10-Q: CXJ Group Reports Q2 2026 Loss Amid Revenue Decline

CXJ Group Co., Limited reported a significant decrease in revenue and continued net losses for the quarter and six months ended November 30, 2025, raising going concern doubts.

Summary

• Net loss for the three months ended November 30, 2025, was $98,298, an improvement from $143,693 in the same period of 2024.
• Net loss for the six months ended November 30, 2025, was $145,074, an improvement from $185,260 in the same period of 2024.
• Total revenue for the three months ended November 30, 2025, decreased by $35,473 to $65,402, down from $100,875 in the prior year.
• Total revenue for the six months ended November 30, 2025, decreased to $156,407, down from $215,257 in the prior year.
• Gross profit for the three months ended November 30, 2025, was $35,503, a decrease of $29,939 from $65,442 in the prior year.
• Cash and cash equivalents increased to $57,481 as of November 30, 2025, from $10,037 as of May 31, 2025.
• Current liabilities increased to $2,097,652 as of November 30, 2025, from $1,855,286 as of May 31, 2025.
• The accumulated deficit grew to $7,792,579 as of November 30, 2025, from $7,647,505 as of May 31, 2025.
• Net cash provided by operating activities for the six months ended November 30, 2025, was $16,212, a significant improvement from a cash outflow of $397,664 in the prior year.
• Goodwill was fully impaired during the year ended May 31, 2025.
• Management concluded that disclosure controls and procedures were not effective as of November 30, 2025, and identified material weaknesses in internal control over financial reporting.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including declining revenue, persistent net losses, a growing accumulated deficit, and a going concern warning. Operational issues are highlighted by ineffective disclosure controls and fully impaired goodwill. While operating cash flow improved, the overall financial health and outlook are poor.

Positives

• Net loss decreased for both the three-month ($98,298 vs $143,693) and six-month ($145,074 vs $185,260) periods compared to the prior year.
• Net cash provided by operating activities was $16,212 for the six months ended November 30, 2025, a significant improvement from a cash outflow of $397,664 in the prior year.
• Cash and cash equivalents increased to $57,481 as of November 30, 2025, from $10,037 as of May 31, 2025.
• General and administrative expenses decreased by $44,789 for the three months ended November 30, 2025, primarily due to lower consultancy fees, rental, travelling expenses, and payroll costs.

Negatives

• Total revenue decreased by $35,473 to $65,402 for the three months ended November 30, 2025, compared to $100,875 for the same period in 2024, attributed to slow market activity.
• Brand name administrative fee revenue decreased by $23,386, and motor oil and auto parts revenue decreased by $12,031 for the three months ended November 30, 2025.
• Gross profit decreased by $29,939 to $35,503 for the three months ended November 30, 2025.
• Selling and distribution expenses increased by $6,333 to $54,957 for the three months ended November 30, 2025, mainly due to higher payroll costs and entertainment expenses.
• The accumulated deficit increased to $7,792,579 as of November 30, 2025, from $7,647,505 as of May 31, 2025.
• Current liabilities increased to $2,097,652 as of November 30, 2025, from $1,855,286 as of May 31, 2025.
• The company's ability to continue as a going concern is in substantial doubt due to accumulated deficit and insufficient cash position to support daily operations.
• Goodwill was fully impaired during the year ended May 31, 2025, indicating a significant write-down of previous acquisitions.
• Disclosure controls and procedures were deemed not effective as of November 30, 2025, and material weaknesses in internal control over financial reporting were identified.

