Exhibit 99.1
UTIME LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data and per share data, or otherwise noted)
(Unaudited)
As of March 31, | As of September 30, | |||||||||||
2023 | 2023 | |||||||||||
Assets | RMB | RMB | USD | |||||||||
Current assets | ||||||||||||
Cash and cash equivalents | ||||||||||||
Restricted cash | ||||||||||||
Accounts receivable, net | ||||||||||||
Prepaid expenses and other current assets, net | ||||||||||||
Due from related parties | ||||||||||||
Inventories | ||||||||||||
Assets related to discontinued operation | ||||||||||||
Total current assets | ||||||||||||
Non-current assets | ||||||||||||
Property and equipment, net | ||||||||||||
Operating lease right-of-use assets, net | ||||||||||||
Intangible assets, net | ||||||||||||
Equity method investment | ||||||||||||
Other non-current assets | ||||||||||||
Total non-current assets | ||||||||||||
Total assets | ||||||||||||
Liabilities and shareholder’s equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | ||||||||||||
Short-term borrowings | ||||||||||||
Current portion of long-term borrowings | ||||||||||||
Due to related parties | ||||||||||||
Lease liability | ||||||||||||
Other payables and accrued liabilities | ||||||||||||
Income tax payables | ||||||||||||
Current liabilities related to discontinued operation | ||||||||||||
Total current liabilities | ||||||||||||
Non-current liabilities | ||||||||||||
Long-term borrowings | ||||||||||||
Government grants | ||||||||||||
Deferred tax liability | ||||||||||||
Lease liability - non-current | ||||||||||||
Total non-current liabilities | ||||||||||||
Commitments and contingencies | ||||||||||||
Shareholder’s equity | ||||||||||||
Additional paid-in capital | ||||||||||||
Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
Accumulated other comprehensive income | ||||||||||||
Total UTime Limited shareholder’s equity | ||||||||||||
Non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||
Total shareholders’ equity | ||||||||||||
Total liabilities and shareholders’ equity |
The accompanying notes are an integral part of these consolidated financial statements.
F-1
UTIME LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands, except share data and per share data, or otherwise noted)
(Unaudited)
Six months ended September 30, | ||||||||||||||
Note | 2022 | 2023 | ||||||||||||
RMB | RMB | USD | ||||||||||||
Revenue | 17 | |||||||||||||
Cost of sales | ||||||||||||||
Gross profit | ||||||||||||||
Operating expenses: | ||||||||||||||
Selling expenses | ||||||||||||||
General and administrative expenses | ||||||||||||||
Other expenses (income), net | 13 | ( | ) | ( | ) | ( | ) | |||||||
Total operating expenses | ||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||
Interest expenses | ||||||||||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||||
Income tax benefits | ( | ) | ( | ) | ( | ) | ||||||||
Loss from discontinued operation | ||||||||||||||
Net loss | ( | ) | ( | ) | ( | ) | ||||||||
Less: Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||||
Net loss attributable to UTime Limited | ( | ) | ( | ) | ( | ) | ||||||||
Comprehensive loss | ||||||||||||||
Net loss | ( | ) | ( | ) | ( | ) | ||||||||
Foreign currency translation adjustment | ||||||||||||||
Total comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||||
Less: Comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||
Comprehensive loss attributable to UTime Limited | ( | ) | ( | ) | ( | ) | ||||||||
Loss per share attributable to UTime Limited | ||||||||||||||
Continuing operations | ( | ) | ( | ) | ( | ) | ||||||||
Discontinued operation | ( | ) | ( | ) | ( | ) | ||||||||
Weighted average ordinary shares outstanding | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
UTIME LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands, except share data, or otherwise noted)
(Unaudited)
Equity attributable to UTime Limited | ||||||||||||||||||||||||||||
Ordinary shares | Additional | Retained
Earnings | Accumulated
Other | Non- | Total | |||||||||||||||||||||||
Number
of Shares | Amount | Paid-in
Capital | (Accumulated
Deficit) | Comprehensive
Income (Loss) | controlling Interests | Shareholders’
Equity | ||||||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||||||
Balance as of April 1, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Foreign currency translation difference | - | ( | ) | |||||||||||||||||||||||||
Balance as of September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
Balance as of April 1, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Foreign currency translation difference | - | ( | ) | |||||||||||||||||||||||||
Balance as of September 30, 2023 | ( | ) | ( | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
UTIME LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands or otherwise noted)
(Unaudited)
Six months ended September 30, | ||||||||||||
2022 | 2023 | |||||||||||
RMB | RMB | USD | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net Loss (excluding discontinued operation) | ( | ) | ( | ) | ( | ) | ||||||
Loss of discontinued operation | ( | ) | ( | ) | ( | ) | ||||||
Adjustments to reconcile net income (loss) from operations to net cash used by operating activities | ||||||||||||
Depreciation and amortization | ||||||||||||
Allowances for obsolete inventories, net | ( | ) | ||||||||||
Loss on disposal of property and equipment | ||||||||||||
