has subscribed capital of $4,670,873 (RMB33,000,000) which are not yet paid up by its shareholders. The subscribed capital is due for payment on June 5, 2039.

Restricted net assets

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary or VIE. Relevant PRC statutory laws and regulations permit payments of dividends by Shanghai Cangyun, Hainan Cangbao, and Shanghai Cangbao only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC subsidiary and VIE and VIE’s subsidiaries included in the Company’s consolidated net assets are also non-distributable for dividend purposes. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Shanghai Cangyun, Hainan Cangbao, and Shanghai Cangbao. The Company is required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, the Company may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.

The ability of the Company’s PRC subsidiary and VIE and VIE’s subsidiaries to make dividends and other payments to the Company may also be restricted by changes in applicable foreign exchange and other laws and regulations. Foreign currency exchange regulation in China is primarily governed by the following rules:

Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;

Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

Currently, under the Administration Rules, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the State Administration of Foreign Exchange (the “SAFE”) is obtained and prior registration with the SAFE is made. Foreign-invested enterprises like Rise King WFOE that need foreign exchange for the distribution of profits to its shareholders may affect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.

Although the current Exchange Rules allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. The Company cannot be sure that it will be able to obtain all required conversion approvals for its operations or the Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Currently, most of the Company’s retained earnings are generated in Renminbi. Any future restrictions on currency exchanges may limit the Company’s ability to use its retained earnings generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China.

The Company’s VIE and its subsidiaries in Renminbi included in the Company’ consolidated net assets, aside from statutory reserve funds, that may be affected by increased restrictions on currency exchanges in the future and accordingly may further limit the Company’s PRC subsidiary and VIE and VIE’s subsidiaries’ ability to make dividends or other payments in U.S. dollars to the Company, in addition to restricted net assets as discussed above.

NOTE 10 – INCOME TAX

United States of America

Cang Bao Tian Xia International Art Trade Center Inc is incorporated in the State of Nevada and is subject to Nevada and US Federal tax laws. Cang Bao has not recognized an income tax benefit for its operating losses based on uncertainties concerning its ability to generate taxable in future period.

The components of deferred tax assets and liabilities as follows:


	September 30, 2020			June 30, 2020
Deferred tax asset
Net operating losses carry forwards	$	4,341,567		$	4,339,886
Valuation allowance		(4,341,567	)		(4,339,886	)
Deferred tax asset, net	$	—		$	—

Cayman Islands

Under the current laws of Cayman Islands, Zhi Yuan Limited is not subject to tax on income or capital gain. In addition, payments of dividends by the Company to their shareholders are not subject to withholding tax in the Cayman Islands.

Hong Kong

Cang Yun (Hong Kong) Limited was incorporated under the Hong Kong tax laws, and the statutory income tax rate was 16.5%. Cang Yun (Hong Kong) Limited has no operating profit or tax liabilities for the three months ended September 30, 2020 and 2019.

China, PRC

Shanghai Cangyun Management Consulting Co.,Ltd., Hainan Cangbao Tianxia Cultural Relic Co., Ltd. and Cangbao Tianxia (Shanghai) Cultural Relic Co.,Ltd. were incorporated in the PRC and are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. On March ~~31, 2010.~~16, 2007, the National People’s Congress enacted a new enterprise income tax law, which took effect on January 1, 2008. The law applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises.

The Company has not recognized an income tax benefit for its operating losses based on uncertainties concerning its ability to generate taxable income in future periods.

The components of deferred tax assets and liabilities as follows:


	September 30, 2020			June 30, 2020
Net operating losses carry forwards	$	1,356,483		$	135,646
Valuation allowance		(1,356,483	)		(135,646	)
Deferred tax asset, net	$	—		$	—

Accounting for Uncertainty in Income Taxes

The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises complete their relevant tax filings. Therefore, the Company’s PRC entities’ tax filings results are subject to change. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s PRC entities’ tax filings, which may lead to additional tax liabilities.

ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and concluded that no provision for uncertainty in income taxes was necessary as of September 30, 2020 and June 30, 2020.

