APEX RESOURCES INC/NV - Quarter Report: 2019 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

Commission File Number 333-207109

Nevada

(State or other jurisdiction of incorporation or organization)

13191 Crossroads Pkwy N, Suite 200, City of Industry, CA 91746

(Address of principal executive offices, including zip code.)

(626) 910-5101

(Telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES x NO o

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

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 12b-2 of the Exchange Act). YES o NO x

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

As of May 15, 2019, we have 5,080,000 shares of common stock, par value $0.001 per share issued and outstanding.

APEX RESOURCES, INC.

FORM 10-Q FOR THE NINE MONTHS PERIOD ENDED MARCH 31, 2019

TABLE OF CONTENTS

ITEM 1. FINANCIAL STATEMENTS

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

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

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

Apex Resources, Inc.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

March 31, 2019

Note 1: Organization and Basis of Presentation

Apex Resources, Inc. (the “Company”) is a for profit corporation established under the Corporation Laws of the State of Nevada on March 31, 2015.

Sales of Steam Room Products

Prior to April 7, 2018, the Company was engaged in the business of selling high quality steam room products at competitive prices. The Company conducted the steam room sales operation from its principal office in Lithuania. The Company’s purchases and sales prices were both quoted in the U.S. Dollars and, therefore, used the U.S. Dollar as its functional currency to account for the financial position and results of operations of the steam room products sales activities.

On March 23, 2018, a change in control of the Company occurred, pursuant to which three parties acquired an aggregate 4,000,000 shares of the Company’s common stock (or approximately 78.74% of the total issued and outstanding shares of the Company as of the date of acquisition) from Tadas Dabasinkas, pursuant to that certain Securities Purchase Agreement (the “SPA”). Mr. Dabasinkas received an aggregate $443,079 for the 4,000,000 shares; the Company received no proceeds from this transaction. Pursuant to the SPA and other related agreements, Mr. Dabasinkas resigned from all management and Board positions; and all of the Company’s outstanding loan balance owed to Mr. Dabasinkas, in the amount of $3,731, was fully forgiven by Mr. Dabasinkas. As a result, the Company recorded additional paid-in capital as of March 23, 2018 for the $3,731 debt discharged by Mr. Dabasinkas. See Note 6: “Debt Discharge” and Note 11: “Change in Control”, for additional details.

After the end of the period ending June 30, 2018, the Company completed the last sale of steam room products by making delivery on April 6, 2018 of inventory ordered by a customer in February 2018. The steam room sales activities were discontinued after April 6, 2018.

Data Center Hosting Services

The Company entered into an agreement dated April 26, 2018 (the “ADC Agreement”) with Chongqing Puxin Blockchain Technology Co., Ltd. (“Puxin”), a cryptocurrency mining company in China, pursuant to which the Company is obligated to contribute $2.0 million to a new company, Apex Data Center Inc. (“ADC”) incorporated by Puxin, in exchange for an 80% equity in ADC. Puxin retains 20% of the equity of ADC. ADC will build a “mining pool”, or a facility with rig machines that mine cryptocurrencies, for a hosting or management fee with the capability of accommodating up to 100,000 dedicated servers in facilities to be built in one or more locations that are currently being evaluated by the Company. While the Company does not currently own any rig machine, it is expected to receive and host 2,000 to 3,000 rig machines owned by Puxin in China into ADC’s facilities in the first phase. We will either host additional machines for other third parties or raise the capital to acquire additional machines. The target is to host a total of 10,000 rig machines in the facility in the next 12 months. As of March 31, 2019, the Company was still evaluating various options and had not finalized on the selection of the location of the facilities.

Under the ADC agreement, the Company has agreed to invest a total of $2 million for the construction and operation of the new ADC data center. Puxin will offer its expertise and assist the Company to design, budget, construct, and manage the day-to-day operations of the new ADC data center. Upon execution of the ADC Agreement, the Company is required to provide the first $280,000 of its total $2 million investment to ADC as working capital for development of the new ADC data center. As of the date of the filing of this Form 10-Q, the Company has provided $20,000 of the required working capital amount. The Company intends to make the total capital contribution of $2 million in the next 12 months.