Deferred tax | ( | ) | ( | ) | ||||||||
Net changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | ( | ) | ||||||||||
Prepaid expenses and other current assets | ( | ) | ( | ) | ( | ) | ||||||
Inventories | ||||||||||||
Accounts payable | ( | ) | ( | ) | ( | ) | ||||||
Other payables and accrued liabilities | ( | ) | ||||||||||
Related parties | ||||||||||||
Government grants | ( | ) | ( | ) | ||||||||
Other non-current assets | ( | ) | ( | ) | ||||||||
Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
Investing activities: | ||||||||||||
Payment for property and equipment | ( | ) | ||||||||||
Payment for intangible assets | ( | ) | ||||||||||
Net cash used in investing activities | ( | ) | ||||||||||
Financing activities: | ||||||||||||
Proceeds from short-term borrowings | ||||||||||||
Loan received from a shareholder | ||||||||||||
Repayment of loan from a shareholder | ( | ) | ( | ) | ( | ) | ||||||
Repayment of short-term borrowings | ( | ) | ( | ) | ( | ) | ||||||
Repayments of long-term borrowings | ( | ) | ( | ) | ( | ) | ||||||
Net cash provided by financing activities | ||||||||||||
Effect of exchange rate changes on cash and cash equivalent and restricted cash | ||||||||||||
Net increase in cash and cash equivalent and restricted cash | ||||||||||||
Cash and cash equivalents and restricted cash at beginning of period | ||||||||||||
Cash and cash equivalents and restricted cash at end of period |
F-4
UTIME LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(Amounts in thousands or otherwise noted)
Six months ended September 30, | ||||||||||||
2022 | 2023 | |||||||||||
RMB | RMB | USD | ||||||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Income taxes paid (refunded) | ||||||||||||
Interest paid |
As of September 30, | ||||||||||||
2022 | 2023 | |||||||||||
RMB | RMB | USD | ||||||||||
Reconciliation of cash, cash equivalents and restricted cash in unaudited condensed consolidated statements of cash flows | ||||||||||||
Restricted cash | ||||||||||||
Cash and cash equivalents | ||||||||||||
Cash, cash equivalents and restricted cash |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES
UTime Limited was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on October 9, 2018. UTime Limited does not conduct any substantive operations on its own but instead conducts its business operations through its subsidiaries, variable interest entity (“VIE”) and subsidiaries of the VIE. UTime Limited, its subsidiaries, VIE and subsidiaries of the VIE (together, the “Company”) is primarily engaged in the operation of designing, manufacturing and marketing mobile communication devices, and selling a variety of related accessories.
(a) History and Reorganization
The Company commenced its
operations in June 2008 through United Time Technology Co., Ltd. (“UTime SZ” or “VIE”), a People’s
Republic of China (the “PRC” or “China”) company established by Mr. Minfei Bao (“Mr. Bao”), Mr. Junlin
Zhou (“Mr. Zhou”) and Mr. Bo Tang (“Mr. Tang”). As of March 31, 2017, Mr. Bao, Mr. Zhou and Mr. Tang held
For the purpose of an initial public offering in the United States (“IPO”), the following transactions were undertaken to reorganize the legal structure (the “Reorganization”) of the Company. In October 2018, UTime Limited was incorporated in the Cayman Islands. In November and December 2018, UTime International Limited (“UTime HK”) was incorporated in Hong Kong and Shenzhen UTime Technology Consulting Co., Ltd. (“UTime WFOE”) was incorporated in China, respectively.
In March 2019, UTime WFOE entered into a series of contractual agreements with VIE and Mr. Bao, which were further amended and restated in August and September 2019, respectively, and were entered into among UTime WFOE, VIE, Mr. Bao and Mr. Min He (“Mr. He”). Pursuant to these agreements as detailed in note 1(b), the Company believes that these contractual arrangements would enable the Company to (1) have power to direct the activities that most significantly affect the economic performance of the VIE and its subsidiaries, and (2) receive the economic benefits of the VIE and its subsidiaries that could be significant to the VIE and its subsidiaries. Accordingly, the Company is considered the primary beneficiary of the VIE and is able to consolidate the VIE and its subsidiaries.
Do Mobile India Private Ltd.
(“Do Mobile”) was incorporated on October 24, 2016 in New Delhi, India. It is an operating entity that sells cell phone products
and provides after-sale services for the Company’s own in-house brand products in India. Prior to the reorganization, the majority
of Do Mobile’s equity interests were held by Mr. Bao through an entrust agreement with Mr. Wukai Song through a holding company,
Bridgetime Limited (“Bridgetime”). Bridgetime was incorporated on September 5, 2016 in British Virgin Island (“BVI”)
under the laws of BVI, with Mr. Wukai Song owning
On March 5, 2018, Bridgetime
issued
F-6
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
After this, Mr. WuKai Song
owned
On May 20, 2019, the Company
approved a board resolution that agreed to transfer
As all the entities involved in the process of the Reorganization are under common control before and after the Reorganization, the Reorganization is accounted for in a manner similar to a pooling-of-interest with the assets and liabilities of the parties to the Reorganization carried over at their historical amounts.