NOTE 11 – CONCENTRATIONS, RISKS AND UNCERTAINTIES

Credit risk

Cash deposits with banks are held in financial institutions in PRC, which are insured with deposit protection up to RMB500,000 (approximately $70,089). Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.

Concentration

The Company has a concentration risk related to the suppliers. Failure to maintain existing relationships with the suppliers or to establish new relationships in the future could negatively affect the Company’s operations.

The concentration on purchases from suppliers’ as follows:


	Three Months Ended					Three Months Ended
	September 30, 2020					September 30, 2019
	Amount		%			Amount		%
Supplier A	$	1,497,460		92	%	$	N/A		N/A
Supplier B		N/A		N/A			296,852		35	%
Supplier C		N/A		N/A			261,829		31	%
Supplier D		N/A		N/A			199,584		23	%
Supplier E		N/A		N/A			94,859		11	%
	$	1,497,460		92	%	$	853,124		100	%

Risks of Variable Interest Entities Structure

Although the structure the Company has adopted is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. There are uncertainties regarding the interpretation and application of PRC laws and regulations including those that govern the Company’s contractual arrangements, which could limit the Company’s ability to enforce these contractual arrangements. If the Company or any of its variable interest entities are found to be in violation of any existing or future PRC laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including levying fines, revoking business and other licenses of the Company’s variable interest entities, requiring the Company to discontinue or restrict its operations, restricting its right to collect revenue, requiring the Company to restructure its operations or taking other regulatory or enforcement actions against the Company. In addition, it is unclear what impact the PRC government actions would have on the Company and on its ability to consolidate the financial results of its variable interest entities in the consolidated financial statements, if the PRC government authorities were to find the Company’s legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If the imposition of any of these government actions causes the Company to lose its right to direct the activities of Hainan Cangbao and Shanghai Cangbao or the right to receive their economic benefits, the Company would no longer be able to consolidate the Hainan Cangbao and Shanghai Cangbao.

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. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time. Since April 2020, the Company gradually resumed operation and is now operating in full capacity.

NOTE 12 - SUBSEQUENT EVENTS

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Based on this evaluation, the Company concluded there are no subsequent events that would require disclosure to or adjustment to the financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our audited and unaudited financial statements are stated in United States Dollars and are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

Overview

We conduct our operations through our two consolidated subsidiaries, Hainan Cangbao Tianxia Cultural Relic Co., Ltd. (“Hainan Cangbao”) and Cangbao Tianxia (Shanghai) Cultural Relic Co.,Ltd.(“Shanghai Cangbao”). These two subsidiaries were incorporated on May 30, 2018 and June 28, 2019 respectively, in PRC, as domestic Chinese limited liability corporations.

We commenced our operations in March 2019, and we intend to make a cultural service platform dedicated to creating industry standards for art investment and creating a model of online art exchanges and transactions, which allows collectors, artists, art dealers and owners to access a much larger art trading market, allowing them to engage with a wide range of collectibles or artwork investors.

Currently we facilitate trading by individual customers of all kinds of collectibles, artworks and commodities on our online platforms, which create two source of income: (1) membership fee income by offering different service packages for members; (2) transaction commission, charging from both the buyer and the seller a commission based on the artwork trading amount upon successfully facilitating artworks transaction.

Cang Bao Tian Xia International Art Trade Center, Inc. has administrative offices located at Unit 609, Shengda Plaza, No. 61 Guoxing Ave Meilan District, Haikou, Hainan Province, China 570203.

The Company’s fiscal year end is June 30.

Recent Developments

Early in January, 2020, we launched a new application, which enables our customers to communicate and list artworks to trade. We are currently working with a third-party technology company to design a tablet, which will have multiple built-in applications to facilitate membership enrollment and artworks trade. The tablet is now generating advertisement revenue for the Company.

Results of Operations

Results of Operations for the three months ended September 30, 2020 and 2019

The following table sets forth key components of Company’s results of operations for the three months ended September 30, 2020 and 2019. The discussion following the table addresses these results.


