Company Quick10K Filing
Moxian
Price2.25 EPS-0
Shares56 P/E-889
MCap127 P/FCF-195
Net Debt-0 EBIT-0
TEV127 TEV/EBIT-889
TTM 2019-06-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-02-16
10-K 2020-09-30 Filed 2021-01-14
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-05-15
10-Q 2019-12-31 Filed 2020-04-20
10-K 2019-09-30 Filed 2020-01-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-Q 2018-12-31 Filed 2019-02-19
10-K 2018-09-30 Filed 2019-01-15
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10-K 2014-09-30 Filed 2014-12-31
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10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-09-23
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10-K 2012-12-31 Filed 2013-06-25
10-Q 2012-09-30 Filed 2013-03-12
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10-Q 2011-12-31 Filed 2012-03-30
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8-K 2020-11-04
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8-K 2018-05-16
8-K 2018-05-11
8-K 2018-04-19
8-K 2018-03-27
8-K 2018-01-31
8-K 2017-12-18

MOXC 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Moxian Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
0.10.10.0-0.0-0.1-0.12012201420172020
Assets, Equity
0.10.10.0-0.0-0.1-0.12012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended December 31, 2020

 

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: 001-37902

 

MOXIAN, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   27-3729742

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

Room 911, 9/F Tower 2, Silvercord, 30 Canton Road, Hong Kong SAR, China   Tel: +852 2961 4888
(Address of Principal Executive Offices and Zip Code)   (Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered
Common Stock   MOXC   Nasdaq Capital Market

 

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

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

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
Emerging growth Company [  ]  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [  ] No [X]

 

As of January 29, 2021, the registrant had 16,191,529 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page No.
     
PART I – FINANCIAL INFORMATION
     
Item 1. Financial Statements 1
     
  Unaudited Condensed Consolidated Balance Sheets as of December 31, 2020 and September 30, 2020 1
     
  Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended December 31, 2020 and 2019 2
     
  Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended December 31, 2020 and 2019 3
     
  Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2020 and 2019 4
     
  Notes to Unaudited Condensed Consolidated Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 19
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 21
     
Item 4. Controls and Procedures. 21
     
PART II – OTHER INFORMATION
     
Item 1. Legal Proceedings. 23
     
Item 1A. Risk Factors. 23
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 23
     
Item 3. Defaults Upon Senior Securities. 23
     
Item 4. Mine Safety Disclosures 23
     
Item 5. Other Information 23
     
Item 6. Exhibits. 24
     
Signatures 25
     
Certifications

 

 
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

MOXIAN, INC.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

   As of 
   December 31, 2020   September 30, 2020 
         
Cash and cash equivalents  $19,402   $5,249 
Account receivable (Note 3)   1,345,080    1,462,698 
Share subscription receivable (Note 4)   827,710    827,710 
           
Total current assets   2,192,192    2,295,657 
Accruals and other payables (Note 6)  $1,718,655   $1,535,335 
Loans payable (Note 7)   382,257    359,549 
           
Total current liabilities   2,100,912    1,894,884 
           
Net Assets   91,280    400,773 
           
Preferred stock, $0.001 par value, authorized: 100,000,000 shares. Nil shares issued and outstanding   -    - 
Common stock, $0.001 par value, authorized: 50,000,000 shares. 16,191,529 shares issued and outstanding as of December 31, 2019 and September 30, 2019, respectively   16,191    16,191 
Additional paid-in capital   40,114,606    40,114.606 
Accumulated deficiency   (41,048,510)   (40,661,350)
Accumulated other comprehensive income   1,008,993    931,326 
Shareholders’ Equity   91,280    400,773 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

1
 

 

MOXIAN, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

   

For Three Months Ended

December 31,

 
    2020     2019  
             
Revenues   $ -     $ 383,375  
                 
Selling, general and administrative expenses    

387,160

      158,957  
Loss from operations     (387,160 )     224,418  
                 
(Loss)/Gain before income tax     (387,160 )     224,418  
                 
Income tax expense     -       -  
Net (loss)/ gain for the period     (387,160 )     224,418  
               

Other comprehensive (loss)/income:

  $       $  
Foreign currency translation adjustment     77,667      

(27,522

)
Comprehensive (loss)/income     (309,493 )     196,896  
                 
Basic and diluted (loss)/ gain per common share   $ (0.02 )   $ 0.01
                 
Basic and diluted weighted average common shares outstanding     16,191,529       16,191,529  

 

See accompanying notes to unaudited condensed consolidated financial statements

 

2
 

 

MOXIAN, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

For the periods ended December 31, 2020 and 2019

 

   Common Stock  

Additional

paid-in

   Accumulated  

Accumulated

other

comprehensive

     
   Shares   Amount   capital   deficit   income   Total 
Balance, September 30, 2020   16,191,529   $16,191   $40,114,606   $(40,661,350)  $931,326   $400,773 
                               
Net loss for the period                  (387,160)   -    (387,160)
Foreign currency translation adjustment   -    -    -    -    77,667    77,667 
                               
Balance, December 31, 2020   16,181,529   $16,191   $40,114,606   $(41,048,510)  $1,008,993   $91,280 
                               
Balance, September 30, 2019   16,191,529   $16,191   $40,114,606   $(40,734,066)  $751,956   $148,687 
Net gain for the period                  224,418         224,418 
Foreign currency translation adjustment                       (27,522)   (27,522)
                               
 Balance, December 31, 2019   16,191,529   $16,191   $40,114,606   $(40,512,648)  $724,434    342,583 

  

See accompanying notes to consolidated financial statements

 

3
 

 

MOXIAN, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

  

