Introduction
The following discussion of our financial condition and results of operations
should be read in conjunction with our audited consolidated financial statements
and the notes to those consolidated 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 the (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"), (ix) Moxian Technologies (Shanghai) Co. Ltd., ("Moxian
Shanghai") (x) Woodland Corporation Limited ("Woodland"),(xi) 369 Technologies
(Beijing) Co. Ltd. and (xii) Shenzhen Moyi Technologies Co. Ltd., a
contractually controlled affiliate of Moxian Shenzhen formed under the laws of
People's Republic of China ("Moyi")
Financial Condition
As of September 30, 2020, the Company had an accumulated deficit of $40.7
million.
Results of Operations
For the year ended September 30, 2020 compared with the year ended September 30,
2019
The fiscal year ended September 30, 2020 represented the first full year of the
Company's business in digital advertising after having signed a Strategic
Co-operative Agreement with Beijing Bi Er Culture and Communication Co., Ltd.
("Beijing Bi Er") in August 2019. Under the Strategic Co-operative Agreement,
the Company could deploy the resources under the Xinhua app, to help its clients
to obtain better visibility of their corporate identities and access to the
affiliations of Xinhua Art & Media Company Limited, with whom the Company has
had an existing collaborative agreement since 2016.
The COVID-19 outbreak began in Wuhan in Central China in December 2019 and
affected all sectors of the economy in the few months of 2020. By April, due to
the stringent measures taken by the Central Government, it was largely under
control. Recovery was initially slow but gathered momentum as the year
progressed and although there were sporadic outbreaks in some cities, they were
mostly isolated cases and the Chinese economy is expected to continue to
strengthen throughout 2021.
The Company's most significant client, Beijing Bi Er, is in the e-sports
business and their business involves large outdoor events in major cities with
mass participation by the general public. Such events were not encouraged by the
local governments once the COVID-19 outbreak began. However, corporate
advertising and promotion of the e-sports industry could still be carried out.
Staff strength remained stable and operating expenses were kept under control.
In comparison, in the year ended September 30, 2019, the Strategic Co-operative
Agreement was signed in August after protracted negotiations and the client
could not be billed for a lot of work by the year-end.
13
Critical Accounting Policies and Estimates
Fair value of financial instruments
The Company follows the provisions of 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 that reflect management's assumptions
based on the best available information.
The carrying value of cash and cash equivalents, prepayments, deposits and other
receivables, accruals and other payables, loans from related parties and
unrelated party approximate their fair values because of the short-term nature
of these instruments.
Use of estimates
The preparation of the 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 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.
Deferred offering costs
Deferred offering costs consisted principally of legal, underwriting and
registration costs in connection with the IPO of the Company's ordinary shares.
Such costs are deferred until the closing of the offering, at which time the
deferred costs are offset against the offering proceeds.
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, an 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.
14
Revenue recognition
On January 1, 2019, the Company adopted ASC Topic 606, "Revenue from Contracts
with Customers" ("ASC 606"). The core principle of ASC 606 requires that an
entity recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. ASC 606 defines
a five-step process to achieve this core principle and, in doing so, it is
possible more judgment and estimates may be required within the revenue
recognition process than required under U.S. GAAP, including identifying
performance obligations in the contract, estimating the amount of variable
consideration to include in the transaction price and allocating the transaction
price to each separate performance obligation.
The Company adopted ASC 606 for all applicable contracts using the modified
retrospective method, which would have required a cumulative-effect adjustment,
if any, as of the date of adoption. The adoption of ASC 606 did not have a
material impact on the Company's consolidated financial statements as of the
date of adoption. As a result, a cumulative effect adjustment was not required.
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 was recorded on a gross basis, net of surcharges and value added tax
("VAT") of gross sales. 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.
Foreign currency transactions and translation
The reporting currency of the Company is United States Dollars (the "USD"). The
functional currency of Moxian Shenzhen, Moyi and Moxian Beijing is the Renminbi
(the "RMB"). The functional currency of Moxian HK is Hong Kong Dollar (the
"HKD"), and the functional currency of Moxian Malaysia is Malaysia Ringgit (the
"RM").
For financial reporting purposes, the financial statements of Moxian Shenzhen,
Moyi, Moxian Beijing, Moxian HK and Moxian Malaysia, which are prepared using
their respective functional currencies, are translated into the reporting
currency, United States dollar ("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 loss in stockholders' deficiency. A translation
gain of $179,370 and $406,351 are recognized in the statements of operations and
comprehensive income for the year ended September 30, 2020 and 2019,
respectively.
The exchange rates applied are as follows:
Balance sheet items, except for equity accounts September 30, 2020 September 30, 2019
RMB:USD 6.8141 7.1484
HKD:USD 7.7502 7.8391
RM:USD 4.1486 4.1889
Items in the statements of operations and comprehensive loss, and statements
cash flows
Years Ended
September 30,
2020 2019
RMB:USD 7.0072 6.8766
HKD:USD 7.7746 7.8363
15
Recently Issued 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.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements.
© Edgar Online, source Glimpses
ABITS GROUP INC. 
