| Summary of Principal Accounting Policies | 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 Shenzhen, Moxian Malaysia, Moyi, Moxian Beijing, Moxian Shanghai and Moxian IP Samoa. All intercompany transactions
and balances have been eliminated in the consolidation. The unaudited interim condensed consolidated
financial information as of March 31, 2019 and for the six months ended March 31, 31, 2019 and 2018 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, 2018, previously filed with the SEC on January 15, 2019. 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 March 31, 2019 and its unaudited condensed consolidated results of operations for the six months ended
March 31, 2019 and 2018 , and its unaudited condensed consolidated cash flows for the six months ended March 31, 2019 and 2018,
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 are included in the accompanying consolidated financial statements of the Company as of March 31, 2019 and September 30, 2018:
March 31, 2019 September 30, 2018
Current assets $ $
Non-current assets - -
Total assets $ $
Current liabilities $ 2,043,779 $ 2,043,779
Non-current liabilities - -
Total liabilities $ 2,043,779 $ 2,043,779 Reclassification Certain prior period
amounts have been reclassified to conform to the current period presentation. 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. As of March 31, 2019, the Company’s current liabilities exceeded
the current assets by approximately $8.9 million, its accumulated deficit was approximately $45.8 million and the Company has incurred
losses since inception. On November 10, 2017, the Company and Ms. Liu
Shu Juan, a director of the Company, entered into a convertible loan agreement of $1,000,000 or its RMB equivalent. Pursuant to
the loan agreement, the Company issued an unsecured convertible promissory note, carrying an interest rate of 4.75% per annum and
due in one year. On May 8, 2018, Liu converted the total outstanding of $1,008,068 into 350,023 shares of the Company’s common
stock at a price of $2.88 per share. The conversion price was calculated using the price of daily volume weighted average price
per share for the 20 consecutive business days prior to the conversion. On May 11, 2018, the Company and Ms. Liu entered
into a loan agreement for a line of credit of $4,000,000 or its RMB equivalent, bearing interest of 4.75% per annum and due in
two years. As of December 31, 2018, the line has been fully drawn down and the total outstanding to Ms. Liu is $ 5,032,760. This
amount exceeded the agreed loan of $4,000,000 and is not covered by any agreement. 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 period ended December 31,
2018 and September 30, 2018 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. 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. 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. Restricted cash Restricted cash represents cash held in an
indemnification escrow account pursuant to the financing agreement signed with the placement agents. Under the terms of the placement agreement,
$500,000 in cash funded an escrow account for a period of two years after the completion of the IPO; this amount was recorded as
restricted cash, long-term as of September 30, 2018. On November 9, 2017, $330,000 was released from this escrow account. On January
2, 2019, the remaining $170,000 was released from this escrow account with the approval of the placement agents and the escrow
agents. 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. 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 March
31, 2019 and September 30, 2018 , 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 March 31, 2019, the tax years ended December
31, 2011 through December 31, 2017 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 Shenzhen, Moyi and Moxian Beijing is Renminbi (the
“RMB”) as China is the primary economic environment in which they operate, 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, 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 March 31, 2019 September 30, 2018
RMB:USD 6.7113 6.8686
HKD:USD 7.8494 7.8259
RM:USD 4.0827 4.1370 Items in the unaudited condensed consolidated
statements of operations and comprehensive loss, and unaudited condensed consolidated statements of cash flows
Six Months Ended March 31,
2019 2018
RMB:USD 6.7498 6.6133
HKD:USD 7.8449 7.8081
RM:USD 4.0911 4.1591 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. Recent accounting pronouncements On October 2, 2017, The FASB has issued Accounting
Standards Update (ASU) No. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606),
Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017
EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.” The ASU adds SEC paragraphs to the new
revenue and leases sections of the Codification on the announcement the SEC Observer made at the 20 July 2017 Emerging Issues Task
Force (EITF) meeting. The SEC Observer said that the SEC staff would not object if entities that are considered public business
entities only because their financial statements or financial information is required to be included in another entity’s
SEC filing use the effective dates for private companies when they adopt ASC 606, Revenue from Contracts with Customers, and ASC
842, Leases. This would include entities whose financial statements are included in another entity’s SEC filing because they
are significant acquirees under Rule 3-05 of Regulation S-X, significant equity method investees under Rule 3-09 of Regulation
S-X and equity method investees whose summarized financial information is included in a registrant’s financial statement
notes under Rule 4-08(g) of Regulation S-X. The ASU also supersedes certain SEC paragraphs in the Codification related to previous
SEC staff announcements and moves other paragraphs, upon adoption of ASC 606 or ASC 842. The Company does not expect that the adoption
of this guidance will have a material impact on its unaudited condensed consolidated financial statements. On November 22, 2017, the FASB ASU No. 2017-14,
“Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts
with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 116 and SEC Release 33-10403.”