Due to the lack of progress in the implementation of the business plan contemplated in the ADC Agreement, the Company and Puxin agreed to terminate the ADC Agreement on April 1, 2019. See Note 12: Subsequent Events for details of the terms of termination.

 Apex Resources, Inc.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements 

March 31, 2019

The Company’s financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and are expressed in the U.S. dollars. The Company’s fiscal year-end is June 30.

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage Entities”. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification (“ASC”), thereby removing the financial reporting distinction between development stage entities and other reporting entities from the U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements for the Company.

The Financial Statements and related disclosures as of March 31, 2019 are reviewed pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Unless the context otherwise requires, all references to “Apex”, “Apex Resources”, “we”, “us”, “our” or the “company” are to Apex Resources, Inc.

Note 2: Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Due to the limited level of operations, the Company has not had to make material assumptions or estimates other than the assumption that the Company is a going concern.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Bank overdraft, if any, is presented as a current liability in the balance sheet.

Fair Value of Financial Instruments

ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2019.

The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accrued liabilities and notes payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value.

 Apex Resources, Inc.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements 

March 31, 2019

Leases

In February 2016, the FAS issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11, ”Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”) and ASU 2018-10, ”Codification Improvements to Topic 842, Leases” (“ASU 2018-10”). ASU 2018-11 provides for an additional optional adoption method of ASU 2016-02, allowing for the application of the new standard as of the adoption date and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-10 provides corrections and updates to the previously issued codification regarding Topic 842. Various areas of the codification were impacted from the update. The two standards follow the effective dates of ASU 2016-02. The Company’s non-cancellable leases consist of an office leases of 6,543 square feet expiring in March 2024. The Company is currently assessing and implementing the new standard, including classification of leases, identifying lease and non-lease components, discount rates, and the practical expedients that are available under the guidance. The Company expects to complete the assessment of the impacts of adopting the new standard by the end of the June 30, 2019 fiscal year.

Basic and Diluted Loss Per Share

The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal as of March 31, 2019.

Revenue Recognition

The company follows the guidelines of ASC 605-15 for revenue recognition. Revenue is recognized when all the following conditions have been met:

Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Income taxes are calculated and accrued for U.S. taxes only. The company did not accrue any Lithuanian taxes under Lithuanian corporate rules, as we believe our business activities prior to the April 7, 2018 discontinuance of steam room products sales generated no taxable income under the local tax rules.

Apex Resources, Inc.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements 

March 31, 2019

Unaudited Financial Statements

The balance sheet as of March 31, 2019, the statements of operations and cash flows for the nine-month period ended March 31, 2019, have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. The results of operations for the nine months ended March 31, 2019 are not necessarily indicative of results expected for the full year ending June 30, 2019. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial position at March 31, 2019 have been made.

It is suggested that these statements be read in conjunction with the June 30, 2018 audited financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K and related amendments filed with the Securities and Exchange Commission.

Note 3: Going Concern

The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern for one year after the date the financial statements were issued.

For the period from its inception on March 31, 2015 to March 31, 2019, the Company had an accumulated net loss of $548,732. The Company also has a negative net worth of $497,801 as of March 31, 2019. This raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The ability to continue as a going concern is dependent upon the Company’s ability to successfully execute its business plan and generate profitable operations in the future, and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operation when they become due. Management intends to finance operating costs over the next twelve months with loans from related parties or the issuance of equity and debt securities.

The failure to achieve the necessary levels of profitability or obtain the additional funding would be detrimental to the Company.

