The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 1 – Nature of Operations and Going Concern
The Company was incorporated in the State of Florida on September 3, 2010 under the name of “mLight Tech, Inc.” (“
MLGT
”). On July 11, 2017, MLGT merged with and into CX Network, Group, Inc., a Nevada corporation and our wholly owned subsidiary ("
CX
"), with CX as the surviving corporation that operates under the name “CX Network Group, Inc.”(the “
Name Change
”), pursuant to an agreement and plan of merger (the "
Merger Agreement
") dated July 3, 2017.
Pursuant to the Merger Agreement, immediately after the effective time of the Merger, the Company’s corporate existence is governed by the laws of the State of Nevada and the Articles of Incorporation and Bylaws of CX (the “
Domicile Change
”), and each outstanding share of MLGT’s common stock, par value $0.0001 per share was converted into 0.0667 outstanding share of common stock of CX, par value $0.0001 per share at a one-for-fifteen reverse split ratio (the “
Reverse Stock Split
”) which resulted in reclassification of capital from par value to capital in excess of par value. Immediately prior to the effectiveness of the reverse stock split, we had 217,300,000 shares of common stock of MLGT issued and outstanding. Immediately upon the effectiveness of the reverse stock split, we have 14,486,670 shares of common stock of CX issued and outstanding. The Company’s Articles of Incorporation provides for 25,000,000 authorized shares of capital stock, consisting of 20,000,000 shares of CX common stock and 5,000,000 shares of preferred stock, par value $0.0001 per share. All share and per share data for fiscal 2017 and comparative periods included within our consolidated financial statements and related footnotes have been adjusted to account for the effect of the Reverse Stock Split.
In connection with the Name Change, Domicile Change, and Reverse Stock Split, the Financial Industry Regulatory Authority assigned the Company a new stock symbol, MLGTD. The Name Change, Reverse Stock Split and Domicile Change took effect at the open of business on July 12, 2017. The new CUSIP number is 12672T 108.
As used herein and except as otherwise noted, the term "Company", "it(s)", "our", "us", "we" and "mLight" shall mean CX Network Group, Inc, mLight Tech, Inc., a Florida corporation, and Ding King Training Institute, Inc., a California corporation ("DKTI"), its wholly-owned subsidiary until March 31, 2017.
mLight Tech, Inc. was incorporated in the State of Florida on September 3, 2010, to provide software solutions that simplify the management of networked personal computers. On October 31, 2013, the Company acquired 100% of the issued and outstanding capital stock of DKTI, a California corporation, in exchange for 166,667 shares of its common stock, par value $0.0001 per share (the “Common Stock”). As a result, DKTI became a wholly-owned subsidiary of the Company. DKTI is the acquirer for financial reporting purposes and mLight is the acquired company. The merger was accounted for as a recapitalization. Subsequent to the merger, the operations of mLight are consolidated with the operations of DKTI. The Company elected to retain September 30 to be its fiscal year end.
On March 31, 2017, the Company entered into a spin-off agreement (the “Spin-Off Agreement”) with DKTI and Todd Sudeck (“Mr. Sudeck”). Pursuant to the Spin-Off Agreement, Mr. Sudeck received all of the issued and outstanding capital stock of DKTI in exchange for 166,667 shares of Common Stock of the Company (the “Shares”) owned by Mr. Sudeck (the “Spin-off”). Immediately after the closing of the Spin-Off, Mr. Sudeck has become the sole equity owner of DKTI and the Company has no further interest in DKTI.
Before the Spin-off, the Company, through DKTI, was in the business of training individuals for a career as a technician in the Automotive Appearance Industry, which includes paint less dent repair, interior restoration, windshield repair, window detailing, odor removal, detailing and alloy wheel repair. The potential students are employees of auto body shops, car rental companies and car dealers as well as entrepreneurs looking to start their own businesses. DKTI is a California state licensed vocational school with the Bureau for Private Post-Secondary Education (BPPE #301591) and authorized to sell business opportunities in the automotive appearance training industry.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 1 – Nature of Operations and Going Concern
(continued)
The financial information presented in these notes to the Company's unaudited consolidated financial statements is for the three months and nine months ended June 30, 2017 and 2016, respectively.
