NOTES TO THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND GOING CONCERN
ORGANIZATION
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. (“the Company”, “CXKJ”, “we”, “us”, “our”),
a Nevada corporation, with the Company 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 the Company (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 CXKJ, 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 had 14,486,670 shares
of common stock of CXKJ issued and outstanding.
The Name Change, Domicile
Change, and Reverse Stock Split went effective on June 12, 2017. Subsequently, the Company’s trading symbol for its common stock
was changed to “CXKJ”.
On March 20, 2018, CXKJ entered
into a share exchange agreement (the “Share Exchange”) with Chuangxiang Holdings Inc. (“CX Cayman”). Under the
Share Exchange, CX Network Group, Inc. issued an aggregate of 5,350,000 shares of common stock, par value $0.0001 per share to the shareholders
of CX Cayman in exchange for 100% of the issued and outstanding equity securities of CX Cayman. The Share Exchange was closed on March
20, 2018. As a result of the Share Exchange, CX Cayman became the Company’s wholly-owned subsidiary.
CX Cayman was incorporated
on February 4, 2016 under the laws of Cayman Islands.
Preceding our business combination
with CX Cayman, our business focused on development and operation of online dating and mobile gaming products either developed and operated
by us or developed by us but co-operated by third parties; or developed by third parties but co-operated by us.
On March 30, 2021, certain
of our shareholders (the “Sellers”) entered into a Stock Purchase Agreement (the “SPA”), with Wenhai Xia (“Purchaser”)
pursuant to which Purchaser agreed to acquire 16,683,334 shares of common stock, par value $0.0001 per share (the “Shares”),
for an aggregate purchase price of $255,000, subject to satisfaction or waiver of the closing conditions set forth in the SPA. Those conditions
have been satisfied, and the Purchaser acquired the Shares.
In connection with the
SPA, on the same day, the Company entered into a spin-off agreement (the “Spin-Off Agreement”) with CX Cayman (“Spin-Off Subsidiary”), and Continent Investment Management Limited and Golden Fish Capital
Investment Limited, (“Spin-Off Subsidiary buyers”). Pursuant to the Spin-Off Agreement, Spin-Off Subsidiary buyers will
receive all of the issued and outstanding capital stock of Spin-Off Subsidiary at a purchase price of $1 at the closing. As a
result, Spin-Off Subsidiary buyers will become the sole equity owner of Spin-Off Subsidiary and the Company will have no further
interest in Spin-Off Subsidiary.
On May 17, 2021, the Company entered into the Share Cancellation Agreement with
a stockholder, Wenhai Xia, to cancel an aggregate of 15,535,309 shares of the Company’s Common Stock owned by Wenhai
Xia.
On May 17, 2021, the Company entered
into the Share Exchange Agreement with KP International and holders of all outstanding capital stock of KP International, we acquired
100% of the outstanding capital stock of KP International, and in exchange, we issued to five former shareholders of KP International
an aggregate of 34,158,391 shares of the Company’s common stock. As a result of the reverse acquisition closed on May 17, 2021,
KP International became our wholly-owned subsidiary and the former shareholders of KP International became the holders of approximately
85% of our issued and outstanding capital stock on a fully diluted basis. For accounting purpose, the transaction with KP International
was treated as a reserve acquisition, with KP International as the acquirer and CX Network as the acquired party. Unless the context suggests
otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the Reverse Acquisition,
we are referring to the business and financial information of KP International and its subsidiaries and consolidated entities. As a result
of the reverse acquisition, CX Network is engaged in the sale of health care and household products through its online platform in the
PRC.
Kun Peng International Holding Limited
Kun Peng International Holding
Limited (“KP International”) was incorporated in the British Virgin Islands on April 20, 2021. KP International is a holding
company and entered into a Bought and Sold Note with Kunpeng (China) Industrial Development Company Limited (“KP Industrial”),
incorporated in Hong Kong on August 11, 2017, at a cash consideration of $0.129 (HK$1) on May 3, 2021. After the ownership transfer, it
became a sole shareholder of KP Industrial.
