Exhibit 99.2
OSTIN TECHNOLOGY GROUP CO., LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)
F-1
OSTIN TECHNOLOGY GROUP CO., LTD.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Financial Statements
F-2
OSTIN TECHNOLOGY GROUP CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2024 AND SEPTEMBER 30, 2023
(IN U.S. DOLLARS, EXCEPT FOR NUMBER OF SHARES DATA)
March 31, 2024 | September 30, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Inventories, net | ||||||||
| Advances to suppliers, net | ||||||||
| Tax receivables | ||||||||
| Due from related parties | ||||||||
| Prepaid expenses and other receivables | ||||||||
| Total Current Assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Land use rights, net | ||||||||
| Intangible assets, net | ||||||||
| Long-term investment | ||||||||
| Right-of-use lease assets | ||||||||
| Other long-term receivables | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Convertible notes | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Advances from customers | ||||||||
| Due to related parties | ||||||||
| Current portion of long-term payable | ||||||||
| Short-term borrowings | ||||||||
| Operating lease liabilities – current | ||||||||
| Deferred tax liability | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabilities – non-current | ||||||||
| Long-term borrowings | ||||||||
| Long-term payables | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
Class
A ordinary share, $ | ||||||||
Class B ordinary share, $ | ||||||||
| Preference share, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Equity Attributable to Ostin Technology Group Co., Ltd. | ||||||||
| Equity attributable to non-controlling interests | ||||||||
| Total Shareholders’ Equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F-3
OSTIN TECHNOLOGY GROUP CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED MARCH 31, 2024 AND 2023
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
| For the six months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Research and development costs | ( | ) | ( | ) | ||||
| Gain from disposal of property, plant and equipment | ||||||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Interest income (expense), net | ( | ) | ( | ) | ||||
| Other income (expenses), net | ||||||||
| Total other income (expenses), net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit / (provision) | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Net loss attributable to Ostin Technology Group Co., Ltd. | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive (loss) income attributable to non-controlling interests | ( | ) | ||||||
| Comprehensive loss attributable to Ostin Technology Group Co., Ltd. | ( | ) | ( | ) | ||||
| Loss per share | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Weighted average number of ordinary shares outstanding | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F-4
OSTIN TECHNOLOGY GROUP CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2024 AND SEPTEMBER 30, 2023
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
| Class A Shares | Amount | Class B Shares | Amoun | Additional paid-in capital | Statutory reserves | Accumulated deficit | Accumulated other comprehensive income (loss) | Non- controlling interests | Total shareholders’ equity | |||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Private placement | ||||||||||||||||||||||||||||||||||||||||
| Private placement | ||||||||||||||||||||||||||||||||||||||||
| Shares repurchase | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Capital contribution by Non- | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
OSTIN TECHNOLOGY GROUP CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2023 AND SEPTEMBER 30, 2022
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
| Shares | Amount | Additional paid-in capital | Statutory reserves | Retained Earnings/ (Accumulated deficit) | Accumulated | Non- controlling interests | Total shareholders’ equity | |||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F-5
OSTIN TECHNOLOGY GROUP CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2024 AND 2023
(IN U.S. DOLLARS)
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation expense | ||||||||
| Amortization expense of land use rights | ||||||||
| Amortization expense of intangible assets | ||||||||
| Amortization expense of right-of-use assets | ||||||||
| Bad debt expense for accounts receivable | ||||||||
| Bad debt expense for advances to suppliers | ||||||||
| Inventory provision | ||||||||
| Deferred tax assets, net | ||||||||
| Gain from disposal of property, plant and equipment | ( | ) | ( | ) | ||||
| Imputed Interest | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Notes receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Advances to suppliers | ( | ) | ||||||
| Prepaid expenses and other receivables | ( | ) | ( | ) | ||||
| Other long-term receivables | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Advances from customers | ( | ) | ||||||
| Income tax payable | ( | ) | ||||||
| Operating lease liability | ( | ) | ||||||
| Other long-term payables | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property, plant and equipment | ||||||||
| Purchases of intangible assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from capital contribution | ||||||||
| Proceeds from private placement | ||||||||
| Proceeds in 2024 from the current portion of Long-term payable | ||||||||
| Proceeds from long-term payable liability | ||||||||
