Registration No.
As filed with the Securities and Exchange Commission on September 14, 2020
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CXJ GROUP CO.,Limited
(Exact name of registrant as specified in its charter)
Nevada | 3714 | 85-2041913 | ||
(State
or jurisdiction of Classification Code Number) |
(Primary Standard Industrial Identification No.) |
(I.R.S. Employer incorporation or organization) |
Room 1903-1,No.1 building, Xizi International center, Jianggan District, Hangzhou City, Zhejiang Province, China
Issuer’s telephone number: +86 18668175727
Company email: cxjgroup@gmail.com
(Address,
including zip code, and telephone number,
including area code, of registrant’s principal mailing address)
Please send copies of all correspondence to:
McMurdo Law Group, LLC
Matthew McMurdo, Esq.
1185 Avenue of the Americas
3rd Floor
New York, NY 10036
TELEPHONE: (917)-318-2865
Email: matt@nannaronelaw.com
http://www.nannaronelaw.com
(Name,
address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement, as determined by the selling shareholders.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
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. (Check one):
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 [ ].
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Share(1) | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee (2) | ||||||||||||
Common Stock, $0.001 par value | 14,100,000 | $ | 3.00 | 42,300,000 | 5,491 |
(1) | Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(a) of the Securities Act of 1933 based upon the closing sale price of our shares of common stock of 3.00 on August 17, 2020. |
(2) | The fee is calculated by multiplying the aggregate offering amount by 0.0001298, pursuant to Section 6(b) of the Securities Act of 1933. |
(3) | Includes 10,000,000 shares of common stock that were issued upon conversion of Series A Preferred Stock by Xinrui Wang. |
(4) | Includes 3,000,000 shares of common stock that were issued upon the conversion of Series A Preferred Stock sold from Xinrui Wang to Wenbin Mao, who is on the board of director. |
(5) | Includes 1,000,000 shares of common stock that were issued upon conversion of Series A Preferred Stock sold from Xinrui Wang to Baiwan Niu, who is on the board of director. |
(6) | Includes 100,000 shares of common stock that were issued to New Charles Technology Group Ltd. in exchange for his interest in CXJ Investment Group Company Ltd. of which Mr. Lixin Cai is the sole director and shareholder. |
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THERE IS NO MINIMUM PURCHASE REQUIREMENT FOR THE OFFERING TO PROCEED.
PRELIMINARY PROSPECTUS
CXJ GROUP CO., LIMITED
14,100,000 SHARES OF COMMON STOCK
$0.001 PAR VALUE PER SHARE
This prospectus relates to shares of common stock of CXJ Group Co Limited. which may be offered by the selling shareholders for their own account.
The shares of common stock being offered by the selling shareholders pursuant to this prospectus are “restricted securities” under the Securities Act of 1933, as amended (the “Securities Act”), before their sale under this prospectus. This prospectus has been prepared for the purpose of registering these shares of common stock under the Securities Act to allow for a sale by the selling shareholders to the public without restriction. Each of the selling shareholders and the participating brokers or dealers may be deemed to be an “underwriter” within the meaning of the Securities Act, in which event any profit on the sale of shares by such selling shareholder, and any commissions or discounts received by the brokers or dealers, may be deemed to be underwriting compensation under the Securities Act.
The registration of the shares of our common stock covered by this prospectus does not necessarily mean that any shares of our common stock will be sold by any of the selling shareholders, and we cannot predict when or in what amounts any of the selling shareholders may sell any of our shares of common stock offered by this prospectus.
Our common stock is quoted on the OTC Pink Marketplace under the symbol “ECXJ.” On August 17, 2020, the closing price of our common stock was $3.00.
We are not selling any shares of our common stock under this prospectus and will not receive any proceeds from any sale or disposition by the selling shareholders of the shares of our common stock covered by this prospectus. We are paying the expenses incurred in registering the shares.
Investing in our securities involves a high degree of risk. Before making any investment decision, you should carefully review and consider all the information in this prospectus and the documents incorporated by reference herein, including the risks and uncertainties described under “Risk Factors” beginning on page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.
The date of this prospectus is September 14, 2020.
CXJ GROUP CO LIMITED.
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus or a supplement to this prospectus. We have not authorized anyone to provide you with different information. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus or any supplement to this prospectus is accurate as of any date other than the date on the front cover of those documents.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements”. Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, a continued decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products and services; the impact of any infringement actions or other litigation brought against us; competition from other providers and products; our ability to develop and commercialize new and improved products and services; our ability to raise capital to fund continuing operations; changes in government regulation that relate to our business, and more specifically, how we market and sell products; our ability to complete customer transactions and capital raising transactions; and other factors (including the risks contained in the section of this prospectus entitled “Risk Factors”) relating to our industry, our operations and results of operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law we do not intend to update any of the forward-looking statements to conform these statements to actual results.
This summary only highlights the more detailed information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information under “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before investing.
In this Prospectus, the “Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our,’’ refer to CXJ Group Co Limited, unless the context otherwise requires. Unless otherwise indicated, the term ‘‘fiscal year’’ refers to our fiscal year ending December 31th. Unless otherwise indicated, the term ‘‘common stock’’ refers to shares of the Company’s common stock.
Corporate History
CXJ Group Co., Limited (“we”, “us”, the “Company” or “ECXJ”) was originally incorporated in State of Nevada on August 20, 1998 under the name Global II, Inc. In April 2000, Global II acquired all of the outstanding shares of Western Professional Hockey League, Inc. (WPHL) from WPHL Holdings, Inc., a British Columbia, Canada corporation. Contemporaneously with the acquisition of WPHL, we changed our name to Global Entertainment Corporation. Pursuant to a joint operating agreement between us and Central Hockey League Inc. (CHL, Inc.), WPHL operated and managed a minor professional hockey league known as the Central Hockey League.
On August 11, 2011, the Company filed a Form 15-12g to suspend its reporting requirements under the Securities Exchange Act.
On March 04, 2019, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for Global Entertainment Corporation, proper notice having been given to the officers and directors of Global Entertainment Corporation. There was no opposition.
On March 05, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On June 18, 2019, control of the Company was transferred by the entity controlled by Custodian Ventures, LLC to Mr. Xinrui Wang, our director, by selling him 10,000,000 shares of Series A Preferred stock and 17,700,000 shares of common stock for a purchase price of $175,000.
On June 21, 2019, Mr. Lixin Cai was appointed act as the new President, CEO, Secretary and Chairman of the Board of Directors of the Company. On June 21, 2019, Ms. Cuiyao Luo was appointed act as the new CFO, Treasurer and Member of the Board of Directors of the Company. On September 30, 2019, the Company appointed three more members to the Board of Directors of the Company, and they are Mr. Xinrui Wang, Mr. Wenbin Mao and Mr. Baiwan Niu.
Effective July 9, 2019 we changed our name from Global Entertainment Corp to CXJ Group Co., Limited. On July 12, 2019, the Company effectuated a 1 for 200 reverse stock splits, while the authorized shares of common stock and preferred shares totally had been increased to 500,000,000. As a result of the foregoing we changed our trading symbol from GNTP and began trading as ECXJ on August 5, 2019.off
On October 4, 2019, Mr. Xinrui Wang entered into a Stock Purchase Agreement pursuant to which the he agreed to sell to Mr. Wenbin Mao and Mr. Baiwan Niu (the “Purchasers”), totaling 1,500,000 preferred stock of the Company (“Shares”) owned by the Seller, for an amount of $1,500. On October 8, 2019, Mr. Xinrui Wang, Mr. Wenbin Mao and Mr. Baiwan Niu effectuated a 1 for 10 conversion to convert all their preferred stock totaling 10,000,000 to 100,000,000 common shares. As a result of the conversion, there was no preferred stock outstanding of the Company as of October 8, 2019. On May 28, 2020, we consummated a share exchange pursuant to a Share Exchange Agreement among the Company, CXJ Investment Group Company Limited, a British Virgin Islands Corporation (“CXJ”) and the shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholder of CXJ of an aggregate of 1,364,800 shares of the Company. The shareholder a selling shareholder in this prospectus and is an affiliate. As a result of the transactions contemplated by the Share Exchange, CXJ became a wholly-owned subsidiary of the Company.
ECXJ, through its wholly owned subsidiary, CXJ and its subsidiaries and the variable interest entity (“VIE”) own and operate active automobile products trading and services business in the People’s Republic of China. Our business is supporting our alliance with products and technical services enable them to service consumers in China.
Our Company structure is shown in the below chart. The percentages denote ownership.
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CXJ (Shenzhen) Technology Co., Ltd, a Chinese company, a wholly foreign owned enterprise (WFOE), also referred to herein as “CXJSZ”, entered into and consummated an agreement with Mr. Lixin Cai, whereas CXJSZ has the option to purchase all of the equity interests of CXJ Technology (Hang Zhou) Co., Ltd, also referred to herein as “CXJHZ”, a Chinese company, from Mr. Lixin Cai. These equity interests would make up 100% of the equity interests of CXJHZ. CXJ Technology (Hangzhou) Co., Ltd is considered to be a variable interest entity to CXJSZ, and therefore a VIE of the issuer, CXJ Group Co., Ltd, a Nevada company. More information regarding this agreement can be found in below, titled, “VIE Arrangements”.
CXJSZ entered into and consummated an agreement with Mr. Lixin Cai whereas Mr. Lixin Cai has given CXJSZ the right to appoint management of CXJSZ to act as proxy to existing shareholders of CXJHZ. This gives management of CXJSZ the ability to conduct and control company affairs of CXJHZ. Actions which management of CXJSZ may be able to carry out include, but are not limited to, exercising voting rights as proxy of the existing shareholder(s), appointing new directors, hiring new management, and carrying out corporate actions. More information regarding this agreement can be found in below, titled, “VIE Arrangements.”
CXJSZ entered into and consummated an agreement with Mr. Lixin Cai whereas Mr. Lixin Cai has engaged CXJSZ to provide management, financial, and other business services to CXJHZ. CXJSZ is to be compensated with 100% of all profits generated by CXJHZ. This Agreement is effective as of May 20, 2019 and will continue in effect for a period of ten (10) years (the “Initial Term”), and for succeeding periods of the same duration (each, “Subsequent Term”), until terminated by one of the following means either during the Initial Term or thereafter: Mutual Consent, Termination by CXJSZ, Breach or Insolvency. CXJHZ is considered to be a VIE to CXJ (Shen Zhen) Technology Co., Ltd, a Chinese company (WFOE), and therefore a VIE of the issuer, CXJ Group Co., Ltd, a Nevada company. More information regarding this agreement can be found in below, titled, “VIE Arrangements.”
On May 28, 2020, CXJSZ entered into and consummated an agreement with Mr. Lixin Cai whereas Mr. Lixin Cai have pledged their equity interests in CXJHZ, to CXJSZ. More information regarding this agreement can be found in below, titled, “VIE Arrangements”
On May 28, 2020, CXJSZ entered into a loan agreement with Mr. Lixin Cai wherein CXJSZ will loan the amount of approximately CNY100,000 to Mr. Lixin Cai, all of which shall be used for the benefit of CXJHZ. More information regarding this agreement can be found in below, titled, “VIE Arrangements”.
Foreign ownership in companies providing automotive cleaner products is subject to certain restrictions under PRC laws and regulations. To comply with the PRC laws and regulations, we, through our wholly owned subsidiary, CXJSZ, entered into a set of contractual arrangements with CXJHZ and its shareholders. The contractual arrangements between CXJSZ, CXJHZ and the sole shareholder of CXJHZ allow us to:
1. | exercise effective control over CXJHZ whereby having the power to direct CXJHZ’s activities that most significantly drive the economic results of CXJHZ; |
2. | receive substantially all of the economic benefits and residual returns, and absorb substantially all the risks and expected losses from CXJHZ as if it was their sole shareholder; and |
3. | have an exclusive option to purchase all of the equity interests in CXJHZ. |
A subsidiary is an entity in which we, directly or indirectly, control more than one half of the voting powers; or has the power to appoint or remove the majority of the members of the board of directors; or to cast a majority of votes at the meeting of directors; or has the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
A consolidated VIE is an entity in which we, or our subsidiaries, through contractual agreements, bears the risks of, and enjoys the rewards normally associated with ownership of the entity. In determining whether we or our subsidiaries are the primary beneficiary, we considered whether it has the power to direct activities that are significant to the consolidated VIE’s economic performance, and also our obligation to absorb losses of the consolidated VIE that could potentially be significant to the consolidated VIE or the right to receive benefits from the consolidated VIE that could potentially be significant to the consolidated VIE. We hold all the variable interests of the consolidated VIE and its subsidiaries and has been determined to be the primary beneficiary of the consolidated VIE.
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We believe that the contractual arrangements among CXJSZ, CXJHZ and the sole shareholder of CXJHZ are in compliance with PRC law and are legally enforceable. However, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements and if the shareholders of our consolidated VIE were to reduce their interest in us, their interests may diverge from ours and that may potentially increase the risk that they would seek to act contrary to the contractual terms.
Our ability to control the consolidated VIE also depends on the voting rights proxy agreement and our company, through CXJSZ, has to vote on all matters requiring shareholder approval in the consolidated VIE. As noted above, we believe this voting rights proxy agreement is legally enforceable but may not be as effective as direct equity ownership.
CXJHZ is the company through which we operate, and which shares our business plan with the goal of developing and providing integrated alcoholic beverage products to our future clients.
The Company’s mailing address is Room 1903-1,No.1 building, Xizi International center, Jianggan District, Hangzhou City, Zhejiang Province, China.
SUMMARY OF THE OFFERING
The following is a summary of the shares being offered by the selling shareholders:
Common stock offered by selling shareholders | Up to 14,100,000 shares of common stock. This represents an aggregate of 13.89% of our outstanding common stock. (1) |
Common stock outstanding prior to the offering | 101,487,017 shares |
Common stock outstanding after the offering | 101,487,017 shares |
Terms of the Offering |
The Selling Shareholders will determine when and how they will sell the common stock offered in this prospectus. as more fully provided in the Plan of Distribution section. of this prospectus commencing Page 42 |
Use of proceeds | We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the. shares of Common Stock covered by this prospectus. |
Risk factors | The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” beginning on page 8. |
OTC Pink Trading Symbol | “ECXJ” |
(1) Based on 101,487,017 shares of common stock outstanding as of August 17, 2020
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Investing in our common stock involves a high degree of risk. You should carefully consider the following risks, together with all of the other information contained in this Registration Statement, including our consolidated financial statements and related notes, before making a decision to invest in our common stock. Any of the following risks could have an adverse effect on our business, operating results, financial condition and prospects, and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, operating results, financial condition and prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
We consider the following to be the material risks for an investor regarding our common stock. Our Company should be viewed as a high-risk investment and speculative in nature. An investment in our common stock may result in a complete loss of the invested amount. An investment in our common stock is highly speculative, and should only be made by persons who can afford to lose their entire investment in us. You should carefully consider the following risk factors and other information in this Registration Statement before deciding to become a holder of our common stock. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent.
Risks Related to Our Business and Industry
Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
Our audited consolidated financial statements as of May 31, 2020 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued a report that included an explanatory paragraph referring to our recurring losses from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We rely entirely on the operations of CXJHZ. Any successes or failures of CXJHZ will directly impact our financial condition and may cause your investment to be either positively or negatively impacted.
At present, we share the same business plan as, and rely entirely upon, CXJHZ. Any successes or failures of CXJHZ will directly impact our financial condition and may cause your investment to be either positively or negatively impacted. CXJHZ is considered a variable interest entity through which we operate exclusively at this time and we have been deemed to currently be a direct beneficiary of CXJHZ. As such, in the event that the business of operations of CXJHZ were to fail, then our own business would, in turn, fail as well. We would be forced to either drastically alter our business strategy, or we would likely cease operations entirely, which could result in the whole or partial loss of any investments made in the company.
Competition from both large, established industry participants and new market entrants may negatively affect our current and future results of operations.
The domestic competition in the vehicle aftermarket industry is quite fierce. We may face the competition challenges in the industry, including price competition, advertising campaign, product introduction and increasing customer service business. If our competitive action has a significant impact on our competitors, it may provoke them against or respond to the action, including the information on price, volume, competitive pattern and distribution channels, etc.
There may be potential entrants in our industry, either a new enterprise or an enterprise originally engaged in other industries with a diversified business strategy. Potential entrants will bring new production capacity and require a certain market share. The threat to the industry posed by potential entrants depends on the barriers to entry in the industry and the strong reaction of existing enterprises after entering the new industry. If the enterprises entering the industry are mature in size and technology, they may negatively affect our current and future results of operations.
We face increasingly intense competition in markets in which we operate.
Some of our competitors may have greater financial, sales and marketing, research and development, manpower, or other resources than we do. Some new market entrants may acquire market share by leveraging existing business relationships and acquiring new technologies from third parties. Our competitors may also be more responsive to changes in technologies or customer requirements, or offer similar products or services at lower prices. All of the foregoing factors may intensify market competition, and we may face pressure in product and service pricing and competition for orders. Any adverse or unforeseeable change in our competitive environment may have a material and adverse effect on our business, prospects, results of operation and financial position.
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Failure to obtain adequate raw materials and equipment or on acceptable commercial terms may adversely affect our business performance and financial position.
Our business requires timely procurement of sufficient raw materials and equipment at commercially acceptable prices. We cannot assure you that we will be able to procure sufficient raw materials and equipment, or even raw materials and equipment, from existing suppliers or other sources in a timely manner at commercially acceptable prices. We cannot assure you that there will be no shortage of raw materials and equipment or that we will be able to pass on the increased costs to our customers in the future. Our inability to obtain sufficient raw materials and equipment or to obtain sufficient raw materials and equipment on acceptable commercial terms in a timely manner may disrupt our business operations and adversely affect our business operation. The fluctuation of the purchase price of raw materials and equipment is an important factor affecting our cost. The prices and availability of raw materials and equipment may be affected by factors beyond our control, including supply and demand relations, inflation and economic cycles, price control measures by governments or private companies, international geopolitical issues, and government instability in exporting countries. Due to the difficulty in predicting price trends for raw materials and equipment, price fluctuations may occur during the contract period and may have a material adverse impact on our profitability, financial position and operating performance.
A decline in general economic condition could lead to reduced consumer demand and could negatively impact our business operation and financial condition, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Our operating and financial performance may be adversely affected by a variety of factors that influence the general economy. Consumer spending habits, including spending on products relating to different levels of their automobiles are affected by, among other things, prevailing economic conditions, levels of unemployment, salaries and wage rates, prevailing interest rates, income tax rates and policies, consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns may be influenced by consumers’ disposable income. In the event of an economic slowdown, consumer spending habits could be adversely affected, and we could experience lower net sales than expected on a quarterly or annual basis which could have a material adverse effect on our business, financial condition and results of operations.
We face inventory risk, and if we fail to predict accurately demand for products, we may face write-downs or other charges.
We are exposed to inventory risks that may adversely affect operating results as a result of new product launches, changes in product cycles and pricing, limited shelf-life of certain of our products, changes in consumer demand, and other factors. We endeavor to predict accurately, based on information from distributors and reasonable assumptions, the expected demand for their products in order to avoid overproduction. Demand for products, however, can change significantly between the time of production and the date of sale. It may be more difficult to make accurate predictions regarding new products. In part, we depend on the marketing initiatives and efforts of distributors in promoting products and creating consumer demand and we have limited or no control regarding their promotional initiatives or the success of their efforts.
The success of our business relies heavily on brand image, reputation, and product quality.
It is important that we maintain and improve the image and reputation of our existing brands and products. Concerns about product quality, even when unsubstantiated, could be harmful to our image and reputation of our brands and products. While we have quality control programs in place, in the event we experienced an issue with product quality, we may experience recalls or liability in addition to business disruption which could further negatively impact brand image and reputation and negatively affect our sales. Our brand image and reputation may also be more difficult to protect due to less oversight and control as a result of the outsourcing of some of our operations. We also could be exposed to lawsuits relating to product liability or marketing or sales practices. Deterioration to our brand equity may be difficult to combat or reverse and could have a material effect on our business and financial results.
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Uncertainty about future market prices (interest rates, exchange rates, stock prices and commodity prices) can adversely affect our business.
Market risks can be divided into interest rate risks, exchange rate risks, stock price risks and commodity price risks. These market factors may directly affect our production, or competitors, suppliers or consumers may indirectly affect our business. Our business model may be suppressed if substitutes emerge in the market for our products, which are other products that can achieve the same function. The threat of alternatives is threefold:
1. The competitiveness of substitutes in price;
2. Satisfaction with the quality and performance of substitutes;
3. How easy it is for customers to switch to substitutes.
At present, there is no substitute for the product itself, unless it is an industry substitute or a new technology emerges. For example, the emergence of new energy vehicles or disruptive products. This will have a destructive effect on our sales
We have historically relied, and expect to continue to rely, on our existing customers for a significant portion of our revenue. The loss of any of existing customers could significantly harm our business, financial condition and results of operations.
We expect that we will continue to depend upon our existing customers for a significant portion of our revenue for the foreseeable future. As a result, if we fail to successfully attract or retain new or existing customers or if existing customers run fewer products purchase with us, defer or cancel their insertion orders, or terminate their relationship with us altogether, whether through the actions of their agency representatives or otherwise, our business, financial condition and results of operations would be harmed.
An increase in the cost of energy or the cost of environmental regulatory compliance could affect our profitability.
The energy costs could continue to rise, which would result in higher transportation, freight and other operating costs. We may experience significant future increases in the costs associated with environmental regulatory compliance, including fees, licenses and the cost of capital improvements to our operating facilities in order to meet environmental regulatory requirements. Future operating expenses and margins will be dependent on the ability to manage the impact of cost increases. We cannot guarantee that it will be able to pass along increased energy costs or increased costs associated with environmental regulatory compliance to our customers through increased prices.
The requirements of being a public company may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act, and other applicable securities rules and regulations. Compliance with these rules and regulations have increased our legal and financial compliance costs, made some activities more difficult, time-consuming or costly and increased demand on our systems and resources. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations. We may need to hire more employees to comply with these requirements in the future, which will increase our costs and expenses.
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We may require additional capital to support growth, and such capital might not be available on terms acceptable to us, if at all. This could hamper our growth and adversely affect our business.
We intend to continue to make investments to support our business growth and may require additional funds, beyond those generated by this offering, to respond to business challenges, including the need to develop new features or enhance our platform, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in public or private equity, equity-linked or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business could be adversely affected.
We may engage in acquisitions, investments or strategic alliances in the future, which could require significant management attention and materially and adversely affect our business and results of operations.
We may identify strategic partners to form strategic alliances, invest in or acquire additional assets, technologies or businesses that are complementary to our existing business. These investments may involve minority stakes in other companies, acquisitions of entire companies or acquisitions of selected assets.
Any future strategic alliances, investments or acquisitions and the subsequent integration of the new assets and businesses obtained or developed from such transactions into our own may divert management from their primary responsibilities and subject us to additional liabilities. In addition, the costs of identifying and consummating investments and acquisitions may be significant. We may also incur costs and experience uncertainties in completing necessary registrations and obtaining necessary approvals from relevant government authorities in China and elsewhere in the world. The costs and duration of integrating newly acquired assets and businesses could also materially exceed our expectations. Any such negative developments could have a material adverse effect on our business, financial condition, results of operations and cash flow.
If we fail to implement and maintain an effective system of internal controls to remediate our material weakness over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.
We will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 10-K beginning with our annual report for the fiscal year ending May 31, 2021. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
Risks Related to Doing Business in China
Introduction of new laws or changes to existing laws by the PRC government may adversely affect our business.
The PRC legal system is a codified legal system made up of written laws, regulations, circulars, administrative directives and internal guidelines. Unlike common law jurisdictions like the U.S., decided cases (which may be taken as reference) do not form part of the legal structure of the PRC and thus have no binding effect on subsequent cases with similar issues and fact patterns. Furthermore, in line with its transformation from a centrally planned economy to a freer market-oriented economy, the PRC government is still in the process of developing a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving, laws and regulations or the interpretation of the same may be subject to further changes. Such changes, if implemented, may adversely affect our business operations and may reduce our profitability.
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Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
Our PRC subsidiaries are foreign-invested enterprises and are subject to laws and regulations applicable to foreign-invested enterprises as well as various Chinese laws and regulations generally applicable to companies incorporated in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.
Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its implementing rules and how they may impact our business, financial condition and results of operations.
The VIE structure through contractual arrangements has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. The MOFCOM published a discussion draft of the proposed PRC Foreign Investment Law in January 2015, or the 2015 Draft FIL, according to which, variable interest entities that are controlled via contractual arrangements would also be deemed as foreign-invested entities, if they are ultimately “controlled” by foreign investors. In March 2019, the PRC National People’s Congress promulgated the PRC Foreign Investment Law, and in December 2019, the State Council promulgated the Implementing Rules of PRC Foreign Investment Law, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the PRC Foreign Investment Law. The PRC Foreign Investment Law and the Implementing Rules both became effective from January 1, 2020 and replaced the major previous laws and regulations governing foreign investments in the PRC. Pursuant to the PRC Foreign Investment Law, “foreign investments” refer to investment activities conducted by foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council. The PRC Foreign Investment Law and the Implementing Rules do not introduce the concept of “control” in determining whether a company would be considered as a foreign-invested enterprise, nor do they explicitly provide whether the VIE structure would be deemed as a method of foreign investment. However, the PRC Foreign Investment Law has a catch-all provision that includes into the definition of “foreign investments” made by foreign investors in China in other methods as specified in laws, administrative regulations, or as stipulated by the State Council, and as the PRC Foreign Investment Law and the Implementing Rules are newly adopted and relevant government authorities may promulgate more laws, regulations or rules on the interpretation and implementation of the PRC Foreign Investment Law, the possibility cannot be ruled out that the concept of “control” as stated in the 2015 Draft FIL may be embodied in, or the VIE structure adopted by us may be deemed as a method of foreign investment by, any of such future laws, regulations and rules. If our consolidated VIE was deemed as a foreign-invested enterprise under any of such future laws, regulations and rules, and any of the businesses that we operate would be in any “negative list” for foreign investment and therefore be subject to any foreign investment restrictions or prohibitions, further actions required to be taken by us under such laws, regulations and rules may materially and adversely affect our business, financial condition and results of operations. Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, business, financial condition and results of operations.
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American investors may have difficulty enforcing judgments against our Company and Officers.
We are a Nevada corporation and most of our assets are and will be located outside of the United States. Almost all of our operations will be conducted in China. In addition, our officers and directors are nationals and residents of a country other than the United States. All of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon them. It may also be difficult to enforce court judgments on the civil liability provisions of the U.S. federal securities laws against our Company and our officer and director, since he is not a resident in the United States. In addition, there is uncertainty as to whether the courts of Hong Kong or other Asian countries would recognize or enforce judgments of U.S. courts.
The PRC government may consider that VIEs does not comply with applicable Chinese law and/or the PRC government may subject us to severe penalties. Accordingly, in the event either of these events transpire, then our business may be materially adversely affected
To comply with PRC laws, we conduct most of our business in China through integrated affiliate entities under contractual arrangements which can enable us:
● To receive most of the economic benefits from our costs for the services rendered by the WFOE;
● To appoint directors and voters of registered shareholders on all matters requiring shareholder approval of the operating entity;
● To have an exclusive option to designate a third party to purchase all or parts of the equity in the operating entity which is permitted by Chinese law.
If the Chinese government considers that our contractual arrangements (defined in this case as when a consolidated affiliate holds the licenses, approvals and principal assets necessary to operate our business) do not comply with its restrictions on foreign investment in the business, or if the Chinese government considers that our contractual arrangements do not comply with its restrictions on foreign investment in the business or lack the necessary licenses to operate the group’s business, we may be subject to with the consequences, including but not limited to, those below:
● Revocation of our business and operating license;
● Termination or restriction of our operations.
● Imposition of a fine or confiscation of any income deemed to have been obtained through illegal operations.
● Implementation of conditions or requirements that we, or any of our integrated affiliates, may not be able to comply with.
● Requiring us, or any of our integrated affiliates, to restructure the relevant ownership structure of our operations.
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● Restriction or prohibition from using proceeds from our initial public offering or other financing activities to fund our consolidated verifier’s operations and operations.
● Other regulatory or enforcement actions may be harmful for our business.
Any such penalty imposed will have adverse effect on our ability to conduct business, financial position and operating performance.
The Variable Interest Entity’s structure is not as stable as an equity structure for investors.
We operate through “CXJ Technology (Hang Zhou) Co., Ltd” a Chinese company, which is considered to be a variable interest entity of our (company), the issuer. We rely in great part on the success of CXJ Technology (Hang Zhou) Co., Ltd. Our consolidated financial statements include the financial statements of our company, our subsidiaries and our consolidated VIE for which we are the primary beneficiary. The Company relies on contractual arrangement of the VIEs to operate business. In accordance with the contractual agreements among our wholly foreign-owned enterprise (WFOE), consolidated VIEs and the respective shareholders of our consolidated VIEs, we have power to direct activities of our consolidated VIEs, and can have assets transferred out of our consolidated VIEs. Our ability to control our consolidated VIEs also depends on the voting rights proxy agreements. Our company, through our WFOE, has to vote on all matters requiring shareholder approval in our consolidated VIEs. As noted above, we believe this voting rights proxy agreement is legally enforceable but may not be as effective as direct equity ownership. Any losses or detriments that affect CXJ Technology (Hang Zhou) Co., Ltd also directly affect our own financial condition. Further, it is possible, although the Company considers it unlikely given the above, that potential conflicts of interest may arise as a result of our ownership structure which could result in, as a worst case scenario, the Company needs to entirely reevaluate and restructure the method through which operations are conducted and could result in a partial or complete loss of investment.
We face potential adverse consequences as a result of the potential dissolution and liquidation of any company within the VIE structure.
Our consolidated affiliate holds rights on behalf of our company that include licenses, domain names and intellectual property. If the consolidated affiliate is bankrupt, or its assets are subjected to third party creditors, we may not be able to continue some or all of our business activities which in turn may negatively impact our business, financial position and operating capacity.
According to the contractual arrangement, without the permission and consent of the WFOE, our relevant VIEs cannot enter into any transaction to affect its assets, obligations, rights or operations (other than those entered into in the ordinary course of business), any associated VIEs entering into voluntary or involuntary liquidation proceedings will let the independent third party creditors hold the right to claim its assets, property and business, therefore impede our ability to conduct our business which can cause our business, financial position for having an adverse impact.
The VIE structure is likely to be audited, or otherwise challenged, by tax authorities.
According to Chinese law, arrangements and transactions between related parties may be audited or challenged by Chinese tax authorities. If the Chinese tax authorities consider that the contracts between WFOE and VIEs are unstable, for instance the arrangement does not mean fair negotiation of prices and adjustment of our VIEs income in the form of transfer pricing adjustments, we may face adverse impact and potential tax ramifications or liabilities. Transfer pricing adjustments may result in the related VIEs record to deduct tax expenses but may increase our tax liability. Additionally, late payment fees and other penalties may be imposed on VIEs for underpayment of taxes.
Additional tax liabilities or other penalties may cause our business performance to be severely negatively impacted.
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Risks Related to Our Common Stock
There is a limited market for our common stock, which may make it difficult for holders of our common stock to sell their stock.
Our common stock currently trades on the OTC Markets under the symbol “ECXJ”. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock. Further, many brokerage firms will not process transactions involving low price stocks, especially those that come within the definition of a “penny stock.” If we cease to be quoted, holders of our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our common stock, and the market value of our common stock would likely decline.
The trading price of our Common Stock is likely to be volatile, which could result in substantial losses to investors.
The trading price of our common stock is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for factors specific to our own operations, including the following:
● | variations in our revenues, earnings and cash flow; | |
● | announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; | |
● | announcements of new offerings, solutions and expansions by us or our competitors; | |
● | changes in financial estimates by securities analysts; | |
● | detrimental adverse publicity about us, our brand, our services or our industry; | |
● | additions or departures of key personnel; | |
● | release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and | |
● | potential litigation or regulatory investigations. |
Any of these factors may result in large and sudden changes in the volume and price at which our common stock will trade.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
We are subject to be the penny stock rules which will make shares of our common stock more difficult to sell.
We are subject now and may continue to be subject in the future, to the SEC’s “penny stock” rules if our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
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In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.
If we become directly subject to the scrutiny, criticism and negative publicity involving U.S. listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business, operations and reputations, which could result in a loss of your investment in our common stock.
U.S. public companies that have substantially all of their operations in China, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our business. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend the Company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our company and business operations will be severely hampered and your investment in our shares could be rendered worthless.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as a source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends., Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. There is no guarantee that our common stock will appreciate in value, or even maintain the price at which you purchased the common stock. You may not realize a return on your investment in our common stock and you may even lose your entire investment in our common stock.
If relations between the United States and China worsen, our stock price may decrease and we may have difficulty accessing the U.S. capital markets.
At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade conflicts between the United States and China could adversely affect the market price of our common stock and our ability to access U.S. capital markets.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the prospectus based on foreign laws.
We are a company incorporated under the laws of the United States and we conduct substantially all of our operations in China. In addition, all our senior executive officers reside within China for a significant portion of the time and most are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as none of them currently resides in the United States or has substantial assets located in the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.
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The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.
We will not receive any proceeds from the sales of shares of our common stock by the selling shareholders.
We will pay for the expenses of this offering, except that the selling shareholders will pay any broker discounts or commissions or equivalent expenses and expenses of selling shareholder’s legal counsel applicable to any sale of the shares.
DETERMINATION OF OFFERING PRICE
The selling shareholders may sell some or all of their shares from time to time in the principal market on which the stock is traded at the prevailing market price or in negotiated transactions. The offering price bears no relationship to our assets, book value, earnings or any other customary investment criteria. We will not receive any proceeds from the sale of the shares by the selling shareholders. The shares may be sold directly by the selling shareholders to or through brokers or dealers, directly to purchasers or through agents designated from time to time.
Corporate History
CXJ Group Co., Limited (“we”, “us”, the “Company” or “ECXJ”) was originally incorporated in State of Nevada on August 20, 1998 under the name Global II, Inc. In April 2000, Global II acquired all of the outstanding shares of Western Professional Hockey League, Inc. (WPHL) from WPHL Holdings, Inc., a British Columbia, Canada corporation. Contemporaneously with the acquisition of WPHL, we changed our name to Global Entertainment Corporation. Pursuant to a joint operating agreement between us and Central Hockey League Inc. (CHL, Inc.), WPHL operated and managed a minor professional hockey league known as the Central Hockey League.
On August 11, 2011, the Company filed a Form 15-12g to suspend its reporting requirements under the Securities Exchange Act.
On March 04, 2019, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for Global Entertainment Corporation, proper notice having been given to the officers and directors of Global Entertainment Corporation. There was no opposition.
On March 05, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On June 18, 2019, control of the Company was transferred by the entity controlled by Custodian Ventures, LLC to Mr. Xinrui Wang, our director, by selling him 10,000,000 shares of Series A Preferred stock and 17,700,000 shares of common stock for a purchase price of $175,000.
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On June 21, 2019, Mr. Lixin Cai was appointed act as the new President, CEO, Secretary and Chairman of the Board of Directors of the Company. On June 21, 2019, Ms. Cuiyao Luo was appointed act as the new CFO, Treasurer and Member of the Board of Directors of the Company. On September 30, 2019, the Company appointed three more members to the Board of Directors of the Company, and they are Mr. Xinrui Wang, Mr. Wenbin Mao and Mr. Baiwan Niu.
Effective July 9, 2019 we changed our name from Global Entertainment Corp to CXJ Group Co., Limited. On July 12, 2019, the Company effectuated a 1 for 200 reverse stock splits, while the authorized shares of common stock and preferred shares totally had been increased to 500,000,000. As a result of the foregoing we changed our trading symbol from GNTP and began trading as ECXJ on August 5, 2019.
On October 4, 2019, Mr. Xinrui Wang entered into a Stock Purchase Agreement pursuant to which the he agreed to sell to Mr. Wenbin Mao and Mr. Baiwan Niu (the “Purchasers”), totaling 1,500,000 preferred stock of the Company (“Shares”) owned by the Seller, for an amount of $1,500. On October 8, 2019, Mr. Xinrui Wang, Mr. Wenbin Mao and Mr. Baiwan Niu effectuated a 1 for 10 conversion to convert all their preferred stock totaling 10,000,000 to 100,000,000 common shares. As a result of the conversion, there was no preferred stock outstanding of the Company as of October 8, 2019.
On May 28, 2020, we consummated a share exchange pursuant to a Share Exchange Agreement among the Company, CXJ Investment Group Company Limited, a British Virgin Islands Corporation (“CXJ”) and the shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholder of CXJ of an aggregate of 1,364,800 shares of the Company. The shareholder a selling shareholder in this prospectus and is an affiliate. As a result of the transactions contemplated by the Share Exchange, CXJ became a wholly-owned subsidiary of the Company.
ECXJ, through its wholly owned subsidiary, CXJ and its subsidiaries and the VIE own and operate an active automobile’s products trading and services business in the People’s Republic of China. Our business is supporting our alliance with products and technical services enable them to service consumers in China.
CXJ (Shenzhen) Technology Co., Ltd, a Chinese company (WFOE), also referred to herein as “CXJSZ”, entered into and consummated an agreement with Mr. Lixin Cai, whereas CXJSZ has the option to purchase all of the equity interests of CXJ Technology (Hang Zhou) Co., Ltd, also referred to herein as “CXJHZ”, a Chinese company, from Mr. Lixin Cai. These equity interests would make up 100% of the equity interests of CXJHZ. Hangzhou CXJ Technology Co., Ltd is considered to be a variable interest entity, also referred to herein as a “VIE”, to CXJSZ, and therefore a VIE of the issuer, CXJ Group Co., Ltd, a Nevada company. More information regarding this agreement can be found in “VIE Arrangements”.
