EDGAR 10-K Filing

Company CIK: 1006840
Filing Year: 2021
Filename: 1006840_10-K_2021_0001553350-21-000905.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS.
On July 27, 2020 (the “Closing Date”), we entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among (i) the Company, (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 Cang Bao 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 our directors, and Mr. Xingtao Zhou, our 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 the Company. After giving effect to the Share Exchange, Mr. Zhou owns 59,839,271 shares of our common stock, which represents 54.24% of our outstanding common stock, and 100% of our issued and outstanding preferred shares.
As a result of the Share Exchange, Cayman Company became our wholly owned subsidiary and we are 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 our primary business and operations. After giving effect to the Share Exchange, we 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, we assumed Cayman Company’s business operations as our own.
The description of the Exchange Agreement and the transactions contemplated by the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Exchange Agreement filed as Exhibit 2.1 to our Form 8-K filed with the Securities and Exchange Commission on July 27, 2020, and incorporated herein by reference.
Immediately prior to the closing of the Share Exchange described above pursuant to which Cayman Company became a wholly owned subsidiary of the Company, the Company was a “shell company,” as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of July 27, 2020, we were no longer a shell. Item 2.01(f) of Form 8-K states that if the registrant was a “shell” company, such as the Company was immediately before the Share Exchange, then the registrant must disclose on a Current Report on Form 8-K the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, this Current Report on Form 8-K includes all of the information that would be included in a Form 10.
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 the Company 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 the Company and Cayman Company occurred at the beginning of the first period presented.
Corporate History
Cang Bao
Cang Bao was incorporated in the State of Nevada on March 13, 2002, as Equicap, Inc. (“Equicap”), for the purpose of entering into a merger with and re-domiciling its predecessor, Equicap, Inc., a California corporation ("Equicap California"). Effective January 25, 2005, Equicap California was merged with and into Equicap in a statutory merger based on management's belief that Nevada law is more advantageous to a corporation than California law. Equicap was considered a blank check company until its March 2007 acquisition of Usunco Automotive Limited, a British Virgin Islands company (“Usunco”). Equicap, Inc. changed its name to Zhongchai Machinery, Inc. (“Zhongchai” or the “Company”) on May 21, 2010.
Zhongchai, a Nevada corporation, was a manufacturer and distributor of gears and gearboxes and drive axles that were marketed and sold to equipment manufacturers in China.
On July 6, 2007, the Board of Directors of Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”), the China based and 75% owned subsidiary of the Company, approved and finalized an Exchange Agreement (“Exchange Agreement”) with Xinchang Keyi Machinery Co., Ltd., (“Keyi”) a corporation incorporated in the People’s Republic of China (“PRC”). Pursuant to the Exchange Agreement, Zhejiang Zhongchai purchased all the outstanding equity of Zhejiang Shengte Transmission Co., Ltd. (“Shengte”) from Keyi, the sole owner of Shengte, for approximately $3.7 million.
On March 7, 2007, the Company and Usunco Automotive, Ltd. (“Usunco”), a British Virgin Islands company, entered into an agreement (the “Usunco Agreement”) which was consummated on March 9, 2007. Under the terms of the Usunco Agreement, the Company acquired all of the outstanding equity securities of Usunco in exchange for 18,323,944 shares of the Company’s common stock.
Because the Company had been a public shell company prior to the Usunco Agreement, that share exchange was treated as a recapitalization of the Company. As such, the historical financial information prior to that share exchange was that of Usunco and its subsidiaries. Historical share amounts were restated to reflect the effect of that share exchange.
On June 18, 2006, Usunco acquired 100% of IBC Automotive Products Inc (“IBC”), a California Corporation as of May 14, 2004 (date of inception), through the issuance of 28% of Usunco’s shares. IBC was considered a “predecessor” business to Usunco as its operations constituted the business activities of Usunco formed to consummate the acquisition of IBC. The consolidated financial statements reflected all predecessor statements of income and cash flow activities from the inception of IBC in May 2004.
On June 15, 2009, IBC was sold to certain management persons of IBC in exchange for the following: (i) the cancellation of an aggregate of 555,994 shares of common stock of the Company which those individuals owned, and (ii) the payment of $60,000 in installments pursuant to the terms of an unsecured promissory note, the final payment of which was made on November 15, 2010. As part of the transaction, the Company cancelled $428,261 through the closing date, of inter-company debt which funds had been used in the business of IBC prior to the transaction.
On September 22, 2009, Xinchang Xian Lisheng Machinery Co., Ltd. (“Lisheng”) was incorporated by Zhejiang Zhongchai and two individual investors. The total registered capital of Lisheng was RMB 5 million, of which Zhejiang Zhongchai accounted for 60%. The Company started production of die casting products in 2010 for use in gearboxes, diesel engines and other machinery products.