	For Three Months Ended September 30,
	2020			2019			Fluctuation			%
Net revenues	$	330,402			1,099,379			(768,977	)		-70	%
Cost of revenues		105,050			697,332			(592,282	)		-85	%
Gross margin		225,352			402,047			(176,695	)		-44	%
Selling expense		754,614			824,207			(69,593	)		-8	%
General and administrative		719,382			605,911			123,5			21	%
Interest income		367			395			(28	)		-7	%
Interest expense		(172	)		—			(172	)		N/A
Other income (expense)		1,757			68			1,689			2484	%
Provision for income taxes expense		—			40,461			(40,461	)		-100	%
Net loss		(1,246,692	)		(1,027,609	)		(189,310	)		18	%

Revenues. For the three months ended September 30,2020 and 2019, we had revenue of $330,402 and $1,099,379, respectively, representing a decrease of $768,977, or 70%, which were derived from service package sales for the members. We have not generated revenue from transaction commission and sales of multifunction demonstration machine since the beginning of operation in March 2019. The significant decrease in revenue was due to the COVID-19 outbreak for the three months ended September 30, 2020.

Cost of Revenue. For the three months ended September 30, 2020 and 2019, we had cost of revenue of $105,050 and $697,332 respectively, representing a decrease of $592,282, or 85%. The cost of revenue represents costs of maintaining our platform such as network service. and artwork merchandise and souvenirs sent to member. The decrease in cost was the result of the decrease in revenue.

Gross Margin. We generated gross profit of $225,352 and $402,047 for the three months ended September 30, 2020 and 2019, with a gross margin of 68% and 37% respectively.

Operating expenses. For the three months ended September 30, 2020 and 2019, we had selling expenses of $754,614 and $824,207 respectively, which includes marketing and advertising costs related to the operations and development of the platform. For the three months ended September 30, 2020 and 2019, we had general and administrative expenses of $719,382 and $605,911, respectively which mainly consist of salaries and related employee benefits, office expenses, professional service fees, depreciation expenses, rent, and related costs. The total operating expenses was $1,473,996 and $1,430,119 for the three months ended September 30, 2020 and 2019, representing a slight increase of $43,876 or 4%. The operating expenses remained stable though the significant decrease in revenue.

Loss from Operations. For the three months ended September 30, 2020 and 2019, we had loss from operations of $1,248,644 and $1,028,072, respectively, representing an increase in loss of $220,571, or 22%.

Net loss. For the three months ended September 30, 2020 and 2019, we had net loss of $1,246,692 and $1,068,070 respectively, representing an increase of $178,624, or 17%. The increase in ~~gross profit margin in this quarter as compared to the same period in the prior fiscal year~~net loss was ~~attributable~~ mainly due to the decrease in ~~transmission gearbox unit cost~~sales revenues.

Liquidity and ~~therefore~~Capital Resources

Working Capital Deficit. As of September 30, 2020 and June 30 2020, the ~~increase in transmission gearbox margin after the expansion in transmission gearbox production capacity~~Company had working capital deficit of $5,987,309 and ~~sales.~~

Selling, general and administrative (“SG&A”) expenses consisted primarily of labor costs and overhead costs for sales, marketing, finance, legal, human resources and general management. Such costs also include the expenses recognized for stock-based compensation pursuant to SFAS 123R (ASC 718).

~~SG&A expenses decreased by $19,320 to $265,020 in the three months ended March 31, 2011, from $284,340 in three months ended March 31, 2010.~~ $4,658,908 respectively.

Cash Flows. The change of SG&A was minimal. Even though the sales have increased 120%, SG&A expenses are almost remained the same compared to the amount at March 31, 2010. There were no significant cost decreases in administration, sales, and professional services.