For Three Months Ended

December 31,

 
   2020   2019 
         
Cash Flows from Operating Activities          
Net (loss)/gain  $(387,160)  $224,418 
Adjustments to reconcile net gain to net cash used in operating activities:          
Changes in net operating assets and liabilities:          
Accounts and other receivables   117,618   (498,623)
Other payables and accruals   183,320    (92,068)
Net cash used in operating activities   (86,222)   (366,273)
Loans payable   22,708    (57,444)
Proceeds from share subscription   -    114,888 
Net cash provided by financing activities   22,708    57,444 
Effect of exchange rates on cash and cash equivalents   77,667    (78,784)
Net increase/(decrease) in cash and cash equivalents   14,153    (387,613)
Cash and cash equivalents, beginning of period   5,249    425,632 
Cash and cash equivalents, end of period   19,402   $38,019 
           
Supplemental cash flow disclosures:          
           
Non-cash financing activities – Share Subscription Proceeds       $779,624 
Non-cash operating activities – Accruals and other payables       $877,134 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

4
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Organization and Corporate Developments

 

Organization of the Group

 

Moxian, Inc. (formerly known as Moxian China, Inc., hereinafter referred as “Moxian,” together with its subsidiaries and variable interest entity, the “Company”), was incorporated under the laws of the State of Nevada on October 12, 2010. The Company, through its subsidiaries and variable interest entity, engages in the business of operating a social network platform that integrates social media and business into one single platform. The Company has devoted its efforts to develop a mobile application and online platform that facilitate the small to medium size businesses to attract more clients. The Company’s ability to generate sufficient funds to meet its working capital requirements is dependent upon its ability to develop additional sources of capital, develop apps and websites, generate servicing income, and ultimately, achieve profitable operations (see Note 2).

 

On February 17, 2014, the Company incorporated Moxian CN Group Limited (“Moxian CN Samoa”) under the laws of Samoa.

 

On February 21, 2014, Moxian acquired Moxian Group Limited (“Moxian BVI”), together with its subsidiaries, Moxian (Hong Kong) Limited (“Moxian HK”), Moxian Technology (Shenzhen) Co., Ltd. (“Moxian Shenzhen”), and Moxian Malaysia Sdn. Bhd.(“Moxian Malaysia”) through our wholly owned subsidiary, Moxian CN Samoa from Rebel Group, Inc. (“REBL”), a company incorporated in the State of Florida and of which our previous Chief Executive Officer, Tan Meng Dong, is a promoter as the term is defined under Rule 405 of Regulation C promulgated under the Securities Act, by entering into a License and Acquisition Agreement (the “License and Acquisition Agreement”) in consideration of $1,000,000 (“Moxian BVI Purchase Price”). As a result, Moxian BVI, together with its subsidiaries, Moxian HK, Moxian Shenzhen, and Moxian Malaysia, became the Company’s subsidiaries. Under the License and Acquisition Agreement, REBL also agreed to grant us the exclusive right to use REBL’s intellectual property rights (collectively, the “IP Rights”) in Mainland China, Malaysia, and other countries and regions where REBL conducts its business (the “Licensed Territory”), and the exclusive right to solicit, promote, distribute and sell REBL products and services in the Licensed Territory for five years (the “License,”) and in consideration of such License, the Company agreed to pay to REBL (i) $1,000,000 as license maintenance royalty each year commencing on the first anniversary of the date of the License Agreement; and (ii) 3% of the gross profits resulting from the distribution and sale of the products and services on behalf of the Company as an earned royalty.

 

Moxian BVI was incorporated on July 3, 2012 under the laws of British Virgin Islands. REBL owned 100% equity interests of Moxian BVI prior to the closing of the License and Acquisition Agreement, among the Company, Moxian BVI and REBL.

 

Moxian HK was incorporated on January 18, 2013 and became Moxian BVI’s subsidiary on February 14, 2013. Moxian HK is currently engaged in the business of online social media. Moxian HK operates through two wholly owned subsidiaries: Moxian Shenzhen and Moxian Malaysia.

 

Moxian Shenzhen is wholly owned by Moxian HK. Moxian Shenzhen was incorporated on April 8, 2013 and is engaged in the business of internet technology, computer software, commercial information consulting.

 

Moxian Malaysia was incorporated on March 1, 2013 and became Moxian HK’s subsidiary since April 2, 2013. Moxian Malaysia was previously in the business of IT services and media advertising but have ceased operations since June 2015.

 

Shenzhen Moyi Technologies Co., Ltd. (“Moyi”) was incorporated on July 19, 2013 under the laws of the People’s Republic of China and became a variable interest entity (“VIE”) of Moxian Shenzhen on July 15, 2014. Moxian Shenzhen controls Moyi through arrangement that absorbs operations risk, as if Moyi is a wholly owned subsidiary of Moxian Shenzhen.

 

Moxian Technologies (Beijing) Co., Ltd. (“Moxian Beijing”) was incorporated on December 10, 2015 under the laws of the People’s Republic of China and is a wholly owned subsidiary of Moxian Shenzhen. Moxian Shenzhen made an investment of RMB 10 million (approximately USD $1.5 million) in Moxian Beijing during the year ended September 30, 2017.

 

On January 30, 2015, the Company entered into an Equity Transfer Agreement (such transaction, the “Equity Transfer Transaction”) with REBL, to acquire from REBL, 100% of the equity interests of Moxian Intellectual Property Limited, a company incorporated under the laws of Samoa and a wholly-owned subsidiary of REBL (“Moxian IP Samoa”) for $6,782,000. Moxian IP Samoa owns all the intellectual property rights relating to the operation, use and marketing of the Moxian Platform, including all of the trademarks, patents and copyrights that are used in the Company’s business. As a result of the Equity Transfer Transaction, Moxian IP Samoa became a wholly-owned subsidiary of the Company.