On December 16, 2009, Zhongchai Machinery and its wholly owned subsidiaries, Usunco and Zhongchai Holding (Hong Kong) Limited, a Hong Kong company (“Zhongchai Holding”), took action to approve transfer of the shares of Zhejiang Zhongchai Machinery Co., from Usunco to Zhongchai Holding. The transfer was completed on December 23, 2009. The purpose of the transfer was to take advantage of the tax treaty between the PRC and the Special Administrative Region of Hong Kong which reduces the withholding tax rate of the PRC on payments to entities outside of China. Usunco, which no longer had any assets after transferring all of them to Zhongchai Holding, was subsequently dissolved. The consolidated financial statements accounted for Zhejiang Zhongchai Machinery Co., in the same manner as before the transfer of the ownership. Shareholder approval by the shareholders of Zhongchai Machinery was not required under Nevada law, as there was no sale of all or substantially all the assets of the Company. The shareholder ownership and shareholder rights of Zhongchai Machinery remained the same as before the transaction.
On April 26, 2010, Zhongchai Holding (Hong Kong) Limited. (“Zhongchai Holding”), which owned 75% of the equity in Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”), executed an agreement (the “Zhejiang Agreement”) with Xinchang Keyi Machinery Co., Ltd., (“Keyi”) a corporation incorporated in the PRC. Pursuant to the Zhegiang Agreement, Zhongchai Holding purchased the residual 25% equity of Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”) from Keyi, for $2.6 million. The Zhegiang Agreement was approved by the local government agency and a new business license was issued as a Wholly Foreign Owned Enterprise.
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.
At the closing of the Share Exchange on July 27, 2020, Cayman Company became our wholly owned subsidiary and we are its public holding company. Prior to the Share Exchange, we were a “shell,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934. We had no active business, and virtually no assets.
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 constitute our primary business and operations. After giving effect to the Share Exchange, we own 100% of the issued and outstanding shares of capital stock of Cayman Company. Cayman Company is a holding company that owns Hong Kong Company, which in turn owns and controls Management Consulting, which has entered into contractual agreements to control the Target Companies.
Cayman Company
Cayman Company was incorporated under the laws of Cayman Islands on April 15, 2019 to serve as an investment holding company, and Hong Kong was incorporated under the laws of Hong Kong by Cayman Company on May 22, 2019.
Overview of Cayman Company Business
Any references to the “Company,” “we,” “us,” “our” or words of similar import in this “Overview of Cayman Company Business” section refer to Cayman Company.
The Cang Bao Tian Xia International Art Trade Center (the “Center”) is 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. The online platform enables our customers to buy, sell, store and invest in various artworks, mostly antiques and some modern paintings. The words “Cang Bao Tian Xia” in our corporate name mean “Treasure World” in English.
We currently facilitate trading by individual customers of all kinds of collectibles, artworks and commodities on our online platforms, which are owned by the Center. We commenced our operations in March 2019, and our customer trading volume was growing rapidly until the advent of COVID-19. We currently have approximately 1000 customers who regularly visit our website. Currently, Shanghai and Hainan are the Center’s operating branches.
We provide customers of our online platform with comprehensive services, including account opening, art investment education, market information, research, real-time customer support, and artwork warehousing services. Most services are delivered online through our proprietary client software and call center. Our client software, which has an app version available for both IOS and Android, provides not only market information and analysis, but also interactive functions including live auction house, live discussion boards, live video conference room, blogs to post and share artwork and instant messaging with other art collectors and customer service representatives, which we believe enhances our customers’ engagement.
Corporate Structure
Our current corporate structure is set forth below:
Our Strategy
We strive to continue building a collectible and artwork trading platform that is highly trusted by individual customers. To achieve this objective, we are implementing the following strategies:
● strengthen our brand and market position;
● introduce new collectibles and artwork products;
● explore mini-account business;
● selectively explore acquisition opportunities; and
● continue to attract, cultivate and retain talent.
Variable Interest Entity Arrangements
In establishing our business, we have used a variable interest entity (“VIE”) structure. In the PRC, investment activities by foreign investors are principally governed by the Guidance Catalog of Industries for Foreign Investment, which was promulgated and is amended from time to time by the PRC Ministry of Commerce (“MOC”), and the PRC National Development and Reform Commission (the “NDRC”). In June 2018, the Guidance Catalog of Industries for Foreign Investment was replaced by the Special Administrative Measures (Negative List) for Foreign Investment Access (2018 Version) (the “Negative List”). The Negative List divides industries into two categories: restricted and prohibited. Industries not listed in the Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations. Our Company and Management Consulting are considered as foreign investors or foreign invested enterprises under PRC law.
Although the business we conduct or will conduct through each VIE is not within the category in which foreign investment is currently restricted under the Negative List or other PRC Laws, we expect that in the future, the Target Companies will engage in marketing survey services for online marketplaces. Marketing survey services are within the category in which foreign investment is restricted pursuant to the Negative List. In addition, we intend to centralize our management and operation in the PRC to avoid being restricted in conducting certain business activities which are important for our current or future business but are currently restricted or might be restricted in the future. As such, we believe the agreements between Management Consulting and each VIE are necessary and essential for our business operation. These contractual arrangements with each VIE and its shareholders enable us to exercise effective control over the VIEs and hence consolidate their financial results as our VIE.