~~Net income was $1,451,738 in three months ended March 31, 2011, compared to~~following is a ~~net income of $263,861 in the three months ended March 31, 2010. The increase of net income in the quarter is mainly attributable to increased sales and gross profit.~~

Sales increased by $8,737,892 or 124% to $15,778,471 for the nine months ended March 31, 2011 compared to $7,040,579 for the nine months ended March 31, 2010. Sales for the nine months ended March 31, 2011 consisted mainly the sales of gears and transmission gearboxes in China. The increase in gear and transmission gearbox sales was attributable to the continued increasingsummary of the Company’s ~~production capabilities, increase sales~~cash flows from operating, investing and ~~an increased share of the market due to the recognition of the Company and its products.~~

Cost of sales was $11,599,149 for the nine months ended March 31, 2011, increasing by $6,117,669, or 112%, from $5,481,480 for the nine months ended March 31, 2010. The gross profit margin was approximately 26% for the nine months ended March 31, 2011, compared to approximately 22% for the nine months ended March 31, 2010. The increase in gross profit margin in this quarter as compared to the same period in the prior fiscal year was attributable mainly to the decrease in transmission gearbox unit cost and therefore the increase in transmission gearbox margin after the expansion in transmission gearbox production capacity and sales.

SG&A expenses increased by $297,345 to $1,213,875 in the nine months ended March 31, 2011, from $916,530 in nine months ended March 31, 2010. As the sales increased significantly, the company spent more resources in administration, sales, and professional services.

Net income was $2,522,507 in nine months ended March 31, 2011, compared to a net income of $281,838 in the nine months ended March 31, 2010. The increase of net income for the period is mainly attributable to increased sales and gross profit.

Accounts receivable were $6,222,150 after a reduction of $35,053 for doubtful accounts at March 31, 2011, compared to accounts receivable of $3,618,030 after a reduction of $37,670 for doubtful accounts at June 30, 2010. The increase in the amount of accounts receivable is mainly attributable to the increased sales of the Company during the period reported upon. The payment term for sold products usually is 60-90 days, and, to date, the Company’s experience is that the accounts receivable are within the payment terms.

Notes receivable were $2,761,806 at March 31, 2011, compared to $463,465 at June 30, 2010. All the current note receivables are from the trade accounts. Many of the principal customers of the Company use bank accepted forward drafts to pay for their purchases. As the sales increased during the reported period, the amount of bank accepted forward drafts also increased somewhat in line with the sales increase.

All foreign currency assets and liabilities are translated at the period-end exchange rate and all revenues and expenses are translated at the average exchange rate for the period. The effects of translating the financial statements of foreign subsidiaries into U.S. Dollars are reported as a cumulative translation adjustment, a separate component of comprehensive income in stockholder's equity. As the exchange rate between CNY to USD is significantly increased during the nine months ended March 31, 2011, the Company recorded a comprehensive income $532,387.

As of March 31, 2010, Zhongchai had current assets equal to $19,415,402, current liabilities equal to $17,987,706 and working capital of $1,427,696. Zhongchai believes that if there is no sufficient operating capital for its current operations, it will seek an increase in its credit available under current bank loans.

Activities.

Net ~~cash used in operating activities was approximately $0.38 million for the nine months ended March 31, 2011, as compared to $0.25 million net~~ cash used in operating activities for the ~~same period in~~three months ended September 30, 2020 was primarily the ~~prior fiscal year. The change was due to~~result of the net loss of $1,246,692, the increase of ~~$1.54 million~~$1,593,168 in ~~accounts receivable, $1.64 million in trade related notes receivable, and $2.77 million in other current liabilities, the~~advance to suppliers, decrease of ~~$1.59 million~~$904,279 in ~~accounts~~account payable, partly offset by the increase of $1,612,968 in advance from customer, and ~~$3.45 million in trade related notes payable during~~ the ~~nine-month period.~~

depreciation of $24,294 for the three months ended September 30, 2020.

Net cash used in operating activities for the three months ended September 30, 2019 was primarily the result of the net loss of $1,068,070, the increase of $1,009,365 in advance to suppliers, decrease of $3,083,927 in advance from customer, partly offset by the increase of $3,099,744 in account payable, and the depreciation of $23,313 for the three months ended September 30, 2019.

Investing Activities.