On June 3, 2019, the Company
entered into a share subscription agreement with HMercury Capital Limited, a company that was incorporated under the laws of the BVI and
controlled by Mr. He. HMercury Capital Limited purchased an aggregation of
On April 29, 2020, the Company
approved a board resolution, which became effective immediately, that agreed to repurchase
Name | Date of Incorporation | Place of Incorporation | Percentage of Beneficial Ownership | Principal Activities | ||||
Subsidiaries | ||||||||
UTime HK | ||||||||
UTime WFOE | ||||||||
Bridgetime | ||||||||
Do Mobile |
F-7
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
Name | Date of Incorporation | Place of Incorporation | Percentage of Beneficial Ownership | Principal Activities | ||||
VIE | ||||||||
UTime SZ | ||||||||
Subsidiaries of the VIE | ||||||||
Guizhou United Time Technology Co., Ltd. (“UTime GZ”) | ||||||||
UTime Technology (HK) Company Limited (“UTime Trading”) | ||||||||
UTime India Private Limited (“UTime India”) | ||||||||
Guangxi UTime Technology Co., Ltd. (“UTime Guangxi”) | ||||||||
Gesoper S De R.L. De C.V. (“Gesoper”) | ||||||||
Firts Communications And Technologies De Mexico S.A. De C.V. (“Firts”) |
(b) VIE Arrangements between the VIE and the Company’s PRC subsidiary
The Company conducts substantial majority of business in the PRC through a series of contractual arrangements with the VIE and its subsidiaries. The VIE and subsidiaries of the VIE hold the requisite licenses and permits necessary to conduct the Company’s business. In addition, the VIE and subsidiaries of the VIE hold the assets necessary to operate the Company’s business and generate substantial majority of the Company’s revenues.
Our contractual arrangements with the VIE and its respective shareholders allow us to (i) determine the most significant economic activities of the VIE; (ii) receive substantially all of the economic benefits of the VIE; and (iii) have an exclusive option to purchase all or part of the equity interest in and/or assets of the VIE when and to the extent permitted by PRC laws. As a result of our direct ownership in UTime WFOE and the contractual arrangements with the VIE, we are regarded as the primary beneficiary of the VIE, and we treat the VIE and its subsidiaries as our consolidated affiliated entities under generally accepted accounting principles in the United States of America (“US GAAP”). We have consolidated the financial results of the VIE and its subsidiaries in our consolidated financial statements in accordance with US GAAP.
The following is a summary of the contractual arrangements by and among UTime WFOE, the VIE and the shareholders of the VIE and their spouses, as applicable.
Exclusive Technical
Consultation and Service Agreement. Pursuant to the exclusive technical consultation and service agreement entered into between
UTime WFOE and the VIE, dated on March 19, 2019, UTime WFOE has the exclusive right to provide or designate any entity to provide the
VIE business support, technical and consulting services. The VIE agrees to pay UTime WFOE (i) the service fees equal to the sum of
F-8
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
Equity Pledge Agreement.
Pursuant to the equity pledge agreement dated March 19, 2019 and amended on September 4, 2019 among UTime WFOE, the VIE and the shareholders
of the VIE, the shareholders of the VIE agree to pledge their
Exclusive Call Option Agreements. Pursuant to the exclusive call option agreement dated March 19, 2019 and amended on September 4, 2019 among UTime WFOE, the VIE and the shareholders of the VIE, each of the shareholders has irrevocably granted UTime WFOE an exclusive option to purchase all or part of its equity interests in the VIE, and the VIE has irrevocably granted UTime WFOE an exclusive option to purchase all or part of its assets. With regard to the equity transfer option, the total transfer price to be paid by UTime WFOE or any other entity or individual designated by UTime WFOE for exercising such option shall be the capital contribution mirrored by the corresponding transferred equity in the registered capital of the VIE. But if the lowest price permitted by the then-effective PRC Law is lower than the above capital contribution, the transfer price shall be the lowest price permitted by the PRC Law. With regard to the asset purchase option, the transfer price to be paid by UTime WFOE or any other entity or individual designated by UTime WFOE for exercising such option shall be the lowest price permitted by the then-effective PRC Law.
Power of Attorney. Pursuant to a series of powers of attorney dated March 19, 2019 and amended on September 4, 2019 issued by each shareholder of the VIE, each shareholder of the VIE irrevocably authorizes UTime WFOE or any natural person duly appointed by UTime WFOE to exercise on the behalf of such shareholders with respect to all matters concerning the shareholding of such shareholders in the VIE, including without limitation, attending shareholders’ meetings of the VIE, exercising all the shareholders’ rights and shareholders’ voting rights, and designating and appointing the legal representative, the chairperson, directors, supervisors, the chief executive officer and any other senior management of the VIE.
Business Operation Agreement. Pursuant to the business operation agreement dated March 19, 2019 and amended on September 4, 2019 among UTime WFOE, the VIE and the shareholders of the VIE, the shareholders of the VIE hereby acknowledge, agree and jointly and severally warrant that without the prior written consent of UTime WFOE or any party designated by UTime WFOE, the VIE shall not engage in any transaction which may have a material or adverse effect on any of its assets, businesses, employees, obligations, rights or operations (except for those occurring in the due course of business or in day-to-day business operations, or those already disclosed to UTime WFOE and with the explicit prior written consent of UTime WFOE). In addition, the VIE and its shareholders hereby jointly agree to accept and strictly implement any proposal made by UTime WFOE from time to time regarding the employment and removal of the VIE’s employees, its day-to-day business management and the financial management system of the VIE.
