CXJ GROUP CO., LIMITED Information included in this Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. We generally use the words "believes," "expects," "intends," "plans," "anticipates," "likely," "will" and similar expressions to identify forward-looking statements. Such forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and factors include, but are not limited to, those factors set forth in our Prospectus on Form S-1 for the period endedFebruary 28, 2022 and the condensed consolidated financial statements included in this Report. Except as required by applicable law, including the securities laws ofthe United States , we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Report. Results of Operations The following table sets forth a summary of our consolidated results of operations and comprehensive loss for the periods presented, both in absolute amount and as a percentage of our revenues for the periods presented. This information should be read together with our audited consolidated financial statements and related notes as well as unaudited interim consolidated financial statements and related notes included elsewhere in this prospectus. The results of operations in any period are not necessarily indicative of our future trends. For the Three Months Ended February 28, 2022 2021 $ $ (unaudited) (unaudited) Revenue 638,316 251,602 Cost of Revenue (129,328 ) (85,923 ) Gross Profit 508,988 165,679 Other Income 1,345 1,439
Selling and Distribution Expenses (130,005 ) (71,627 ) General and Administrative Expenses (221,972 )
(129,131 ) Profit/(Loss) from Operation 158,356 (33,640 ) Interest Income/(Expense) 79 -
Profit/(Loss) before Income Taxes 158,435 (33,640 ) Income Taxes (1,714 ) (491 ) Net Profit/(Loss) before Non-controlling Interest 156,721 (34,131 ) Non-controlling Interest 2,810
-
Profit/(Loss) Attributable to Shareholders 153,911
(34,131 )
For the three month period ended
Revenues
We generate revenues from selling auto parts, motor oil and providing brand name services The following table sets forth the components of our revenues by amounts and percentages of our total revenues for the periods presented
For the Three Months Ended For the Three Months Ended
February 28, 2022 % of February 28, 2021 % of
$ Net Sales $ Net Sales
Administrative fee of
brand name 401,563 62.9 % 150,935 60.0 %
Motor Oil 185,014 29.0 % 18,130 7.2 %
Sales of auto parts 32,933 5.2 % 12,609 5.0 %
Others 18,806 2.9 % 69,928 27.8 %
Total 638,316 100 % 251,602 100 %
The Company are engaging in trading of auto parts and motor oil to their
third-party agents in China . Revenues from services consist of administrative of
brand name and training fees. Payments of services are generally received before
delivery the services.
28
Sales of
The Company received the purchase order from their third-party agents, the selling price is based on the purchase price plus on a certain margin. Revenues related to sales of auto parts and motor oil are recognized in the consolidated statements of operations and comprehensive income/(loss) at the time when the goods are delivered and the ownership transfer to the third-party agents.
Administrative Fee of Brand Name
We earned the brand name administrative fees from our customers, who pay one-time fixed feeRMB90,000 for one to three years andRMB200,000 for fives for exchange of (1) the right to use the brand name "Chejiangling / TeenageHero Car " and "ECXJ", (2) the right to receive 10% of other new shops' brand name permission fee, (3) the right to receive 5% of other new shops' selling, and (4) the right to receive 20% of other new shops' administrative fee. The fee is
not be refundable. Total revenues for three months endedFebruary 28, 2022 were$638,316 compared to$251,602 for the three months endedFebruary 28, 2021 , which increased by$386,714 , mainly due to the increased of brand name administrative fee by$250,628 , sales of motor oil by$166,884 , sales of auto parts by$20,324 and decreased of others by$51,122 . Cost of Revenue
Cost of revenue consist primarily of costs associated with the purchase of goods.
For three months endedFebruary 28, 2022 compared to three months endedFebruary 28, 2021 For the Three Months Ended For the Three Months Ended
February 28, 2022 % of February 28, 2021 % of
$ Cost $ Cost
Motor Oil 101,616 79 % 14,010 16.3 %
Sales of auto parts 23,931 19 % 9,427 11.0 %
Others 3,781 3 % 62,486 72.7 %
Total 129,328 101 % 85,923 100 %
Cost of revenue for the three months ended
Gross Profit Gross profit for the three months endedFebruary 28, 2022 were$508,988 compared to$165,679 as ofFebruary 28, 2021 , an increment of$343,309 is mainly due to the increase of brand name administrative fee and sales of motor oil. 29
Selling and Distribution Expenses
Selling and Distribution expenses include salary, sales-related consultancy fee, travelling expenses, conference and function expenses and other operating expenses associated with sales and marketing.
