| Summary of Principal Accounting Policies | 2. Summary of principal accounting policies Basis of presentation and consolidation The accompanying consolidated financial statements
of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
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 and Moxian IP Samoa. All intercompany transactions and balances have been eliminated in the
consolidation. 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. The Company
has retroactively restated all shares and per share data for all the periods presented. In accordance with U.S. GAAP, variable interest
entities (“VIEs”) are generally entities that lack sufficient equity to finance their activities without additional
financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs with which the Company
is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary
is required to consolidate the VIE for financial reporting purposes. Accounting Standards Codification (“ASC”)
810-10 “Consolidation” addresses whether certain types of entities referred to as VIEs, should be consolidated in a
company’s consolidated financial statements. Pursuant to an Exclusive Business Cooperation Agreement by and between Moxian
Shenzhen and Moyi, dated July 15, 2014, Moxian Shenzhen has the exclusive right to provide to Moyi technical and systems support,
marketing consulting services, training for technical personnel and technical consulting services. As payment for these services,
Moyi has agreed to pay Moxian Shenzhen a service fee equal to 100% Moyi’s pre-tax profit. In addition, Moxian Shenzhen will
also absorb losses from Moyi, if any, based on the service agreement. In accordance with the provisions of ASC 810, the Company
has determined that Moyi is a VIE of Moxian Shenzhen and that the Company is the primary beneficiary, and accordingly, the financial
statements of Moyi are consolidated into the results of the Company. The following assets and liabilities of the
VIE are included in the accompanying consolidated financial statements of the Company as of September 30, 2020 and 2019:
September 30, 2020 September 30, 2019
Current assets $ - $ -
Non-current assets - -
Total assets $ - $ -
Current liabilities $ - $ -
Non-current liabilities - -
Total liabilities $ - $ - 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 September 30, 2020. the Company only had a net shareholders’
equity of about $400,000, having incurred losses since inception and with only one subsidiary in business operation due to the
lack of working capital. Going Concern On November 14, 2016,
the Company completed its initial public offering (“IPO”) with net proceeds of $8.50 million after deducting placement
agents’ commission and other offering costs, which helped the Company’s cash flow in fiscal 2017. However, as of the
date of this report, the Company has utilized all of the IPO proceeds and is not generating sufficient revenue to support its operations.
The Company hopes to fund its cash flow shortfalls as follows:
● Financial support commitments from the Company’s major stockholders
● Seeking additional public and/or private issuance of securities. 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 years ended September 30,
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. 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 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 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. Fair value of financial instruments 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, provision for doubtful accounts, intangible
assets valuation, inventory valuation, value added recoverable valuation and deferred tax assets valuation. Actual results could
differ from those estimates. Cash and cash equivalents The Company considers all short-term highly
liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less to
be cash equivalents. As of September 30, 2020 and 2019, the Company had only small balances in its bank accounts. Inventories Inventories consist of merchandise and are
stated at the lower of cost or market value, and cost is calculated on the moving weighted average basis. The cost of inventories
comprises all costs of purchases and other costs incurred in bringing the inventories to their present condition. As of September
30, 2020 and 2019, the Company had no inventories. Prepayments, deposits
and other receivables Prepayments and deposits
represent amounts advanced to suppliers. The suppliers usually require advance payments or deposits when the Company makes purchase
or orders service and the prepayments and deposits will be utilized to offset the Company’s future payments. Other receivables
mainly consist of various cash advances to employees for business needs. These amounts are unsecured, non-interest bearing and
generally short-term in nature. Allowances are recorded when utilization and
collection of amounts due are in doubt. Delinquent prepayments, deposits and other receivables are written-off after management
has determined that the likelihood of utilization or collection is not probable and known bad debts are written off against the
allowances when identified. 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 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 Intangible assets,
net Intangible assets, comprising
Intellectual property rights (“IP rights”) and software, which are separable from property and equipment, are stated
at cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives
of 3- 10 years. 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 recognized impairment losses of $3,009,732 for the IP rights and other
intangible assets during the year ended September 30, 2017 resulting in the IP rights and other intangible assets having a nil
value as of September 30, 2020 and 2019. 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 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 evaluate 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. The Company does not anticipate any
significant increase to its liability for unrecognized tax benefit within the next 12 months. As of September 30,
2020, the tax years ended December 31, 2011 through to 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 Shenzhen, Moyi and Moxian
Beijing is 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, 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 in stockholders’ deficiency. Translation losses of $ and $ are recognized in
the statements of operations and comprehensive loss for the years 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:
Year Ended September 30,
2020 2019
RMB:USD 7.0072 6.8766
HKD:USD 7.7746 7.8363 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 products. Gain per share Basic gain per share
is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares
outstanding during the period are included in diluted earnings per share. FASB Accounting Standard
Codification Topic 260 (“ASC 260”), “Earnings Per Share,” requires that employee equity share options,
non-vested shares and similar equity instruments granted to employees be treated as potential common shares in computing diluted
earnings per share. Diluted earnings per share should be based on the actual number of options or shares granted and not yet forfeited,
unless doing so would be anti-dilutive. The Company uses the “treasury stock” method for equity instruments granted
in share-based payment transactions provided in ASC 260 to determine diluted earnings per share. Antidilutive securities represent
potentially dilutive securities which are excluded from the computation of diluted earnings or loss per share as their impact was
antidilutive. Recently Adopted
Accounting Pronouncements In
March 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2016, the
FASB issued ASU 2016-02, Leases (Topic 842) |