Spouse Consent Letter. Pursuant to a series of spousal consent letters dated March 19, 2019 and amended on September 4, 2019, executed by the spouses of the shareholders of the VIE, Mr. Bao and Mr. He, the signing spouses confirmed and agreed that the equity interests of the VIE are the own property of their spouses and shall not constitute the community property of the couples. The spouses also irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection with the equity interests of the VIE held by their spouses.
F-9
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
Risks in relation to VIE structure
The Company believes that the contractual arrangements with its VIEs and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If we or the VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:
● | revoke the business and operating licenses of the Company’s PRC subsidiary and VIE; |
● | discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE; |
● | limit the Company’s business expansion in China by way of entering into contractual arrangements; |
● | imposing fines, confiscating the income from the Company’s PRC subsidiary or the VIE, or imposing other requirements with which we or the VIE may not be able to comply; |
● | requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or determine the most significant economic activities of the VIE; or |
● | restricting or prohibiting our use of the proceeds of its IPO to finance our business and operations in China. |
The Company’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to determine the most significant economic activities of the VIE and it may lose the ability to receive economic benefits from the VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary or VIE.
Mr. Bao and Mr. He hold
F-10
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
The Company has aggregated
the financial information of the VIE and subsidiaries of the VIE in the table below.
As of | As of | |||||||
March 31, | September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | ||||||||
Restricted cash | ||||||||
Accounts receivable, net | ||||||||
Prepaid expenses and other current assets, net | ||||||||
Due from related parties | ||||||||
Inventories | ||||||||
Total current assets | ||||||||
Non-current assets | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets, net | ||||||||
Intangible assets, net | ||||||||
Equity method investment | ||||||||
Other non-current assets | ||||||||
Total non-current assets | ||||||||
Total assets | ||||||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable | ||||||||
Short-term borrowings | ||||||||
Current portion of long-term borrowings | ||||||||
Due to related parties | ||||||||
Lease liability | ||||||||
Other payables and accrued liabilities | ||||||||
Income tax payables | ||||||||
Total current liabilities | ||||||||
Non-current liabilities | ||||||||
Long-term borrowings | ||||||||
Government grants | ||||||||
Deferred tax liability | ||||||||
Lease liability - non-current | ||||||||
Total non-current liabilities | ||||||||
Total liabilities |
F-11
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Revenue | ||||||||
Net loss | ( | ) | ( | ) | ||||
Net cash used in operating activities | ( | ) | ||||||
Net cash used in investing activities | ( | ) | - | |||||
Net cash provided by financing activities | ( | ) |
(c) Initial Public Offering
On April 8, 2021, the Company
completed its IPO on Nasdaq Capital Market. In the offering,
(d) Asset Acquisitions
On December 17, 2021, the
Company, through UTime Trading, acquired a
(e) Discontinued operation in India
The Company ceased operations in India, where in-house brand products were produced, for the six months ended September 30, 2023. Due to an overall change of business environment in India since July 2021, the Company decided to make a strategic shift and switch focus from India to Mexico. Assets, liabilities and expenses of India are disclosed as assets, liabilities and loss of discontinued operation in the consolidated financial statements.
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Assets classified as discontinued operation | ||||||||
Liabilities classified as discontinued operation |
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Loss from discontinued operation, net of income taxes |
F-12
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 2 — GOING CONCERN
The Company’s financial statements is prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern.
As of September 30, 2023,
the Company had current assets of RMB
The Company had accumulated
deficit of RMB
The Company continues to focus on improving operational efficiency and cost reductions, developing core cash-generating business and enhancing efficiency. The Company expects that the existing and future cash generated from operation will be sufficient to fund the future operating expenses and capital expenditure requirements. In addition, the Company is also working on raising additional funding to finance the operations as well as business expansion.
The consolidated financials have been prepared assuming that the Company will continue as a going concern and, accordingly financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
F-13
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries, VIE and VIE’s subsidiaries for which the Company is the primary beneficiary. All significant inter-company balances and transactions between the Company, its subsidiaries, VIE and VIE’s subsidiaries are eliminated.
Use of estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Management evaluates these estimates and assumptions on a regular basis. Significant accounting estimates reflected in the Company’s consolidated financial statements include but are not limited to estimates and judgments applied in the allowance for receivables, write down of other assets, estimated useful lives of property and equipment, impairment on inventory, sales return, product warranties, the valuation allowance for deferred tax assets and income tax and provision for employee benefits. Actual results could differ from those estimates and judgments.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank deposits and short-term, highly liquid investments with original maturities of three months or less at the date of purchase, that are readily convertible to known amounts of cash and have insignificant risk of changes in value related to changes in interest rates.
Restricted cash
Restricted cash consisted of collateral representing cash deposits for long-term borrowings.
F-14
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Accounts receivable, net
Accounts receivable and other receivables are reflected in the Company’s consolidated balance sheets at their estimated collectible amounts. A substantial majority of its accounts receivable are derived from sales to well-known technological clients. The Company follows the allowance method of recognizing uncollectible accounts receivable and other receivables, pursuant to which the Company regularly assesses its ability to collect outstanding customer invoices and make estimates of the collectability of accounts receivable and other receivables. The Company provides an allowance for doubtful accounts when it determines that the collection of an outstanding customer receivable is not probable. The allowance for doubtful accounts is reviewed on a timely basis to assess the adequacy of the allowance. The Company takes into consideration (a) historical bad debts experience, (b) any circumstances of which it is aware of a customer’s or debtor’s inability to meet its financial obligations, (c) changes in its customer or debtor payment history, and (d) its judgments as to prevailing economic conditions in the industry and the impact of those conditions on its customers and debtors. If circumstances change, such that the financial conditions of its customers or debtors are adversely affected and they are unable to meet their financial obligations to the Company, it may need to record additional allowances, which would result in a reduction of its net income.
