Kun Peng International Ltd. - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from ____________ to ____________

Commission File Number: 333-169805

(011) (86) 755-26412816

(Registrant’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 ☐ No ☒

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

As of May 17, 2021, we have 21,376,918 shares of common stock, par value $0.0001 per share issued and outstanding.

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our annual report on Form 10-K, quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CX NETWORK GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

CX NETWORK GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

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

CX NETWORK GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Six Months Ended March 31, 2021

(UNAUDITED)

CX NETWORK GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

CX Network Group, Inc

Notes to the Consolidated Financial Statements (Unaudited)

NOTE 1 – ORGANIZATION AND GOING CONCERN

ORGANIZATION

The Company was incorporated in the State of Florida on September 3, 2010 under the name of “mLight Tech, Inc.” (“MLGT”). On July 11, 2017, MLGT merged with and into CX Network Group, Inc. (“CXKJ”), a Nevada corporation, with CXKJ as the surviving corporation that operates under the name “CX Network Group, Inc.” (the “Name Change”), pursuant to an agreement and plan of merger (the “Merger Agreement”) dated July 3, 2017.

Pursuant to the Merger Agreement, immediately after the effective time of the Merger, the Company’s corporate existence is governed by the laws of the State of Nevada and the Articles of Incorporation and bylaws of CXKJ (the “Domicile Change”), and each outstanding share of MLGT’s common stock, par value $0.0001 per share was converted into 0.0667 outstanding share of common stock of CXKJ, par value $0.0001 per share at a one-for-fifteen reverse split ratio (the “Reverse Stock Split”) which resulted in reclassification of capital from par value to capital in excess of par value. Immediately prior to the effectiveness of the reverse stock split, we had 217,300,000 shares of common stock of MLGT issued and outstanding. Immediately upon the effectiveness of the reverse stock split, we had 14,486,670 shares of common stock of CXKJ issued and outstanding.

The Name Change, Domicile Change, and Reverse Stock Split went effective on June 12, 2017. Subsequently, the Company’s trading symbol for its common stock was changed to “CXKJ”.

On March 20, 2018, CXKJ entered into a share exchange agreement (the “Share Exchange”) with Chuangxiang Holdings Inc. (“CX Cayman”). Under the Share Exchange, CX Network Group, Inc. issued an aggregate of 5,350,000 shares of common stock, par value $0.0001 per share to the shareholders of CX Cayman in exchange for 100% of the issued and outstanding equity securities of CX Cayman. The Share Exchange was closed on March 20, 2018. As a result of the Share Exchange, CX Cayman became the Company’s wholly-owned subsidiary.

CX Cayman was incorporated on February 4, 2016 under the laws of Cayman Islands.

Chuangxiang (Hong Kong) Holdings Limited (“CX HK”) was incorporated on February 23, 2016 and became CX Cayman’s wholly owned subsidiary on December 1, 2016. CX HK operates through its subsidiary, Shenzhen Chuangxiang Network Technology (Shenzhen) Limited (“CX Network”). CX Network was incorporated by CX HK on April 12, 2016 under the laws of People’s Republic of China (“PRC”) as a wholly foreign owned enterprise.

Shenzhen Chuangxiang Network Technology Limited (“Shenzhen CX”) is a limited liability company formed under the laws of PRC on August 14, 2015. Shenzhen CX became a variable interest entity (“VIE”) of CX Network through a series of contractual arrangements entered into on April 20, 2017. CX Network controls Shenzhen CX through agreements and arrangements that absorbs operating risk, as if Shenzhen CX is a wholly owned subsidiary of CX Network. Shenzhen CX is engaged in the business of developing and operating membership-based social network, dating and mobile gaming, and interactive live broadcast platforms.

The transaction has been treated as a recapitalization of CX Cayman and its subsidiaries, with CXKJ (the legal acquirer of CX Cayman and its subsidiaries) considered the accounting acquiree, and CX Cayman (the legal acquiree) considered the accounting acquirer. Accordingly, CX Cayman’s assets, liabilities and results of operations will become the historical financial statements of the registrant, and CXKJ’s assets, liabilities and results of operations will be consolidated with CX Cayman effective as of the date of the closing of the Share Exchange (March 20, 2018). The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. CX Cayman received cash of $145 and assumed $249,966 liabilities upon execution of the Share Exchange. The 5,350,000 shares of common stock issued in conjunction with the Share Exchange have been presented as outstanding for all periods.

