10-Q 1 cat9q2.htm FORM 10-Q

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

  [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the quarterly period ended June 30, 2019
     
  [  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
       

Commission file number: 333-222288

 

CAT9 Group Inc.

(Exact name of registrant as specified in its charter)

 

  Delaware   47-2912810  
  (State or Other Jurisdiction of   (I.R.S. Employer  
  Incorporation or Organization)   Identification No.)  
         
         
   Room 1702, Building 2, No. 301, Yunan Avenue, Banan District, Chongqing, China    401320  
  (Address of Principal Executive Offices)   (Zip Code)  

 

Securities registered pursuant to Section 12(b) of the Act: 


Title of each class
 
Trading Symbol(s)
  Name of each exchange on which registered
         

Common
 
CATN
  OTC

 

Registrant’s telephone number, including area code: 86-028-85594777 

 1 

 

 

N/A 

(Former name, former address and former fiscal year, if changed since last report)

  

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

[ ] Large accelerated filer [ ] Accelerated filer
[ ] Non-accelerated filer [X] Smaller reporting company
  [X] Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No    

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 13, 2019, the issuer had 102,166,400 shares of its common stock issued and outstanding.  

 

 

TABLE OF CONTENTS

PART I    
Item 1. Unaudited Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
PART II    
Item 1. Legal Proceedings 14
Item 1A. Risk Factors 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Mine Safety Disclosures 14
Item 5. Other Information 14
Item 6. Exhibits 14
  Signatures 15

 

 

 

 2 

 

 

  PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Contents

 

Financial Statements PAGE
   
Condensed Balance Sheets as of June 30, 2019 and December 31, 2018 (Unaudited)  4
   
Condensed Statements of Operations for the three and six months ended June 30, 2019 and 2018 (Unaudited) 5
   
Condensed Statements of Stockholders’ Deficit for the three and six months ended June 30, 2019 and 2018 (Unaudited) 6
   
Condensed Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (Unaudited) 7
   
Notes to Unaudited Condensed Financial Statements 8
   

 

 

 3 

 

CAT9 GROUP, INC. and Subsidiaries

Condensed Consolidated Balance Sheets

                 
     

June 30,

2019

     

December 31,

2018

 
ASSETS     (Unaudited)          
Current assets:                
Cash   $ 504,104     $ 119,792  
Accounts receivable, net     10,871       10,129  
Prepaid expenses     4,946       13,285  
Inventories     366,030       141,531  
Other receivables, related party     7,813       1,682  
Advances to suppliers     63,062       78,403  
Other current assets     47,030       45,971  
Total current assets     1,003,856       410,793  
Property & equipment, net     36,341       42,181  
                 
Total assets   $ 1,040,197     $ 452,974  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current liabilities:                
Accounts payable and accrued liabilities   $ 130,311     $ 151,840  
Customer deposits     203,277       14,092  
Loan payable     72,827       87,230  
Loan payable, related party     559,528       466,121  
Other payables     9,221       15,575  
Other payables, related party     403,345       330,518  
Total current liabilities     1,378,509       1,065,376  
                 
Total liabilities     1,378,509       1,065,376  
                 
Shareholders' Deficit:                
Preferred stock $0.0001 par value, 5,000,000 shares authorized; none issued and outstanding     —         —    
Common stock $0.0001 par value, 500,000,000 shares authorized; 102,166,400 and 102,166,400 shares issued and outstanding, respectively     10,217       10,217  
Additional paid-in capital     497,573       497,573  
Accumulated deficit     (831,070)       (1,118,259)
Accumulated other comprehensive loss     (15,032)       (1,933)
Total Stockholders’ Deficit     (338,312)       (612,402)  
Total liabilities and stockholders’ deficit   $ 1,040,197     $ 452,974  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 4 

 

CAT9 GROUP, INC. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss 

(Unaudited)

    Three Months Ended 
June 30,
  Six Months Ended 
June 30,
      2019       2018     2019   2018
Revenue   $ 1,655,995     $ 8,318     $ 1,989,246   $ 28,427
Cost of revenue     557,891       4,490       744,304     14,185
Gross margin     1,098,104       3,828       1,244,942     14,242
                             
Operating expenses:                            
   Professional fees     14,374       16,201       33,929     56,634
   Consulting     15,740       24,713       50,330     42,023
   Selling, general and administrative     622,891       95,114       873,080     285,540
Total operating expenses     653,005       136,028       957,339     384,197
Income (loss) from operations     445,099       (132,200)       287,603     (369,955)
                             
Other income (expense):                            
     Other income     1,513       346       1,364     2,624
     Interest expense     (1,241)       -       (1,780)     -
Total other income (expense)     272       346       (416)     2,624
                             
Income (loss) before income taxes     445,371       (131,854)       287,187     (367,331)
                             