As shown in the accompanying consolidated financial statements, the Company has faced significant liquidity shortages. As of June 30, 2017, the Company's total liabilities exceeded its total assets by $91,160. The Company has a net profit of $41,372 for the nine months ended June 30, 2017 and has recorded an accumulated deficit of $244,810 as of June 30, 2017. The Company has had difficulty in raising capital. On June 30, 2017 and as of the date of this report, due to the Spin-Off Agreement, the Company does not have substantial operations. These factors raise a substantial doubt about the Company's ability to continue as a going concern. If the Company is unable to obtain adequate capital through borrowings or sale of its common stock, it could be forced to cease to exist. The Company cannot provide any assurance that new financing will be available to us on commercially. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 2 – Summary of Significant Accounting Policies
The following summary of significant accounting policies is presented to assist in the understanding of the Company's consolidated financial statements. The consolidated financial statements and notes are the representation of the Company's management who is responsible for their fair presentation. The consolidated financial statements of the Company conform to generally accepted accounting principles in the United States of America (U.S. GAAP).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CX and its wholly-owned subsidiary Ding King Training Institute, Inc. through March 31, 2017, at which date the DKTI subsidiary was spun-off. All intercompany balances and transactions are eliminated in consolidation.
Use of Estimates
The preparation of 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 disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 2 – Summary of Significant Accounting Policies
(continued)
Accounts Receivable
Accounts receivable represent income earned from training provided to students for which the Company has not yet received payment. Payment plans are offered to students to pay off remaining tuition on an installment basis over periods not to exceed one year. Accounts receivable are recorded at the invoiced amount and stated at the amount management expect to collect from balances outstanding at period-end. The Company estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer's ability to pay. The Company recorded bad debt expense of $0 and $19,054 for the three months and nine months ended June 30, 2017, respectively, as compared to bad debt expense of $44,094 and $84,333 for the three months and nine months ended June 30, 2016, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated based on the straight-line method over the estimated useful lives of the related assets as summarized below. Major renewals and betterments are capitalized while maintenance costs are expensed as incurred. On March 31, 2017, immediately after the closing of the Spin-Off, all property and equipment were spun off to DKTI. As the result of the Spin-off, the Company does not have any property and equipment at June 30, 2017. Depreciation and amortization expense for the three months and nine months ended June 30, 2017 was $0 and $1,390, respectively, and depreciation and amortization expense for the three months and nine months ended June 30, 2016 was $763 and $2,224, respectively.
|
Machinery and equipment
|
3-5 years
|
|
|
|
|
|
|
Furniture and office equipment
|
5 years
|
|
Fair value of Financial Instruments and Fair Value Measurements
ASC 820, "Fair Value Measurements and Disclosures", requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 2 – Summary of Significant Accounting Policies
(continued)
Fair value of Financial Instruments and Fair Value Measurements
(continued)
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts payable, accrued liabilities, and short term loans. Pursuant to ASC 820 and ASC 825, "Financial Instruments", the fair value of our cash equivalents is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. The Company had no financial assets or liabilities carried and measured on a non-recurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.
Revenue Recognition
Through March 31, 2017, the Company's tuition packages vary in price according to the different types of training programs purchased by the students. Upon commencement of the courses, the Company recognizes as revenue any deposits previously received, as they are non-refundable upon commencement of the courses. The remaining tuition from the student or the student's employer, which is received upon the commencement of the course or extended credit over a period of one to three months or as agreed upon, is recognized as revenue upon the completion of the training courses. The training course duration is from one to two weeks.
The Company's revenue recognition policy is based on the revenue recognition criteria established under the SEC's Staff Accounting Bulletin No. 104. The criteria and how the Company satisfies each element are as follows: (1) persuasive evidence of an arrangement - the Company and the student or the student's employer (the customer) enters into a signed contract with the Company; (2) delivery has occurred - as noted above, upon the commencement of the course, the deposit is non-refundable per the terms of the signed contract and upon completion of the course, the Company has provided all services to be delivered to the student under the contract; (3) the price is fixed and determinable - the signed contract indicates a fixed dollar amount for the tuition for the courses enrolled by the student; (4) collectability is reasonable assured - the Company receives as payment a deposit and the balance of the tuition before the course is completed, or credit is extended for installment payments, as evidenced by promissory note not to exceed one year.
The Company records licensing revenue by granting an annual exclusive license to sell Dent Tools Direct, USA Inc. ("Dent Tools") merchandise online under the Ding King name and logo on the DKTI website. The Company recognizes licensing revenue ratably monthly as the Company earns revenue and satisfies conditions for recognition of revenues (See Note 7).