| Proceeds from short-term bank borrowings | ||||||||
| Repayments on short-term bank borrowings | ( | ) | ( | ) | ||||
| Proceeds from short-term borrowings from third party individuals | ||||||||
| Repayments on short-term borrowings from third party individuals | ( | ) | ( | ) | ||||
| Proceeds from related parties | ||||||||
| Repayments on related parties | ( | ) | ||||||
| Proceeds from Convertible notes | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of changes in currency exchange rates | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash, cash equivalents and restricted cash at the beginning of period | ||||||||
| Cash and cash equivalents and restricted cash at the end of period | $ | $ | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F-6
OSTIN TECHNOLOGY GROUP CO., LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Ostin Technology Group Co., Ltd. (“Ostin”)
is a holding company incorporated on
Reorganization
A reorganization of the Company’s legal structure was completed in June 2020. The reorganization involved (i) the incorporation of Ostin, a Cayman Islands company; Ostin Technology Holdings Limited (“Ostin BVI”), a British Virgin Islands company and a wholly owned subsidiary of Ostin; Ostin Technology Limited (“Ostin HK”), a Hong Kong company and a wholly owned subsidiary of Ostin BVI; and Nanjing Aosa Technology Development Co., Ltd. (“Nanjing Aosa”), a PRC limited liability company and a wholly owned subsidiary of Ostin HK; and (ii) the entry into a series of contractual arrangements (the “VIE Agreements”) by and between Nanjing Aosa and certain shareholders of Jiangsu Austin Optronics Technology Co., Ltd. (“Jiangsu Austin”) which was a PRC company limited by shares formed in December 2010 and has been the primary operating company of the Company in China. Ostin, Ostin BVI, Ostin HK, and Nanjing Aosa are all holding companies and have not commenced operations.
Prior to the reorganization, Mr. Tao Ling,
Mr. Xiaohong Yin and 54 other shareholders (collectively and excluding Suhong Yuanda (as defined below), the “VIE
Shareholders”) collectively owned
Termination of the VIE Arrangements
In August 2021, shareholders of Jiangsu Austin
entered into shares transfer agreements with the Company. Pursuant to the agreement, they agreed to transfer an aggregate of
During the years presented in these consolidated financial statements, the control of the entities has never changed (always under the control of the Company). Accordingly, the combination has been treated as a corporate restructuring (“Reorganization”) of entities under common control and thus the current capital structure has been retroactively presented in prior periods as if such structure existed at that time and in accordance with ASC 805-50-45-5, the entities under common control are presented on a combined basis for all periods to which such entities were under common control. The consolidation of Ostin and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
F-7
The following diagram illustrates the Company’s corporate structure, including its subsidiaries as of the six months ended March 31, 2024.
F-8
The condensed consolidated financial statements included herein are unaudited. The balance sheet at September 30, 2023 has been derived from the audited consolidated financial statements as of that date. In the opinion of management, the unaudited condensed consolidated interim financial statements include all normal recurring adjustments necessary for a fair statement of the financial position as of March 31, 2024 and the results of operations and comprehensive income (loss) for the six months ended March 31, 2024 and 2023 and cash flows for the six months ended March 31, 2024 and 2023. Certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations and comprehensive income (loss) for the six months ended March 31, 2024 and cash flows for the six months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the year ended September 30, 2023.
On November 20, 2023, Beijing Suhongyuanda
Technology Co., Ltd. entered into an equity transfer agreement with Shenzhen Ou Xun Electronics Co., Ltd. (“Ou Xun”),
under which Suhong Yuanda agreed to transfer
On January 9, 2024, Sichuan Ausheet
Electronic Materials Co., Ltd. (“Sichuan Ausheet”) entered into an equity transfer agreement with Nanjing Aoni
Investment Management Partnership (Limited Partnership), a related party (“Nanjing
Aoni”). Pursuant to the equity transfer agreement, Sichuan Ausheet transferred RMB
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Going Concern
As
of March 31, 2024, the Company had current assets of $
The Company meets its day-to-day working capital requirements through its bank facilities. Most of the bank borrowings as of March 31, 2024 that are repayable within the next 12 months are subject to renewal and the management is confident that these borrowings can be renewed upon expiration based on the Company’s past experience and credit history.
In order to strengthen the Company’s liquidity in the foreseeable future, the Company has taken the following measures: (i) Negotiating with banks in advance for renewal and obtaining new banking facilities; (ii) Diversifying financing channels includes but is not limited to methods such as equity financing, sale and leaseback; and (iii) Implementing various strategies to enhance sales and profitability.
The management has a reasonable expectation that the Company has adequate resources to continue in operational existence for 12 months from the filing date.
