| 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 Beijing, and Moxian IP Samoa. All inter-company transactions and balances have been eliminated in the consolidation. All other
subsidiary companies and the sole VIE, Moyi, have been inactive since September 30, 2018. The unaudited interim condensed consolidated financial
information as of March 31, 2020 and for the six months ended March 31, 2020 and 2019 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, 2019, previously filed with the
SEC on January 14, 2020. Basis of presentation (continued) 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, 2021 and of its unaudited condensed consolidated results of operations for the six months ended March 31, 2021
and 2020, and of its unaudited condensed consolidated cash flows for the six months ended March 31, 2021 and 2020, 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, which
has been dormant since September 30, 2018, are included in the accompanying consolidated financial statements of the Company as of March
31, 2021 and September 30, 2019:
March 31, September 30,
Current assets $ - $ -
Non-current assets - -
Total assets $ - $ -
Current liabilities $ - $ -
Non-current liabilities - -
Total liabilities $ - $ - Reclassification Certain prior period amounts
have been reclassified to conform to the current period presentation. Going Concern As explained in Note 1, the Company has had only a single line of business
since September 30, 2018 due to a lack of working capital. 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. 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 March 31, 2020 and September 30, 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 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. Since September 30, 2018 the Company’s operations
have been carried out in its Beijing subsidiary, Moxian Beijing, whereas the intermediate company in Hong Kong, Moxian HK, provides support
for the treasury and corporate functions. All other companies of the Group are dormant and have no business operations. 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. 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, 2021 and September 30, 2020, 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, 2021, the tax years ended December
31, 2011 through December 31, 2020 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 Beijing is Renminbi (the “RMB”) as China is the primary
economic environment in which they operate. The functional currency of Moxian HK is the Hong Kong Dollar (the “HKD”). Foreign currency transactions and translation (continued) For financial reporting purposes, the financial statements
of Moxian Beijing and Moxian HK, 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, September 30,
RMB:USD 6.5527 6.8141
HKD:USD 7.7743 7.7502 Items in the unaudited condensed consolidated statements
of operations and comprehensive loss, and unaudited condensed consolidated statements of cash flows
Six Months Ended
2021 2020
RMB:USD 6.5532 7.0125
HKD:USD 7.7546 7.7928 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 In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers
(Topic 606),” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition
(“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification
on a number of specific issues as well as requiring additional disclosures. 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 existing
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 guidance also requires enhanced disclosures regarding
the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance
may be adopted through either retrospective application to all periods presented in the financial statements (full retrospective approach)
or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance was
revised in July 2015 to be effective for private companies and emerging growth public companies for annual and interim periods beginning
on or after December 15, 2018. These new standards became effective for AESE on January 1, 2019 and were adopted using the modified retrospective
method. The adoption of ASC Topic 606 did not have a material impact on our consolidated financial statements as of the date of adoption,
and therefore a cumulative-effect adjustment was not required. In February 2016, the FASB issued Accounting Standards
Update (“ASU”) 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize the assets and liabilities
that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments
(the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with
a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of
the earliest period presented using a modified retrospective approach. This amendment will be effective for private companies and emerging
growth companies for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December
15, 2021. The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11 “Leases
(Topic 842) Targeted Improvements” in July 2018, and ASU No. 2018-20 “Leases (Topic 842) - Narrow Scope Improvements for Lessors”
in December 2018. ASU 2018-10 and ASU 2018-20 provide certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02.
ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which
an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening
balance of retained earnings in the period of adoption. We are currently evaluating the impact that this guidance will have on our consolidated
financial statements. In June 2016, the FASB issued ASU No. 2016-13 “Financial
Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04
and ASU 2019-05 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets
held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking
information to calculate credit loss estimates. We will be required to adopt the provisions of this ASU effective on January 1, 2023,
with early adoption permitted for certain amendments. Topic 326 must be adopted by applying a cumulative effect adjustment to retained
earnings. The adoption of Topic 326 is not expected to have a material impact on our consolidated financial statements or disclosures. Recent accounting pronouncements (continued) In August 2016, the FASB issued Accounting Standards
Update (“ASU”) ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”
(“ASU 2016-15”). The new standard will make eight targeted changes to how cash receipts and cash payments are presented and
classified in the statement of cash flows. The new standard for private companies and emerging growth public companies is effective for
fiscal years beginning after December 15, 2018. We adopted this new standard on January 1, 2019. The adoption of ASU 2016-15 did not have
a material impact on our consolidated financial statements or disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles
– Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance simplifies the accounting for goodwill
impairment by eliminating Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires
entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination
by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess
of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step
1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. The new standard is
effective beginning in January 2020, with early adoption permitted. We do not expect the impact of adopting this guidance to be material
to our consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-09, “Codification
Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to certain ASC subtopics including
the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10), Debt - Modifications and Extinguishments
(Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10), Compensation - Stock Compensation - Income Taxes
(Topic 718-740), Business Combinations - Income Taxes (Topic 805-740), Derivatives and Hedging – Overall (Topic 815-10), and Fair
Value Measurement – Overall (Topic 820-10). The majority of the amendments in ASU 2018-09 will be effective in annual periods beginning
after December 15, 2019. The adoption of ASU 2018-09 is not expected to have a material impact on our consolidated financial statements
or disclosures. In August 2018, the FASB issued ASU No. 2018-13, “Fair
Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU
2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the
concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and
losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative
description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in
the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective
date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2018-13 it not expected to have
a material impact our consolidated financial statements. In March 2019, the FASB issued ASU 2019-02, which
aligns the accounting for production costs of episodic television series with the accounting for production costs of films. In addition,
ASU 2019-02 modifies certain aspects of the capitalization, impairment, presentation and disclosure requirements in Accounting Standards
Codification (“ASC”) 926-20 and the impairment, presentation and disclosure requirements in ASC 920-350. This ASU must be
adopted on a prospective basis and is effective for annual periods beginning after December 15, 2020, including interim periods within
those years, with early adoption permitted. We are currently evaluating the impact that this pronouncement will have on our consolidated
financial statements. In December 2019, the FASB issued ASU 2019-12, Income
Taxes – Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing several
exceptions in the current standard and adding guidance to reduce complexity in certain areas, such as requiring that an entity reflect
the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes
the enactment date. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2020, with early adoption permitted. We are currently assessing the impact that adopting this guidance will have on our consolidated
financial statements. |