Kunpeng (China) Industrial Development Company Limited
Kunpeng (China) Industrial
Development Company Limited (“KP Industrial”) was incorporated as a limited liability company in Hong Kong under the name
of Jing Jin Ji Investment Group Co., Limited (“Jing Jin Ji”) on August 11, 2017. The share capital of KP Industrial is 10,000
ordinary shares at $1,292 (HKD10,000) and was wholly owned by an individual. On November 9, 2018, Jing Jin Ji changed its name to “Kunpeng
(China) Industrial Development Company Limited” and filed a Certificate of Change of Name with the Hong Kong Company Registry on
the same day. Although it was incorporated in 2017, it did not commence operations until July 2020 as it focused on exploring business
opportunities in its initial phrase and developing our online mobile application, King Eagle Mall, through its subsidiary, King Eagle
(China) Co., Ltd. It became a wholly owned subsidiary of KP International on May 3, 2021.
Kun Peng (Hong Kong) Industrial Development Limited
Kun Peng (Hong Kong) Industrial Development Limited
(“KP (Hong Kong)”) was incorporated as a limited liability company in Hong Kong on June 21, 2021. It is a holding company
and is wholly owned by Kun Peng International Holding Limited. The share capital of this entity upon formation is $0.13 (HK$1).
King Eagle (China) Co., Ltd.
King Eagle (China) Co., Ltd.
(“King Eagle (China)”) was incorporated as a limited liability company in Beijing Economic Technological Development Zone
in the People’s Republic of China (“the PRC”) on March 20, 2019 with a registered capital of approximately $15 million
(RMB100 million). King Eagle (China) was a wholly owned subsidiary of KP Industrial at the time of establishment. KP Industrial transferred
its approximately $2.2 million (RMB 15 million) or 15% to Guoxin Ruilian Group Co., Ltd., a limited liability company incorporated in
Beijing, the PRC, on November 2, 2020.
On March 26, 2021, Guoxin
Ruilian Group Co., Ltd entered into equity transfer agreements with KP Industrial and Guoxin Zhengye. Both Guoxin Ruilian Group Co., Ltd
and Guoxin Zhengye are wholly owned by a common shareholder, Guoxin United Holdings Group Co., Ltd. Under the agreements, Guoxin Ruilian
Group Co., Ltd agreed to transfer its 8% of its ownership in King Eagle (China) to Guoxin Zhengye and the remaining 7% ownership in King
Eagle (China) to KP Industrial on April 20, 2021. After the transfer, KP Industrial and Guoxin Zhengye became the 92% and 8% shareholders
of King Eagle (China), respectively.
Some of the business engaged
in by King Eagle (Tianjin) is restricted or prohibited for foreign investment under PRC regulations. As such, King Eagle (China) has entered
into the VIE Agreements with King Eagle (Tianjin) and their shareholders. We do not own any equity interests in King Eagle
(Tianjin), but control and receive the economic benefits of their respective business operations through the VIE Agreements. The
VIE Agreements enable us to provide King Eagle (Tianjin) with consulting services on an exclusive basis, in exchange for all of its annual
profits, if any. In addition, we are able to appoint its senior executives and approve all matters requiring approval of its shareholders. The
VIE Agreements are comprised of a Consulting Service Agreement, Business Operation Agreement, Proxy Agreement, Equity Disposal Agreement,
and Equity Pledge Agreement.
Under current Chinese laws
and regulations, the Company believes that the VIE Agreements are not subject to any government approval. The shareholders of King
Eagle (Tianjin) were required to register with SAFE when they established offshore vehicles to hold KP International, and such SAFE registration
was effected on May 14, 2021. These shareholders of King Eagle (Tianjin) will have to register their equity pledge arrangement as required
under the Equity Pledge Agreement with King Eagle (China). The Company faces uncertainty with respect to future actions by the PRC
government that could significantly affect King Eagle (Tianjin)’s financial performance and the enforceability of the VIE Agreements.
King Eagle (Tianjin) Technology Co., Ltd.