As used in this report, unless otherwise indicated, the terms “we” and “us” refer to CX Network Group, Inc., a Nevada corporation (previously known as “mLight Tech, Inc.”, a Florida corporation,), its owned subsidiaries CX Cayman, CX HK, CX Network and Shenzhen CX, which is controlled by us via various contracts.

On March 30, 2021, the controlling shareholders of the Company (the “Sellers”), and certain investor (the “Purchaser”) entered into a Stock Purchase Agreement (the “SPA”), pursuant to which the Purchasers will acquire 16,683,334 shares of common stock, par value $0.0001 per share (the “Shares”), for an aggregate purchase price of $255,000. Pursuant to the SPA, the Sellers assumed all assets and liabilities of the Company as of March 30, 2021. In connection with the SPA, on the same day, the Company, Chuangxiang Holdings Inc., a Cayman Islands corporation (“Spin-Off Subsidiary”), and Continent Investment Management Limited and Golden Fish Capital Investment Limited, (“Spin-Off Subsidiary buyers”) entered into a spin-off agreement (the “Spin-Off Agreement”). Pursuant to the Spin-Off Agreement, Spin-Off Subsidiary buyers will receive all of the issued and outstanding capital stock of Spin-Off Subsidiary at a purchase price of $1 at the closing. As a result, Spin-Off Subsidiary buyers will become the sole equity owner of Spin-Off Subsidiary and the Company will have no further interest in Spin-Off Subsidiary. The Company sold the entire Spin-Off Subsidiaries to the related party, resulting in a gain on disposal of 382,930 which was included in additional paid-in capital because it is not an arm length transaction. 

The accompanying unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of CXKJ, its wholly owned subsidiaries, CX Cayman, CX HK, CX Network, and its VIE, Shenzhen CX. All intercompany transactions and balances have been eliminated in the consolidation. Certain information and footnote disclosures normally included in financial statements prepared in conjunction with U.S. GAAP have been condensed or omitted as permitted by the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results for the three months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020, or for any subsequent period. These interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended September 30, 2020 included in the Form 10-K filed with the SEC on January 13, 2021.

Going Concern

In assessing the Company’s liquidity, the Company monitors and analyzes its cash and cash equivalents and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. As of March 31, 2021, the Company’s its accumulated deficit was approximately $2,637,668 and the Company has incurred losses since inception, although no liabilities were on the book due to the assumption of all assets and liabilities by original controlling shareholders of the Company. None of the Company’s stockholders, officers or directors, or third parties, are under any obligation to advance us funds, or to invest in the Company. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing overhead expenses. In the coming years, the Company plans to develop E-commerce business in the app of Little Love to increase revenues to meet its future cash flow requirements. However, the Company cannot provide any assurance on the successful development of the Company’s contemplated plan of operations or the financing that will be available to us on commercially acceptable terms, if at all.

These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update No. 2016-13,“Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements, particularly its recognition of allowances for accounts receivable. 

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated financial position, statements of operations and cash flows. 

NOTE 3 – SHORT-TERM LOANS

As of March 31, 2021 and September 30, 2020, the balance of the short-term loans was $nil and $58,064, respectively. The amount represents loans borrowed from an individual and a company that are unsecured, no interest bearing and due on demand.

NOTE 4 – INCOME TAXES

The Company accounts for income taxes pursuant to the accounting standards that requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. Additionally, the accounting standards require the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company and its subsidiaries file separate income tax returns.

United States

CXKJ is incorporated in the State of Nevada and is subject to the United States federal income tax. No provision for income taxes in the U.S. has been made as the Company has no U.S. taxable income for the three months ended December 31, 2020 and 2019.

Cayman Islands

CX Cayman is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, CX Cayman is not subject to tax on income or capital gains. In addition, upon payments of dividends by CX Cayman, no Cayman Islands withholding tax is imposed.

Hong Kong

CX HK is incorporated in Hong Kong and Hong Kong’s profits tax rate is 8.25% for the first $0.26 million (HK$2 million), the excess part will be taxed at 16.5%. CX HK did not earn any income that was derived in Hong Kong for the three months ended December 31, 2020 and 2019 and therefore, CX HK was not subject to Hong Kong profits tax for the years reported.