CXJSZ entered into and consummated an agreement with Mr. Lixin Cai whereas Mr. Lixin Cai has given CXJSZ the right to appoint management of CXJSZ to act as proxy to existing shareholders of CXJHZ. This gives management of CXJSZ the ability to conduct and control company affairs of CXJHZ. Actions which management of CXJSZ may be able to carry out include, but are not limited to, exercising voting rights as proxy of the existing shareholder(s), appointing new directors, hiring new management, and carrying out corporate actions. More information regarding this agreement can be found in “VIE Arrangements.”
CXJSZ entered into and consummated an agreement with Mr. Lixin Cai whereas Mr. Lixin Cai havs engaged CXJSZ to provide management, financial, and other business services to CXJHZ. CXJSZ is to be compensated with 100% of all profits generated by CXJHZ. This Agreement is effective as of May 20, 2020 and will continue in effect for a period of ten (10) years (the “Initial Term”), and for succeeding periods of the same duration (each, “Subsequent Term”), until terminated by one of the following means either during the Initial Term or thereafter: Mutual Consent, Termination by CXJSZ, Breach or Insolvency. CXJHZ is considered to be a VIE to CXJ (Shen Zhen) Technology Co., Ltd, a Chinese company (WFOE), and therefore a VIE of the issuer, CXJ Group Co., Ltd, a Nevada company. More information regarding this agreement can be found in “VIE Arrangements.”
On May 26, 2020, CXJSZ entered into and consummated an agreement with Mr. Lixin Cai whereas Mr. Lixin Cai have pledged their equity interests in CXJHZ, to CXJSZ. More information regarding this agreement can be found in “VIE Arrangements.”
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On May 26, 2020, CXJSZ entered into a loan agreement with Mr. Lixin Cai wherein CXJSZ will loan the amount of approximately CNY100,000 (Chinese Yuan) to Mr. Lixin Cai, all of which shall be used for the benefit of CXJHZ. More information regarding this agreement can be found in “VIE Arrangements”.
VIE Arrangements
We rely on our consolidated affiliated entities to maintain or renew their respective qualifications, licenses or permits necessary for our business in China. We believe that under the VIE Agreements described below, we have substantial control over our consolidated affiliated entities and their respective shareholders to renew, revise or enter into new contractual arrangements prior to the expiration of the current arrangements on terms that would enable us to continue to operate our business in China after the expiration of the current arrangements, or pursuant to certain amendments and changes of currently applicable PRC laws, regulations and rules on terms that would enable us to continue to operate our business in China legally. While we currently do not anticipate any changes to PRC laws in the near future that may impact our ability to carry out our business in China, no assurances can be made in this regard. See the Risk Factors above for a detailed description of the risks associated with our corporate structure and the contractual arrangements that support our corporate structure.
The Company consolidates CXJ Group Co., Limited in which it holds a variable interest and are the primary beneficiary through contractual agreements. The Company is the primary beneficiary because it has the power to direct activities that most significantly affect their economic performance and have the obligation to absorb the majority of their losses or benefits. The results of operations and financial position of the VIE are included in our consolidated financial statements.
In order to operate its business in PRC and to comply with PRC laws and regulations that prohibit or restrict foreign ownership of companies that provides services, the Company entered into a series of contractual agreements with the VIE. These contractual agreements may not be terminated by the VIE, except with the consent of, or a material breach by us. Currently, the Company is still evaluating the overall operating strategy for business and does not have plan to provide any funding to the VIE.
The key terms of the VIE Agreements are summarized as follows:
(a) Exclusive Consulting and Services Agreement
The WFOE has the exclusive right to provide technical service, marketing and management consulting service, financial support service and human resource support services to the VIE, and the VIE is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by WFOE. As compensation for providing the services, WFOE is entitled to receive service fees from the VIE equivalent to the WFOE’s cost plus 20%-30% of such costs as calculated on accounting policies generally accepted in the PRC. The WFOE and the VIE agree to periodically review the service fee and make adjustments as deemed appropriate. The term of the Technical Services Agreement is perpetual, and may only be terminated upon written consent of both parties.
(b) Equity Pledge Agreement
Mr. Lixin Cai, our Chairman and principal executive officer respectively, (the “VIE Shareholders”) pledged all of their equity interests in VIE (the “Collateral”) to WFOE, our wholly owned subsidiary in PRC, as security for the performance of the obligations to make all the required technical service fee payments pursuant to the Technical Services Agreement and for performance of the VIEs’ Shareholders’ obligation under the Call Option Agreement. The terms of the Equity Pledge Agreement expire upon satisfaction of all obligations under the Technical Services Agreement and Call Option Agreement.
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(c) Exclusive Option Agreement
The VIEs’ shareholders granted an exclusive option to WFOE, or its designee, to purchase, at any time and from time to time, to the extent permitted under PRC law, all or any portion of the VIE’s shareholders’ equity in the VIE. The exercise price of the option shall be determined by WFOE at its sole discretion, subject to any restrictions imposed by PRC law. The term of the agreement is until all of the equity interest in the VIE held by the VIEs’. Shareholders are transferred to WFOE, or its designee and may not be terminated by any part to the agreement without consent of the other parties.
(d) Power of Attorney
The VIE’s shareholders granted WFOE the irrevocable right, for the maximum period permitted by law, all of its voting rights as shareholders of the VIE. The VIE’s shareholders may not transfer any of its equity interest in the VIE to any party other than WFOE. The Power of Attorney agreements may not be terminated except until all of the equity in VIEs has been transferred to WFOE or its designee.
Business Overview
We are an automobile exhaust cleaner and parts wholesaler, as well as an auto detailing store consultancy company. Our business mainly divided into three sectors, namely sales of automobile exhaust cleaner and parts, provision of auto detailing store consultancy services and authorization fee on our brand name “Chejiangling / Teenage Hero Car”.
We provide consultancy services to our customers, who are auto detailing store owners or persons who are going to start the stores. Our customer will use our brand name “Chejiangling / Teenage Hero Car” for their auto detailing stores. We will provide professional training and guidelines to our customers for standardizing their stores, in terms of their products and services, store decorations, operating procedures, etc. We will also provide training to the store employees to ensure they provide standardize and professional services to the end customers. We have also developed an enterprise resource planning system (ERP) for our customers. The ERP system can allow information management (from both PC and mobile device) and daily operation of the stores, increasing the efficiency of store management.
Our customer can sell our star product - Ksoncar, an automobile exhaust cleaner, in their auto detailing stores. With our star product and the brand name effect, end customers will be attracted to visitour customers’ store and enjoy other professional services provided by our customers, including automobile detailing services, automobile engine system maintenance, air conditioning system cleaning and maintenance, braking system maintenance and transmission system maintenance. More information can be found in the sections of “Sale and services” and “Customer”.
All our customers’ auto detailing stores are located within three kilometers or 10 minutes drives from the residential area, we target our brand “Chejiangling / Teenage Hero Car” can become popular and recognized as “neighbor auto detailing stores”.
We have set up over 300 auto detailing stores with our customers with our brand name, the store network has reached 21 provinces and 115 cities in China. We aim to open 700 stores with our customers across China in the future.
Our customers
Our customers refer to all auto detailing store owners or persons who are going to start the stores.
Our customers are authorized to operate the auto detailing stores under our brand name “Chejiangling / Teenage Hero Car” and sell our product Ksoncar in their stores. Our customers have to be fulfilled several criterions before using our brand name, including the location of their stores, services they provided, etc. Our customers must provide respective automobile services according to their store types and scales, including automobile detailing services, automobile engine system maintenance, air conditioning system cleaning and maintenance, braking system maintenance and transmission system maintenance.
We standardize the stores and require our customers to provide standard and professional services to the end customers. The premium experience of visiting the stores will enhance our brand name “Chejiangling / Teenage Hero Car”, and hence attract more customers to join our network of auto detailing stores.
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Sales and services
Sales of automobile exhaust cleaner and parts
The Company sells an automobile exhaust cleaner named “Ksoncar” and the product has been developed and put into the market since 2016. “Ksoncar” features the below five main functions which make our environment cleaner:
1. | Reducing at least 50% of gas emissions and pollutants from automobile. |
2. | Boosting the performance of automobile |
3. | Reducing the overall gas consumption and improving the running mileage of the automobile |
4. | Compatible with any other gasoline in the market |
5. | Removal of carbon particles in the engine to extend its useful life |
Besides, the Company also source and trade other auto parts and equipment to third parties.
Authorization fee on brand name
We currently own a brand named “Chejiangling” / “Teenage Hero Car”, in which the brand is registered under the National Intellectual Property Administration of the PRC (also known as the Chinese Patent Office). We engage with partners in different parts in China, who are interested in auto detailing operation, and authorize them the right to use our brand to operate auto detailing store business. In return, we receive an authorization fee on brand name from the partners.
Under the use of our brand name, the partners are permitted to provide auto detailing related services, which can be classified into five aspects, including:
1. | Automobile exterior and interior detailing services: Including car wash, paint treatment, engine treatment and interior decoration. |
2. | Automobile engine maintenance services: Including replacement of motor engine oil, engine system maintenance and cooling system maintenance |
3. | Automobile air conditioning maintenance services: Including replacement of refrigerant, duct maintenance, compressor maintenance, and air filter cleaning. |
4. | Automobile braking systems maintenance services: Including braking disks checks and replacements, brake fluid replacement and rust-proof treatments on brake disks |
5. | Automobile gearbox maintenance services: Including gearbox lubricant and filter replacement |
Auto detailing store consultancy services
To nurture auto detailing practitioners and make their business more sustainable, we provide our alliances, who are authorized to operate the auto detailing store using our brand name “Chejiangling” / “Teenage Hero Car”, with a 3-day auto detailing store consultancy services regarding operation support on auto detailing. Our alliances will enroll, on a voluntary basis, during the time they set up the auto detailing store.
The consultancy services consist of three main components, namely theory class, practical training and career planning. Participants will be able to acquire relevant knowledge regarding operating an auto detailing, including but not limited to the following: -
- | Professional knowledge and practical skills on auto detailing |
- | Customer management |
- | Conversion marketing |
- | Store management |
- | Financial management |
- | Store sales and marketing |
- | Personnel management |
- | Leadership training |
The main objective of the consultancy services is to maximize customers’ experience and to enable our alliances to equip well to combat in the auto detailing industry. The intended learning outcome is supported by various key performance indicators, which are measured on the participants during the consultancy period.
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We have provided a total of 240 consultancy hours operating 10 training camps. More than 300 participants took part in in the consultancy services, with an average passing rate of 97%.
Revenue model of brand licensing authorization
For our partners who are authorized to operate the auto detailing shops using our brand “Chejiangling” / “Teenage Hero Car”, according to the authorization agreement, they have to pay the Company: 1) a one-time fee of CNY100,000 for acquisition of the right of the use of the brand for the agreed period; 2) Management fee of CNY10,000 per annum; and 3) A refundable deposit of CNY30,000 as a brand guarantee.
Marketing Plan
Our marketing plan primarily focused upon our efforts to attract customers in China. In the coming years, and subsequently, we intend to make efforts to expand throughout the Southeast Asia, especially in Malaysia. Accordingly, we anticipate spending a substantial amount in marketing and advertising in the coming years.
While our marketing plans have not yet been determined in full, we do have tentative plans to penetrate the marketplace and attract customers by building our brand image through print advertisements, and possibly online paid advertisements to create brand awareness. We plan to develop a corporate website, although we do not have any definitive timeline in place to do so, which will introduce the benefits to our prospective clients. We intend to market our products through this corporate website and utilize search engine marketing to improve the number of sub-distributors and consumers who can find and view our future website.
The global presence social media has provided is an invaluable resource. As we begin to grow, create brand awareness and expand our operations to South East Asia, especially in Malaysia, we intend to use social media to reach and engage additional sub-distributors and customers. We intend to create social media pages, on platforms such as Weibo, Twitter, Instagram and Facebook, in the future in order to promote our products to overseas markets. However, we do not have any definitive plans for how we will manage or grow our social media presence at this time.
All of the above marketing plans have not yet been determined in sufficient detail to outline at this time and remain under development.
Competition
Although there are numerous alternative brands, we intend to distinguish ourselves by creating a strong relationship with our customers. We believe that we will have competitive strengths that will allow us to effectively compete in this market. It is our intention to create competitive strengths via our future pricing model and the quality of our products and network of stores.
Our partners are also important for our marketing, the local resources held by our alliance combine with our mature management and technical support can create huge value and great service for consumers, so we are confident about our advantage for both of our services and products, with more and more club set up in most of the city, our business will become a automobile living cycle focus on automobile aftermarket services.
We believe that our products and services can attract new customers while keeping our current customers satisfied.
Future Plans
In the future, we intend to continue solidifying our market position within the automobile detailing services in China and enhancing our market penetration into different customer segments and preferences. We also plan to expand our products to Southeast Asia, especially in Malaysia, and manufacture a new product.
For our future expansion plan to South East Asia, especially in Malaysia, we plan to apply for the respective licenses required in order to operate automotive service club in Malaysia and select suitable distributors in South East Asia. We anticipate there will be a need to hire additional staff in Malaysia and that we will incur marketing cost for our future offline and online marketing initiatives. Accordingly, we plan to hire an additional 10 to 20 employees in order to increase our marketing presence in South East Asia. However, we do not have a distinct and detailed expansion and marketing plan as of this point in time.
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In regards to our future plan to use our core independent product which further drives a series of high-tech maintenance products such as independent brand motor oil. However, without determining an appropriate budget and conducting intensive research, plans regarding the development, expansion and concrete timescales cannot be determined at present. We cannot say with certainty, at this point in time, how long it will take for us to conduct the research that will be required to move forward in these endeavors.
Employees
We currently have 17 equivalent full-time employees and contractors, of which two are executives, six are focused on accounting and administrative, five are focused on direct and indirect production, one is focused on sales and marketing and three are focused on logistics. We also hire seasonal, part-time labor and consultants as necessary.
Mr. Lixin Cai, have the ability to be involved in our business operations for up to 35 hours per week, but they are prepared to devote more time if necessary. The Company intends to employ 10 more employees by the end of September 2020. We currently intend to hire three employees for selling, general and administration departments. The Company intends to hire more employees who hold relevant professional certificates and above average Mandarin proficiency.
We do not presently have pension, health, annuity, insurance, stock options, profit sharing, or similar benefit plans; however, we may adopt plans in the future. There are presently no personal benefits available to our employee, Officer and Director.
There are no pending legal proceedings to which we are a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us
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MANAGEMENT’S DISCUSSION AND ANALYSIS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Financial Data” and our financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations. Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Risk Factors”.
We make forward-looking statements in this report, in other materials we file with the Securities and Exchange Commission (the “SEC”) or otherwise release to the public, and on our website. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings) and demand for our products and services, and other statements of our plans, beliefs, or expectations, including the statements contained in this Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” regarding our future plans, strategies and expectations are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements because these forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Thus, our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: economic conditions generally and the automotive modified plastics market specifically, legislative or regulatory changes that affect our business, including changes in regulation, the availability of working capital, the introduction of competing products, and other risk factors described herein. These risks and uncertainties, together with the other risks described from time-to-time in reports and documents that we filed with the SEC should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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 year Ended May 31, | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 803,840 | - | |||||
Cost of revenue | (614,967 | ) | - | |||||
Gross profit | 188,873 | - | ||||||
Other Income | 7,926 | |||||||
Sales and marketing fee | (529,780 | ) | - | |||||
General and administrative | (348,067 | ) | (31,912 | ) | ||||
Loss from operation | (681,048 | ) | (31,912 | ) | ||||
Loss before income taxes | (681,048 | ) | (31,912 | ) | ||||
Income taxes | (1,418 | ) | - | |||||
Net loss attributable to CXJ Group | $ | (682,466 | ) | $ | (31,912 | ) |
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Revenues
We generate revenues from selling automobile exhaust cleaner and auto parts, providing branded 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 year Ended May 31, | For the year Ended May 31, | |||||||||||||||
2020 | % of net sales | 2019 | % of net sales | |||||||||||||
Sales of automobile exhaust cleaner | $ | 575,886 | 71.64 | % | - | - | ||||||||||
Sales of auto parts | 159,046 | 19.79 | % | - | - | |||||||||||
Administrative fee of brand name | 64,156 | 7.98 | % | - | - | |||||||||||
Training fee | 4,752 | 0.59 | % | - | - | |||||||||||
Total revenue | $ | 803,840 | 100 | % | - | - |
The Company are engaging in trading of automobile exhaust cleaner and auto parts 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.
Sales of automobile exhaust cleaner and auto parts
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 automobile exhaust cleaner and auto parts 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 administrative fees from our customers, who pay one-time fixed fee RMB100,000 for three years for exchange of (1) the right to use the brand name “Chejiangling / Teenage Hero Car”, (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.
Training fee
We earned the one-time fixed fee RMB3,000 from our customers or their staffs, the training included (1) automobile exhaust cleaner product’s training, such as how to use the product, the component of the product and quality control.
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(2) How to sell the automobile exhaust cleaner
(3) Technical training
(4) Opening support
Year ended May 31, 2020 compared to year ended May 31, 2019
Total revenues for 2020 were $803,840, an increase of 100% from $0 for 2019.
Net sales from sales of automobile exhaust cleaner and auto parts for 2020 were $734,932, an increase of 100% from $0 in 2019. Net sales from administrative fees for 2020 were $64,156, an increase of100% from $0 in 2019. Net sales from training fees for 2020 were $4,752, an increase of100% from $0 in 2019.
The following table illustrates our effectiveness in attracting and customer retention through several key performance indicators, including the number of members, and volume of trading.
Cost of revenue
Cost of revenue consist primarily of costs associated with the purchase of goods.
For the year Ended May 31, | For the year Ended May 31, | |||||||||||||||
2020 | % of net sales | 2020 | % of net sales | |||||||||||||
Purchases of automobile exhaust cleaner | 496,997 | 61.83 | - | - | ||||||||||||
Purchases of auto parts | 117,970 | 14.68 | - | - | ||||||||||||
Total cost of revenue | 614,967 | 76.50 | - | - |
Year ended May 31, 2020 compared to year ended May 31, 2019
Cost of revenue for 2020 were $614,967, an increase of $614,967, compared to $0 in 2019.
Gross Profit
Year ended May 31, 2020 compared to year ended May 31, 2019
Gross Profit for 2020 were $188,873, an increase of $188,873, compared to $0 in 2019. It was mainly due to business startup in June 2019.
Sales and Marketing Expenses
Sales and Marketing expenses include the coupon cost for promotion, advertisement and other operating expenses associated with sales and marketing.
For the year Ended May 31, | For the year Ended May 31, | |||||||||||||||
2020 | % of net sales | 2019 | % of net sales | |||||||||||||
Sales and Marketing Expenses | 529,780 | 65.91 | % | - | - |
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Year ended May 31, 2020 compared to year ended May 31, 2019
Sales and marketing expenses for 2020 were $529,780, an increase of $529,780, compared to $0 in 2019. The significant increase was primarily due to increase on human resources and consulting fee.
General and Administrative Expenses
General and Administrative (G&A) expenses consist primarily of payroll, employee benefits, facility cost, rental fee and other related expenses.
For the year Ended May 31, | For the year Ended May 31, | |||||||||||||||
2020 | % of net sales | 2019 | % of net sales | |||||||||||||
General and Administrative | 348,067 | 43.30 | % | 31,912 | - |
Year ended May 31, 2020 compared to year ended May 31, 2019
G&A expenses for 2020 were $348,067, an increase of $316,155, or 990.71%, compared to $31,912 in 2019. The increase was primarily due to the increase of head account and salary and welfare and traveling expenses to cope with expanding business, rental expenses and miscellaneous expense.
We expect our general and administrative expenses to increase in absolute amounts in the foreseeable future due to the anticipated growth of our business as well as accounting, insurance, investor relations and other public company costs.
Operating Loss
Year ended May 31, 2020 compared to year ended May 31, 2019
Operating loss for 2020 were $681,048, compared to $31,912 in 2019. This increased operating loss is primarily due to the company launched the business in June 2019 and lower sales and higher marketing expenses and G&A expenses.
Taxation
We recorded $1,418 and nil in income tax expenses for the years ended May 31, 2020 and 2019, respectively.
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 in China 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.
We are subject to value-added tax at a rate of 13% on sales of exhaust cleaner 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
Year ended May 31, 2020 compared to year ended May 31, 2019
Net loss attributable to the Company for 2020 were $682,466, compared to $31,912 in 2019.
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LIQUIDITY AND CAPITAL RESOURCES
Since commencing operations, our primary uses of cash have been to finance working capital needs for business expansion. We have financed these requirements primarily from cash generated from operations and related party advances. As of May 31, 2020 and 2019, we had $15,588 and $nil, respectively, in the amount of cash and cash equivalents.
We have been able to make repayments when due. As of May 31, 2020, we have contractual obligations to pay lease commitments in the amount of $195,803, including $87,940 due as of May 31, 2021.
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 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.
As of and for the year ended May 31, | ||||||||
2020 | 2019 | |||||||
Net cash provided by/ (used in) operating activities | 89,437 | (30,481 | ) | |||||
Net cash used in investing activities | (29,646 | ) | - | |||||
Net cash provided by finance activities | 46,505 | 30,481 | ||||||
Exchange rate effect on cash and cash equivalents | 2,302 | - | ||||||
Net increase in cash and cash equivalents | 15,588 | - | ||||||
Cash and cash equivalents at beginning of year | - | - | ||||||
Cash and cash equivalents at end of year | 15,588 | - |
Operating Activities
Net cash provided by operating activities in 2020 was $89,437, as compared to net loss of $682,466 in the same period. Changes in operating assets and liabilities provided by net cash of $651,774. The cash inflow included $436,620 used in account receivable and $3,719,036 from other liabilities which were partially offset by $2,518,698 from other receivable.
Net cash used in operating activities in 2019 was $30,481, as compared to net loss of $31,912 in the same period. Changes in operating assets and liabilities provided to net cash of $nil. The cash inflow included $1,431 from Note payable.
Investing Activities
Net cash used in investing activities in 2020 was $29,646. It was used for purchasing intangible assets.
Net cash used in investing activities in 2019 was $nil.
Financing Activities
Net cash used in financing activities in 2020 was $46,505.
Net cash provided by financing activities in 2019 was $30,481.
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Based on past performance and current expectations, we believe our cash and cash equivalents provided by operating activities will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months.
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 May 31, 2020 are as follows:
Payments Due by period | ||||||||||||||||||||
Operating leases | Total | Less than 1 year | 1-3 year | 3-5 years | More than 5 years | |||||||||||||||
195,803 | 83,044 | 112,759 | - | - | ||||||||||||||||
Total | $ | 195,803 | 83,044 | 112,759 | - | - |
Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of May 31, 2020.
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.
Critical Accounting Policies
An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.
The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this prospectus. When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.
Revenue recognition
Effective March 20, 2017, the Company early adopted ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606). Under Topic 606, 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.
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Product Revenue
We generate revenue primarily from the sales of automobile exhaust cleaner and auto parts directly to members. 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 cleaner 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 members, 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 members, and provision of management service. Revenue from the maintenance service to the members 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.
Receivables
Although we evaluated client credit worthiness, we provided an allowance for doubtful accounts for the estimated loss when collection may no longer be reasonably assured. We assessed collectability of receivables based on a number of factors including analysis of creditworthiness, client’s historical payment history, current economic conditions, and the length of time an individual receivable balance.
Income taxes
We 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. We 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.
We 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.
Impairment of long-lived assets
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary.
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We make various assumptions and estimates regarding estimated future cash flows and other factors in determining the fair values of the respective assets. The assumptions and estimates used to determine future values and remaining useful lives of long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as our business strategy and its forecasts for specific market expansion.
There was no impairment charges on long-lived assets in fiscal year 2020 and 2019, respectively.
Comprehensive income
We have adopted FASB Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income” (formerly known as SFAS No. 130, “Reporting Comprehensive Income”), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments of the Company.
Recently issued accounting guidance
We considered that the other recently issued but not yet effective accounting standards from ASU 2018-16, if currently adopted, would not have a material effect of the condensed financial position, results of operation and cash flows.
Going concern
As shown in the financial statements, we have generated a net loss of $682,466 in 2020 and an accumulated deficit of $42,911 as of May 31, 2019 and will be required continuous financial support from the shareholder. We will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, we may be continuously raising capital through the sale of debt and equity securities.
Our ability to achieve these objectives cannot be determined at this stage. If we are unsuccessful in its endeavors, it may be forced to cease operations. The unaudited condensed financial statements do not include any adjustments that might result from this uncertainty which may include adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
These factors have raised substantial doubt about our ability to continue as a going concern. There can be no assurances that we will be able to obtain adequate financing or achieve profitability. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Risk
Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.
Foreign Currency Exchange Rates
The most of our revenues are collected in and our expenses are paid in RMB. We face foreign currency rate translation risks when our results are translated to U.S. dollars.
The RMB was relatively stable against the U.S. dollar at approximately 8.28 RMB to the US$1.00 until July 21, 2005 when the Chinese currency regime was altered resulting in a 2.1% revaluation versus the U.S. dollar. From July 21, 2005 to September 30, 2010, the RMB exchange rate was no longer linked to the U.S. dollar but rather to a basket of currencies with a 0.3% margin of fluctuation resulting in further appreciation of the RMB against the U.S. dollar. Since September 30, 2009, the exchange rate had remained stable at 6.8307 RMB to 1.00 U.S. dollar until September 30, 2010 when the People’s Bank of China allowed a further appreciation of the RMB by 0.43% to 6.798 RMB to 1.00 U.S. dollar. The People’s Bank of China allowed the RMB and U.S. dollar exchange rate to fluctuate within 1% on April 16, 2012 and 2% on March 17, 2014, respectively. On May 31, 2020, the RMB traded at 7.0999 RMB to 1.00 U.S. dollar.
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There remains international pressure on the Chinese government to adopt an even more flexible currency policy and the exchange rate of RMB is subject to changes in China’s government policies which are, to a large extent, dependent on the economic and political development both internationally and locally and the demand and supply of RMB in the domestic market. There can be no assurance that such exchange rate will continue to remain stable in the future amongst the volatility of currencies, globalization and the unstable economies in recent years. Since (i) our revenues and net income of our PRC operating entities are denominated in RMB, and (ii) the payment of dividends, if any, will be in U.S. dollars, any decrease in the value of RMB against U.S. dollars would adversely affect the value of the shares and dividends payable to shareholders, in U.S. dollars.
Inflation
To date, inflation in China has not materially affected our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2017, 2018 and 2019 were increases of 1.6%, 2.1% and 1.6%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future.
Controls and Procedures
We have been a private company with limited accounting personnel and other resources with which we address our internal control over financial reporting. In connection with the audits of our financial statements as of May 31, 2020 and 2019. Our management assessed that our internal control over financial reporting was ineffective as of May 31, 2020. Our management, with the participation of our chief executive officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a 15(e) and 15d 15(e) promulgated under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, our management has concluded that, as of May 31, 2020, our disclosure controls and procedures were ineffective because of the material weaknesses described below under “Management’s Annual Report on Internal Control over Financial Reporting.” As such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a 15(f) under the Exchange Act, for our Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As required by Section 404 of the Sarbanes Oxley Act of 2002 and related rules promulgated by the Securities and Exchange Commission, our management, chief executive officer assessed the effectiveness of internal control over financial reporting as of May 31, 2020 using the criteria set forth in the report “Internal Control-Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission.
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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As a result of management’s evaluation of our internal control over financial reporting, the following material weakness in our internal control over financial reporting was identified as of May 31, 2020.
(i) The Company did not have sufficient resources with an appropriate level of knowledge and experience in U.S. GAAP to properly account for complex accounting issues under U.S. GAAP. Complex issues such as investment accounting, impairment assessment and loss contract reserve may not be accounted for properly in the future.
The material weakness described above may result in misstatement of the Company’s consolidated financial statements that would result in a material misstatement to the Company’s quarterly or annual consolidated financial statements that would not be prevented or detected. As a result of the material weakness, management has concluded that our internal control over financial reporting was ineffective as of May 31, 2020.
Changes in Internal Control over Financial Reporting
Management has evaluated, with the participation of our chief executive officer whether any changes in our internal control over financial reporting that occurred during our last fiscal year have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Recently Issued Accounting Pronouncements
A list of recently issued accounting pronouncements that are relevant to us is included in “Summary of Significant Accounting Policies—(y) Recent accounting pronouncements” of our financial statements included elsewhere in this prospectus.
Legal Proceedings
None.
INDUSTRY OVERVIEW
This section includes market and industry data that we have developed from publicly available information; various industry publications and other published industry sources and our internal data and estimates. Although we believe the publications and reports are reliable, we have not independently verified the data. Our internal data, estimates and forecasts are based upon information obtained from trade and business organizations and other contacts in the market in which we operate and our management’s understanding of industry conditions.
As of the date of the preparation of this section, these and other independent government and trade publications cited herein are publicly available on the Internet without charge. Upon request, the Company will also provide copies of such sources cited herein.
Large and Fast Growing in China
China’s real GDP reached $13.2 trillion in 2017, and 10 trillion for the nine-month period ended September 30,
2018, respectively, according to the National Bureau of Statistics of China, or NBS. According to the International
Monetary Fund, or IMF, China’s real GDP is projected to grow at a rate of no less than 6.3% per annum through to
2020. Meanwhile, real consumption growth in China is projected to outpace China’s real GDP growth at a compound annual growth rate, or CAGR, of 7.5% per annum from 2017 to 2020, according to IMF.
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Chinese automobile Industry
China’s automobile production and sales have been ranked first in the world for 11 consecutive years. In June 2018, China’s motor vehicle ownership reached 319 million, including 1.99 million new energy vehicles, of which 1.62 million were pure electric vehicles,81.4% of total new energy vehicles. automobile production and sales market are becoming a mass consumer product in China, which will directly promote the rapid development of the automotive aftermarket. It is predicted that the scale of China’s automotive aftermarket will continue to grow at a compound annual growth rate of 12.7%. The market size will be close to 3 trillion after 2020.
Despite the decline in China’s overall automobile production and sales in 2018, the sales volume of new energy vehicles in 2018 still maintained a high growth rate of 61.7%, which will bring about the renewal of the post-market of new vehicles such as power batteries. In 2018, China’s second-hand car transaction volume reached 13.822 million, an increase of 11.5% year on year. More than 70% of the second-hand car transactions are over three years old. With the increase of vehicle ages, owners’ demand for after-market services will show stronger growth. Beijing auto group and many other main engine plants set up a car maintenance chain system. Jd.com, Alibaba, Tencent and other Internet giants have entered the post-auto market across the border. In 2018, the market penetration rate of online automobile users reached 16.0%, and the growth rate of female car owners was rapid. Netizens in Jiangsu province paid the most attention to the topic of post-automobile market. Shanghai automotive maintenance line project growth fastest, up 120.3%. In the automotive supplies, the highest index for the search for decorative goods, consumers are most concerned about the automotive accessories, perfume and stickers. Among electronic products, auto data recorder attracts the most attention. In 2018, the market size of auto data recorder reaches 31.3 billion yuan, and nearly 60% of consumers purchase auto data recorder at more than 1000 yuan. Behind the increasing number of car ownership indicates the continued growth of the automotive aftermarket. According to the data of the Prospective Industry Research Institute, in 2017, the scale of my country’s automotive aftermarket exceeded the trillion mark, reaching 1.07 trillion, and it is expected to continue to grow at a rate of more than 19% in 2018, with a market size of about 1.279 trillion yuan. With the continuous improvement of the number of motor vehicles in China, the demand for auto supplies in the post-maintenance market of automobile maintenance and auto modification has also gradually expanded, and the requirements for auto supplies are becoming higher and higher.
China’s auto aftermarket will remain in the growing trillion-scale volume for a long time, as more cars maintenance period expires, car owners will choose an independent aftermarket in the future. At the same time, due to the steady increase in ownership and the slowdown in the growth of new car sales, China’s passenger car market is showing an aging trend, and the average car age is constantly rising. The demand for maintenance of older car owners is more than that of new users. According to the SOHU research, the difference in vehicle age has led to a difference in output value of after-sales stores between China and the United States. The after-sales output value of a single store in China’s unauthorized system is 780,000 yuan, 3.7 times than the United States. Older vehicle owners have higher demands for maintenance than new users. Therefore, the automotive aftermarket, which encompasses all transactions and services in the life cycle of automobile use, maintenance, repair, and repurchase.
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company adopted the new standard effective January 1, 2019 and elected the package of practical expedients permitted under the transition guidance, which allows to carryforward our historical lease classification, and initial direct costs for any leases that exist prior to adoption of the new standard. The Company will also keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term. The Company estimates approximately $247,369 would be recognized as total right-of-use assets and total lease liabilities on its consolidated balance sheet as of June 1, 2019. Other than additional disclosure, the Company does not expect the new standard to have a material impact on its consolidated financial statements.
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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. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
MARKET PRICE FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is currently quoted on the OTC Pink under the trading symbol “ECXJ”. Trading in stocks quoted on the OTC Pink is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the future. There is not active trading market for our common stock.
Shareholders
As of September 4, 2020, there were approximately 265 shareholders of record of our common stock.
Dividend Policy
We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.
Sale of Restricted Shares
All, but 15,345 of the shares of our common stock outstanding are “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemption provided by Rule 144.
Equity Compensation Plan Information
Currently, there is no equity compensation plans in place.
DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Biographical information regarding the officers and directors of the Company, who will continue to serve as officers and Directors of the Company are provided below:
Officer Biographies
NAME | AGE | DATES OF APPOINTMENT | POSITION | |||
Lixin Cai | 31 | June 21 2019 | Chief Executive Officer and Director | |||
Add: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxun District, Huzhou City, Zhejiang Province, China | ||||||
Cuiyao Luo | 38 | June 21 2019 | Chief Operating Officer and Director | |||
Add: Room 102, Unit 5, Building 4, Daguanyuan (east 4th), Gongsu District, Hangzhou City, Zhejiang Province, China |
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The term of office for each director is one (1) year.
Lixin Cai - Chief Executive Officer
Mr. Cai obtained a college’s degree in Vehicle Inspection and maintenance professional from Central South University in 2010.
From 2010 to 2012, he served at Hangzhou Xiaomuzhi Auto Maintenance Technology Co., Ltd. and was subsequently promoted to Marketing Manager. His major responsibilities were planned, executed, and led online marketing tactics, resulting in wide range company advancements.
From 2012 to 2019, he joined Hangzhou Kuaidian Maintenance Technology Development Co., Ltd. and served as Operating Controller. He was responsible to lead company’s internal operational teams including designating roles, assigning objectives, and monitoring and evaluating results and reports. Due to Mr. Cai’s status as a qualified expert in auto industry, along with his 10 years of professional working experience, the Board of Directors has determined it best to appoint him to the position of Chief Executive Officer of the Company.
Cuiyao Luo - Chief Operating Officer
Ms. Luo has three degrees, her first college’s degree in Proximate Analysis was from Zhejiang Shuren University in 2000, her second college’s degree in Computer Science and Technology was from Hunan University in 2003 and earned her master’s degree in Administration Major in Jiangnan University.
From 2003 to 2005, Ms. Luo worked at Zhejiang Talent Specialized College as office director of the Teacher Training Institution. Her responsibilities include fostering communication and providing advice on critical issues. Ms. Luo became the President Assistant and Marketing Manager in Hangzhou Xiaomuzhi Auto Maintenance Technology Co., Ltd since from year 2006 to 2012. From year 2013 to present, she founded her own company.Due to Ms. Luo’s over 18 years of experience in management of various businesses, the Board of Directors elected to appoint Ms. Luo to the positions of Chief Operating Officer the company.
Xinrui Wang –Director, Ultimate Conttoller
Xinrui Wang, aged 40, graduated from Dahua Group Technical College and obtained his Fine Chemical Bachelor’s degree from University of Science & Technology, Beijing in 2002. Xinrui Wang has extensive knowledge in network optimal design, mathematical modeling and enterprises management. He started his own business in 2011. From 2016 to now, Xinrui Wang founded and has been serving as president in Hebei Changlai Changwang Network Technology Co., Ltd. In the same year, Xinrui Wang founded the Chang Lai Chang Wang (Hangzhou) E-commerce Co., Ltd, where he served as President. He is responsible for all aspects of business development and strategic planning for the business and established and maintained company policies and procedures.
Corporate Governance
The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has not formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers and Directors as the Company is not required to do so.
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In lieu of an Audit Committee, the Company’s Board of Directors, is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. The Board of Directors, the Chief Executive Officer and the Chief Financial Officer of the Company review the Company’s internal accounting controls, practices and policies.
Committees of the Board
Our Company currently does not have nominating, compensation, or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or audit committee charter. Our Directors believe that it is not necessary to have such committees, at this time, because the Director(s) can adequately perform the functions of such committees.
Audit Committee Financial Expert
Our Board of Directors has determined that we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(D)(5) of Regulation S-K, nor do we have a Board member that qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(14) of the FINRA Rules.
We believe that our Director(s) are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The Director(s) of our Company does not believe that it is necessary to have an audit committee because management believes that the Board of Directors can adequately perform the functions of an audit committee. In addition, we believe that retaining an independent Director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not generated any positive cash flows from operations to date.
Involvement in certain legal proceedings
Our Directors and our Executive officers have not been involved in any of the following events during the past ten years:
1. | Bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
2. | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
3. | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his/her involvement in any type of business, securities or banking activities; or | |
4. | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. | |
5. | Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; | |
6. | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; | |
7. | Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:(i) Any Federal or State securities or commodities law or regulation; or(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
8. | Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
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Independence of Directors
We are not required to have independent members of our Board of Directors, and do not anticipate having independent Directors until such time as we are required to do so.
