#onlinedating | CX NETWORK GROUP, INC. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) | #bumble | #tinder | #pof


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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 2019 Annual Report filed with the Securities and Exchange Commission on
December 30, 2019 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 product Little Love (“???”)
and Hotchat (“??”) 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 work with its advertisers to
maximize the effectiveness of their campaigns by optimizing advertisement
formats and placements. We temporarily suspended our operation of Hotchat at the
end of year 2019 due to the revenue from in-app purchase was insufficient to
support the cost of the operation. And we temporarily suspended the operation of Little Love since April 2020, as the Company is working internally to develop
E-commerce business in app of Little Love. The company currently has no plan to
resume the advertisement and operation of Little Love until the E-commerce
business is launched.

Our self-developed mobile gaming application is Eternal Tribe (“????”) which was
launched by us in January 2018. For Eternal Tribe, our users can deposit fund on
as needed basis for the in-app purchases. Eternal Tribe is Android-based mobile
games developed solely by us to diversify our product portfolio. We updated
Eternal Tribe based on the collected user experiences and market feedbacks and
launched an upgraded version of Eternal Tribe in July 2018 and engaged third
party to co-market and co-operate Eternal Tribe on different platforms and
channels. However, based on the market responses, we suspended Eternal Tribe in
November 2018 and dismissed the development team for Eternal Tribe.

Coronavirus (“COVID-19”) Updates

The COVID-19 pandemic has caused disruptions to our operations starting in
January 2020. Our operations were closed in early February due to China’s
government mandates. In late February 2020, substantially all of our employees
were back to work in our offices. The ongoing COVID-19 pandemic not only
adversely impacted our operations but the business of our customers. We
experienced and are continually experiencing delayed customer payments and
rescheduled customer orders, which adversely impacted the Company’s results of
operations, cash flows and financial position.



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The extent of the impact on our fiscal 2020 results will be dependent on future
developments such as the length and severity of the crisis, the potential
resurgence of the crisis, future government actions in response to the crisis
and the overall impact of the COVID-19 pandemic on the global economy and
capital markets, among many other factors, all of which remain highly uncertain
and unpredictable. The Company continues taking actions to help mitigate, as
best we can, the impact of the COVID-19 pandemic on the health and well-being of
our employees, the communities in which we operate and our partners, as well as
the impact on our operations and business as a whole.



Foreign Operations


Substantially all of our business operations are conducted in Mainland China.
Accordingly, our results of operations, financial condition and prospects are
subject to a significant degree to economic, political and legal developments in
the PRC. We also have operations in Hong Kong. Operating in foreign countries
involves substantial risk. For example, our business activities subject us to a
number of Chinese laws and regulations, such as anti-corruption laws, tax laws,
foreign exchange controls and cash repatriation restrictions, data privacy and
security requirements, labor laws, intellectual property laws, privacy laws, and
anti-competition regulations, which have uncertainties. Any failure to comply
with the PRC laws and regulations could subject us to fines and penalties, make
it more difficult or impossible to do business in China and harm our reputation.

Operating in foreign countries also subjects us to risk from currency
fluctuations. Our primary exposure to movements in foreign currency exchange
rates relates to non-U.S. dollar denominated sales and operating expenses. The
weakening of foreign currencies relative to the U.S. dollar adversely affects
the U.S. dollar value of our foreign currency-denominated sales and earnings.
This could either reduce the U.S. dollar value of our prices or, if we raise
prices in the local currency, it could reduce the overall demand for our
offerings. Either could adversely affect our revenue. Conversely, a rise in the
price of local currencies relative to the U.S. dollar could adversely impact our
profitability because it would increase our costs denominated in those
currencies, thus adversely affecting gross margins.

Financial Operations Overview

Results of Operations for the three months ended June 30, 2020 and 2019



Revenues


For the three months ended June 30, 2020, we had total revenues of $0 as
compared to $18,943 for the three months ended June 30, 2019. There was no
revenues generated during the three months ended June 30, 2020. The decrease of
$18,943 or 100% during the three months ended June 30, 2020 was primarily due to
the Company temporarily suspended its operation from April 2020 and has not
resume to its normal level of operation as of the filing date.



Cost of Revenues


For the three months ended June 30, 2020 and 2019, cost of revenues amounted to
$65 and $767, respectively. The decrease of cost of revenues during the three
months ended June 30, 2020 compared to the three months ended June 30, 2019 was
primarily attributable to the Company temporarily suspended its operation from
April 2020 and has not resume to its normal level of operation as of the filing
date.




Gross Profit (Loss)



For the three months ended June 30, 2020 and 2019, gross profit (loss) amounted
to $(65) and $18,176, respectively. The decrease of gross profit during the
three months ended June 30, 2020 compared to the comparative period in 2019 was
primarily attributable to the reason above.