In our case, Management Consulting effectively assumed management of the business activities of each our VIEs through a series of agreements which are referred to as the VIE Agreements. The VIE Agreements are comprised of a series of agreements, including the Management Consultation Service Agreement, dated August 8, 2019, by and among Management Consulting, the VIEs and the three Cayman Company Shareholders, (the “Management Agreement”), the Equity Pledge Agreement, dated August 8, 2019, by and among Management Consulting, the Target Companies and the three Cayman Company Shareholders (the “Pledge Agreement”), the Call Option Agreement, dated August 8, 2019, by and among Management Consulting, the Target Companies and the three Cayman Company Shareholders (the “Option Agreement”) and the Proxy Agreement , dated August 8, 2019, by and among Management Company, the Target Companies and the three Cayman Company Shareholders, (the “Proxy Agreement”). Through the VIE Agreements, Management Consulting has the right to advise, consult, manage and operate the VIEs for an annual consulting service fee in the amount of 100% of the VIEs’ net profit. The shareholders of the VIEs have pledged all of their right, title and equity interest in the VIEs as security for Management Consulting to collect consulting services fees provided to the VIEs through the Pledge Agreement. In order to further reinforce Management Consulting’s right to control and operate the VIEs, the VIEs’ shareholders have granted Management Consulting an exclusive right and option to acquire all of their equity interests in the VIE through the Pledge Agreement.
Management Consulting has entered into a series of VIE agreements with the Target Companies’ shareholders, upon the same material terms as described above. The material terms of the VIE Agreements with the Target Companies are as follows:
Management Consultation Service Agreement. Pursuant to the Management Consultation Service Agreement between (a) Management Consulting, and (b) 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 the 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 (also, 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).
Business Model
Operation Description
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The operation team defined the unique operation mode of "3+1" of Cangbao Tian Xia as the core orientation of the project. The closed loop of project operation was achieved through interlocking organic logic, and the revenue generation prospect of the project is being realized through the close combination of financial means and member ports. Since its inception, Cang Bao Tian Xia has developed from a single offline product line to rapidly growing product diversification in multiple regions in mainland China. The Treasure World-created online App is geared to the needs of the market, as a new window to be multiplied by the rapid development of Internet and the Internet of things change, to the developing trend of our brand platform, thus effectively expanding the flow ports and enhancing the capacity of solid flow, i.e., the flow "member", "collection flow" and "capital flow." At the same time, with the help of cooperative insurance guarantee social credibility behind the brand influence, our professional appraisal team identifies trading opportunities, eventually to form an "objects, people, gold" ideal situation of the inner loop.
We believe that the characteristics and style of the Chinese consumer market will directly determine the “treasure” of the Treasure World, and will create the financial services needed to get the full extent of the consumer market acceptance and highest market sense of affinity, loan products and financial services within the Chinese consumer market demand in the global consumer market.
Becoming a member of the Treasure World is a very low threshold for consumer groups in the market to access the Treasure Circle. We believe that the lowering of entry standards will not have an impact on industry or brand endorsements, and instead, it will introduce our Company as the most professional collection appraisal agency providing appraisal services for collections on the platform and world-class insurance companies providing high-quality assessment guarantees for collections and transactions on the platform. Therefore, with the people-friendly standards of the Treasure World, stronger brand endorsements and market recognition and satisfaction will grow. And at the same time, with our appraisals, transactions and other links performed inside our brand platform, our membership will continue to grow and reflect the significance of the Treasure World.
We believe that the advantages of membership creation are reflected in several aspects:
· First, the new online app and offline access port makes it easier for unfamiliar persons in the market to become members, and the simple and convenient operation process enhances the members' experience and identity multiples.
· Second, with the credibility of world-class insurance brands behind the Treasure World, the pure collection appraisal trading platform service will become a world-class professional collection comprehensive ecosystem. Through professional guarantees, any member, any collection and any transaction can be carried out in a safe, just and strong environment, increase membership, collections and capital market behavior from hierarchy to another level, to enhance the experience and guarantee protection.
· Third, members can make financial investments in any collection in the platform built by the brand, avoiding the situation of collection value-added income that can only be achieved by owning a collection independently. Membership broadens the traditional restrictions of the industry, and allow any member to effectively invest in any collection in which the member is interested, and receive the corresponding benefits brought by the increase in the value of the collection in the market;
· Fourth, transactions of all collections in which all members of the brand platform to which they belong will be conducted under the effective supervision of the platform, which enhances the protection of member transactions, and at the same time, carries out effective regular flow of capital within the platform. The effective flow of collections under the platform can bring non-member consumer groups in the market organically into the platform, and thus become effective registered members of the platform. At the same time, members in the platform display their collections to the platform, thereby forming the mutual promotional effect of "members pulling new collections, collections carrying new members" positively guiding the organic cycle.