Apex Resources, Inc.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements 

March 31, 2019

Note 4: Lease Commitment

The Company entered into a 63-month operating lease for its office space in the City of Industry on January 1, 2019. California. The payment obligations of the lease are guaranteed by Harbor Green Grains, LP, an entity controlled by one of the Company’s majority shareholders. Future minimum lease payment under the lease are as follows:

Rent expense for the three and nine months ended March 31, 2019 was $32,061 and $32,061, respectively. No rent expense was incurred in the comparable periods in 2018.

The Company has no known legal proceedings pending.

Note 6: Debt

In June 2015, the Company’s former Director and President Tadas Dabasinkas made the initial deposits to the Company’s bank accounts (checking and savings) in the amount $105 which was carried as a loan payable. On January 31, 2016, Mr. Dabasinkas loaned the company an additional $326. During the year ended June 30, 2017, Mr. Dabasinkas paid an invoice for $800 on behalf of the Company. The balance of the loans at June 30, 2017, was $1,231. The loan is non-interest bearing, unsecured and due upon demand.

As of March 23, 2018, the outstanding principal balance of such loans from and advances by Mr. Dabasinkas was in the amount of $3,731. As a result of the change in control on March 23, 2018, and as more fully described in Note 11, “Change in Control”, the entire unpaid principal balance of these loans was discharged by Mr. Dabasinkas. The balance of the loans payable to Mr. Dabasinkas as of March 31, 2019, was $0.

Between March 23, 2018 (the date of the Change in Control as explained in Note 11), and March 31, 2019, a principal shareholder Harbor Torrance Family Trust made advances and loans (net of repayments) in the total amount of $508,913 to the Company as working capital. The loan from Harbor Torrance Family Trust is payable on demand and carries an interest rate of 0%.

Note 7: Capital Stock

As of March 31, 2019, the Company had 75,000,000 shares of common stock, par value of $0.001 per share, authorized.

On June 15, 2015, the Company issued 4,000,000 shares of common stock for a purchase price of $0.001 per share to its then-sole Director. The Company received aggregate gross proceeds of $4,000. As of March 31, 2019, there were no outstanding stock options or warrants.

In November 2016, the Company sold and issued 1,080,000 shares at $0.04 per share pursuant to its offering on a Registration Statement on Form S-1. The shares were issued to 31 independent shareholders for proceeds of $43,200.

Note 8: Fixed Assets

In June 30, 2015, the Company purchased land and a small office located at Aytaus g. 100, Varena, Lithuania. The purchase price of $8,655 was allocated as $4,327.50 for the building and $4,327.50 for the land. Prior to April 7, 2018, the Company utilized the space as its principal office to conduct the Company’s former steam room products sales activities. As the Company discontinued the steam room products sales activities on April 7, 2018, the office in Lithuania is treated as an asset held for sale under ASC 250-45 and ASC 360-10 post-April 6, 2018. Based on the analysis of the management, the sale of the land and the building is not likely to occur. Thus, management wrote off the fixed assets, i.e. $7,791 for the period ended September 30, 2018.

Apex Resources, Inc.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements 

March 31, 2019

Note 9: Income Taxes

Apex Resources Inc. is registered in the State of Nevada and is subject to the tax law of the United States of America and a federal corporate statutory tax rate of 21% starting January 1, 2018.

As of March 31, 2019, the Company had net operating loss carry forwards of approximately $548,731 that may be available to reduce future years’ taxable income through 2036 and 2039. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

Benefit of income taxes for the nine-month periods ended March 31, 2019 and 2018 were $0 and $0, respectively.

Note 10: Related Party Transactions

The Company has related party loan transactions involving the Company’s former director and a principal shareholder. The nature and details of these transactions are described in Note 6: Debt.

Note 11: Change in Control

On March 23, 2018, three parties acquired an aggregate 4,000,000 shares of the Company’s common stock (or 78.74% of the total issued and outstanding shares of the Company as of the date of acquisition) from Tadas Dabasinkas pursuant to the SPA. Mr. Dabasinkas received an aggregate $443,079 for the 4,000,000 shares; the Company received no proceeds from this transaction. Pursuant to the SPA and other related agreements, Mr. Dabasinkas resigned from all management and Board positions, and all of the Company’s outstanding loan balance owed to Mr. Dabasinkas, in the amount of $3,731, was fully forgiven by Mr. Dabasinkas.