  

5
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Organization and Corporate Developments (Continued)

 

On May 24, 2016, the Board of approved a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-2 (the “Reverse Stock Split”). The Reverse Stock Split was effective on June 20, 2016 (the “Effective Date”). Simultaneously with the Reverse Stock Split, the number of shares of the Company’s authorized Common Stock was reduced from 500,000,000 shares to 250,000,000 shares without changes in par value per share.

 

On November 14, 2016, the Company announced the completion of a public offering of 2,501,250 shares of its common stock at a public offering price of $4.00 per share. The gross proceeds from the offering were approximately $10,005,000 before deducting placement agents’ commissions and other offering expenses, resulting in net proceeds of approximately $8.5 million. In connection with the offering, the Company’s common stock began trading on the NASDAQ Capital Market beginning on November 15, 2016 under the symbol “MOXC”.

 

On December 18, 2017, the Company entered into a Tripartite Agreement with the original shareholders of Moyi and the new shareholders of Moyi wherein the Company agrees to the transfer of the equity interests of Moyi and all related rights, liabilities and obligations under the Moyi Agreements such that the new shareholders stand in place of the old shareholders in all aspects of the Moyi Agreements.

 

On January 30, 2018, a wholly-owned subsidiary of Moxian Shenzhen, Moxian Information Technologies (Shanghai) Co. Ltd. (“Moxian Shanghai”) was incorporated under the laws of the People’s Republic of China.

 

On April 22, 2019, the Company implemented a 1-for-5 reverse share split and concurrently reduced its authorized shares of common stock from 250,000,000 to 50,000,000 (See Note 8 (c) Reverse Share Split).

 

On May 2, 2019, the Company reached an agreement with each of its three loan creditors as of September 30, 2018 regarding settlement of their loans to the Company. Under the agreements, all three loan creditors, which are unrelated parties as of the date of the agreements, would write off a total of $6,243,439 of the loans due from the Company and would accept a total of 720,000 shares of Common Stock in settlement of the remaining balances of the loans. The 720,000 new shares of Common Stock were issued on September, 30, 2019.

 

On May 8, 2019, Woodland Corporation Limited (“Woodland”) was incorporated under the laws of Hong Kong as a wholly-owned subsidiary of Moxian, Inc. Woodland is engaged in the business of investment holding but has yet to commence operations as of December 31, 2020.

 

On June 21, 2019, the Company entered into an Agreement (“the Agreement”) with Joyful Corporation Limited (the “Investor”) whereby the Investor (a) purchased from the Company 2,000,000 shares of the Company’s common stock at a price of $1.25 per share for aggregate gross proceeds of $2,500,000 and (b) acquired from the Company a call option to purchase up to 690,000 shares of the Company’s common stock at a price per share of $1.25; the option expired on September 30, 2019.

 

On September 30, 2019, the Company issued 2,000,000 new shares of its Common Stock to Joyful Corporation Limited, a company incorporated in Samoa, pursuant to an agreement entered into on June 21, 2019. As a result of these new issues during that fiscal year, the number of outstanding shares of Common Stock of the Company increased to 16,191,529 as of September 30, 2019.

 

On December 20, 2019, 369 Technologies (Beijing) Co. Ltd., was incorporated under the laws of the People’s Republic of China as a wholly-owned subsidiary of Woodland Corporation. It has not commenced operations as of December 31, 2020.

 

The Company has two main divisions of business. It is in the O2O (“Online-to-Offline”) business with the development of an online platform for small and medium sized enterprises (“SMEs”) with physical stores to conduct business online, interact with existing customers and obtain new customers. It also operates pursuant to an exclusive agreement, the Games Channel of the state-owned Xinhua News Agency App and is a general agent for all advertisements on this mobile application.

 

However, due to the highly competitive nature of the O2O market, and the slow development of its products, the Company has incurred losses since inception. By September 30, 2018, the Company had run out of funds and some of the major shareholders of the Company were not prepared to give further financial support. The Company decided to continue its operations in the digital advertising business but temporarily halt the operation of its App until its financial situation improved.

 

2. Summary of principal accounting policies

 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and reflect the activities of the following subsidiaries and VIE: Moxian CN Samoa, Moxian BVI, Moxian HK, Moxian Beijing, and Moxian IP Samoa. All inter-company transactions and balances have been eliminated in the consolidation. All other subsidiary companies and the sole VIE, Moyi, have been inactive since September 30, 2018.

 

The unaudited interim condensed consolidated financial information as of December 31, 2020 and for the three months ended December 31, 2020 and 2019 have been prepared, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited interim condensed consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the fiscal year ended September 30, 2020, previously filed with the SEC on January 14, 2021.

 

6
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Summary of principal accounting policies (Continued)

 

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s unaudited condensed consolidated financial position as of December 31, 2020 and of its unaudited condensed consolidated results of operations for the three months ended December 31, 2020 and 2019, and of its unaudited condensed consolidated cash flows for the three months ended December 31, 2020 and 2019, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

 

The following assets and liabilities of the VIE, which has been dormant since September 30, 2018, are included in the accompanying consolidated financial statements of the Company as of December 31, 2020 and September 30, 2020:

 

   December 31, 2020   September 30, 2020 
         
Current assets  $            -   $            - 
Non-current assets   -    - 
Total assets  $-   $- 
           
Current liabilities  $-   $- 
Non-current liabilities   -    - 
Total liabilities  $-   $- 

 

Reclassification

 

Certain prior period amounts have been reclassified to conform to the current period presentation.