Concentration of credit risk and major customers
Assets that potentially subject
the Company to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable
and other current assets. The maximum exposure of such assets to credit risk is their carrying amounts as at the balance sheet dates.
As of March 31, 2022 and September 30, 2023, the aggregate amounts of cash and cash equivalents, and restricted cash are RMB
To limit exposure to credit
risk relating to deposits, the Company primarily place cash deposits with large financial institutions in PRC. The Company conducts credit
evaluations of its customers, and generally does not require collateral or other security from them. The Company establishes an accounting
policy for allowance for doubtful accounts on the individual customer’s financial condition, credit history, and the current economic
conditions. As of March 31, 2023 and September 30, 2023, the Company recorded RMB
Major customers and accounts
receivable — During the six months ended September 30, 2022, the Company had three customers that accounted over
Major suppliers —During
the six months ended September 30, 2022, the Company had no suppliers accounting over
Inventories
Inventories of the Company consist of raw materials, finished goods and work in process. Inventories are stated at lower of cost or net realizable value with cost being determined on the weighted average method. Elements of cost in inventories include raw materials, direct labor costs, other direct costs, consignment manufacturing cost and manufacturing overhead. The Company assesses the valuation of inventory and periodically writes down the value for estimated excess and obsolete inventory based upon the product life-cycle.
F-15
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Property and equipment, net
Property and equipment are
stated at cost less accumulated depreciation and impairment, if any. Cost represents the purchase price of the asset and other costs incurred
to bring the asset into its existing use. Maintenance and repairs are charged to expenses as incurred.
Useful life | ||
Office real estate | ||
Furniture and equipment | ||
Production and other machineries |
Upon retirement or sale of an asset, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to other (income) expenses, net.
Intangible assets, net
Intangible asset results from
the acquisition of the licensed software and customer relationships. Identifiable intangible assets are carried at acquisition cost less
accumulated amortization and impairment loss, if any. The Company accounts for such licensed software with definite lives and amortized
using the straight-line method over its estimated useful life of
Impairment of long-lived assets
The Company reviews the carrying value of long-lived assets to be held and used when events and circumstances warrants such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed are determined in a similar manner, except that fair market values are reduced for the cost to dispose. No impairment charge was recognized for all periods presented.
Equity method investment
The Company’s long-term investments consist of equity method investment. Investment in entities in which the Company can exercise significant influence and holds an investment in voting common stock or in-substance common stock (or both) of the investee but does not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC topic 323 (“ASC 323”), Investments-Equity Method and Joint Ventures. Under the equity method, the Company initially records its investment at cost. The Company subsequently adjusts the carrying amount of the investments to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. The Company evaluates the equity method investment for impairment under ASC 323. An impairment loss on the equity method investment is recognized in earnings when the decline in value is determined to be other-than-temporary.
F-16
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Fair value of financial instruments
Under the FASB’s authoritative guidance on fair value measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.
Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 | Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. | |
Level 2 | Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities. | |
Level 3 | Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker traded transactions. Level 3 valuations incorporate certain unobservable assumptions and projections in determining the fair value assigned to such assets. |
All transfers between fair value hierarchy levels are recognized by the Company at the end of each reporting period. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risks associated with investment in those instruments.
Fair Value Measured or Disclosed on a Recurring Basis
Borrowings — Interest rates under the borrowing agreements with the lending parties were determined based on the prevailing interest rates in the market. The Company classifies the valuation techniques that use these inputs as Level 2 fair value measurement. The carrying value of the Company’s borrowings approximates fair value as the borrowing bears interest rates that are similar to existing market rates.
Other financial items for disclosure purpose — The fair value of other financial items of the Company for disclosure purpose, including cash and cash equivalents, restricted cash, accounts receivable, other receivables, other current assets, accounts payable, other payables and accrued liabilities, approximate their carrying value due to their short-term nature.
Government Grants
Government
grants are recognized in the balance sheet initially when there is reasonable assurance that they will be received and that the enterprise
will comply with the conditions attached to them. When the Company received the government grants but the conditions attached to the
grants have not been fulfilled, such government grants are deferred and recorded as deferred revenue. As of September 30, 2023 and March
31, 2023, the deferred revenue were RMB
F-17
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease, right-of-use (“ROU”) assets and lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease, ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. It uses the implicit rate when readily determinable. The operating lease, ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company have elected not to recognize ROU assets and lease liabilities for short-term leases for all classes of underlying assets. Short-term leases are leases with terms of 12 months or less and does not include a purchase option that is reasonably certain to exercise.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.
Revenue recognition
The Company derives revenue principally from the sale of mobile phones and accessories. Revenue from contracts with customers is recognized using the following five steps:
1. | Identify the contract(s) with a customer; |
2. | Identify the performance obligations in the contract; |
3. | Determine the transaction price; |
4. | Allocate the transaction price to the performance obligations in the contract; and |
5. | Recognize revenue when (or as) the entity satisfies a performance obligation. |
A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct. The transaction price is the amount of consideration the Company expects to be entitled from a customer in exchange for providing the goods or services.