King Eagle (Tianjin) Technology
Co., Ltd. (“King Eagle (Tianjin)”) was incorporated as a limited liability company in Tianjin Pilot Free Trade Zone in the
People’s Republic of China on September 2, 2020 with a registered capital of approximately $1.5 million (RMB 10 million). It is
owned by multiple individuals: Chengyuan Li, 51%, Jinjing Zhang, Wanfeng Hu, Cuilian Liu, Zhizhong Wang (each of them owns 6%), Zhandong
Fan, Yanlu Li, Yuanyuan Zhang, Xiangyi Mao and Hui Teng (each of them owns 5%). Those shareholders also indirectly own KP International
through two British Virgin Islands entities: Kunpeng Tech Limited and Kunpeng TJ Limited. Additionally, out of these stakeholders, four
of them are the directors and executives of KP International which include: Chenyuan Li, Director, Xiangyi Mao, Chief Executive Officer,
Yuanyuan Zhang, Chief Financial Officer and Yanlu Li, Vice President.
The following diagram illustrates
our corporate structure as of the date of this Report:
Going Concern
The accompanying financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate
continuation of the Company as a going concern basis. The going-concern basis assumes that assets are realized, and liabilities are extinguished
in the ordinary course of business at amounts disclosed on the financial statements. The Company’s ability to continue as a going
concern depends on the liquidation of its current assets and business developments. In assessing the Company’s liquidity, 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 June 30, 2021, the Company’s
accumulated deficit was approximately $2,269,639 and the Company has incurred losses since inception. The Company had negative working
capital of $2,859,345 as of June 30, 2021. None of the Company’s stockholders, officers or directors, or third parties, are under
any obligation to advance us funds, or to invest in the Company. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which
could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of our business plan, and reducing overhead
expenses. Management is optimistic about the Company’s ability to increase revenues to meet its future cash flow requirements. However,
the Company cannot provide any assurance that it will be able to increase revenue, that it will be able to successfully implement its
business plan, or that financing that will be available to it on commercially acceptable terms, if at all.
These conditions raise substantial
doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should
the Company be unable to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to
interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United
States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the
opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations
and cash flows for the interim periods have been included.
These interim condensed consolidated
financial statements should be read in conjunction with the audited and pro forma financial statements included with the Amendment to
the Form 8-K filed with the SEC on May 19,2021, and the Company’s audited consolidated financial statements and notes thereto for
the year ended September 30, 2020 included in the Form 10-K filed with the SEC on January 13, 2021.
The interim condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. This
basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and
expenses and losses are recognized when incurred. The consolidated financial statements are expressed in U.S. dollars.
Principles of Consolidation
The interim condensed consolidated
financial statements include the financial statements of the Company, its subsidiaries and variable interest entity (“VIE”).
Use of Estimates and Assumptions
The preparation of consolidated
financial statements in conformity with generally accepted accounting principles requires management to make estimate and assumptions
that impact the presented amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the presented amounts of revenues and expenses during the period. Actual results may differ from those estimates. Significant
estimates during the nine months ended June 30, 2021 and 2020 include the collectability of receivables, the useful lives of long-lived
assets and intangibles, assumptions used in assessing impairment of long-lived assets, valuation of accruals for expenses and tax due.
Revenue Recognition
Revenue is comprised of sales
of goods and represents the amount of consideration the Company is entitled to upon the transfer of goods. Revenue was recorded on a gross
basis, net of surcharges and value added tax (“VAT”) of gross sales. The Company recorded revenue on a gross basis because
the Company is the primary obligor of the sales arrangements has latitude in establishing prices, has discretion in suppliers’ selection
and assumes credit risks on receivables from customers.
Revenue is measured based
on the amount of consideration that we expect to receive, reduced by estimates for return allowances, promotional discounts, and rebates.
Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes.
Consistent with the criteria
of ASC 606 “Revenue from Contracts with Customers,” we recognize revenue when performance obligations are satisfied by transferring
control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, we also consider
the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment,
(ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership and (v) acceptance of
the good or service. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress toward
complete satisfaction of a performance obligation.
Accounting Pronouncements Not Yet
Adopted
In June 2016, the FASB issued
Accounting Standards Update No. 2016-13,“Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU
2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.
Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15,
2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic
326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public
companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including
interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023. The Company
is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its consolidated financial statements,
particularly its recognition of allowances for accounts receivable.