 

Going Concern

 

As explained in Note 1, the Company has been restricted to a single line of business since September 30, 2018.

 

In assessing the Company’s liquidity and its ability to continue as a going concern, 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.

 

If the Company is unable to obtain the necessary additional capital on a timely basis and on acceptable terms, it will be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures. Any of these factors would have a material adverse effect on its business, prospects, financial condition and results of operations and raise substantial doubts about the ability of the Company to continue as a going concern. The consolidated financial statements for the periods ended December 31, 2020 and September 30, 2020 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from the inability of the Company to continue as a going concern.

 

7
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Summary of principal accounting policies (Continued)

 

Risks and Uncertainties

 

The Company’s operations are substantially carried out in the People’s Republic of China (“PRC”). Accordingly, the Company’s business, financial condition and results of operations may be substantially influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

 

Since September 30, 2018 the Company’s operations have been carried out in its Beijing subsidiary, Moxian Beijing, whereas the intermediate holding company in Hong Kong, Moxian HK, provides support for the treasury and corporate functions. All other companies of the Group are dormant and have no business operations.

 

Fair value of financial instruments

 

The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1-Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect management’s assumptions based on the best available information.

 

The carrying value of cash and cash equivalents, restricted cash, prepayments, deposits and other receivables, Value added tax recoverable, accruals and other payables, loans from related parties and stock subscription payable approximate their fair values because of the short-term nature of these instruments.

 

Use of estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the accompanying unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include but not limited to, useful lives of property and equipment, intangible assets valuation, inventory valuation and deferred tax assets. Actual results could differ from those estimates.

 

8
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Summary of principal accounting policies (Continued)

 

Property and Equipment, net

 

Property and equipment are recorded at cost less accumulated depreciation and impairment. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives as follows:

 

  Electronic equipment 3-6 years
  Furniture and fixtures 3-6 years
  Leasehold improvements Shorter of estimated useful life or term of lease

 

Impairment of long-lived assets

 

The Company classifies its long-lived assets into: (i) computer and office equipment; (ii) furniture and fixtures, (iii) leasehold improvements, and (iv) finite-lived intangible assets.

 

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary.

 

The Company makes various assumptions and estimates regarding estimated future cash flows and other factors in determining the fair values of the respective assets. The assumptions and estimates used to determine future values and remaining useful lives of long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as the Company’s business strategy and its forecasts for specific market expansion.

 

Due to the continuing losses from operations with minimal revenues, the Company recorded a valuation reserve against its remaining intangible assets in 2018.

 

9
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Summary of principal accounting policies (Continued)

 

Revenue recognition

 

The Company currently recognizes revenue from the sale of merchandise through its online platforms. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Revenue is recorded on a gross basis, net of surcharges and value added tax (“VAT”). The Company recorded revenue on a gross basis because the Company has the following indicators for gross reporting: it is the primary obligor of the sales arrangements, is subject to inventory risks of physical loss, has latitude in establishing prices, has discretion in suppliers’ selection and assumes credit risks on receivables from customers.

 

Revenue from advertising is recognized as advertisements are displayed. Revenue from software development services comprises revenue from time and material and fixed price contracts. Revenue from time and material contracts are recognized as related services are performed. Revenue on fixed price contracts is recognized in accordance with percentage of completion method of accounting.

 

Income taxes

 

The Company utilizes ASC Topic 740 (“ASC 740”) “Income taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC 740 “Income taxes” clarifies the accounting for uncertainty in tax positions. This interpretation requires that an entity recognizes in the unaudited condensed consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the unaudited consolidated statements of operations and comprehensive losses. The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of December 31, 2020 and September 30, 2020, the Company did not have any unrecognized tax benefits. The Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months.

 

As of December 31, 2020, the tax years ended December 31, 2011 through December 31, 2019 for the Company’s PRC entities remain open for statutory examination by the PRC tax authorities.

 

Foreign currency transactions and translation

 

The reporting currency of the Company is United States Dollars (the “USD”) and the functional currency of Moxian Beijing is Renminbi (the “RMB”) as China is the primary economic environment in which they operate. The functional currency of Moxian HK is the Hong Kong Dollar (the “HKD”).

 

10
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Summary of principal accounting policies (Continued)

 

Foreign currency transactions and translation (continued)

 

For financial reporting purposes, the financial statements of Moxian Beijing and Moxian HK, which are prepared using their respective functional currencies, are translated into the reporting currency, USD, so to be consolidated with the Company’s. Monetary assets and liabilities denominated in currencies other than the reporting currency are translated into the reporting currency at the rates of exchange ruling at the balance sheet date. Revenues and expenses are translated using average rates prevailing during the reporting period. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity (deficiency). Transaction gains and losses are recognized in the unaudited consolidated condensed statements of operations and comprehensive loss.

 

The exchange rates applied are as follows:

 

Balance sheet items, except for equity accounts  December 31,
2020
   September 30,
2020
 
RMB:USD   6.5401    6.8141 
HKD:USD   7.7521    7.7502 

 

Items in the unaudited condensed consolidated statements of operations and comprehensive loss, and unaudited condensed consolidated statements of cash flows

 

   Three Months Ended
December 31,
 
   2020   2019 
RMB:USD   

6.6222

    

7.0427

 
HKD:USD   

7.7517

    7.8249 

 

Research and Development

 

Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other related expenses associated with product development. Research and development expenses also include third-party development, programming costs, and localization costs incurred to translate software for local markets. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached. Once technological feasibility is reached, such costs are capitalized and amortized as part of the cost of revenue over the estimated lives of the product.