Code of Ethics
We have not adopted a formal Code of Ethics. The Board of Directors evaluated the business of the Company and the number of employees and determined that since the business is operated by a small number of persons, general rules of fiduciary duty and federal and state criminal, business conduct and securities laws are adequate ethical guidelines. In the event our operations, employees and/or Directors expand in the future, we may take actions to adopt a formal Code of Ethics.
Shareholder Proposals
Our Company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for Directors. The Board of Directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our President, at the address appearing on the first page of this Information Statement.
Pre-Transaction - CXJ Group Co Limited
The following table sets forth the compensation earned during the past two fiscal years by the person who served as our principal executive officer at the end of 2020.
Summary Compensation Table
Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Non- Incentive Compen | Change in Value and Deferred | All Other Compens-ation | Total | |||||||||||||||||||||||||||
Lixin Cai, CEO | 2020 | $ | 26,070 | - | - | - | - | - | - | 26,070 | ||||||||||||||||||||||||||
Cuiyao LUO, CFO | 2020 | - | - | - | - | - | - | - | - |
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Narrative Disclosure to Summary Compensation Table
There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
Outstanding Equity Awards at Fiscal Year-End
There are no current outstanding equity awards to our executive officers as of May 31, 2020.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
Compensation Committee
We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
Compensation of Directors
The directors of the Company receive no extra compensation for their services on our Board of Directors.
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executive or any future executives a salary, and/or issue them shares of common stock in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officer and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-term, Stock Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executive and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors, which we do not currently have any immediate plans to award.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of the date of this Report by: (i) each of our directors; (ii) each of our executive officers; (iii) all of our current executive officers and directors as a group, Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.
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Based on 101,487,017 shares of common stock issued and outstanding as of the date of this Registration Statement. The number and percentage of shares beneficially owned is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown that are beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.
Number of Shares Total Beneficially Held
Name and Address of Beneficial Owner (1) | Beneficially Held | Percent | ||||||
Directors and Officers | ||||||||
Xinrui Wang | 85,088,500 | 83.84 | % | |||||
Wenbin Mao | 10,500,000 | 10.35 | % | |||||
Baiwan Niu | 4,500,000 | 4.43 | % | |||||
Lixin Cai(2) | 4,500,000 | 1.34 | % | |||||
Luo Cuiyao | - | - |
All officers and directors as a group (5 people)
(1) | The mailing address for each person is : |
Xinrui Wang: Room 1004 Block 1 Section C, Feng Huang Cheng, CangZhou City, Hebei, China
Wenbin Mao: RM 202, Block 3 Unit Ding, WeiYe Zhenpin, Lanling north road, Changzhou City, Jiangsu,, China
Baiwan Niu: Group 2, Guanzhai Village, Lankao county, Sanyizhai town, Henan, China.
New Charles Technology Group Ltd: OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands
(2) | Held through New Charles Technology Group Ltd. Includes 1,364,800 shares issued in exchange for his interest in CXJ Investment Group Company Ltd. of which Mr. Lixin Cai is the sole director and shareholder. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND CORPORATE GOVERNANCE
On March 04, 2019, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for the Company, proper notice having been given to the officers and directors of Global Entertainment Corporation. There was no opposition. On June 18, 2019, control of the Company was transferred by the entity controlled by Custodian Ventures, LLC to Mr. Xinrui Wang, our director, by selling him 10,000,000 shares of Series A Preferred stock and 17,700,000 shares of common stock for a purchase price of $175,000.
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On October 4, 2019, Xinrui Wang, entered into a Stock Purchase Agreement to pursuant to which the Seller agreed to sell to Wenbin Mao and Baiwan Niu, totaling 1,500,000 preferred stock of the Company (“Shares”) owned by the Seller, for an amount of $1,500. On October 8, 2019, Xinrui Wang, Wenbin Mao and Baiwan Niu effectuated a 1 for 10 conversion to convert all their preferred stock totaling 10,000,000 to 100,000,000 common shares. As a result of the conversion, there was no preferred stock outstanding of the Company as of October 8, 2019.
On May 28, 2020, we consummated the transactions contemplated by the Share Exchange Agreement among the Company, CXJ Investment Group Company Ltd., a British Virgin Islands corporation (“CXJ”) and the solely shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholders of CXJ of an aggregate of 1,364,800 shares of the Company.
Review, Approval and Ratification of Related Party Transactions
Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officer(s), Director(s) and significant stockholders. We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. On a moving forward basis, our Directors will continue to approve any related party transaction.
Director Independence
Our board of directors is currently composed of three single members. We do not believe that our directors are independent in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by us in connection with the sale of common stock being registered. All amounts are estimates except for the SEC filing fee.
SEC filing fee | $ | 5,491 | ||
Legal fees and expenses | $ | 50,000 | ||
Accounting fees and expenses | $ | 50,000 | ||
Total | $ | 105,491 |
Name of Selling Shareholders | Beneficial Ownership Before the Offering | Shares of Common Stock Included in Prospectus | Beneficial of Ownership After the Offering | Percentage Ownership After the Offering | ||||||||||||
Xinrui Wang(1) | 85,088,500 | 10,000,000 | 75,088,500 | 73.99 | % | |||||||||||
Wenbin Mao(2) | 10,500,000 | 3,000,000 | 7,500,000 | 7.39 | % | |||||||||||
Baiwan Niu(3) | 4,500,000 | 1,000,000 | 3,500,000 | 3.45 | % | |||||||||||
New Charles Technology Group Ltd(4) | 1,364,800 | 100,000 | 1,264,800 | 1.25 | % |
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(1) | The 10,000,000 shares of common stock were issued upon conversion of Series A Preferred Stock by Xinrui Wang, who is on the board of directors. | |
(2) | The 3,000,000 shares of common stock were issued upon the conversion of Series A Preferred Stock sold from Xinrui Wang to Wenbin Mao, who is on the board of directors. | |
(3) | The 1,000,000 shares of common stock were issued upon conversion of Series A Preferred Stock sold from Xinrui Wang to Baiwan Niu, who is on the board of directors. | |
(4) | The 100,000 shares were issued to New Charles Technology Group Ltd. in exchange for his interest in CXJ Investment Group Company Ltd. of which Mr. Lixin Cai is the sole director and shareholder. |
We may require the selling shareholders to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus, or the related registration statement, untrue in any material respect, or that requires the changing of statements in these documents in order to make statements in those documents not misleading. We will file a post-effective amendment to this registration statement to reflect any material changes to this prospectus.
Effect of Sales on Our Shareholders
All shares of common stock that are covered by this prospectus are expected to be freely tradable. The sale by the selling shareholders of a significant amount of shares registered in this offering at any given time could cause the market price of our common stock to decline and to be highly volatile.
The Selling Shareholders and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of the shares of our common stock covered by this prospectus on the over-the-counter market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. The Selling Shareholder may sell all or a portion of their respective shares of common stock covered by this prospectus from time to time at prevailing market prices at the time of sale, at varying prices or at negotiated prices. A Selling Shareholder may use any one or more of the following methods when selling securities:
● | on any national securities exchange or quotation service on which the Shares may be listed or quoted at the time of sale; | |
● | in the over-the-counter market; | |
● | in the transactions otherwise than on these exchanges or systems or in the over-the-counter market; | |
● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | |
● | block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; | |
● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | |
● | an exchange distribution in accordance with the rules of the applicable exchange; [ ] privately negotiated transactions; | |
● | short sales; | |
● | through the listing or settlement of options or other hedging transactions, whether such options are listed on an options exchange or otherwise; | |
● | broker-dealers may agree with the selling shareholders to sell a specified number of such Shares at a stipulated price; | |
● | a combination of any such methods of sale; and | |
● | any other method permitted pursuant to applicable law. |
42 |
Brokers, dealers, underwriters, or agents participating in the distribution of the shares as agents may receive compensation in the form of commissions, discounts, or concessions from the selling shareholders and/or purchasers of the common stock for whom the broker-dealers may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions.
The selling shareholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling shareholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
In connection with the sale of our common stock, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling shareholders may also sell shares of our common stock short and deliver shares to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell such shares.
Neither we nor the selling shareholders can presently estimate the amount of compensation that any agent will receive. We know of no existing arrangements between the selling shareholders, any other shareholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names of any agents, underwriters, or dealers and any compensation from the selling shareholder, and any other required information.
We will pay all of the expenses incident to the registration, offering, and sale of the shares to the public other than commissions or discounts of underwriters, broker-dealers, or agents. Any commissions, discounts or other fees payable to brokers-dealers in connection with any sale of the shares of common stock will be borne by the selling shareholders, the purchasers participating in such transaction, or both.
We have agreed to indemnify those selling shareholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus up to an amount not to exceed the net proceeds of the Offering.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.
We have advised the selling shareholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling shareholders and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling shareholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling shareholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
We and the selling shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations under it, including, without limitation, Rule 10b-5.
This offering will terminate on the date that all shares offered by this prospectus have been sold by the selling shareholders.
Under the securities laws of some states, the shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
43 |
Penny Stock Rules
Our shares of common stock are subject to the “penny stock” rules of the Exchange Act. In general terms, “penny stock” is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, authorized for quotation from the NASDAQ stock market, issued by a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on the issuer’s net tangible assets or revenues. In the last case, the issuer’s net tangible assets must exceed $3,000,000 if in continuous operation for at least three years or $5,000,000 if in operation for less than three years, or the issuer’s average revenues for each of the past three years must exceed $6,000,000.
Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of stockholders to sell their shares.
The following description of our capital stock is only a summary and is qualified in its entirety by the provisions of our certificate of incorporation and bylaws, each as amended and restated, which have been filed as exhibits to the registration statement of which this prospectus forms a part.
We are authorized to issue 490,000,000 shares of Common Stock, par value $0.001. As of the date of this Report, there were 101,487,017 shares of Common Stock issued and outstanding.
Voting Rights
Except as otherwise required by law or as may be provided by the resolutions of the Board of Directors authorizing the issuance of common stock, all rights to vote and all voting power shall be vested in the holders of common stock. Each share of common stock shall entitle the holder thereof to one vote. Except as may be provided by the resolutions of the Board of Directors authorizing the issuance of common stock, cumulative voting by any shareholder is expressly denied.
Rights upon Liquidation, Dissolution or Winding-Up of the Company
Upon any liquidation, dissolution or winding-up of the corporation, whether voluntary or involuntary, the remaining net assets of the Company shall be distributed pro rata to the holders of the common stock.
The holders of our Common Stock have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by our board of directors. Holders of Common Stock are also entitled to share ratably in all of our assets available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of the affairs.
Transfer Agent
The transfer agent for our capital stock is Action Stock Transfer Corporation, with an address of 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, UT 84121. The telephone number is (801) 274-1088.
44 |
Anti-Takeover Effects of Certain Provisions of Nevada Law
Effect of Nevada Anti-takeover Statute. We are subject to Section 78.438 of the Nevada Revised Statutes, an anti-takeover law. In general, Section 78.438 prohibits a Nevada corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless prior to that date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder. Section 78.439 provides that business combinations after the three year period following the date that the stockholder becomes an interested stockholder may also be prohibited unless approved by the corporation’s directors or other stockholders or unless the price and terms of the transaction meet the criteria set forth in the statute.
Section 78.416 defines “business combination” to include the following:
● | any merger or consolidation involving the corporation and the interested stockholder or any other corporation which is an affiliate or associate of the interested stockholder; | |
● | any sale, transfer, pledge or other disposition of the assets of the corporation involving the interested stockholder or any affiliate or associate of the interested stockholder if the assets transferred have a market value equal to 5% or more of all of the assets of the corporation or 5% or more of the value of the outstanding shares of the corporation or represent 10% or more of the earning power of the corporation; | |
● | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation with a market value of 5% or more of the value of the outstanding shares of the corporation; | |
● | the adoption of a plan of liquidation proposed by or under any arrangement with the interested stockholder or any affiliate or associate of the interested stockholder; | |
● | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder; or | |
● | the receipt by the interested stockholder or any affiliate or associate of the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 78.423 defines an interested stockholder as any entity or person beneficially owning, directly or indirectly, 10% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any of these entities or persons.
Control Share Acquisitions. Sections 78.378 through 78.3793 of the Nevada Revised Statutes limit the voting rights of certain acquired shares in a corporation. The provisions apply to any acquisition of outstanding voting securities of a Nevada corporation that has 200 or more stockholders, at least 100 of which are Nevada residents, and conducts business in Nevada (an “issuing corporation”) resulting in ownership of one of the following categories of an issuing corporation’s then outstanding voting securities: (i) twenty percent or more but less than thirty-three percent; (ii) thirty-three percent or more but less than fifty percent; or (iii) fifty percent or more. The securities acquired in such acquisition are denied voting rights unless a majority of the security holders approve the granting of such voting rights. Unless an issuing corporation’s articles of incorporation or bylaws then in effect provide otherwise: (i) voting securities acquired are also redeemable in part or in whole by an issuing corporation at the average price paid for the securities within 30 days if the acquiring person has not given a timely information statement to an issuing corporation or if the stockholders vote not to grant voting rights to the acquiring person’s securities, and (ii) if outstanding securities and the security holders grant voting rights to such acquiring person, then any security holder who voted against granting voting rights to the acquiring person may demand the purchase from an issuing corporation, for fair value, all or any portion of his securities. These provisions do not apply to acquisitions made pursuant to the laws of descent and distribution, the enforcement of a judgment, or the satisfaction of a security interest, or made in connection with certain mergers or reorganizations.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its affiliates as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
45 |
We have filed with the SEC this registration statement on Form S-1 under the Securities Act with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes a part of this registration statement, does not contain all of the information in this registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, you should refer to this registration statement and the exhibits filed as part of that document. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to this registration statement. Each of these statements is qualified in all respects by this reference.
We are subject to the informational requirements of the Exchange Act and file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including this registration statement, over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You may also request a copy of these filings, at no cost, by writing or telephoning us at: Blue Star Foods Corp., 3000 NW 109th Avenue, Miami, Florida 33172 or (305) 836-68 ECXJ. In addition, all documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering (excluding any information furnished rather than filed) shall be deemed to be incorporated by reference into this prospectus.
McMurdo Law Group, LLC will opine on the validity of the shares being offered hereby.
The consolidated financial statements included in this prospectus and in the registration statement for the fiscal year ended May 31, 2020 and 2019 have been audited by B F Borgers CPA PC, an independent registered public accounting firm and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
46 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of CXJ Group Co., Limited
Room 1903-1,No.1 building, Xizi International center, Jianggan District, Hangzhou City, Zhejiang Province, China
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CXJ Group Co., Limited and its subsidiaries (the ‘Company’) as of May 31, 2020 and 2019, and the related consolidated statements of operation and comprehensive, stockholders’ equity, and cash flows for each of the years in the two year period ended of May 31, 2020 and 2019 , and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two year period ended May 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, for the year ended May 31, 2020 the Company incurred a net loss and having net current liabilities and shareholders’ deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We have served as the Company’s auditor since 2020.
/s/ Total Asia Associates PLT | |
TOTAL ASIA ASSOCIATES PLT | |
Kuala Lumpur, Malaysia | |
September 4, 2020 |
F-1 |
CXJ GROUP CO., LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF May 31, 2020, AND 2019
(CURRENCY EXPRESSED IN UNITED STATES DOLLARS (“US$”), EXCEPT FOR NUMBER OF SHARES)
As of May 31, | ||||||||
2020 | 2019 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Account receivables | 436,620 | - | ||||||
Deposits paid, prepayments and other receivables | 2,518,698 | - | ||||||
Inventories | 124,658 | - | ||||||
Due from a director | 115,868 | - | ||||||
Due from a shareholder | 51,458 | - | ||||||
Cash and cash equivalents | $ | 15,588 | $ | - | ||||
Total current assets | 3,262,890 | - | ||||||
NON-CURRENT ASSETS | ||||||||
Operating lease right-of-use assets | 192,741 | - | ||||||
Intangible assets | 29,646 | - | ||||||
Total non-current assets | 222,387 | - | ||||||
TOTAL ASSETS | $ | 3,485,277 | $ | - | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Account payables | 156,955 | - | ||||||
Accrued expenses and other payables | 3,735,680 | 1,431 | ||||||
Amount due to a director | 26,302 | 12,781 | ||||||
Operating lease liabilities, net of current portion | 83,044 | - | ||||||
Total current liabilities | 4,001,981 | 14,212 | ||||||
NON-CURRENT LIABILITIES | ||||||||
Operating lease liabilities, non-current portion | 112,759 | - | ||||||
TOTAL LIABILITIES | 4,114,740 | 14,212 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $0.001 par value, 490,000,000 and 50,000,000 shares authorized, 101,487,017 and 24,356,062 shares issued and outstanding as of May 31, 2020 and May 31, 2019 respectively | 101,487 | 24,356 | ||||||
Additional paid-in capital | - | 4,343 | ||||||
Accumulated other comprehensive income | 7,215 | - | ||||||
Accumulated deficit | (738,165 | ) | (42,911 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | (629,463 | ) | (14,212 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,485,277 | $ | - |
F-2 |
CXJ GROUP CO., LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED MAY 31, 2020, AND 2019
(CURRENCY EXPRESSED IN UNITED STATES DOLLARS (“US$”), EXCEPT FOR NUMBER OF SHARES)
For the year ended May 31, | ||||||||
2020 | 2019 | |||||||
REVENUE | $ | $ | ||||||
- Non-related party | 803,840 | - | ||||||
COST OF REVENUE | (614,967 | ) | - | |||||
GROSS PROFIT | 188,873 | - | ||||||
OTHER INCOME | 7,926 | - | ||||||
Selling and distribution expenses | (529,780 | ) | - | |||||
GENERAL AND ADMINISTRATIVE EXPENSES | (348,067 | ) | (31,912 | ) | ||||
LOSS FROM OPERATIONS | (681,048 | ) | (31,912 | ) | ||||
INTEREST INCOME | - | |||||||
LOSS BEFORE INCOME TAX | (681,048 | ) | (31,912 | ) | ||||
INCOME TAXES EXPENSE | (1,418 | ) | - | |||||
NET LOSS | $ | (682,466 | ) | $ | (31,912 | ) | ||
Other comprehensive income: | - | - | ||||||
- Foreign exchange adjustment gain | 7,215 | - | ||||||
COMPREHENSIVE LOSS | $ | (675,251 | ) | $ | - | |||
Net loss per share - Basic and diluted | (0.01 | ) | $ | - | ||||
Weighted average number of common shares outstanding – Basic and diluted | 76,426,231 | - |
F-3 |
CXJ GROUP CO., LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICITS
FOR THE YEARS ENDED MAY 31, 2020, AND 2019
(CURRENCY EXPRESSED IN UNITED STATES DOLLARS (“US$”), EXCEPT FOR NUMBER OF SHARES)
COMMON STOCK | ADDITIONAL | ACCUMULATED OTHER | TOTAL | |||||||||||||||||||||
Number of shares | Amount | PAID-IN CAPITAL | COMPREHENSIVE INCOME | ACCUMULATED DEFICIT | STOCKHOLDER’ DEFICIT | |||||||||||||||||||
Balance as of June 1, 2018 | 6,656,062 | $ | 6,656 | $ | 4,343 | $ | - | $ | (10,999 | ) | $ | - | ||||||||||||
Common stock issued | 17,700,000 | 17,700 | - | - | - | 17,700 | ||||||||||||||||||
Net Loss | - | - | - | - | (31,912 | ) | (31,912 | ) | ||||||||||||||||
Balance as of May 31, 2019 | 24,356,062 | 24,356 | 4,343 | - | (42,911 | ) | (14,212 | ) | ||||||||||||||||
1 for 200 reverse stock split | (24,233,845 | ) | (24,234 | ) | 24,234 | - | - | - | ||||||||||||||||
Preferred Stock issued and converted to common stock | 100,000,000 | 100,000 | (90,000 | ) | - | - | 10,000 | |||||||||||||||||
Common stock issued | 1,364,800 | 1,365 | 4,093,088 | - | - | 4,094,453 | ||||||||||||||||||
Acquisition of subsidiary | - | - | (4,031,665 | ) | - | (12,788 | ) | (4,044,453 | ) | |||||||||||||||
Net Loss | - | - | - | - | (682,466 | ) | (682,466 | ) | ||||||||||||||||
Accumulated other comprehensive income | - | - | - | 7,215 | - | 7,215 | ||||||||||||||||||
Balance as of May 31, 2020 | 101,487,017 | 101,487 | - | 7,215 | (738,165 | ) | (629,463 | ) |
F-4 |
CXJ GROUP CO., LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2020, AND 2019
(CURRENCY EXPRESSED IN UNITED STATES DOLLARS (“US$”), EXCEPT FOR NUMBER OF SHARES)
For the year ended May 31, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (682,466 | ) | $ | (31,912 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Acquisition of subsidiary | 50,000 | - | ||||||
Conversion of preferred shares to common shares | 10,000 | - | ||||||
Operating lease expense | 60,129 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivables | (436,620 | ) | - | |||||
Prepayments, deposits and other receivables | (2,518,698 | ) | - | |||||
Inventory | (124,658 | ) | - | |||||
Due from a director | (119,363 | ) | - | |||||
Due from a shareholder | (1,458 | ) | - | |||||
Due from a related company | 13,521 | - | ||||||
Accounts payable | 172,168 | - | ||||||
Operating lease liabilities | (52,154 | ) | - | |||||
Other payables, advanced received and accrued liabilities | 3,719,036 | 1,431 | ||||||
Net cash provided by/(used in) operating activities | 89,437 | (30,481 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITY: | ||||||||
Purchase of intangible assets | (29,646 | ) | - | |||||
Net cash used in investing activity | (29,646 | ) | - | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Loan from related party | 3,495 | 17,700 | ||||||
(Advances to) directors | (50,000 | ) | 12,781 | |||||
Net cash (used in)/provided by financing activities | (46,505 | ) | 30,481 | |||||
Effect of exchange rate changes on cash and cash equivalents | 2,302 | - | ||||||
Net change in cash and cash equivalents | 15,588 | - | ||||||
Cash and cash equivalents, beginning of year | - | - | ||||||
- | ||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 15,588 | $ | - |
F-5 |
CXJ GROUP CO., LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended May 31, 2020 and 2019
Currency expressed in United States Dollars (“US$”), except for number of shares)
Note 1. Company Overview
CXJ Group Co., Limited (“we”, “us”, the “Company” or “ECXJ”) was originally incorporated in State of Nevada on August 20, 1998 under the name Global II, Inc and underwent several name changes prior to its current name. Until August 2019, the Company was known as Global Entertainment Corp., which was a dormant company.
On March 04, 2019, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for the Company, proper notice having been given to the officers and directors of Global Entertainment Corporation. There was no opposition. On June 18, 2019, control of the Company was transferred by the entity controlled by Custodian Ventures, LLC to Xinrui Wang, our director, by selling him 10,000,000 shares of Series A Preferred stock and 17,700,000 shares of common stock for a purchase price of $175,000.
On June 21, 2019, Lixin Cai was appointed act as the new President, CEO, Secretary and Chairman of the Board of Directors of the Company. On June 21, 2019, Cuiyao Luo was appointed act as the new CFO, Treasurer and Member of the Board of Directors of the Company. On September 30, 2019, the Company appointed three more members to the Board of Directors of the Company, and they are Xinrui Wang, Wenbin Mao and Baiwan Niu.
Effective July 9, 2019 we changed our name from Global Entertainment Corp to CXJ Group Co., Limited. On July 12, 2019, the Company effectuated a 1 for 200 reverse stock split, while the authorized shares of common stock and preferred shares totally had been increased to 500,000,000. As a result of the foregoing we changed our trading symbol from GNTP and began trading as ECXJ on August 5, 2019.
On October 4, 2019, Xinrui Wang (the “Seller”), entered into a Stock Purchase Agreement to pursuant to which the Seller agreed to sell to Wenbin Mao and Baiwan Niu (the “Purchasers”), totaling 1,500,000 preferred stock of the Company (“Shares”) owned by the Seller, for an amount of $1,500. On October 8, 2019, Xinrui Wang, Wenbin Mao and Baiwan Niu effectuated a 1 for 10 conversion to convert all their preferred stock totaling 10,000,000 to 100,000,000 common shares. As a result of the conversion, there was no preferred stock outstanding of the Company as of October 8, 2019.
On May 28, 2020, we consummated the transactions contemplated by the Share Exchange Agreement among the Company, CXJ Investment Group Company Limited, a British Virgin Islands Corporation (“CXJ”) and the shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholder of CXJ of an aggregate of 1,364,800 shares of the Company. The shareholder is the selling security holder in this prospectus and are all affiliates. As a result of the transactions contemplated by the Share Exchange, CXJ became a wholly-owned subsidiary of the Company.
ECXJ, through its wholly owned subsidiary, CXJ and its subsidiaries and the VIE own and operate an active automobiles products trading and services business in the People’s Republic of China. Our business is supporting our alliance with products and technical services enable them to service consumers in China.
Note 2. Summary of Significant Accounting Policies
(a) | Basis of presentation and liquidation |
F-6 |
The accompanying consolidated balance Sheets as of May 31, 2020 and 2019 and the consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flow for the year ended May 31, 2020 and 2019 have been prepared by the Company is in conformity with generally accepted accounting principles in the United States (“US GAAP”).
The Company incurred net loss of $682,466, $31,912 during the year ended May 31, 2020 and 2019, respectively. As of May 31, 2020, and 2019, the Company had an accumulated deficit of $738,165 and $42,911, respectively. Although it was loss in these two years, the Company generated/(used in) net cash inflow from operations of $89,437 and ($30,481) during the years ended May 31, 2020 and 2019, respectively.
As of May 31, 2020, and 2019, the Company had cash and cash equivalents of $15,588 and $nil, the current liability of $4,001,981 and $14,212. The Company’s China subsidiaries and VIE are subject to preapproval from the State Administration of Foreign Exchange (“SAFE”) for non-domestic financing. Additionally, the amount of cash available for transfer from the China subsidiaries and the VIE for use by the Company’s non-China subsidiaries is also limited both by the liquidity needs of the subsidiaries in China and the restriction on foreign currency exchange by Chinese-government mandated limitations including currency exchange controls on certain transfers of funds outside of China.
The company currently is seeking to restructure the terms of our liabilities by raising funds to pay off liabilities. Our ability to continue as a going concern is depend upon obtaining the necessary financing or negotiating the terms of the existing borrowing to meet our current and future liquidity need.
(b) | 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 substantially trading of exhaust cleaner and brand name management service 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 these 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 Arrangement”.
Subsidiaries: | Date of incorporation |
Interest % | Place of incorporation | |||||||
CXJ Investment Group Company Ltd | 2020/2/19 | 100 | % | BVI | ||||||
CXJ (HK) Technology Group Company Ltd | 2020/3/11 | 100 | % | Hong Kong | ||||||
CXJ (SHENZHEN) TECHNOLOGY CO., LTD | 2020/5/26 | 100 | % | PRC | ||||||
VIE: | ||||||||||
CXJ TECHNOLOGY (HANGZHOU) CO., LTD | 2019/3/28 | 100 | % | PRC |
F-7 |
(c) | Use of estimates |
The accompanying consolidated financial statements have been prepared in conformity with US GAAP 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.
(d) | 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 Remibi, 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.
(e) | 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.
(f) | 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.
(g) | Inventories, net |
Inventories, consisting 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.
(h) | Prepayments |
Prepayments are mainly consisted of prepaid income tax, rental, prepayments for consulting fee and advances to supplies.
F-8 |
(i) | 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 software and non-patent technology with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated useful lives.
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 are as follow:
Non-patent technology | 5 years |
(j) | 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.
For all periods presented, there was no impairment of any of the Company’s long-lived assets.
(k) | 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.
F-9 |
(l) | Revenue recognition |
Effective March 20, 2017, the Company early adopted ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606). Under Topic 606, 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 members. 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 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 members, 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 members, and provision of management service. Revenue from the maintenance service to the members 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.
(m) | Sales and Marketing expense |
Selling and handling costs amounted to $529,780 and $nil for the year ended May 31, 2020 and 2019, respectively. Selling and marketing costs are expensed as incurred and included in selling expenses.
(n) | General and administrative expenses |
General and administrative expenses consist primarily of research and development expenses, salary and welfare for general and administrative personnel, rental expenses, entertainment expenses, general office expenses and professional service fees.
(o) | 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:
F-10 |
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. Please refer to Note 2-Recently adopted accounting pronouncements for the disclosures regarding the Company’s method of adoption of ASC 842 and the impacts of adoption on its consolidated balance sheets, results of operations and cash flows. 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.
(p) | 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.
(q) | 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% for most enterprises. The Company’s VIE through which the majority of our business in China is applicable to this tax rate
F-11 |
The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the year ended May 31, 2020 and 2019, respectively:
For the year ended May 31, | ||||||||
2020 | 2019 | |||||||
PRC statutory rate | 25 | % | 25 | % | ||||
Net operating losses for which no deferred tax assets was recognized | (25.0 | ) | (25.0 | ) | ||||
The Company’s expense is out of limit than that of PRC statutory tax policy allowed | 16.5 | 0.0 | ||||||
Effective income tax rate | 16.5 | % | 0.0 | % |
Income tax expense for the year ended May 31, 2020 and 2019 is as follows:
For the year ended May 31, | ||||||||
2020 | 2019 | |||||||
Current | 1,418 | - | ||||||
Deferred | - | - | ||||||
Income tax expense | 1,418 | - |
(r) | 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.
(s) | 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).
(t) | 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.
(u) | 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 segment. As the Company’s long-lived assets are substantially all located in the PRC and substantially all the Company revenues are derived from within the PRC, no geographical segments are presented.
F-12 |
(v) | Recent accounting pronouncements |
The Company is an emerging growth company (“EGC”) as defined by the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. However, the Company would not like to take this advantage at current stage.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company adopted the new standard effective January 1, 2019 and elected the package of practical expedients permitted under the transition guidance, which allows to carryforward our historical lease classification, and initial direct costs for any leases that exist prior to adoption of the new standard. The Company will also keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term. The Company estimates approximately US$374,341 would be recognized as total right-of-use assets and total lease liabilities on its consolidated balance sheet as of June 1, 2019. Other than additional disclosure, the Company does not expect the new standard to have a material impact on its consolidated financial statements.
Note 3. Acquisition
On March 28, 2019, Mr. Cai, Lixin (Mr. Cai), the Company’s Chairman of the Board and Chief Executive Officer and Chief Financial Officer, incorporated CXJ Technology (Hangzhou) Co., Ltd (“CXJHZ”) in Hangzhou, China. Mr. Cai in turn incorporated CXJ Investment Group Company Ltd (“CXJ”), CXJ (HK) Technology Group Company Ltd (“CXJHK”), and CXJ (Shenzhen) Technology Co., Ltd (“CXJSZ”) and reorganized these entities with CXJ being a holding entity with the solely shareholder. As a result of the reorganization, CXJ owns 100% interest in CXJHK and CXJHK owns 100% interest in CXJSZ. CXJSZ controls 100% interest in CXJHZ through VIE contractual arrangements as disclosed in Note 4. Such reorganization was completed on May 28, 2020.
On June 18, 2019, the Company underwent a change of control as a result of the transfer of 10,000,000 shares of Series A Preferred stock (which voted on a 10 for one basis at the time of the change of control) from Custodian Ventures, LLC and 17,700,000 shares of common stock to Xinrui Wang.
On May 28, 2020, we consummated the transactions contemplated by the Share Exchange Agreement among the Company, CXJ Investment Group Company Limited (“CXJ”), a British Virgin Islands Corporation and the shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholder of CXJ of an aggregate of 1,364,800 shares of the Company. The shareholder is the selling security holder in this prospectus and are all affiliates. As a result of the transactions contemplated by the Share Exchange, CXJ became a wholly-owned subsidiary of the Company.
The Company accounted for above transaction as a reverse acquisition under ASC Subtopic 805-40, based on the fact that the CXJ is an accounting acquirer and the Company is the accounting acquiree. Meanwhile, the CXJ retrospectively consolidates the Company and as if it had been owned by CXJ since May 28, 2020, the date the Company was acquired by Mr. Lixin Cai, in accordance with ASC Subtopic 805-50.
Note 4. VIE Structure and Arrangements
The Company consolidates VIE in which it holds a variable interest and is the primary beneficiary through contractual agreements. The Company is the primary beneficiary because it has the power to direct activities that most significantly affect their economic performance and have the obligation to absorb the majority of their losses or benefits. The results of operations and financial position of the VIE are included in the Company’s consolidated financial statements.
F-13 |
In order to operate its business in PRC and to comply with PRC laws and regulations that prohibit or restrict foreign ownership of companies that provides value-added services, the Company entered into a series of contractual agreements with the VIE: CXJ Technology (Shenzhen) Co., Ltd. (“CXJSZ”). These contractual agreements may not be terminated by the VIE, except with the consent of, or a material breach by us. Currently, the Company is still evaluating the overall operating strategy for business and does not have plan to provide any funding to the VIE. Please refer to Note 7 for associated regulatory risks.
The key terms of the VIE Agreements are summarized as follows:
(a) | Exclusive Consulting and Services Agreement |
The WFOE has the exclusive right to provide technical service, marketing and management consulting service, financial support service and human resource support services to the VIE, and the VIE is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by WFOE. As compensation for providing the services, WFOE is entitled to receive service fees from the VIE equivalent to the WFOE’s cost plus certain percentage of such costs as calculated on accounting policies generally accepted in the PRC. The WFOE and the VIE agree to periodically review the service fee and make adjustments as deemed appropriate. The term of the Technical Services Agreement is perpetual, and may only be terminated upon written consent of both parties.
(b) | Equity Pledge Agreement |
The VIE’s shareholders pledged all of their equity interests in VIE (the “Collateral”) to WFOE, our wholly owned subsidiary in PRC, as security for the performance of the obligations to make all the required technical service fee payments pursuant to the Technical Services Agreement and for performance of the VIEs’ Shareholders’ obligation under the Call Option Agreement. The terms of the Equity Pledge Agreement expire upon satisfaction of all obligations under the Technical Services Agreement and Call Option Agreement.
(c) | Exclusive Option Agreement |
The VIEs’ Shareholders granted an exclusive option to WFOE, or its designee, to purchase, at any time and from time to time, to the extent permitted under PRC law, all or any portion of the VIE’s shareholders’ equity in the VIE. The exercise price of the option shall be determined by WFOE at its sole discretion, subject to any restrictions imposed by PRC law. The term of the agreement is until all of the equity interest in the VIE held by the VIEs’. Shareholders are transferred to WFOE, or its designee and may not be terminated by any part to the agreement without consent of the other parties.
(d) | Power of Attorney |
The VIE’s shareholders granted WFOE the irrevocable right, for the maximum period permitted by law, all of its voting rights as shareholders of the VIE. The VIE’s shareholders may not transfer any of its equity interest in the VIE to any party other than WFOE. The Power of Attorney agreements may not be terminated except until all of the equity in VIEs has been transferred to WFOE or its designee.
Note 5 .Shareholders’ equity
The Company has 490,000,000 shares of common stock authorized with a par value of $0.001 per share as of May 31, 2020 and 2019.
Effective July 9, 2019 we changed our name from Global Entertainment Corp to CXJ Group Co., Limited. On July 12, 2019, the Company effectuated a 1 for 200 reverse stock split, while the authorized shares of common stock and preferred shares totally had been increased to 500,000,000. As a result of the foregoing we changed our trading symbol from GNTP and began trading as ECXJ on August 5, 2019.
On October 4, 2019, Xinrui Wang (the “Seller”), entered into a Stock Purchase Agreement to pursuant to which the Seller agreed to sell to Wenbin Mao and Baiwan Niu (the “Purchasers”), totaling 1,500,000 preferred stock of the Company (“Shares”) owned by the Seller, for an amount of $1,500. On October 8, 2019, Xinrui Wang, Wenbin Mao and Baiwan Niu effectuated a 1 for 10 conversion to convert all their preferred stock totaling 10,000,000 to 100,000,000 common shares. As a result of the conversion, there was no preferred stock outstanding of the Company as of October 8, 2019.
On May 28, 2020, we consummated the transactions contemplated by the Share Exchange Agreement among the Company, CXJ Investment Group Company Limited, a British Virgin Islands Corporation (“CXJ”) and the shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholder of CXJ of an aggregate of 1,364,800 shares of the Company. The shareholder is the selling security holder in this prospectus and are all affiliates. As a result of the transactions contemplated by the Share Exchange, CXJ became a wholly-owned subsidiary of the Company.
F-14 |
Note 6 . Prepayment, deposits and other receivables
Prepaid expenses and other receivables consisted of the following at May 31, 2020 and May 31, 2019:
As of | ||||||||
May 31, 2020 | May 31, 2019 | |||||||
Prepayment | 110,382 | - | ||||||
Deposit | 39,598 | - | ||||||
Other receivables | 2,368,718 | - | ||||||
Total | $ | 2,518,698 | $ | - |
As of May 31, 2020, the balance $39,598 represented the rental deposit and advanced payment to supplier, the balance $110,382 represented an outstanding prepaid expense and prepayment which included social security fee, housing fund, property management and employee receivables, the balance $2,368,718 represented other receivables, which included the employee receivables, VAT receivable and the receivable from other companies.