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 2 – Summary of Significant Accounting Policies
(continued)
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740,
Income Taxes
. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company follows the provisions of ASC 740-10, "
Accounting for Uncertain Income Tax Positions
." When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Earnings (Loss) Per Common Share
The Company computes net earnings (loss) per share in accordance with ASC 260, "
Earnings per Share
". ASC 260 requires presentation of both basic and diluted net earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. For the three months and nine months ended June 30, 2017 and 2016, there were no potentially dilutive common shares outstanding during the period.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers: Topic 606
and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016 and May 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-12, respectively (ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-12 collectively, Topic 606). Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 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 are required under existing 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, among others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts. The revenue recognition standard affects all entities—public, private, and not-for-profit—that have contracts with customers with certain exceptions. The new revenue recognition standard eliminates the transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. The guidance was originally effective for annual reporting periods of public entities beginning on or after December 15, 2016, including interim periods within that reporting period. For all other entities, the amendments in the new guidance were originally effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. To allow entities additional time to implement systems, gather data and resolve implementation questions, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, in August 2015, to defer the effective date of ASU No. 2014-09 for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans will apply the guidance in FASB ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application will be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities will apply the guidance in FASB ASU No. 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Application will be permitted earlier only as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period, or an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which an entity first applies the guidance in ASU No. 2014-09. The Company current does not generate revenue. The Company will evaluate this guidance to determine the impact it may have on its financial statements.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 2 – Summary of Significant Accounting Policies
(continued)
Recent Accounting Pronouncements
(continued)
In January 2016, the FASB issued ASU 2016-01, “
Financial Instruments - Overall
(Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.
” The main objective of this update is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The new guidance addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company currently does not have any lease agreements. The Company will evaluating this guidance to determine the impact it may have on its financial statements once the Company has lease agreements.
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 – Payroll Taxes
On January 21, 2016, the Company negotiated a settlement with the Internal Revenue Service ("IRS") taxing authority and agreed to a monthly payment of $756 starting March 15, 2016, to pay previously unpaid payroll tax obligations of $18,130 over a period of 24 months. The Company had accrued a total obligation of $44,442 which included an estimate for penalties and interest. The IRS has agreed to waive the charge for penalties and interest, provided the Company submits a written request to the IRS for waiver of penalties and interest. The monthly payment of $756 had been deferred by the IRS pending resolution of the Company's waiver request. Management has reduced the payroll tax liability by $26,312 as a change in estimate in the prior fiscal year. On October 19, 2016, the Company paid IRS $18,806 in full settlement of its unpaid payroll tax obligations.
NOTE 4 – Notes Payable
Notes payable consists of:
|
|
|
June 30,
2017
|
|
|
September 30,
2016
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
Note payable to individual, unsecured, 10% interest, due June 30, 2017
|
|
$
|
-
|
|
|
$
|
50,000
|
|
|
Note payable to individual, unsecured, 10% interest, due June 30, 2017
|
|
|
-
|
|
|
|
68,000
|
|
|
Note payable to individual, unsecured, 10% interest, due June 30, 2017
|
|
|
-
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable to bank, secured, week day payment of $481.14 for 330 weekdays (“Loan”)
|
|
|
-
|
|
|
|
109,699
|
|
|
Note payable to individual, unsecured, 8% interest, due April 18, 2018
|
|
|
150,000
|
|
|
|
-
|
|
|
Total
|
|
$
|
150,000
|
|
|
$
|
235,199
|
|
|
Less Debt discount
|
|
|
-
|
|
|
|
(34,343
|
)
|
|
Total Note payable
|
|
$
|
150,000
|
|
|
$
|
200,856
|
|
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 4 – Notes Payable
(continued)
On January 9, 2015, the Company and the individual debt holder of the three promissory notes collectively referred to as (“Notes”), totaling $133,000, mutually agreed to extend the payment due date of the Notes due on March 31, 2017. On December 19, 2016, the parties mutually agreed to further extend the maturity date to December 31, 2017. The extension provided for the Notes bearing the same terms upon maturity, the unpaid principal and accrued interest due in full as a balloon payment. On March 31, 2017, the original individual debt holder transferred the three notes to three different individuals. The Company and the three individual debt holders mutually agreed to revise the Notes maturity date to June 30, 2017 and waived all outstanding interest on the Notes. For the nine months ended June 30, 2017, the Company made no cash payments towards the Notes. On April 19, 2017, the Company entered into a note conversion Agreement (the “Conversion Agreement”) with three Notes holders (the “Converters”) to convert their promissory notes (the “Notes”) issued by the Company into the Company’s common stock. Pursuant to the Conversion Agreement, the entire principal amount of the Notes are converted into shares of common stock of the Company, par value $.0001 per share (the “Common Stock”) at a conversion price of $.15 per share (the “Conversion Shares”), for an aggregate number of 886,667 shares (the “Note Conversion”). Upon execution of the Conversion Agreement, all the Converters agree to waive their rights to receive the payment of accrued and outstanding interest under the Notes as of the date of the Conversion Agreement. For the three and nine months ended June 30, 2017, the Company recorded interest expense of $0 and $1,569 related to the Notes, respectively. The Company has recorded interest expense of $6,944 and $10,082 for the three and nine months ended June 30, 2016, respectively.