 

11
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Summary of principal accounting policies (Continued)

 

Recent accounting pronouncements

 

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The provisions of this ASU are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

 

In December 2019, the FASB issued ASU 2019-12: Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 clarifying and amending existing guidance. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

 

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. The provisions may be adopted prospectively or retrospectively. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

 

In August 2018, the FASB issued ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendments require additional disclosure for the weighted-average interest crediting rates, a narrative description of the reasons for significant gains and losses, and an explanation of any other significant changes in the benefit obligation or plan assets. The amendment removes disclosure requirement for accumulated other comprehensive income expected to be recognized over the next year, information about plan assets to be returned to the entity, and the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The ASU does not amend the interim disclosure requirements of ASC 715-20. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820 to add and remove disclosure requirements related to fair value measurement. The amendments include new disclosure requirements for changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The amendments eliminated disclosure requirements for amount of and reasons for transfers between Level 1 and Level 2, valuation processes for Level 3 fair value measurements, and policy for timing of transfers between levels of the fair value hierarchy. In addition, the amendments modified certain disclosure requirement to provide clarification or to promote appropriate exercise of discretion by entities. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05“Financial Instruments-Credit Losses”, ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) to clarify and address certain items related to the amendments in ASU 2016-13. Topic 326 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

 

12
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

3. Account Receivable

 

The Company had a major account receivable, that of Beijing Bi Er Culture Communication Limited, a limited company based in Beijing, for which the Company provided advertising and other support services under a Strategic Co-operative Agreement signed in August 2019. The balance as of December 31, 2020 is $1,345,080 after making a provision for doubtful debt of $176,680 (September 30, 2020: Nil).

 

4. Share Subscription Receivable

 

On September, 30, 2019 the Company issued 2,000,000 new shares of Common Stock to a Joyful Corporation Limited, (“Joyful”) a Samoa-based company at a price of $1.25 per share, for cash with total proceeds of $2.5 million. Of this amount, a sum of $400,000 was deposited as an advance upon the signing of the Share Subscription Agreement.

 

Over the course of the year to September 30, 2020, various creditors of the Company had agreed to assign their receivables from the Company to Joyful which, in turn offset these amounts against the appropriate share subscription amounts due to the Company for the shares issued. The total amounts agreed to be offset in this manner was $512,412.

 

The amount for Share Subscription Receivable has not changed since September 30, 2020 whilst negotiations continued in respect of other parties for a similar arrangement of a set-off between three indebted parties. See Note 11(b) on Subsequent Events.

 

5. Cessation of the Mobile Application part of business and the consequential effects on the Balance Sheet

 

The Company ceased the part of its business associated with the mobile application in the year ended September 30, 2018. As a result, as of that date, it had fully provided for all its related business assets as of September 30, 2018. There have been no movements since as the business had not been re-activated. Therefore, the fully written down value of the assets remain unchanged as of December 31, 2020 and September 30, 2020, is as follows:

 

(a) Prepayments, deposits and other receivables

 

   December 31,
2020
   September 30,
2020
 
         
Prepayments to suppliers  $567,934   $567,934 
Rental and other deposits   341,674    341,674 
Employee advances and others   32,240    32,240 
Sub total   941,848    941,848 
Less: allowance for doubtful accounts   (941,848)   (941,848)
Prepayments, deposits and other receivables, net  $-   $- 

 

(b) Property and equipment, net

 

   December 31,
2020
   September 30,
2020
 
         
Electronic equipment  $2,319,545   $2,319,545 
Furniture and fixtures   70,596    70,596 
Leasehold improvements   263,609    263,609 
Total property and equipment   2,653,750    2,653,750 
Less: Accumulated depreciation and amortization   (2,653,750)   (2,653,750)
Total property and equipment, net  $-   $- 

 

(c) Intangible assets

 

   December 31,
2020
   September 30,
2020
 
         
IP rights  $1,410,335   $1,410,335 
Other intangible assets   394,883    394,883 
    1,805,218   $1,805,218 
Less: accumulated amortization   (1,805,218)   (1,805,218)
Net intangible assets  $-   $- 

 

13
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

6. Accruals and other payables

 

   December 31,
2020
   September 30,
2020
 
         
Salaries payable  $83,061   $61,761 
Directors’ fees   

435,750

    398,250 

Other payables and accrued expenses

   

434,565

    

330,006

 
Other provisions   

735,328

    

735,328

 
  $

1,718,655

   $

1,535,335

 

 

7. Loans payable

 

   December 31, 2020   September 30, 2020 
         
Tang Junsheng (“Mr. Tang”)  $321,096   $308,185 
Others  $61,161   $51,364 
Total  $382,257   $359,549 

 

14
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

8. Income taxes

 

The Company and its subsidiaries file separate income tax returns.

 

The United States of America

 

Moxian is incorporated in the State of Nevada in the U.S. and is subject to U.S. federal corporate income taxes. The State of Nevada does not impose any state corporate income tax. As of December 31, 2020, future net operation losses of approximately $8.9 million are available to offset future operating income through 2036.

 

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 24.5% for our fiscal year ending September 30, 2018, and 21% for subsequent fiscal years. Accordingly, we have to remeasure our deferred tax assets on net operating loss carryforward in the U.S at the lower enacted cooperated tax rate of 21%. However, this remeasurement has no effect on the Company’s income tax expenses as the Company has provided a 100% valuation allowance on its deferred tax assets previously.

 

Additionally, the 2017 Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to remeasure all U.S. deferred income tax assets and liabilities for temporary differences and NOL carryforwards and recorded one-time income tax payable to be paid in 8 years. However, this one-time transition tax has no effect on the Company’s income tax expenses as the Company has no undistributed foreign earnings prior to December 31, 2017, as the Company has cumulative foreign losses as of December 31, 2020.