Note 7 . Intangible Assets
Intangible assets and related accumulated amortization were as follows:
As of | ||||||||
May 31, 2020 | May 31, 2019 | |||||||
Software | 29,646 | - | ||||||
Less: Accumulated amortization | - | - | ||||||
Total | $ | 29,646 | $ | - |
For the May ended, 2020, the Company has completed the development of the enterprise resource planning system (ERP) for the partners or clients, the system can be used on both PC/APP. The function can be classified into vehicles management, membership management, inventory management and financial management. The app for clients or partners is also available on WeChat mini program to manage consumers’ request and reservation. No amortization provision for the year ended May 31, 2020.
Note 8 . Advanced received, accrued expenses and other payables
As of | ||||||||
May 31, 2020 | May 31, 2019 | |||||||
Accrued expenses | 66,934 | 1,431 | ||||||
Advanced received | 2,185,552 | - | ||||||
Other payables | 1,483,194 | - | ||||||
Total | $ | 3,735,680 | $ | 1,431 |
Other payables and accrued include accrued rental expenses, tax and surcharges payable, employee payables and payable to other companies. Advanced received from customers are brand name management fee and goods purchases paid by customers.
F-15 |
Note 9: Related party transaction
(a) Related party list
Names of related parties | Relationship with the Company | |
New Charles Technology Group Limited | Company controlled by the director | |
Lixin Cai | Director | |
Cuiyao Luo | Director |
The Company had the following related party balances and transactions as of and for the year ended May 31, 2020 and as of and 2019. All related parties are controlled by either the founder or the directors of the Company and are providing professional services for the Company to facilitate its operation of the Company. These advanced balances are short-term in nature, bearing no interest, and due on demand.
Amounts due from related parties | As of | |||||||
May 31, 2020 | May 31, 2019 | |||||||
Lixin Cai | 115,868 | - | ||||||
New Charles Technology Group Limited | 51,458 | - | ||||||
Total | $ | 167,326 | $ | - |
For the years ended May 31, 2020, the amount $115,868 loan to the director “Lixin Cai”, The amount due is unsecured, interest free and has no fixed repayment term. As the reporting date, the amount due from the director is Nil.
Amounts due to related parties | As of | |||||||
May 31, 2020 | May 31, 2019 | |||||||
Cuiyao Luo | 26,302 | 12,781 | ||||||
Total | $ | 26,302 | $ | 12,781 |
For the years ended May 31, 2020 and 2019, Cuoyao Luo advanced $26,302 and $12,781 to the company as working capital and to pay administrative expenses, which is unsecured, interest-free with no fixed payment term, for working capital purpose.
Note 10. Lease Right-Of-Use Asset and Lease Liabilities
The Company officially adopted ASC 842 for the period on and after June 1, 2019 as permitted by ASU 2016-02. ASC 842 originally required all entities to use a “modified retrospective” transition approach that is intended to maximize comparability and be less complex than a full retrospective approach. On July 30, 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU 2016-02 of which permits entities may elect not to recast the comparative periods presented when transitioning to ASC 842. As permitted by ASU 2018-11, the Company elect not to recast comparative periods, thusly.
As of June 1, 2019, the Company recognized approximately US$247,369, lease liability as well as right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. Lease liabilities are measured at present value of the sum of remaining rental payments as of June 1, 2019, with discounted rate of 3.25% adopted from The People’s Bank Of China’s base lending rate as a reference for discount rate, as this bank is the largest bank and national bank of China.
A single lease cost is recognized over the lease term on a generally straight-line basis. All cash payments of operating lease cost are classified within operating activities in the statement of cash flows.
F-16 |
The initial recognition of operating lease right and lease liability as follow:
Gross lease payable | 259,257 | |||
Less: imputed interest | (11,888 | ) | ||
Initial recognition as of June 1, 2019 | $ | 247,369 | ||
As of May 31, 2020, operating lease right of use asset as follow: | ||||
Initial recognition as of June 1, 2019 | 247,369 | |||
Accumulated amortization | (54,628 | ) | ||
Balance as of May 31, 2020 | $ | 192,741 | ||
As of May 31, 2020, operating lease liability as follow: | ||||
Initial recognition as of June 1, 2019 | 247,369 | |||
Less: gross repayment | (56,390 | ) | ||
Add: imputed interest | 4,824 | |||
Balance as of May 31, 2020 | $ | 195,803 | ||
Less: lease liability current portion | (83,044 | ) | ||
Lease liability non-current portion | $ | 112,759 |
For the year ended May 31, 2020 and 2019, the amortization of the operating lease right of use asset are $54,628 and $0 respectively.
Maturities of operating lease obligation as follow:
Year ending May 31, | Operating Lease | |||
2020 | $ | 83,044 | ||
2021 | 89,567 | |||
2022 | 23,192 | |||
Total | $ | 195,803 |
Other information:
Year ended May 31, 2020 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flow from operating lease | 57,032 | |||
Right-of-use assets obtained in exchange for operating lease liabilities | 192,741 | |||
Remaining lease term for operating lease (years) | 2.25 | |||
Weighted average discount rate for operating lease | 3.25 | % |
Lease expenses were $60,129 and $0 for the year ended May 31, 2020 and 2019, respectively.
Note 11: Subsequent event
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to the May 31, 2020 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by us in connection with the sale of common stock being registered. All amounts are estimates except for the SEC filing fee.
SEC filing fee | $ | 5,491 | ||
Legal fees and expenses | $ | 50,000 | ||
Accounting fees and expenses | $ | 50,000 | ||
Total | $ | 105,491 |
Item 14. Indemnification of Directors and Officers
(a) | The Company shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any claim, action, suit, or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that the person, or a person for whom he or she is the legal representative, is or was a Director or officer of the Company or is or was serving at the request of the Company as a director, officer or fiduciary of another corporation or of a partnership, joint venture, trust, non-profit entity, or other enterprise, including service with respect to employee benefit plans, against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person. The right to indemnification conferred in this Bylaw shall be a contract right. Except as provided in paragraph (c) of this Bylaw with respect to proceedings seeking to enforce rights to indemnification, the Company shall indemnify a person in connection with a proceeding initiated by such person or a claim made by such person against the Company only if such proceeding or claim was authorized in the specific case by the Board of Directors of the Company. |
(b) | Subject to applicable law, the Company shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that if and to the extent required by law the payment of expenses incurred by any person covered hereunder in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by or on behalf of the affected person to repay all amounts advanced if it should ultimately be determined that such person is not entitled to be indemnified under this Bylaw or otherwise. |
(c) | If a claim for indemnification (following the final disposition of such proceeding) or advancement of expenses under this Bylaw is not paid in full within thirty days, or such other period as might be provided pursuant to contract, after a written claim therefor has been received by the Company, the claimant may file suit to recover the unpaid amount of such claim or may seek whatever other remedy might be provided pursuant to contract. In any such action the Company shall have the burden of proving that the claimant was not entitled to the requested indemnification or advancement of expenses under applicable law. If successful in whole or in part, claimant shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. Neither the failure of the Company (including its Directors, independent legal counsel or shareowners) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the General Corporation Law of Nevada, nor an actual determination by the Company (including its Directors, independent legal counsel or shareowners) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. |
(d) | Any determination regarding whether indemnification of any person is proper in the circumstances because such person has met the applicable standard of conduct set forth in the General Corporation Law of Nevada shall be made in accordance with the applicable provisions of Nevada law. |
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(e) | The Company may, but shall not be required to, indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any claim, action, suit, or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that the person, or a person for whom he or she is the legal representative, is or was an employee or agent of the Company or is or was serving at the request of the Company as an employee or agent of another corporation or of a partnership, joint venture, trust, non-profit entity, or other enterprise, including service with respect to employee benefit plans, against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person. |
(f) | The rights conferred on any person by this Bylaw shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of shareowners or disinterested Directors or otherwise. |
(g) | Any repeal or modification of the foregoing provisions of this Bylaw shall not adversely affect any right or protection hereunder of any person with respect to any act or omission occurring prior to or at the time of such repeal or modification for which indemnification or advancement of expenses is sought. |
(h) | The Company’s obligation, if any, to indemnify or to advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. |
We currently maintain and intend to maintain for the foreseeable future director and officer liability insurance on behalf of our directors and officers.
Item 15. Recent Sales of Unregistered Securities
During the past three years, we sold the following securities which were not registered under the Securities Act, all of which were offered and sold in reliance upon exemptions from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.
On May 28, 2020, we consummated the transactions contemplated by the Share Exchange Agreement among the Company, CXJ Investment Group Company Limited, a British Virgin Islands Corporation (“CXJ”) and the shareholder of CXJ, pursuant to which we acquired all the ordinary shares of CXJ in exchange for the issuance to the shareholder of CXJ of an aggregate of 1,364,800 shares of the Company. The shareholder is the selling security holder in this prospectus and are all affiliates. As a result of the transactions contemplated by the Share Exchange, CXJ became a wholly-owned subsidiary of the Company.
On October 4, 2019, Xinrui Wang (the “Seller”), entered into a Stock Purchase Agreement to pursuant to which the Seller agreed to sell to Wenbin Mao and Baiwan Niu (the “Purchasers”), totaling 1,500,000 preferred stock of the Company (“Shares”) owned by the Seller, for an amount of $1,500. On October 8, 2019, Xinrui Wang, Wenbin Mao and Baiwan Niu effectuated a 1 for 10 conversion to convert all their preferred stock totaling 10,000,000 to 100,000,000 common shares. As a result of the conversion, there was no preferred stock outstanding of the Company as of October 8, 2019.
On June 18, 2019, control of the Company was transferred by the entity controlled by Custodian Ventures, LLC to Xinrui Wang, our director, by selling him 10,000,000 shares of Series A Preferred stock and 17,700,000 shares of common stock for a purchase price of $175,000.
On March 04, 2019, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for the Company, proper notice having been given to the officers and directors of Global Entertainment Corporation. There was no opposition.
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Item 16. Exhibits
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Item 17. Undertakings
The Company hereby undertakes:
(a)(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
i. | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; | |
ii. | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. | |
iii. | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(4) | That, for the purpose of determining liability of the Company under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Company undertakes that in a primary offering of securities of the undersigned Company pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Company will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(i) | Any preliminary prospectus or prospectus of the undersigned Company relating to the offering required to be filed pursuant to Rule 424; | |
(ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Company or used or referred to by the undersigned Company; | |
(iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Company or its securities provided by or on behalf of the undersigned Company; and | |
(iv) | Any other communication that is an offer in the offering made by the undersigned Company to the purchaser. |
(5) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the Company is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Shenzhen Guangdong China, on September 14, 2020.
CXJ Group Co., Ltd. | ||
September 14, 2020 | By: | /s/ Lixin Cai |
Lixin Cai | ||
Chairman and Chief Executive Officer and Director | ||
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
September 14, 2020 | By: | /s/ Lixin Cai |
Lixin Cai | ||
Chairman and Chief Executive Officer and Director | ||
(Principal Executive Officer) | ||
September 14, 2020 | By: | /s/ Cuiyao Luo |
Cuiyao Luo | ||
Director | ||
September 14, 2020 | By: | /s/ Xinrui Wang |
Xinrui Wang | ||
Director |
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Exhibit 2.1
DEFINITIVE SHARE EXCHANGE AGREEMENT
This Definitive Share Exchange Agreement (“Agreement”), dated as of May 28, 2020, is among CXJ Investment Group Company Limited (“CXJ”), a British Virgin Islands company, number 2031896, located at OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. New Charles Technology Group Limited, the sole shareholder of CXJ (the “Shareholder”), and CXJ Group Co., Limited, a Nevada corporation (“ECXJ”), located at 50 West Liberty Street, Suite 880, Reno, NV 89501, and Lixin Cai, the Chief Executive Officer of ECXJ (“Cai”). Collectively, the Shareholder, CXJ, ECXJ and Cai are the “Parties.”
The parties hereby enter into this Agreement, following which,
1. | ECXJ will own 50,000 of the shares of CXJ, representing all of its issued and outstanding shares; | |
2. | the Shareholder, or its assignee, will issued 1,364,800 shares of ECXJ (the “Common Stock”), representing 1.3% of ECXJ’s outstanding shares of Common Stock (the “Share Exchange”), calculated post-issuance based upon the combined valuation of CXJ and ECXJ on April 30, 2020; and | |
3. | CXJ will hold no common shares of ECXJ, as the wholly-owned subsidiary of ECXJ. |
As a result of this Agreement, ECXJ will be announcing this reverse merger. The first consolidated post-acquisition report will be the Annual Report for the year ended May 31, 2020.
RECITALS
WHEREAS, the Shareholder currently holds all of the equity of CXJ and is desirous of relinquishing all of its CXJ shares so that it, or its assignee, is issued 1,364,800 shares of ECXJ Common Stock, of the 101,487,017 shares of ECXJ Common Stock to be outstanding; this would represent 1.3% of ECXJ’s issued and outstanding shares of Common Stock; and that CXJ would be a wholly-owned subsidiary of ECXJ. The number of shares fully-paid and non-assessable shares of ECXJ issued to the Shareholder as of May 28, 2020 are based on a combined valuation of CXJ and ECXJ as of April 30, 2020.
WHEREAS, Cai and the Board of Directors of the CXJ are desirous of CXJ becoming a wholly-owned subsidiary of ECXJ.
WHEREAS, ECXJ and CXJ are desirous of ECXJ acquiring 100% of the outstanding shares of CXJ, and issuing 1,364,800 shares of ECXJ Common in the process, making CXJ a wholly-owned subsidiary of ECXJ with a combined valuation based on such value at April 30, 2020.
WHEREAS, ECXJ and Cai are desirous of ECXJ acquiring 100% of the outstanding shares of CXJ.
WHEREAS, the Board of Directors and Shareholder of ECXJ and CXJ, respectively, have each agreed to Exchange and issue shares, as necessary to cause the forgoing results, upon the terms, and subject to the conditions, set forth in this Agreement.
WHEREAS, it is intended that, for federal income tax purposes, the Share Exchange shall qualify as a reorganization under the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”), and the rules and regulations promulgated thereunder, and be tax-free pursuant to Section 351(a) of the Code.
WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises herein made, and in consideration of the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the Parties agree as follows:
INCORPORATION OF RECITALS BY REFERENCE. The Recitals are hereby incorporated herein by this reference, as if fully restated herein.
ARTICLE I
DEFINITIONS
I.1 Certain Definitions. The following terms shall, when used in this Agreement, have the following meanings:
“Acquisition” means the acquisition of any businesses, assets or property other than in the ordinary course, whether by way of the purchase of assets or stock, by ECXJ acquiring all of the outstanding shares of CXJ pursuant to this Share Exchange Agreement from the Shareholder and the Shareholder relinquishing and exchanging its shares of CXJ to ECXJ.
“Affiliate” means, with respect to any Person: (i) any Person directly or indirectly owning, controlling or holding with power to vote ten percent (10%) or more of the outstanding voting securities of such other Person (other than passive or institutional investors); (ii) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; and (iv) any officer, director or partner of such other Person. “Control” for the foregoing purposes shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract or otherwise.
“Business Day” means any day other than Saturday, Sunday or a day on which banking institutions in New York, New York, are required or authorized to be closed.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Collateral Documents” mean the Exhibits and any other documents, instruments and certificates to be executed and delivered by the Parties hereunder or there under.
“Commission” means the Securities and Exchange Commission or any Regulatory Authority that succeeds to its functions.
“Effective Time” means, the moment in time when the shares of the ECXJ are exchanged for the shares of CXJ.
“Encumbrance” means any material mortgage, pledge, lien, encumbrance, charge, security interest, security agreement, conditional sale or other title retention agreement, limitation, option, assessment, restrictive agreement, restriction, adverse interest, restriction on transfer or exception to or material defect in title or other ownership interest (including restrictive covenants, leases and licenses).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations there under.
“GAAP” means United States generally accepted accounting principles as in effect from time to time.
“Legal Requirement” means any statute, ordinance, law, rule, regulation, code, injunction, judgment, order, decree, ruling, or other requirement enacted, adopted or applied by any Regulatory Authority, including judicial decisions applying common law or interpreting any other Legal Requirement.
“Losses” shall mean all damages, awards, judgments, assessments, fines, sanctions, penalties, charges, costs, expenses, payments, diminutions in value and other losses, however suffered or characterized, all interest thereon, all costs and expenses of investigating any claim, lawsuit or arbitration and any appeal there from, all actual attorneys’, accountants’ investment bankers’ and expert witness’ fees incurred in connection therewith, whether or not such claim, lawsuit or arbitration is ultimately defeated and, subject to Section 9.4, all amounts paid incident to any compromise or settlement of any such claim, lawsuit or arbitration.
“Liability” means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.
“Material Adverse Effect” means a material adverse effect on (i) the assets, Liabilities, properties or business of the Parties, (ii) the validity, binding effect or enforceability of this Agreement or the Collateral Documents or (iii) the ability of any Party to perform its obligations under this Agreement and the Collateral Documents; provided, however, that none of the following shall constitute a Material Adverse Effect on ECXJ: (i) the filing, initiation and subsequent prosecution, by or on behalf of Shareholder of any Party, of litigation that challenges or otherwise seeks damages with respect to the Share Exchange, this Agreement and/or transactions contemplated thereby or hereby, (ii) occurrences due to a disruption of a Party’s business as a result of the announcement of the execution of this Agreement or Changes caused by the taking of action required by this Agreement, (iii) general economic conditions, or (iv) any Changes generally affecting the industries in which a Party operates.
“Exchange Shares” means the issued and outstanding common shares of CXJ (the “CXJ Shares”), Exchanged by the Shareholder to ECXJ, for 1,364,800 fully-paid, nonassessable newly issued, as of May 28, 2020, Common Stock of ECXJ (the “ECXJ Shares”).
“ECXJ Business” means the business conducted by ECXJ.
“ECXJ Common Stock” means the common shares of ECXJ.
“Permit” means any license, permit, consent, approval, registration, authorization, qualification or similar right granted by a Regulatory Authority.
“Permitted Liens” means (i) liens for Taxes not yet due and payable or being contested in good faith by appropriate proceedings; (ii) rights reserved to any Regulatory Authority to regulate the affected property; (iii) statutory liens of banks and rights of set off; (iv) as to leased assets, interests of the lessors and sub-lessors thereof and liens affecting the interests of the lessors and sub-lessors thereof; (v) inchoate material men’s, mechanics’, workmen’s, repairmen’s or other like liens arising in the ordinary course of business; (vi) liens incurred or deposits made in the ordinary course in connection with workers’ compensation and other types of social security; (vii) licenses of trademarks or other intellectual property rights granted by ECXJ, in the ordinary course and not interfering in any material respect with the ordinary course of the business of ECXJ; and (viii) as to real property, any encumbrance, adverse interest, constructive or other trust, claim, attachment, exception to or defect in title or other ownership interest (including, but not limited to, reservations, rights of entry, rights of first refusal, possibilities of reversion, encroachments, easement, rights of way, restrictive covenants, leases, and licenses) of any kind, which otherwise constitutes an interest in or claim against property, whether arising pursuant to any Legal Requirement, under any contract or otherwise, that do not, individually or in the aggregate, materially and adversely affect or impair the value or use thereof as it is currently being used in the ordinary course.
“Person” means any natural person, corporation, partnership, trust, unincorporated organization, association, Limited Liability Company, Regulatory Authority or other entity.
“Regulatory Authority” means: (i) the United States of America; (ii) any state, commonwealth, territory or possession of the United States of America and any political subdivision thereof (including counties, municipalities and the like); (iii) Canada and any other foreign (as to the United States of America) sovereign entity and any political subdivision thereof; or (iv) any agency, authority or instrumentality of any of the foregoing, including any court, tribunal, department, bureau, commission or board.
“Representative” means any director, officer, employee, agent, consultant, advisor or other representative of a Person, including legal counsel, accountants and financial advisors.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations there under.
“Subsidiary” of a specified Person means (a) any Person if securities having ordinary voting power (at the time in question and without regard to the happening of any contingency) to elect a majority of the directors, trustees, managers or other governing body of such Person are held or controlled by the specified Person or a Subsidiary of the specified Person; (b) any Person in which the specified Person and its subsidiaries collectively hold a fifty percent (50%) or greater equity interest; (c) any partnership or similar organization in which the specified Person or subsidiary of the specified Person is a general partner; or (d) any Person the management of which is directly or indirectly controlled by the specified Person and its Subsidiaries through the exercise of voting power, by contract or otherwise.
“Tax” means any U.S. or non U.S. federal, state, provincial, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, intangible property, recording, occupancy, sales, use, transfer, registration, value added minimum, estimated or other tax of any kind whatsoever, including any interest, additions to tax, penalties, fees, deficiencies, assessments, additions or other charges of any nature with respect thereto, whether disputed or not.
“Tax Return” means any return, declaration, report, claim for refund or credit or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Treasury Regulations” means regulations promulgated by the U.S. Treasury Department under the Code.
ARTICLE II
THE SHARE EXCHANGE
II.1 Share Exchange. In accordance with and subject to the provisions of this Agreement and the Nevada Revised Statutes (the “Code”), at the Effective Time, CXJ shall become a wholly-owned subsidiary of ECXJ, and ECXJ shall be its only shareholder and shall continue in its existence with one owner, ECXJ, until a merger, if any. Pursuant to the Share Exchange, (A) the Shareholder is relinquishing all of its 50,000 CXJ common shares, constituting all issued and outstanding shares of CXJ (the “CXJ Shares”), and is acquiring the ECXJ Shares, representing 1.3% of the outstanding Common Stock of ECXJ, based upon a valuation of the combined entity of CXJ and ECXJ on April 30, 2020.
II.2 Stock Transfer Books. Effective immediately after the Share Exchange, the stock transfer books of CXJ shall be closed, and there shall be no further issuance or registration of transfers of shares hereafter on the records of CXJ.
II.3 Restriction on Transfer. The Exchange Shares may not be sold, transferred, or otherwise disposed of without registration under the Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Share Exchange Shares or any available exemption from registration under the Act, the Share Exchange Shares must be held indefinitely. The Parties are aware that the Share Exchange Shares may not be sold pursuant to Rule 144 promulgated under the Act unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 may be the availability of current information to the public about the Surviving Company.
II.4 Restrictive Legend. All certificates representing the Exchange Shares shall contain an appropriate restrictive legend.
II.5 Closing. The closing of the transactions contemplated by this Agreement and the Collateral Documents (the “Closing”) shall take place via conference call at the offices of McMurdo law Group, LLC, 1185 Avenue of the Americas, 3rd Floor, NY 10036, or at such other location as the parties may agree at 10:00 AM, EST Time on May 28, 2020, which, shall be concurrent with the signing hereof (the “Closing Date”).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ECXJ AND CAI
ECXJ and Cai represent and warrant to the Shareholder that the statements contained in this ARTICLE III are correct and complete as of the date of this Agreement and, except as provided in Section 7.1, will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ARTICLE III, except in the case of representations and warranties stated to be made as of the date of this Agreement or as of another date and except for Changes contemplated or permitted by this Agreement).
III.1 Organization and Qualification. ECXJ is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization. ECXJ has all requisite power and authority to own, lease and use its assets as they are currently owned, leased and used and to conduct its business as it is currently conducted. ECXJ is duly qualified or licensed to do business in and is in good standing in each jurisdiction in which the character of the properties owned, leased or used by it or the nature of the activities conducted by it make such qualification necessary, except any such jurisdiction where the failure to be so qualified or licensed would not have a Material Adverse Effect on ECXJ or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of ECXJ to perform its obligations under this Agreement or any of the Collateral Documents.
III.2 Capitalization.
(a) The authorized capital stock and other ownership interests of ECXJ, a Nevada corporation, consists of 490,000,000 common shares of Common Stock, of which 100,122,217 were issued and outstanding as of May 28, 2020. ECXJ has 10,000,000 shares of Preferred Stock authorized, with 0 issued and outstanding. All of the outstanding ECXJ Common Stock and Preferred Stock have been duly authorized and are validly issued, fully paid and non-assessable.
(b) Other than what has been described herein or in ECXJ’s filings with OTC Markets, there are no outstanding or authorized options, warrants, purchase rights, preemptive rights or other contracts or commitments that could require ECXJ to issue, sell, or otherwise cause to become outstanding any of its capital stock or other ownership interests (collectively “Options”).
(c) All of the issued and outstanding shares of ECXJ Common Stock have been duly authorized and are validly issued and outstanding, fully paid and non-assessable and have been issued in compliance with applicable securities laws and other applicable Legal Requirements or transfer restrictions under applicable securities laws.
III.3 Authority and Validity. ECXJ has all requisite corporate power to execute and deliver, to perform its obligations under, and to consummate the transactions contemplated by, this Agreement (subject to the receipt of any necessary consents, approvals, authorizations or other matters referred to herein). The execution and delivery by ECXJ of, the performance by ECXJ of its obligations under, and the consummation by ECXJ of the transactions contemplated by, this Agreement have been duly authorized by all requisite action of ECXJ (subject to the approval of ECXJ Shareholder as contemplated herein). This Agreement has been duly executed and delivered by ECXJ and (assuming due execution and delivery by the Shareholder and approval by ECXJ Shareholder) is the legal, valid and binding obligation of ECXJ, enforceable against it in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles. Upon the execution and delivery of the Collateral Documents by each Person (other than by the Shareholder) that is required by this Agreement to execute, or that does execute, this Agreement or any of the Collateral Documents, and assuming due execution and delivery thereof by the Shareholder, the Collateral Documents will be the legal, valid and binding obligations of ECXJ, enforceable against ECXJ in accordance with their respective terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles.
III.4 No Breach or Violation. Subject to obtaining the consents, approvals, authorizations, and orders of and making the registrations or filings with or giving notices to Regulatory Authorities and Persons identified herein, the execution, delivery and performance by ECXJ of this Agreement and the Collateral Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof, do not and will not conflict with, constitute a violation or breach of, constitute a default or give rise to any right of termination or acceleration of any right or obligation of ECXJ under, or result in the creation or imposition of any Encumbrance upon ECXJ, ECXJ assets, ECXJ Business or ECXJ Common Stock by reason of the terms of (i) the articles of incorporation, by laws or other charter or organizational document of ECXJ or any Subsidiary of ECXJ, (ii) any material contract, agreement, lease, indenture or other instrument to which ECXJ is a party or by or to which ECXJ, or the assets may be bound or subject and a violation of which would result in a Material Adverse Effect on ECXJ, (iii) any order, judgment, injunction, award or decree of any arbitrator or Regulatory Authority or any statute, law, rule or regulation applicable to ECXJ or (iv) any Permit of ECXJ, which in the case of (ii), (iii) or (iv) above would have a Material Adverse Effect on ECXJ or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of ECXJ to perform its obligations under this Agreement or any of the Collateral Documents.
III.5 Consents and Approvals. Except for requirements described in Schedule 3.5, no consent, approval, authorization or order of, registration or filing with, or notice to, any Regulatory Authority or any other Person is necessary to be obtained, made or given by ECXJ in connection with the execution, delivery and performance by ECXJ of this Agreement or any Collateral Document or for the consummation by ECXJ of the transactions contemplated hereby or thereby, except to the extent the failure to obtain any such consent, approval, authorization or order or to make any such registration or filing would not have a Material Adverse Effect on ECXJ or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of ECXJ to perform its obligations under this Agreement or any of the Collateral Documents.
III.6 Intellectual Property. ECXJ warrants that it has good title to or the right to use all material company intellectual property rights and all material inventions, processes, designs, formulae, trade secrets and know how necessary for the operation of ECXJ Business without the payment of any royalty or similar payment.
III.7 Compliance with Legal Requirements. ECXJ has operated its business in compliance with all Legal Requirements applicable to ECXJ except to the extent the failure to operate in compliance with all material Legal Requirements would not have a Material Adverse Effect on ECXJ or Material Adverse Effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents.
III.8 Litigation. There are no outstanding judgments or orders against or otherwise affecting or related to ECXJ, ECXJ Business or ECXJ assets and there is no action, suit, complaint, proceeding or investigation, judicial, administrative or otherwise, that is pending or, to ECXJ’s knowledge, threatened that, if adversely determined, would have a Material Adverse Effect on ECXJ or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents, except as noted in the Company’s financial statements published on OTC Markets or documented by ECXJ to the Shareholder.
III.9 Taxes. ECXJ has duly and timely filed in proper form all Tax Returns for all Taxes required to be filed with the appropriate Regulatory Authority, and has paid all taxes required to be paid in respect thereof except where such failure would not have a Material Adverse Effect on ECXJ, except where, if not filed or paid, the exception(s) have been documented by ECXJ to the Shareholder.
III.10 Books and Records. The books and records of ECXJ accurately and fairly represent ECXJ Business and its results of operations in all material respects.
III.11 Brokers or Finders. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by ECXJ and/or its Affiliates/Representatives in connection with the transactions contemplated by this Agreement, neither ECXJ, nor any of its Affiliates/Representatives have incurred any obligation to pay any brokerage or finder’s fee or other commission in connection with the transaction contemplated by this Agreement.
III.12 Disclosure. No representation or warranty of ECXJ in this Agreement or in the Collateral Documents and no statement in any certificate furnished or to be furnished by ECXJ pursuant to this Agreement contained, contains or will contain on the date such agreement or certificate was or is delivered, or on the Closing Date, any untrue statement of a material fact, or omitted, omits or will omit on such date to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
III.13 No Undisclosed Liabilities. ECXJ is not subject to any material liability (including unasserted claims), absolute or contingent, which is not shown or which is in excess of amounts shown or reserved for in the balance sheet as of April 30, 2020 other than liabilities of the same nature as those set forth in ECXJ’ financial statements and reasonably incurred in the ordinary course of its business after April 30, 2020.
III.14 Disclosed Liabilities. All liabilities disclosed by ECXJ shall be paid from ECXJ’s accounts receivable when and as is due, and ECXJ shall have no Liabilities upon the reverse merger. Any Liabilities, disclosed or undisclosed, shall be the sole obligation of Cai.
III.15 Absence of Certain Changes. Since April 30, 2020, ECXJ has not: (a) suffered any material adverse change in its financial condition, assets, liabilities or business; (b) contracted for or paid any capital expenditures; (c) incurred any indebtedness or borrowed money, issued or sold any debt or equity securities, declared any dividends or discharged or incurred any liabilities or obligations except in the ordinary course of business as heretofore conducted; (d) mortgaged, pledged or subjected to any lien, lease, security interest or other charge or encumbrance any of its properties or assets; (e) paid any material amount on any indebtedness prior to the due date, forgiven or cancelled any material amount on any indebtedness prior to the due date, forgiven or cancelled any material debts or claims or released or waived any material rights or claims; (f) suffered any damage or destruction to or loss of any assets (whether or not covered by insurance); (g) acquired or disposed of any assets or incurred any liabilities or obligations; (h) made any payments to its affiliates or associates or loaned any money to any person or entity; (i) formed or acquired or disposed of any interest in any corporation, partnership, limited liability company, joint venture or other entity; (j) entered into any employment, compensation, consulting or collective bargaining agreement or any other agreement of any kind or nature with any person. Or group, or modified or amended in any respect the terms of any such existing agreement; (k) entered into any other commitment or transaction or experience any other event that relates to or affect in any way this Agreement or to the transactions contemplated hereby, or that has affected, or may adversely affect ECXJ Business, operations, assets, liabilities or financial condition; or (1) amended its Articles of Incorporation or By-laws, except as otherwise contemplated herein.
III.16 Contracts. A true and complete list of all contracts, agreements, leases, commitments or other understandings or arrangements, written or oral, express or implied, to which ECXJ is a party or by which it or any of its property is bound or affected requiring payments to or from, or incurring of liabilities by, ECXJ in excess of $10,000 (the “Contracts”). The Company has complied with and performed, in all material respects, all of its obligations required to be performed under and is not in default with respect to any of the Contracts, as of the date hereof, nor has any event occurred which has not been cured which, with or without the giving of notice, lapse of time, or both, would constitute a default in any respect there under. To the best knowledge of ECXJ, no other party has failed to comply with or perform, in all material respects, any of its obligations required to be performed under or is in material default with respect to any such Contracts, as of the date hereof, nor has any event occurred which, with or without the giving of notice, lapse of time or both, would constitute a material default in any respect by such party there under. ECXJ knows of and has no reason to believe that there are any facts or circumstances which would make a material default by any party to any contract or obligation likely to occur subsequent to the date hereof.
III.17 Permits and Licenses. ECXJ has all certificates of occupancy, rights, permits, certificates, licenses, franchises, approvals and other authorizations as are reasonably necessary to conduct its business and to own, lease, use, operate and occupy its assets, at the places and in the manner now conducted and operated, except those the absence of which would not materially adversely affect its business. ECXJ has not received any written or oral notice or claim pertaining to the failure to obtain any material permit, certificate, license, approval or other authorization required by any federal, state or local agency or other regulatory body, the failure of which to obtain would materially and adversely affect its business.
III.18 Assets Necessary to Business. ECXJ owns or leases all properties and assets, real, personal, and mixed, tangible and intangible, and is a party to all licenses, permits and other agreements necessary to permit it to carry on its business as presently conducted.
III.19 Labor Agreements and Labor Relations. ECXJ has no collective bargaining or union contracts or agreements. ECXJ is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practices; there are no charges of discrimination or unfair labor practice charges” or complaints against ECXJ pending or threatened before any governmental or regulatory agency or authority; and, there is no labor strike, dispute, slowdown or stoppage actually pending or threatened against or affecting ECXJ.
III.20 Employment Arrangements. ECXJ has no employment or consulting agreements or arrangements, written or oral, which are not terminable at the will of ECXJ, or any pension, profit-sharing, option, other incentive plan, or any other type of employment benefit plan as defined in ERISA or otherwise, or any obligation to or customary arrangement with employees for bonuses, incentive compensation, vacations, severance pay, insurance or other benefits. No employee of ECXJ is in violation of any employment agreement or restrictive covenant.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represent and warrant to ECXJ that the statements contained in this ARTICLE IV are correct and complete as of the date of this Agreement and, except as provided in Section 8.1, will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ARTICLE IV, except in the case of representations and warranties stated to be made as of the date of this Agreement or as of another date and except for Changes contemplated or permitted by the Agreement).
IV.1 Organization and Qualification. CXJ has all requisite power and authority to own, lease and use CXJ’ assets as they are currently owned, leased and used and to conduct its business as it is currently conducted. CXJ is duly qualified or licensed to do business in and are each in good standing in each jurisdiction in which the character of the properties owned, leased or used by it or the nature of the activities conducted by it makes such qualification necessary, except any such jurisdiction where the failure to be so qualified or licensed and in good standing would not have a Material Adverse Effect on CXJ or a Material Adverse Effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of CXJ or the Shareholder to perform their obligations under this Agreement or any of the Collateral Documents.
IV.2 Capitalization.
(a) The authorized capital stock of CXJ is 50,000 shares of common stock. All outstanding shares of CXJ Common Stock are owned by the Shareholder, consisting of 50,000 shares. CXJ has no shares of preferred stock authorized. The shares of CXJ Common Stock are duly issued and outstanding, and have been duly authorized, validly issued and outstanding and fully paid and non-assessable, which shares are Exchanged hereby, as above provided.
(b) There no outstanding or authorized options, warrants, purchase rights, preemptive rights or other contracts or commitments that could require CXJ or any of its Subsidiaries to issue, sell, or otherwise cause to become outstanding any of its capital stock or other ownership interests.
(c) All of the issued and outstanding shares of the CXJ capital stock have been duly authorized and are validly issued and outstanding, fully paid and non-assessable (with respect to Subsidiaries that are corporations) and have been issued in compliance with applicable securities laws and other applicable Legal Requirements.
IV.3 Authority and Validity. The Shareholder has all requisite power to execute and deliver to perform its obligations under, and to consummate the transactions contemplated by, this Agreement and the Collateral Documents. The execution and delivery by the Shareholder and the performance by the Shareholder of its obligations under, and the consummation by the Shareholder of the transactions contemplated by, this Agreement and the Collateral Documents have been duly authorized by all requisite action of the Shareholder. This Agreement has been duly executed and delivered (assuming due execution and delivery by the Shareholder) is the legal, valid and binding obligation of the Shareholder, enforceable in accordance with its terms except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles. Upon the execution and delivery by the Shareholder of the Collateral Documents to which it is a party, and assuming due execution and delivery thereof by the other parties thereto, the Collateral Documents will be the legal, valid and binding obligations, enforceable in accordance with their respective terms except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles.
IV.4 No Breach or Violation. Subject to obtaining the consents, approvals, authorizations, and orders of and making the registrations or filings with or giving notices to Regulatory Authorities and Persons identified herein, the execution, delivery and performance by the Shareholder of this Agreement and the Collateral Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof, do not and will not conflict with, constitute a violation or breach of, constitute a default or give rise to any right of termination or acceleration of any right or obligation of the Shareholder under, or result in the creation or imposition of any Encumbrance upon the property of the Shareholder by reason of the terms of (i) the articles of incorporation, by laws or other charter or organizational document of CXJ, (ii) any contract, agreement, lease, indenture or other instrument to which any the Shareholder or CXJ are a party or by or to which the Shareholder or CXJ or their property may be bound or subject and a violation of which would result in a Material Adverse Effect on the Shareholder or CXJ taken as a whole, (iii) any order, judgment, injunction, award or decree of any arbitrator or Regulatory Authority or any statute, law, rule or regulation applicable to the Shareholder or CXJ or (iv) any Permit of CXJ or subsidiary, which in the case of (ii), (iii) or (iv) above would have a Material Adverse Effect on CXJ or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of the Shareholder or CXJ to perform its obligations hereunder or there under.