Except for the above-mentioned
pronouncements, there are no new recent issued accounting standards that will have material impact on the interim condensed consolidated
financial position, statements of operations and cash flows.
NOTE 3 - VARIABLE INTEREST ENTITIES “VIE” ARRANGEMENTS
On May 15, 2021, King Eagle (China) entered into a series of contractual
arrangements with King Eagle (Tianjin) and its shareholders. As a result of the contractual arrangements, the Company classified King
Eagle (Tianjin) as a Variable Interest Entity “VIE”.
VIEs are entities that have
either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial
support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right
to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest
holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE.
King Eagle (China) is deemed to have a controlling financial interest and be the primary beneficiary of King Eagle (Tianjin) because it
has both of the following characteristics:
|
(1)
|
The power to direct activities at King Eagle (Tianjin) that most significantly impact such entity’s economic performance, and
|
|
(2)
|
The obligation to absorb losses of, and the right to receive benefits from, King Eagle (Tianjin) that could potentially be significant to such entity.
|
Pursuant to the Contractual
Arrangements, King Eagle (Tianjin) pays service fees equal to all of its net profit after tax payments to King Eagle (China). At the same
time, to King Eagle (China) is obligated to absorb all of their losses. The Contractual Arrangements are designed so that King Eagle (Tianjin)
operates for the benefit of to King Eagle (China) and ultimately the Company.
Based on the foregoing VIE
Agreements, King Eagle (China) has effective 100% fully control of King Eagle (Tianjin), which enables King Eagle (China) to receive all
of their expected residual returns and absorb the expected losses of the VIE. Accordingly, the Company consolidates the accounts of King
Eagle (Tianjin) and its subsidiaries for the periods presented herein, in accordance with Accounting Standards Codification, or ASC, 810-10,
Consolidation.
Accordingly, the accounts
of the King Eagle (Tianjin) are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition,
their financial positions and results of operations are included in the Company’s financial statements.
The Company consolidated
its VIE as of June 30, 2021 and September 30, 2020. The carrying amounts and classification of the VIE’s assets and liabilities
included in the consolidated balance sheets are as follows:
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
1,704,591
|
|
|
$
|
209,316
|
|
Noncurrent assets
|
|
|
43,860
|
|
|
|
71,192
|
|
Total assets
|
|
|
1,748,451
|
|
|
|
280,508
|
|
Total liabilities
|
|
|
3,162,760
|
|
|
|
290,892
|
|
Net liabilities
|
|
$
|
(1,414,309
|
)
|
|
$
|
(10,384
|
)
|
The VIE’s liabilities
consisted of the following as of June 30, 2021 and September 30, 2020:
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
|
|
|
$
|
|
|
Trade and other payable
|
|
|
1,322,582
|
|
|
|
9,244
|
|
Advance from customers
|
|
|
1,781,326
|
|
|
|
203,586
|
|
Payroll payable
|
|
|
5,507
|
|
|
|
-
|
|
Tax payable
|
|
|
11,250
|
|
|
|
8,550
|
|
Operating lease obligations, currents
|
|
|
38,605
|
|
|
|
40,752
|
|
Total current liabilities
|
|
|
3,159,270
|
|
|
|
262,132
|
|
Total noncurrent liabilities
|
|
|
|
|
|
|
-
|
|
Operating lease obligations, net of current portion
|
|
|
3,490
|
|
|
|
28,760
|
|
Total noncurrent liabilities
|
|
|
3,490
|
|
|
|
28,760
|
|
Total liabilities
|
|
$
|
3,162,760
|
|
|
$
|
290,892
|
|
The operating results of the VIE were as follows:
|
|
Nine months ended
June 30
|
|
|
Three months ended
June 30
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,625,621
|
|
|
$
|
-
|
|
|
$
|
452,027
|
|
|
$
|
-
|
|
Gross profit
|
|
|
2,104,793
|
|
|
|
-
|
|
|
|
246,586
|
|
|
|
-
|
|
Loss from operations
|
|
|
(1,389,906
|
)
|
|
|
-
|
|
|
|
(1,389,854
|
)
|
|
|
-
|
|
Other income
|
|
|
420
|
|
|
|
-
|
|
|
|
303
|
|
|
|
-
|
|
Net loss
|
|
$
|
(1,389,486
|
)
|
|
$
|
-
|
|
|
$
|
(1,389,551
|
)
|
|
$
|
-
|
|
NOTE 4 - PREPAYMENTS
Prepayments consisted of
the following:
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
Prepaid service fee (1)
|
|
$
|
348,373
|
|
|
$
|
-
|
|
Prepaid rent and building management and utilities
|
|
|
19,827
|
|
|
|
34,651
|
|
Prepaid supplies
|
|
|
14,702
|
|
|
|
-
|
|
Prepaid system maintenance services
|
|
|
7,455
|
|
|
|
6,733
|
|
Prepaid income tax
|
|
|
5,678
|
|
|
|
-
|
|
Prepaid professional services
|
|
|
10,322
|
|
|
|
356
|
|
Prepaid others
|
|
|
10,519
|
|
|
|
971
|
|
Total prepayments
|
|
$
|
416,876
|
|
|
$
|
42,711
|
|
|
(1)
|
Amount paid to Guoxin Star Network Co., Ltd by our VIE, King
Eagle (Tianjin) for the construction and development of Smart Kiosk.