Basis of presentation and principles of consolidation
The accompanying condensed consolidated interim financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United Stated of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated upon consolidation. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair presentation of the Company’s financial position, its results of operations and its cash flows, as applicable, have been made. Interim results are not necessarily indicative of results to be expected for the full year. Accordingly, these statements should be read in conjunction with the Company’s audited financial statements and note thereto as of and for the years ended September 30, 2023 and 2022.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power, has the power to appoint or remove the majority of the members of the board of directors, to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
F-9
Use of estimates
The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Such estimates include, but are not limited to, allowances for doubtful accounts, inventory valuation, useful lives of property, plant and equipment, intangible assets, and income taxes related to realization of deferred tax assets and uncertain tax position. Actual results could differ from those estimates.
Foreign currency translation
The financial records of the Company’s subsidiaries in China are maintained in their local currencies which are Chinese Yuan (“RMB”). Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the consolidated balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income, net in the consolidated statements of income and comprehensive income.
The Company and its subsidiaries in British Virgin Islands and Hong Kong maintained their financial record using the United States dollar (“USD”) as the functional currency, while the subsidiaries of the Company in mainland China maintained their financial records using RMB as the functional currency. The reporting currency of the Company is USD. When translating local financial reports of the Company’s subsidiaries into USD, assets and liabilities are translated at the exchange rates at the consolidated balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the consolidated statements of income and comprehensive income.
| March 31, 2024 | September 30, 2023 | March 31, 2023 | ||||||||||
| Period ended RMB: USD exchange rate | ||||||||||||
| Period average RMB: USD exchange rate | ||||||||||||
Cash and cash equivalents
The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains most of the bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.
Restricted cash
Restricted cash is certain portion of bank deposit used for pledging or guarantee purpose.
Accounts receivable and allowance for credit losses Accounts receivable is recognized and carried at original invoiced amount less an estimated allowance for credit losses. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on an aging analysis basis. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written-off against the allowance for credit losses after management has determined that the likelihood of collection is not probable.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments to inventory for excess quantities, obsolescence or impairment when appropriate to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory.
F-10
Advances to suppliers
Advances to suppliers refer to advances for purchase of materials or other services, which are applied against accounts payable when the materials or services are received.
The Company reviews a supplier’s credit
history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting
in an impairment of their ability to deliver goods or provide services, the Company would write off such amount in the period when it
is considered as impaired. The allowance for advances to suppliers recognized for the six months ended March 31, 2024 and 2023 were $
Advances from customers
Advances from customers refer to advances received from customers regarding product sales, for which revenue is recognized upon delivery.
Property, plant and equipment, net
Property, plant, and equipment are recorded at
cost less accumulated depreciation.
| Useful Lives | ||
| Buildings | ||
| Machinery and equipment | ||
| Transportation vehicles | ||
| Office equipment | ||
| Electronic equipment |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses.
Leasehold Improvement
Leasehold improvement projects refer to the renovation, refurbishment, or decoration of leased premises or assets with the aim of enhancing efficiency and value. Leasehold improvement assets are initially measured at cost upon acquisition and are amortized over their estimated useful lives, typically the lease term. Amortization expense is recognized using the straight-line method.
Construction in progress
Construction in progress refers to ongoing or partially completed projects that the company is engaged in, including land development, new building construction, remodeling and renovation projects, among others. Construction in progress is measured using the cost model. The cost of construction in progress includes direct labor costs, material costs, subcontractor expenses, and interest expenses directly related to the project. The cost model is based on actual incurred expenses and is continuously updated.
Upon completion of the construction in progress, the company will apply the applicable accounting standards and policies to amortize the asset based on its estimated useful life and estimated fair value. The method of amortization will be determined based on the nature of the project and the company’s accounting policies.
F-11
Land use rights, net
Under the PRC law, all land in the PRC is owned
by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels
of land for specified periods of time.
| Rental period | ||
| Land use rights |
Intangible assets, net
Intangible assets consist of software and patent
purchased from other companies and capitalized software developed by the Company, which are recorded at cost less accumulated amortization.
| Useful lives | ||
| Software | ||
| Patent |
Capitalized software represents software that is developed or purchased by an entity that will be sold, leased, or marketed as a stand-alone product as well as a software that will be sold as part of another product or process. All costs of developing software prior to establishing its technological feasibility are research and development costs and are expensed as incurred. Technological feasibility is achieved when an entity has completed all planning, designing, coding, and testing activities necessary to establish that the software product can be produced to meet its design specifications, including functions, features, and technical performance requirements. As described in ASC 985-20-25-1, this can be achieved through the use of either (1) a detail program design, or (2) the combination of a product design and working model, which have been confirmed for completeness by testing. Costs of developing software after establishing technological feasibility are recorded capitalized software.
The capitalized costs of developing software that will be sold, leased, or marketed will be amortized separately for each software product. An entity will begin amortizing the capitalized costs of the software when the product first becomes available for general release to customers.