On May 9, 2016, DKTI entered a Business Loan Agreement (the “Loan”) with a third-party financier and received cash proceeds of $109,500. The Loan is secured by the assets of DKTI and requires DKTI to make a daily cash payment of principal and interest, amounting to $481.14 on each business day, for a total of 330 business days. The total daily cash payments of principal and interest at maturity date would amount to $158,775. In connection with the issuance of the Loan, the Company recorded an original issue discount (the “OID”) of $49,275 which is being amortized to interest expense over the term of Loan using the effective interest method. As of June 30, 2017, the Company has made total cash payments of $80,350 on the Loan. In connection with the Spin-Off agreement, Mr. Sudeck became the sole owner of DKTI and the Company no longer consolidates DKTI’s assets and liabilities. The Loan was spun off to DKTI. As such, there was no Loan outstanding on the Company’s balance sheet as of June 30, 2017. The Company has recorded the amortization of OID discount as interest expense of $0 and $9,556 for the three and nine months ended June 30, 2017, respectively. The unamortized portion of OID discount at June 30, 2017 and September 30, 2016 was $0 and $34,343, and the principal balance due on the Loan at June 30, 2017 and September 30, 2016 was $0 and $109,699, respectively.
On April 19, 2017, the Company entered into a securities purchase agreement (the “Debenture Purchase Agreement”) pursuant to which the Company issued and sold in a private placement to a non-U.S. persona series A convertible debenture in an aggregate principal amount of $150,000 (the “Debenture”) with a 8% annual interest convertible into shares of Common Stock (the “Conversion Share(s)”) at price of $0.15 per share. The note is due on April 18, 2018. For the three and nine months ended June 30, 2017, the Company recorded interest expense of $ 2,367 related to the Debenture.
NOTE 5 – Commitments and Contingencies
Operating Lease
The Company’s previous lease commitments were all signed under DKTI. In connection with the Spin-off Agreement, the Company no longer has ownership of DKTI as of March 31, 2017. The Company currently does not have any outstanding lease agreements or commitments. The total rent expense including common area maintenance charges was $0 and $41,285, for the three months and nine months ended June 30, 2017, respectively, compared to $18,741 and $46,810 for the three months and nine months ended June 30, 2016, respectively,.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 5 – Commitments and Contingencies Operating Lease
(continued)
Legal Matters
From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.
NOTE 6 – Purchase Commitments
DKTI received $430,000 in advances from a manufacturer and a distributor for anticipated rebates from purchases of paint and related products. In exchange for the advanced funds, DKTI agreed to exclusively purchase paint and related products from the manufacturer and the distributor over a five and seven year period commencing in 2007 up to a certain dollar volume amount (the "Rebate Agreement(s)"). DKTI initially recorded the amount of the advances as a liability on the balance sheet under "Purchase commitments". Based on the volume of products purchased by the Company, this liability is reduced on a pro-rata basis. DKTI has not purchased the volume of products at the rate anticipated in the Rebate Agreements. The Company’s remaining amount of the rebates advanced is $0 and $365,538 as of June 30, 2017 and September 30, 2016, respectively.
The total dollar amount of products DKTI is required to buy under the Rebate Agreement from the distributor was $4,200,000. The Company's original distributor ceased operations and sold its business to the Company's current distributor, and management believes the Rebate Agreement was assigned to the current distributor. The Rebate Agreement with the distributor expired in November 2012. Management is still operating under the same contractual terms of the agreement as if it is still effective. DKTI has previously made an effort to contact the current distributor regarding its purchase commitments. Management anticipates they will be able to successfully negotiate a revised agreement to fulfill the purchase commitment or obtain a concession from the distributor as DKTI is currently purchasing products in the ordinary course of business. In the event DKTI cannot negotiate a satisfactory agreement, other vendors exist in the market to purchase these products and management believes there would be no significant impact on the Company's operations.