|
NOTE 5 - OTHER RECEIVABLES
Other receivables included
the following:
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
Rental deposits
|
|
$
|
91,606
|
|
|
$
|
8,847
|
|
Advance to employees
|
|
|
15,963
|
|
|
|
46,811
|
|
Others
|
|
|
77
|
|
|
|
-
|
|
Total other receivables, net
|
|
$
|
107,646
|
|
|
$
|
55,658
|
|
Advance to employees represents funds provided
to our officers and employees for the business expenses, such as travel, parking, gasoline, membership, meals, that are anticipated to
be incurred by our officers and employees on behalf of the Company. Advances to employees are required to repay within a year. As of June
30, 2021, the ending balance of the advance to employees is due in December 2021.
NOTE 6 - PROPERTY AND EQUIPMENT, NET
Property and equipment consisted
of the following:
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
$
|
29,830
|
|
|
$
|
28,372
|
|
Furniture and fixtures
|
|
|
9,516
|
|
|
|
-
|
|
Computer equipment
|
|
|
43,372
|
|
|
|
32,625
|
|
Office equipment
|
|
|
1,630
|
|
|
|
720
|
|
Computer software
|
|
|
-
|
|
|
|
11,364
|
|
Subtotal
|
|
|
84,348
|
|
|
|
73,081
|
|
Less: accumulated depreciation
|
|
|
(19,103
|
)
|
|
|
(2,959
|
)
|
Total property and equipment, net
|
|
$
|
65,245
|
|
|
$
|
70,122
|
|
The depreciation expense
was $4,123 and nil for the three months ended June 30, 2021 and 2020, respectively and $15,834 and nil for the nine months ended June
30, 2021 and 2020, respectively.
NOTE 7 – INTANGIBLE ASSETS
Intangible assets consist
of the Company’s trademarks of King Eagle Mall with the useful life of ten years. The intangible asset, net was $2,631 and nil as
of June 30, 2021 and September 30, 2020, respectively. Amortization expense was $67 and nil for the three months ended June 30, 2021 and
2020, respectively and $67 and nil for the nine months ended June 30, 2021 and 2020, respectively.
NOTE 8 - RELATED PARTY
TRANSACTIONS
Other payables-related
party is nontrade payable arising from transactions between the Company and a related party, such as operating loans from such related
party. The loans owed to the related parties are interest free, unsecured and repayable on demand.
.
Other payables-related party
consisted of the following:
Name of related party
|
|
Relationship
|
|
Nature of transactions
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Yihe Pang
|
|
Director
|
|
Loan from a director for operating cash flows
|
|
$
|
30,966
|
|
|
$
|
252,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
30,966
|
|
|
$
|
252,606
|
|
NOTE 9 - EQUITY
Share capital:
On September 1, 2020, KP
Industrial entered into a sales and purchase agreement with Guoxin Ruilian Group Co., Ltd. KP Industrial transferred 15% of its ownership
in King Eagle (China) to Guoxin Ruilian Group Co., Ltd on November 2, 2020. After the ownership transfer, KP Industrial became a 85% shareholder
of King Eagle (China).