F-18
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The unit of account for revenue recognition is a performance obligation (a good or service). A contract may contain one or more performance obligations. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. Otherwise, performance obligations are combined with other promised goods or services until the Company identifies a bundle of goods or services that is distinct. Promises in contracts which do not result in the transfer of a good or service are not performance obligations, as well as those promises that are administrative in nature, or are immaterial in the context of the contract. The Company has addressed whether various goods and services promised to the customer represent distinct performance obligations. The Company applied the guidance of ASC Topic 606-10-25-16 through 18 in order to verify which promises should be assessed for classification as distinct performance obligations.
The Company’s revenue is primary derived from (i) OEM and ODM services for well-known brands; (2) its own in-house brands, positioned in the emerging middle class consumer groups and price-sensitive consumers in emerging markets. Refer to Note 18 to the consolidated financial statements for disaggregation of the Company’s revenue by type of product and geography information for the six months ended September 30, 2022 and 2023.
1) Cooperation with OEM/ODM customers
Revenue is measured based on the consideration to which the Company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Company generates its revenue through product sales, and shipping terms generally indicate when it has fulfilled its performance obligations and passed control of products to its customer, when the goods have been shipped to the customer’s specific location (delivery). Following delivery, the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility when selling the goods and bears the risks of obsolescence and loss in relation to the goods but has no right to return the products (other than for defective products). A receivable is recognized by the Company when the goods are delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due. Revenue from OEM/ODM customers does not meet the criteria to be recognized over time since 1) it does not have the right of payment for the performance completed to date, 2) its work neither creates or enhances an asset controlled by customers until goods are delivered to the customer, 3) customers do not receive and consume benefits simultaneously provided by its performance.
F-19
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
2) Sales of products for in-house brands
The Company ceased operations in India where in-house brand products were produced, for the six months ended September 30, 2023. Due to an overall change of business environment in India since July 2021, the Company has decided to make a strategic shift and switch focus from India to Mexico.
Contract assets and liabilities
Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. The majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventories and property and equipment, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing processes.
Contract liabilities are mainly advance from customers.
Warranty
The
Company offers a standard product warranty that the product will operate under normal use. For products sold to OEM/ODM customers, the
warranty period generally ranges from
Value added tax
In
the PRC, value added tax (the “VAT”) of
Cost of sales
Cost of sales consists primarily of material costs, direct labor costs, other direct costs, consignment manufacturing cost and manufacturing overhead, which are directly attributable to the production of products. Write-down of inventories to lower of cost or net realizable value is also recorded in cost of sales.
F-20
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Borrowing cost
Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalized as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized. All other borrowing costs are recognized in interest expenses in the consolidated statement of comprehensive loss in the period in which they are incurred.
Income taxes
Income taxes are accounted for using the asset and liability method as prescribed by ASC 740 “Income Taxes.” Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for those deferred tax assets for which if it is more likely than not that the related benefit will not be realized.
Uncertain tax positions
The guidance on accounting for uncertainties in income taxes prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining its provision for income taxes. The Company recognizes interests and penalties, if any, under accrued expenses and other current liabilities on its balance sheet and under other expenses in its statement of comprehensive income. The Company did not recognize any interest and penalties associated with uncertain tax positions for the six months ended September 30, 2022 and 2023. As of March 31, 2023 and September 30, 2023, the Company did not have any significant unrecognized uncertain tax positions.
F-21
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Foreign currency translation and transactions
The reporting currency of the Company is the RMB. The Company’s subsidiaries, consolidated VIE and VIE’s subsidiaries with operations in the PRC, Hong Kong, and other jurisdictions generally use their respective local currencies as their functional currencies, except that UTime Trading uses United States dollar (“US$”) as functional currency. The financial statements of the Company’s subsidiaries, other than the consolidated VIE and VIE’s subsidiary with the functional currency in RMB, are translated into RMB using the exchange rate as of the balance sheet date for assets and liabilities, historical exchange rate for equity amounts and the average rate during the reporting period for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders’ equity.
In the financial statements of the Company’s subsidiaries and consolidated VIE and VIE’s subsidiary, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in other (income) expenses, net in the consolidated statements of comprehensive loss.
Convenience translation
Translations
of balances in the consolidated balance sheets, consolidated statements of comprehensive loss and consolidated statements of cash flows
from RMB into USD as of and for the six months ended September 30, 2023 are solely for the convenience of the reader and has been made
at the exchange rate quoted by the central parity of RMB against the USD by the People’s Bank of China on September 30, 2023 of
USD1.00 = RMB
F-22
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Comprehensive loss
Comprehensive loss is comprised of the Company’s net loss and comprehensive loss. The component of comprehensive loss is consisted solely of foreign currency translation adjustments.
Loss per share
Basic
net loss per share is the amount of net loss available to each share of ordinary shares outstanding during the reporting period. Diluted
net loss per share is the amount of net loss available to each share of ordinary shares outstanding during the reporting period adjusted
to include the effect of potentially dilutive ordinary shares, if any.