Note 12: Subsequent Events

The Company has evaluated events subsequent through the date these consolidated financial statements have been issued, May 15, 2019, to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these consolidated financial statements were available to be issued. Based upon this evaluation, the company has no subsequent event occurred that require recognition or disclosure in the consolidated financial statements, except for the followings:

Termination of the ADC Agreement

On April 1, 2019, the Company signed a termination and release agreement (the “ADC Termination Agreement”) with Chongqing Puxin Blockchain Technology Co., Ltd., a company organized under the laws of the People’s Republic of China (“Puxin”) to terminate the agreement previously entered into by the two companies on April 26, 2018 (the “ADC Agreement”). Under the ADC Agreement, (1) a joint venture entity Apex Data Center Inc. was incorporated to pursue the data mining operations in the state of Washington, (2) the Company was obligated to contribute the sum of $2.0 million cash in exchange for 80% of ADC’s shares of common stock to be issued, and (3) Puxin was obligated to contribute properties and services in kind (equipment, labor, professional services, etc.) for its 20% ownership in ADC. Upon signing of the ADC Termination Agreement, the Company and Puxin agreed to terminate the ADC Agreement immediately. The Companmy and Puxin also agreed to irrevocably and unconditionally release each other from any claims, charges, causes of action or any other liabilities arising out of the ADC Agreement.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Overview

Apex Resources Inc (“Apex”, the “Company”, “we”, “us,” or “our”) was incorporated on March 31, 2015, under the laws of the State of Nevada. On June 15, 2015, Tadas Dabasinskas, who at the time was our sole director and officer, purchased 4,000,000 shares of our common stock for $4,000 in cash. In November 2016, we sold 1,080,000 shares of our common stock to 31 individuals at $0.04 per share, for aggregate gross proceeds of $43,200, in a registered public offering pursuant to a Registration Statement on Form S-1 (file number: 333-207109) that had been declared effective by the Securities and Exchange Commission on October 4, 2016.

On March 23, 2018, Tadas Dabasinkas, the then majority shareholder, sole director and sole officer of the Company, entered into stock purchase agreements and sold an aggregate 4,000,000 shares of the common stock of the Company, or approximately 78.7% of the issued and outstanding shares of common stock of the Company as of such date, being all of the shares owned by Mr. Dabasinkas, for an aggregate $443,079 in cash. The purchasers of the shares were Sumunity Group, Inc. (“Sumunity”) and Harbor Torrance Family Trust (“Harbor”), which purchased 1,200,000 and 2,800,000 shares, respectively. Harbor also acted in part as agent for Bo Qian in purchasing 800,000 of the shares initially purchased by Harbor, which shares were resold by Harbor to Mr. Qian on or about March 31, 2018 for the same price at which they were purchased by Harbor from Mr. Dabasinkas (such transaction is sometimes referred as the “Change-of-Control Transaction” in this Form 10-Q). The Company received no proceeds from the Change-of-Control Transaction. None of the purchasers is an affiliate of Mr. Dadasinkas.

In connection with the Change-of-Control Transaction, and on the same date, (i) Mr. Dabasinkas resigned as director of the Company and from all officer positions with the Company, including Chief Executive Officer and President; (ii) Xiaoya Deng, Meijuan Fu and Yuen Wong Moon were appointed as directors of the Company; (iii) Jeff Bodnar was appointed as Chief Executive Officer and President of the Company; and (iv) Meijuan Fu was appointed as Chief Financial Officer and Secretary of the Company. Effective June 30, 2018, Ms. Fu resigned as a director, Chief Financial Officer and Secretary of the Company.

