As used herein and except as otherwise noted, the term "Company", "it(s)",
"our", "us", "we", "CX" and "CXKJ" shall mean CX Network Group, Inc., a Nevada
corporation (previously known as "mLight Tech Inc." or "MLGT", a Florida
corporation), its owned subsidiaries Chuangxiang Holdings Inc.("CX Cayman"),
Chuangxiang (Hong Kong) Holdings Limited ("CX HK"), Chuangxiang Network
Technology (Shenzhen) Limited ("CX Network") and Shenzhen Chuangxiang Network
Technology Limited ("Shenzhen CX"), which is controlled by us via various
contracts.
This Form 10-Q contains forward-looking statements. Our actual results could
differ materially from those set forth as a result of general economic
conditions and changes in the assumptions used in making such forward-looking
statements. The following discussion and analysis of our financial condition and
results of operations should be read together with the audited financial
statements and accompanying notes and the other financial information appearing
in the 2020 Annual Report filed with the Securities and Exchange Commission on
December 30, 2020 and elsewhere in this quarterly report. The analysis set forth
below is provided pursuant to applicable Securities and Exchange Commission
regulations and is not intended to serve as a basis for projections of future
events.
Overview of the Business
Our business focuses 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.
Our self-developed and self-operated online dating products Little Love ("???")
and Hotchat ("??"), which are no longer in operations since November 2019, are
mobile applications geared towards Chinese singles designed to increase a user's
likelihood of finding a romantic connection. Our mission is to help individuals
forge life-long relationships with others that share their interests and values.
Through these mobile applications, our users can search for and communicate with
other like-minded individuals. Our product creates a virtual community where
users can meet, chat and message. We operate location-based social networks for
meeting new people on mobile platforms, including on iPhone, Android, iPad and
other tablets that facilitate interactions among users and encourage users to
connect and chat with each other.
Our online dating mobile platforms monetize through advertising, in-app
purchases, and paid subscriptions. The Company offers online marketing
capabilities, which enable marketers to display their advertisements in
different formats and in different locations. In the near future, we plan to
offer sophisticated data science for highly effective hyper-targeting. The
Company is actively seeking the opportunities to works with its advertisers to
maximize the effectiveness of their campaigns by optimizing advertisement
formats and placements. We temporarily suspend our paid advertisements for
Little Love to adjust our marketing strategy of Little Love from April 2018.
Based on the market responses, the Company started to suspend the operation of
the Little Love and Hotchat in November 2019. After July 2020, the Company
completely ceased the operations of the Little Love and Hotchat.
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As China mobile game market continues to grow at rapid pace, our management team
believe it is the right time to leverage our expertise in gaming app development
to tap into this hot market. We have been actively developing co-operation
relationship with other developers and operators since March 2018. There are two
games that we are currently co-operating with their developers: Magician Hero
("????") and Shu Mountain Fantasy ("????") of which we are responsible for
marketing, co-operating and maintenance on the platforms and channels introduced
by us. Magician Hero features non-stop-3D real action and battles based on Greek
mythology. Shu Mountain Fantasy is a role-playing game of Xian Xia theme based
on the period of the fairy magic war, so that users can witness the fall of the
fairy tales. However, based on the market responses, we suspended the operations
of the co-operations with other developers or operators in July 2020.
On April 20, 2017, CX Network entered into a series of VIE Agreements with
Shenzhen Chuangxiang Network Technology Limited, or Shenzhen CX, and its
stockholders, in which CX Network effectively assumed management of the business
activities of Shenzhen CX and has the right to appoint all executives and senior
management and the members of the board of directors of Shenzhen CX. Shenzhen CX
is a Chinese limited liability company and was formed under laws of the People's
Republic of China on August 14, 2015. Shenzhen CX engages in the business of
developing and operating membership-based social network, dating and mobile
gaming, and interactive live broadcast platforms. The Company is currently
devoting its efforts to develop mobile applications and online platforms
servicing the Asia market.
Financial Operations Overview
Results of Operations for the three months ended December 31, 2020 and 2019.