PRC

The PRC’s statutory income tax rate is 25%. The Company’s subsidiary and VIE registered in PRC are subject to income tax rate of 25%, unless otherwise specified.

CX Network did not generate taxable income in the PRC for the three months ended December 31, 2020 and 2019. Management estimated that CX Network will not generate any taxable income in the future.

Shenzhen CX was incorporated in the PRC. For the three months ended December 31, 2020 and 2019, Shenzhen CX incurred net operating losses and no provision for income taxes has been recorded. In addition, a full valuation allowance has been provided against Shenzhen CX’s deferred income tax assets due to the uncertainty of the realization of any tax assets.

NOTE 5 – STOCKHOLDERS’ DEFICIT

As of March 31, 2021 and September 30, 2020, there were 21,376,918 shares issued and outstanding, respectively.

On March 30, 2021, the controlling shareholders of the Company (the “Sellers”), and certain investor (the “Purchaser”) entered into a Stock Purchase Agreement (the “SPA”), pursuant to which the Purchasers will acquire 16,683,334 shares of common stock, par value $0.0001 per share (the “Shares”), for an aggregate purchase price of $255,000. Pursuant to the SPA, the Sellers assumed all assets and liabilities of the Company as of March 30, 2021. Hence, the net amount of $531,858  liabilities assumed by the Sellers is considered as capital contribution to additional-paid in capital.

NOTE 6 – RELATED PARTY TRANSACTIONS

The related parties consist of the following:

Due to related parties

Due to related parties consist of the following:

The balance of due to related parties represents expense paid by related parties on behalf of the Company and the loans the Company obtained from related parties for working capital purpose. The loans owed to the related parties are interest free, unsecured and repayable on demand.

NOTE 7 – SUBSEQUENT EVENTS

On May 17, 2021, CX Network Group, Inc. (“CXKJ” and Seller), Kun Peng International Holdings Limited (“KPI”) and KPI’s shareholders, Kunpeng Tech Limited, Kunpeng TJ Limited, Pui Chun Wong, Sheng Liao, and Wenqiang Wang (the “KPI shareholders”) entered into a Share Exchange Agreement (the “Agreement”), pursuant to which the KPI shareholders desire to acquire 34,158,391 shares of common stock of CXKJ, par value $0.0001 per share (the “CNKJ Shares”), in exchange for 100% of the outstanding shares of KPI.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

On May 17, 2021, CX Network Group, Inc. (“CXKJ”) entered into a definitive Share Exchange Agreement (the “Share Exchange Agreement”) with Kun Peng International Holding Limited (“KP International”), a British Virgins Island company, and the shareholders of KP International (the “Shareholders”). The Share Exchange Agreement is effective on May 17, 2021.

For accounting purposes, the Share Exchange Agreement has been accounted for as a reverse acquisition, and the transactions has been treated as a recapitalization of KP International, with KP International as the accounting acquirer and continuing entities although CXKJ is the legal acquirer. Accordingly, the Company’s historical financial statements are those of KP International immediately following the consummation of the reverse acquisition.

The accompanying unaudited pro forma condensed combined financial information have been prepared to present the balance sheet and statements of operations of CXKJ to indicate how the combined financial statements might have looked like if the acquisition of KP International and the transactions related to the acquisition had occurred as of the beginning of the period presented.

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 and September 30, 2020 is presented as if we have entered into and closed the Share Exchange Agreement, hence consummation of the reverse acquisition on March 31, 2021 and September 30, 2020.

The unaudited pro forma condensed combined statements of operations for the six months ended March 31, 2021 and from inception through September 30, 2020 are presented as if the reverse acquisition consummated at the beginning of the period presented and were carried forward through each of the aforementioned periods presented. The unaudited pro forma condensed combined financial statements of CXKJ were derived from the audited financial statements contained on its September 30, 2020 Form 10-K, as filed with the Securities and Exchange Commission. The unaudited pro forma condensed combined financial statements of CXKJ were derived from its books and records.

The unaudited pro forma condensed financial statements of KP International and its subsidiaries were derived from their books and records and assumed the VIE Agreements consummated on such period.

The unaudited pro forma condensed financial statements of King Eagle (Tianjin) were derived from its books and records.

These unaudited pro forma condensed financial statements are presented for illustrative purposes only and are not intended to be indicative of actual consolidated financial position and consolidated results of operations.

