| Summary of Significant Accounting Policies | Note
2. Summary of Significant Accounting Policies (a)
Basis of presentation and liquidation The
condensed consolidated balance Sheets as of November 30, 2023 and May 31, 2023 and the condensed consolidated statements of operations
and comprehensive income (loss), shareholders’ equity, and cash flow for the six months ended November 30, 2023 and 2022 have been
prepared by the Company is in conformity with generally accepted accounting principles in the United States (“US GAAP”). The
Company incurred net profit of $ 203,216 23,814 3,632,597 3,307,640 542,850 As
of November 30, 2023 and May 31, 2023, the Company had cash and cash equivalents of $ 68,135 659,451 2,726,136 3,119,612 The
company is currently seeking to restructure the terms of our liabilities by raising funds to pay off liabilities. Our ability to continue
as a going concern is dependant upon obtaining the necessary financing and negotiating the terms of the existing borrowing to meet our
current and future liquidity needs. (b)
Going Concern Uncertainties The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated
deficit of $ 3,632,597 3,307,640 203,216 23,814 542,850 829,409 The
Company’s cash position is not significant to support the Company’s daily operation. While the Company believes in the viability
of its business strategy plans such as Cloud chain, Wechat’s sales model and Douyin e-commerce sales model,
and its ability to raise additional funds, there can be no assurance to that effect. The Company’s ability to continue as a going
concern is dependent upon its ability to improve profitability and the ability to acquire financial support from its major shareholder. These
and other factors raise substantial doubts about the Company’s ability to continue as a going concern within one year after the
date that financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amount and classification of liabilities that may result in the Company not
being able to continue as a going concern. (c)
Principles of Consolidation The
accompanying consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIE. All significant
inter-company transactions and balances between the Company, its subsidiaries and the VIE have been eliminated upon consolidation. To
comply with PRC laws and regulations, the Company provides trading of motor oil, auto parts, exhaust gas cleaners and brand name management
services in China via its VIE, which hold critical operating licenses that enable the Company to do business in China. Substantially
all of the Company’s revenues, costs and net income (loss) in China are directly or indirectly generated through this VIE. The
Company has signed various agreements with its VIE and legal shareholders of the VIE to allow the transfer of economic benefits from
the VIE to the Company and to direct the activities of the VIE. The
Company believes that the contractual arrangements among its subsidiaries, the VIE and its shareholders are in compliance with the current
PRC laws and legally enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies
could limit the Company’s ability to enforce these contractual arrangements. As a result, the Company may be unable to consolidate
the VIE and its subsidiary in the consolidated financial statements. The Company’s ability to control its VIE also depends on the
authorization by the shareholders of the VIE to exercise voting rights on all matters requiring shareholders’ approval in the VIE.
The Company believes that the agreements on authorization to exercise shareholder’s voting power are legally enforceable. In addition,
if the legal structure and contractual arrangements with its VIE were found to be in violation of any future PRC laws and regulations,
the Company may be subject to fines or other actions. The Company believes the possibility that it will no longer be able to control
and consolidate its VIE as a result of the aforementioned risks and uncertainties is remote. The
following table sets forth its subsidiaries and the VIE, including their country of incorporation or residence and our ownership interest
in such subsidiaries. Please see “Note 4 VIE Structure and Arrangements”. Schedule
of Ownership Interest in Subsidiaries
Entity Name Date of Incorporation Parent Entity Interest Nature of Operation Place of Incorporation
CXJ Investment Group Company Ltd 2020/2/19 US CXJ 100 Investment holding British Virgin Islands
CXJ (HK) Technology Group Company Ltd (HK CXJ) 2020/3/11 BVI CXJ 100 Investment holding Hong Kong, PRC
CXJ (Shenzhen) Technology Co., Ltd 2020/5/26 HK CXJ 100 Investment holding PRC
VIE:
CXJ Technology (Hangzhou) Co., Ltd 2019/3/28 SZ CXJ 100 Trading,brand name management fee and consultancy services PRC
Qingdao Hong Run Kuo Ye Network Technology Co., Ltd 2019/8/19 HZ CXJ 100 Trading and consultancy services PRC
Xishijie Automobile Industry Ecology Technology Co., Ltd (formerly known as Shenzhen Lanbei Ecological Technology Co., Ltd) 2020/10/28 HZ CXJ 51 Trading and consultancy services PRC
Longkou Xianganfu Trading Co., Ltd. 2018/4/23 SZ CXJ 100 Trading and consultancy services PRC The
Company disposed 51 1 (d)
Use of Estimates The
accompanying consolidated financial statements have been prepared in conformity with US GAAP, which requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and revenues and expenses during
the reporting periods. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but
not limited to economic lives and impairment of long-lived assets, valuation allowance for deferred tax assets, and uncertain tax position.
Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences
may be material to the consolidated financial statements. (e)
Foreign Currency The
functional currency of the Company, CXJ Group Co., Ltd, CXJ Investment Group Company Ltd and CXJ (HK) Technology Group Company Ltd is
US Dollar. The VIE determined their functional currency to be Chinese Renminbi, or RMB based on the criteria of ASC 830, Foreign Currency
Matters. The Company uses USD as its reporting currency. The
Company uses the average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results
and financial position, respectively. The Company also uses the historical exchange rate at the initial transaction date to translate
the capital and various reserve items. Translation differences are recorded in accumulated other comprehensive income (loss), a component
of shareholders’ deficits. Translation
of amounts from RMB into US$1 has been made at the following exchange rates for the respective periods: Schedule
of Exchange Rates
November 30, November 30,
As of and for the
November 30, November 30,
Period-end RMB: US$1 exchange rate 7.12 7.09
Period-average RMB: US$1 exchange rate 7.26 7.12
Exchange rate 7.26 7.12 (f)
Cash and Cash Equivalents Cash
and cash equivalents consist of cash on hand, demand deposits placed with banks or other financial institutions and have original maturities
of less than three months. (g)
Accounts Receivable and Allowance for Doubtful Accounts Accounts
receivable are stated at the historical carrying amount net of allowance for doubtful accounts. The
Company maintains an allowance for doubtful accounts which reflects its best estimate of amounts that potentially will not be collected.
The Company determines the allowance for doubtful accounts taking into consideration various factors including but not limited to historical
collection experience and credit-worthiness of the debtors as well as the age of the individual receivables balance. Additionally, the
Company makes specific bad debt provisions based on any specific knowledge the Company has acquired that might indicate that an account
is uncollectible. The facts and circumstances of each account may require the Company to use substantial judgment in assessing its collectability. (h)
Inventories, Net Inventories,
consist of finished goods, work in process, and raw materials. Inventories are stated at the lower of cost and net realizable value.
Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write down the cost of inventory
to the estimated net realizable value due to slow-moving and obsolete inventory, which is dependent upon factors such as historical and
forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. (i)
Prepayments Prepayments
are mainly consisted of prepaid income tax, rental, prepayments for consulting fee and advances to supplies. (j)
Intangible Assets, Net The
Company’s intangible assets with definite useful lives primarily consist of software, non-patent technology and land use right.
The Company typically amortizes its purchased software, non-patent technology and land use right with definite useful lives on a straight-line
basis over the shorter of the contractual terms or the estimated useful Lives. The Company’s policy is to write off 100% of the
in-house developed software expenses during the year incurred. According
to the law of PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only
through land use rights granted by the Chinese government for a specified period of time. The Company amortizes its land use rights using
the straight-line method over the periods the rights are granted. The
estimated useful lives of purchased software and non-patent technology are as follow: Schedule
of Intangible Assets Estimated Useful Lives
Purchased software and copyrights 10 (k)
Impairment of Long-lived Assets Other Than Goodwill The
Company evaluates its long-lived assets, including fixed assets and intangible assets with finite lives, for impairment whenever events
or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets,
indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability
of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the
use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount
of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value.
Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not
readily available. (l)
Goodwill Goodwill
represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. In
accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment
for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value
based test. Fair value is generally determined using a discounted cash flow analysis. In
January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity
should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the
amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual and interim reporting periods beginning after
December 15, 2022 for smaller reporting companies. The Company has early adopted ASU 2017-04 on June 1, 2020. (m)
Fair Value of Financial Instruments The
Company’s financial instruments include cash and cash equivalents, amount due from/to related parties, merchant deposits, payables
to merchants. The carrying values of these financial instruments approximate their fair values due to their short-term maturities. The
Company applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”). ASC 820 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided
on fair value measurement. ASC
820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level
1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level
2—Other inputs that are directly or indirectly observable in the marketplace. Level
3—Unobservable inputs which are supported by little or no market activity. ASC
820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach;
and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical
or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value
amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach
is based on the amount that would currently be required to replace an asset. (n)
Revenue Recognition In
accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
606, Revenue from Contracts Revenues
are recognized when the promised products have been confirmed of delivery or services have been transferred to the consumers in amounts
that reflect the consideration the customer expects to be entitled to in exchange for those services. The Company presents value added
taxes (“VAT”) as reductions of revenues. The Company recognizes revenues net of value added taxes (“VAT”) and
relevant charges. Product
Revenue We
generate revenue primarily from the sales of automobile exhaust cleaners and auto parts directly to customers. We recognize product revenue
at a point in time when the control of the products has been transferred to customers. The transfer of control is considered complete
when products have been picked up by or shipped to our customers. Our sales arrangements for automobile exhaust cleaners, motor oil and
auto parts usually require a full prepayment before the delivery of products. We
also generate revenue from the sales of auto parts directly to the customers, such as a business or individual engaged in auto parts
businesses. We recognize revenue at a point in time when products are delivered and customer acceptance is made. For the sales arrangements
of auto parts products, we generally require payment upon issuance of invoices. Service
Revenue We
also generate revenue from brand name authorization fee and brand name management service under separate contracts. Revenue from brand
name authorization and management services include service fees for provision of brand name “teenage hero car” to our customers,
and provision of management service. Revenue from the maintenance service to the customers is recognized at a point in time when services
are provided. Revenue from the management service to the customer is recognized as the performance obligation is satisfied over time
over the contracting period. (o)
Sales and Distribution Expense Selling
and distribution expenses amounted to $ 183,389 104,343 51,344 81,428 17,707 8,610 3,918 4,875 6,470 (p)
General and Administrative Expenses General
and administrative expenses amounted to $ 149,720 209,265 61,654 51,142 17,013 (q)
Operating Leases Prior
to the adoption of ASC 842 on January 1, 2019: Leases,
mainly leases of factory buildings, offices and employee dormitories, where substantially all the rewards and risks of ownership of assets
remain with the lessor are accounted for as operating leases. Payments made under operating leases are recognized as an expense on a
straight-line basis over the lease term. The Company had no finance leases for any of the periods stated herein. Upon
and hereafter the adoption of ASC 842 on January 1, 2019: The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, operating lease liability, and operating lease liability, non-current in the Company’s consolidated balance sheets. ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend
or terminate the lease when it is reasonably certain that it will exercise that option, if any. As the Company’s leases do not
provide an implicit rate, the Company used an incremental borrowing rate based on the information available at commencement date in determining
the present value of lease payments. The Company has elected to adopt the following lease policies in conjunction with the adoption of
ASU 2016-02: (i) for leases that have lease terms of 12 months or less and does not include a purchase option that is reasonably certain
to exercise, the Company elected not to apply ASC 842 recognition requirements; and (ii) the Company elected to apply the package of
practical expedients for existing arrangements entered into prior to January 1, 2019 to not reassess (a) whether an arrangement is or
contains a lease, (b) the lease classification applied to existing leases, and(c) initial direct costs. (r)
Value-added Taxes Revenue
is recognized net of value-added taxes (“VAT”). The VAT is based on gross sales price and VAT rates applicable to the Company
is 17% for the period from the beginning of 2018 till the end of April 2018, then changed to 16% from May 2018 to the end of March 2019,
and changed to 13% from April 2019. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers
against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded as VAT payable if output VAT is larger
than input VAT and is recorded as VAT recoverables if input VAT is larger than output VAT. All of the VAT returns filed by the Company’s
subsidiaries in China, have been and remain subject to examination by the tax authorities. (s)
Income Taxes The
Company followed the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes, or ASC 740. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets
and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company
recorded a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized
in tax expense in the period that includes the enactment date of the change in tax rate. The
Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognized tax benefit
recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive loss as income tax expense. British
Virgin Island Under
the current tax laws of British Virgin Island, the Company and its subsidiaries are not subject to tax on their income or capital gains.