IV.5 Consents and Approvals. Except for requirements under applicable United States or state securities laws, no consent, approval, authorization or order of, registration or filing with, or notice to, any Regulatory Authority or any other Person is necessary to be obtained, made or given by the Shareholder in connection with the execution, delivery and performance by them of this Agreement or any Collateral Documents or for the consummation by them of the transactions contemplated hereby or thereby, except to the extent the failure to obtain such consent, approval, authorization or order or to make such registration or filings or to give such notice would not have a Material Adverse Effect on the Shareholder, in the aggregate, or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of the Shareholder to perform its obligations under this Agreement or any of the Collateral Documents.
IV.6 Compliance with Legal Requirements. CXJ’s business has operated in compliance with all material Legal Requirements including, without limitation, the Securities Act applicable to CXJ, except to the extent the failure to operate in compliance with all material Legal Requirements, would not have a Material Adverse Effect on CXJ or a Material Adverse Effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents.
IV.7 Litigation. There are no outstanding judgments or orders against or otherwise affecting or related to CXJ, or the business or assets; and there is no action, suit, complaint, proceeding or investigation, judicial, administrative or otherwise, that is pending or, to the best knowledge of the Shareholder, threatened that, that has not been disclosed and if adversely determined, would have a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents.
IV.8 Ordinary Course. Since the date of its most recent balance sheet, there has not been any occurrence, event, incident, action, failure to act or transaction involving CXJ, which is reasonably likely, individually or in the aggregate, to have a Material Adverse Effect on CXJ.
IV.9 Assets and Liabilities. As of the date of this Agreement, neither CXJ nor any of its Subsidiaries has any Assets or Liability, except for the (i) Liabilities disclosed in the balance sheet disclosed to ECXJ through the date hereof and (ii) as described in Exhibit A, attached hereto.
IV.10 Taxes. CXJ, and any Subsidiaries, has duly and timely filed in proper form all Tax Returns for all Taxes required to be filed with the appropriate Governmental Authority, except where such failure to file would not have a Material Adverse Effect on CXJ.
IV.11 Books and Records. The books and records of CXJ and any Subsidiaries accurately and fairly represent the CXJ Business and its results of operations in all material respects. All accounts receivable and inventory of the CXJ Business are reflected properly on such books and records in all material respects.
IV.12 Financial and Other Information. To the knowledge of the Shareholder, CXJ’s financials do not contain (directly or by incorporation by reference) any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (or incorporated therein by reference), in light of the circumstances under which they were or will be made, not misleading.
IV.13 Brokers or Finders. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by CXJ and/or its Affiliates/Representatives in connection with the transactions contemplated by this Agreement, neither CXJ, nor any of its Affiliates/Representatives have incurred any obligation to pay any brokerage or finder’s fee or other commission in connection with the transaction contemplated by this Agreement.
IV.14 Disclosure. No representation or warranty of the Shareholder in this Agreement or in the Collateral Documents and no statement in any certificate furnished or to be furnished by the Shareholder pursuant to this Agreement contained, contains or will contain on the date such agreement or certificate was or is delivered, or on the Closing Date, any untrue statement of a material fact, or omitted, omits or will omit on such date to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
IV.15 Filings. Neither CXJ nor the Shareholder are subject to filings required by the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended.
IV.16 Conduct of Business. Prior to the Closing Date, CXJ shall conduct its business in the normal course, and shall not sell, pledge, or assign any assets, without the prior written approval of ECXJ, except in the regular course of business. Except as otherwise provided herein, CXJ shall not amend its Articles of Incorporation or By-Laws, declare dividends, redeem or sell stock or other securities, acquire or dispose of fixed assets, change
IV.17 employment terms, enter into any material or long-term contract, guarantee obligations of any third party, settle or discharge any material balance sheet receivable for less than its stated amount, pay more on any liability than its stated amount or enter into any other transaction other than in the regular course of business.
ARTICLE V
COVENANTS OF ECXJ
Between the date of this Agreement and the Closing Date:
V.1 Additional Information. ECXJ shall provide to the Shareholder and its Representatives such financial, operating and other documents, data and information relating to ECXJ, ECXJ Business and ECXJ’ assets and liabilities, as the Shareholder or its Representatives may reasonably request. In addition, ECXJ shall take all action necessary to enable the Shareholder and its Representatives to review, inspect and review ECXJ Assets, ECXJ Business and Liabilities of ECXJ and discuss them with ECXJ’s officers, employees, independent accountants, customers, licensees, and counsel. Notwithstanding any investigation that the Shareholder may conduct of ECXJ, ECXJ Business, ECXJ Assets and the Liabilities of ECXJ, the Shareholder may fully rely on ECXJ’s warranties, covenants and indemnities set forth in this Agreement.
V.2 Consents and Approvals. As soon as practicable after execution of this Agreement, ECXJ shall use commercially reasonable efforts to obtain any necessary consent, approval, authorization or order of, make any registration or filing with or give any notice to, any Regulatory Authority or Person as is required to be obtained, made or given by ECXJ to consummate the transactions contemplated by this Agreement and the Collateral Documents.
V.3 Non-circumvention. It is understood that in connection with the transactions contemplated hereby, ECXJ will not, and it will cause its directors, officers, employees, agents and representatives not to attempt, directly or indirectly, (i) to contact any party introduced to it by the Shareholder, or (ii) deal with, or otherwise become involved in any transaction with any party which has been introduced to it by the Shareholder, without the express written permission of the introducing party. Any violation of the covenant shall be deemed an attempt to circumvent the Shareholder, and the party so violating this covenant shall be liable for damages in favor of the circumvented party.
V.4 No Solicitations. From and after the date of this Agreement until the Effective Time or termination of this Agreement pursuant to ARTICLE X, ECXJ will not nor will it authorize or permit any of its officers, directors, affiliates or employees or any investment banker, attorney or other advisor or representative retained by it, directly or indirectly, (i) solicit or initiate the making, submission or announcement of any other acquisition proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any person any nonpublic information with respect to any other acquisition proposal, (iii) engage in discussions with any Person with respect to any other acquisition proposal, except as to the existence of these provisions, (iv) approve, endorse or recommend any other acquisition proposal or (v) enter into any letter of intent or similar document or any contract agreement or commitment contemplating or otherwise relating to any other acquisition proposal.
V.5 Notification of Adverse Change. ECXJ shall promptly notify the Shareholder of any material adverse Change in the condition (financial or otherwise) of ECXJ.
V.6 Notification of Certain Matters. ECXJ shall promptly notify the Shareholder of any fact, event, circumstance or action known to it that is reasonably likely to cause ECXJ to be unable to perform any of its covenants contained herein or any condition precedent in ARTICLE VII not to be satisfied, or that, if known on the date of this Agreement, would have been required to be disclosed to the Shareholder pursuant to this Agreement or the existence or occurrence of which would cause any of ECXJ’s representations or warranties under this Agreement not to be correct and/or complete. ECXJ shall give prompt written notice to the Shareholder of any adverse development causing a breach of any of the representations and warranties in ARTICLE III as of the date made.
V.7 The Company Disclosure Schedule. For purposes of determining the satisfaction of any of the conditions to the obligations of the Shareholder in ARTICLE VII, ECXJ disclosures shall be deemed to include only (a) the information contained therein on the date of this Agreement and (b) information provided by written supplements delivered prior to Closing by ECXJ that (i) are accepted in writing by a majority of the Shareholder, or (ii) reflect actions taken or events occurring after the date hereof prior to Closing.
V.8 State Statutes. ECXJ and its Board of Directors shall, if any state takeover statute or similar law is or becomes applicable to the Share Exchange, this Agreement or any of the transactions contemplated by this Agreement, use all reasonable efforts to ensure that the Share Exchange and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on the Share Exchange, this Agreement and the transactions contemplated hereby.
V.9 Conduct of Business. Prior to the Closing Date, ECXJ shall conduct its business in the normal course, and shall not sell, pledge, or assign any assets, without the prior written approval of the Shareholder, except in the regular course of business. Except as otherwise provided herein, ECXJ shall not amend its Articles of Incorporation or Bylaws, declare dividends, redeem or sell stock or other securities, acquire or dispose of fixed assets, change employment terms, enter into any material or long-term contract, guarantee obligations of any third party, settle or discharge any material balance sheet receivable for less than its stated amount, pay more on any liability than its stated amount, or enter into any other transaction other than in the regular course of business.
V.10 Filings. Until closing, ECXJ will timely file all reports and other documents relating to the operation of ECXJ required to be filed, which reports and other documents do not and will not contain any misstatement of a material fact, and do not and will not omit any material fact necessary to make the statements therein not misleading.
ARTICLE VI
COVENANTS OF THE SHAREHOLDER
Between the date of this Agreement and the Closing Date,
VI.1 Additional Information. The Shareholder shall provide to ECXJ and its Representatives such financial, operating and other documents, data and information relating to CXJ, the CXJ Business and the CXJ Assets and the Liabilities of the CXJ and its Subsidiaries, as ECXJ or its Representatives may reasonably request. In addition, the Shareholder shall take all action necessary to enable ECXJ and its Representatives to review and inspect the CXJ Assets, the CXJ Business and the Liabilities of CXJ and discuss them with ECXJ’s officers, employees, independent accountants and counsel. Notwithstanding any investigation that ECXJ may conduct of CXJ, the CXJ Business, the CXJ Assets and the Liabilities of the CXJ, ECXJ may fully rely on the Shareholder’s warranties, covenants and indemnities set forth in this Agreement.
VI.2 No Solicitations. From and after the date of this Agreement until the Effective Time or termination of this Agreement pursuant to ARTICLE X, the Shareholder will not nor will it authorize or permit any of CXJ’s officers, directors, affiliates or employees or any investment banker, attorney or other advisor or representative retained by it, directly or indirectly, (i) solicit or initiate the making, submission or announcement of any other acquisition proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to any other acquisition proposal, (iii) engage in discussions with any Person with respect to any other acquisition proposal, except as to the existence of these provisions, (iv) approve, endorse or recommend any other acquisition proposal or (v) enter into any letter of intent or similar document or any contract agreement or commitment contemplating or otherwise relating to any other acquisition proposal.
VI.3 Notification of Adverse Change. The Shareholder shall promptly notify ECXJ of any material adverse Change in the condition (financial or otherwise) of CXJ.
VI.4 Consents and Approvals. As soon as practicable after execution of this Agreement, the Shareholder shall use his commercially reasonable efforts to obtain any necessary consent, approval, authorization or order of, make any registration or filing with or give notice to, any Regulatory Authority or Person as is required to be obtained, made or given by the Shareholder to consummate the transactions contemplated by this Agreement and the Collateral Documents.
VI.5 Notification of Certain Matters. The Shareholder shall promptly notify ECXJ of any fact, event, circumstance or action known to him that is reasonably likely to cause CXJ to be unable to perform any of its covenants contained herein or any condition precedent if not to be satisfied, or that, if known on the date of this Agreement, would have been required to be disclosed to ECXJ pursuant to this Agreement or the existence or occurrence of which would cause the Shareholder’ representations or warranties under this Agreement not to be correct and/or complete. The Shareholder shall give prompt written notice to ECXJ of any adverse development causing a breach of any of the representations and warranties in ARTICLE IV.
VI.6 The CXJ Executive Summary. The Shareholder shall, from time to time prior to Closing, supplement the CXJ business plan with additional information that, if existing or known to it on the date of this Agreement, would have been required to be included therein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CXJ AND THE SHAREHOLDER
All obligations of CXJ and the Shareholder under this Agreement shall be subject to the fulfillment at or prior to Closing of each of the following conditions, it being understood that the Parties may, in their sole discretion, to the extent permitted by applicable Legal Requirements, waive any or all of such conditions in whole or in part.
VII.1 Accuracy of Representations. All representations and warranties of ECXJ contained in this Agreement, the Collateral Documents and any certificate delivered by any of ECXJ at or prior to Closing shall be, if specifically qualified by materiality, true in all respects and, if not so qualified, shall be true in all material respects, in each case on and as of the Closing Date with the same effect as if made on and as of the Closing Date, except for representations and warranties expressly stated to be made as of the date of this Agreement or as of another date other than the Closing Date and except for Changes contemplated or permitted by this Agreement.
VII.2 Covenants. ECXJ shall, in all material respects, have performed and complied with each of the covenants, obligations and agreements contained in this Agreement and the Collateral Documents that are to be performed or complied with by them at or prior to Closing.
VII.3 Consents and Approvals. All consents, approvals, permits, authorizations and orders required to be obtained from, and all registrations, filings and notices required to be made with or given to, any Regulatory Authority or Person as provided herein.
VII.4 Delivery of Documents. ECXJ shall have delivered, or caused to be delivered, to the Shareholder the following documents:
(i) Copies of ECXJ articles of incorporation and bylaws and resolutions of the board of directors of ECXJ authorizing the execution of this Agreement and the Collateral Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby.
(ii) Such other documents and instruments as the Shareholder may reasonably request: (A) to evidence the accuracy of ECXJ’s representations and warranties under this Agreement, the Collateral Documents and any documents, instruments or certificates required to be delivered hereunder; (B) to evidence the performance by ECXJ of, or the compliance by ECXJ with, any covenant, obligation, condition and agreement to be performed or complied with by ECXJ under this Agreement and the Collateral Documents; or (C) to otherwise facilitate the consummation or performance of any of the transactions contemplated by this Agreement and the Collateral Documents.
VII.5 No Material Adverse Change. Since the date hereof, there shall have been no material adverse Change in ECXJ’s assets, ECXJ Business or the financial condition or operations of ECXJ, taken as a whole.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CAI AND ECXJ
All obligations of Cai and ECXJ under this Agreement shall be subject to the fulfillment at or prior to Closing of the following conditions, it being understood that ECXJ may, in its sole discretion, to the extent permitted by applicable Legal Requirements, waive any or all of such conditions in whole or in part.
VIII.1 Accuracy of Representations. All representations and warranties of CXJ and the Shareholder contained in this Agreement and the Collateral Documents and any other document, instrument or certificate delivered by CXJ or the Shareholder at or prior to the Closing shall be, if specifically qualified by materiality, true and correct in all respects and, if not so qualified, shall be true and correct in all material respects, in each case on and as of the Closing Date with the same effect as if made on and as of the Closing Date, except for representations and warranties expressly stated to be made as of the date of this Agreement or as of another date other than the Closing Date and except for Changes contemplated or permitted by this Agreement.
VIII.2 Covenants. CXJ and the Shareholder shall, in all material respects, have performed and complied with each obligation, agreement, covenant and condition contained in this Agreement and the Collateral Documents and required by this Agreement and the Collateral Documents to be performed or complied with by the Shareholder at or prior to Closing.
VIII.3 Consents and Approvals. All consents, approvals, authorizations and orders required to be obtained from, and all registrations, filings and notices required to be made with or given to, any Regulatory Authority or Person as provided herein.
VIII.4 Delivery of Documents. CXJ and the Shareholder shall have executed and delivered, or caused to be executed and delivered, to ECXJ the following documents:
Documents and instruments as ECXJ may reasonably request: (A) to evidence the accuracy of the representations and warranties of the Shareholder and CXJ under this Agreement and/or the Collateral Documents and any documents, instruments or certificates required to be delivered hereunder; (B) to evidence the performance by the Shareholder of, or the compliance by the Shareholder with, any covenant, obligation, condition and agreement to be performed or complied with by the Shareholder under this Agreement and the Collateral Documents; or (C) to otherwise facilitate the consummation or performance of any of the transactions contemplated by this Agreement and the Collateral Documents.
VIII.5 No Material Adverse Change. There shall have been no material adverse change in the business, financial condition or operations of CXJ and its Subsidiaries taken as a whole.
VIII.6 No Litigation. No action, suit or proceeding shall be pending or threatened by or before any Regulatory Authority and no Legal Requirement shall have been enacted, promulgated or issued or deemed applicable to any of the transactions contemplated by this Agreement and the Collateral Documents that would: (i) prevent consummation of any of the transactions contemplated by this Agreement and the Collateral Documents; (ii) cause any of the transactions contemplated by this Agreement and the Collateral Documents to be rescinded following consummation; or (iii) have a Material Adverse Effect on CXJ.
ARTICLE IX
INDEMNIFICATION
IX.1 Indemnification by ECXJ. ECXJ shall indemnify, defend and hold harmless (i) the Shareholder, (ii) any the Shareholder’s assigns and successors in interest to ECXJ Shares, and (iii) each of the Shareholder, members, partners, directors, officers, managers, employees, agents, attorneys and representatives, from and against any and all Losses which may be incurred or suffered by any such party and which may arise out of or result from any breach of any material representation, warranty, covenant or agreement of ECXJ contained in this Agreement. All claims to be assorted hereunder must be made for the first anniversary of the Closing.
IX.2 Indemnification by the Shareholder. CXJ and the Shareholder shall indemnify, defend and hold harmless ECXJ from and against any and all Losses which may be incurred or suffered by any such party hereto and which may arise out of or result from any breach of any material representation, warranty, covenant or agreement of the Shareholder contained in this Agreement. All claims to be assorted hereunder must be made for the first anniversary of the Closing.
IX.3 Notice to Indemnifying Party. If any party (the “Indemnified Party”) receives notice of any claim or other commencement of any action or proceeding with respect to which any other party (or parties) (the “Indemnifying Party”) is obligated to provide indemnification pursuant to Sections 9.1 or 9.2, the Indemnified Party shall promptly give the Indemnifying Party written notice thereof, which notice shall specify in reasonable detail, if known, the amount or an estimate of the amount of the liability arising here from and the basis of the claim. Such notice shall be a condition precedent to any liability of the Indemnifying Party for indemnification hereunder, but the failure of the Indemnified Party to give prompt notice of a claim shall not adversely affect the Indemnified Party’s right to indemnification hereunder unless the defense of that claim is materially prejudiced by such failure. The Indemnified Party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld or delayed) unless suit shall have been instituted against it and the Indemnifying Party shall not have taken control of such suit after notification thereof as provided in Section 9.4.
IX.4 Defense by Indemnifying Party. In connection with any claim giving rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a Person who is not a party to this Agreement, the Indemnifying Party at its sole cost and expense may, upon written notice to the Indemnified Party, assume the defense of any such claim or legal proceeding (i) if it acknowledges to the Indemnified Party in writing its obligations to indemnify the Indemnified Party with respect to all elements of such claim (subject to any limitations on such liability contained in this Agreement) and (ii) if it provides assurances, reasonably satisfactory to the Indemnified Party, that it will be financially able to satisfy such claims in full if the same are decided adversely. If the Indemnifying Party assumes the defense of any such claim or legal proceeding, it may use counsel of its choice to prosecute such defense, subject to the approval of such counsel by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. The Indemnified Party shall be entitled to participate in (but not control) the defense of any such action, with its counsel and at its own expense; provided, however, that if the Indemnified Party, in its sole discretion, determines that there exists a conflict of interest between the Indemnifying Party (or any constituent party thereof) and the Indemnified Party, the Indemnified Party (or any constituent party thereof) shall have the right to engage separate counsel, the reasonable costs and expenses of which shall be paid by the Indemnified Party. If the Indemnifying Party assumes the defense of any such claim or legal proceeding, the Indemnifying Party shall take all steps necessary to pursue the resolution thereof in a prompt and diligent manner. The Indemnifying Party shall be entitled to consent to a settlement of, or the stipulation of any judgment arising from, any such claim or legal proceeding, with the consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed; provided, however, that no such consent shall be required from the Indemnified Party if (i) the Indemnifying Party pays or causes to be paid all Losses arising out of such settlement or judgment concurrently with the effectiveness thereof (as well as all other Losses theretofore incurred by the Indemnified Party which then remain unpaid or unreimbursed), (ii) in the case of a settlement, the settlement is conditioned upon a complete release by the claimant of the Indemnified Party and (iii) such settlement or judgment does not require the encumbrance of any asset of the Indemnified Party or impose any restriction upon its conduct of business.
ARTICLE X
TERMINATION
X.1 Termination. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, at any time prior to it being fully executed, or thereafter:
(a) by mutual written agreement of the Shareholder and ECXJ hereto duly authorized by action taken by or on behalf of the respective Boards of Directors; or
(b) by either ECXJ or the Shareholder upon notification to the non-terminating party by the terminating party:
(i) if the terminating party is not in material breach of its obligations under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement on the part of the non-terminating party set forth in this Agreement such that the conditions will not be satisfied; provided, however, that if such breach is curable by the non-terminating party and such cure is reasonably likely to be completed prior to the Closing Date ; or
(ii) if any court of competent jurisdiction or other competent Governmental or Regulatory Authority shall have issued an order making illegal or otherwise permanently restricting, preventing or otherwise prohibiting the Share Exchange and such order shall have become final.
(c) Effect of Termination. If this Agreement is validly terminated by either ECXJ or the Shareholder pursuant to Section 10.1, this Agreement will forthwith become null and void and there will be no liability or obligation on the part of the parties hereto, except that nothing contained herein shall relieve any party hereto from liability for willful breach of its representations, warranties, covenants or agreements contained in this Agreement.
ARTICLE XI
MISCELLANEOUS
XI.1 Parties Obligated and Benefited. This Agreement shall be binding upon the Parties and their respective successors by operation of law and shall inure solely to the benefit of the Parties and their respective successors by operation of law, and no other Person shall be entitled to any of the benefits conferred by this Agreement. Without the prior written consent of the other Party, no Party may assign this Agreement or the Collateral Documents or any of its rights or interests or delegate any of its duties under this Agreement or the Collateral Documents.
XI.2 Publicity. All press release shall be joint press releases between ECXJ and CXJ and each shall consult with each other prior to issuing any press releases or otherwise making public announcements with respect to the Share Exchange and the other transactions contemplated by this Agreement and prior to making any filings with any third party and/or any Regulatory Authorities (including any national securities inter dealer quotation service) with respect thereto, except as may be required by law or by obligations pursuant to any listing agreement with or rules of any national securities inter dealer quotation service.
XI.3 Notices. Any notices and other communications required or permitted hereunder shall be in writing and shall be effective upon delivery by hand or upon receipt if sent by certified or registered mail (postage prepaid and return receipt requested) or by a nationally recognized overnight courier service (appropriately marked for overnight delivery) or upon transmission if sent by telex or facsimile (with request for immediate confirmation of receipt in a manner customary for communications of such respective type and with physical delivery of the communication being made by one or the other means specified in this Section as promptly as practicable thereafter). Notices shall be addressed as follows:
If to the Shareholder or CXJ: |
CXJ Investment Group Company Limited OMC Chambers, Wickhams Cay 1 Road Town Tortola, British Virgin Islands | |
If to ECXJ or Cai: |
Cai, Lixin No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China |
XI.4 Addresses. Any Party may change the address to which notices are required to be sent by giving notice of such change in the manner provided in this Section.
XI.5 Attorneys’ Fees. In the event of any action or suit based upon or arising out of any alleged breach by any Party of any representation, warranty, covenant or agreement contained in this Agreement or the Collateral Documents, the prevailing Party shall be entitled to recover reasonable attorneys’ fees and other costs of such action or suit from the other Party.
XI.6 Headings. The Article and Section headings of this Agreement are for convenience only and shall not constitute a part of this Agreement or in any way affect the meaning or interpretation thereof.
XI.7 Choice of Law. This Agreement and the rights of the Parties under it shall be governed by and construed in all respects in accordance with the laws of the State of Nevada, without giving effect to any choice of law provision or rule.
XI.8 Rights Cumulative. All rights and remedies of each of the Parties under this Agreement shall be cumulative, and the exercise of one or more rights or remedies shall not preclude the exercise of any other right or remedy available under this Agreement or applicable law.
XI.9 Further Actions. The Parties shall execute and deliver to each other, from time to time at or after Closing, for no additional consideration and at no additional cost to the requesting party, such further assignments, certificates, instruments, records, or other documents, assurances or things as may be reasonably necessary to give full effect to this Agreement and to allow each party fully to enjoy and exercise the rights accorded and acquired by it under this Agreement.
XI.10 Time of the Essence. Time is of the essence under this Agreement. If the last day permitted for the giving of any notice or the performance of any act required or permitted under this Agreement falls on a day which is not a Business Day, the time for the giving of such notice or the performance of such act shall be extended to the next succeeding Business Day.
XI.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
XI.12 Entire Agreement. This Agreement (including the Exhibits, disclosures made as to ECXJ, the CXJ financial statments and any other documents, instruments and certificates referred to herein, which are incorporated in and constitute a part of this Agreement) contains the entire agreement of the Parties.
XI.13 Survival of Representations and Covenants. Notwithstanding any right of the Shareholder to fully investigate the affairs of ECXJ and notwithstanding any knowledge of facts determined or determinable by the Shareholder pursuant to such investigation or right of investigation, the Shareholder shall have the right to rely fully upon the representations, warranties, covenants and agreements of ECXJ contained in this Agreement. Each representation, warranty, covenant and agreement of ECXJ contained herein shall survive the execution and delivery of this Agreement and the Closing and shall thereafter terminate and expire on the first anniversary of the Closing Date unless, prior to such date, the Shareholder has delivered to ECXJ Shareholder a written notice of a claim with respect to such representation, warranty, covenant or agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the day and year first above written.
Dated: May 28, 2020 |
CXJ Investment Group Company Limited
By: | ||
Name: | Lixin Cai | |
Title: |
New Charles Technology Group Limited
By: | ||
Name: | Lixin Cai | |
Title: |
CXJ Group Co. Limited
By: | ||
Name: | Lixin Cai | |
Title: | Chief Executive Officer |
Lixin Cai |
Exhibit 3.3
Exhibit 3.4
Exhibit 3.5
Exhibit 3.6
Exhibit 5.1
MCMURDO LAW GROUP, LLC Matthew C. McMurdo | 917 318 2865 | matt@nannaronelaw.com |
1185 Avenue of the Americas 3rd Floor New York, NY 10036
|
September 4, 2020
CXJ Group Co., Ltd.
Room 1903-1, No.1 building, Xizi International center, Jianggan District, Hangzhou City, Zhejiang Province, China
Hangzhou City, Zhejiang Province, China
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
I am counsel for CXJ Group Co., Limited, a Nevada corporation (the “Company”), in connection with the proposed public offering of up to an aggregate of 14,100,000 shares of the common stock, $0.001 par value per share (“Common Stock”), of the Company by New Charles Technology Group Limited, Wenbin Mao, Baiwan Niu, and Xinrui Wang (the “Selling Shareholders”) under the Securities Act of 1933, as amended, through a Registration Statement on Form S-1 (the “Registration Statement”) as to which this opinion is a part, to be filed with the Securities and Exchange Commission on or about September 4, 2020.
In connection with rendering my opinion as set forth below, I have reviewed and examined originals or copies identified to my satisfaction of the following:
(1) Articles of Incorporation, of the Company as filed with the Secretary of State of Nevada;
(2) By-laws of the Company;
(3) Corporate minutes containing the written resolutions of the Board of Directors of the Company;
(4) The Registration Statement and the prospectus contained within the Registration Statement; and
(5) The other exhibits of the Registration Statement.
I have examined such other documents and records, instruments and certificates of public officials, officers and representatives of the Company, and have made such other investigations as I have deemed necessary or appropriate under the circumstances.
In my examination, I have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to me as original documents and the conformity to original documents of all documents submitted to me as certified, conformed, facsimile, electronic or photostatic copies. I have relied upon the statements contained in the Registration Statement and certificates of officers of the Company, and I have made no independent investigation with regard thereto.
Based upon the foregoing and in reliance thereon, it is my opinion that the 14,100,000 shares of Common Stock that are currently issued and outstanding and being offered by the Selling Shareholders are legally, issued, fully paid and non-assessable, pursuant to the laws of the State of Nevada and the laws of the United States of America.
I hereby consent to this opinion being included as an exhibit to the Registration Statement and to the use of my name under the caption “EXPERTS” in the prospectus constituting a part thereof.
MCMURDO LAW GROUP, LLC | |
/s/ Matthew McMurdo, Esq. | |
Matthew McMurdo, Esq. |
McMurdo Law Group, LLC
New York
Exhibit 10.1
STOCK PURCHASE AGREEMENT
CUSTODIAN VENTURES, LLC,
a Wyoming limited-liability company,
as the Seller of
17,700,000 Shares of Common Stock and
10,000,000 Shares of Series A Preferred Stock
of
GLOBAL ENTERTAINMENT CORP.,
a Nevada corporation
and
WANG XINRUI
as the Buyer of the Shares
June 18, 2019
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is entered into effective as of the __ day of June, 2019 (the “Effective Date”), by and between CUSTODIAN VENTURES, LLC, a Wyoming limited-liability company (“Seller”), as owner of 17,700,000 shares of Common Stock and 10,000,000 shares of Series A Preferred Stock of GLOBAL ENTERTAINMENT CORP., a Nevada corporation (“GNTP”); and WANG XINRUI (“Xinrui,” or “Buyer”), a ___________. Buyer and Seller are sometimes referred to collectively herein as the “Parties”, and each individually as a “Party”.
RECITALS
A. Seller owns Seventeen Million Seven Hundred Thousand (17,700,000) restricted shares of the common stock (the “Common Shares”) of GNTP.
B. The Common Shares represent approximately 72.672% of the voting power of the common stock of GNTP.
C. Seller owns Ten Million (10,000,000) restricted shares of the Series A Preferred stock (the “Preferred Shares,” and together with the Common Shares, the “Purchased Shares”) of GNTP.
D. The Preferred Shares represent one hundred percent (100%) of the duly authorized, validly issued, and currently outstanding Series A Preferred stock of GNTP.
E. At Closing the Purchased Shares will represent approximately 94.65% of the voting interest of GNTP, calculated as if the Preferred Shares had been converted into voting shares of common stock of GNTP at the time Closing and the Preferred Shares vote at 10 votes per share.
F. Seller desires to sell the Purchased Shares to Buyer, and Buyer desires to purchase the Purchased Shares from the Seller pursuant to the terms, covenants, and conditions contained herein.
G. Seller and Buyer have appointed the law firm of McMurdo Law Group LLC (the “Law Firm”) for this transaction and to receive and hold the Purchase Price (as defined below) received from the Buyer for the purchase of the Shares and all documents, stock certificates for the Purchased Shares and corporate records of GNTP in the possession of Seller (“Documents”) in the Law Firm’s Trust Account (the “Escrow Account”) and control unless other arrangements are agreed to by all Parties.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
I
SALE AND TRANSFER OF THE PURCHASED SHARES
1.1 Purchase and Sale. On the closing date specified in Section 6.1 herein (the “Closing”), Seller shall sell, transfer, convey, and deliver to Buyer, and Buyer shall purchase from Seller, the Purchased Shares, pursuant to the terms of this Agreement.
1.2 Purchase Price
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1.2.1. Amount. At the Closing, Buyer shall acquire the Purchased Shares for a purchase price of One Hundred Seventy-Five Thousand Dollars ($175,000 U.S.) (the “Purchase Price”). This is a private transaction between the Seller and Buyer.
1.2.2. Purchase Price Escrow; Payment.
1.2.2.1 Law Firm. The Seller and Buyer hereby appoint the Law Firm to act with respect to the distribution of the Purchase Price received for the purchase of the Purchased Shares and distribution of the Purchased Shares and documents of GNTP. Buyer acknowledges that the Law Firm has also represented the Seller and the Company in other transactions.
1.2.2.2 Deposit. The Law Firm has received and is holding $50,000 of the Purchase Price (the “Deposit”). The Deposit, and the balance of Purchase Price if tendered by Buyer to the Law Firm prior to the Closing, will be held in the Law Firm’s Escrow Account until Closing (as defined in Section 6.1 of this Agreement) or until ordered released as per other sections of this Agreement.
1.2.2.3 Payment of Purchase Price. Buyer shall pay the balance of the Purchase Price less the Deposit to the Law Firm’s Escrow Account on or before the Closing. The aggregate amount One Hundred Seventy-Five Thousand Dollars ($175,000) shall be payable, in full, from the Law Firm’s Escrow Account to Seller at Closing via wire transfer in accordance with the instructions provided by Seller and reflected on Exhibit 1.2.2.3 attached hereto and incorporated herein by reference.
1.3 Share Certificates. At the Closing, Seller shall deliver to GNTP’s transfer agent (the “Transfer Agent”) instructions to transfer the Purchased Shares and to issue the Purchased Shares in book entry format in the name of Buyer.
1.4 Other Closing Deliveries by Seller. In addition to the stock certificates, at the Closing Seller to deliver to Buyer the following:
1.4.1 A certificate issued by the Nevada Secretary of State as to the good standing of GNTP as of a date within two (2) business days after the Closing;
1.4.2 A true and complete copy of the Articles of Incorporation of GNTP as in effect as of the date of the Closing, certified by the Secretary of State of Nevada;
1.4.3 Notarized board resolutions authorizing all transactions contemplated by this Agreement, including, without limitation the appointment of the Buyer’s designees as the officers and directors of GNTP;
1.4.4 Copies of all federal and state tax returns filed by GNTP in the possession of Seller;
1.4.5 EDGAR filing codes of GNTP;
1.4.6 Copy of CUSIP confirmation indicating current number;
1.4.7 Certified current list of stockholders from the Transfer Agent;
1.4.9 All SEC, FINRA and OTC correspondence in the possession of Seller;
1.4.10 GNTP’s minute books containing the resolutions and actions by written consent of the directors and stockholders of GNTP and GNTP’s other original books and records, including all financial and accounting records (including the general ledger), all banking records and other regulatory filings and filing codes in whatever media they exist, including paper and electronic media in the possession of Seller;
1.4.11 Duly executed and notarized resignations of GNTP’s sole officer and director;
1.4.12 A good standing or other document from the State of Wyoming evidencing the existence of Seller;
1.4.13 All other documents, instruments and writings required by this Agreement to be delivered by GNTP at the Closing, all of GNTP’s original books of account and record, and any other documents or records relating to GNTP in the possession of Seller.
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II
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants to Buyer that the representations and warranties contained in this Article II are true, correct, and complete as of the Effective Date and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the Effective Date throughout this Article II), except as otherwise expressly provided for to the contrary herein:
2.1 Execution and Performance of Agreement. Seller has the requisite right, power, authority, and capacity to enter into, execute, deliver, perform, and carry out the terms and conditions of this Agreement and each of any other instruments and agreements to be executed and delivered by Seller in connection with this Agreement (the “Seller Transaction Documents”), as well as all transactions contemplated hereunder. All requisite corporate proceedings have been taken and Seller has obtained all approvals, consents, and authorizations necessary to authorize the execution, delivery, and performance by Seller of this Agreement, and each of the Seller Transaction Documents to which it is a party. This Agreement has been duly and validly executed and delivered by Seller and constitutes the valid, binding, and enforceable obligation of Seller, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law.
2.2 Effect of Agreement. As of the Closing, the consummation by Seller of the transactions herein contemplated, including the execution, delivery and consummation of this Agreement and the Seller Transaction Documents to which it is a party, to the knowledge of Seller, will not:
(a) Violate any judgment, statute, law, code, act, order, writ, rule, ordinance, regulation, governmental consent or governmental requirement, or determination or decree of any arbitrator, court, or other governmental agency or administrative body, which now or at any time hereafter may be applicable to and enforceable against the relevant party, work, or activity in question or any part thereof (collectively, “Requirement of Law”) applicable to or binding upon Seller, GNTP, or the Purchased Shares;
(b) Violate the terms of any agreement, contract, mortgage, indenture, bond, bill, note, or other instrument or writing binding upon Seller or GNTP or the Purchased Shares or to which Seller or GNTP or the Purchased Shares is subject; or
(c) Result, to the knowledge of Seller, in the breach of, constitute a default under, constitute an event which with notice or lapse of time, or both, would become a default under, or result in the creation of any lien, security interest, charge or encumbrance upon the Purchased Shares under any agreement, commitment, contract (written or oral) or other instrument to which Seller or GNTP is a party, or by which any of its assets (or any part thereof) is bound or affected.
2.3 Consents. No consents, approvals or other authorizations or notices, other than those which have been obtained and are in full force and effect, all of which have been previously delivered to the Buyer, are required by any state or federal regulatory authority or other person or entity in connection with the execution and delivery of this Agreement and the performance of any obligations contemplated thereby, including without limitation the Eighth Judicial District Court, Clark County, Nevada.
2.4 Authorized and Outstanding Stock To the knowledge of Seller, the authorized capital stock of GNTP consists of (i) 50,000,000 authorized shares of common stock with $0.001 par value, of which 24,356,062 shares are validly issued and outstanding; and, (ii) 10,000,000 authorized shares of preferred stock with $0.001 par value, of which the Preferred Shares are the only preferred shares which are issued and outstanding, and all of which Preferred Shares are owned by Seller. To the knowledge of Seller, there are no (i) outstanding proxies, options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities, notes or rights convertible into or exchangeable for any shares of capital stock of GNTP, or arrangements by which GNTP is or may become bound to issue additional shares of capital stock; (ii) agreements or arrangements under which GNTP is obligated to register the sale of any of its securities under the Securities Act of 1933 (the “Act”); and (iii) anti-dilution or price adjustment provisions contained in any security issued by GNTP. All references in this Agreement to “knowledge of Seller” shall mean the actual knowledge of Seller and its sole manager. The Seller has no officers or any member or manager other than David Lazar.
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2.5 Title to the Purchased Shares. To the knowledge of Seller, there are no outstanding subscriptions, options, warrants, calls, commitments or agreements to which Seller or GNTP is a party or by which Seller or GNTP is bound relating to the Purchased Shares. The Purchased Shares are owned beneficially and of record by Seller. Seller has full right and title to the Purchased Shares, free and clear of any lien or encumbrance whatsoever, and full and unrestricted right and power to sell and deliver the Purchased Shares pursuant to the provisions of this Agreement without obtaining the consent or approval of any other person. The rights of the Preferred Shares are as provided in the Certificate of Designation filed with the Nevada Secretary of State on June __, 2019. Upon transfer of the Purchased Shares to Buyer hereunder, Buyer will acquire good and marketable title to the Purchased Shares free and clear of any lien or encumbrance. To the knowledge of Seller, Seller acquired the Common Shares in a lawful transaction and in accordance with (i) the Order Appointing Custodian dated January 14, 2019, Eighth Judicial District Court of Nevada, Clark County, Case No. A-19-787455-P, (ii) Nevada corporate law and (iii) applicable securities laws of the United States.