On March 23, 2018, in connection with the Change-of-Control Transaction, the loans from Mr. Dabasinkas were forgiven by him. Through March 23, 2018, we received a total of $1,231 through loans from Mr. Dabasinskas. The loans were interest free, unsecured, and payable on demand. Proceeds from the loans were used to open the company bank accounts and pay certain expenses.

Recent Development

Since our inception on March 31, 2015 until the Change-of-Control Transaction on March 23, 2018, we were was in the steam room products distribution business. Following the Change-of-Control Transaction on March 23, 2018, our new management decided to pursue a different business from the steam room products distribution business. The Company completed the last sale of steam room products by making delivery on April 6, 2018 of inventory ordered by a customer in February 2018. The steam room sales activities were discontinued after April 6, 2018.

We intend to pursue one or more business opportunities using Blockchain technology related products and services in various areas, such as e-commerce platforms offering online retail service involving Blockchain-as-a-service. We are in the early stages of analyzing and developing our new business model and pursuing business opportunities.

We must raise a significant amount of capital, in the form of equity and/or debt, unless and until we have sufficient cash flow from operations. We do not anticipate any significant additional revenue until and unless we begin to execute on our new plan of operations, described herein, e-commerce platforms offering online retail service involving Blockchain-as-a-service. There is no assurance we will ever reach that stage. While there is an informal arrangement with one of our principal shareholders to provide loans to fund our working capital needs at present, there is no commitment from any person for any such capital and there can be no assurances that capital will be available to us on favorable terms, or at all.

After the Change-of-Control Transaction, we entered into an agreement dated April 26, 2018 (the “ADC Agreement”), with Chongqing Puxin Blockchain Technology Co., Ltd. (“Puxin”), a cryptocurrency mining company in China, pursuant to which we would contribute $2 million to a new company, Apex Data Center Inc. (“ADC”), incorporated by Puxin, in exchange for an 80% equity in ADC. Puxin would retain 20% of the equity of ADC. ADC would build a “mining pool,” or a facility with rig machines that mine cryptocurrencies, for a hosting or management fee, with the capability of accommodating up to 100,000 dedicated servers in a facility to be built in Washington State. As of the date of this quarterly report, we provided $20,000 of the required working capital amount, the source of which were loans from one of our principal shareholders. Though we entered into the ADC Agreement with a good intention to commence to the mining business, we were not able to raise sufficient fund at terms and conditions acceptable to us to carry out our obligations within the timeframe given by the ADC Agreement and the parties terminated the ADC Agreement on April 1, 2019.

Plan of Operations and Current Status

We are planning to establish e-commerce platforms offering online retail service (the “E-Commerce Platforms Project”) and are currently designing and developing our Blockchain-as-a-service that is intended for all our customers who will join our e-commerce platforms as vendors and suppliers. We feel this business model would require less capital at early stage of design and development and may potentially be profitable once established. Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through development of various Blockchain technology related products and acquisition of a business rather than immediate, short-term earnings.

The analysis of E-Commerce Platforms Project has been undertaken by or under the supervision of our management. Our company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze business opportunities, we are considering the following factors:

Blockchain technology is emerging as a major disruptive force across many industries, including those involved in online retail. Once established, we believe that our e-commerce platforms enabling Blockchain technology could allow our customers to conduct business in more synchronized and collaborative ways to substantially increase operational efficiency and reduce trade costs across the online retail chain.

We anticipate that the process of developing e-commerce platforms enabling Blockchain will be complex and extremely risky. Blockchain technology is rapidly emerging and is regarded as a major disruptive force to government authorities and business organizations across many industries. Blockchain technology is still new but the impact on e-commerce could be immense. E-Commerce or online retail Blockchain applications are currently being developed and piloted with limited use cases to increase transparency and visibility across the supply chain and payment process, prove authenticity and origin of import and export goods, and accelerate flow of goods and cargos across international borders. We are in the process of completing our feasibility study of our E-Commerce Platforms Project and we anticipate the initial cost to commence our research and design of e-commence platforms involving Blockchain technology would be $5 million including the equipment costs. We also plan to seek partnership or collaboration opportunities with existing e-commerce platforms or Blockchain technology companies to reduce our capital expense and increase feasibilities. However, if we are not unable to overcome the difficulties of obtaining additional financing and capital from the market, it may be extremely difficult for us to start the establishment of e-commerce platform that could fuel the organic growth of our business.

