LDDD 10-Q
Longduoduo Co Ltd (LDDD)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from_____________ to____________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
Office:
(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 | ||
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.
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).
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 | ☐ | |
| ☐ | 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
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. | 7 |
| Item 4. | Controls and Procedures. | 7 |
| PART II—OTHER INFORMATION | 8 | |
| Item 1. | Legal Proceedings. | 8 |
| Item 1A. | Risk Factors | 8 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 8 |
| Item 3. | Defaults Upon Senior Securities. | 8 |
| Item 4. | Mine Safety Disclosure | 8 |
| Item 5. | Other Information. | 8 |
| Item 6. | Exhibits. | 9 |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
1
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| March 31, 2024 | June
30, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other receivables | ||||||||
| Prepayments | ||||||||
| Inventories | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Right-of-use assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Deferred revenue | ||||||||
| Accrued expenses | ||||||||
| Due to related parties | ||||||||
| Security deposits | ||||||||
| Other payables | ||||||||
| Operating lease liabilities, current | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred stock; $ | ||||||||
| Common stock; $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity (deficit) attributable to common stockholders | ( | ) | ||||||
| Non-controlling interests | ( | ) | ||||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and equity(deficit) | $ | $ | ||||||
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 INCOME (LOSS)
(UNAUDITED)
| For
the Three Months Ended March 31, | For
the Nine Months Ended March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues: | ||||||||||||||||
| Service revenue | $ | $ | $ | $ | ||||||||||||
| Product revenue | ||||||||||||||||
| Commission revenue | ||||||||||||||||
| Total revenue, net | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| Cost of service | ||||||||||||||||
| Cost of product | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Less: net income (loss) attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Less: comprehensive income (loss) attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Comprehensive income (loss) attributable to the common stockholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(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, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance
at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Common stock | Additional | Accumulated Other | Total Stockholder’ | Non- | Total | |||||||||||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Income | Equity
(Deficit) | controlling Interests | Equity (Deficit) | |||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net income (loss) | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Adjustment for the reverse stock split | ||||||||||||||||||||||||||||||||
| Net income (loss) | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Net income (loss) | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
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 Nine Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Operating lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ||||||||
| Prepayments | ( | ) | ( | ) | ||||
| Inventories | ||||||||
| Due from related parties | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Deferred revenue | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Due to related parties | ( | ) | ||||||
| Security deposits | ( | ) | ||||||
| Other payables | ( | ) | ||||||
| Payment of operating lease liabilities | ( | ) | ||||||
| Other current liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Purchase of intangible asset | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Repayment of short-term borrowing from third party | ( | ) | ||||||
| Net cash used in Financing Activities | ( | ) | ||||||
| Effect of exchange rate fluctuation on cash and cash equivalents | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| 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
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Longduoduo Company Limited (“Longduoduo”, together as a group with Longduoduo’s subsidiaries referred to as the “Company” or “we”) was incorporated in the State of Nevada on October 25, 2021. Initially acting in a principal capacity, the Company provided customers 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. In June 2023, the Company began to engage in agent sales of preventive healthcare solutions on behalf of third-party providers and earn commissions revenue.
On September 21, 2023, the Company implemented a 1-for-10 reverse split of its outstanding common stock, effective at the close of business on September 26, 2023. The accompanying financial statements have been adjusted to retroactively reflect this reverse stock split.
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 |
| ● | 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 |
| ● | 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 |
| ● | 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 has controlled |
| ● | 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 has controlled |
| ● | 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 |
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
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Going concern
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities
in the normal course of business. At June 30, 2023, the Company had cash of $
Commencing in the last quarter of the fiscal year ended June 30, 2023,
the Company changed its business plan to focus on resale of health care services offered by its contractor. At March 31, 2024, the Company
had cash of $
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”).
Interim Financial Information
The unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 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 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 of the financial position and the results of operations and cash flows for the interim periods have been included. These financial statements should be read in conjunction with the audited financial statements as of and for the year ended June 30, 2023, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements as of and for the year ended June 30, 2023.
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
| Name | Place
of Incorporation | Attributable
equity interest % | Authorized capital | |||||||
| Longduoduo Company Limited | Hong Kong | HK$ | ||||||||
| Longduoduo Health Technology Company Limited | China | |||||||||
| Inner Mongolia Qingguo Health Consulting Company Limited | China | |||||||||
| Inner Mongolia Rongbin Health Consulting Company Limited | China | |||||||||
| Inner Mongolia Chengheng Health Consulting Company Limited | China | |||||||||
| Inner Mongolia Tianju Health Consulting Company Limited | China | |||||||||
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.
