U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number: 333-222288

CAT9 Group Inc.

(Exact name of registrant as specified in its charter)

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

Registrant’s telephone number, including area code: 86-028-85594777 

N/A

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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 ☒   

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 13,November 12, 2019, the issuer had 102,166,400 shares of its common stock issued and outstanding.  

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Contents

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

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

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

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

CAT9 GROUP, INC.and SubsidiariesGroup Inc. & Subsidiary

Notes to Condensed Consolidated Financial Statements

JuneSeptember 30, 2019

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY

Description of business

CAT9 Group Inc., (the “Company”), was incorporated under the laws of the State of Delaware on January 26, 2015. On December 27, 2016, the Company and its wholly-owned subsidiary, CAT9 Holdings Ltd, a company organized under the laws of the Cayman Islands, ("CAT9 Cayman"); CAT9 Cayman's wholly-owned subsidiary, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing CAT9 Industry Company Ltd, a company organized under the laws of the People's Republic of China closed a share exchange transaction pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing CAT9 Industrial Company Ltd.

CAT9 Cayman is a holding company incorporated in August 20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.

Chongqing CAT9 Industrial Company Ltd. is located in Chongqing, PRC and was incorporated under the laws of the PRC on June 26, 2014. Chongqing Field Industrial Company Ltd. operates through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery sales.

 NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CAT9 Group Inc. have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the audited financial statements of CAT9 Group Inc. in our Form 10-K.

The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of JuneSeptember 30, 2019, and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.

The Company's functional currency for Chongqing CAT9 is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in the United States Dollars (“USD”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CAT9 Cayman, and its subsidiaries, including CAT9 Investment China, and Chongqing Field Industrial Company Ltd. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.

Translation Adjustment

For the sixthree and nine months ended JuneSeptember 30, 2192019 and for the year ended December 31, 2018, the accounts of the Chongqing CAT9 were maintained, and its financial statements were expressed, in RMB.  Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the RMB as the functional currency.  According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital.  Transaction gains and losses are reflected in the income statement.

NOTE 3 –INVENTORY

Inventory consist of the following:

NOTE 4 – LOAN PAYABLE

On June 16, 2018, the Company entered a loan agreement with an individual in the amount of $74,500$72,500 (RMB $500,000). The maturity date is June 15, 2019.16, 2020. The loan is unsecured, non-interest bearing.

On July 10, 2018, the Company entered a loan agreement with an individual in the amount of $14,538 (RMB $100,000). The maturity date is July 9, 2019. The loan is unsecured and bears 10% annual interest rate. The loan was paid off in January 2019.

NOTE 5 - RELATED PARTY TRANSACTIONS

Loan payable, related parties

On January 1, 2018, the Company entered into a loan agreement with Sichuan CAT9 Technology, the company under control of Wenfa Sun, the Company’s President, Chief Executive Officer and Chairman. The loan agreement offers the Company $728,262$708,124 (RMB 5,000,000) credit line. The maturity date is December 31, 2018.2019. The loan is unsecured, non-interest bearing. As of JuneSeptember 30, 2019, the balance of the loan is $559,528$372,691 and unused credit line is $168,733.$335,433.

Due to related parties

During the normal course of business, affiliated companies, members, and/or officers may advance the Company funds to pay for certain operating expenses. All advances are unsecured, non-interest bearing and due on demand.

As of June September30, 2019 andDecember 31, 2018, the Company was indebted to related parties that advanced loans to the Company without any formal repayment terms. As of June September30, 2019 andDecember 31, 2018, the Company owed the aforementioned related parties $403,345$415,396 and $330,518, respectively.

NOTE 6 - STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock. As of JuneSeptember 30, 2019, and no shares of preferred stock had been issued.

NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Balance of related after-tax components comprising accumulated other comprehensive income included members’ capital were as follows:

NOTE 8 – SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with our unaudited financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

On May 2, 2016, the Company entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and Meihong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to Meihong "Sanya" Qian.

On May 3, 2016, the sole shareholder of the Company, Chongqing Field Industrial Ltd., ("CQFI") consented to a redemption of its 10,000,000 shares of common stock at a price of $0.0001 per share for an aggregate redemption price of $1,000. As a result of this action by CQFI, management of the Company now control 100% of the issued and outstanding shares.

With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders are the current members of management of the Company. 

Results of Operations

Three months ended JuneSeptember 30, 2019 compared to the three months ended JuneSeptember 30, 2018

Sales Revenue

Sales revenue for the three months ended JuneSeptember 30, 2019, was $1,655,995,$2,208,669, compared to $8,318$28,488 for the three months ended JuneSeptember 30, 2019,2018, an increase of $1,647,677.$2,180,181. During the current quarteryear the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.