Risks

• PRC laws and regulations prohibit or restrict foreign ownership in certain businesses (Internet information, value-added telecommunications), forcing the company to rely on contractual arrangements (VIE Agreements) which have not been tested in court and face uncertainty with future PRC government actions.
• The Foreign Investment Law (effective January 1, 2020) introduces uncertainties regarding the interpretation and implementation of contractual arrangements as a form of foreign investment, potentially deeming them in violation of market access requirements.
• The Chinese government may exercise significant oversight and discretion over business operations, intervening or influencing operations at any time, which could materially affect the business and share value.
• New and more stringent cybersecurity and data protection laws in China (e.g., Cybersecurity Law, Measures for Cybersecurity Review) could impact operations, especially if the company is deemed an 'Operator' controlling over one million users' personal information.
• Reliance on dividends from PRC subsidiaries is subject to PRC accounting standards, statutory reserve requirements (10% of after-tax profits until 50% of registered capital), and capital controls imposed by the PRC government, limiting the ability to transfer cash out of China.
• Dividends from PRC subsidiaries to the Hong Kong subsidiary are subject to a 10% withholding tax, potentially reduced to 5% under a tax treaty, but this reduction is not assured and could be adjusted by tax authorities.
• A downturn in the Chinese or global economy or changes in China's economic and political policies could adversely affect the VIE's business and financial condition, impacting the company's financial position and stock value.
• The company could become subject to scrutiny, criticism, and negative publicity involving U.S. listed China-based companies, potentially leading to significant resource expenditure for defense, limiting financing, and causing securities to decline in value.
• Political risks are associated with conducting business in Hong Kong and China.
• Potential delisting under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect the company's auditors in the future.
• The company's accumulated deficit, recurring net losses, and insufficient cash position raise substantial doubt about its ability to continue as a going concern.
• A majority of transactions are in RMB, which is not freely convertible, exposing the company to currency risk from exchange rate fluctuations and PRC government controls on foreign exchange transactions.
• Concentration of credit risk exists in cash deposits with Chinese financial institutions and accounts receivable.
• Reliance on a few major customers and a single major vendor for a significant portion of revenue and purchase costs creates concentration risk.
• Fluctuations in market interest rates may negatively affect financial condition, with no derivative instruments used to manage this risk.
• The fast growth of electric vehicles (EV) in China could harm the motor oil and auto parts market, seriously affecting financial condition and future business expansion.

Future Outlook

The company plans to extend its market share by acquiring quality businesses in the automotive aftermarket, aiming to increase its customer base and supply channels, and acquire more skilled employees and business connections. It also intends to diversify its existing product portfolio strategically to offer a wider range of choices and broaden its customer base. The major shareholder has agreed to provide financial support to the company. Management believes in the viability of its business strategy plans, including the Flash Lion e-commerce sales model and Cloud chain (Wechat, REDnote, and Tik Tok short videos e-commerce sales model), but provides no assurance of success. The company intends to retain all available funds and future earnings for the operation of its VIE's business and has no plan to distribute earnings or settle amounts owed under the VIE Agreements in the foreseeable future.

Management Comments

• "We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made."
• "Any forward-looking statements represent managements best judgment as to what may occur in the future."
• "In the opinion of management, the financial statements contain all material adjustments, consisting only of normal adjustments considered necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented."
• "While the Company believes in the viability of its business strategy plans such as Flash Lion e-commerce sales model, Cloud chain (including Wechat, REDnote and Tik Toks short videos e-commerce sales model), and its ability to raise additional funds, there can be no assurance to that effect."
• "Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans."
• "Management concluded that the internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles."
• Lixin Cai (CEO) and Cuiyao Luo (CFO) certified that disclosure controls and procedures were not effective as of November 30, 2025.

Industry Context

The company operates in the automotive aftermarket in China, a sector facing significant disruption from the rapid growth of electric vehicles (EVs). The filing explicitly notes that EV sales exceeded 50% of total motor vehicle sales in China in 2025, which is expected to harm the company's motor oil and auto parts market. This trend indicates a challenging environment for businesses focused on traditional internal combustion engine (ICE) related products, necessitating strategic adaptation and diversification, which the company aims to address through acquisitions and product portfolio expansion.

Comparison to Industry Standards

• The company's significant revenue decline and persistent net losses, coupled with a growing accumulated deficit and a going concern warning, indicate performance substantially below industry standards for a healthy, growing enterprise.
• The full impairment of goodwill suggests that past acquisitions have failed to generate expected value, contrasting with successful strategic integrations seen in more robust industry players.
• The disclosure of ineffective internal controls and material weaknesses points to fundamental operational and governance issues that are typically not present in well-managed, industry-leading companies.