In addition, upon of dividends by the Company to its shareholders, no British Virgin Island withholding tax will be imposed. United
States Under
the current tax laws of United States, the Company and its subsidiaries are not subject to tax on their income or capital gains. In addition,
upon of dividends by the Company to its shareholders, no United States withholding tax will be imposed. P.R.C
China The
China Corporate Income Tax Law (“CIT Law”) became effective on January 1, 2008. Under the CIT Law, China’s dual tax
system for domestic enterprises and foreign investment enterprises (“FIEs”) was effectively replaced by a unified system.
The new law establishes a tax rate of 25 The
following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three months ended November 30,
2023 and November 30, 2022, respectively: Schedule
of Reconciliation PRC Statutory Rates
For the three months ended November 30, For the three months ended November 30,
PRC statutory rate 25 % 25 %
Net operating losses for which no deferred tax assets was recognized (25 )% (25 )%
The Company’s expense is out of limit than that of PRC statutory tax policy allowed 16.5 % 16.5 %
Effective income tax rate 16.5 % 16.5 % Income
tax expense for the three months and six month ended November 30, 2023 and November 30, 2022, respectively are as follows: Schedule
of Income Tax Expense
November 30, November 30,
For the three months ended
November 30, November 30,
Current - (1,513 )
Deferred - -
Income tax expense/(income) - (1,513 )
November 30, November 30,
For the six months ended
November 30, November 30,
Current - 2,385
Deferred - -
Income tax expense/(income) - 2,385 There
was a tax refund of $ 1,513 (t)
Employee Benefit Expenses As
stipulated by the regulations of the PRC, full-time employees of the Company are entitled to various government statutory employee benefit
plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance and pension benefits through
a PRC government-mandated multi-employer defined contribution plan. The Company is required to make contributions to the plan and accrues
for these benefits based on certain percentages of the qualified employees’ salaries. (u)
Comprehensive Income (Loss) Comprehensive
income (loss) is defined as the changes in equity of the Company during a period from transactions and other events and circumstances
excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive
Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the
periods presented, the Company’s comprehensive income (loss) includes net loss and foreign currency translation adjustment and
is presented in the consolidated statements of operations and comprehensive income (loss). (v)
Loss Per Share Basic
loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period using the two-class method. Under the two-class method, net loss is allocated between ordinary shares and
other participating securities based on their participating rights. Diluted loss per share is calculated by dividing net loss attributable
to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period.
Ordinary equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent
shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive. (w)
Segment Reporting The
Company follows ASC 280, Segment Reporting. The Company’s Chief Executive Officer as the chief operating decision-maker reviews
the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a
whole and hence, the Company has only one reportable segment. The Company operates and manages its business as a single (x)
Recently Issued Accounting Standards Recent
accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements. |