2.6 Financial Statements To the Knowledge of Seller, GNTP’s financial statements dated March 28, 2019, for the quarter ending February 28, 2019 and filed on the OTC portal (the “Financial Statements”) and, to the knowledge of Seller, have been prepared on a consistent basis and present fairly the financial position of GNTP as of the date thereof. Except to the extent reflected and reserved against in the Financial Statements and as listed on Schedule 2.6 hereto, to the knowledge of Seller, GNTP did not have, as of the date of the Financial Statements, any debts, liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due. GNTP is a “shell,” as that term is defined in the SEC’s Rules and Regulations, and files its reports as a shell. Seller hereby waives all rights to the related party note payable to Seller.
2.7 Changes in Financial Condition. Since the date of the Financial Statements, to the knowledge of Seller, there has not been:
(a) Any material change in the condition (financial or otherwise) or business of GNTP, except changes in the ordinary course of business, none of which has been materially adverse;
(b) Any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the properties, assets, business or prospects of GNTP;
(c) Any change in the accounting methods or business followed by GNTP, or any change in the depreciation or amortization policies or rates adopted by GNTP (whether or not presently outstanding), except liabilities incurred, and obligations under agreements entered into, in the ordinary course of business; or
(d) Any sale, lease, abandonment or other disposition by GNTP, other than in the ordinary course of business, of any machinery, equipment or other operating properties directly or indirectly related to the business of GNTP.
2.8 SEC and OTC Filings. GNTP is not subject reporting requirements under the Securities Exchange Act of 1934, as amended (the “1934 Act”). The shares of common stock are currently eligible for quotation on the OTC Markets Group, Inc. under the symbol “GNTP” with “Pink Current Information” affixed next to its symbol. To the knowledge of Seller, none of the OTC Documents filed with the OTC Markets (all of the foregoing which were filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “OTC Documents”), at the time they were filed with the OTC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. To the knowledge of Seller, none of the statements made in any such OTC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof).
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2.9 Litigation. To the knowledge of Seller, there is no claim, legal action, suit, arbitration, investigation or hearing, notice of claims or other legal, administrative or governmental proceedings pending or to the knowledge of Seller, threatened against Seller or GNTP (or in which Seller or GNTP is plaintiff or otherwise a party thereto), and, to the knowledge of Seller, there are no facts existing which might result in any such claim, action, suit, arbitration, investigation, hearing, notice of claim or other legal, administrative or governmental proceeding. Neither Seller nor, to the knowledge of Seller, GNTP have waived any statute of limitations or other affirmative defense with respect to any of its liabilities. To the knowledge of Seller, there is no continuing order, injunction, or decree of any court, arbitrator, or governmental or administrative authority to which Seller or GNTP is a party or to which it or any of its assets is subject. To the knowledge of Seller, neither Seller nor GNTP have been permanently or temporarily enjoined or barred by order, judgment or decree of any court or other tribunal or any agency or regulatory body from engaging in or continuing any conduct or business.
2.10 Employee Benefit Plans. To the knowledge of Seller, GNTP is not a party to any written or oral (i) contract with any labor union, (ii) bonus, pension, profit-sharing, retirement, deferred compensation, savings, stock purchase, stock option, hospitalization, insurance or other plan providing employees benefits, (iii) employment, agency, consulting or similar contract which cannot be terminated by it in one hundred twenty (120) days or less, without cost, or (iv) any other plan, agreement or arrangement governed by the Employee Retirement Income Security Act of 1974, as amended.
2.11 Material Agreements. Except as set forth in Schedule 2.6 or in the Financial Statements incorporated herein by reference, and to the knowledge of Seller, GNTP is not a party to, and is not bound by or subject to, any agreement, arrangement or contract, whether oral or in writing, including without limitation, loan agreements, credit lines, promissory notes, mortgages, pledges, guarantees, security agreements, powers of attorney or other arrangements to loan or borrow money or extend credit, other than this Agreement, including without limitation any of the following:
(a) license, agreement, assignment, or contract (whether as licensor or licensee, assignor or assignee) relating to trademarks, trade names, patents or copyrights (or applications therefore), know-how or technical assistance, or other proprietary rights (other than trademark agreements which are entered into in the ordinary course of the Seller’s business in conjunction with sales agreements;
(b) agreement or other arrangement for the sales of goods or services by GNTP to any government or governmental authority (other than pursuant to open purchase orders issued by such entities);
(c) agreement with any vendor, distributor, dealer, sales agent or representative;
(d) agreement with any supplier or customer with respect to discounts (other than those reflected on the Seller’s current price lists) or allowances or extended payment terms;
(e) joint venture or partnership agreement with any other person;
(f) agreement which restricts GNTP from doing business anywhere in the world; or
(g) long-term services agreement.
2.12 Employment Agreements. To the knowledge of Seller, GNTP is not a party to any employment agreement, independent contractor agreement, or similar arrangement or agreement, whether it be reduced to written form or an oral promise.
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2.13 Other Arrangements. To the knowledge of Seller, neither Seller nor GNTP is a party to any contract, commitment or agreement, nor are any of its assets subject to, or bound or affected by, any order, judgment, decree, law, statute, ordinance, rule, regulation or other restriction of any kind or character which is not applicable to GNTP generally, which would, individually or in the aggregate, materially adversely GNTP, the Purchased Shares or any of the assets of GNTP. Seller is also not a party or subject to any agreement, contract or other obligation which would require the making of any payment, other than payments contemplated by this Agreement, to any other person as a result of the consummation of the transactions contemplated herein.
2.14 Bad Actor. No current officer or director of GNTP would be disqualified under Rule 506(d) of the Act as amended on the basis of being a “bad actor”. David Lazar is the sole duly appointed officer and director of GNTP.
2.15 Environmental Matters. To the knowledge of Seller, with regard to matters of environmental compliance:
(a) GNTP has conducted and is conducting its business, and has used and is using its properties, whether currently owned, operated or leased or owned, operated or leased by Seller at any time in the past; and at the time of acquisition of any security interest, all properties in which Seller has a security interest had always been used, in compliance with all applicable federal, and state and local environmental laws and regulations, except where the failure to comply with such laws and regulations, in the aggregate, has not had and could not have a material adverse effect on the condition (financial or otherwise), business or properties of GNTP.
(b) Neither GNTP nor any property currently owned, operated or leased or which has been owned, operated or leased by GNTP, is subject to any existing, pending or threatened investigation, action or proceeding, including any notice of violation, by any governmental authority regarding contamination of any part of such property or infractions of any law, statute, ordinance or regulation or any license or permit issued by any government agency pertaining to health, industrial hygiene or environmental safety or environmental conditions on, under or about such property, except where such investigations, actions, proceedings, notifications or infractions, in the aggregate, have not had and could not have a material adverse effect on the condition (financial or otherwise), business or properties of GNTP.
(c) There are no underground storage tanks or toxic or hazardous wastes, substances, or materials, or pollutants or contaminants, including asbestos, presently located on or under any property which is currently or has been owned, operated or leased by GNTP; there were no underground storage tanks or toxic or hazardous wastes, substances, or materials, or pollutants or contaminants, including asbestos, located on or under any property in which GNTP has or had an interest. As used herein, the terms toxic or hazardous wastes, substances or materials, pollutants and contaminants mean any material which is or becomes during the term of this Agreement regulated or controlled as a hazardous or toxic waste or environmental pollutant under any federal, state or local law, ordinance, order, decree or regulation currently in effect and applicable to Seller or any property owned, operated or leased by Seller.
2.16 Material Defaults. To the knowledge of Seller, GNTP is not in default, or alleged to be in default, under any agreement, contract, lease, mortgage, commitment, instrument or obligation, and no other party to any agreement, contract, lease, mortgage, commitment, instrument or obligation to which GNTP is a party is in default thereunder, which default would materially and adversely affect the properties, assets, business or prospects of GNTP.
2.17 Disclosure. No representation or warranty made by Seller in this Agreement or in any writing furnished or to be furnished pursuant to or in connection with this Agreement knowingly contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact required to make the statements herein or therein contained not misleading. Seller has disclosed to Buyer all material information known to it related to GNTP, and their respective condition, operations, and prospects. Seller acknowledges that the Buyer has represented to Seller that Buyer intends to cause GNTP to acquire a business or assets after the Closing.
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III
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer hereby represents and warrants to Seller that the representations and warranties contained in this Article III are true, correct, and complete as of the Effective Date and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the Effective Date throughout this Article III), except as otherwise expressly provided for to the contrary herein:
3.1 Execution and Performance of Agreement. Buyer has the requisite right, power, authority, and capacity to enter into, execute, deliver, perform, and carry out the terms and conditions of this Agreement and each of the other instruments and agreements to be executed and delivered by Buyer in connection with this Agreement (the “Buyer Transaction Documents”), as well as all transactions contemplated hereunder. This Agreement has been duly and validly executed and delivered by Buyer and constitutes the valid, binding, and enforceable obligation of Buyer, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law.
3.2 Effect of Agreement. As of the Closing, the consummation by Buyer of the transactions herein contemplated, including the execution, delivery and consummation of this Agreement and the Buyer Transaction Documents to which it is a party, will not:
(a) Violate any Requirement of Law applicable to or binding upon Buyer; or
(b) Violate the terms of any material agreement, contract, mortgage, indenture, bond, bill, note, or other material instrument or writing binding upon Buyer or to which Buyer is subject.
3.3 Consents. No consents, approvals or other authorizations or notices, other than those which have been obtained and are in full force and effect, are required by any state or federal regulatory authority or other person or entity in connection with the execution and delivery of the Buyer Transaction Documents and the performance of any obligations contemplated thereby.
3.4 Investigation. On or prior to the Closing, Buyer will have had the opportunity to investigate the books and records of GNTP and the Financial Statements. As of the Closing, Buyer will be purchasing the Purchased Shares based upon Buyer’s own independent investigation and evaluation of GNTP, and the covenants, representations and warranties of Seller set forth herein. Buyer is expressly not relying on any oral representations made by Seller with regard to the Purchased Shares or GNTP.
3.5 Investment Purpose. Buyer is acquiring the Purchased Shares for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws; provided, however, by making the representations herein, Buyer does not agree, or make any representation or warranty, to hold any of the Purchased Shares for any minimum or other specific term and reserves the right to dispose of the Purchased Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Act. The Buyer is acquiring the Purchased Shares hereunder in the ordinary course of its business. The Buyer does not presently have any agreement or understanding, directly or indirectly, with any person to distribute any of the Purchased Shares in violation of applicable securities laws. The Buyer acknowledges that the Shares have been offered to him in direct communication between him and Seller, and not through any advertisement of any kind. The Buyer represents that after the Closing of this transaction, the Buyer intends to cause GNTP to acquire a business and/or assets.
3.6 Accredited Investor Status and Related Acknowledgments. Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”). Buyer further acknowledges (i) that the purchase of the Purchased Shares involves a high degree of risk in that GNTP has no operations and requires substantial funds; (ii) that an investment in GNTP is highly speculative and only investors who can afford the loss of their entire investment should consider investing in GNTP and acquiring the Purchased Shares; and, (iii) that Buyer has such knowledge and experience in finance, securities, investments (including investment in non-listed and non-registered securities), and other business matters so as to be able to protect its interests in connection with this transaction.
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3.7 Reliance on Exemptions. Buyer understands that the Purchased Shares are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that (i) the sale of the Purchased Shares to Buyer is not registered with the SEC or with the securities administrator of any state; (ii) the Purchased Shares are being sold pursuant to an exemption from such registration requirements; (iii) the Shares are “restricted securities” that will bear a restrictive legend prohibiting their further transfer without registration or any exemption therefrom; and, (iv) GNTP is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Purchased Shares.
3.8 Legends. Buyer understands that the Purchased Shares have been issued pursuant to an exemption from registration or qualification under the Act and applicable state securities laws, and the Purchased Shares shall bear a legend as required by the “blue sky” laws of any state and a restrictive legend in compliance with applicable federal law.
3.9 Notification of OTC Markets Group, Inc. and Nevada Secretary of State. Buyer shall, not later than forty-eight (48) hours following the Closing make all required filings with any state and federal regulators, as is required to keep GNTP in good standing with any and all regulatory bodies having authority, including without limitation, taking the following actions:
(a) Notify OTC Markets Group, Inc., and update the Company information on OTC Markets Group, Inc.’s website section established for this purpose, of the new address for the Company, the new director(s) of the Company and the new officers of the Company, including its President. Buyer shall promptly pay any fees associated with this notice.
(b) Notify the Nevada Secretary of State, by filing an amended annual list of officers and directors and by filing a change of address, the new director(s) of the Company and the new officers of the Company, including its President. Buyer shall promptly pay any fees associated with these filings.
(c) Should Buyer fail to perform according to this Section 3.9, Buyer expressly authorizes Seller to provide the notices and filings contemplated by this Section 3.9 and Buyer agrees to promptly reimburse Seller for all expenses related thereto, including filing fees and attorney’s fees and costs actually incurred.
3.10 Anti-Money Laundering, Anti-Corruption and Anti-Terrorism Laws. The Buyer represents that the funds representing the Purchase Price do not represent proceed of crime for the purpose of any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. The Buyer is in compliance with, and has not previously violated, the United States of America Patriot Act of 2001, as amended through the date of this Agreement, to the extent applicable to the Buyer and all other applicable anti-money laundering, anti-corruption and anti-terrorism laws and regulations.
3.11 Shell company. Buyer acknowledge that GNTP is currently a “shell company” as defined by Rule 144(i) of the 1934 Act.
IV
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Buyer. Unless otherwise waived, in whole or in part, in writing by Buyer, the obligations of Buyer to affect the consummation of the transactions contemplated hereunder, and in the other agreements referred to herein, shall be subject to the satisfaction at the Closing of each of the following conditions:
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4.1.1. Representations and Warranties of Seller to be True. The representations and warranties of Seller contained in this Agreement or in any statement, certificate, schedule or other document delivered pursuant to this Agreement or in connection with the transactions contemplated hereby, shall be true and correct (to the knowledge of Seller where specifically stated) in all material respects on the Closing with the same force and effect as though made at such time. Seller shall have performed all obligations and complied with all covenants required by this Agreement, and the other agreements referred to herein, to be performed or complied with by him prior to the Closing.
4.1.2. No Proceedings. To the knowledge of Seller, no suit, action or other proceeding of material consequence are pending or threatened before any court or other governmental agency which seeks to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or to obtain damages or other relief in connection therewith.
4.1.3. No Liabilities. To the knowledge of Seller, GNTP shall have no liabilities or financial obligations at Closing except as disclosed on Schedule 2.6 or as provided on the Financial Statements. Seller shall have no obligation to pay any known or unknown liabilities of GNTP.
4.1.4. Consents. Seller shall have obtained and delivered to Buyer all written consents of the other party to all contracts which by their terms or otherwise require the consent of such party to the transfer thereof by Seller as indicated on Schedule 4.1.4 attached hereto.
4.1.5. Board Appointments and Resignations. Seller shall use commercially reasonable efforts to facilitate the individuals designated by Buyer being elected as directors of GNTP, and that all current officers and directors of GNTP shall resign as of the Closing. Written notarized Consent of the resignations of all officers and directors and of resolutions of the Board of Directors of GNTP shall be delivered by Seller at Closing.
4.1.6 Closing Documents. Seller shall have delivered to Buyer all the documents provided for in Article I of this Agreement.
4.2 Conditions to Obligations of Seller Unless otherwise waived, in whole or in part, in writing by Seller, the obligations of Seller to affect the consummation of the transactions contemplated hereunder, and in the other agreements referred to herein, shall be subject to the satisfaction at the Closing of each of the following conditions:
4.2.1. Representations and Warranties of Buyer to be True. The representations and warranties of Buyer contained in this Agreement or in any statement, certificate, schedule or other document delivered pursuant to this Agreement or in connection with the transactions contemplated hereby, shall be true and correct in all material respects on the Closing with the same force and effect as though made at such time. Buyer shall have performed all obligations and complied with all covenants required by this Agreement, and the other agreements referred to herein, to be performed or complied with by it prior to the Closing.
4.2.2. Payment of Purchase Price. Buyer shall have paid the Purchase Price as provided for herein.
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V
CONDUCT OF GNTP’s BUSINESS PRIOR TO CLOSING
Seller hereby covenants, agrees, represents, and warrants to Buyer that, except as otherwise consented to in writing by Buyer, pending the Closing:
(a) GNTP will carry on its business in a good and diligent manner consistent with prior business, and will use commercially reasonable efforts to preserve its business organization intact, and to keep available the services of all of its present employees, agents, and representatives.
(b) No change will be made in the authorized or issued capital stock of GNTP, nor shall any rights, warrants, or options relating thereto be issued.
(c) No dividend or other distribution will be declared, set aside, or paid on or in respect of the common capital stock of GNTP, nor will GNTP directly redeem, retire, purchase, or otherwise reacquire any of its stock.
(d) GNTP will not sell or otherwise dispose of the assets or any other properties or assets, purchase or otherwise acquire any properties or assets, incur any liabilities or enter into any transactions, except in the ordinary course of business.
(e) From and after the Effective Date, GNTP and Seller will permit Buyer and its duly authorized agents to have reasonable access to the offices, properties, assets, books, and records of GNTP for the purpose of investigating the business and examining the records of GNTP, verifying the representations made in this Agreement and the performance of the conditions set forth in this Agreement.
VI
CLOSING DATE AND TRANSFER DATE
6.1 Closing Date. The closing of the transactions contemplated under this Agreement (the “Closing”) and the transfer of the Purchased Shares by Seller to Buyer shall have taken place when the Seller delivers the Seller Transaction Documents, at such place as the Parties may agree, or at such other time as the Parties may agree. The date on which the Closing occurs is also referred to herein as the “Closing Date”.
6.2 Obligations of Seller. At the Closing, Seller shall deliver or cause to be delivered to Buyer:
(a) Share certificates representing the Purchased Shares, duly endorsed for transfer, free and clear of all liens and encumbrances, dated as of the Closing;
(b) Executed Seller Transaction Documents as provided in Section 1.4 above;
(c) Written waiver of the $900 note payable to Seller;
(c) Any governmental and third-party consents, approvals, assurances or UCC-2 termination statements necessary for the consummation of the transactions contemplated by this Agreement or as may be required to permit Seller to deliver the Purchased Shares free and clear of any and all liens, claims, encumbrances or restrictions.
6.3 Obligations of Buyer. At the Closing, Buyer shall deliver or cause to be delivered to Seller:
(a) Buyer’s funds, by wire transfer, in the amount of Purchase Price.
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VII
POST-CLOSING COVENANTS
7.1 Books and Records. Seller shall deliver, at Closing or as soon as possible after Closing, all books and records of Seller in its possession reasonably related to GNTP and the rights and obligations of Buyer hereunder.
7.2 Reasonable Assistance. Seller shall use and exercise commercially reasonable efforts, taking reasonable, ordinary and necessary measures to ensure an orderly and smooth transition and conversion of the transfer of the Purchased Shares to Buyer.
7.3 Survival of Representations. All of the covenants, agreements, representations, and warranties made by each Party, or pursuant hereto or in connection with the transactions contemplated hereby, shall survive the Closing for a period of six (6) months.
7.4 Brokers. Each Party represents and warrants that no broker or finder has acted for it in connection with this Agreement or the transactions contemplated hereby and that no broker or finder is entitled to any brokerage or finder’s fee or other commission. Each Party agrees to indemnify and hold harmless the other Parties with respect to any claim for any brokerage or finder’s fee or other commission.
7.5 Transaction Documents. This Agreement, the Seller Transaction Documents, the Buyer Transaction Documents, and any other agreements attached hereto as Schedules or Exhibits, will be referred to herein collectively as the “Transaction Documents”.
7.6 Expenses. All costs and expenses incurred in conducting the purchase and sale described in this Agreement in the manner prescribed by this Agreement shall be borne by the Party incurring said expense.
7.7 Early Termination. This Agreement shall terminate upon:
(a) The mutual agreement of Buyer and Seller, provided, however, that such termination is set forth in a writing executed by both Parties; or
(b) By either Buyer or Seller, in a writing, if the Closing does not occur on or prior to June 17, 2019, other than by reason of a breach of a duty or an obligation hereunder of the Party electing to terminate this Agreement. In the event of such termination, no Party shall have any obligation or liability to any other in respect to this Agreement, except for any breach of contract occurring prior to such termination.
7.8 Taxes. Buyer shall be liable for the filing of all tax returns and reports and for the payment of all federal, state, and local taxes of GNTP for any period whether before or after the Closing Date and any taxes due from GNTP. Seller shall remain liable for the payment of all of its taxes attributable to or relating to the consummation of the transactions contemplated herein and shall indemnify and hold Buyer and GNTP harmless from and against all liability in connection therewith.
VIII
ADDITIONAL PROVISIONS
8.1 Executed Counterparts. This Agreement may be executed in any number of counterparts, all of which when taken together shall be considered one and the same agreement, it being understood that all Parties need not sign the same counterpart. In the event that any signature is delivered by Fax or by E-Mail, such signature shall create a valid and binding obligation of that Party (or on whose behalf such signature is executed) with the same force and effect as an original thereof. Any photographic, photocopy, or similar reproduction copy of this Agreement, with all signatures reproduced on one or more sets of signature pages, shall be considered for all purposes as if it were an executed counterpart of this Agreement.
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8.2 Entire Agreement. This Agreement, and all references, documents, or instruments referred to herein, contains the entire agreement and understanding of the Parties in respect to the subject matter contained herein. The Parties have expressly not relied upon any promises, representations, warranties, agreements, covenants, or undertakings, other than those expressly set forth or referred to herein. This Agreement supersedes (i) any and all prior written or oral agreements, understandings, and negotiations between the Parties with respect to the subject matter contained herein; and, (ii) any course of performance and/or usage of the trade inconsistent with any of the terms hereof.
8.3 Severability. Each and every provision of this Agreement is severable and independent of any other term or provision of this Agreement. If any term or provision hereof is held void or invalid for any reason by a court of competent jurisdiction, such invalidity shall not affect the remainder of this Agreement.
8.4 Governing Law. This Agreement shall be governed by the laws of the State of Nevada, without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada. If any court action is necessary to enforce the terms and conditions of this Agreement, the Parties hereby agree that the state or federal courts in the County of Clark, State of Nevada, shall be the sole jurisdiction and venue for the bringing of such action.
8.5 Enforcement. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, it is agreed that the Parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. The remedies of the Parties under this Agreement are cumulative and shall not exclude any other remedies to which any person may be lawfully entitled.
8.6 Waiver. No failure by any Party to insist on the strict performance of any covenant, duty, agreement, or condition of this Agreement or to exercise any right or remedy on a breach shall constitute a waiver of any such breach or of any other covenant, duty, agreement, or condition.
8.7 Recovery of Fees by Prevailing Party. In the event of any legal action (including arbitration) to enforce or interpret the provisions of this Agreement, except as otherwise expressly provided herein, each party will be responsible for their own attorney’s fees and costs of litigation.
8.8 Recitals. The facts recited in the Recitals above, are hereby conclusively presumed to be true as between and affecting the Parties and are hereby incorporated into this Agreement as if fully set forth herein.
8.9 Amendment. This Agreement may be amended or modified only by a writing signed by all Parties.
8.10 Successors and Assigns. Except as expressly provided in this Agreement, each and all of the covenants, terms, provisions, conditions, and agreements herein contained shall be binding upon and shall inure to the benefit of the successors and assigns of the Parties.
8.11 Assignability. This Agreement is not assignable by either Party without the expressed written consent of all Parties.
8.12 No Third-Party Beneficiaries. This Agreement has been entered into solely by and between Seller and Buyer, solely for their benefit. There is no intent by either Party to create or establish a third-party beneficiary to this Agreement, and no such third party shall have any right to enforce any right, claim, or cause of action created or established under this Agreement. This Agreement shall be binding upon and shall inure only to the benefit of the parties hereto, and their permitted assigns hereunder.
8.13 Time. All Parties agree that time is of the essence as to this Agreement.
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8.14 Provision Not Construed Against Party Drafting Agreement. This Agreement is the result of negotiations by and between the Parties, and each Party has had the opportunity to be represented by independent legal counsel of its choice. This Agreement is the product of the work and efforts of all Parties, and shall be deemed to have been drafted by all Parties. In the event of a dispute, no Party shall be entitled to claim that any provision should be construed against any other Party by reason of the fact that it was drafted by one particular Party.
8.15 Agreement Provisions, Exhibits, and Schedules. When a reference is made in this Agreement to an Article, Section, Subsection, Exhibit, or Schedule, such reference shall be to said item of this Agreement unless otherwise indicated. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof as if set out in full herein.
8.16 Further Assurances. Each Party agrees (i) to furnish upon request to each other Party such further information; (ii) to execute and deliver to each other Party such other documents; and, (iii) to do such other acts and things, all as another Party may reasonably request for the purpose of carrying out the intent of this Agreement and the transactions envisioned hereunder. However, this provision shall not require that any additional representations or warranties be made and no Party shall be required to incur any material expense or potential exposure to legal liability pursuant to this Section 8.16.
8.17 Notices.
8.17.1 All notices, requests, demands and other communications required or permitted to be given hereunder shall be affected as follows:
If to Buyer: | If to Seller: |
WANG Xinrui Room 1004, Block 1, Section C, Feng Huang Cheng, Cangzhou City, Hebei Province, China E-mail: 18268988559@163.com
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Custodian Ventures, LLC c/o David Lazar, Manager 3443 Lawrence Ave. Oceanside, NY 11572 E-mail: david@zenithpi.com
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McMurdo Law Group, LLC 1185 Avenue of the Americas, 3rd Floor New York, NY 10036 Phone: 917-318-2865 E-mail: matt@nannaronelaw.com |
-with copy to-
Bryan R. Clark PC 6910 S. Cimarron Rd., Ste. 240 Las Vegas, NV 89113 Phone: 702-527-5277 Email: bclark@clarklg.com
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8.17.2. Method and Delivery. All notices, requests and demands hereunder shall be in writing and delivered by hand, by Electronic Transmission, by mail, or by recognized commercial over-night delivery service (such as Federal Express or UPS), and shall be deemed given (a) if by hand delivery, upon such delivery; (b) if by Electronic Transmission, upon telephone confirmation of receipt of same; (c) if by mail, forty-eight (48) hours after deposit in the United States mail, first class, registered or certified mail, postage prepaid; or, (d) if by recognized commercial over-night delivery service, upon such delivery.
8.17.3. Consent to Electronic Transmission. Each Party hereby expressly consents to the use of Electronic Transmission for communications and notices under this Agreement. For purposes of this Agreement, “Electronic Transmission” means a communication (i) delivered by Fax or E-Mail when directed to the Fax number or E-Mail address, respectively, for that recipient on record with the sending Party; and, (ii) that creates a record that is capable of retention, retrieval, and review, and that may thereafter be rendered into clearly legible tangible form.
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8.17.4. Address Changes. Any Party may alter the Fax number, E-Mail address, physical address, or postage address to which communications or copies are to be sent by giving notice of such change of address to the other Parties in accordance with the provisions of this Section 8.17.
8.18 Disputes. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTER CLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
8.19 Efforts. Each Party shall cooperate in good faith with the other Parties generally, and in particular, the Parties shall use and exercise commercially reasonable efforts, taking all reasonable, ordinary and necessary measures to ensure an orderly and smooth relationship under this Agreement, and further agree to work together and negotiate in good faith to resolve any differences or problems which may arise in the future. However, the obligations under this Section 10.19 shall not include any obligation to incur substantial expense or liability.
8.20 Definitional Provisions. For purposes of this Agreement, (i) those words, names, or terms which are specifically defined herein shall have the meaning specifically ascribed to them; (ii) wherever from the context it appears appropriate, each term stated either in the singular or plural shall include the singular and plural; (iii) wherever from the context it appears appropriate, the masculine, feminine, or neuter gender, shall each include the others; (iv) the words “hereof”, “herein”, “hereunder”, and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, and not to any particular provision of this Agreement; (v) all references to “Dollars” or “$” shall be construed as being United States Dollars; (vi) the term “including” is not limiting and means “including without limitation”; and, (vii) all references to all statutes, statutory provisions, regulations, or similar administrative provisions shall be construed as a reference to such statute, statutory provision, regulation, or similar administrative provision as in force at the date of this Agreement and as may be subsequently amended.
8.21 Confidentiality. Each party hereto agrees with the other party that, unless and until the transactions contemplated by this Agreement have been consummated, they and their representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and shall not use such data or information or disclose the same to others, except: (i) to the extent such data is a matter of public knowledge or is required by law to be published; and (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement.
8.22 Execution Knowing and Voluntary. In executing this Agreement, the parties severally acknowledge and represent that each: (a) has fully and carefully read and considered this Agreement; (b) has been or has had the opportunity to be fully apprized by its attorneys of the legal effect and meaning of this document and all terms and conditions hereof; (c) is executing this Agreement voluntarily, free from any influence, coercion or duress of any kind.
IX
EXECUTION
IN WITNESS WHEREOF, this STOCK PURCHASE AGREEMENT has been duly executed by the Parties and shall be effective as of and on the Effective Date. Each of the undersigned Parties hereby represents and warrants that it (i) has the requisite power and authority to enter into and carry out the terms and conditions of this Agreement, as well as all transactions contemplated hereunder; and, (ii) it is duly authorized and empowered to execute and deliver this Agreement.
****EXECUTION APPEARS ON NEXT PAGE****
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****EXECUTION PAGE TO STOCK PURCHASE AGREEMENT****
BUYER: | SELLER: | ||
WANG XINRUI
|
CUSTODIAN VENTURES, LLC, a Wyoming limited-liability company | ||
_____________________ | By: | _____________________ | |
Name: | David Lazar | ||
Its: | Manager | ||
DATED: _____________________ | DATED: _____________________ |
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EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit
SCHEDULES
Schedule
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Exhibit 1.2.2.3
Wire Instructions
[PLESE PROVIDE WIRE INSTRUCTIONS]
Schedule 2.6
GNTP’ Liabilities
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Exhibit 10.2
Business Operation Agreement
This business operation agreement (hereinafter referred as “the agreement”) has been concluded by the following three parties (hereinafter referred as “all contracting parties”) in Shenzhen City, Guangdong Province, the People’s Republic of China (hereinafter referred as “China”) on May 28, 2020:
Party A: CXJ (Shenzhen) Technology Co., Limited
Add: 3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China.
Party B: CXJ Technology (Hangzhou) Co., Limited
Add: Room 1903-1, Xizi International Center, Jianggan District, Hangzhou City, Zhejiang Province, China.
Party C: Lixin Cai Id Card No.: 330501198809306554
Add: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China.
Preface
(1) |
Party A is a wholly foreign-owned enterprise registered and founded according to Chinese laws and has professional knowledge, capacity and resources of providing consultation and service. |
(2) |
Party B is a limited liability company registered and founded in China and undertaking research and development, production and distribution business of hi-tech products in the auto environmental protection field (hereinafter referred as “business”). |
(3) | Party C is the shareholder of Party B, owing Party B’s all stock right (100%). |
(4) | Party A has established business relations with Party B through the “Consulting Service Agreement” (hereinafter referred as “Service Agreement”) concluded with Party B on ______________(Date). |
(5) | According to the service agreement, Party B shall pay Party A certain amount. However, Party B has not paid any account payable. In addition, Party B’s daily operation shall greatly affect Party B’s ability to pay such account payable to Party A. |
(6) | The purpose that all contracting parties sign the agreement is to make clear of matters relevant to Party B’s operation. |
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Therefore, the contracting parties of the agreement have reached the following agreement by means of mutual negotiation:
1. | Party A agrees that under the premise that Party B meets relevant terms of the agreement, Party A shall play the role as Party B’s guarantor in the contract and agreement with Party B relating to operation or relevant transactions between Party B and any other third party and shall provide Party A with the complete guarantee to implement such contract, agreement or transaction. Party B agrees to pledge all assets (including accounts receivable) to Party A as counter guarantee according to the collateral arrangement stated above. Party A hopes to sign the written guarantee contract with Party B’s transaction counterparty, so as to undertake the guarantee liability as the guarantor when it is necessary. Therefore, Party B and Party C shall adopt all necessary measures (including but not limited to the signing of relevant documents and transaction of relevant registration procedure) to transact the procedure of the counter-guarantee, which provides to Party A. |
2. | Given the requirement in article 1 in this agreement, for making sure that various operation agreements between Party B and Party A have been implemented and relevant account payable paid by Party B to Party A, Party B hereby agrees together with Party C, as Party B’s shareholder, that unless Party A’s prior written approval has been achieved, Party B can not conduct any transaction, which can greatly affect Party B’s assets, obligations, rights or operation (but excluding the signing of business contracts and agreement, sale or purchase of assets during Party B’s normal operation, as well as the lien achieved by relevant counterparty according to the agreement). Such transactions include but are not limited to: |
2.1 | to conduct borrowings or undertake any debt to any third party. |
2.2 | to sell or purchase any asset or right to any third party, including but not limited to any intellectual property. |
2.3 | to provide any guarantee to any third party with Party B’s assets or intellectual property. |
2.4 | to transfer Party B’s business agreement to any third party. |
3. | In order to make sure that various operation agreements between Party A and Party B have been implemented and Party B pays to Party A various accounts payable, Party B and Party C, as Party B’s shareholder, hereby agree to accept policy and suggestions about the company, which have been provided and related to the daily operation, financial management, staff’s employment and dismiss in the company from time to time. |
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4. | Party B hereby agrees with Party C, as Party B’s shareholder, that Party B shall appoint the personnel recommended by Party A as Party B’s directors and appoint the senior managers of Party A as Party B’s general managers, chief financial officer and other senior managers. Once the senior managers above dismiss or are fired by Party A, they shall be disqualified to hold any position in Party B. Under such cases, other senior managers of Party A recommended by Party A shall fill in the positions. The personnel recommended by Party A according to the article shall meet the qualification conditions of directors, general managers, chief financial officer and other senior managers regulated by applicable laws. |
5. | Party B and Party C, as Party B’s shareholder, hereby agree and confirm that if they require any guarantee relating to their acts of implementing any contract or repaying any flowing fund loan, they shall find Party B for such guarantee first and foremost. Under such case, Party A shall have the right to decide whether Party A should provide relevant guarantee to Party B (However, they shall have no obligations to provide such guarantee to Party B). If Party A decides not to provide such guarantee to Party B, Party A shall send the written notice to Party B immediately, so that Party B can seek guarantee from other third party. |
6. | Under such case that any agreement terminates or the period of validity expires, Party A shall have the right, but no obligations to terminate all agreements with Party B, including but not limited to the service agreement. |
7. | Any revision and supplement to the agreement shall be in the written form. The revised edition and supplementary provisions of the agreement formally signed by all contracting parties shall be deemed to be part of the agreement and shall have the same legal force with the agreement. |
8. | If any provision of the agreement according to relevant laws is considered to be invalid or does not have compulsory executive force, the provision only within the application scope of such law shall be considered to be invalid. In addition, the validity and enforceability of the rest provisions in the agreement shall not be affected in any form. |
9. | Without the prior written agreement of Party A, Party B shall not transfer rights and obligations under the articles of the agreement to any third party. Party B shall hereby agree that Party A can transfer rights and obligations under the articles of the agreement as needed, and Party A shall only notify Party B in the written form of t such transaction act, without any further agreement from Party B. |
10. | All contracting parties admit and confirm that any verbal or written materials about the communication of the agreement shall be confidential documents. All contracting parties shall be confidential to all such documents. Without prior written agreement from other contracting parties, any contracting party shall not disclose to any third party any such document, excluding the following documents: (1) the documents the public have known or will know (excluding the documents not authorized by the accepting party, but disclosed to the public); (2) any document disclosed according to the rules or regulations of applicable laws or the stock exchange; (3) the documents required to be disclosed to their legal adviser or financial consultant of any contracting party for the transactions under the terms of the agreement, with such legal advisor or financial consultant required to follow the confidentiality provisions in the agreement as well. The behavior of the staff of any contracting party or the institute employed by such contracting party to disclose the confidential documents shall be deemed as the behavior of such contracting party. Besides, such contracting party shall undertake the responsibilities for the defaults to their staff or such institute according to the agreement. Even if the agreement expires, is revised, canceled, terminated or not implemented, the terms shall remain effective. |
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11. | The agreement is governed and interpreted by Chinese laws. |
12. | When all contracting parties have any dispute about the interpretation and implementation of the terms under the agreement, all contracting parties shall kindly negotiate and solve the dispute. If the negotiation fails, either party can submit relevant dispute to China International Economic and Trade Arbitration Commission for arbitration according to the effective arbitration rules then. The arbitration site is Shenzhen and the language used for the arbitration is Chinese. The arbitration decision is final and binding to all contracting parties. The regulation of the provision shall not be affected by the termination or removal of the agreement.