On March 26, 2021, Guoxin
Ruilian Group Co., Ltd entered into equity transfer agreements with KP Industrial and Guoxin Zhengye. Both Guoxin Ruilian Group Co., Ltd
and Guoxin Zhengye are wholly owned by a common shareholder, Guoxin United Holdings Group Co., Ltd. Under the agreements, Guoxin Ruilian
Group Co., Ltd agreed to transfer its 8% of its ownership in King Eagle (China) to Guoxin Zhengye and the remaining 7% ownership in King
Eagle (China) to KP Industrial on April 20, 2021. After the transfer, KP Industrial and Guoxin Zhengye became the 92% and 8% shareholders
of King Eagle (China), respectively.
On March 30, 2021, the controlling
shareholders of the Company (the “Sellers”), and investors (the “Purchaser”) entered into a Stock Purchase Agreement
(the “SPA”), pursuant to which the Purchasers acquired 16,683,334 shares of common stock, par value $0.0001 per share (the
“Shares”), for an aggregate purchase price of $255,000. Pursuant to the SPA, the Sellers assumed all assets and liabilities
of the Company as of March 30, 2021. Hence, the 30, 2021. Hence, the all liabilities assumed by the Sellers is recognized as capital contribution
to additional-paid in capital.
On May 3, 2021, KP International
entered into a Bought and Sold Note with Kunpeng (China) Industrial Development Company Limited (“KP Industrial”), incorporated
in Hong Kong on August 11, 2017 at a cash consideration of $0.128 (HK$1). After the ownership transfer, it became a sole shareholder of
KP Industrial.
On May 15, 2021, King Eagle (China) entered into a series of contractual arrangements with King Eagle (Tianjin)
and its shareholders. As a result of the contractual arrangements, the Company classified King Eagle (Tianjin) as a Variable Interest
Entity “VIE”.
On May 17, 2021, KP International
completed a share exchange agreement with CX Network Group, Inc. (“CXKJ”) and the shareholders of KP International on May
17, 2021 to acquire all the issued and outstanding capital of KP International in exchange for the shares of CX Network Group Inc. to
the shareholders of KP International (“Reverse Acquisition”). CX Network Group, Inc issued an aggregate
of 34,158,391 newly issued, fully paid and non-assessable shares of CXKJ, par value $0.0001, to the KP International’s Shareholders.
As a result of the Reverse Acquisition, KP International became a wholly-owned subsidiary of CX Network. In connection to the Share Exchange agreement, the Company also entered into the Share Cancellation Agreement with a stockholder, Wenhai
Xia, to cancel an aggregate of 15,535,309 shares of the Company’s Common Stock owned by Wenhai Xia.
The equity structure of the Company
was retrospectively adjusted under ASC Topic 805-40. As of June 30, 2021 and September 30, 2020, there were 40,000,000 shares issued and
outstanding.
King Eagle (China) has a subscribed
capital of approximately $14.94 million (RMB100 million). The $13.88 million (RMB92 million) or 92% of its subscribed capital is receivable
from King Eagle (Hong Kong) due by March 1, 2039, while the $1.06 million (RMB 8 million) or 8% of its subscribed capital is receivable
from Guoxin Ruilian Group Co., Ltd. due by March 1, 2031.
King Eagle (Tianjin) has a subscribed
capital of approximately $1.46 million (RMB10 million), which is due for payment by December 31, 2050.
Restricted net assets:
Our ability to pay dividends
is primarily dependent on us receiving distributions of funds from its subsidiary or VIE. Relevant PRC statutory laws and regulations
permit payments of dividends by only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and
regulations and after it has met the PRC requirements for appropriation to statutory reserves. Share capital of the PRC subsidiary and
VIE included in the Company’s consolidated net assets are also non-distributable for dividend purposes. The results of operations
reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the
statutory financial statements of King Eagle (China), the foreign-invested enterprise, and King Eagle (Tianjin), the VIE. The Company
is required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such
reserve funds reach 50% of its registered capital. In addition, the Company may allocate a portion of its after-tax profits based on PRC
accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. The statutory reserve funds and
the discretionary funds are not distributable as cash dividends.