Results of Operations

Three-Month Period Ended March 31, 2019 compared to the Three-Month Period Ended March 31, 2018

Revenue, Cost of Revenue and Gross Profit

For the three months ended March 31, 2019 and March 31, 2018, we generated $0 in revenues and $0 in cost of revenue, respectively. We suspended the steam room products sales activities in April 2018 to pursue a new cryptocurrency mining business, following the change in control of March 23, 2018. As of March 31, 2019, no revenue has been generated by the new cryptocurrency mining business.

For the three months ended March 31, 2019 and March 31, 2018, our gross profit was $0, respectively. As explained above, during the three months ended March 31, 2019, no sales and cost of revenue was recorded, resulting in a $0 gross profit.

Operating Expenses

For the three months ended March 31, 2019, we incurred operating expenses of $182,811, which represents an increase in the amount of $181,281 as compared to $1,530 during the same period of 2018. While operating expenses for three months ended March 31, 2018 consists of only legal and professional expenses, the $182,811 operating expenses for the three months ended March 31, 2019 include legal and professional expenses and other expenses incurred for the development of the new cryptocurrency mining business, such as consulting fee of $12,608, legal and professional fee of $85,245, salaries and wages of $38,967, and Rent of $32,061.

Provision for (Benefit of) Income Taxes

Benefit of Income Taxes for the three months ended March 31, 2019 and 2018 was $0 and $1,298, respectively. The $1,298 benefit for the period ending March 31, 2018 is the result of a reversal of accrued estimated corporate income tax liabilities originally previously recorded on June 30, 2015. No current tax liability was provided for the three months ended March 31, 2019.

Net Loss

Our net loss for the three-month period ended March 31, 2019 was $183,184, an increase loss of $182,952 compared to a net loss of $232 during the same period of 2018. The increase in net losses is primarily caused by the increase in the Company’s operating expenses during the three-month period ended March 31, 2019.

Nine-Month Period Ended March 31, 2019 compared to the Nine-Month Period Ended March 31, 2018

Revenue, Cost of Revenue and Gross Profit

For the nine months ended March 31, 2019, we generated $0 in revenues and $0 in cost of Revenue, compared to steam room products revenue of $60,474 and cost of revenue of $50,843 during the same period of 2018. The changes represent decreases in revenue and cost of revenue in the amounts of $60,474 and $50,843, respectively. We suspended the steam room products sales activities in April 2018 to pursue a new cryptocurrency mining business, following the change in control of March 23, 2018. As of March 31, 2019, no revenue has been generated by the new cryptocurrency mining business.

For the nine months ended March 31, 2019, our gross profit was $0, or a decrease of $9,631 from the gross profit of $9,631 during the same period of 2018. As explained above, during the nine months ended March 31, 2019, no sales and cost of revenue was recorded, resulting in a $0 gross profit.

Operating Expenses

For the nine months ended March 31, 2019, we incurred operating expenses of $425,585, which represents an increase in the amount of $420,763 as compared to $4,822 during the same period of 2018. While operating expenses for nine months ended March 31, 2018 consists of only legal and professional expenses, the $425,585 operating expenses for the nine months ended March 31, 2019 include legal and professional expenses and other expenses incurred for the development of the new cryptocurrency mining business, such as consulting fee of $70,408, legal and professional fee of $169,791, salaries and wages of $38,967, rent of $32,061 and travel expenses of $50,316.

Provision for (Benefit of) Income Taxes

Benefit of Income Taxes for the nine months ended March 31, 2019 and 2018 was $0 and $1,298, respectively. The $1,298 benefit for the period ending March 31, 2018 is the result of a reversal of accrued estimated corporate income tax liabilities originally previously recorded on June 30, 2015. No current tax liability was provided for the nine months ended March 31, 2019.