For the six months ended March 31, 2024, the Company purchased intangible assets from third parties.
Lease
From the Perspective as a Lessee
The Company has three operating leases for manufacturing facilities and offices with no option to renew and the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. When each lease begins, the management evaluates factors such as the lease term, rental payment method, and transfer of control to determine whether it should be classified as an operating lease or finance lease. Effective October 1, 2019, the Company adopted the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed in financial statements. For related leases before the adoption date October 1, 2019, ROU assets and related lease obligations are recognized at adoption date based on the present value of remaining lease payments over the lease term. For related leases after the adoption date, ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
F-12
From the Perspective as a Lessor
The Company leased a building to a third party
for a period of
The Company also leased some equipment to third
parties, without a purchase option at the end of the lease term, while lease term of those equipment leases is mostly from
Long-term investment
Company’s long-term investment consists of equity investments without a readily determinable fair value. Under ASC Topic 321, Accounting for Equity Securities and Equity Investment, a measurement alternative is allowed for equity securities without a readily determinable fair value. Under the measurement alternative, the investment is measured at cost minus impairment, if any, plus or minus changes results from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Convertible notes
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging -Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. For share-settled convertible debt and convertible preferred stock, the if-converted method is typically used to account for diluted earnings per share. For public companies, the guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The company adopted this standard beginning October 1, 2023. Following the adoption of ASU 2020-06 Convertible notes are recorded and disclosed as convertible notes payable, net of unamortized discount.
Long-term payable
During the six months ended March 31, 2024, the
Company has two transactions with two third-party for manufacturing facilities where the Company sold certain machinery located in China and
subsequently leased the machinery back for 24 months. In these arrangements, the Company has no obligation to transferring the underlying
asset to an unaffiliated third party or has a bargain purchase option at a price of RMB
The Company concluded these transactions were
not qualified as sale-leaseback accounting and shall account as normal borrowings from third parties. For accounting purposes, the Company
did not derecognize the transferred asset and accounts for any amounts received as a financial liability measured at amortized cost subsequent
to initial recognition. The balances with these third-party lenders as of March 31, 2024 and September 30, 2023 are $
For the six months ended March 31, 2024 and 2023,
the Company recognized interest expense of $
F-13
Impairment of long-lived assets
The Company’s management reviews the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
There was no impairment charge recognized for long-lived assets for March 31, 2024 and 2023.
Fair value measurement
Fair value measurements and disclosures requires disclosure of the fair value of financial instruments held by the Company. Fair value is defined as 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. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| ● | Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
For the Company’s financial instruments, including cash and cash equivalents, accounts receivable, other receivables, accounts payable, due to related parties, notes receivable, notes payable, and short-term borrowing, the carrying amounts approximate their fair values due to their short maturities as of March 31, 2024 and 2023.
Value-added tax (“VAT”)
Sales revenue represents the invoiced value of
goods, net of VAT. All of the Company’s products sold in the PRC are subject to a VAT on the gross sales price. The Company is subject
a VAT rate of
Revenue recognition
The Company generates its revenues mainly from sales of display modules and polarizers to third-party customers, who are mainly display manufacturers and end-brand customers. The Company follows Financial Accounting Standards Board (FASB) ASC 606 and accounting standards updates (“ASU”) 2014-09 for revenue recognition. On October 1, 2017, the Company has early adopted ASU 2014-09, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) identify the contract 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.
F-14
The Company considers customer purchase orders to be the contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. The Company considers whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for the other party to provide those goods or services (that is, the entity is an agent).
In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company offers customer warranty of six months to five years for defective products that is beyond contemplated defective rate mutually agreed in contract with customers. The Company analyzed historical refund claims for defective products and concluded that they have been immaterial.
Revenues are reported net of all VAT. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on their relative standalone selling price.
Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied at a point in time), which typically occurs at delivery. For international sales, the Company sells its products primarily under the free onboard (“FOB”) shipping point term. For sales under the FOB shipping point term, the Company recognizes revenues when products are delivered from Company to the designated shipping point. Prices are determined based on negotiations with the Company’s customers and are not subject to adjustment.
The Company also generates revenues from providing repair services. Revenues from repair service agreements are recognized at a point in time once the service is rendered to the customer. The Company considers whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for the other party to provide those goods or services (that is, the entity is an agent).
The Company also generates revenues from providing research and development services. Revenues from research and development are mainly generated from video conferencing system development service. When the contract is awarded, the Company will develop the video conferencing system significantly customized to the needs of the customer. The duration of contracts ranges from nine months to twelve months. The Company develops the customized video conferencing system, which is combined output, to the customers. Therefore, each development contract is a single performance obligation under ASC 606-10-25-21. The Company considers whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for the other party to provide those goods or services (that is, the entity is an agent).