· Fifth, the effective expansion of new members will be guided by the platform's active policy during the operation of the platform, encouraging new members to actively join, thus rapidly growing and changing the platform as currently established. The platform's evaluation of the number of final members is unpredictable, because the openness of the platform will determine that the port to enter the platform is infinite, because the professionalism of the platform will determine that the endorsement of the platform will occupy the mainstream position in the market, and because the circulation of the platform will determine that the amount of resources lost by the platform will be minimal. Therefore, in terms of the acquisition of new members and the reciprocating operation of various links within the platform, we believe that the operation mechanism of Booty World will make it a leading brand in the global consumer market.
Professional Appraisal
Behind the brand, there are national and internationally recognized professional appraisal experts to ensure that each piece of collection is well-documented and real, after passing the treasure appraisal, and are responsible for each piece of art collection.
Professional Team
Treasure World has what it believes is a very professional appraisal team. We have retained domestic and international talents in the process of forming the team, so that Treasure World is filled with world-class talents in all fields and positions. In terms of warehousing and storage, financial services, operation planning, cross-industry cooperation, etc., high-quality talents have formed an outstanding team. In 2018, the “Treasure World” section of the treasure track recorded by Treasure World began broadcasting on 9 Chinese TV stations across the country, premiering on Saturdays throughout the year and rebroadcasting on Sundays,
In 2019, Treasure World launched this section on television stations in various provinces across the country to better serve global collectors.
The industry's first to adopt VR 2.0 technology, "360 ° + 720 °" display collections, global collections online "touch" collection textures, effectively captures the eyes of global collection experts, collection enthusiasts and outsiders, through offline
promotion. This unique model for the industry has effectively reduced the industry threshold for the collection industry. At the same time, we use VR 2.0 technology to achieve part of the transparency of the collection information. The most professional technology products of the society at this stage are used in the Treasure World industry. Psychology collects a large number of new treasure enthusiasts and effectively increases market share.
Profit Model
Our member system is an exclusive online service system created by Treasure World, which responds to the original intention of Treasure World: standardizing the transactions of the collection industry and providing professional art consulting services for collectors. In order to meet the needs of different collectors, Treasure World has comprehensively upgraded its service package system to provide personalized "collection- certification-marketing" services.
A. Profit model: service package
Including the business of appraisal of treasures, consignment of APPs, etc., the situation of packaging services with different types of services, civilianization of profit points, allowing more people outside the industry to understand and use treasures through the new service model;
B. Profit model: collection and storage
The Company’s professional storage and custody service allows those who have treasures in their homes, but are limited by venues and conditions, to accept their collections into one of the world's most professional collection management systems, lowering the threshold and making them available to everyone;
C. Profit model: Treasure consignment
Our Professional appraisal team, professional output resources, etc., enables each piece of collection to be commissioned on the safest, most professional and authoritative platform for agency storage and evaluation transactions;
D. Profit model: financial loan.
Our authoritative guarantee group and professional financial team can maximize the commercial value of the user's collections within a reasonable range, but also connect users with high-quality financial solutions, thus generating the highest quality services will generate maximum commercial value;
E. Profit model: underwriting agreement
We provide an integrated service, from the examination of a person’s collection to the docking transaction, and a transaction guarantee after the transaction is completed, to achieve an excellent service experience without worry;
F. Profit model: All-in-one advertising
Our market resources organically and effectively dock the most cutting-edge market promotion platforms, to maximize market promotion and the most innovative publicity ports. We believe that consumers in the hunting market find us to be an excellent publicity and promotional resource.
G. Profit model: VR Museum
Our offline VR (virtual reality) museum uses high-tech cutting-edge technology to lead consumer groups outside the industry to understand the collection industry in depth and expand the channels for consumer sources.
Employees
We currently employ 33 employees, consisting of 22 who are employed by Hainan and 11 of whom are employed by Shanghai Cangbao. Eight of the 33 employees at the two locations are management personnel; 11 are employed by the Company’s marketing department, who are responsible for developing new customers and maintaining existing customers; and 14 are support and administrative staff.
Competition
The art e-commerce market is highly competitive and many traditional art galleries and auction houses may provide a platform for artwork owners to sell their collections. However, we believe that their trading model is substantially different from ours. As of August 31, 2020, we believe that there were at least five active art e-commerce platforms operating nationwide in China. These trading service providers compete with each other for customers and trading volume based on factors including brand, technology, research and customer services.
Although some of our competitors have greater financial resources or larger customer bases than we do, we believe that our proprietary technology platform, our comprehensive customer services and strong brand recognition in the industry will enable us to compete effectively in the fast evolving art e-commerce trading industry in the PRC.
Government Regulation
All of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations are influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole, as to which there can be no assurance.