General and Administrative Expenses

For the three months ended June 30, 2020 and 2019, general and administrative
expenses amounted to $35,522 and $78,194, respectively. The decrease of general
and administrative expenses in the amount of $42,672 or 55% was primarily
attributable to the COVID-19 pandemic surfaced in China has significantly
affected the Company’s operation from January 2020 and the Company temporarily
suspended all of its operation from April 2020.



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Research and Development Expenses

For the three months ended June 30, 2020 and 2019, research and development
expenses amounted to $0 and $1,501, respectively.



Other Expense


For the three months ended June 30, 2020, total other expense was $419 as
compared to $311 for the three months ended June 30, 2019. The increase in other
expense is primarily attributable to the increased bank charge.



Net loss


For the three months ended June 30, 2020 and 2019, net loss amounted to $36,006
and $61,830, respectively. The decrease of net loss in the amounts of $25,824 or
42% for the three months ended June 30, 2020 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 $443 for the three months ended June 30,
2020
as compared to a foreign currency translation gain of $2,623 for the three
months ended June 30, 2019. This non-cash gain or loss had an effect of
decreasing or increasing our reported comprehensive loss.



Comprehensive Loss


For the three months ended June 30, 2020, comprehensive loss of $36,449 is
derived from our net loss of $36,006. For the three months ended June 30, 2019,
comprehensive loss of $59,207 is derived from our net loss of $61,830.

Results of Operations for the nine months ended June 30, 2020 and 2019



Revenues


For the nine months ended June 30, 2020, we had total revenues of $4,172, as
compared to $67,589 for nine months ended June 30, 2019. The revenues were
mainly generated through the in-app purchase of Little Love. The decrease of
$63,417, or 94%, during the nine months ended June 30, 2019 was primarily
attributable to that the Company temporarily suspended the operation, the number
of active users of Hotchat and Little Love decreased. The influence of COVID-19
pandemic has also resulted in a significant drop in revenue.



Cost of Revenues


For the nine months ended June 30, 2020 and 2019, cost of revenues amounted to
$670 and $12,289, respectively. The decrease of cost of revenues in 2020 was
primarily attributable to decrease of labor cost associated with maintenance of
mobile platform, suspension of operation from February 2020 and the influence of
the COVID-19 pandemic.



Gross Profit


For the nine months ended June 30, 2020 and 2019, gross profit amounted to
$3,502 and $55,300, respectively. The decrease of gross profit for the nine
months ended at June 30, 2020 was primarily attributable to the reason above.



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General and Administrative Expenses

For the nine months ended June 30, 2020 and 2019, general and administrative
expenses amounted to $143,257 and $278,761, respectively. The decrease of
general and administrative expenses of $135,504 or 49% during the nine months
ended June 30, 2020 was primarily attributable to the decrease of salary
expense, professional fees, and lease expense and the influence of the COVID-19
pandemic.

Research and Development Expenses

For the nine months ended June 30, 2020 and 2019, research and development
expenses amounted to $5,835 and $2,001, respectively. The increase of research
and development expenses in the amount of $3,834 or 192% was primarily
attributable to the fact that the Company adjusted the strategy to develop
E-commerce business in the nine months ended June 30, 2020.



Other Income (Expenses)


For the nine months ended June 30, 2020, total other expenses was $(2,059) as
compared to total other income of $44,864 for the nine months June 30, 2019. The
decrease in other income is primarily attributable to the security deposit for
the Company’s office forfeited during the nine months ended June 30, 2020 and
government subsidy received by the Company during the nine months ended June 30,
2019
.




Net loss



For the nine months ended June 30, 2020 and 2019, net loss amounted to $147,649
and $180,598, respectively. The decrease of net loss in the amounts of $32,949
was a result of the factors described above.

Foreign Currency Translation Adjustment

The functional currency of our VIE entity operating in the PRC is the Chinese
Yuan or RMB. The financial statements of our VIE are translated to U.S. dollars
using period end rates of exchange for assets and liabilities, and average rates
of exchange (for the period) for revenues, costs, and expenses. Net gains and
losses resulting from foreign exchange transactions are included in the
consolidated statements of operations.

As a result of these translations, which are a non-cash adjustment, we reported
a foreign currency translation loss of $908 for the nine months ended June 30,
2020
as compared to a foreign currency translation loss $74 for the nine months
ended June 30, 2019. This non-cash loss had the effect of increasing our
reported comprehensive loss.



Comprehensive Loss


For the nine months ended June 30, 2020, comprehensive loss of $148,557 is
derived from the sum of our net loss of $147,649 and foreign currency
translation loss of $908. For the nine months ended June 30, 2019, comprehensive
loss of $180,672 is derived from the sum of our net loss of $180,598 and foreign
currency translation loss of $74.

Liquidity and Capital Resources

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, 2020, the
Company’s working capital deficit was approximately $737,000 as compared to
working capital deficit of approximately $596,000 as of September 30, 2019. As
of June 30, 2020 and September 30, 2019, the Company’s accumulated deficit was
approximately $2,449,000 and $2,301,000, 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.



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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
nine months ended June 30, 2020 and 2019:

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