Provision for income taxes     —         —         —       —  
Net Income (Loss)   $ 445,371     $ (131,854)     $ 287,187   $ (367,331)
                             
Other comprehensive loss:                            
                             
Foreign currency translation adjustment     1,532       (4,660)       (13,099)     (8,073)
Comprehensive income (loss)     446,903       (136,514)       274,088     (375,404)
Basic and diluted net income (loss) per share   $ 0.00     $ (0.00)     $ 0.00   $ (0.00)
Weighted average number of common shares outstanding, basic and diluted     102,166,400       101,781,873     102,166,400   101,393,096

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 5 

 

 

CAT9 GROUP, INC. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (Deficit)

For the Six Months Ended June 30, 2019 and 2018

(unaudited)

      Common Stock       Additional paid in       Accumulated       Other comprehensive          
      Shares       Amount       Capital       Deficit       income       Total       
Balance, December 31, 2017     101,000,000      $ 10,100      $ 404,378      $ (402,365)      $ (9,705)      $ 2,408  
Foreign currency translation adjustment     —         —         —         —         (3,413)       (3,413)  
Net loss     —         —         —         (235,477)       —         (235,477)  
Balance, March 31, 2018     101,000,000       10,100       404,378       (637,842)       (13,118)       (236,482)  
Common stock issued for cash     1,166,400       117       93,195       —         —         93,312  
Contributed capital     —         —         7,679       —         —         7,679  
Foreign currency translation adjustment     —         —         —         —         (4,660)       (4,660)  
Net loss     —         —         —         (131,854)       —         (131,854)  
Balance, June 30, 2018     102,166,400     $ 10,217     $ 505,252     $ (769,696)     $ (17,778)     $ (272,005)  
 

 

      Common Stock       Additional paid in       Accumulated       Other comprehensive        
      Shares       Amount       Capital       Deficit       income       Total     
Balance, December 31, 2018     102,166,400      $ 10,217      $ 497,573      $ (1,118,259)      $ (1,933)      $ (612,402)
Foreign currency translation adjustment     —         —         —         —         (14,631)       (14,631)
Net loss     —         —         —         (158,182)       —         (158,182)
Balance, March 31, 2019     102,166,400       10,217       497,573       (1,276,441)       (16,564)       (785,215)
Foreign currency translation adjustment     —         —         —         —         1,532       1,532
Net income     —         —         —         445,371       —         445,371
Balance, June 30, 2019     102,166,400     $ 10,217     $ 497,573     $ (831,070)     $ (15,032)     $ (338,312)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 6 

 

CAT9 Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

   For the Six Months Ended
June 30,
   2019  2018
Cash flows from operating activities:          
Net Income (Loss)  $287,187   $(367,331)
Adjustments to reconcile net income to net cash used in operating activities:          
Foreign currency translation adjustment   (13,099)   —   
Bad debt expense   (2,653)   —   
Depreciation expense   6,559    6,077 
Changes in operating assets and liabilities:          
    Accounts receivable   1,911    2,037 
    Prepaid expenses   8,339    (21,883)
    Inventories   (224,499)   (9,447)
    Other assets, related party   (6,131)   (21,535)
    Advances to suppliers   15,341    50,690 
Other current assets   (1,059)   16,928 
Accounts payable and accrued liabilities   (21,529)   2,499 
Customer deposit   189,185    —   
Other payables   (6,354)   88,423 
Net cash provided by (used in) operating activities   233,198    (253,542 
           
Cash flows from investing activities:          
 Purchase of equipment   (572)   (2,802)
Net cash used in investing activities   (572)   (2,802)
           
Cash flows from financing activities:          
Contributed capital   —      7,679 
Sale of common stock   —      93,312 
Proceeds from loan payable   79,004    —   
Loans from related parties   72,827    —   
Net cash provided by financing activities   151,831    100,991 
           
Net change in cash   384,457    (155,353)
           
Effects of currency translation   (145)   (9,372)
Cash, beginning of period   119,792    168,539 
           
Cash, end of period  $504,104   $3,814 
           
SUPPLEMENTAL DISCLOSURES:          
Cash paid for interest  $930   $—   
Cash paid for taxes  $—     $—   

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 7 

 

CAT9 GROUP, INC. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2019

(Unaudited)

 

NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY

 

Description of business

CAT9 Group Inc., (the “Company”), was incorporated under the laws of the State of Delaware on January 26, 2015. On December 27, 2016, the Company and its wholly-owned subsidiary, CAT9 Holdings Ltd, a company organized under the laws of the Cayman Islands, ("CAT9 Cayman"); CAT9 Cayman's wholly-owned subsidiary, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing CAT9 Industry Company Ltd, a company organized under the laws of the People's Republic of China closed a share exchange transaction pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing CAT9 Industrial Company Ltd.

 

CAT9 Cayman is a holding company incorporated in August 20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.