There are no investing activities for the three months ended September 30, 2020. Net cash provided by investing activities was ~~$0.96 million~~$2,479 for the ~~nine-month period~~three months ended ~~March 31, 2011, a decrease from $2.72 million for the same period in fiscal year 2010. The decrease was~~September 30, 2019. Net cash provided by investing activities mainly ~~due to the $2.3 million advance payment being returned to the Company in December 2010. The advance payment was originally made~~reflect disposal of intangible assets of $6,468, offset by ~~the Zhongchai China to Xinchai Holdings in 2009, for the~~ purchase of ~~land use rights and building for Zhongchai China’s future expansion~~intangible assets of its production capabilities. Because there were several legal issues regarding the transferring of title of ownership, the deposit was returned; however, the Company believes that the issues shall be solved in the future and the Company will pursue title ownership.$3,989.

Financing ~~Activities~~

Activities.

Net cash provided by financing activities was ~~$4.4 million~~$8,005 and $9,220 for the ~~nine-month period~~three months ended ~~March 31, 2011,~~September 30, 2020 and 2019, respectively, both of which ~~consisted~~referred to the proceeds from related parties.

Off-Balance Sheet Arrangements

As of ~~the following: a loan from a bank with an annual fixed interest rate of 5.31% which is due on~~ September 20, 2011; a loan from a bank with an annual fixed interest rate of 5.56% which is due on November 7, 2011; a loan from a bank with an annual fixed interest rate of 5.56% which is due on November 28, 2011;30, 2020 and ~~a loan from a bank with an annual fixed interest rate of 1.98% which is due on December 20, 2011. These loans aggregated a total outstanding loan from a bank in principal amount of $5,893,510.~~

~~Other Current Liabilities~~

On March 31, 2011, the other current liabilities of the Company were $1,047,833, which included $440,612 due to Keyi from the Shengte acquisition in July 2007, there is no any interest charge or penalty due in respect of this liability. The remaining other current liabilities of $607,221 are as follows:

Professional Fees $ 94,524
Accrued Consulting Fees $ 123,601
Tax Payment $ 84,236
Pension Payment $ 3,832
Employee Rent Withhold $ 5,767
Rent Payment $ 9,471
Working Meal Payment $ 993
Working Cloth Deposit $ 2,333
Other Trade Related Payments $ 282,464
Total $ 607,221

As Zhongchai expands its operations and considers additional acquisitions of private companies, divisions or product lines, it may require additional capital for its business development and operations. Zhongchai doesJune 30, 2020, we did not have any specific sources of capital at this time; therefore, it would need to find additional funding for its capitalization needs. Such capital may be in the form of either debt or equity or a combination. To the extent that financing is in the form of debt, it is anticipated that the terms will include various restrictive covenants, affirmative covenants and credit enhancements such as guarantees or security interests. The terms of any proposed financing may not be acceptable to Zhongchai. There is no assurance that funding will be identified or accepted by Zhongchai or, that if offered, it will be concluded.

~~Off-Balance Sheet Arrangements~~

~~The Company does not have~~ off-balance sheet arrangements ~~financings, or other relationships with unconsolidated entities or other persons, also known~~ as ~~“special purpose entities” (SPEs).~~

defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

Contractual Obligations and Commitments

As of September 30, 2020 and June 30, 2020, we did not have any contractual obligations.

Critical Accounting Policies ~~and Estimates~~

~~Please refer~~

Our significant accounting policies are described in the notes to ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in~~ our ~~Annual Report on Form 10-K~~financial statements for the ~~year~~three months ended ~~June~~September 30, ~~2010, for disclosures regarding Zhongchai Machinery, Inc.’s critical accounting policies~~2020 and ~~estimates. The interim financial statements follow the same accounting policies~~2019, and ~~methods of computations as those for the year ended June 30, 2009. There were no new accounting policies and estimates during the period ended March 31, 2011 which affects the Company.~~

are included elsewhere in this report.

~~Item~~

ITEM 3. ~~Quantitative~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and ~~Qualitative Disclosures about Market Risk~~

~~Not applicable.~~

are not required to provide the information under this item.