As a result of the foregoing
restrictions, King Eagle (China) and King Eagle (Tianjin) are restricted in their ability to transfer their net assets to the Company.
Foreign exchange and other regulation in the PRC may further restrict these two entities from transferring funds to the Company in the
form of dividends, loans and advances. As of June 30, 2021 and September 30, 2020, the Company had negative net assets which included
common stock, additional paid-in capital, subscription receivable, accumulated deficit and foreign exchange translation adjustment of
its subsidiaries in BVI, Hong Kong and the PRC and the VIE that are included in the Company’s consolidated financial statements.
Due to the net operating loss, as of June 30, 2021, King Eagle (China) and King Eagle (Tianjin) incurred negative net assets which amounted
to $911,237 and $1,414,309, respectively. As of September 30, 2020, King Eagle (China) and King Eagle (Tianjin) incurred negative net
assets which amounted to $205,275 and $10,384, respectively. Accordingly, the Company did not accrue statutory reserve funds
as of June 30, 2021 and September 30, 2020.
NOTE 10- INCOME TAXES
The Company accounts for income
taxes pursuant to the accounting standards that requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit
to be derived from tax losses and tax credit carryforwards. Additionally, the accounting standards require the establishment of a valuation
allowance to reflect the likelihood of realization of deferred tax assets. The Company and its subsidiaries file separate income tax returns.
United States
CXKJ is incorporated in the
State of Nevada and is subject to the United States federal income tax. No provision for income taxes in the U.S. has been made as the
Company has no U.S. taxable income for the nine months and three months ended June 30, 2021 and 2020.
British Virgin Islands
KP International is a holding
corporation organized as an International Business Company under the laws of the British Virgin Islands (“BVI”), and its principal
operating subsidiaries are organized under the laws of Hong Kong and the laws of the PRC. KP International and its subsidiaries are not
subject to income taxes in the BVI.
Hong Kong
KP Industrial and KP (Hong
Kong) were incorporated in Hong Kong and Hong Kong’s profits tax rate is 8.25% for the first $0.26 million (HK$2 million), the excess
part will be taxed at 16.5%. KP Industrial and Kun Peng (Hong Kong) did not earn any income that was derived in Hong Kong for the nine
months and three months ended June 30, 2021 and 2020 and therefore, KP Industrial and KP (Hong Kong) were not subject to Hong Kong profits
tax for the periods reported.
PRC
The PRC’s statutory
income tax rate is 25%. The Company’s subsidiary and VIE registered in PRC are subject to income tax rate of 25%, unless otherwise
specified.
The income tax expense rate
for the three months ended June 30, 2021 and 2020 was nil and for the nine months ended June 30, 2021 and 2020 was nil. Our PRC subsidiary
and VIE entity incurred tax loss. At this time, the Company considered it is more likely than not that King Eagle (China) and King Eagle
(Tianjin) do not have sufficient taxable income in the near future that will allow them to realize these DTAs. Therefore, the Company
recorded a full valuation allowance against all of its deferred tax assets as of June 30, 2021 and September 30, 2020. The Company intends
to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal
of all or portion of these allowance.