Intellectual Property
The Company owns the intellectual property of an APP and a customized tablet, which enable our customers to communicate and list artworks to trade, as well as to facilitate membership enrollment and artworks trade. The Company also owns the domain name of www.txcb.com.
Research and Development
In the fiscal year ended June 30, 2021, we spent $0 on research and development of our APP and tablet. Our APP was launched on January 3, 2020, and was purchased from a third party, after research and development had been completed. The third party also provides ongoing technical support and maintenance services.
Marketing Strategy
Our ability to establish effective marketing campaigns is the key to our success. Our advertisements promote our corporate image and our services. We believe that effectively developing and maintaining awareness of our brand is critical to attracting new and retaining existing clients. Successful promotion of our brand and our ability to attract quality clients depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our services.
Corporate Information
Our principal executive offices are located at Unit 609, Shengda Plaza, No. 61, Guoxing Ave. Meilan District, Hainan Province, China 570203.
Our telephone number at this address is (86) 898 66186181. Our registered office in the Cayman Islands is located at Sertus Chambers, Governors Square, Suite# 5-204,23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman, KY1-1104, Cayman Island. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices.
Our website is www.txcb.com. The information contained on, or that can be accessed through, our website is not a part of, and shall not be deemed incorporated into, this Annual Report on Form 10-K.
Reports to Security Holders
We intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the SEC in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the SEC if they become necessary in the course of our Company’s operations.
The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

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ITEM 1A. RISK FACTORS
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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES.
Prior to the Share Exchange, the Company’s headquarters were located at 5-1-1206 Hefeng Jiangan, Nianqing Rd. Meilan District, Hainan Province, China 570203. Since the Share Exchange, the Company no longer uses the foregoing property.
Effective as of the closing of the Share Exchange, the Company’s principal office is located at Unit 609, Shengda Plaza, No. 61, Guoxing Ave. Meilan District, Hainan Province, China 570203. We rent 2,100 square feet of office space at that location from an unaffiliated landlord. Our lease expires on December 31, 2021; annual rent is $40,000. We also rent an office, which is approximately 1,700 square feet, in Shanghai from an unaffiliated landlord; the annual rent is $34,600 and the lease expires on July 15, 2022.
In addition, we rent space in Shanghai and Chengdu as storage spaces to display our artworks. Our storage space in Shanghai, which is located in the historic town of Zhu Jia Jiao, is approximately 4,300 square feet. Because that space is used as a nonprofit museum, we are able to lease the space from the local township at no cost; that lease expires on December 31, 2021. Our VR museum, which is approximately 7,500 square feet, is located in Chengdu, and is leased from an unaffiliated landlord; the lease expires on March 13, 2022, and annual rent is $336,000.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
None.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our trading symbol on OTC Markets is TXCB. However, there is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained. A stockholder in all likelihood, therefore, will not be able to resell his or her securities should he or he desire to do so when eligible for public resale. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops. We have no plans, proposals, arrangements, or understandings with any person with regard to the development of a trading market in any of our securities.
Penny Stock Considerations
Our shares likely will be “penny stocks” as that term is generally defined in the Exchange Act and the rules and regulations promulgated thereunder to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale. Generally, an individual with a net worth in excess of $1,000,000 (not including the principal residence) or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
· Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
· Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
· Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and
· Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of stockholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities.. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our stockholders will, in all likelihood, find it difficult to sell their securities.
Stockholders
As of the date of this Annual Report, we had 151 holders of record of our Common Stock.
Dividends
We have not declared any cash dividends on our Common Stock since our inception and do not anticipate paying such dividends in the foreseeable future. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA.
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.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company for the fiscal years ended June 30, 2021 and 2020. The discussion and analysis that follows should be read together with our financial statements and the notes to the financial statements included elsewhere in this Annual Report on Form 10-K. Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.
Business Development
On July 27, 2020 (the “Closing Date”), we entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among (i) the Company, (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 Exchange Agreement, we issued to the Cayman Company Shareholders an aggregate of 75,000,000 shares of Cang Bao common stock, representing approximately 67.98% of Cang Bao’s total issued and outstanding common stock (the “Share Exchange”).
As a result of the Share Exchange, Cayman Company became our wholly owned subsidiary and we are 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 our primary business and operations. After giving effect to the Share Exchange, we 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 Company now operates an online and offline cultural exchange service platform, through which we are dedicated to create industry standards for art investment and to create 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.
Cang Bao Tian Xia International Art Trade Center, Inc. has administrative offices located at Unit 609, Shengda Plaza, No. 61, Guoxing Ave. Meilan District, Hainan Province, China 570203.
The Company’s fiscal year end is June 30.
Critical accounting policies and estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments 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 revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Going Concern
The accompanying audited consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the Company has incurred a net loss of $8,445,157 for the year ended June 30, 2021. As of June 30, 2021, the Company had an accumulated deficit of $33,499,423, working capital deficit of $17,113,370.