~~Item~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and ~~Procedures.~~

AsProcedures

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the ~~end of the period covered by this report, the Company conducted an evaluation,~~reports that it files under the ~~supervision~~Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and ~~with~~reported within required time periods. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the ~~participation of~~reports that it files or submits under the ~~Chief Executive Officer~~Exchange Act is accumulated and ~~Chief Financial Officer, of~~communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in ~~Rules~~Rule 13a-15(e) ~~and 15d-15(e)~~) under the Exchange ~~Act. Based on this evaluation, the Chief Executive Officer and Acting Chief Financial Officer concluded~~Act) that ~~the Company’s disclosure controls and procedures are effective~~is designed to ensure that information required to be disclosed by the Company in the reports that ~~it files~~we file or ~~submits~~submit under the Exchange Act is recorded, processed, summarized and reported, within the time ~~periods~~ specified in ~~Securities and Exchange Commission~~the Commission’s rules and forms. ~~There was no change~~Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of September 30, 2020. Based upon that evaluation, the Company’s CEO concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2020 due to the Company’s limited internal ~~control~~resources resulting in lack of ability to have segregation of duties and US GAAP accounting personnel to prepare the financials.

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop procedures to address the current deficiencies to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the ~~Company’s most recently completed fiscal quarter~~three months ended September 30, 2020, that ~~has~~have materially affected, or isare reasonably likely to materially affect, ~~the Company’s~~our internal ~~control~~controls over financial reporting.

PART ~~II —~~II. - OTHER INFORMATION

~~Item~~

ITEM 1. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. ~~Exhibits.~~

OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are included with this report.

~~Exhibit~~	~~Description~~
Exhibit

*31.1 Number	~~Certificate~~	Name

31.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to ~~Section 302~~Rule 13a-14(a)/15d-14(a).

32.1		Certification of ~~the Sarbanes-Oxley Act of 2002 – Peter Wang~~

*32.1	~~Certificate~~Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 – Peter Wang~~2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Schema Document

101.CAL		XBRL Calculation Linkbase Document

101.DEF		XBRL Definition Linkbase Document

101.LAB		XBRL Label Linkbase Document

101.PRE		XBRL Presentation Linkbase Document

* Filed herewith

~~SIGNATURES~~

SIGNATURES

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


	~~ZHONGCHAI MACHINERY,~~ CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.

Date: November 16, 2020	By:		/s/ Xingtao Zhou
	~~By:~~	~~/s/ Peter Wang~~
	~~Name:~~	~~Peter Wang~~
	~~Title:~~	~~President & Acting~~ Xingtao Zhou, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer)

~~Date: May 12, 2011~~


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2020

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________

~~NEVADA~~
Nevada	47-0925451
(State or other jurisdiction of ~~Incorporation)~~	~~33-0652593~~ (I.R.S. Employer ~~I.D. Number)~~
incorporation or organization)	Identification No.)


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

					~~Page No.~~
				Page
PART I			I. - FINANCIAL INFORMATION

~~Item 1~~ ITEM 1. FINANCIAL STATEMENTS		~~Financial Statements~~		1

~~Unaudited~~ Consolidated Balance ~~Sheet~~Sheets as of ~~March 31, 2011~~September 30, 2020 and June 30, ~~2010~~2020 (Unaudited)		2 1

~~Unaudited~~ Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~March 31, 2011~~September 30, 2020 and ~~2010~~2019 (Unaudited)		3 2

~~Unaudited~~ Consolidated ~~Statements~~Statement of ~~Comprehensive Income~~Stockholders’ Deficit for the three ~~and nine~~ months ended ~~March 31, 2011~~September 30, 2020 and ~~2010~~2019 (Unaudited)		4 3

~~Unaudited~~ Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~March 31, 2011~~September 30, 2020 and ~~2010~~2019 (Unaudited)		5 4