NOTE 11 - LEASE
The Company has operating
leases for its office facilities and employee accommodation. Leases with an initial term of 12 months or less are not recorded on the
balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The following table provides
a summary of leases as of June 30, 2021 and September 30, 2020:
Assets/liabilities
|
|
Classification
|
|
June 30,
2021
|
|
|
September 30,
2020
|
|
Assets
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
Operating lease assets
|
|
$
|
289,330
|
|
|
$
|
413,156
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability - current
|
|
Current operating lease liabilities
|
|
$
|
267,515
|
|
|
$
|
254,780
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability – net of current portion
|
|
Long-term operating lease liabilities
|
|
$
|
21,815
|
|
|
$
|
158,376
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease liabilities
|
|
|
|
$
|
289,330
|
|
|
$
|
413,156
|
|
The operating lease expense
for the nine months ended June 30, 2021 and 2020 and three months ended June 30, 2021 and 2020 was as follows:
|
|
|
|
For the nine months ended
June 30
|
|
|
For the three months ended
June 30
|
|
Lease Cost
|
|
Classification
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Operating lease cost
|
|
General and administrative
|
|
$
|
227,132
|
|
|
$
|
-
|
|
|
$
|
79,483
|
|
|
$
|
-
|
|
Total lease cost
|
|
|
|
$
|
227,132
|
|
|
$
|
-
|
|
|
$
|
79,483
|
|
|
$
|
-
|
|
Maturities of operating lease
liabilities as of June 30, 2021 were as follow:
Maturity of Lease Liabilities
|
|
Operating Leases
|
|
The remaining 2021
|
|
$
|
79,565
|
|
2022
|
|
|
208,197
|
|
2023
|
|
|
9,290
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total lease payments
|
|
$
|
297,052
|
|
Less: interest
|
|
|
(7,722
|
)
|
Present value of lease payments
|
|
$
|
289,330
|
|
Maturities of operating lease
liabilities as of September 30, 2020 were as follow:
Maturity of Lease Liabilities
|
|
Operating Leases
|
|
2021
|
|
$
|
267,360
|
|
2022
|
|
|
162,677
|
|
2023
|
|
|
-
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total lease payments
|
|
$
|
430,037
|
|
Less: interest
|
|
|
(16,881
|
)
|
Present value of lease payments
|
|
$
|
413,156
|
|
Supplemental information
related to operating leases was as follows:
|
|
For the nine months ended
June 30
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
$
|
218,511
|
|
|
$
|
-
|
|
New operating lease assets obtained in exchange for operating lease liabilities
|
|
$
|
71,045
|
|
|
$
|
-
|
|
Weighted average remaining lease term
|
|
|
1.0 year
|
|
|
|
-
|
|
Weighted average discount rate
|
|
|
4.75
|
%
|
|
|
-
|
%
|
NOTE 12 - COMMITMENTS AND
CONTINGENCIES
On March 31, 2021, King Eagle
(Tianjin) entered into a Cooperation Agreement with Guoxin Star Network Co., Ltd who assigned and franchised the operation of 50 Smart
Kiosks to King Eagle (Tianjin) for five years. Total franchise fee payable by King Eagle (Tianjin) to Guoxin Star Network Co., Ltd is
approximately $1.14 million (RMB 7,500,000). In April 2021, King Eagle (Tianjin) had remitted approximately $0.34 million (RMB2,250,000)
to Guoxin Star Network Co. Ltd. The remaining balance, approximately $0.8 million (RMB5,250,000), is payable upon the completion of the
implementation of Smart Kiosks. King Eagle (Tianjin) estimated the implementation will be completed by the end of the calendar year 2021.
NOTE 13 - SUBSEQUENT EVENT
Effective as of July 20,
2021, a Certificate of Amendment was approved by unanimous written consent of the board of directors of the Company and by written consent
of 55.5% of the stockholders of the Company CX Network Group, Inc. to:
|
1.
|
change the name of the Company from CX Network Group, Inc. to Kun Peng International Ltd. and
|
|
2.
|
increase the authorized number of shares of the Company’s $0.0001 par value common stock from 40,000,000 shares to 200,000,000 shares; and
|
|
3.
|
provide that the existing 10,000,000 shares of $0.0001 par value Preferred Stock may be issued in series and with such voting powers, designations, preferences, limitations, restrictions, and relative rights as the Board of Directors shall determine in its sole discretion shall remain authorized; and
|
|
4.
|
provide that upon filing of the Articles of Amendment to the Articles of Incorporation, the Corporation shall have 210,000,000 authorized shares of Capital Stock with 200,000,000 designated as $0.0001 par value Common Stock, and 10,000,000 designated as $0.0001 par value Preferred Stock.
|
On August 10, 2021, the Company
established a subsidiary Kun Peng Tian Yu Health Technology (Tianjin) Co., Ltd as a wholly owned subsidiary of Kun Peng (Hong Kong) Industrial
Development Limited.
The Company evaluated and concluded
that there are no other subsequent events have occurred that would require recognition or disclosure in the financial statements other
than ones disclosed above.