CX NETWORK GROUP, INC. AND ITS SUBSIDIARIES

Unaudited Pro Forma Condensed Combined Balance Sheets as of March 31, 2021

 CX NETWORK GROUP, INC. AND ITS SUBSIDIARIES

Unaudited Pro Forma Condensed Statements of Operations and Comprehensive Loss

for the Six Months Ended March 31, 2021

CX NETWORK GROUP, INC. AND ITS SUBSIDIARIES

Unaudited Pro Forma Condensed Combined Balance Sheets as of September 30, 2020

 CX NETWORK GROUP, INC. AND ITS SUBSIDIARIES

Unaudited Pro Forma Condensed Statements of Operations and Comprehensive Loss

for the year ended September 30, 2020

CX NETWORK GROUP, INC. AND ITS SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed Financial Statements

Note 1 – Basis of Presentation

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 and September 30, 2020 and the unaudited pro forma condensed combined statements of operations for the six months ended March 31, 2021 and from inception through September 30, 2020, are based on the historical financial statements of CX Network Group Inc (“CXKJ”) and KP International after giving effect of the reverse merger between CXKJ and KP International on May 17, 2021, and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.

Note 2 –Adjustments

ITEM 2. MANAGEMENT DISCUSSION AND ANLYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used herein and except as otherwise noted, the term “Company”, “it(s)”, “our”, “us”, “we”, “CX” and “CXKJ” shall mean CX Network Group, Inc., a Nevada corporation (previously known as “mLight Tech Inc.” or “MLGT”, a Florida corporation), its owned subsidiaries Chuangxiang Holdings Inc.(“CX Cayman”), Chuangxiang (Hong Kong) Holdings Limited (“CX HK”), Chuangxiang Network Technology (Shenzhen) Limited (“CX Network”) and Shenzhen Chuangxiang Network Technology Limited (“Shenzhen CX”), which is controlled by us via various contracts.

This Form 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited financial statements and accompanying notes and the other financial information appearing in the 2020 Annual Report filed with the Securities and Exchange Commission on December 30, 2020 and elsewhere in this quarterly report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

Overview of the Business

Our business focuses on development and operation of online dating and mobile gaming products either developed and operated by us, or developed by us but co-operated by third parties; or developed by third parties but co-operated by us.

Our self-developed and self-operated online dating products Little Love (“小恋爱”) and Hotchat (“热聊”), which are no longer in operations since November 2019, are mobile applications geared towards Chinese singles designed to increase a user’s likelihood of finding a romantic connection. Our mission is to help individuals forge life-long relationships with others that share their interests and values. Through these mobile applications, our users can search for and communicate with other like-minded individuals. Our product creates a virtual community where users can meet, chat and message. We operate location-based social networks for meeting new people on mobile platforms, including on iPhone, Android, iPad and other tablets that facilitate interactions among users and encourage users to connect and chat with each other.

Our online dating mobile platforms monetize through advertising, in-app purchases, and paid subscriptions. The Company offers online marketing capabilities, which enable marketers to display their advertisements in different formats and in different locations. In the near future, we plan to offer sophisticated data science for highly effective hyper-targeting. The Company is actively seeking the opportunities to works with its advertisers to maximize the effectiveness of their campaigns by optimizing advertisement formats and placements. We temporarily suspend our paid advertisements for Little Love to adjust our marketing strategy of Little Love from April 2018. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. 

As China mobile game market continues to grow at rapid pace, our management team believe it is the right time to leverage our expertise in gaming app development to tap into this hot market. We have been actively developing co-operation relationship with other developers and operators since March 2018. There are two games that we are currently co-operating with their developers: Magician Hero (“魔纹游戏”) and Shu Mountain Fantasy (“蜀山奇缘”) of which we are responsible for marketing, co-operating and maintenance on the platforms and channels introduced by us. Magician Hero features non-stop-3D real action and battles based on Greek mythology. Shu Mountain Fantasy is a role-playing game of Xian Xia theme based on the period of the fairy magic war, so that users can witness the fall of the fairy tales. However, based on the market responses, we suspended the operations of the co-operations with other developers or operators in July 2020.

