| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of presentation and principles of consolidation The
accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the
Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of CXKJ, its
wholly owned subsidiaries, CX Cayman, CX HK, CX Network, and its VIE, Shenzhen CX. All intercompany transactions and balances
have been eliminated in the consolidation and all necessary adjustments have been made to present the financial statements in
accordance with U.S. GAAP. Use
of estimates The
preparation of 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 disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period including valuation of allowance for
deferred tax assets and useful life of properties and equipment. Actual results could differ from those estimates. Net
loss per common share The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss
per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares
outstanding for the period. At September 30, 2020 and 2019, the Company did not have any dilutive securities and other contracts
that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result,
diluted loss per common share is the same as basic loss per common share for the periods presented. 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-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other the quoted prices that are observable, and inputs derived
from or corroborated by observable market data. Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information. The
carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable, other receivable, prepaid
expenses, current security deposit, accrued liabilities and other payables, and short-term loans approximate their fair market
value based on the short-term maturity of these instruments. Management
believes it is not practical to estimate the fair value of due to related party because the transactions cannot be assumed to
have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available
for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments,
if any, and the associated potential costs. Risks
and uncertainties The
Company’s operations are substantially carried out in the PRC. Accordingly, the Company’s business, financial condition
and results of operations maybe 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. Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts
receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits
are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks
on its cash in bank accounts. Cash
and cash equivalents Cash
and cash equivalents consist of cash on hand and all highly liquid instruments with original maturities of three months or less
when purchased. Accounts
receivable Accounts
receivable primarily represents the cash due from customers, third-party application stores and other payment channels, net of
allowance for doubtful accounts. The Company makes estimates for the allowance for doubtful accounts based upon its assessment
of various factors, including the age of accounts receivable balances, credit quality of third-party application stores and other
payment channels, current economic conditions and other factors that may affect their ability to pay. An allowance for doubtful
accounts is recorded in the period in which a loss is determined to be probable. Provision for doubtful accounts was $2,894 and
$nil for the year ended September 30, 2020 and 2019, respectively. Property
and equipment, net Property
and equipment are recorded at cost less accumulated depreciation and amortization. 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 based on cost, less their estimated residual value, if any, using the straight-line method over the estimated useful
lives as follows:
Office
equipment 3
years
Furniture
and fixtures 3
years Impairment
of long-lived 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. The
Company did not record any impairment charges for the years ended September 30, 2020 and 2019. Advertising
costs Advertising
costs are classified as selling expenses and are expensed in the period incurred and represent online marketing, including fees
paid to search engines, and online and offline marketing. Advertising expense was $nil for both of the years ended September 30,
2020 and 2019. Income
taxes The
Company utilizes ASC Topic 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 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 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 consolidated statements of operations. 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 September 30, 2020 and 2019,
the Company did not have any unrecognized tax benefits. Revenue
recognition Effective
October 1, 2018, the Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers”
(“ASC 606”) using the modified retrospective method. Results for the reporting period beginning after October 1, 2018
are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with
the Company’s historic accounting under Topic 605. Management has determined that the adoption of ASC 606 did not impact
the Company’s previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment
to opening retained earnings. Under
ASC 606, the Company recognizes revenue when a customer obtains control of promised goods, in an amount that reflects the consideration
which the Company expects to receive in exchange for the goods. To determine revenue recognition for arrangements within the scope
of ASC 606, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations
in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. The Company only applies
the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange
for the goods it transfers to the customer. The
Company currently recognizes revenue from application users in the form of membership subscription and à la carte online
credit purchases. Membership subscription is a service package which enables members to enjoy additional functions and privileges.
Members pay in advance, primarily by using a debit card or through mobile app stores, and, subject to certain conditions identified
in the Company’s terms and conditions, all purchases are final and nonrefundable. Fees collected, in advance for membership
subscription, are deferred and recognized as revenue using the straight-line method over the terms of the applicable membership
period, which primarily range from one to three months. Membership subscription revenue is insignificant for the years ended September
30, 2019 and 2018. À la carte online credit purchases are non-refundable and the risk passes to users when users pay for
à la carte features. Revenue from the purchase of à la carte features is recognized upon users paying for the purchase.