F-6
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
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.
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.
| For
the Nine Months Ended March 31, | ||||||||||
| 2024 | 2023 | |||||||||
| (USD
to RMB/ USD to HKD) | (USD
to RMB/ USD to HKD) | |||||||||
| Assets and liabilities | period end exchange rate | |||||||||
| Revenue and expenses | period weighted average | |||||||||
F. Concentration of credit risk
The
Company maintains cash in state-owned banks in China. In China, the insurance coverage of each bank is RMB
For
the nine months ended March 31, 2024,
| For
the Nine Months Ended March 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| Cost
of revenue | Percentage of Cost of revenue | Cost
of revenue | Percentage of Cost of revenue | |||||||||||||
| Supplier A | $ | % | $ | % | ||||||||||||
| Supplier B | % | % | ||||||||||||||
| Supplier C | % | % | ||||||||||||||
| Supplier D | % | % | ||||||||||||||
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 banks as of March 31, 2024 and June 30, 2023.
F-7
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(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.
| Office equipment and furniture | ||
| Leasehold Improvements |
I. Intangible Assets
Intangible
assets consist of software. Intangible assets are initially recognized at their respective acquisition costs.
| Software |
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 nine months ended March 31, 2024 and 2023.
Financial assets and liabilities of the Company are primarily comprised of cash and cash equivalents, other receivables, accounts payable, accrued expenses, due to related parties, security deposits and other payables. As of March 31, 2024 and June 30, 2023, 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
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
K. Segment information and geographic data
The
Company is operating in
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 packages, including healthcare consulting services and healthcare products. Customers may purchase a 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 packages that include services and products, the Company allocates revenues based on their relative selling prices.
The Company sells a healthcare service package to a customer, which represents the rights to services purchased by the Company. The delivery of a healthcare service package to a customer represents a separate performance obligation. The Company’s policy is to recognize service revenue at that time when the healthcare service package has been sold, ownership and risk of loss have been transferred to the customer, and the service has been provided. 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 and there are no remaining performance obligations.
Management
regularly reviews the sales returns and allowances based on historical experience. Any subsequent sales returns and cancellations are
recognized upon notification from the customers. The liability for sales returns and allowances relating to the sale of healthcare service
packages amounted to $
Product
revenue results from the sale of healthcare and nutritional products, including Collagen peptide, Calcium tablets and other products.
The Company recognizes revenue when the product has been delivered and ownership and risk of loss have been transferred to the customer.
The Company accepts returns provided the products are well packaged and can be resold. Management regularly reviews the sales returns
and allowances based on historical experience. The liability for sales returns and allowances relating to the sale of healthcare products
amounted to $
The Company typically collects fees before delivery of healthcare packages. Amounts received from a customer before the delivery of the healthcare package are recorded as deferred revenue on the Consolidated Balance Sheets.
Commission Revenue
Commencing in the three months ended June 30, 2023, the Company started offering in a sales agent capacity healthcare service and product packages of a third-party provider. The third party is responsible for fulfillment of the services to the customer and the Company has no performance commitment or liability to the customer. The Company receives deposits from the customers, remits to the third-party provider the provider’s contracted amounts, and retains the remaining amounts as commission revenue. The commission revenue is recognized upon acceptance of the customer contract by the third-party provider and is presented on a net basis in the Statements of Operations and Comprehensive Income (Loss).
Cost of Revenues
Cost of service revenue consists primarily of the cost of healthcare service packages purchased from third party healthcare service providers to fulfill contracts with customers.
Cost of product revenue consists primarily of the cost of healthcare products purchased from suppliers. Cost of product revenue is recognized when the product has been delivered to the customer.
F-9
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
M. Advertising and promotion
Advertising
and promotion costs, which are expensed as incurred, were $
N. 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.
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.
O. 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 March 31, 2024 and June 30, 2023, the Company was not party to any contract to issue shares.
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.