Chongqing CAT9 Industrial Company Ltd. is located in Chongqing, PRC and was incorporated under the laws of the PRC on June 26, 2014. Chongqing Field Industrial Company Ltd. operates through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer Truncatum trees and harvesting of Acer Truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery sales.

 

 NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CAT9 Group Inc. have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the audited financial statements of CAT9 Group Inc. in our Form 10-K.

 

The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of June 30, 2019, and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.

 

The Company's functional currency for Chongqing CAT9 is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in the United States Dollars (“USD”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CAT9 Cayman, and its subsidiaries, including CAT9 Investment China, and Chongqing Field Industrial Company Ltd. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.

 

Translation Adjustment

For the six months ended June 30, 219 and for the year ended December 31, 2018, the accounts of the Chongqing CAT9 were maintained, and its financial statements were expressed, in RMB.  Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the RMB as the functional currency.  According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital.  Transaction gains and losses are reflected in the income statement.

 

 8 

 

NOTE 3 –INVENTORY

 

Inventory consist of the following:

   June 30,  December 31,
   2019  2018
Raw materials and parts  $66,402   $26,849 
Finished goods   299,628    114,682 
Total   366,030    141,531 
Less: allowance for inventory reserve   —      —   
Inventory, net  $366,030   $141,531 

 

NOTE 4 – LOAN PAYABLE

 

On June 16, 2018, the Company entered a loan agreement with an individual in the amount of $74,500 (RMB $500,000). The maturity date is June 15, 2019. The loan is unsecured, non-interest bearing.

 

On July 10, 2018, the Company entered a loan agreement with an individual in the amount of $14,538 (RMB $100,000). The maturity date is July 9, 2019. The loan is unsecured and bears 10% annual interest rate. The loan was paid off in January 2019.

  

NOTE 5 - RELATED PARTY TRANSACTIONS

 

Loan payable, related parties

 

On January 1, 2018, the Company entered into a loan agreement with Sichuan CAT9 Technology, the company under control of Wenfa Sun, the Company’s President, Chief Executive Officer and Chairman. The loan agreement offers the Company $728,262 (RMB 5,000,000) credit line. The maturity date is December 31, 2018. The loan is unsecured, non-interest bearing. As of June 30, 2019, the balance of the loan is $559,528 and unused credit line is $168,733.

 

Due to related parties

 

During the normal course of business, affiliated companies, members, and/or officers may advance the Company funds to pay for certain operating expenses. All advances are unsecured, non-interest bearing and due on demand.

 

As of June 30, 2019 and December 31, 2018, the Company was indebted to related parties that advanced loans to the Company without any formal repayment terms. As of June 30, 2019 and December 31, 2018, the Company owed the aforementioned related parties $403,345 and $330,518, respectively.

 

NOTE 6 - STOCKHOLDERS’ EQUITY

 

Preferred Stock

The Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock. As of June 30, 2019, and no shares of preferred stock had been issued.

 

NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME

 

Balance of related after-tax components comprising accumulated other comprehensive income included members’ capital were as follows:

 9 

 

  

    June 30, 2019   December 31, 2018
Accumulated other comprehensive income, beginning of period   $ (1,933 )   $ (9,705
Change in cumulative translation adjustment     (13,099 )     7,772  
Accumulated other comprehensive income, end of period   $ (15,032 )   $ (1,933 )

 

NOTE 8 – SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

 

 

 

 

 

 

 10 

 

Special Note Regarding Forward-Looking Statements

 

The following discussion should be read in conjunction with our unaudited financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

On May 2, 2016, the Company entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and Meihong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to Meihong "Sanya" Qian.

 

On May 3, 2016, the sole shareholder of the Company, Chongqing Field Industrial Ltd., ("CQFI") consented to a redemption of its 10,000,000 shares of common stock at a price of $0.0001 per share for an aggregate redemption price of $1,000. As a result of this action by CQFI, management of the Company now control 100% of the issued and outstanding shares.

  

With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders are the current members of management of the Company. 

 

Results of Operations

 

Three months ended June 30, 2019 compared to the three months ended June 30, 2018

 

Sales Revenue

Sales revenue for the three months ended June 30, 2019, was $1,655,995, compared to $8,318 for the three months ended June 30, 2019, an increase of $1,647,677. During the current quarter the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.

 

Cost of Goods Sold

Cost of goods sold for the three months ended June 30, 2019, was $557,891, compared to $4,490 for the three months ended June 30, 2018, an increase of $553,401. The increase in cost of goods is directly related to the increase in sales. Specifically, for the cost of 3L blending oil and the Acer Truncatum Gel Candy.

 

Operating Expenses

Professional fees were $14,374 for the three months ended June 30, 2019, compared to $16,201 for the three months ended June 30, 2018, a decrease of $1,827 or 11.3%. Professional fees consist mostly of legal and audit expense.