Revenues
For the three-month ended September 30, 2020 and 2019, we had no revenues. Based
on the market responses, the Company started to suspend the operation of the
Little Love and Hotchat in November 2019. After July 2020, the Company
completely ceased the operations of the Little Love and Hotchat. Hence, no
revenue was recorded during the two periods.
Cost of Revenues
For the three-month ended September 30, 2020 and 2019, we had no cost of
revenues. Based on the market responses, the Company started to suspend the
operation of the Little Love and Hotchat in November 2019. After July 2020, the
Company completely ceased the operations of the Little Love and Hotchat. Hence,
no revenue was recorded during the two periods.
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Gross Profit
For the three-month ended September 30, 2020 and 2019, we had no profit margin.
Based on the market responses, the Company started to suspend the operation of
the Little Love and Hotchat in November 2019. After July 2020, the Company
completely ceased the operations of the Little Love and Hotchat. Hence, no
revenue was recorded during the two periods.
General and Administrative Expenses
For the three months ended December 31, 2020 and 2019, general and
administrative expenses amounted to $31,808 and $74,156, respectively. The
decrease of general and administrative expenses in the amount of $42,347 or 57%
was primarily attributable to the decrease of salary expense, professional fees,
and lease expense.
Research and Development Expenses
For the three months ended December 31, 2020 and 2019, research and development
expenses amounted to $nil and $5,122, respectively. Based on the market
responses, the Company started to suspend the operation of the Little Love and
Hotchat in November 2019. After July 2020, the Company completely ceased the
operations of the Little Love and Hotchat. Hence, no revenue was recorded during
the current period.
Other Income (Expenses)
For the three months ended December 31, 2020, total other income (expense) was
$1,779 as compared to $920 for the three months ended December 31, 2019.
Net loss
For the three months ended December 31, 2020 and 2019, net loss amounted to
$30,029 and $78,378, respectively. The decrease of net loss in the amounts of
$48,349 or 62% for the three months ended December 31, 2019 was a result of the
factors described above.
Foreign Currency Translation Adjustment
The reporting currency of the Company is the U.S. Dollar. The functional
currency of Shenzhen CX and CX Network operating in the PRC is the Chinese Yuan
or Renminbi ("RMB"). The financial statements of entities in PRC are translated
to U.S. dollars using period end rates of exchange for assets and liabilities,
historical rates of exchange for equity, and average rates of exchange during
the period for results of operations. Net gains and losses resulting from
foreign exchange transactions are included in the consolidated statements of
operations and comprehensive loss.
As a result of these translations, which are a non-cash adjustment, we reported
a foreign currency translation loss of $6,201 for the three months ended
December 31, 2020 as compared to a foreign currency translation loss of $2,907
for the three months ended December 31, 2019. This non-cash loss or gain had an
effect of increasing or decreasing our reported comprehensive loss.
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Comprehensive Loss
For the three months ended December 31, 2020, comprehensive loss of $38,344 is
derived from our net loss of $30,029. For the three months ended December 31,
2019, comprehensive loss of $81,285 is derived from our net loss of $78,378.
Liquidity and Capital Resources
In assessing the Company's liquidity, the Company monitors and analyses 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 December 31, 2020,
the Company's working capital deficit was approximately $893,821 as compared to
working capital deficit of approximately $857,591 as of September 30, 2020. As
of December 31, 2020, and September 30, 2020, the Company's accumulated deficit
was approximately $2,597,442 and $2,567,413, respectively, and the Company has
incurred losses since inception. None of the Company's stockholders, officers or
directors, or third parties, are under any obligation to advance the Company
funds, or to invest in it. 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 its business plan, and reducing overhead expenses. The
Company cannot provide any assurance that new financing will be available to us
on commercially acceptable terms, if at all.
Cash flows from the Company's operations are calculated based upon the local
currencies using the average translation rate. As a result, amounts related to
assets and liabilities reported on the statement of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheets.
The following summarizes the key components of the Company's cash flows for the
three months ended December 31, 2020 and 2019:
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