NOTE 3. PREPAYMENTS
Prepayments
represent payments in advance to suppliers for expenses, equipment, leasing and products. As of March 31, 2024 and June 30, 2023 prepayments
were $
On February 8, 2024, the Company executed an engagement letter with
Network 1 Financial Services, Inc (“Network 1”). The letter provides for Network 1 to act as an underwriter of a proposed
offering of ordinary shares of the Company. The Company delivered $
F-10
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
NOTE 4. PROPERTY AND EQUIPMENT
| March 31, | June 30, | |||||||
| 2024 | 2023 | |||||||
| Office equipment and furniture | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
The
Company recorded depreciation expense of $
The
Company recorded depreciation expense of $
NOTE 5. RELATED PARTY TRANSACTIONS
Due to related parties
| Name of related party | March 31, 2024 | June
30, 2023 | ||||||
| Zhang Liang | $ | $ | ||||||
| Zhou Hongxiao | ||||||||
| Total | $ | $ | ||||||
Until
November 29, 2023, Zhang Liang was the President and Chairman of the Board of Longduoduo. Mr. Zhang Liang controls approximately
NOTE 6. INCOME TAXES
United States
Longduoduo
is subject to the U.S. corporation tax rate of
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
China
Longduoduo
Health Technology and subsidiaries are subject to a
F-11
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
| For the
Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Foreign | ( | ) | ||||||
| Income (loss) before income taxes | $ | $ | ( | ) | ||||
| For
the Nine Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Foreign | ( | ) | ||||||
| Income (loss) before income taxes | $ | $ | ( | ) | ||||
| For
the Nine Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Income tax (benefit) at USA statutory rate | ( | )% | ( | )% | ||||
| U.S. valuation allowance | % | % | ||||||
| Income tax (benefit) at USA effective rate | ( | )% | ( | )% | ||||
| For
the Nine Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Income tax (benefit) at PRC statutory rate | % | ( | )% | |||||
| Utilization of net operating loss carry forward | ( | )% | ||||||
| PRC valuation allowance | % | % | ||||||
| Other | ||||||||
| Income tax (benefit) at PRC effective rate | % | ( | )% | |||||
For the nine months ended March 31, 2023, the Company did not recognize deferred tax assets since at that time it did not appear more likely than not that it would 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 March 31, 2024, Longduoduo Health Technology and its subsidiaries have total net operating loss carry forwards of approximately $
The
Company incurred losses from its United States operations during the nine months ended March 31, 2024 of approximately $
F-12
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
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.
| Earliest
tax year that remains subject to examination | ||
| U.S. Federal | ||
| China |
NOTE 7. LEASES
In
April 2021, Qingguo entered into an operating cooperation agreement with Hohhot Aihua Traditional Chinese Medicine Hospital. Under the
terms Qingguo was able to use office space (approximately
On
July 2, 2022 the Company leased a staff dormitory under a non-cancellable operating lease agreement with a third party, Xi Ling. Under
the terms of the agreement, the Company was committed to make total lease payments of $
On
April 4, 2023, Chengheng leased office space (approximately
On
August 31, 2023, Qingguo leased office space (approximately
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 to by the lessors. The depreciable life
of assets and leasehold improvements are limited by the term of the respective leases, unless there is a transfer of title or a 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 noncancelable operating leases was $
| March 31, 2024 | June
30, 2023 | |||||||
| Assets | ||||||||
| Operating lease right of use assets | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – non-current | ||||||||
| Total Operating lease liabilities | $ | $ | ||||||
F-13
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
NOTE 8. 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 March 31, 2024 and June 30, 2023.
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT)
On
February 20, 2023, the Company issued
On
September 21, 2023, the Company filed with the Nevada Secretary of State a Certificate of Change Pursuant to NRS 78.209.
NOTE 10. 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.
| For
the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net Income (loss) attributable to common stockholders | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Net income (loss) per share: | ||||||||
| $ | $ | ( | ) | |||||
F-14
LONGDUODUO COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
(UNAUDITED)
| For
the Nine Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Net income (loss) per share: | ||||||||
| $ | $ | ( | ) | |||||
NOTE 11. 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
As
of March 31, 2024 and June 30, 2023, the non-controlling interests in the consolidated balance sheet was $
For
the three months ended March 31, 2024, the comprehensive income attributable to common stockholders and non-controlling interests were
$
For
the three months ended March 31, 2023, the comprehensive loss attributable to common stockholders and non-controlling interests were
$
NOTE 12. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date on which the consolidated financial statements were available to be issued. 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 and nine months ended March 31, 2024, 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
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
The following table shows key components of the unaudited results of operations during the three months ended March 31, 2024 and March 31, 2023:
| For the Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||
| (Unaudited) | (Unaudited) | $ | % | |||||||||||||
| Total revenue | $ | 1,790,084 | $ | 280,138 | $ | 1,509,946 | 539 | % | ||||||||
| Cost of revenue | 38,597 | 118,516 | (79,919 | ) | (67 | )% | ||||||||||
| Gross Profit | 1,751,487 | 161,622 | 1,589,865 | 984 | % | |||||||||||
| Total operating expenses | 1,032,623 | 634,143 | 398,480 | 63 | % | |||||||||||
| Income (loss) from operations | 718,864 | (472,521 | ) | 1,191,385 | (252 | )% | ||||||||||
| Other income (expense), net | (9,603 | ) | 1,213 | (10,816 | ) | (892 | )% | |||||||||
| Income (loss) before income taxes | 709,261 | (471,308 | ) | 1,180,569 | (250 | )% | ||||||||||
| Income tax | 191,292 | - | 191,292 | n/a | ||||||||||||
| Net Income (Loss) | $ | 517,969 | $ | (471,308 | ) | $ | 989,277 | (210 | )% | |||||||
2
During the three months ended March 31, 2024, our revenue was $1,790,084, of which $53,807 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. The remaining $1,736,277 of revenue was commission revenue that arose from a contract the Company made in June 2023 to act as sales agent for a single healthcare provider. From June of 2023, the Company focused its marketing on the sales of preventive healthcare solutions provided by our contractor. Since the contractor is responsible for providing all services, we recorded our portion of the customer payments as a commission on sales of the contractor’s services. As of March 31, 2024, we operated through five entities: Longduoduo Health Technology, Tianju, Qingguo, Rongbin and Chengheng, which are established in Ordos, Ulanqab, Huhhot, Baotou and Ordos, respectively, four of the ten largest cities in Inner Mongolia, China.