The Company plans to continue its expansion and investments, which will require continued improvements in revenue, net income, and cash flows.
Results of Operations
Results of Operations for the year ended June 30, 2021 and 2020
The following table sets forth key components of Company’s results of operations for the year ended June 30, 2021 and 2020. The discussion following the table addresses these results.
For the year Ended
June 30,
Fluctuation
%
Net revenues
$ 1,303,486
7,153,948
(5,850,462)
(81.8) %
Cost of revenues
1,730,812
4,005,174
(2,274,362)
(56.8) %
Gross margin
(427,326)
3,184,774
(3,576,100)
(113.6) %
Operating expenses
7,681,231
5,039,882
2,641,349
52.4 %
Loss from operations
(8,108,557)
(1,891,108)
(6,217,449)
328.8 %
Interest income
7,699
7,929
(230)
(2.9) %
Interest expense
-
-
-
-
Other income (expense)
(342,487)
(64,139)
(278,348)
434.0 %
Provision for income taxes expense
1,812
12,696
(10,884)
85.7 %
Net loss
(8,445,157)
(1,960,014)
(6,485,143)
330.9 %
Revenues. For the year ended June 30, 2021 and 2020, we had revenue of $1,303,486 and $7,153,948 respectively, representing a decrease of $5,850,462 or 81.8%, which were derived from service package sales for the members and the sales and leasing income from multimedia tablets. The significant decrease in revenue was due to there were decrease in revenue from service package in 2021.
Cost of Revenue. For the year ended June 30, 2021 and 2020, we had cost of revenue of $1,730,812 and $4,005,174 respectively, representing an decrease of $2,274,362 or 56.8%. The cost of revenue represents costs of maintaining our platform such as network service artwork merchandise and gifts sent to members and cost of multimedia tablets. The decrease in cost was in line with the decrease in revenue.
Gross Margin. We generated gross profit of $(427,326) and $ 3,184,774 for the year ended June 30, 2021 and 2020, with a gross margin of (32.8)% and 44.0% respectively.
Operating expenses. The total operating expenses was $7,681,231 and $5,039,882 for the year ended June 30, 2021 and 2020, representing an increase of $2,641,349 or 52.4%. The increase was mainly due to market expansion.
Loss from Operations. For the year ended June 30, 2021 and 2020, we had loss from operations of $8,108,557 and $1,891,108 respectively, representing an increase in loss of $6,217,449 or 328.8%.
Net loss. For the year ended June 30, 2021 and 2020, we had net loss of $8,445,157 and $1,960,014 respectively, representing a decrease of $6,485,143 or 330.9%. The increase in net loss was mainly due to the decrease in sales revenues.
Liquidity and Capital Resources
Working Capital Deficit. As of June 30, 2021 and 2020, the Company a working capital deficit of $ (17,113,370) and $ (4,739,357), respectively.
Cash Flows. The following is a summary of the Company’s cash flows from operating, investing and financing activities:
For the year ended
June 30,
For the year ended
June 30,
Net cash used in operating activities
$ (1,595,879 )
$ (1,567 )
Net cash used in (provided by) investing activities
(163,156 )
11,654
Net cash provided by financing activities
33,748
78,671
Effect of exchange rate change on cash
215,197
(438,545 )
Net decrease in cash and cash equivalents
$ (1,510,090 )
$ (349,787 )
Operating Activities.
Net cash used in operating activities was approximately $1.6 million for the year ended June 30, 2021, as compared to approximately $1,567 net cash used in operating activities for the year ended June 30, 2020. Net cash used in operating activities for the year ended June 30, 2021 was mainly due to the decrease of approximately $6.2 million accounts payable, the decrease of approximately $3.6 million of accounts receivables, the increase of approximately $6.6 million of prepayments, and the increase of approximately $16.7 million of customer deposits, and the increase of approximately $1.1 million of other receivable - related party.
Net cash used in operating activities for the year ended June 30, 2020 was mainly due to the increase of approximately $7.8 million accounts payable, the increase of approximately $3.4 million of accounts receivables, the increase of approximately $1.1 million of prepayments, and the decrease of approximately $1.2 million of other payables and accrued liabilities.
Investing Activities.
Net cash used in investing activities was $163,156 for the year ended June 30, 2021. Net cash used in investing activities mainly reflect disposal of intangible assets of $12,812, offset by purchases of equipment of $175,968.
Net cash provided by investing activities was $11,654 for the year ended June 30, 2020. Net cash provided by investing activities mainly reflect disposal of intangible assets of $5,155, offset by purchases of equipment of $16,809.
Financing Activities.
Net cash provided by financing activities was $33,748 and $78,671 for the year ended June 30, 2021 and 2020, respectively, both of which referred to the proceeds from related parties.
Off-Balance Sheet Arrangements
As of June 30, 2021 and 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.