Notes to Consolidated Financial Statements (Unaudited)		6 5
~~Item 2~~		~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		12
~~Item 3~~ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		~~Quantitative and Qualitative Disclosures about Market Risk~~		14 22
~~Item 4~~		~~Controls and Procedures~~		15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK				24
~~PART II~~		~~OTHER INFORMATION~~
ITEM 4. CONTROLS AND PROCEDURES				24
~~Item 5~~		~~Exhibits~~		15
~~Signatures~~ PART II. - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	26

ITEM 1A. RISK FACTORS	16 26

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	26

ITEM 4. MINE SAFETY DISCLOSURES	26

ITEM 5. OTHER INFORMATION	26

ITEM 6. EXHIBITS	26

SIGNATURES	27

	March 31,			June 30,
	2011			2010
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	4,687,656		$	1,495,597
Restricted cash		1,371,280			90,810
Accounts receivable, net of allowance for doubtful accounts of $35,053		6,222,150			3,618,030
and $37,670 at March 31, 2011 and June 30, 2010, respectively
Inventory		3,920,950			2,680,666
Notes receivable		2,761,806			463,465
Advance payments		130,247			33,132
Other current assets		321,313			110,131
Total current assets		19,415,402			8,491,831

Property and equipment, net		5,791,640			3,017,569

Goodwill		3,546,808			3,425,868

Advance payments – non current portion		3,185,583			4,960,475

Other assets		-			451

Total assets	$	31,939,433		$	19,896,194

Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	6,832,919		$	3,504,923
Trade notes payable		3,428,200			142,365
Short-term bank loans		5,893,510			1,428,810
Taxes payable		395,994			224,108
Dividend payable		389,250			381,201
Other current liabilities		1,047,833			3,322,277
Total current liabilities		17,987,706			9,003,684

Total liabilities		17,987,706			9,003,684

Equity
Stockholders’ equity:
Common stock, $.001 par value, 500,000,000 shares authorized,
27,613,019 shares issued and outstanding at March 31, 2011 and
June 30, 2010, respectively		27,613			27,613
Stock subscription receivable		(33,120	)		(33,120	)
Additional paid-in capital		16,487,924			16,484,097
Statutory reserves		315,152			315,152
Accumulated deficit		(5,036,035	)		(7,558,542	)
Accumulated other comprehensive income		1,894,033			1,361,646
Total stockholders’ equity		13,655,567			10,596,846

Non-controlling interest		296,160			295,664

Total equity		13,951,727			10,892,510

Total liabilities and equity	$	31,939,433		$	19,896,194


~~224 Tianmushan Road,~~ ~~Zhongrong Chengshi Huayuan 5-1-602,~~ ~~Hangzhou, P.R. China~~ ~~(Address~~ Title of ~~principal executive offices)~~ each class	~~310007~~ ~~(zip code)~~ Trading Symbol(s)	Name of each exchange on which registered

	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
	2011			2010			2011			2010

Sales	$	7,044,067		$	3,202,350		$	15,778,471		$	7,040,579

Cost of sales		5,128,888			2,454,953			11,599,149			5,481,480

Gross profit		1,915,179			747,397			4,179,322			1,559,099

Operating expenses
Selling, general and administrative		265,020			284,340			1,213,875			916,530

Income from operations		1,650,159			463,057			2,965,447			642,569

Other income (expenses):
Interest expense, net		(15,197	)		(29,095	)		(217,935	)		(63,364	)
Other income, net		47,564			16,289			190,663			56,598
Total other income (expenses)		32,367			(12,806	)		(27,272	)		(6,766	)

Income before provision for income taxes		1,682,526			450,251			2,938,175			635,803

Provision for income taxes		230,742			73,448			415,397			140,541

Net income		1,451,784			376,803			2,522,778			495,262

Less: Net income attributable to noncontrolling interest		46			112,942			271			213,424

Net income attributable to Zhongchai Machinery, Inc.		1,451,738			263,861			2,522,507			281,838

Income per common share:
Basic	$	0.05		$	0.01		$	0.09		$	0.01
Diluted	$	0.05		$	0.01		$	0.09		$	0.01

Weighted average number of common shares outstanding:
Basic		27,613,019			27,613,019			27,613,019			27,613,019
Diluted		27,904,892			27,613,019			27,901,009			27,613,019