On April 20, 2017, CX Network entered into a series of VIE Agreements with Shenzhen Chuangxiang Network Technology Limited, or Shenzhen CX, and its stockholders, in which CX Network effectively assumed management of the business activities of Shenzhen CX and has the right to appoint all executives and senior management and the members of the board of directors of Shenzhen CX. Shenzhen CX is a Chinese limited liability company and was formed under laws of the People’s Republic of China on August 14, 2015. Shenzhen CX engages in the business of developing and operating membership-based social network, dating and mobile gaming, and interactive live broadcast platforms. The Company is currently devoting its efforts to develop mobile applications and online platforms servicing the Asia market.

On March 30, 2021, the controlling shareholders of the Company (the “Sellers”), and certain investor (the “Purchaser”) entered into a Stock Purchase Agreement (the “SPA”), pursuant to which the Purchasers will acquire 16,683,334 shares of common stock, par value $0.0001 per share (the “Shares”), for an aggregate purchase price of $255,000. Pursuant to the SPA, the Sellers assumed all assets and liabilities of the Company as of March 30, 2021. In connection with the SPA, on the same day, the Company, Chuangxiang Holdings Inc., a Cayman Islands corporation (“Spin-Off Subsidiary”), and Continent Investment Management Limited and Golden Fish Capital Investment Limited, (“Spin-Off Subsidiary buyers”) entered into a spin-off agreement (the “Spin-Off Agreement”). Pursuant to the Spin-Off Agreement, Spin-Off Subsidiary buyers will receive all of the issued and outstanding capital stock of Spin-Off Subsidiary at a purchase price of $1 at the closing. As a result, Spin-Off Subsidiary buyers will become the sole equity owner of Spin-Off Subsidiary and the Company will have no further interest in Spin-Off Subsidiary.

Financial Operations Overview

Results of Operations for the three months ended March 31, 2021 and 2020.

Revenues

For the three months ended March 31, 2021, we had no revenues, compared to $26 for three months ended March 31, 2020. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the two periods. 

Cost of Revenues

For the three months ended March 31, 2021, we had no cost of revenues, compared to $88 for three months ended March 31, 2020. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the two periods. 

Gross Profit (loss)

For the three months ended March 31, 2021 and 2011, gross profit (loss) amounted to $nil and $(62), respectively. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the two periods. 

General and Administrative Expenses

For the three months ended March 31, 2021 and 2020, general and administrative expenses amounted to $40,226 and $33,559, respectively. The increase of general and administrative expenses in the amount of $6,667 was primarily attributable to the increase of professional fees.

Research and Development Expenses

For the three months ended March 31, 2021 and 2020, research and development expenses amounted to $nil and $713, respectively. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the current period. 

Other Income (Expenses)

For the three months ended March 31, 2021, total other income was $nil as compared to $1,069 for the three months ended March 31, 2020.

Net loss

For the three months ended March 31, 2021 and 2020, net loss amounted to $40,226 and $33,265, respectively. The increase of net loss in the amounts of $6,961 for the three months ended March 31, 2021 was a result of the factors described above.

Foreign Currency Translation Adjustment

The reporting currency of the Company is the U.S. Dollar. The functional currency of Shenzhen CX and CX Network operating in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements of entities in PRC are translated to U.S. dollars using period end rates of exchange for assets and liabilities, historical rates of exchange for equity, and average rates of exchange during the period for results of operations. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and comprehensive loss.

As a result of these translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $19,259 for the three months ended March 31, 2021 as compared to a foreign currency translation gain of $2,442 for the three months ended March 31, 2020. This non-cash gain had an effect of decreasing our reported comprehensive loss.

Comprehensive Loss

For the three months ended March 31, 2021, comprehensive loss of $20,967 is derived from our net loss of $40,226. For the three months ended March 31, 2020, comprehensive loss of $30,823 is derived from our net loss of $33,265.

Results of Operations for the Six Months ended March 31, 2021 and 2020

Revenues

For the six months ended March 31, 2021, we had total revenues of $nil, as compared to $4,172 for six months ended March 31, 2020. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the two periods. 

Cost of Revenues

For the six months ended March 31, 2021 and 2020, cost of revenues amounted to $nil and $605, respectively. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the two periods. 

Gross Profit

For the six months ended March 31, 2021 and 2020, gross profit amounted to $nil and $3,567, respectively. The decrease of gross profit for the six months ended at March 31, 2021 was primarily attributable to the reason above.

General and Administrative Expenses

For the six months ended March 31, 2021 and 2010, general and administrative expenses amounted to $72,008 and $107,735, respectively. The decrease of general and administrative expenses of $35,727 during the six months ended March 31, 2021 was primarily attributable to the decrease of salary expense and lease expense.