 

British Virgin Islands

 

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

 

Hong Kong

 

Moxian HK is incorporated in Hong Kong and Hong Kong’s profits tax rate is 16.5%. Moxian HK did not earn any income that was derived in Hong Kong for the years ended December 31, 2019 and 2018 and therefore, Moxian HK was not subject to Hong Kong profits tax.

 

Malaysia

 

Moxian Malaysia did not have taxable income for the years ended December 31, 2019 and 2018. The management estimated that Moxian Malaysia will not generate any taxable income in the future.

 

15
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

8. Income taxes (continued)

 

PRC

 

Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax rate of 25%, unless otherwise specified.

 

As of September 30, 2018, the Company had net operating loss carry forwards of approximately of $20.2 million in the PRC tax jurisdiction, which expires in the years 2018 through 2022.

 

Moxian Shenzhen was incorporated in the People’s Republic of China. Moxian Shenzhen did not generate taxable income in the People’s Republic of China for the period from April 8, 2013 (date of inception) to September 30, 2020. Management estimated that Moxian Shenzhen will not generate any taxable income in the future.

 

Moyi was incorporated in the People’s Republic of China. Moyi did not generate taxable income in the People’s Republic of China for the period from July 19, 2013 (date of inception) to December 31, 2020.

 

Moxian Beijing was incorporated in the People’s Republic of China. Moxian Beijing did not generate taxable income in the People’s Republic of China for the period from December 10, 2015 (date of inception) to December 31, 2020.

 

The Company’s effective income tax rates were 0% for the three months ended December 31, 2020 and 2019. Income tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences.

 

   December 31, 2020   December 31, 2019 
U.S. statutory rate   34.0%   34.0%
Foreign income not registered in the U.S.   (34.0)%   (34.0)%
PRC statutory rate   25.0%   25.0%
Changes in valuation allowance and others   (25.0)%   (25.0)%
Effective tax rate   0%   0%

 

Because of the uncertainty regarding the Company’s ability to realize its deferred tax assets, a 100% valuation allowance has been established as of December 31, 2020 and September 30, 2020, respectively.

 

As of December 31, 2020 and September 30, 2020, the valuation allowance was approximately $9.0 million. For the three months ended December 31, 2020 and 2019, there were no increase in the valuation allowance.

 

   December 31, 2020   September 30, 2020 
Deferred tax asset from net operating loss and carry-forwards  $9,032,129   $9,032,129 
Valuation allowance   (9,032,129)   (9,032,129)
Deferred tax asset, net  $-   $- 

 

16
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

9. Capital Stock

 

(a) Reverse Share Split

 

On April 5, 2019, the Board of Directors approved a Split of 1 for 5 which became effective on April 22, 2019. As a result of this reverse stock split, the number of outstanding shares of Common Stock of the Company was reduced from 67,357,222 to 13,471,529. Concurrently, the authorized share capital of the Company was reduced to 50,000,000 shares of Common Stock from 250,000,000 shares.

 

(b) Debt Exchange

 

On May 2, 2019, the Company reached an agreement with each of the three loan creditors as of September 30,2018 regarding settlement of their loans to the Company. (“Debt Exchange”). Under the agreements, the loan creditors, all three loan creditors, which were unrelated parties as of the date of the agreements, would write off a total of $6,243,439 of the loans due from the Company and would accept a total of 720,000 shares of Common Stock at a price of $1.50 per share, in settlement of the remaining balances of the loans. The 720,000 new shares of Common Stock were issued on September 30, 2019.

 

(c) New Share Placement

 

On June 21, 2019, the Company entered into an Agreement with Joyful Corporation Limited (the “Investor”) a company incorporated in Samoa whereby the Investor would (a) purchase from the Company 2,000,000 shares of the Company’s Common Stock at a price of $1.25 per share for aggregate gross proceeds of $2,500,000 and (b) acquire from the Company a call option to purchase up to 690,000 shares of the Company’s Common Stock at a price per share of $1.25, which option expired unexercised on September 30, 2019.

 

The shares were issued to Joyful Corporation on September 30, 2019 by which date a sum of $400,000 had been received by the Company.

 

(d) Public Offering Warrants

 

In connection with and upon closing of the Public Offering on November 14, 2016, the Company issued warrants equal to four percent (4%) of the shares issued in the Public Offering, totalling 100,050 units to the placement agents for the offering. The warrants carry a term of five years and shall be exercisable at a price equal to $4.60 per share. Management determined that these warrants meet the definition of a derivative under ASC 815-40, however, they fall under the scope exception which states that contracts issued that are both (a) indexed to its own stock; and (b) classified in stockholders’ equity are not considered derivatives. The warrants were recorded at their fair value on the date of grant as a component of stockholders’ deficiency.

 

The aggregated fair value of the Public Offering Warrants on November 14, 2016 was $280,042. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying stock of $4.09; risk free rate of 1.66%; expected term of 5 years; exercise price of the warrants of $4.60; volatility of 90.7%; and expected future dividends of Nil. As of December 31, 2020, 100,060 shares of warrants were issued and outstanding; and none of the warrants has been exercised.

 

17
 

 

MOXIAN, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

10. Commitments and contingencies

 

Operating Lease

 

The Company leases a number of properties under operating leases. Rental expenses under operating leases for the three months ended December 31, 2020 and 2019 were $56,522 and $63,250, respectively. As of December 31, 2020 the Company was not obligated under non-cancellable operating leases minimum rentals.