In the year ended September 30, 2019, the Company also generated revenue from development and sale of software. Revenue from development
and sale of software is recognized when the software is delivered to and accepted by the customer. 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: is the primary obligor of the sales
arrangements has latitude in establishing prices, has discretion in suppliers’ selection and assumes credit risks on receivables
from customers. Cost
of revenues Cost
of revenues primarily includes bandwidth costs, professional expenses associated with maintenance of mobile platform, and labor
costs. Foreign
currency translation The
reporting currency of the Company is the U.S. dollar. The functional currency of Shenzhen CX and CX Network is the local currency,
the Chinese Renminbi (“RMB”) as PRC is the primary economic environment in which they operate. The functional currency
of CX HK is Hong Kong Dollar (the “HKD”). The Company’s subsidiaries or VIE with functional currency of RMB
translate their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Results
of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated
at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. Translation adjustments
resulting from the process of translating the local currency financial statements into U.S. dollars are included in other comprehensive
income in the statement of stockholders’ equity. The Company does not enter any material transaction in foreign currencies
and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations
of the Company. Accumulated
other comprehensive loss Comprehensive
loss is comprised of net loss and all changes to the statements of stockholders’ deficit, except those due to investments
by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the years
ended September 30, 2020 and 2019 included net loss and unrealized loss (gain) from foreign currency translation adjustments. Research
and development expenses Research
and development expenses include salaries and benefits for research and development personnel, depreciation expenses associated
with the research and development activities, and other related expenses associated with product development. The Company’s
research and development activities primarily consist of the research and development of new features for its mobile platform
and its self-developed mobile applications. The Company has expensed all research and development expenses when incurred. Related
parties Parties
are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control,
are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company,
its management, members of the immediate families of principal owners of the Company and its management and other parties with
which the Company may deal if one party controls or can significantly influence the management or operating policies of the other
to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Operating
leases On
October 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (as amended by ASU 2017-13, 2018-01, 2018-10
& 11, 2018-20, and 2019-01, collectively ASC Topic 842), using the modified retrospective method. The Company elected the
transition method which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the
opening balance of retained earnings in the period of adoption. As a result of electing this transition method, previously reported
financial information has not been restated to reflect the application of the new standard to the comparative periods presented.
The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other
things, allows the Company to carry forward certain historical conclusions reached under ASC Topic 840 regarding lease identification,
classification, and the accounting treatment of initial direct costs. The Company elected not to record assets and liabilities
on its consolidated balance sheet for new or existing lease arrangements with terms of 12 months or less. The Company recognizes
lease expenses for such lease on a straight-line basis over the lease term. The
primary impact of applying ASC Topic 842 is the initial recognition of approximately $15,000 of lease liability and right-of-use
asset on the Company’s consolidated balance sheet as of October 1, 2019, for lease classified as operating lease under ASC
Topic 840, as well as enhanced disclosure of the Company’s leasing arrangement. There is no cumulative effect to accumulated
deficit or other components of equity recognized as of October 1, 2019 and the adoption of this standard did not impact the consolidated
statement of operations and comprehensive loss. The Company does not have finance lease arrangements as of June 30, 2020. See
Note 8 for further discussion. New
accounting pronouncements In
February 2018, the FASB released ASU 2018-2, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income.” This standard update addresses a specific consequence of the Tax Cuts and Jobs Act (the “Tax Act”)
and allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting
from the Tax Act. Consequently, the update eliminates the stranded tax effects that were created as a result of the historical
U.S. federal corporate income tax rate to the newly enacted U.S. federal corporate income tax rate. The Company is required to
adopt this standard in the first quarter of fiscal year 2020, with early adoption permitted. The amendments in this update should
be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal
corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted this ASU in the first quarter of 2020
and the new standard did not have a material impact on the consolidated financial statements. In
August 2018, the FASB issued ASU 2018-13 Disclosure Framework — Changes to the Disclosure Requirements for Fair Value
Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820.
This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments
in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning
after December 15, 2019, with early adoption permitted. The Company adopted this ASU in the first quarter of 2020 and the new
standard did not have a material impact on the consolidated financial statements. In
December 18, 2019, the FASB issued ASU 2019-12, income Taxes — Simplifying the Accounting for Income Taxes serves to simplify
the accounting for income taxes by removing certain following Codification exceptions, including exception to the requirement
to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment.
This guidance will be effective after December 15, 2020, with early adoption permitted. The Company is currently evaluating the
impact of the new guidance and do not expect the adoption of this guidance will have a material impact on the consolidated financial
statements. In
January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities, Investments—Equity Method and Joint Ventures,
and Derivatives and Hedging, which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting
for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.
This guidance will be effective in the first quarter of 2021 on a prospective basis, with early adoption permitted. The Company
is currently evaluating the impact of the new guidance and do not expect the adoption of this guidance will have a material impact
on the consolidated financial statements. |