The ASU amends various paragraphs in ASC 220, Income Statement — Reporting Comprehensive Income; ASC 605, Revenue Recognition;
and ASC 606, Revenue From Contracts With Customers, that contain SEC guidance. The amendments include superseding ASC 605-10-S25-1
(SAB Topic 13) as a result of SEC Staff Accounting Bulletin No. 116 and adding ASC 606-10-S25-1 as a result of SEC Release No.
33-10403. The Company does not expect that the adoption of this guidance will have a material impact on its unaudited condensed
consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02,
“Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income.” The ASU amends ASC 220, Income
Statement — Reporting Comprehensive Income In March 2018, the FASB issued ASU 2018-05
— Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”),
which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”)
that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by
the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related
exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate
internationally. The Company does not believe this guidance will have a material impact on its unaudited condensed consolidated
financial statements. In July 2018, the FASB issued ASU 2018-10,
“Codification Improvements to Topic 842, Leases.” The ASU addresses 16 separate issues which include, for example,
a correction to a cross reference regarding residual value guarantees, a clarification regarding rates implicit in lease contracts,
and a consolidation of the requirements about lease classification reassessments. The guidance also addresses lessor reassessments
of lease terms and purchase options, variable lease payments that depend on an index or a rate, investment tax credits, lease terms
and purchase options, transition guidance for amounts previously recognized in business combinations, and certain transition adjustments,
among others. For entities that early adopted Topic 842, the amendments are effective upon issuance of this Update, and the transition
requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition
requirements will be the same as the effective date and transition requirements in Topic 842. The Company does not believe this
guidance will have a material impact on its unaudited condensed consolidated financial statements. In July 2018, the FASB issued ASU 2018-11 -
Leases (Topic 842): Targeted Improvements. The ASU simplifies transition requirements and, for lessors, provides a practical expedient
for the separation of nonlease components from lease components. Specifically, the ASU provides: (1) an optional transition method
that entities can use when adopting ASC 842 and (2) a practical expedient that permits lessors to not separate nonlease components
from the associated lease component if certain conditions are met. For entities that have not adopted Topic 842 before the issuance
of this Update, the effective date and transition requirements for the amendments in this Update are the same as the effective
date and transition requirements in Update 2016-02. For entities that have adopted Topic 842 before the issuance of this Update,
the transition and effective date of the amendments in this Update are as follows: 1) The practical expedient may be elected either
in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity.
2) The practical expedient may be applied either retrospectively or prospectively. All entities, including early adopters, that
elect the practical expedient related to separating components of a contract in this Update must apply the expedient, by class
of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected. The Company does not
believe this guidance will have a material impact on its unaudited condensed consolidated financial statements. In October 2018, the FASB issued ASU 2018-17
– Consolidation (Topic 810): Targeted Improvements to Related {arty Guidance for Variable Interest Entities. The amendments
in this Update affect reporting entities that are required to determine whether they should consolidate a legal entity under the
guidance within the Variable Interest Entities Subsections of Subtropic 810-10, Consolidation. Overall, including private companies
that have elected the accounting alternative for leasing arrangements under common control. The amendments for the private company
accounting alternative apply to all entities except for public business entities and not-for-profit entities are defined in the
Master Glossary of the FASB Accounting Standards Codification” and employee benefit plans within the scope of Topics 960,962
and 965 on plan accounting. The Company does not believe this guidance will have a material impact on its unaudited condensed consolidated
financial statements. All other recent accounting pronouncements,
up to and including ASU 2018-04 are either concerned with special interest entities such as financial institutions or specific
topics that do not relate to the Company. The Company does not believe the on these topics will have any impact on its unaudited
condensed consolidated financial statements. |