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Numerator: | ||||||||
Net loss | ( | ) | ( | ) | ||||
Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
( | ) | ( | ) | |||||
Denominator: | ||||||||
Net loss attributable to UTime Limited per ordinary share: | ||||||||
Continuing operations | ( | ) | ( | ) | ||||
Discontinued operation | ( | ) | ( | ) |
F-23
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Recently issued accounting standards
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The new amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.
NOTE 4 — ACCOUNTS RECEIVABLE, NET
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Accounts receivable | ||||||||
Allowance for doubtful accounts | ( | ) | ( | ) | ||||
Accounts receivable, net |
For the six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Balance at beginning of period | ||||||||
Additions for the period | ||||||||
Written off for the period | ||||||||
Foreign currency translation difference | ||||||||
Balance at the end of period |
F-24
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 4 — ACCOUNTS RECEIVABLE, NET (cont.)
As
of March 31, 2023 and September 30, 2023, the allowance for doubtful accounts amounted to RMB
NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Advance to suppliers | ||||||||
Input GST/IVA | ||||||||
Receivables from supply chain service provider | ||||||||
Expected return assets | ||||||||
Other receivables | ||||||||
Allowance for doubtful accounts | ( | ) | ( | ) | ||||
Prepaid expenses and other current assets, net |
As
of March 31, 2023, other receivables consisted of deposits for leased equipment and VAT accrued for purchase of raw materials amounted
to RMB
F-25
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 6 — INVENTORIES
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Raw materials | ||||||||
Work in progress | ||||||||
Finished goods | ||||||||
Total inventory, gross | ||||||||
Inventory reserve | ( | ) | ( | ) | ||||
Total inventory, net |
Six months ended September 30, | Six months ended September 30, | |||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Balance at beginning of year | ||||||||
Additional charge (written off), net | ( | ) | ||||||
Foreign currency translation difference | ||||||||
Balance at the end of year |
NOTE 7 — PROPERTY AND EQUIPMENT, NET
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Office real estate | ||||||||
Furniture and equipment | ||||||||
Production and other machineries | ||||||||
Total | ||||||||
Less: accumulated depreciation | ||||||||
Property and equipment, net |
Depreciation
charged to expense amounted to RMB
impairment for property and equipment was recorded for the six months ended September 30, 2022 and 2023.
F-26
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 8 — LEASE LIABILITIES
Operating leases as lessor
As of September 30, | RMB | |||
2024 | ||||
2025 | ||||
Total |
For
the six months ended September 30, 2022 and 2023, the operating lease income of RMB
Operating leases as lessee
The Company leases space under non-cancelable operating leases for office and manufacturing locations and production equipment. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.
Most leases include option to renew in condition that it is agreed by the landlord before expiry. Therefore, the majority of renewals to extend the lease terms are not included in its right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluate the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.
As most of the Company’s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Operating lease cost | ||||||||
Short-term lease cost | ||||||||
Lease cost |
F-27
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 8 — LEASE LIABILITIES (cont.)
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash outflow from operating leases |
RMB | USD | |||||||
2024 | ||||||||
2025 | ||||||||
2026 and after | ||||||||
Total lease payments | ||||||||
Less: Interest | ( | ) | ( | ) | ||||
Present value of lease liabilities | ||||||||
Less current portion, record in current liabilities | ( | ) | ( | ) | ||||
Present value of lease liabilities |
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Remaining lease term and discount rate: | ||||||||
Weighted average remaining lease term (years) | ||||||||
Weighted average discount rate | % | % |
NOTE 9 — EQUITY METHOD INVESTMENT
For the six months ended September 30, 2022 and 2023, the Company recorded its pro-rata share of losses in Philectronics of RMBnil, as other (income) expenses, net in the consolidated statements of comprehensive loss. The Company recorded RMBnil impairment losses on its investment during the six months ended September 30, 2022 and 2023, as other expenses, net in the consolidated statements of comprehensive loss. Philectronics has net liability position and temporarily ceased its operation without foreseeable plan for resuming its business operation.
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Cost | ||||||||
Less: accumulated impairment | ( | ) | ( | ) | ||||
Equity method investment, net |
F-28
UTIME
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 10 — OTHER NON-CURRENT ASSETS
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Prepayment for property and equipment and intangible asset | ||||||||
Total other non-current assets |
NOTE 11 — BORROWINGS
As of March 31, | As of September 30, | |||||||||||
Note | 2023 | 2023 | ||||||||||
RMB | RMB | |||||||||||
Short-term borrowings | ||||||||||||
Secured loan | (a) | |||||||||||
PingAn Bank Co., Ltd. | (b) | |||||||||||
China Resources Bank of Zhuhai Co., Ltd. Loan 1 | (c) | |||||||||||
China Resources Bank of Zhuhai Co., Ltd. Loan 2 | (d) | |||||||||||
Baosheng County Bank | (e) | |||||||||||
WeBank Co., Ltd. 1 | (f) | |||||||||||
WeBank Co., Ltd. 2 | (g) | |||||||||||
WeBank Co., Ltd. 3 | (h) | |||||||||||
China Resources SZITIC Trust Company Limited | (i) | |||||||||||
Industrial and Commercial Bank of China (“ICBC”) Loan 1 | (j) | |||||||||||
ICBC Loan 2 | (k) | |||||||||||
Long-term borrowings | ||||||||||||
Shenzhen Rural Commercial Bank loan 1 | (l) | |||||||||||
Shenzhen Rural Commercial Bank loan 2 | (m) | |||||||||||
Representing by: | ||||||||||||
Current portion of long-term borrowings | ||||||||||||
Non-current portion of long-term borrowings |
(a) |
F-29
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 11 — BORROWINGS (cont.)