Contractual Obligations and Commitments
As of June 30, 2021 and 2020, we did not have any contractual obligations.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial statements for the year ended June 30, 2021 and 2020, and are included elsewhere in this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to Pages through comprising a portion of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no disagreements with our accountants related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the 2021 fiscal years.
On April 5, 2021, the Company dismissed JLKZ CPA LLP (“JLKZ”). The report issued by JLKZ dated October 13, 2020 related to its audit of our balance sheet as of June 30, 2020 and the related statement of operations, stockholder’s deficit and cash flows for the year ending June 30, 2020 with an unqualified opinion.
Our decision to dismiss JLKZ is not the result of any disagreement between us and JLKZ on matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures. During our most recent fiscal years through the date of dismissal of JLKZ, there were no disagreements with JLKZ on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of JLKZ, would have caused JLKZ to make a reference to the subject matter of the disagreement in connection with its reports. Pursuant to the rules of the SEC applicable to smaller reporting companies, JLKZ was not required to provide an attestation as to the effectiveness of our internal control over financial reporting.
There were no reportable events (as that term is defined in Item 304(a)(1)(v) of Regulation S-K) during our most recent fiscal years through the date of dismissal of JLKZ. Our Board of Directors discussed the subject matter referred to above with JLKZ. We authorized JLKZ to respond fully and without limitation to all requests of our successor accountant concerning all matters related to the annual and interim periods audited and reviewed by JLKZ, including with respect to the subject matter of any reportable event.
Effective on April 5, 2021 and with the approval of our Board of Directors, we have engaged WWC, P.C. (“WWC”), as our new registered independent public accountant. During the year ended June 30, 2021, the Company did not consult with WWC regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company’s financial statements by WWC, in either case where written or oral advice provided by WWC would be an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor or was a reportable event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively).

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, Xingtao Zhou, who is our Chairman, Founder, Chief executive officer and Chief financial officer, as of June 30, 2021, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer has concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission's rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, internal control over financial reporting is a process designed by, or under the supervision of, Xingtao Zhou, the Company's Chief Executive Officer, and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company's management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting at June 30, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as of June 30, 2021, our internal control over financial reporting was not effective.
Our internal controls are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only two persons, one of which is the Company's principal executive officer and principal financial officer and, (ii) the Company does not have an audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will continue to reassess this matter to determine whether improvement in segregation
of duty is feasible. In addition, we would need to expand our board to include independent members.
Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the exemption provided to issuers that are not "large accelerated filers" nor "accelerated filers" under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION.
None
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
None of our officers or directors have been convicted in, or are subject to, any criminal or bankruptcy proceeding.
The names and ages of the directors and executive officers of the Company and their positions with the Company are as follows:
Name
Age
Position
Xingtao Zhou
President, Chief Executive Officer, Chief Financial Officer (Principal Accounting Officer), Chairman of the Board
Liang Tan
Director
Xingtao Zhou -- President, Chief Executive Officer, Chief Financial Officer (Principal Accounting Officer), Chairman of the Board of Directors. Mr. Zhou has served as the chairman and founder of Hainan Cang Bao Tian Xia Artwork Co. Ltd. since 2017 and Cang Bao Ge (Hong Kong) Arts Co., Ltd since 2012. From 2009 to 2012, Mr. Zhou served as the president of Yi Hua Cultural Diffusion Co., Ltd. Mr. Zhou served as the curator of the Yin Yuan Min Su Museum from 2003 to 2009 and as the vice curator from 1999 to 2003. Mr. Zhou received a bachelor’s degree in International Business from Southwestern University of Finance and Economics.
Liang Tan, Director. Liang Tan has served as the general manager of Shanghai Qingsheng Investment Co., Ltd. since 2017. Mr. Tan served as the deputy general manager of Shanghai Daren Asset Management Co., Ltd. from 2013 to 2016.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
The following table summarizes, for each of 2021 and 2020, the compensation awarded, paid to or earned by our President, CEO, CFO and Chairman of the Board of Directors, Xingtao Zhou.
Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards
($)
Option Awards
($)
Non-Equity Incentive Plan Compensation
($)
Non-Qualified Deferred Compensation Earnings
($)
All Other Compensation
($)
Total
($)
Xingtao Zhou (1)
42,372
-
-
-
-
-
-
42,372
President CEO and CFO
42,372
-
-
-
-
-
-
42,372
-------
(1) Mr. Zhou has received $84,744 in cash compensation from Hainan Cangbao since inception of Hainan Cangbao on March 1, 2019.
The Company has no stock option, retirement, pension, or profit-sharing programs for the benefit of directors, officers or other employees, but our officers and directors may recommend adoption of one or more such programs in the future. We have no employment agreements with Mr. Zhou or with any of our employees.