Except the matters about the appearance of disputes, all contracting parties shall continue to implement their obligations according to the regulations of the agreement based on the Principle of Good Faith. |
13. | The agreement has been signed by the representatives formally authorized by all contracting parties on the date providing in the first part of the agreement and shall take effect since the day. |
14. | Notwithstanding the foregoing regulation in Article 13 in the agreement, all contracting parties shall confirm that the agreement has constituted the entire agreement reached by all contracting parties for the subject in the agreement, and shall replace all verbal and/or written agreement and understanding reached as to the subject of the agreement by all contracting parties before or at present. |
15. | The validity period of the agreement shall be ten (10) years, unless the agreement is terminated according to the agreement or related provisions of any other agreement signed by all contracting parties in advance. The validity period of the contract cannot be extended only when Party B confirms in a written form. Besides, Party B shall make the confirmation of the item before the validity of the period is expired. As for the specific extension time of the period of validity, it shall be decided by all contracting parties through negotiation. Within the above period, if Party A or Party B terminates within the expiration of term of operation (including any extended operation term) or for any other reason, the agreement shall terminate as well, unless Party A or Party B has transferred their rights and obligations according to the regulations of Article 9 in the agreement. |
16. | Unless according to the renewal of related regulations of the agreement, the agreement shall terminate on the maturity date. Within the period of validity of the agreement, Party B shall not terminate the agreement. Notwithstanding the forgoing, Party A shall have the right to notify Party B thirty (30) days in advance in the written form of terminating the agreement any time. |
17. | The agreement is in triplicate, with each contracting party holding one original copy, and all original copies shall have the same legal force. |
[Signing page below]
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All contracting parties have demanded their own legal person and their representatives formally authorized to formally sign the agreement on the date stated in the first part of the agreement. This is hereby to prove.
Party A: | CXJ (Shenzhen) Technology Co., Limited |
The undersigned:__________________ | |
Name: | |
Position: | |
Party B: | CXJ Technology (Hangzhou) Co., Limited |
The undersigned:__________________ | |
Name: | |
Position: | |
Party C: | Lixin Cai |
___________________ | |
The undersigned: | |
China’s Id Card No.: 330501198809306554 |
Exhibit 10.3
Agency Agreement
The shareholders’ voting agency agreement (hereinafter referred as “This Agreement”) is concluded by the following parties on May 28, 2020:
Party A: | CXJ (Shenzhen) Technology Co., Limited |
Registered address:3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China. | |
Party B: | Lixin Cai Id Card No.: 330501198809306554 Address: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China. |
In this agreement, Party A and Party B are collectively referred to as “all contracting parties ”
Preface
A. | Party A is a limited company founded and registered in accordance with Chinese laws and has professional knowledge, capacity and resources providing consultation and service. |
B. | Till the date of signing the agreement, Party B has been the only registered shareholder of xxx limited company (hereinafter referred as “the company”), which is founded and registered according to the laws of the People’s Republic of China (hereinafter referred as “China”). The total shares held by Party B accounts for 10% of the total shares issued by the company. |
C. | Party B has intentionally delegated Party A’s board of directors to implement the right of voting contained in the shares of the company held by Party B within the longest term allowed by the law on behalf, which is taken as the return for Party A to provide the loan to Party B. |
Therefore, the both parties shall reach the following agreement:
1. | Party B shall irrevocably agree, authorize and delegate Party A to implement all right of voting of all shares held by Party B, as the shareholder of the company, on behalf within the longest term allowed by law. Party A shall implement such right within the scope regulated by Chinese laws and the Article of Association of the company according to the regulations of Chinese law and the Article of Association of the company. |
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2. | Party A can formulate and modify the rules followed Party A, when Party B authorizes the right to Party A to implement the right on behalf according to the agreement, including but not limited to the number or proportion of shareholders required by the documents, which have authorized or implemented any act and signing to prove that such act has been implemented. In addition, Party A can only act according to such rules. |
3. | All contracting parties of the agreement hereby confirm that however the company equity has any change, Party B shall delegate Party A’s designated staff to implement the right of voting owned by Party B. Party B shall not transfer the equity of the company owned by Party B to any person or company (excluding Party A or individual or entity appointed by Party A). |
4. | The agreement is formally signed by all contracting parties on the date appeared on the first part of the agreement and shall take effect on the day. |
5. | Party B hereby states and promises to Party A that Party B has had all shares of the company, with Party B’s name providing in the signing page of the following text. There is not any lien and right in other items based on such shares. Except Party A, Party B has never issued the Power of Attorney relating to such shares or the right enjoyed Party B, as the shareholder of the company, or never designated the agent relating to such shares or the rights enjoyed by Party B, as the shareholder of the company. Party B shall further state or promise the acts of signing and passing on the agreement does not violate any applicable laws, regulations, judicature or administrative orders, arbitral decision, agreement, contract or covenant. |
6. | Without the unanimous approval from Party A and Party B, the agreement shall not be terminated. However, Party A can terminate the agreement after notifying Party B 30 days before in the written form. |
7. | It requires Party A’s and Party B’s unanimous agreement in the written form to modify and/or terminate the agreement. |
8. | The signing, effect, interpretation and implementation of the agreement are under the jurisdiction of China’s laws. |
9. | The agreement is in duplicate, with Party A and Party B respectively holding one copy. All original documents shall have the same legal effect. |
10. | The both parties agree that if disputes appear due to the agreement, the both parties shall mediate. If within 45 days since the day of mediation, Party A and Party B can not solve such disputes, either party can submit such dispute to [China International Economic and Trade Arbitration Commission] and solve them by means of arbitration according to the effective arbitration rules then, with the arbitration location in Shenzhen. The language used during the arbitration is Chinese. The arbitral decision shall be final and binding on both parties. The regulation of the article is not affected by the termination or removal of the agreement. |
[Signing page below]
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The both parties have formally signed or demanded their respective representatives formally authorized to sign the agency agreement on the date stated on the first part of the agreement. This is hereby to prove.
Party A: | CXJ (Shenzhen) Technology Co., Limited | ||
The undersigned: |
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Name: | |||
Position: | |||
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Party B: | Lixin Cai | ||
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The undersigned: | |||
China’s Id Card No.: 330501198809306554 |
Exhibit 10.4
Equity Pledge Agreement
The Equity Pledge Agreement (“the agreement”) has been signed by the following three parties in Shenzhen City of the People’s Republic of China (“China”) on May 28, 2020:
(1) Lixin Cai , Chinese citizens (hereinafter referred as “pledgee”, Id Card No.: 330501198809306554, Address: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China.;) | |
(2) CXJ Technology (Hangzhou) Co., Limited (“The Company”),a legal person of social organization founded and existed according to Chinese laws, with the address: Room 1903-1, Xizi International Center, Jianggan District, Hangzhou City, Zhejiang Province, China; and | |
(3) CXJ (Shenzhen) Technology Co., Limited (“pledgee”), a wholly foreign-owned enterprise founded and existed according to Chinese laws, with the registered address: 3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China. |
Preface
1. The pledgee is a limited company, which is registered and founded according to the laws of the People’s Republic of China (hereinafter referred as “China”), having the professional knowledge, capacity and resources providing consulting and service.
2. The pledgor is the shareholder of the company. The pledgor has all issued stock rights (100%) in the company.
3. While the pledgee is signing the agreement with the company, it is also signing a consulting service agreement with the company (hereinafter referred as “Consulting Service Agreement” or “Service Agreement”). According to the service agreement, the company shall pay to the pledgee technical consulting and service charge (hereinafter referred as “Consulting Service Charge” or “Service Charge”), which shall be taken as the return for the pledgee to provide consulting and relevant service to the company.
4. The pledgee and pledgor have signed a loan contract on May 28, 2020 (hereinafter referred as “Loan Contract”).
5. In order to make sure that the company implements its obligations under the terms in the consulting service agreement and provide extra guarantee for the pledgee to forcibly exercise its rights to collect consulting service charge from the company, as well as provide guarantees for the loan contract, the pledgor agrees to pledge all stock right of the company held by itself.
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Therefore, through the mutual negotiation between the company and the pledgor, they have specially signed the agreement. The specific terms in the agreement are shown as follow:
1. Definition and interpretation
Unless otherwise stipulated in the agreement, the following terms have the following corresponding meanings:
1.1 “Signing parties” mean all signing parties in the agreement, including pledgee, the company and pledgor (singly referred as “one party”).
1.2 Refer to article 2 in the agreement for the definition of “pledge “.
1.3 “Stock right” means all stock rights legally held by the pledgor in the company.
1.4 “Validity of the pledge” means the term regulated in Article 3.2 in the following text.
1.5 “Default events” mean any event regulated in Article 7.1 in the following text.
1.6 “Default notices” mean the default notice issued by the pledgee according to the agreement.
2. Pledge
The pledgee agrees to pledge the stock right of the company held by it (hereinafter referred as “collateral security”) to the pledgee, which shall be taken as the guarantee for the company to implement its obligations under the terms of the consulting service agreement and the obligations under the loan contract. The pledge under the terms of the agreement means the rights owned by the pledgee, which means the pledgee shall have the right to discount the stock right pledged to it by the pledgor or be preferentially compensated in the price obtained in the way of auctioning or selling such stock right.
3. Validity of the pledge
2.1 The pledge shall take effect since the day when the stock right under the terms of the contract is pledged to the pledgee and recorded in the register book. The validity of the pledge shall be two (2) years after the obligations under the terms of the consulting service agreement are implemented.
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2.2 With the validity of the pledge, if the pledgor fails to perform its obligations under the Consulting Service Agreement and the Loan Contract and the Company fails to pay the consulting service charge under the Consulting Service Agreement, the pledgee shall have the right to exercise the voting rights contained in the pledged assets or to control, sell or dispose the pledged assets under the Agreement.
2.3 During the period of validity of the pledge, the pledgee shall be entitled to any and all dividends distributed or paid pursuant to the Agreement in connection with the stock right.
4. Pledge procedure and registration
The pledge under the terms of the agreement shall be recorded in the register of shareholders of the company. The pledgor shall go through the procedures for the registration of pledge with the Administration for Industry and Commerce within 10 working days since the effective date of the agreement.
5. Statement and promise of the pledgor
5.1 The pledgor is the legal owner of the pledged stock right.
5.2 The Pledgor has never pledged equity to any other contracting party other than the pledgee, or never set other rights over equity for the benefit of any person other than the pledgee.
6. Promises of the pledgor
6.1 The pledgor promises to the pledgee, within the period of the validity of the agreement:
6.1.1 Without the prior written consent from the pledgee, the pledgor shall not transfer or assign the stock right, nor shall it establish any pledge on the equity that may adversely affect the rights or interests of the pledgee, nor shall it be permitted to establish any such pledge.
6.1.2 The pledgor shall observe and execute laws and regulations relating to the pledge; notify the pledgee such notice, order or suggestions within five (5) days after receipt of the notice, order or suggestions issued or made by the competent authority concerning the pledge and follow such notice, orders or suggestions; or raise an objection to above matters under the case when the pledgee makes a reasonable request or with the consent of the pledgee.
6.1.3 When any part, which appears and may affect the equity or the right of the pledgor, or has any guarantee and obligations of the pledgor under the terms of the agreement changed, events appear, which may affect the pledgor to implement its obligations under the terms of the agreement, or receiving any notice, which may have such influence, the pledgor shall notify the pledgee in time.
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6.2 The pledgor agrees that the pledgee’s pledge achieved under the agreement shall not be suspended for any legal proceedings brought by the pledgor or any successor of the pledgor or any person authorized by the pledgor or any other person, or subject to such legal proceedings.
6.3 The pledgor promises to the pledgee that in order to make sure that the service charge is paid or the guarantee to the payment of the service charge is perfected, it shall sign and promote other parties sharing rights and interests in the pledge to sign all relevant property certificates and contracts, adopt and promote other parties sharing the right and interest in the pledge to adopt relevant measures according to the requirements of the pledgee and provide convenience to the pledgee when the pledgee exercises the rights and interests and limits of authority granted by the agreement based on the principle of integrity.
6.4 The pledgor promises to pledgee that it shall sign all amended versions of the agreement relating to the registered pledge (if applicable and necessary) and provide necessary notices, orders and letter of decision to the pledgee within the reasonable term under the case that the pledgee puts forward the requirements.
6.5 The pledgor promises to the pledgee that it shall follow and implement all guarantee, promises, pledges, statement and conditions made or put forward for the interest and right of the pledgee. For the loss suffered by the pledgee due to that the pledgor does not implement or finish implementing such guarantee, promises, pledges, statement and conditions, the pledgor shall compensate.
7. Default event
7.1 The following events shall be considered to be defaults:
7.1.1 If the agreement is considered to be illegal by Chinese competent authority, or the pledgor can not go on implementing its obligations under the terms of the agreement due to any other reason beyond the force majeure;
7.1.2 The company does not pay the service charge in full within the period specified in the Service Agreement
7.1.3 Any statement or guarantee made by the pledgor in article 5 in the agreement are seriously false or misleading, and/or the pledgor breaches any guarantee made in article 5 in the agreement;
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7.1.4 The pledgor breaches its commitments made under Article 6 in the agreement;
7.1.5 The pledgor violates the terms or conditions in the agreement.
7.1.6 The pledgor shall give up or transfer or assign the pledged equity without the prior written consent from the pledgee;
7.1.7 The company is unable to meet its general or other debts;
7.1.8 Any property of the pledgor is adversely affected, so that the pledgee considers that the pledgor’s ability to perform its obligations under the agreement is also adversely affected;
7.1.9 The derivative company or agent of the company can perform only part obligations of the company under the service agreement or refuse to perform payment obligations of the company under the terms of the service agreement;
7.1.10 Other terms of the agreement are violated for the pledgor’s act or omission.
7.2 If the pledgor becomes aware of or finds any event under Article 7.1 in the agreement or any event that has or may cause the appearance of above events, the pledgor shall immediately notify the pledgee in writing.
7.3 Unless the default events under Article 7.1 in the agreement have been resolved to the satisfaction of the pledgee, the pledgee may send a written notice about the default to the pledgor and require the pledgor to pay immediately and in full the unpaid service charge under the terms of the service agreement, as well as the principal and interest payable under the loan contract, or exercise other rights in accordance with Article 8 hereof at any time upon or after the occurrence of any default event.
8. Exercise of Right of Relief
8.1 Measures the secured party have the right to adopt
The pledgor shall irrevocably appoint the pledgee as its agent. The agency rights of the pledgee include the implementation of guarantee clauses in the agreement, any measure necessarily or properly taken in order to realize all purposes in the agreement, or necessary or proper conclusion of any legal document required to realize all purposes in the agreement. If any default event appears, or any default event is occurring, the pledgee shall have the right to exercise the following rights and powers:
8.1.1 | to collect back, check and/or acquire all funds, incomes and other funds, as well as the property arising from the collateral security at present or in the future through the legal procedures or in other ways; |
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8.1.2 | to enter into any extension agreement, reorganization agreement, deposit agreement, merger agreement, consolidation agreement or other agreement in connection with the collateral security, or pledge, give up, accept, hold or use other property in exchange for the collateral security; | |
8.1.3 | to transfer the collateral security to itself or the designated person under its name or the designated person’s name; | |
8.1.4 | to conduct the compromise or settlement, which it considers proper and be related to the collateral security, and take measures, which it thinks proper and is related to collateral security; | |
8.1.5 | to notify any debtor in connection with any collateral security to pay directly to the pledgee; | |
8.1.6 | The pledgor shall stop exercising its all rights, including the right to vote and other rights, which they agree, and then can be exercised (i.e. the rights they can also exercise under other cases where the pledgor does not adopt any measure or send any notice). In addition, all such rights shall belong to the pledgee right away; | |
8.1.7 | The pledgor shall cease to exercise its right authorized to collect and retain allotments in relation to collateral security under other circumstances. And all such rights shall belong to the pledgee right away; | |
8.1.8 | in order to allow the pledgee to exercise the right to vote and other rights as it may be entitled to, and in order to enable the pledgee to obtain all allotments to which it may be entitled, the pledgor shall sign and deliver to the pledgee related legal documents as the pledgee may require it to sign. |
The pledgor hereby issues a power of attorney, which is irrevocable and exclusive, to the pledgee. Pursuant to this power of attorney, the pledgee is fully authorized to take all measures permitted under this term (i.e. Term 8.1) by means of representing and taking the place of the pledgor. After the occurrence of any default event, this power of attorney shall automatically become effective as long as such default event continues and no action is required by any person (including the transfer of any collateral security). However, the pledgee has no obligation to exercise or maintain any such right. Even if it does not exercise or delays in exercising any such right, it does not need to undertake any responsibility for this.
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8.2 Default events and relief.
If any default event appears, in addition to all rights and interests and right of relief it can acquire according to the current effective Chinese laws, the pledgee can also implement any of the following actions under the case of not notifying or exhorting the pledgor:
8.2.1 to ask the pledgor to pay all funds at once, which are due and have not been paid under the terms of the consulting service agreement;
8.2.2 to implement foreclosure to the collateral security, or enforce the security interest of the pledgee in any manner permitted by law or regulated in the agreement;
8.2.3 to terminate the agreement according to the regulations of Article 11;
8.2.4 Exercise any and all of its rights as the beneficiary and legal owner of the collateral security, including but not limited to perfect, transfer and exercise any and all voting rights in connection with any collateral security, the rights and powers and other rights and powers, which can be exercised by mutual consent;
8.2.5 When default event appears, any and all rights and interests and right of relief exercised by it as the person enjoying the security right according to applicable laws.
8.3 The pledgee shall send a notice about the breach to the pledgor when pledgee exercises its right of relief under the terms of the agreement.
8.4 Subject to Term 7.3, the pledgee may exercise its right of relief under the terms of the agreement any time after notice about breach has been given pursuant to the regulation of the term.
8.5 The pledgor shall have the right to discount all or partial stock rights pledged to it according to the agreement and legal procedure, or preferentially be compensated based on the price and funds achieved in the way of auctioning or selling such stock rights, until the unpaid service charge under the terms of the service agreement are paid off.
8.6 The pledgor shall not obstruct the pledgee from exercising the rights of the pledgee under the agreement, but shall provide necessary assistance, so that the pledgee can fully exercise its rights.
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9. Transfer
9.1 Without the prior agreement from the pledgee, the pledgor shall not assign or transfer its rights and obligations under the terms of the agreement.
9.2 The agreement shall have the binding force to the pledgor, its successors, pledgees, and succession company and assignee.
9.3 The pledgee may at any time assign or transfer all or any of its rights and obligations under the service agreement to any person (natural person or legal entity) designated by it.In such case, the assignee shall enjoy all rights of the pledgee under the agreement and assume all obligations of the pledgee under the agreement.Where the pledgee assigns or transfers its rights and obligations under the service agreement, the assignment or transfer shall take effect after the pledgee has delivered a written notice to the pledgor. At the request of the pledgee, the pledgor shall sign the agreements and/or documents relating to the transfer or assignment.
9.4 If the agreement is transferred or assigned due to the change of the control right of the pledgee, for the successors of the pledgee, a new pledge contract shall be signed.
10. Commission charges, expenses and other charges
10.1 The pledgor shall bear all costs and actual expenses in connection with the agreement, including but not limited to attorney’s fees, production costs, stamp duty and other taxes and fees. If the pledgee pays relevant taxes in accordance with applicable laws, the pledgor shall reimburse the pledgee in full for such taxes paid by the pledgee.
10.2 The pledgor shall be liable for all expenses incurred as a result of the pledgee’s failure to pay any tax payable or failure to pay any relevant fees or charges resulting in the pledgee’s recourse against it in any way or manner (including but not limited to any tax, commission, management fees, legal costs, attorney’s fees, and insurance premiums in connection with the disposition of the pledge).
11. Force majeure
11.1 “Force majeure” means any unforeseeable events beyond the reasonable control of each Contracting Party and cannot be prevented by taking reasonable measures, including but not limited to act of government, Acts of God, fires, explosion, typhoon, flood, earthquakes, tides, lightning strikes and wars. However, any shortage of credit, funds or financing shall not be deemed to be an event beyond the reasonable control of the Contracting Parties.The contracting party affected by any force majeure shall promptly notify the other contracting parties of the events leading to its release from liability.
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11.2 In the event that a party affected by force majeure delays in performing or is unable to perform its obligations under the agreement, such party shall not be liable for undertaking any responsibility of compensation for damage resulting therefrom. However, such liability exemption scope only covers such liability of compensation for damage.
12. Confidentiality.
All contracting parties admit that any verbal or written materials relating to the agreement shall be confidential. All contracting parties shall be confidential to all such documents. Without prior written agreement from other contracting parties, any contracting party shall not disclose to any third party such materials, excluding the following documents: (1) the materials the public have known or will know, even if any signing party of the agreement does not disclose it; (2) materials required to be disclosed by law or the rules of the relevant stock exchange; or (3) materials, which are related to this transaction, but has been disclosed to legal or financial advisers of other contracting parties, in the premise that such advisors shall keep confidential of such materials. The behavior of the staff of any contracting party or the institute employed by such contracting party to disclose the confidential information shall be deemed as the behavior of such contracting party. Therefore, all contracting parties shall be responsible to such behaviors.
14. Dispute Resolution.
14.1 The agreement is governed and interpreted by Chinese laws.
When all contracting parties have any dispute about the interpretation and implementation of the terms under the agreement, all contracting parties shall kindly negotiate and solve the dispute. If the negotiation fails, either party can submit relevant dispute to China International Economic and Trade Arbitration Commission for arbitration according to the effective arbitration rules then. The arbitration site is Shenzhen and the language used for the arbitration is Chinese. The arbitration decision is final and binding to all contracting parties. The regulation of the provision shall not be affected by the termination or removal of the agreement.
Except the matters about the appearance of disputes, all contracting parties shall continue to implement their obligations according to the regulations of the agreement based on the Principle of Good Faith.
15. Notice.
Any notice given by all parties for the purpose of exercising their rights and performing their obligations under this Agreement shall be in writing. If the notice is delivered to the recipient by hand, the time of delivery shall be the time when the addressee actually receives the notice; and if the notice is sent by fax, the time of delivery is when the notice is sent.If the date on which the notice is received by the addressee is not a working day, or if the addressee receives the notice after business hours, the notice shall be served on the working day following that day. All notices under the agreement shall be delivered to the address of each contracting party set forth in the first part of the agreement or such other addresses as each contracting party may specify in writing from time to time (including by fax).
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16. Entire agreement.
All contracting parties agree that the agreement has constituted the entire agreement reached by all contracting parties for the subject in the agreement, and shall replace all formerly verbal and/or written agreements and understandings entered into by all parties in connection with the agreement.
17. Severability.
The validity and enforceability of the remaining provisions of the agreement shall not be affected if any provision of the agreement is held to be invalid or unenforceable due to non-compliance with relevant laws.
18. Attachment
The attachment of the agreement constitutes integral part of the agreement.
19. Amendment or supplement
19.1 The agreement may be amended or supplemented by a separate written agreement among all contracting parties hereto, provided, however, that such revised text is duly signed by all parties hereto. Such revised text shall form part of the agreement and shall have the same legal force and effect with the agreement once it is signed by all contracting parties.
19.2 The agreement and any amendment, modification, supplement, addition or alteration to the agreement shall be in writing and shall come into force upon execution by all contracting parties hereto.
20. Language and copies of the agreement.
The agreement is in triplicate, with each party holding one original copy. And all original copies shall have the same legal force.
[Signing page below]
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All contracting parties have promoted their own legal person and their representatives formally authorized to formally sign the agreement on the date stated in the first part of the agreement. This is hereby to prove.
Pledgee: | CXJ (Shenzhen) Technology Co., Limited |
The undersigned:__________________ | |
Name: | |
Position: | |
The company: | CXJ Technology (Hangzhou) Co., Limited |
The undersigned:__________________ | |
Name: | |
Position: | |
Pledgor: | Lixin Cai |
___________________ | |
The undersigned: | |
Chinese Id Card No.: 330501198809306554 |
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Attachment 1
CXJ Technology (Hangzhou) Co., Limited
(hereinafter referred as “the company”)
Resolution of shareholders’ meeting
Whereof, the shareholders of the company have agreed to pledge all shares of the company held according to the Equity Pledge Agreement signed among xx limited company, the company and the shareholders of the company on May 28, 2020.
Whereof, the behavior of the company’s shareholders of signing the Equity Pledge Agreement serves the best interest of the company.
This is hereby to reach the resolution that it is approved that the shareholders of the company pledge all their shares of the company under the Equity Pledge Agreement.
The resolution is signed and submitted by the following undersigned shareholders on May 28, 2020:
Shareholder:
___________________ | |
The undersigned: Lixin Cai | |
Chinese identity card No.: 330501198809306554 |
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Exhibit 10.5
Loan Contract
Lender: CXJ (Shenzhen) Technology Co., Limited
Add: 3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China.
Tel:
Legal representative/Person in charge:
Borrower (full name): Lixin Cai
Add: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China.
Tel:
Id Card No.: 330501198809306554
The borrower agrees to borrow the own funds legally possessed to the borrower. After the both parties negotiate and reach the consensus, they have concluded the following content, which shall be followed together.
Article 1 Promises
The borrow promises as follows: according to the term, purpose of use, way,etc. agreed in the contract, the borrower shall use the loan legally and shall not undertake the behavior of violating laws and regulations by using the loan, and the document materials about the borrowers, guarantor and shareholders shall be real, complete, precise, legal and effective.
Article 2 Borrowings
2.1 Currency and amount of the borrowings (in words): RMB2,000,000 Yuan
2.2 Purpose of the use of the borrowing: daily operation of xxx limited company, in which the borrower holds all shares.
2.3 Term of borrowing:
2.4 Interest rate of the borrowing
2.4.1 For China Yuan borrowings, the interest rate shall be confirmed in the following third way:
(1) fixed interest rate: according to the basis of concurrent and same-grade interest rate publicized by the People’s Bank of China corresponded by the single borrowing term on ____ (the withdrawal date/contract signing date of each borrowing), float upward/downward by ____% till the maturity date of the borrowing.
(2) Floating interest rate: according to the basis of concurrent and same-grade interest rate publicized by the People’s Bank of China corresponded by the single borrowing term on ____ (the withdrawal date/contract signing date of each borrowing), float upward/downward by ____%. The adjustment of floating interest rate shall take _____ (in words) month(s) as one cycle, which shall start from the corresponding date of the borrowing in the first month of the next cycle after the adjustment of benchmark interest rate of CNY borrowings from the People’s Bank of China. And according to the same-grade benchmark interest rate in the corresponding term after the adjustment, the borrower can not further notify the borrower. If there is no corresponding date of the borrowing, the last day in the month shall be deemed to be the corresponding day of the borrowing.
(3) Other ways: the interest rate of the borrowing under the terms of the contract is 5% (monthly interest rate).
2.5 Way of interest accrual and interest settlement
2.5.1 The borrowing shall settle the interest according to the second way:
(1) settle the interest according to _______(month/quarter/year). The date of interest settlement is the 20th of the _____(month/last month of the season/last month of the year). The borrower shall pay the interest on each day of interest settlement. If the last repayment date of the borrowing principal is not on the date of interest settlement, the interest not paid shall be settled with the principal.
(2) Interest shall be paid in full on the maturity date of the borrowing.
(3) The borrowers shall pay Party A all interest of borrowings in full on the second day after receiving the borrowings under the terms of the contract, which is RMB _______ yuan in total.
2.5.2 Implement the borrowing of the fixed interest rate and calculate the interest according to the agreed interest rate. The borrowings, which implement the floating interest rate, shall calculate the interest according to the interest rate confirmed in the floating period then. If the interest rate floats for many times on the single interest settlement day, please calculate the interest in different floating periods at first and then add the gross interest in different floating periods. If it implements other interest, calculate the interest according to the agreement.
2.5.3 If the maturity date of the borrowing is the legal festival and holiday, as well as public holiday. The normal repayment date shall be deferred to the first working day after the legal festival and holiday, as well as the public holiday. During the extension period, calculate and collect the interest according to the agreed way of interest calculation.
2.6 Payment of borrowings
The borrower pays the amount to the designated account stated below according to the instruction of the borrower:
2.7 Repayment
2.7.1 Way of repayment of the borrowings under the terms of the contract is (to select by ticking):
[ ] Installment repayment. The borrowing shall be repaid in _______ installments, with the repayment of the borrowing principal of RMB________ in equal installment in each period. √ is the one-off repayment. The borrowers shall repay all borrowing principal on the maturity date.
2.7.2 The borrower shall repay the borrowing into the following account designated by the lender.
2.8 Repayment in advance
2.8.1 If the borrower repays in advance, the borrower shall issue the written notice of the repayment in advance to the lender. After the lender agrees, the borrower can repay in advance.
2.8.2 When the lender repays in advance, for the repayment part in advance, the interest shall be calculated and collected according to the actual borrowing term and the interest rate agreed in the contract.
2.8.3 If the borrower repays the part loans in advance, the loan not repaid shall be calculated and paid the interest rate according to the interest rate of the borrowing agreed in the contract.
2.9 Bank receipt voucher
The bank receipt of the borrowing, which is offered by the lender, and the bank receipt of the interest payment of the repayment from the borrower are the constituent part of the contract. When the borrowed amount, withdrawal deposit amount, repayment amount, loan releasing date and maturity date, term of the borrowing, interest rate of the borrowing and the usage purpose of the borrowing not recorded in the contract or recorded are inconsistent with the records on the bank receipt, the records on the bank receipt voucher shall prevail.
Article 3 Legal Responsibilities
3.1 Rights and obligations of the borrower
(1) loan withdrawn according to the contracted agreement.
(2) the principal and interest of the borrowing shall be repaid in time and in full amount.
(3) The borrowing is used according to the regulations of laws and rules or the purpose of usage and way agreed in the contract. The borrowing can not be used in the fields and for the purpose of usage, where the country prohibits the manufacture and operation.
(4) To accept and actively cooperate the borrowers to supervise and check the financial activities, usage of the borrowings and other relevant matters. According to the demand of the borrower, other materials and information relating to the usage of borrowings, the demands of the financial account and the lender shall be reported and sent to the lender in time.
3.2 Rights and obligations of lenders
(1) Issue the loan on schedule and in full to the borrower;
(2) If the borrower may suffer the situations of affecting the safety of loan or the implementation of loans, or guarantors suffer halt production, out of business, cancellation of registration, the cancellation of business licence, bankruptcy, removal, the substantial operation losses and others, which may lead it to partially or fully losing corresponding guarantee capacity, or the mortgage and pledges as the guarantees of the borrowing are reduced values, accidentally damaged, or get lost, etc. which may endanger the reality of guarantee, the lender can ask the borrower to rectify, implement the credit right guarantee measures, provide other valid guarantee, or stop issuing loans, publicizing that the borrowings are due in advance, collected back in advance and so forth within the limited term.
(3) Other rights and obligations regulated by laws and regulations or agreed by both parties.
3.3 Other obligations
3.3.1 The both parties shall undertake the confidentiality obligation to the business secrets of the other side achieved and other information relating to the interest during the process of concluding and implementing the contract. Unless otherwise stipulated by laws and regulations, without the approval from the other side, the side can not disclose or reveal the above information to any third party.
3.3.2 After the contracted rights and obligations are terminated, the both parties shall implement necessary notes, assistance and other obligations in accordance with the principle of honesty and credibility.
3.4 Following behaviors of the borrower shall be part of defaults:
(1) violate the obligations agreed in the contract;
(2) do not implement the promises in the article 1 in the contract;
(3) expressly state or indicate with the behavior that the debts, which have been due or are not due, are not repaid.
(4) Do not implement or do not fully implement the obligations under the terms of the contract signed by the borrowers and lenders and the lender announces that the lender violates the terms of the contract.
(5) The lender does not implement or fully implement other situations in the contract.
3.5 If the following situations appear, the lender can adopt the relief measures listed in article 3.6:
(1) the lender or the guarantor default;
(2) the repayment capacity of the lender or the guarantor may have significant disadvantageous changes;
(3) the guarantees and pledges may suffer extensive damage or their values may be reduced or damaged;
(4) the national policy has adjustment, which may bring material and disadvantageous influences on the safety of borrowings.
3.6 when the situations stated in Article 3.4 and Article 3.5 appear, the lender can adopt the following relief measures:
(1) ask the borrowers and guarantors to correct default behaviors or other situations disadvantageous to the safety of loan, implement the measures of other debt liabilities or provide other efficient guarantee within the limited time.
(2) stop issuing the borrowings and collect back the issued borrowings in advance;
(3) execute the legal or agreed rights to the borrowers, such as set-off;
(4) ask the borrowers to undertake damages and compensation, as well as other legal responsibilities;
(5) adopt corresponding asset secure measures and other legal measures;
(6) publicly disclose the default behavior of the borrower;
(7) Other relief measures:__________.
3.7 Due to the default of the borrower, the borrower adopts lawsuit, arbitration and other means to realize the credit, the counsel fee, business travel fee, execution fee, evaluation fee and other necessary fee for realizing the credit paid by the lender for this shall be under the charge of the debtor.
Article 4 Other matters
4.1 Notice
The notice and various communication and contract ways under the terms of the contract shall be sent to the other side according to the correspondence address, telex number or other contract way recorded in the contract. When the contact method of one side changes, they shall immediately notify the rest parties in time.
4.2 Dispute resolution
4.2.1 When disputes appear, the both parties shall negotiate to solve them. If the negotiation fails, they shall be solved according to the first method:
(1) to file a lawsuit in the local people’s court, where the contract is concluded;
(2)to submit __________ for arbitration.
4.2.2 During the lawsuit or arbitration period, in the contract, the articles, which do not involve in the dispute, shall be continued to implement.
4.3 Validity of the contract
4.3.1 The contract shall take effect since the day when it is signed or stamped by both parties.
4.3.2 Signed at: Shenzhen City, the people’s Republic of China.
4.3.3 Before the contract is finished the implementation, if due to the change of laws and regulations, the partial or all provisions in the contract do not match the requirements of laws and regulations and the relevant departments in the country execute according to the laws and regulations newly implemented, the lender can execute relevant matters according to the laws and regulations newly implemented, unless otherwise agreed by both parties.
4.3.4 The borrowings under the terms of the contract only satisfy Party B’s temporary interbank fund borrowing demand required by the finance business of the supply chain. If Party A issues the loans to Party B, it shall be not the behavior of violating the national financial control by taking it as the common business to provide the financial integration to Party B.
4.3.5 For the matters not providing in the contract, the both parties shall further negotiate and confirm.
4.3.6 The contract is in duplicate, with the lender and the borrower respectively holding one copy, which shall have the same legal force.
[Signing page below]
(No text below. This is the signing page of the Loan Contract)
Lender (signature and seal):
Legal representative/person in charge or authorized agent
Date:
Borrower (signature):
Date:
Exhibit 10.6
Option Agreement
The Option Agreement (hereinafter referred as “the agreement”) is signed by the following contracting parties in Shenzhen in China on May 28, 2020:
Party A : CXJ (Shenzhen) Technology Co., Limited
Add: 3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China.
Party B : CXJ Technology (Hangzhou) Co., Limited
Add: Room 1903-1, Xizi International Center, Jianggan District, Hangzhou City, Zhejiang Province, China.
Party C : Lixin Cai, Id Card No.: 330501198809306554
Add: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China.
In the agreement, Party A, Party B and Party C are collectively referred to as “All contracting parties”.
Preface
1. | Party A is a limited company, which is registered and founded according to the laws of the People’s Republic of China (hereinafter referred as “China”), having the professional knowledge, capacity and resources providing consulting and service. |
2. | Party B is a limited liability company, which is registered and founded in China and undertakes the research and development, manufacture and distribution businesses (hereinafter referred as “Business”) of hi-tech products in the auto environmental protection field. |
3. | Party C is the shareholder of Party B and owns all Party B’s stock right (100%). |
4. | All contracting parties have entered into a series of agreements including consulting service agreement (hereinafter referred as “the service agreement”) on May 28, 2020. |
5. | All contracting parties have signed an Equity Pledge Agreement on May 28, 2020 (hereinafter referred as “Equity Pledge Agreement”). |
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6. | Party A and Party C have signed a loan contract on May 28, 2020 (hereinafter referred as “the loan contract”) |
7. | All contracting parties sign the Option Agreement, which shall be taken as the supporting contract of Equity Pledge Agreement, Loan Contract, Consulting Service Agreement and relevant agreements. |
Therefore, all contracting parties reach the following agreement:
1. | Purchase and Sale of Stock Right |
1.1 | Authorization. Party C (hereinafter collectively referred to as “the transferor”) hereby irrevocably authorizes Party A to buy or arrange any person designated by Party A from the transferor its partial or all stock right held by Party B (hereinafter referred as “Option Right”) any time within the scope permitted by the laws of the People’s Republic of China according to the steps confirmed by Party A and at the price stated in term 1.3 in the agreement. Except Party A and/or designated persons by Party A, the “option right” can not be granted to any third party. Party B hereby approves the “option” granted to Party A and/or Party A’s designated person by Party C. The “person” in the article and in the agreement means individual, company, joint entity, partner, enterprise, trust or unincorporated organization.