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
(i) |
|
(j) |
F-30
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 11 — BORROWINGS (cont.)
(k) |
(l) | |
(m) |
NOTE 12 — OTHER PAYABLES AND ACCRUED LIABILITIES
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Advance from customers | ||||||||
Accrued payroll | ||||||||
VAT payable | ||||||||
Other payables | ||||||||
Total |
As of March 31, 2023, other
payables mainly included RMB
F-31
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 13 — OTHER EXPENSES/(INCOME), NET
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Exchange gains | ( | ) | ( | ) | ||||
Government grants | ( | ) | ||||||
Others | ( | ) | ||||||
Total | ( | ) | ( | ) |
NOTE 14 — RELATED PARTIES BALANCES AND TRANSACTIONS
Related Parties | Relationship | |
Mr. Bao | ||
Mr. He | ||
Mr. Yu | ||
Philectronics | ||
Grandsky Phoenix Limited |
(1) |
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Philectronics | ||||||||
Mr. Yu | ||||||||
F-32
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 14 — RELATED PARTIES BALANCES AND TRANSACTIONS (cont.)
(2) |
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
Mr. Bao | ||||||||
Grandsky Phoenix Limited | ||||||||
(1) | On April 1, 2023, The Company entered into a loan agreement
with Grandsky Phoenix Limited to borrow USD |
NOTE 15 — SHAREHOLDERS’ EQUITY
As of March 31, 2021, the
Company had
On April 8, 2021, the Company
completed its IPO on Nasdaq Capital Market. In the offering,
On June 29, 2022, the board
of directors of the Company approved the 2022 Performance Incentive Plan (the “2022 PIP”). Under the 2022 PIP, the Company
has reserved a total of
F-33
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 16 — COMMITMENTS AND CONTINGENCIES
(a) | Capital commitment |
As of September 30, 2023, the Company had no capital commitments.
(b) | Legal proceedings |
From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually and in the aggregate, is likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company has not recorded any material liabilities in this regard as of March 31, 2023 and September 30, 2023.
However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the Company’s financial position and results of operations for the periods in which the unfavorable outcome occurs.
NOTE 17 — REVENUE AND GEOGRAPHY INFORMATION
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Feature phone | ||||||||
Smart phone | ||||||||
Others | ||||||||
Total |
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Mainland China | ||||||||
Hong Kong | ||||||||
Africa | ||||||||
The United States | ||||||||
Mexico | ||||||||
South America | ||||||||
Others | ||||||||
Total |
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
PRC | ||||||||
Mexico | ||||||||
Total |
Pursuant to ASC 280-10-50-41,
the other non-current assets of RMB
F-34
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 18 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
The Company performed a test
on the restricted net assets of consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08
(e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial
statements for the parent company. The amounts restricted include paid-in capital, capital surplus and statutory reserves, after intercompany
eliminations, as determined pursuant to PRC generally accepted accounting principles, totaling RMB
The subsidiaries did not pay any dividend to the parent for the periods presented. For the purpose of presenting parent only financial information, the Company records investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income of the subsidiary is presented as “Income from equity method investments.” Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.
As of March 31, | As of September 30, | |||||||
2023 | 2023 | |||||||
RMB | RMB | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and Cash equivalents | ||||||||
Prepaid expenses and other current assets | ||||||||
Inter-company receivable | ||||||||
Non-current assets | ||||||||
Investment in subsidiary | ( | ) | ( | ) | ||||
Total assets | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Inter-company payable | ||||||||
Due to related parties | ||||||||
Other payables and accrued liabilities | ||||||||
Total liabilities | ||||||||
Shareholders’ equity | ||||||||
Ordinary shares, par value US$ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive income | ||||||||
Total shareholder’s equity | ||||||||
Total liabilities and shareholders’ equity |
F-35
UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)
NOTE 18 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (cont.)
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
Loss from equity method investments | ( | ) | ( | ) | ||||
Operating expenses | ( | ) | ( | ) | ||||
Net loss | ( | ) | ( | ) | ||||
Foreign currency translation difference | ||||||||
Comprehensive loss | ( | ) | ( | ) |
Six months ended September 30, | ||||||||
2022 | 2023 | |||||||
RMB | RMB | |||||||
CASH FLOW FROM OPERATING ACTIVTIES | ||||||||
Net loss | ( | ) | ( | ) | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Equity loss of subsidiaries | ||||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | ( | ) | ||||||
Inter-company payable (net of inter-company receivable) | ( | ) | ||||||
Related parties | ||||||||
Other payables and accrued liabilities | ||||||||
Net cash used in operating activities | ( | ) | ||||||
Loan received from a shareholder | ||||||||
Effect of exchange rate changes on cash and cash equivalent and restricted cash | ( | ) | ||||||
Net change in cash and cash equivalent | ||||||||
Cash and cash equivalents, beginning of year | ||||||||
Cash and cash equivalents, end of year |
The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of March 31, 2023 and September 30, 2023, respectively.
NOTE 19 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
F-36