	For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2011		2010		2011		2010

Net income	$	1,451,784	$	376,803	$	2,522,778	$	495,262

Other comprehensive income
Foreign currency translation adjustment		111,732		398		532,387		16,521

Total other comprehensive income		111,732		398		532,387		16,521

Comprehensive income		1,563,516		377,201		3,055,165		511,783

Less: Comprehensive income attributable to the		46		112,942		271		213,424
noncontrolling interest

Comprehensive income attributable to Zhongchai Machinery, Inc.	$	1,563,470	$	264,259	$	3,054,894	$	298,359

	March 31, 2011		June 30, 2010

Notes receivable-trade	$	2,761,806	$	440,965
Notes receivable-other		-		22,500

Total	$	2,761,806	$	463,465


Electronic equipment		3-5 years
Furniture and Fixture		5 years
Motor vehicles		4years-
Computer software		5 years
Leasehold improvements		5 years

Add: Construction in progress		2,744,720		273,606

Total	$	5,791,640	$	3,017,569

Balance as of June 30, 2009	$	3,407,262
Goodwill acquired during the year		-
Effect of foreign currency translation		18,606
Impairment		-
Balance as of June 30, 2010		3,425,868
Goodwill acquired during the year		-
Effect of foreign currency translation		120,940
Impairment		-
Balance as of March 31, 2011	$	3,546,808

	March 31, 2011		June 30, 2010

Accounts payable	$	6,789,211	$	3,419,595
Accrued expenses		43,708		85,328

Total	$	6,832,919	$	3,504,923

On December 2, 2010, the Company obtained a loan from Agricultural
Bank of China, the principal of which is due on November 28, 2011.
Interest is paid monthly, at 5.56% per annum. The loan is guaranteed
by a third party, Zhejiang Xinchai Co., Ltd.		1,372,500		-

On December 29, 2010, the Company obtained a loan from Standard
Chartered Bank (Hong Kong) Limited at 1.98% per annum. Accrued
interest amounting to $53,701 together with principal is due and payable
on December 20, 2011.		2,691,010		-

Total short-term bank loans	$	5,893,510	$	1,428,810

	Three Months Ended March 31,
	2011		2010

Net income attributable to Zhongchai	$	1,451,738	$	263,861
Machinery, Inc.

Weighted average common shares		27,613,019		27,613,019
(denominator for basic income per share)

Effect of dilutive securities:		291,873		-

Weighted average common shares		27,904,892		27,613,019
(denominator for diluted income per share)

Basic net income per share	$	0.05	$	0.01
Diluted net income per share	$	0.05	$	0.01

	March 31,		June 30,
	2011		2010

Manufacturing equipment	$	3,863,765	$	3,272,563
Office equipment and furniture		60,596		51,306
Vehicles		127,306		122,965
Subtotal		4,051,667		3,446,834
Less: Accumulated depreciation		1,004,747		702,871
		3,046,920		2,743,963

	Nine Months Ended March 31,
	2011		2010

Net income attributable to Zhongchai	$	2,522,507	$	281,838
Machinery, Inc.

Weighted average common shares		27,613,019		27,613,019
(denominator for basic income per share)

Effect of dilutive securities:		287,990		-

Weighted average common shares
(denominator for diluted income per share)		27,901,009		27,613,019

Basic net income per share	$	0.09	$	0.01
Diluted net income per share	$	0.09	$	0.01


	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019
Net cash used in operating activities	$	(2,078,215	)	$	(1,478,238	)
Net cash used in investing activities		—			3,989
Net cash provided by financing activities		8,005			9,220
Net change in cash and cash equivalents	$	(2,072,210	)	$	(1,466,539	)

Professional Fees	$	94,524
Accrued Consulting Fees	$	123,601
Tax Payment	$	84,236
Pension Payment	$	3,832
Employee Rent Withhold	$	5,767
Rent Payment	$	9,471
Working Meal Payment	$	993
Working Cloth Deposit	$	2,333
Other Trade Related Payments	$	282,464
Total	$	607,221