The total dollar amount of products DKTI is required to buy under the Rebate Agreement from the manufacturer was $1,780,000. The contract with the manufacturer expired in November 2014. Management is still operating under the same contractual terms of the agreement as if it is still effective. DKTI has previously made an effort to contact the current manufacturer regarding its purchase commitments. If DKTI cannot fulfill the purchase obligation, management anticipates they will be able to negotiate a time extension to fulfill the purchase commitment. In connection with the Spin-Off Agreement, the Company is no longer liable for the Rebate Agreements.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 7 – Related Party Transactions with the Shareholder
Cash received by a Company’s former principal shareholder/Officer has been recorded as compensation to officer. The Company has recorded $0 and $141,925 as compensation expense for the three months and nine months ended June 30, 2017, and $189,342 and $257,525 for the three months and nine months ended June 30, 2016, respectively. The Company’s loan payable to the same officer amounted to $0 and $64,600 as of June 30, 2017 and September 30, 2016, respectively.
For time to time, the Company’s former shareholder/Officer provided advances to the Company for working capital purposes. These advances are non-interest bearing and unsecured. For three months ended June 30, 2017, a current officer of the Company advanced the approximately $54,000 for expenses. These advances were repaid as of June 30, 2017.
NOTE 8 – Stockholders' Equity
The Company's capitalization at June 30, 2017 was 25,000,000 authorized shares of capital stock, consisting of 20,000,000 shares of CX common stock and 5,000,000 shares of preferred stock, par value $0.0001 per share, among which, 13,600,000 shares were issued and outstanding (given the effect of the Reverse Stock Split).
On July 11, 2017, the Company’s board of directors authorized a 1 for 15 Reverse Stock Split (defined hereinafter). The record date of the split was July 11, 2017 and the effective date was July 12, 2017. All prior period shares and per share calculations in these financial statements and elsewhere in this report have been retroactively adjusted to reflect this stock split.
On August 1, 2013, in a private transaction, Todd Sudeck, the sole director and officer of the Company, acquired a total of 12,000,000 shares of the Company's Common stock from Edward Sanders, the Company's former director and officer and principal shareholder.
On October 31, 2013, the Company acquired all 100% of the issued and outstanding capital stock of DKTI by issuing 166,667 shares of its Common Stock valued at $250. The acquisition is being accounted as recapitalization. At the closing of the acquisition, the Company recorded an increase in common stock of $15,400 as a result of recapitalization.
In connection with the Spin-Off Agreement, the Company received 166,667 shares of common stock from Mr. Sudeck and the Company returned those shares into treasury shares. The Company recorded a decrease in common stock of $250 as a result of the Spin-Off.
On April 17, 2017, the Company entered into the Conversion Agreement with three Converters to convert the promissory notes issued pursuant to them pursuant to the Spin-Off Agreement into shares of Common Stock. Pursuant to the Conversion Agreement, the entire principal amount of the Notes was converted into shares of Common Stock at a conversion price of $.15 per share, for an aggregate number of 886,667 shares. Pursuant to the Conversion Agreement, all the Converters agree to waive their rights to receive the payment of accrued and outstanding interest under these promissory notes as of the date of the Conversion Agreement.
As a result of all prior stock issuances and the cancellation of Spin-Off Agreement, the Company has 14,486,670 and 13,766,667 shares of common stock issued and outstanding at June 30, 2017 and September 30, 2016, respectively.
CX Network Group, Inc.
(Formerly known as mLight Tech, Inc.)
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
NOTE 9 – Subsequent Events
On July 11, 2017, the Company merged with and into CX with CX as the surviving corporation that operates under the name “CX Network Group, Inc.”, pursuant to the Merger Agreement. Immediately after the effectiveness of the Merger, the Company’s corporate existence is governed by the laws of the State of Nevada and the Articles of Incorporation and bylaws of CX, and each outstanding share of MLGT’s common stock, par value $0.0001 per share was converted into 0.0667 outstanding share of common stock of CX, par value $0.0001 per share at a one-for-fifteen reverse split ratio. Immediately prior to the effectiveness of the Reverse Stock Split, we had 217,300,000 shares of common stock of MLGT issued and outstanding. Immediately upon the effectiveness of the Reverse Stock Split, we have 14,486,670 shares of common stock of CX issued and outstanding.
In connection with the Name Change, Domicile Change, and Reverse Stock Split, the Financial Industry Regulatory Authority assigned the Company a new stock symbol, MLGTD. The Name Change, Reverse Stock Split and Domicile Change took effect at the open of business on July 12, 2017. The new CUSIP number is 12672T 108.