There is no direct cost that we incur when we refer a customer to our contractor. Therefore, cost of revenue on our Statements of Operations consists entirely of the cost we incur when our subsidiaries provide healthcare services for our customers and the cost of purchasing products.
During the three months ended March 31, 2024, our cost of revenue was $38,597, with the result that our gross profit was $1,781,487, a gross margin of more than 98%. Gross margin at that level was sufficient to operate profitably. However, we realized only $517,969 in income from operations for the three months ended March 31, 2024 because the Company incurred significant marketing expense 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 March 31, 2024 increased by $398,480 when compared to the three months ended March 31, 2023, primarily attributable to:
| ● | $634,316 in advertising and promotion expenses incurred during the three months ended March 31, 2024, compared to $308,990 recorded during the three months ended March 31, 2023. |
| ● | $171,901 in office expenses during the three months ended March 31, 2024, compared to $77,501 during the three months ended March 31, 2023. The increase was mainly attributable to the fact that the growth of business has led to an increase in daily expenses. |
3
As described above, our net income for the three months ended March 31, 2024 was $517,969, compared to a net loss of $471,308 for the three months ended March 31, 2023.
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 March 31, 2024 and 2023, foreign currency translation adjustments of $(10,118) and $(7,394), respectively, have been reported as other comprehensive (loss) in the consolidated statement of operations and comprehensive income (loss).
Nine Months Ended March 31, 2024 Compared to Nine Months Ended March 31, 2023
The following table shows key components of the unaudited results of operations during the nine months ended March 31, 2024 and 2023:
| For the Nine Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||
| (Unaudited) | (Unaudited) | $ | % | |||||||||||||
| Total revenue | $ | 5,718,060 | $ | 759,895 | $ | 4,958,165 | 652 | % | ||||||||
| Cost of revenue | 143,347 | 299,780 | (156,433 | ) | (52 | )% | ||||||||||
| Gross Profit | 5,574,713 | 460,115 | 5,114,598 | 1112 | % | |||||||||||
| Total operating expenses | 4,026,082 | 1,424,759 | 2,601,323 | 183 | % | |||||||||||
| Income (loss) from operations | 1,584,631 | (964,644 | ) | 2,513,275 | (261 | )% | ||||||||||
| Other income (expense), net | (144,825 | ) | 1,744 | (146,569 | ) | (8404 | )% | |||||||||
| Income (loss) before income taxes | 1,403,806 | (962,900 | ) | 2,366,706 | (246 | )% | ||||||||||
| Income tax | 408,265 | - | 408,265 | n/a | ||||||||||||
| Net Income (Loss) | $ | 995,541 | $ | (962,900 | ) | $ | 1,958,441 | (203 | )% | |||||||
During the nine months ended March 31, 2024, our revenue was total $5,718,060, of which $327,653 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. The remaining $5,390,407 of revenue was commission revenue that arose from a contract the Company made in June 2023 to act as sales agent for a single healthcare provider. From June of 2023, the Company focused its marketing on the sales of preventive healthcare solutions provided by our contractor. Since the contractor is responsible for providing all services, we recorded our portion of the customer payments as a commission on sales of the contractor’s services. As of March 31, 2024, we operate through five entities: Longduoduo Health Technology, Tianju, Qingguo, Rongbin and Chengheng, which are established in Ordos, Ulanqab, Huhhot, Baotou and Ordos, respectively, four of the ten largest cities in Inner Mongolia, China.