Research and Development Expenses

For the six months ended March 31, 2021 and 2020, research and development expenses amounted to $nil and $5,835, respectively. Based on the market responses, the Company started to suspend the operation of the Little Love and Hotchat in November 2019. After July 2020, the Company completely ceased the operations of the Little Love and Hotchat. Hence, no revenue was recorded during the current period. 

Other Income (Expenses)

For the six months ended March 31, 2021, total other expenses was $1,753 as compared to total other expenses of $1,640 for the six months March 31, 2019.

Net loss

For the six months ended March 31, 2021 and 2020, net loss amounted to $70,225 and $111,643, respectively. The decrease of net loss in the amounts of $41,418 was a result of the factors described above.

Foreign Currency Translation Adjustment

The functional currency of our VIE entity operating in the PRC is the Chinese Yuan or RMB. The financial statements of our VIE are translated to U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations.

As a result of these translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $13,058 for the six months ended March 31, 2021 as compared to a foreign currency translation loss $465 for the six months ended March 31, 2019. This non-cash loss had the effect of increasing our reported comprehensive loss.

Comprehensive Loss

For the six months ended March 31, 2021, comprehensive loss of $57,197 is derived from the sum of our net loss of $70,225 and foreign currency translation gain of $13,058. For the six months ended March 31, 2020, comprehensive loss of $112,108 is derived from the sum of our net loss of $111,463 and foreign currency translation loss of $465.

Liquidity and Capital Resources

In assessing the Company’s liquidity, the Company monitors and analyzes its cash and cash equivalents and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. As of March 31, 2021, the Company’s working capital deficit was approximately $nil as compared to working capital deficit of approximately $857,591 as of September 30, 2020. As of March 31, 2021 and September 30, 2020, the Company’s accumulated deficit was approximately $2,637,668 and $2,567,413, respectively, and the Company has incurred losses since inception. None of the Company’s stockholders, officers or directors, or third parties, are under any obligation to advance the Company funds, or to invest in it. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.

Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

The following summarizes the key components of the Company’s cash flows for the six months ended March 31, 2021 and 2020:

Operating Activities.

Net cash used in operating activities totaled $65,878 for the six months ended March 31, 2021, which was attributable to the net loss of around $70,255, gain from disposal of investment $419, and the increase of accrued liability and account payable around $4,796, as compared to net cash used in operating activities of $86,270 for the six months ended March 31, 2020.

Investing Activities.

Net cash provided by financing activities the six months ended March 31, 2021 was $1 as compared to $nil for the six months ended March 31, 2020. The increase in cash provided by financing activities for the six months ended March 31, 2021 was mainly due to the proceeds from disposal of investment.

Financing Activities.

Net cash provided by financing activities the six months ended March 31, 2021 was $65,201 as compared to $83,271 for the six months ended March 31, 2020. The decrease in cash provided by financing activities for the six months ended March 31, 2021 was mainly due to the decrease of proceeds from related party.

Going Concern

In assessing the Company’s liquidity, the Company monitors and analyzes its cash and cash equivalents and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. As of March 31, 2021, the Company’s its accumulated deficit was approximately $2,637,668 and the Company has incurred losses since inception, although no liabilities were on the book due to the assumption of all assets and liabilities by original controlling shareholders of the Company. None of the Company’s stockholders, officers or directors, or third parties, are under any obligation to advance us funds, or to invest in us. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing overhead expenses. In the coming years, the Company plans to develop E-commerce business in the app of Little Love to increase revenues to meet its future cash flow requirements. However, the Company cannot provide any assurance on the successful development of the Company’s contemplated plan of operations or the financing that will be available to us on commercially acceptable terms, if at all.

These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Off-Balance Sheet Arrangements

As of March 31, 2021 and September 30, 2020, there are no off-balance sheet arrangements between us and any other entity 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 are material to our 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 DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the three months ended December 31, 2020, our chief executive officer, who served as both our chief financial officer and principal accounting manager, concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer, to allow timely decisions regarding required disclosure as a result of the material weaknesses in our internal control over financial reporting due to the existence of the following material weaknesses:

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first fiscal quarter covered by this quarterly report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than the facts disclosed above.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None. 

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 September 30, 2020 filed with the SEC on January 13, 2021.

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

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.

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