 

Legal Proceedings

 

As of December 31, 2020, Beijing Moxian is under a local court order to repay RMB 2,220,000 (about $323,000) to an unrelated third party, Junsheng Tang (See Note 7 and Note 11(a)). Other than this, the Company is not aware of any material outstanding claim and litigation against it.

 

11. Subsequent events

 

Subsequent events

 

(a) Loan payable to Mr. Tang

 

In August 2020, Junsheng Tang filed a civil action against Beijing Moxian for the recovery of RMB 2,100,000 (about $321,096) which was the remaining part of a loan that he advanced to Beijing Moxian in January 2019. Mr. Tang was awarded judgment by the People’s Court in Fuzhou, China and Beijing Moxian was ordered to pay Mr. Tang RMB 2,220,000, (about $323,000) inclusive of interest and costs. On December 11, 2020, Mr. Tang assigned his debt from Beijing Moxian to Beijing Bi Er, who undertook to settle the full amount under a Debt Assignment Agreement. This Agreement became effective in January 2021.

 

(b) Subscription Receivable

 

In return for undertaking to settle the amount owed by Beijing Moxian to Mr. Tang, as described in (a) above, Beijing Bi Er would receive shares in the Company which had been issued to Joyful in September 2019. As a result, the Subscription Receivable, which is due from Joyful, would be reduced by a corresponding amount ($339,444). Other creditors which the Company owed up to $375,750 also agreed to a similar set-off. This, together with cash received from Joyful, totalling $114,574, resulted in the Share Subscription Receivable being fully settled as of January 14, 2021.

 

(c) Merger with Btab Group, Inc (“Btab”)

 

On August 27, 2020, the Company signed a Share Exchange Agreement with Btab, a company incorporated in Delaware, which is subject to the satisfaction of a few conditions precedent. As of the date of this Report, the conditions have yet to be satisfied and the Share Exchange Agreement has not been consummated.

 

(d) Market Value Rule Deficiency

 

On October 4, 2020 the Company received a notice (the “Notice”) from the Staff of Nasdaq notifying the Company that for the last 30 consecutive business days prior to the date of the Notice, the market value of the Company’s listed securities was less than $35 million, which does not meet the requirement for continued listing on The Nasdaq Capital Market, as required by Listing Rule 5550(b)(2) (the “Market Value Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq has provided the Company with 180 calendar days, or until May 3, 2021, to regain compliance with the Market Value Rule.

 

If the Company regains compliance with the Market Value Rule, Nasdaq will provide written confirmation to the Company and close the matter. If the Company does not regain compliance with this requirement by May 3, 2021, the Company will receive written notification from the Staff that its securities are subject to delisting. At that time, the Company may appeal the delisting determination to a Hearing Panel.

 

18
 

 

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.

 

Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

 

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

The “Company,” “we,” “us,” “our” or “Moxian” are references to the combined business of

 

(i) Moxian, Inc., a company incorporated under the laws of Nevada;

 

(ii) Moxian CN Group Limited, a company incorporated under the laws of Independent State of Samoa (“Moxian CN Samoa”),

 

(iii) Moxian Intellectual Property Limited, a company incorporated under the laws of Independent State of Samoa (“Moxian IP Samoa”);

 

(iv) Moxian Group Limited, a company incorporated under the laws of British Virgin Islands (“Moxian BVI”),

 

(v) Moxian (Hong Kong) Limited, a limited liability company incorporated under the laws of Hong Kong (“Moxian HK”),

 

(vi) Moxian Technologies (Shenzhen) Co., Ltd., a company incorporated under the laws of People’s Republic of China (“Moxian Shenzhen”),

 

(vii) Moxian Malaysia Sdn.Bhd. (“Moxian Malaysia”), a company incorporated under the laws of Malaysia (“Moxian Malaysia”),

 

(viii) Moxian Technologies (Beijing) Co., Ltd., a company incorporated under the laws of People’s Republic of China (“Moxian Beijing”) and

 

(ix) Moxian Technologies (Shanghai) Co. Ltd., a company incorporated under the laws of the Peoples’ Republic of China (“Moxian Shanghai”) and

 

(x) Shenzhen Moyi Technologies Co. Ltd., a contractually controlled affiliate of Moxian Shenzhen formed under the laws of People’s Republic of China (“Moyi”).
   
(xi) Woodland Corporation Limited, a company incorporated under the laws of Hong Kong SAR (“Woodland”)
   
(xii) Sanliujiu Technologies (Beijing) Co. Ltd., a company incorporated under the laws of the People’s Republic of China

 

Overview

 

We have been in the O2O (“Online-to-Offline”) business since the inception of the Company until the fiscal year ended September 30, 2018. We developed an online platform for small and medium sized enterprises (“SMEs”) with physical stores to conduct business online, interact with existing customers and obtain new customers. We developed products and services designed to allow our clients to conduct targeted advertising campaigns and promotions and attract potential customers.

 

However, due to a highly competitive market, and the slow development of our products, we have continued to incur losses in every fiscal year since inception. By September 30, 2018, we had run out of funds and the shareholders of the Company were not prepared to give further financial support. The Company decided to continue its operations in digital advertising but temporarily halt the operation of its App until its financial situation improved. The Company has since operated as a general agent for the Xinhua App, of which the Company had exclusive agreements to operate the Games Channel on its app. This business requires less manpower and funding levels. The Company currently employs 11 individuals, of which 3 are in marketing and business development and the rest in administration and finance.

 

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Going Concern

 

In assessing the Company’s liquidity and its ability to continue as a going concern, 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.