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1.2 | Exercise of rights. In accordance with laws and regulations of the People’s Republic of China, Party A and/or Party A’s designated person can exercise the “option right” by means of issuing the written notice ( “the notice”) to the transferor. The notice shall state clearly the stock right bought from the transferor (“equity to be purchased”) and the way of purchase. | |
1.3 | Purchase price. |
1.3.1 | When Party A exercises the option right, the purchase price of the equity to be purchased (“the purchase price”) shall be equal to the one actually paid when the transferor initially buys the equity to be purchased, unless the applicable Chinese laws and regulations require to evaluate or have other limitations to the purchase price of the stock right. |
1.3.2 | All contracting parties agree to set the purchase price to be the minimum price permitted by applicable Chinese law if applicable Chinese law requires the valuation of the equity or has other restrictions on the purchase price at the time when Party A exercises its option right. |
1.4 | Transfer of equity to be purchased. After exercising the option right under the terms of the agreement every time: |
1.4.1 | The transferor requires Party B to hold the stockholders’ meeting. During the stockholders’ meeting, Party C shall propose the resolution to transfer the corresponding equity to Party A and/or Party A’s designated persons by means of approval. |
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1.4.2 | The transferor shall enter into the Equity Purchase Agreement with Party A and/or Party A’s designated persons (if applicable) in the reasonable format as Party A deems acceptable in accordance with the terms and conditions of the agreement and the notice in connection with the equity to be purchased. | |
1.4.3 | Related contracting parties shall enter into all other necessary contracts, agreements or documents, acquire all necessary approval and agreement from the government, adopt all necessary measures, transfer the ownership of the equity to be purchased, which is efficient and does not include security interest, to Party A and/or Party A’s designated persons, and makes Party A and /or Party A’s persons to be registered as the owner of equity to be purchased. In the article and the agreement, the term “security interest” means any mortgage, pledge, right and interest or equity of a third party, any stock purchase right, acquisition right, preemption, right of set-off, retention of ownership or other security arrangement, but does not include any security interest created under the Equity Pledge Agreement. |
1.5 | Payment. When to pay the purchase price shall be confirmed through the confirmation between Party A and/or Party A’s designated persons with the transferor according to the applicable laws when exercising the option right. |
2. | Promises related to equity. |
2.1 | Promises related to Party B. Party B hereby promises: |
2.1.1 | Without Party A’s prior written consent, it will not supplement, modify or update the Articles of Association in any form, nor increase or decrease its registered capital, nor change the structure of its registered capital in any other form. | |
2.1.2 | It shall continue the company in accordance with good manager principles applicable to the company and its shareholders and shall carry on its business with diligence and efficiency. | |
2.1.3 | After signing the agreement, without the prior written consent from Party A, Party B shall not sell, transfer, mortgage or dispose any of its assets and legitimate rights and interests or beneficiary of the business or income in any other way, set encumbrance or any security interest upon Party A’s assets, or even approve to set such encumbrance or security interest. | |
2.1.4 | Without prior written notice from Party A, do not provide any guarantee or allow the existence of any debt, except the following debts (i) debts arising out of normal or routine business, other than loans; (ii) debts that have been disclosed to Party A and obtained the written consent from Party A. | |
2.1.5 | Party B shall normally operate all of its business and maintain the value of its assets, without any act or omission which may materially and adversely affect its business or the value of its assets. | |
2.1.6 | Without Party A’s prior written consent, Party B shall not enter into any material agreement other than those entered into during the course of its daily business (in this article, if an agreement involves the amount greater than RMB100,000, the agreement shall be deemed to be a material agreement). |
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2.1.7 | Without Party A’s prior written consent, it will not provide loans or credit loans to any other person. | |
2.1.8 | If requested by Party A, it shall provide Party A with all materials relating to its operation and finance. | |
2.1.9 | Purchase insurance and maintain such insurance from an insurance company approved by Party A. The amounts and types of such insurance shall be the same as those purchased by the company in the same industry or field that carries on similar business and owns similar properties and assets. | |
2.1.10 | Without prior written consent from Party A, it will not merge with or associate with any company, nor acquire or invest in any company. | |
2.1.11 | It will notify Party A of any relevant litigation, arbitration or administrative proceedings that have occurred or may occur and is related to its assets, business and revenues. | |
2.1.12 | In order to maintain its ownership to all its assets, it will sign all documents necessarily or properly, take all necessary or suitable measures, and make all appropriate claims or initiate all necessary or proper claims. | |
2.1.13 | Without prior written notice from Party A, it will not transfer the equity to the shareholders in any form. However, at the request of Party A, it shall distribute all or part of its distributable profits to its shareholders. | |
2.1.14 | It shall appoint any person designated by Party A as its director at the request of Party A. |
2.2 | Promises related to the transferor. Party C hereby promises that: |
2.2.1 | After the execution of the agreement, Party A shall not sell, transfer, mortgage or dispose any legitimate interest or beneficial right of equity in any form without prior written consent from Party A, nor approve the setup of any other security interest over equity, except the pledge over the equity of the transferor under the Equity Pledge Agreement. |
2.2.2 | Without Party A’s prior written notice, it shall not make any decision of shareholders’ resolutions through any legitimate interest or beneficial power of approving, selling, transferring, mortgaging or disposing equity, or setting any other real rights granted by way of security upon equity (excluding pledge set up upon the transferor’s equity according to the Equity Pledge Agreement), nor support or sign any such shareholders’ resolution in the shareholders’ meeting. |
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2.2.3 | Without prior written notice from Party A, all contracting parties hereto shall not agree with, support or sign any shareholders’ resolution at any shareholders’ meeting of Party B about approving the merger or association of Party B with any company, or the acquisition of or investment in any company. | |
2.2.4 | It will notify Party A of any litigation, arbitration or administrative proceedings that have occurred or may occur , and are related to the equity it owns. | |
2.2.5 | It shall promote Party B’s board of directors to approve the transfer of equity to be purchased according to the agreement. | |
2.2.6 | In order to maintain its ownership to all stock rights, it will sign all documents necessarily or properly, take all necessary or suitable measures, and make all necessary or appropriate claims or make necessary or appropriate defense aiming at all compensation requirements. | |
2.2.7 | If Party A requests, it shall appoint Party A’s designated persons to be Party B’s directors. | |
2.2.8 | Whenever Party A requests, it shall transfer its equity to the representative designated by Party A any time unconditionally and give up preemptive right as to the equity transferred to other shareholders by it. | |
2.2.9 | It shall follow the agreement actually and all regulations of other agreement signed by the transferor, Party B and Party A together or respectively, implement all obligations of it under the terms of the agreement diligently, without any act or omission fully affecting the validity and enforceability of such agreement. |
3. | Statement and guarantee. Party B and Party C hereby state and guarantee together and respectively, as of the day of signing the agreement and every transfer date: |
3.1 | It has the right and ability to execute and deliver the agreement and any Equity Transfer Agreement to which it is a contracting party (the “Transfer Agreement”) and implements its obligations under the agreement and terms of any transfer agreement, in the premise that the transfer agreement is related to every transfer of equity to be purchased conducted according to the agreement. Once the agreement and the equity transfer agreement in which Party B and Party C are the contracting parties are signed, it shall constitute the obligations, which are legitimate, effective and have binding force to Party B and Party C. In addition, according to the articles in the above agreements, it can be enforced upon to Party B and Party C. | |
3.2 | Its execution and delivery of the agreement and any behavior of transferring the agreement and the behavior of performance of its obligations under the agreement and any transfer agreement shall not: (i) cause it to violate any relevant Chinese law and regulation; (ii) lead to conflicts with its Articles of Association or other organizational documents; (iii) cause it to violate any agreement or contract in which it is the contracting party or bound upon, or constitute the defaults under the terms of any agreement or contract in which it is the contracting party or is bound upon; (iv) lead to its violation of any relevant authorized agreement or approval paper and/or any standing condition; (v) lead to suspended implementation, cancellation or other attached conditions of any relevant authorized agreement or approval paper. |
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3.3 | Party B’ shares can be transferred. However, Party B has never set any security interest upon shares. | |
3.4 | Party B has no other outstanding liabilities other than the following debts: (i) liabilities arising from its normal business; and (ii) the debts that have been disclosed to and approved by Party A in writing. |
3.5 | Party B complies with all Chinese laws and regulations applicable to the acquisition of assets and securities in connection with the agreement. | |
3.6 | No litigation, arbitration or administrative proceedings are in progress or pending, and are related to the equity, Party B’s assets or Party B itself, and none of the contracting parties is aware of any impending or threatened claim. | |
3.7 | The transferor shall have fair and saleable ownership to its equity and shall have no encumbrances of any kind other than the security interest set up under the Equity Pledge Agreement. |
4. | Agreement transfer |
4.1 | Without Party A’s prior written agreement, Party B and Party C can not transfer their rights and obligations under the terms in the agreement to any third party. | |
4.2 | Party B and Party C hereby agree that Party A may assign all rights and obligations of Party B and Party C under the agreement to any third party as required, and Party A may execute such assignment only by notifying Party B and Party C in writing without obtaining any further consent from Party B and Party C. |
5. | Effective Date and Validity |
5.1 | The agreement shall take effect since the day it is signed. | |
5.2 | The agreement shall remain in force for ten years unless terminated earlier in accordance with the agreement or other provisions of the relevant agreements entered into by all contracting parties. Prior to the expiration of the agreement, The validity of the agreement may be extended with the written consent from Party A. The specific extension time of the validity shall be decided by all contracting parties after they reach an agreement through negotiation. | |
5.3 | If Party A or Party B terminates before its business term (including any extended business term) or other term set forth in Article 5.2 in the agreement, the agreement shall terminate at the same time, unless Party A has transferred its rights and obligations in accordance with Article 4.2 in the agreement. |
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6. | Applicable laws and resolution of disputes |
6.1 | Applicable laws. The execution, validity, interpretation and performance of the agreement and the settlement of disputes under the agreement shall be governed by the laws of China. | |
6.2 | Resolution of disputes. When disputes about the explanation and implementation under the terms of the agreement from all contracting parties appear, all contracting parties shall negotiate to solve the dispute kindly. If negotiation fails,, any side can submit relevant disputes to China International Economic and Trade Arbitration Commission, which shall be solved by arbitration through effective arbitration rules then. The arbitration location is in [Shenzhen] and the language serving the arbitration is Chinese. The arbitration decision shall be final and have binding force to both parties during the negotiation. The regulation of the article is not affected by the termination or cancellation of the agreement.
In addition to the affairs that the both sides of the agreement have disputes on, the both sides of the agreement shall go on implementing their obligations respectively according to the regulation of the agreement based on the good-will principles. |
7. | Taxes and fees. Each contracting party shall bear any and all stamp duty and equity transfer costs and fees incurred in connection with the drafting and execution of the agreement and all transfer agreements and the completion of transactions under the agreement and all transfer agreements in accordance with Chinese law. |
8. | Notice. Any side shall write in Chinese the notice or other letters sent according to the agreement, which shall be sent to the following address or other addresses designated by the other side from time to time in any of the following ways:delivered by hand; sent in the way of registered mail, the mail under postage prepaid or sent through approved express company; or sent by fax. The date when such notice is formally sent shall be confirmed according to the following regulations: (1) once the notice delivered to the recipient by hand shall be considered to be sent formally; (2)the notice shall be considered to be formally sent by mailing in the form of registered mail by air under postage prepaid within ten (10) days since the day when it is sent out (according to the date shown on the postmark) or since the notice delivered to the express service company approved publicly in the world for four (4) days; (3) by means of the notice sent by fax since the day when it is received (subject to the time shown on the delivery confirmation sheet of the relevant documents). |
Party A: | CXJ (Shenzhen) Technology Co., Limited | |
Add: 3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China. | ||
Recipient:Lixin Cai | ||
Fax: | ||
Tel: |
Party B: | CXJ Technology (Hangzhou) Co., Limited | |
Add: Room 1903-1, Xizi International Center, Jianggan District, Hangzhou City, Zhejiang Province, China. | ||
Recipient:Lixin Cai | ||
Tel: | ||
Fax: |
Party C: | Lixin Cai | |
Add: No. 24, Xidou, Zhitou Village, Shuanglin Town, Nanxum District, Hunzhou City, Zhejiang Province, China. | ||
Tel: Fax: |
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9. | Confidentiality.All contracting parties admit and confirm that any verbal or written materials that all contracting parties exchange and are relating to the agreement shall be confidential. All contracting parties shall be confidential to all such materials. Without prior written agreement from other contracting parties, any contracting party shall not disclose to any third party any relevant document, excluding the following materials: |
a. | the documents the public have known or may know (excluding the materials disclosed by each contracting party after receiving such materials); | |
b. | the documents the public have known or may know (excluding the materials disclosed by each contracting party after receiving such materials); | |
c. | the documents required to be disclosed to their legal adviser or financial consultant of any contracting party for the transactions under the terms of the agreement, with such legal advisor or financial consultant required to follow the confidentiality provisions in the agreement as well. The behavior of the staff of any contracting party or the institute employed by such contracting party to disclose the confidential documents shall be deemed as the behavior of such contracting party. Besides, such contracting party shall undertake the responsibilities for the defaults to their staff or such institute according to the agreement. Even if the agreement expires, is revised, canceled, terminated or not implemented, the terms shall remain effective. |
10. | Further guarantee. All contracting parties agree and sign reasonable documents in time, which are necessary, so as to implement all regulations of the agreement or of the documents favorable to all contracting parties and realize the purposes of the agreement or such documents, and agree to adopt necessary measures in order to implement all regulations in the agreement and realize the purpose of the agreement, or adopt measures favorable to it. |
11. | Other regulations |
11.1 | Revision, amendment and supplement. Any amendment or supplement to the agreement shall be in writing and shall be valid only when it is signed by all contracting parties hereto. |
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11.2 | Entire agreement. Notwithstanding the foregoing regulation in Article 5 in the agreement, all contracting parties admit that the agreement has constituted the entire agreement reached by all contracting parties for the subject in the agreement, and shall replace all verbal and/or written agreement and understanding reached as to the subject of the agreement by all contracting parties before or at present. |
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11.3 | Severability. If any provision of the agreement is held to be invalid or unenforceable in accordance with relevant laws, such provision shall be deemed invalid only to the extent within the scope of applicable Chinese laws and regulations. And the validity, legality and enforceability of the remaining provisions of the agreement shall not be affected or weakened in any form.All contracting parties shall formulate valid terms similar in economic effect to such invalid, illegal or unenforceable terms through fair negotiation, so as to replace the invalid, illegal or unenforceable provisions. |
11.4 | Headlines. The headings preceding each provision of the agreement are set for convenience of reference only and shall not affect the interpretation and description of the agreement or in any other way affect the meaning of each provision of the agreement. | |
11.5 | Copies. The agreement is in triplicate, with each contracting party holding one (1) original copy. All original copies shall have the same legal force. | |
11.6 | Successor. The agreement has the binding force to the successors and permitted assignees of each contracting party and shall have them benefited. | |
11.7 | Remain in force. Notwithstanding the possibility of early termination of the agreement, any obligation performed prior to early termination of the agreement shall remain in force. After the termination of the agreement, Article 6, Article 8, Article 9 and Article 11.7 of the agreement shall remain in force. | |
11.8 | Waiver. Any contracting party may waive the terms and conditions of the agreement in writing provided that they are signed by all contracting parties. A waiver by any contracting party of a breach of contract committed by another party under a given circumstance shall not be construed as a waiver by such party of a breach of contract committed by any other party under any similar circumstances. |
[Signing page below]
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All contracting parties have promoted their own legal person and their representatives formally authorized to formally sign the agreement on the date stated in the first part of the agreement. This is hereby to prove.
Party A: | CXJ (Shenzhen) Technology Co., Limited |
The undersigned: __________________ | |
Name: | |
Position: |
Party B: | CXJ Technology (Hangzhou) Co., Limited |
The undersigned:__________________ | |
Name: | |
Position: |
Party C: | Lixin Cai |
___________________ | |
The undersigned: | |
Chinese Id Card No.: 330501198809306554 |
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Exhibit 10.7
Consulting Service Agreement
The consulting and service agreement (hereinafter referred as “the agreement”) is concluded by the following two parties (hereinafter referred as “two parties of the agreement”) in Shenzhen City, Guangdong Province, the People’s Republic of China (hereinafter referred as “China”):
Party A: CXJ (Shenzhen) Technology Co., Limited
Add:3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China.
Party B: CXJ Technology (Hangzhou) Co., Limited
Add: Room 1903-1, Xizi International Center, Jianggan District, Hangzhou City, Zhejiang Province, China.
Preface
(1) Party A is an exclusively foreign-owned enterprise, which has been legally founded and effectively exists in China. It has professional knowledge, capacity and resources of providing consulting and service.
(2) Party B is a limited liability company registered and founded in China. Party B undertakes the development and research, production and distribution businesses of hi-tech technology in the auto environmental protection field (hereinafter referred as “the business”).
(3)The both parties hope Party A to provide management, technology consulting service and relevant service to Party B.
(4)The purpose that the both parties sign the agreement is to regulate that Party A shall provide consulting service to Party B based upon terms and conditions.
Therefore, the both parties shall conclude the following agreements:
1. Definition
1.1 In this definition, the corresponding meanings of the following terms are as follow:
“Related parties” mean to anyone, any other person directly or indirectly control the person, is co-controlled with the person or is co-controlled by the person. In the definition, “control” means to directly or indirectly control or manipulate the management activities or policies of another person (including owing the securities of another person, other owner’s equity or being partner with another person in accordance with the contract or in other way).
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Refer to term 3.1 for the definition of “Consulting service charge”.
“Debt” means to anyone, (i) all funds, which are borrowed by the person to pay for the deferred purchase price of assets or service (including principal, interest, fees and charges); (ii) all L/C issued according to the amount of debt of the person and the face amount of all drafts issued according to such L/C; (iii) all debts taking any encumbrance as the guarantee set upon any property owned by the person whether the person has undertaken such debt or not; (iv) gross amounts of lease capitalization taking the person as the tenant; and (v) all contingent liabilities of the person (including but not limited to all guarantee of the third party).
“Encumbrance” means the legal limit to any type of asset, including but not limited to lien, encumbrance, guarantee, rights of others, agency of right to vote, trust of right of voting or similar arrangement, pledge, security interests, subordinate guarantee agreement, mortgage objection, defects of ownership, reserve protocol of ownership, option, restrictive covenants, transfer limit, preemptive right or preferred right to offer, or any similar equity, or legal limit in any nature.
“Person” means any person, legal person, company, society under voluntary association, partnership, joint venture enterprise, trust, non-corporate organization, equity or other organization or any government body.
“China” means the People’s Republic of China.
“Service”means the service planned to be provided to Party B by Party A in accordance with the agreement. For more detailed description on service, please refer to Article 2. In the agreement, unless the context otherwise requires, “Article” is the term of the agreement.
1.2 All headlines in the agreement do not affect the interpretation to the agreement.
2.Employment and service scope
2.1 Party B agrees to employ Party A to provide service relating to the business at present with Party A and planned to operate in China according to the terms and conditions of the agreement. Party A shall also accept Party B’s employment. The service subject to the agreement includes but is not limited to:
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2.1.1 Operation service of general business. Provide related suggestions and assistance with the development of technology, as well as provide consulting service, especially the consulting service related to auto environmental protection.
2.1.2 Human resources service
(i) to provide suggestions and assistance related to Party B’s working staff, including the assistance of recruitment, employment, secondment of administrative staff, executive staff and Party B’s working staff;
(ii) to train Party B’s management, staff and administrative staff;
(iii) to assist Party B to develop the sound salary management control system;
(iv) to provide suggestions and assistance related to the relocation of Party B’s management staff and workers.
2.1.3 Research and development service
(i) to provide suggestions and assistance related to the research and development to Party B;
(ii) to provide suggestions and assistance related to the development of the industry; and
2.1.4 Other service. Provide other suggestions and assistance to Party B according to the agreement of both parties.
2.2 Exclusive service provider. Within the period of validity in the agreement, Party A is the exclusive provider of service. Unless Party A’s prior written approval is achieved, Party B shall not seek or accept similar service from other service providers.
2.3 Intellectual property related to service. Any right, ownership, equity and intellectual property (including but not limited to copyright, patent right, technical secrets, commercial secrets and others). Whether it is developed by Party A independently, or by Party B based on Party A’s intellectual property, or by Party A based on Party B’s intellectual property, Party A shall enjoy the exclusive and sole right and equity and Party B shall not claim any right, ownership, right and intellectual property to Party A.
However, if the development is conducted by Party A based on Party B’s intellectual property, Party B shall make sure that there is no defect in the intellectual property. If the loss occurs to Party A, Party B shall undertake it. If Party A undertakes the compensation responsibility to any third person for this, after such compensation is made, Party A shall have the right to pursue the recovery from Party B for all loss .
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2.4 Pledge. Party B shall allow and promote Party B’s shareholders to pledge Party B’s equity held by Party B’s shareholder to party A, which shall be taken as the guarantee of Party B for the payment provided to Party A according to the agreement.
3.Payment
3.1 General regulations.
3.1.1 Within the period of validity of the agreement, Party B shall pay the consulting service charge to Party A (hereinafter referred as “Consulting Service Charge”) as the return for the service provided by Party A according to the agreement. Party B shall pay the consulting service charge with Chinese Yuan [according to the quarter]. Its amount shall be confirmed on the basis of all income in the current season recorded in the quarterly financial statement prepared according to the following Term 5.1. Party B shall pay the consulting service charge in the season to party A within 15 days since the day when Party A receives the above financial statement.
3.1.2 When Party A puts forward reasonable requirements, Party B shall allow Party A or Party A’s agent or representative (including independent public accountants, who can be Party B’s) to regularly audit (i) Party B’s account book and record from time to time; (ii) check, duplicate and excerpt all account books, records and documents (including, but not limited to tapes and disks used in the computer) owned by Party B or under Party B’s control; (iii) visit Party C’s workplace and property in the purpose of checking the materials stated in (ii) and (iv) discuss with Party B’s relevant senior clerks or staff about the matters related to Party B’s behavior of implementing the agreement. Such senior clerks or staff mean Party B’s senior clerks or staff knowing about such matters. Party A can exercise the auditing right stated above any time after notifying Party B 10 days earlier. Such written notice shall record the scope, purpose and lasting time of such auditing. However, all of such auditing shall be conducted in the way of not disturbing Party B’s normal operation.
3.2 Unless prior written approval from Party A, Party B shall have no right to offset any account owed by Party A, which Party B claims, and any consulting service charge paid to Party A.
3.3 Party B shall wire the consulting service charge into Party A’s account with Chinese Yuan. Party A’s account information is shown as follows (Party A can designate other account in the written form):
3.4 If Party B does not pay all or part matured consulting service charge to Party A according to the term regulated in the article (i.e. Article 3), Party B shall pay Party A interest of overdue amount in Chinese Yuan according to the interest rate of three-month Chinese Yuan loan publicized by Bank of China on relevant maturity date.
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3.5 Party B shall pay all funds according to the agreement (excluding taxes). Party B shall not deduct tax from such funds, unless Party B must pay withholding taxes when paying such funds.
4. Clauses of further cooperation
Party B shall deposit all business income into the bank account designated by Party A.
5. Party B’s guarantee
Party B hereby agrees that within the period of validity of the agreement:
5.1 Promise of information. Party B shall be provided:
5.1.1 Preliminary monthly statement. Within five days when each calendar month ends, preliminary income statement and balance sheet prepared as of the ending of the calender month according to China Generally Accepted Accounting Principles, which has been continued to be applicable.
5.1.2 Final monthly statement. Within 10 days at the ending of each calender month, the final statement of partial financial status, operation results and matters transaction results prepared as of the day when the calender month ends according to China Generally Accepted Accounting Principles, which has been continued to be applicable, and of the corresponding financial year in the past. Such statement shall include the comparable chart of Party B in the last financial year in the same period.
5.1.3 Quarterly statement. Within 45 days since the end of each quarter (refer to the definition in the following text), concluded income statement, concluded retained earnings statement and changes of concluded financial status statement of Party B in the season and in the relevant financial year in the period from the beginning of the financial year to the ending date of such season, which have not been audited, as well as the statement of changes in financial position (if applicable) of Party B and Party B’s subsidiary and the consolidated balance sheet, which takes the ending date of the season as the expiration date, can be available. Such statement shall record the comparison of Party B’s actual expenditures and budget and include the comparison table of corresponding consolidated data of Party B in the last financial year in the same period. At the same time, relevant certificate issued by Party B’s chief financial officer is attached. The certificate shall clearly state that such financial statement has fairly reflected consolidated financial status and operating results of Party B and Party B’s subsidiary and is prepared according to China Generally Accepted Accounting Principles, which remains applicable as of the ending of corresponding statement period (such statement period is subject to the year-end audit adjustment and the note of audited financial statement).
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5.1.4 Audited annual accounts. Within 6 months at the ending of each financial year, Party B’s relevant annual accounts, which have been prepared according to China Generally Accepted Accounting Principles, keeping applicable, and have been audited (Under any case, such annual account shall list the corresponding data in the last financial year in the form of comparing the table).
5.1.5 Budget. Before the beginning of each financial year, within at least 90 days, the budget of each financial season within such financial year is prepared according to the format matching Party A’s requirements (including Revenue Budgets Income Statement, Cash Source, Use Statement and the balance sheet). Besides, relevant statement issued by Party B’s chief financial officer is attached. Party B’s CFO shall state in such statement that as far as he/she knows, such budget is the reasonable estimate to income, income source, financial expenditure, etc. within the corresponding budget term.
5.1.6 Notice of Action. Notice relating to the following events: (i) any lawsuit or administrative procedure, which may point to Party B and may disadvantageously influence Party B’s business, operation, property, asset status or Party B’s earnings prospect; (ii) any other possible event, which may disadvantageously influence Party B’s business, operation, property, asset status or Party B’s earnings prospect. Party B shall send such notice to Party A in time. (Under any case, Party B shall send such notice to Party A within one working day after any senior staff knows about such event).
5.1.7 Other information. Other information or documents (financial documents or in other aspects) provided by Party B under the request of Party A. In the agreement, “the ending day of the season” is Mar 31, Jun 30, Sep 30, and Dec 30 in every year. The ending day of the first season shall be the first Mar 31, Jun 30, Sep 30 and Dec 31 after the day when the agreement is signed. However, if any ending day of the season is not working day in China, the ending day of the season shall be delayed to the next working day in China.
5.2 Booklet, record and check. Party B shall store the record book and accounts containing the complete, real and precise entries and shall make sure that it matches Chinese GAAP and all requirements in law about all business dealings and transactions relating to Party B’s business and activities. Party B shall allow Party A’s senior staff and the representatives designated by Party A to visit and check their any operation field under the guidance of their senior staff, check their record book and entries and discuss with Party A’s senior staff about Party B’s all events, financial affairs and entries. Party A’s senior staff and the representatives designated by Party A conduct all activities stated above according to the intervals and reasonable degree required by Party A in all reasonable time.
5.3 Franchise rights of the company. Party B shall adopt or instruct Party B’s relevant staff to adopt all necessary measures, so as to maintain its subject qualification and existence and sufficient force of Party B’s major rights, franchise rights and right of licenced use.
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5.4 Affairs of following laws. Party B shall follow all applicable laws, regulations and decrees, as well as all applicable limited conditions imposed upon by all government institutes aiming at its business behavior and property ownership right, including, but not limited to store the valid and correct government approval paper and license when providing services, unless even though such laws, regulations and decrees, as well as limited conditions are not followed, Party B’s business, operation, property, asset status or Party B’s profit prospect will not suffer gross and unfavorable effect in general.
6. Negalive Covenants
Party B promises and agrees that within the period of validity of the agreement, without prior written agreement from Party A, the following behavior will not be implemented:
6.1 Stock right.Party B shall not issue, purchase or redeem its any stock right or bond.
6.2 Encumbrance. Party B shall set, incur or undertake any encumbrance upon any property or asset, which have been owned right now or obtained later (whether or not such property or asset is real estate, or personal property or asset, or such property or asset is tangible property or asset or intangible property or assets), or allow the existence of any such encumbrance. However, the regulations of the article (i.e. Article 6.2) do not forbid setting, incurring, undertaking or having the following encumbrance:
6.2.1 Aiming at the encumbrance set by the undue taxes or the encumbrance set by aiming at the taxes suffering the well-meaning questioning in relevant legal procedure. In addition, Party B has established sufficient reserve aiming at such taxes. And
6.2.2 Encumbrance set upon Party B’s property or asset by law and matching the following conditions during the daily business process: (1) such encumbrance will not have the gross value of such property or asset greatly reduced, or have the use value of such property or asset seriously decreased during the process of Party B’s operation business, or (2) such encumbrance has suffered well-meaning questioning during the related legal procedure. Besides, such legal procedure has the effect to stop foreclosure or sale of such property or asset from being constrained by any such encumbrance.
6.3 Consolidate, merge and sell assets, etc. Party B shall not close a business, be liquidated or dismissed, reach any merging or consolidated transaction or transfer, sell, lease or dispose in other way (or agree to perform the events stated above in any time in the future) its all or partial property or asset, or purchase or acquire any part of any one’s property or asset (in once or a series of related transactions) (excluding the situations of taking over inventory, materials and facility in other way during the daily operation business), unless (i) Party B can sell inventory during the daily business process; (ii) Party B can sell the equipment during the daily operation process, which may not be profited or be outdated.
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6.4 Dividend. Party B shall not declare or pay any dividend, or refund any asset to its shareholders, or authorize or allocate or pay any other fund or deliver any property or cash to its shareholders on its own account, by taking paying certain consideration as the condition, directly or indirectly redeem, collect back, purchase or acquire in other way any type of any share, which has been issued at present or later (or any stock right or any warrant relating to its capital stock issued by it), or reserve any capital for any purpose stated above.
6.5 Lease. Party B shall not allow the gross amount of the funds (inclduing but not limited to any house property tax paid in the name of extra rental or rent expense) paid by it according to any lease agreement about any real estate or private property within any accounting year over [RMB 1 million].
6.6 Debts. Party B shall not sign any debt contract, or create, incur or undertake any debt or allow the existence of any debt, not including the accrued charge and the funds from floating trade, which should be paid, and the debts appearing based on the trade L/C issued during the daily operation process and matching the following conditions (the purpose that Party B has such debt is to achieve the capital to purchase commodities. Besides, such debts shall be fully repaid within [one ] year since the day when it appears initially).
6.7 Advance payment, investment and loan. Party B shall not lend any fund or credit to any person, or provide advance payment to any person, purchase or acquire any stock, debt or security or any other interest from any person, or fund any person, unless Party A can collect back funds payable appearing during the daily business process.
6.8 Transactions with the related parties. Whether or not in the daily operation process, Party B shall not reach any transaction or a series of related transactions with any related part, excluding the related transaction according to the terms and conditions favorable to it in nature. Such terms and conditions mean the ones which can be achieved when Party B has conducted the comparable fair transaction with the people but not the related parties on this premise of achieving Party A’s prior written agreement.
6.9 Capital expenditure. In the following any period (one accounting period in general), the total amount of Party B’s any fixed asset or expenditure of capital and assets (including but not limited to the maintenance and repair expenditure according to the capitalization of Chinese GAAP) should not surpass the amount in the beginning of the year corresponding to the accounting year.
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6.10 Amendment of debt arrangement, agreement or the article of association. Party B shall not (i) pay or prepay, or redeem or acquire any exiting debt voluntarily or optionally (including but not limited to before relevant funds or securities are due, deposit the funds to the bailee, which shall be paid when current debts are due), (ii) modify or amend, or allow to modify or amend any existing debt or any agreement relevant to any item stated above (including but not limited to any purchase agreement, covenant, loan agreement or guarantee agreement), or (iii) modify, amend or change its article of association or business license, any concluded agreement relating to its capital stock, or new agreement relating to its capital stock.
6.11 Business scope. Unless written agreement from Party A is achieved, Party B shall not (directly or indirectly) undertake any business within the operation scope regulated by its business license.
7. Validity and termination
7.1 The agreement shall take effect since the day it is signed. Unless it is terminated according to the regulation of Article 7.2, the agreement shall remain full force.
7.2 Under the following cases, the agreement can be terminated:
7.2.1 If any party seriously violates the agreement (including, but not limited to the consulting service charge unpaid by Party B) and the default belongs to the behavior, which is not non-financial obligation, but can be remedied, the defaulting party does not adopt remedy measures after receiving the written notice from the observant party within 14 days, then the observant party can terminate the agreement after being noticed of defaulting in the written form.
7.2.2 If any party goes bankruptcy or suffers insolvency, is implementing the liquidation or dissolution procedure, bonded by the arrangement of liquidation or dissolution, stops carrying on business or repaying its matured debts, the other side can terminate the agreement after notifying the side in the written form.
7.2.3 If Party A stops operating due to any reason, any party can terminate the agreement after issuing the written notice to the other side.
7.2.4 If party B’s business license or any other license or approval paper for carrying out operation activities are terminated, canceled or revoked, any side can terminate the agreement after sending out the written notice to the other side.
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7.2.5 If the cases appear, which may unfavorably affect the implementation or the goals of the agreement, any side can terminate the agreement after sending out the written notice to the other side. Or
7.2.6 Party A can decide to terminate the agreement on its own, whether or not if it states the reasons of terminating the agreement.
7.3 If one side properly terminates the agreement according to the regulations of Article 7.2, the side does not need to undertake compensation, supplement or damage compensate responsibility only due to it implements the right of termination. Even if the period of validity of the agreement expires or is terminated, it shall not affect Party B’s responsibility to go on paying any consulting service charge, which has appeared or should be paid to Party A, for it is due. When the validity of the agreement expires or is terminated, according to the agreement, the funds, which have been due, but not have been paid to Party A by Party B, as well as all other funds, which Party B shall pay to Party B, but are not due, shall be due right away and paid.
8. Party A’s remedy channels after Party B defaults
In addition to the remedy channels regulated by other articles in the agreement, Party A shall have the right to achieve the remedy channels allowed by Chinese laws, including but not limited to acquire the compensation of any direct or indirect loss arisen due to Party B’s default behavior, as well as the counsel fee appearing for recovering the loss due to such default behavior.
9. Agency
The both parties are independent contractors. Besides, any regulation about the agreement is interpreted to be that for any purpose, one side shall be the agent, partner, legal person or employer of the other side. Unless otherwise specified in this Agreement, any side shall have no right to implement the behaviors with binding force to the other side.
10. Settlement of Disputes
When the both sides of the agreement have disputes about the explanation and implementation of articles under the agreement, the both sides shall kindly negotiate to solve such disputes. If the negotiation fails, any side can submit relevant disputes to China International Economic and Trade Arbitration Commission, which shall be solved by arbitration through effective arbitration rules then. The arbitration location is in [Shenzhen] and the language serving the arbitration is Chinese. The arbitration decision shall be final and have binding force to both parties. The regulation of the article is not affected by the termination or cancellation of the agreement.
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In addition to the affairs that the both sides of the agreement have disputes, the both sides of the agreement shall go on implementing their obligations respectively according to the regulation of the agreement based on the good-will principles.
11. Transfer
Neither side shall assign or transfer any part in this Agreement without the prior written consent of the other side.Therefore, any such assignment or transfer shall be ineffective acts. However, Party A may assign its rights and obligations under this Agreement to its related parties.
12. Notice
Any side shall write in English and Chinese the notice or other letters sent according to the agreement, which shall be sent to the following designated address of the other side or the address designated by the other side from time to time in any following way:delivered by hand; sent in the way of registered mail, the mail under postage prepaid or approved express company; or sent by fax.The date when such notice is formally sent shall be confirmed according to the following regulations: (1) once the notice delivered to the recipient by hand shall be considered to be sent formally; (2)the notice shall be considered to be formally sent by mailing in the form of registered mail by air under postage prepaid within ten (10) days since the day when it is sent out (subject to the date shown on the postmark) or since the notice delivered to the express service company approved publicly in the world for four (4) days; (3) by means of the notice sent by fax since the day when it is received (subject to the time shown on the relevant documents, which are being sent and waited for being confirmed).
Party A: | CXJ (Shenzhen) Technology Co., Limited | |
Add:3607B1, Block A, Xinghe Shiji Building, Southwest of the junction of Shenzhen Avenue and CaiTian Road, Futian District, Shenzhen City, China. | ||
Recipient:Lixin Cai | ||
Fax: | ||
Tel: | ||
Party B: | CXJ Technology (Hangzhou) Co., Limited | |
Add: Room 1903-1, Xizi International Center, Jianggan District, Hangzhou City, Zhejiang Province, China. | ||
Recipient: Lixin Cai | ||
Tel: | ||
Fax: |
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13. General terms
13.1 Even if any side can not or delays in exercising its any right or right of relief under the terms of the contract, it can not constitute that the side has given up such right or right of relief, or the side has given up any other right or right of relief under the terms of the agreement. Even if any side only exercises any item of rights or right of relief under the terms of the agreement or partially exercises such right or right of relief, it can not hamper it to further exercise such right or right of relief, or even any other right or right of relief.
13.2 Even if all or any part of any provision of this Agreement is declared invalid or unenforceable for any reason, all other provisions in this Agreement or all other parts of this article shall remain in full force.
13.3 The agreement has constituted the entire agreement reached by both parties for the subject in the agreement, and shall replace all relevant agreements formerly.
13.4 No amendment or change to this Agreement shall be effective unless made in writing and signed by the parties or their respective agents.
13.5 The agreement is in duplicate, with Party A and Party B holding one original copy respectively. All original copies shall have the same legal force.
[The following is the signing page]
12 |
Both sides have demanded their own legal person and their representatives formally authorized to formally sign the agreement on the date stated in the first part of the agreement. This is hereby to prove.
Party A: | CXJ (Shenzhen) Technology Co., Limited | ||
The undersigned: | |||
Name: | |||
Position: | |||
Party B: | CXJ Technology (Hangzhou) Co., Limited | ||
The undersigned: | |||
Name: | |||
Position: |
[签名页– 咨询服务协议]
Exhibit 22.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors,
CXJ GROUP CO., LIMITED
Room 1903-1, No. 1 building, Xizi International center,
Jianggan District, Hangzhou City,
Zhejiang Province, China.
We consent to the inclusion in the Registration Statement on Form S-1 of CXJ Group Co., Limited of our report date September 1, 2020, relating to our audit of the consolidated balance sheets of CXJ Group Co., Limited as of May 31, 2020 and 2019 and the related consolidated statements of operation and comprehensive, stockholders’ equity, and cash flows for each of the two year period ended of May 31, 2020 and 2019.
We also consent to the reference to us under the caption “Interest of Named Experts and Counsel” in the Registration Statement.
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TOTAL ASIA ASSOCIATES PLT | |
KUALA LUMPUR, MALAYSIA | |
September 4, 2020 |
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