Cost of Goods Sold

Cost of goods sold for the three months ended JuneSeptember 30, 2019, was $557,891,$860,496, compared to $4,490$11,955 for the three months ended JuneSeptember 30, 2018, an increase of $553,401.$848,541. The increase in cost of goods is directly related to the increase in sales. Specifically, for the cost of 3L blending oil and the Acer Truncatum Gel Candy.

Operating Expenses

Professional fees were $14,374$4,730 for the three months ended JuneSeptember 30, 2019, compared to $16,201$156 for the three months ended JuneSeptember 30, 2018, a decreasean increase of $1,827 or 11.3%.$4,574.Professional fees consist mostly of legal and audit expense.

Consulting expense was $15,740$15,090 for the three months ended JuneSeptember 30, 2019, compared to $24,713,$55,073 for the three months ended JuneSeptember 30, 2018, a decrease of $8,973$39,983 or 36.3%73%. Consulting expense has decreased due to decreased use of one of the Company’s consultants for which they incurred higher fees in the prior period.

General and administrative expense was $622,891$843,813 for the three months ended JuneSeptember 30, 2019, compared to $95,114$116,841 for the three months ended JuneSeptember 30, 2018, an increase of $527,777$726,973 or 554.9%622%.The increase is the result of the hiring of additional salesoverall increase operations including salaries and other support staff as well as other costs associated with the increase in business.wages and marketing expense.

Net Income (Loss)

Net income for the three months ended JuneSeptember 30, 2019, was $445,369,$475,096, compared to a net loss of $131,854$157,529 for the three months ended JuneSeptember 30, 2018. The increase from the net loss to net income is the direct result of the increase in sales.

SixNine months endedJuneSeptember 30, 2019, compared to the sixnine months ended JuneSeptember 30, 2018

Sales Revenue

Sales revenue for the sixnine months endedJune September 30, 2019, was $1,989,246,$4,197,915 compared to $28,427$56,915 for the sixnine months ended JuneSeptember 30, 2018, an increase of $1,960,819.$4,141,000. During the current quarteryear the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.

Cost of Goods Sold

Cost of goods sold for the sixnine months endedJune September 30, 2019, was $744,304,$1,604,800 compared to $14,185$26,140 for the sixnine months ended JuneSeptember 30, 2018, an increase of $730,119.$1,578,660. The increase in cost of goods is directly related to the increase in sales. Specifically, for the cost of 3L blending oil and the Acer Truncatum Gel Candy.

Operating Expenses

Professional fees were $33,929$38,659 for the sixnine months ended JuneSeptember 30, 2019, compared to $56,634$56,790 for the sixnine months ended JuneSeptember 30, 2018, a decrease of $22,705$18,131 or 40.1%32%.Professional fees consist mostly of legal and audit expense. The decrease is the result of decreased audit and legal expense.

Consulting expense was $50,330$65,420 for the sixnine months ended JuneSeptember 30, 2019, compared to $42,023$97,096 for the sixnine months ended JuneSeptember 30, 2018, a decrease of $31,676 or 33%. Consulting expense has decreased due to decreased use of one of the Company’s consultants for which they incurred higher fees in the prior period.

General and administrative expense was $1,716,893 for the nine months ended September 30, 2019 compared to $402,381 for the nine months ended September 30, 2018, an increase of $8,307$1,314,512 or 19.8%.

General and administrative expense was $873,080 for the six months endedJune 30, 2019, compared to $285,540 for the six months ended June 30, 2018, an increase of $587,540 or 205.8%327%.The increase is the result of the hiring of additional sales and other support staff as well as other costs associated with theoverall increase in business.operations including salary and wages and marketing expense.

Net Income (Loss)

Net income for the sixnine months endedJune September 30, 2019, was $287,187,$762,283 compared to a net loss of $367,331$524,860 for the sixnine months ended JuneSeptember 30, 2018. The increase from the net loss to net income is the direct result of the increase in sales.

Liquidity and Capital Resources 

During the sixnine months ended JuneSeptember 30, 2019, we used cash of $463,211 in operating activities, provided $233,198 of cash. We used $572$12,732 in investing activities and hadused net cash of $151,831 provided by$24,970 in financing activities. 

Operating Capital and Capital Expenditure Requirements

Our controlling shareholders expect to advance us additional funding for operating costs in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.

Plan of Operation and Funding

We do not currently engage in enough business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to:

  (i) Filing of Exchange Act reports, and

  (ii) Costs relating to developing our business plan

We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our controlling shareholder and or other means of financing that may be available to us.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

None.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, JuneSeptember 30, 2019. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to a material weakness in our internal control over financial reporting, which is described below.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of JuneSeptember 30, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of JuneSeptember 30, 2019, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended JuneSeptember 30, 2019 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.Exhibits