 

Consulting expense was $15,740 for the three months ended June 30, 2019, compared to $24,713, for the three months ended June 30, 2018, a decrease of $8,973 or 36.3%. Consulting expense has decreased due to decreased use of one of the Company’s consultants for which they incurred higher fees in the prior period.

 

 11 

 

General and administrative expense was $622,891 for the three months ended June 30, 2019, compared to $95,114 for the three months ended June 30, 2018, an increase of $527,777 or 554.9%. The increase is the result of the hiring of additional sales and other support staff as well as other costs associated with the increase in business.

  

Net Income (Loss)

Net income for the three months ended June 30, 2019, was $445,369, compared to a net loss of $131,854 for the three months ended June 30, 2018. The increase from the net loss to net income is the direct result of the increase in sales.

 

Six months ended June 30, 2019, compared to the six months ended June 30, 2018

 

Sales Revenue

Sales revenue for the six months ended June 30, 2019, was $1,989,246, compared to $28,427 for the six months ended June 30, 2018, an increase of $1,960,819. During the current quarter the Company increased its sales staff. The new sales agents have been very successful with their sales efforts.

 

Cost of Goods Sold

Cost of goods sold for the six months ended June 30, 2019, was $744,304, compared to $14,185 for the six months ended June 30, 2018, an increase of $730,119. The increase in cost of goods is directly related to the increase in sales. Specifically, for the cost of 3L blending oil and the Acer Truncatum Gel Candy.

 

Operating Expenses

Professional fees were $33,929 for the six months ended June 30, 2019, compared to $56,634 for the six months ended June 30, 2018, a decrease of $22,705 or 40.1%. Professional fees consist mostly of legal and audit expense. The decrease is the result of decreased audit and legal expense.

 

Consulting expense was $50,330 for the six months ended June 30, 2019, compared to $42,023 for the six months ended June 30, 2018, an increase of $8,307 or 19.8%.

 

General and administrative expense was $873,080 for the six months ended June 30, 2019, compared to $285,540 for the six months ended June 30, 2018, an increase of $587,540 or 205.8%. The increase is the result of the hiring of additional sales and other support staff as well as other costs associated with the increase in business.

 

Net Income (Loss)

Net income for the six months ended June 30, 2019, was $287,187, compared to a net loss of $367,331 for the six months ended June 30, 2018. The increase from the net loss to net income is the direct result of the increase in sales.

 

Liquidity and Capital Resources 

During the six months ended June 30, 2019, operating activities provided $233,198 of cash. We used $572 in investing activities and had net cash of $151,831 provided by financing activities. 

Operating Capital and Capital Expenditure Requirements

 

Our controlling shareholders expect to advance us additional funding for operating costs in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.

 

Plan of Operation and Funding

 

We do not currently engage in enough business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to:

 

  (i) Filing of Exchange Act reports, and

  (ii) Costs relating to developing our business plan

 12 

 

We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our controlling shareholder and or other means of financing that may be available to us.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

None.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, June 30, 2019. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to a material weakness in our internal control over financial reporting, which is described below.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of June 30, 2019, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

  

 13 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

 

Item 1A. Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
2.1 Share Exchange Agreement dated December 27, 2016, by and among the Registrant, CAT9 Cayman Holdings,; CAT9 Investment China Limited, and Chongqing Field Industrial Company Ltd.   8-K   2.1 12/27/16
3.1 Certificate of Incorporation   10   3.1 02/06/15
3.2 Bylaws   10   3.2 02/06/15
3.3    Amendment to Certificate of Incorporation   8-K         3.3         09/01/15
3.4 Certificate of Approval, Agreement of Merger   8-K 3.4 12/27/16
10.1    Wenfa "Simon" Sun Employment Agreement            8-K                  10.1        12/27/16
10.2 MeiHong "Sanya" Qian Employment Agreement    8-K   10.2 12/27/16
10.3 Agreement with Yunnan Province, Acreage Terms   8-K   10.3 05/02/17
10.4 Agreement with Yunnan Province, RMB Amount   8-K   10.4  05/02/17
21.1    List of Subsidiaries   10-K   21.1 04/01/19
31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X        
32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X        
101.INS XBRL Instance Document X        
101.SCH XBRL Taxonomy Extension Schema Document X        
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X        
101.LAB XBRL Taxonomy Extension Label Linkbase Document X        
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X        
101.DEF XBRL Taxonomy Extension Definition Linkbase Definition X        

 14 

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CAT9 Group Inc.

 

By: /s/ Wenfa “Simon” Sun

Wenfa “Simon” Sun. President, Chief Executive Officer, and Chairman of the Board of Directors

 

By: /s/ Suyun Cao

Suyun Cao, Chief Financial Officer, Secretary

 

Dated: August 13, 2019

 

 

 15