There is no direct cost that we incur when we refer a customer to our contractor. Therefore, cost of revenue on our Statements of Operations consists entirely of the cost we incur when our subsidiaries provide healthcare services for our customers and the cost of purchasing products. During the nine months ended March 31, 2024, our cost of revenue was $143,347, with the result that our gross profit was $5,574,713, a gross margin of more than 97%. Gross margin at that level was sufficient to operate profitably. However, we realized only $995,541 in income from operations for the nine months ended March 31, 2024 because the Company incurred significant marketing expense 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 nine months ended March 31, 2024 increased by $2,601,323, primarily attributable to:
| ● | $2,667,233 in advertising and promotion expenses incurred during the nine months ended March 31, 2024, compared to $539,836 recorded during the nine months ended March 31, 2023. |
| ● | $494,416 in salaries and benefit expenses in the nine months ended March 31, 2024, compared to $476,436 during the nine months ended March 31, 2023. |
| ● | $599,169 in office expenses during the nine months ended March 31, 2024, compared to $228,133 during the nine months ended March 31, 2023. The increase was mainly attributable to the fact that the growth of business has led to an increase in daily expenses. |
4
As described above, our net income for the nine months ended March 31, 2024 was $995,541, compared to a net loss of $962,900 for the nine months ended March 31, 2023.
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 nine months ended March 31, 2024 and 2023, foreign currency translation adjustments of $(4,761) and $14,963, respectively, have been reported as other comprehensive income (loss) in the consolidated statement of operations and comprehensive income (loss).
Liquidity and Capital Resources
As of March 31, 2024, the Company had $1,883,261 in cash and cash equivalents. On the same date, we had a working capital of only $94,687, primarily because we had received $1,135,696 from customers as deposits for future services but used the majority of the deposited sum to pay ongoing expenses and so had only $225,725 in prepayments on our March 31, 2024 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. 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.
Cash Flows
The following unaudited table summarizes our cash flows for the nine months ended March 31, 2024 and 2023.
| For
the Nine Months Ended March 31, | ||||||||||||
| 2024 | 2023 | |||||||||||
| (Unaudited) | (Unaudited) | Change | ||||||||||
| Net cash provided by operating activities | $ | 988,489 | $ | 507,942 | $ | 489,936 | ||||||
| Net cash used in investing activities | (248,874 | ) | (75,353 | ) | (173,521 | ) | ||||||
| Net cash used in financing activities | - | (138,450 | ) | 138,450 | ||||||||
| Effect of exchange rate fluctuation on cash and cash equivalents | 7,084 | (6,189 | ) | 3,884 | ||||||||
| Net increase in cash and cash equivalents | 746,699 | 287,950 | 458,749 | |||||||||
| Cash and cash equivalents, beginning of period | 1,136,562 | 356,672 | 779,890 | |||||||||
| Cash and cash equivalents, end of period | $ | 1,883,261 | $ | 644,622 | $ | 1,283,639 | ||||||
Net Cash Provided by Operating Activities
For the nine months ended March 31, 2024, our operating activities provided $988,4899 cash, compared to $507,942 provided by operating activities during the nine months ended March 31, 2023. The cash inflow that we realized during the nine months ended March 31, 2024 was primarily due to recording net income of $995,541 and receiving $546,243 in deposits by customers for future services, from which we used $417,694 to reduce accounts payable and $105,225 to pay off loans made to us by related parties.
Net Cash Used in Investing Activities
Net cash used in investing activities for the nine months ended March 31, 2024 was $248,874, compared to $75,353 for the nine months ended March 31, 2023. The cash was used in both periods for the purchase of fixed assets.
Net Cash Used in Financing Activities
Net cash provided by financing activities for the nine months ended March 31, 2024 was $nil, compared to $138,450 for the nine months ended March 31, 2023, which was the proceeds of a loan from a third party.
5
Trends, Events and Uncertainties
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.
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.
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.
6
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
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 March 31, 2024. 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 March 31, 2024 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.
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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, 2023, as filed with the SEC on November 14, 2023.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
During the quarter ended March 31, 2024, 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 March 31, 2024.
Item 3. Defaults upon Senior Securities.
Not applicable
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information.
During
the quarter ended March 31, 2024, no director or officer
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Item 6. Exhibits
INDEX TO EXHIBITS
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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 | May 9, 2024 | ||
| Zhou Hongxiao | (Principal Executive Officer) | |||
| /s/ Kang Liping | Chief Financial Officer | May 9, 2024 | ||
| Kang Liping | (Principal Financial and Accounting Officer) |
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