Corporate Governance

Related Party Transactions

• Amounts due from New Charles Technology Group Limited (controlled by Lixin Cai) were $300 as of November 30, 2025, for expenses paid on its behalf.
• Amounts due from Hangzhou Xieli Internet Technology Co., Ltd (controlled by Cuiyao Luo) were $98,702 as of November 30, 2025, representing an unsecured, interest-free, repayable on demand short-term loan.
• Amounts due to Cuiyao Luo (CFO & major shareholder) were $405,081 as of November 30, 2025, representing unsecured, interest-free advances for working capital.
• Amounts due to Rudong Shi (Director) were $9,746 as of November 30, 2025, representing unsecured, interest-free advances for working capital.
• Revenue from Jinan Jieshun Vehicle Service Co., Ltd. and Jinan Jiehuiya Vehicle Service Co., Ltd. (controlled by ShenJie Guo, 0.015% equity owner) was $21,945 for brand name management fees for the three months ended November 30, 2025.
• Revenue from Suzhou Tongxuan Vehicle Service Co., Ltd. (controlled by GenRong Zhang, 0.015% equity owner) was $16,511 for brand name management fees for the three months ended November 30, 2025.
• Revenue from Zhenzhou Maozuo Vehicle Service Co., Ltd. (controlled by WenZhen Guo, 0.015% equity owner) was $21,945 for brand name management fees for the three months ended November 30, 2025.
• Revenue from Changsha Shengqun Vehicle Service Co., Ltd. and Shaoyang Hengchao Vehicle Co., Ltd. (controlled by Zhongxin Lei, 0.176% equity owner) was $21,945 for brand name management fees for the three months ended November 30, 2025.
• A provision of $84,746 is made for a business dispute with a customer, with no legal action taken against the company.

Stakeholder Impact

• Shareholders face significant negative impact due to declining revenue, persistent losses, growing accumulated deficit, going concern doubt, full goodwill impairment, and ineffective internal controls, with potential for further share price decline and dilution if a capital raise occurs.
• Employees may be impacted by potential cost-cutting measures or business restructuring due to the company's financial difficulties.
• Customers may experience reduced service offerings or product availability due to slow market activity and decreased revenue from brand name administrative fees and motor oil/auto parts sales.
• Suppliers/Vendors face high concentration risk with a single major vendor accounting for over 90% of purchase costs, indicating potential vulnerability if this relationship changes or if the company faces payment difficulties.
• Creditors face increased risk due to rising current liabilities and the going concern doubt, raising concerns about the company's ability to meet short-term obligations, with reliance on unsecured, interest-free related party advances highlighting financial fragility.

Next Steps

• Improve profitability and increase market share.
• Extend market share through acquiring quality businesses in the automotive aftermarket industries.
• Increase customer base and supply channels.
• Acquire more skilled employees and business connections.
• Diversify existing product portfolio strategically.
• Major shareholder to provide financial support.
• Address material weaknesses in internal controls and disclosure procedures.

Key Dates

Recommendation

The company exhibits severe financial distress, evidenced by a going concern warning, substantial revenue contraction, and a rapidly expanding accumulated deficit. The full impairment of goodwill signals a failure of past strategic investments. Furthermore, the disclosure of ineffective internal controls and material weaknesses points to fundamental operational and governance issues. While operating cash flow improved, the overall picture is one of a deeply troubled entity with significant unaddressed risks, particularly concerning its VIE structure and reliance on related party funding. The industry context of EV growth further threatens its core business. A seasoned investor would view these factors as compelling reasons to exit any position.

Keywords

Automotive aftermarket, China, VIE structure, SEC filing, 10-Q, financial results, motor oil, auto parts, brand management, EV impact, liquidity, going concern, regulatory risk, capital controls, internal controls