 

If the Company is unable to obtain the necessary additional capital on a timely basis and on acceptable terms, it will be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures. Any of these factors would have a material adverse effect on its business, prospects, financial condition and results of operations and raise substantial doubts about the ability of the Company to continue as a going concern. The consolidated financial statements for the periods ended December 31, 2020 and 2019 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from the inability of the Company to continue as a going concern.

 

For the three months ended December 31, 2020 compared with the three months ended December 31, 2019

 

The Company recorded no revenue in the quarter ended December 31, 2020 because its major client in digital advertising, Beijing Bi Er, which is an e-Sports company, could not hold any large-scale events in China with mass participation by fans, enthusiast and the general public due to the fears of a COVID-19 outbreak. Although COVID-19 infections were generally under control in China, there were periodic clusters of the virus infections from time to time. The Company continued to maintain a skeletal staff of 11 but outsourced specialist services whenever required.

 

In the quarter ended December 31, 2019, the Company developed various initiatives for Beijing Bi Er and could bill them on several projects.

 

Critical Accounting Policies and Estimates

 

Use of estimates

 

The preparation of the unaudited condensed consolidated 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 disclosures of contingent assets and liabilities at the date of the accompanying unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include but not limited to, useful lives of property and equipment, intangible assets valuation, inventory valuation and deferred tax assets. Actual results could differ from those estimates.

 

Recently Issued Accounting Pronouncements

 

Reference is made to the “Recent Accounting Pronouncements” in Note 2 to the Unaudited Condensed Consolidated Financial Statements included in this Report for information related to new accounting pronouncements, as well as the related impact of those recent accounting pronouncements.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2020, we did not have any off-balance sheet arrangements.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of December 31, 2020, the Company carried out an evaluation, under the supervision of and with the participation of management, including our Company’s chief executive officer, of the effectiveness of the design and operation of our Company’s disclosure controls and procedures under the 2013 COSO framework. Based on the foregoing, the chief executive officer concluded that our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were ineffective in timely alerting management to information required to be included in the Company’s periodic filings to the Securities and Exchange Commission filings.

 

Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2020, the Company’s disclosure controls and procedures were ineffective due to the Company’s lacks of formal documented controls and procedures applicable to all officers and directors to disclose the required information under the Exchange Act.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. It is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel. The objective is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

 

  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

 

  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

 

  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by the internal controls over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

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As of December 31, 2020, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in by the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 Internal Control Integrated Framework and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules. This was primarily due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls. These deficiencies may be considered to be material weaknesses.

 

Identified Material Weakness

 

A material weakness in internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

 

Management identified the following material weaknesses during its assessment of internal controls over financial reporting as of December 31, 2020:

 

  (1) A lack of understanding of the requirements of NASDAQ, made worse by a poor command of the English language at the senior levels of management.
     
  (2) As a small company with limited staff, the CEO is often directly involved in operational decisions which sometimes exceeded his limits of authority and communication between him and the Board of Directors was critical to ratify such decisions
     
  (3) There are no written policies and procedures covering such operational activities such as sales and procurement due to a lack of staff stability, especially at senior management levels.
     
  (4) Chinese accounting practices require standard official invoices to be issued and paid before they can be recognized in the accounting records leading to cut-off issues at every period end, so special procedures have to be adopted to ensure proper accounting.

 

As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control—Integrated Framework issued by COSO (2013 framework). However, management does not believe that any of our annual or interim financial statements issued to date contain a material misstatement as a result of the aforementioned weaknesses in our internal control over financial reporting.

 

Management’s Remediation Initiatives

 

To mediate the identified material weaknesses and other deficiencies, we have introduced the following measures:

 

  (1) Ensure that the Audit Committee meets regularly and review all related party transactions to ensure that they are in the best interest of the Company.
     
  (2) Hold monthly board meetings with telephone participation by those directors unable to attend in person.
     
  (3)

Maintain the composition of the Board since 2019 to ensure continuity and familiarity of the board members as regards the business of the Company

     
  (4) Design and monitor controls over financial reporting, including the introduction of a proper checklist of cut-off procedures to ensure proper accounting of accruals and payables.
     
  (5) Continue to provide training to financial staff on U.S. GAAP and educate management staff and directors on NASDAQ Listing Rules and SEC Reporting Requirements.

 

Changes in internal controls over financial reporting

 

There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS.

 

We face risks related to Novel Coronavirus (COVID-19) which could significantly disrupt our operations, sales and financial results.

 

Our business will be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments will cause disruption to our operations and business activities.

 

As of the date of this Report, the COVID-19 outbreak in China that began in December 2019 is substantially under control. From January 2020, worker absenteeism, quarantines and restrictions on our employees’ ability to work, office closures, and other travel or health-related restrictions in China caused material disruptions in our operations. Travel restrictions remain in place, and there are quarantine measures at various ports of entry as the Chinese economy slowly reopens. Economic activity is expected to be sluggish and our operations are likely to continue to be adversely affected by this lower level of economic activity. However, we have not yet been forced to reduce staffing levels. And we resumed normal operating hours beginning April 1, 2020.  We cannot be certain that we will be able to continue normal operations in the short or long term or that lingering effects of the COVID-19 outbreak in China and elsewhere will not have additional adverse effects on our business and operations.

 

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

 

(a) None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

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ITEM 6. EXHIBITS.

 

 

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SIGNATURES

 

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

 

  Moxian, Inc.
     
Date: February 16, 2021 By: /s/ Hao Qinghu
  Name: Hao Qinghu
  Title: Chief Executive Officer
    (Principal Executive Officer)

 

  Moxian, Inc.
     
Date: February 16, 2021 By: /s/ Tan Wanhong
  Name: Tan Wanhong
  Title: Chief Financial Officer
    (Principal Financial Officer)

 

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