The Company does not have a standing compensation committee, audit committee, nomination committee, or committees performing similar functions. We anticipate that we will form such committees of the Board of Directors once we have a full Board of Directors.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information as of the date of this Annual Report on Form 10-K, with respect to the beneficial ownership of our common stock and preferred stock for (i) each director and named executive officer, (ii) all of our directors and officers as a group, and (iii) each person known to us to own beneficially 5% or more of the outstanding shares of our common stock. As of the date of this Annual Report on Form 10-K, there are 110,319,245 shares of common stock issued and outstanding.
Name and Address of Beneficial Owner (1)
Class of
Securities
Shares
Beneficially
Owned
Percentage
Owned (4)
Directors and Named Executive Officers
Xingtao Zhou
Preferred Stock
9,920,000
100.0%
Common Stock
59,839,271
54.2%
Yaqin Fu (2)
Common Stock
15,663,849
14.2%
All Officers and Directors as a group (2 persons)
Common Stock
75,503,120
68.4%
5% Stockholders
Wei Wang (3)
Common Stock
18,000,000
16.3%
-------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
(2) Yaqin Fu is the wife of Liang Tan, a director of the Company, and therefore Mr. Tan may be deemed to be the beneficial owner of the shares owned by Ms. Fu.
(3) Mr. Wang was one of the Cayman Company Shareholders.
(4) Based on 110,319,245 shares of our Common Stock issued and outstanding as of the date of this Annual Report on Form 10-K.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
On June 15, 2018, the Company entered into a promissory note payable with David Lazar, the former Chief Executive Officer. The note is unsecured, noninterest bearing and due in 12 months from the date of issuance. On December 13, 2018, the Company forgave $5,000 of the entire amount owed on this promissory note to David Lazar. The gain was recorded in additional paid in capital due to its related party nature. As of June 30, 2020 and 2019, $0 remains outstanding.
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.
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, the former Chief Executive Officer, for services valued at $4,000,000.
On December 16, 2018, Custodian Ventures LLC (the “Seller”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which the Seller agreed to sell to Xingtao Zhou and Yaqin Fu (together, the “Purchaser”), the 3,096,200 common shares and the 10,000,000 preferred shares of the Company (together, the “Shares”) owned by the Seller, for a total purchase price of $375,000. As a result of the sale, and David Lazar’s resignation as sole officer and director of the Company, there was a change of control of the Company. There is no family relationship or other relationship between the Seller and the Purchaser.
During the period July 01, 2018 thru December 13, 2018, David Lazar, paid $17,350 of expenses related to accounting, transfer agent, audit and legal fees on behalf of the company. On December 13, 2018, the Company forgave $31,446 of the loan payable to David Lazar. The gain was
recorded in additional paid in capital due to its related party nature. As of June 30, 2021 and 2020, $0 remains outstanding.
During the years ended June 30, 2021 and 2020, Mr. Xingtao Zhou, paid a total of $33,748 and $79,189 respectively, in expenses on behalf of the Company, for transfer agent, legal, audit and accounting fees. As of June 30, 2021 and 2020, The outstanding balances owed to Mr. Zhou are $128,793, and $95,045 respectively. This loan is non-interest bearing and has no specific terms for repayment.
Conflicts of Interest
Certain potential conflicts of interest are inherent in the relationships between our officers and directors, and the Company.
From time to time, one or more of our affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with ours with respect to operations, including financing and marketing, management time and services and potential customers. These activities may give rise to conflicts between or among the interests of us and other businesses with which our affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither we nor our shareholders will have any right to require participation in such other activities.
Further, because we intend to transact business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons or entities. We believe that such transactions will be completed on terms at least as favorable to us as those available from unrelated third parties.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following table shows the fees paid or accrued by us for the audit and other services provided by WWC, P.C., (“WWC”) for the periods ended June 30, 2021 and JLKZ CPA LLP for the periods ended June 30, 2020.
June 30,
June 30,
Audit Fees
$ 240,000
$ 60,000
Audit Related Fees
-
-
Tax Fees
-
-
All Other Fees
-
-
Total
$ 240,000
$ 60,000
Audit fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by the above auditors in connection with statutory and regulatory fillings or engagements.
Audit-Related Fees" are fees for assurance and related services by the principal accountant that are traditionally performed by the principal accountant and which are "reasonably related to the performance of the audit or review of the registrant's financial statements.
In the absence of a formal audit committee, the full Board of Directors pre-approves all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended. The Board of Directors pre-approved 100% of the audit, audit-related and tax services performed by the independent registered public accounting firm for the fiscal years ended June 30, 2021 and 2020. The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this Annual Report:
(a) Financial Statements:
Page
Report of Independent Registered Accounting Firm
Balance Sheets as of June 30, 2021 and 2020
Statements of Operations and Comprehensive Loss for the year ended June 30, 2021 and 2020
Statement of Changes in Shareholders’ Deficit for the year ended June 30, 2021 and 2020
Statements of Cash Flows for the years ended June 30, 2021 and 2020
Notes to Financial Statements
(b) Exhibits:
Exhibit
Number
Name
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 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