For three months endedFebruary 28, 2022 compared to three months endedFebruary 28, 2021 For the Three Months Ended For the Three Months Ended
February 28, 2022 % of February 28, 2021 % of
$ Net Sales $ Net Sales
Selling and
Distribution Expenses 130,005 20.4 % 71,627 28.5 %
Sales and marketing expenses for the three months ended February 28, 2022 were
$130,005 compared to $71,627 as of February 28, 2021 . The significant increase
was primarily due to increase on salary and and sales-related consultancy fee
and travelling expenses.
General and Administrative Expenses
General and Administrative (G&A) expenses consist primarily of salary, employee benefits, facility cost, rental fee and other related expenses.
For three months endedFebruary 28, 2022 compared to three months endedFebruary 28, 2021 For the Three Months Ended For the Three Months Ended November 30, 2021 % of November 30, 2020 % of $ Net Sales $ Net Sales General and Administrative Expenses 221,972 34.8 % 129,131 51.3 % G&A expenses for the three months endedFebruary 28, 2022 were$221,972 compared to$129,131 as ofFebruary 28, 2021 . The increment was primarily due to the increase of salary and welfare, travelling expenses, consultancy fee and rental expenses. Taxation We recorded 1,714 and$491 in income tax expenses for the period endedFebruary 28, 2022 andFebruary 28, 2021 , respectively. Received a corporation tax refund$8,435 from tax authority inNovember 2021 . The Company, incorporated in the PRC, was governed by the income tax law of the PRC, and is subject to PRC enterprise income tax ("EIT"), The EIT rate of PRC is 25%.
Generally, our PRC subsidiaries, VIEs and their subsidiaries are subject to enterprise income tax on their taxable income inChina at a statutory rate of 25%. The enterprise income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards. 30 We are subject to value-added tax at a rate of 13% on sales of motor oil and auto parts and 6% on the services (brand name management services), in each case less any deductible value-added tax we have already paid or borne. We are also subject to surcharges on value-added tax payments in accordance with PRC law. Net Loss
Net profit/(loss) for the three months ended
LIQUIDITY AND CAPITAL RESOURCES
Since commencing operations, our primary uses of cash have been to finance working capital needs for ave financed these requirements primarily from cash generated from operations and related party advances.
We are in start-up stage operations and have generated limited revenues. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows. We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could contractual result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on
terms
acceptable to us, or at all.
The following table sets forth a summary of our cash flows for the periods
indicated.
For the Nine Months Ended
February 28, 2022 February 28, 2021
$ $Cash Flows (used in)/provided by operating activities (151,608 ) 127,566 Cash Flows used in investing activities (104,742 ) (74,654 ) Cash Flows provided by financing activities. 78,488 34 Effects on change in foreign exchange rate (106,544 ) (67,041 ) Net Change in cash during period (284,406
) (14,095 ) Operating Activities Net cash (used in)/provided by operating activities for the nine months endedFebruary 28, 2022 were ($151,608 ) compared to$127,566 provided by operating activities as ofFebruary 28, 2021 . And as compared to net profit of$429,212 and net loss of$173,592 , respectively, in the same period. 31 Investing Activities
Net cash used in investing activities for the nine months ended
Financing Activities
Net cash provided by financing activities for the nine months ended
The majority of the Company's revenues and expenses were denominated primarily
in Renminbi ("RMB"), the currency of the People's Republic of China . There is no
assurance that exchange rates between the RMB and the U.S. Dollar will remain
stable. Inflation has not had a material impact on the Company's business.COMMITMENTS AND CONTINGENCIES
Contractual Obligations
Our contractual obligations as of
Payments Due by period
Less than 1 More than 5
Operating leases Total year 1-3 year 3-5 years years
Total 34,868 34,868 - - -
Other than as shown above, we did not have any significant capital and other
commitments, long-term obligations or guarantees as of
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements.
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