Net Loss

Our net loss for the nine-month period ended March 31, 2019 was $426,007, an increase loss of $432,114 compared to a net income of $6,107 during the same period of 2018. The increase in net losses is primarily caused by the increase in the Company’s operating expenses during the nine-month period ended March 31, 2019.

Liquidity and Capital Resources

At March 31, 2019, we had cash in bank of $13,351, a decrease by $58,148 from the cash in bank balance of $71,499 at June 30, 2018. While we received a net $353,913 loan from our related parties during the period ending March 31, 2019, our operating activities used a total of $182,811 of cash and we made a $55,751 security deposit during the nine months ended March 31, 2019, which caused the cash balance to drop substantially.

The cash in bank of $13,351 and prepaid expense of $1,145 were our only current assets as of March 31, 2019 and June 30, 2018, respectively. We had $571,819 in total current liability as of March 31, 2019, including a $57,574 of accounts payable and a $508,913 of loan from related parties, as compared to the total current liabilities of $156,000 at June 30, 2018. The balance of loan from the related parties was $155,000 as of June 30, 2018.

We have a working capital deficit as of March 31, 2019 in the amount of $557,323. For the period from inception (March 31, 2015) to March 31, 2019, we had an accumulated net loss of $548,732. Our net worth was a negative $497,801 as of March 31, 2019. This raises substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

Our independent registered public accountant has issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months unless we obtain additional capital to pay our expenses. We do not anticipate any significant revenue until and unless we begin to execute on our new plan of operations involving blockchain technology related products and services. There is no assurance we will ever reach that stage.

Our ability to continue as a going concern is dependent upon our ability to successfully execute our new business plan and generate profitable operations in the future, and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operation as and when they become due. Management intends to finance operating costs for the foreseeable future with loans from related parties and the issuance of equity and/or debt. There is no commitment from any person for any such capital and there can be no assurances that capital will be available to us on favorable terms, or at all.

One of our new principal shareholders has informally agreed to lend us some of the funds needed for some of our operating expenses, but he has no legal obligation to do so and may discontinue making any such loans at any time. Our failure to achieve the necessary levels of profitability or obtain the additional significant funding required to meet our expenses and other financial obligations would be detrimental to us.

Going Concern

The accompanying consolidated financial statements and notes have been prepared assuming that the Company will continue as a going concern for one year after the date the consolidated financial statements were issued.

For the period from inception (March 31, 2015) to March 31, 2019, the company had an accumulated net loss of $548,732. The Company also had a negative net worth of $497,801 as of March 31, 2019. This raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The ability to continue as a going concern is dependent upon the Company’s ability to successfully execute its business plan and generate profitable operations in the future, and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operation when they become due. Management intends to finance operating costs over the next 12 months with loans from related parties or the issuance of equity and debt securities.

The failure to achieve the necessary levels of profitability or obtain the additional funding would be detrimental to the Company.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Recent Accounting Pronouncements

See Note 2 of our Financial Statements included in this quarterly report for discussion of recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Not applicable for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2019.

Based on that evaluation, management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were not effective as of March 31, 2019, because of the material weaknesses in our internal control over financial reporting listed below:

Insufficient Resources: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.

Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.

Lack of Audit Committee and Outside Directors on the Company’s Board of Directors: We do not have a functioning audit committee or outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Management is committed to improving its internal controls and will, subject to having adequate funds, among other things, (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.

Due to the nature of these material weaknesses, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

Changes in Internal Controls over Financial Reporting

As of the end of the period covered by this report, there have been no changes in the internal controls over financial reporting during the quarter ended March 31, 2019, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date of management’s last evaluation.

PART II.

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.

ITEM 1A. RISK FACTORS

As of the date of this quarterly report, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended June 30, 2018 filed with the SEC on January 11, 2019.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

_______________

** Furnished, not filed

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.