The Company is not able to sell the research and development services to another customer due to the individual customization of each contract and the Company has an enforceable right to payment for performance completed to date, which meets the criteria of the performance obligation over time under ASC 606-10-25-29. For performance obligations satisfied over time, the Company recognizes revenue over time by using the output method to measure the progress toward complete satisfaction of a performance obligation. The Company used the milestones reached method specified in each contract to determine the extent of progress toward completion.
Government subsidies
Government subsidies refer to the financial assistance provided by the government to enterprises, either in the form of monetary or non-monetary assets, without charge. These subsidies can be categorized into two types: subsidies related to assets and subsidies related to revenue.
Subsidies related to assets: These subsidies are obtained by enterprises and used for the acquisition or formation of long-term assets. Typically, the terms and conditions of the subsidy require the enterprise to utilize the funds for the acquisition of long-term assets. In terms of accounting treatment, there are two options available: i) Recognition as deferred income: The subsidy related to assets can be recognized as deferred income, which is gradually recognized in the income statement as the assets are utilized. ii)Reduction of the carrying value of assets: The subsidy can also be used to reduce the carrying value of the long-term assets, reflecting their actual acquisition costs.
F-15
Subsidies related to revenue: These subsidies, which are distinct from those related to assets, are primarily aimed at compensating enterprises for expenses or losses that have already occurred or are expected to occur. Due to their shorter benefit period, they are typically recognized in the income statement or used to offset related costs when the conditions of the subsidy are met.
For the six months ended March 31, 2024 and 2023,
the Company received government subsidies of $
Research and development costs
Research and development activities are directed toward the development of new products as well as improvements in existing processes. These costs, which primarily include salaries, contract services and supplies, are expensed as incurred.
Shipping and handling costs
Shipping and handling costs are expensed when
incurred and are included in selling and marketing expense. Shipping and handling costs were $
Income taxes
The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the unaudited consolidated financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the fiscal years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts.
The Company records uncertain tax positions in
accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that
the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the
more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than
To the extent applicable, the Company records interest and penalties as other expense. All of the tax returns of the Company’s PRC subsidiaries remain subject to examination by PRC tax authorities for five years from the date of filing. The fiscal year for tax purpose in PRC is December 31.
The Company is not subject to U.S. tax laws and local state tax laws. The Company’s income and that of its related entities must be computed in accordance with Chinese and foreign tax laws, as applicable, and all of which may be changed in a manner that could adversely affect the amount of distributions to shareholders. There can be no assurance that Income Tax Laws of PRC will not be changed in a manner that adversely affects shareholders. In particular, any such change could increase the amount of tax payable by the Company, reducing the amount available to pay dividends to the holders of the Company’s ordinary shares.
Earnings per share
Earnings per share is calculated in accordance with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed in accordance with the treasury stock method and based on the weighted average number of ordinary shares and dilutive ordinary share equivalents. Dilutive ordinary share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive. There were no dilutive ordinary share equivalents outstanding during the six months ended March 31, 2024 and 2023.
F-16
Significant risks and uncertainties
Exchange Rate Risks
The Company operates in PRC, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB.
Currency Convertibility Risks
Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents, restricted cash, accounts receivables, and notes receivable. The Company places its cash and cash equivalents, restricted cash, and note receivable in good credit quality financial institutions in Hong Kong and PRC. Concentration of credit risks with respect to accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers’ financial condition.
Interest Rate Risks
The Company is subject to interest rate risk. Although the Company’s interest-bearing loans carry fixed interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged by the banks if and when these loans are refinanced.
Risks and Uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings (loss) or and financial position.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates. Management periodically reviews new accounting standards that are issued.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This amends guidelines on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current U.S. GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date of ASU 2016-13. The amendments in these ASUs are effective for the Company’s fiscal years, and interim periods within those fiscal years beginning April 1, 2022. The Company has adopted this guidance for the Company’s consolidated financial statements. The adoption of this policy has no material impact.
F-17
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes. This standard removes certain exceptions related to the approach for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The amendments in these ASUs are effective for the Company’s fiscal years, and interim periods within those fiscal years beginning October 1, 2022. The Company has adopted this guidance for the Company’s consolidated financial statements. The adoption of this guidance has no impact on the calculation of Company’s income taxes.
Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Company’s financial position, result of operations or cash flows.
NOTE 3 – RESTRICTED CASH
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| Pledge of bank deposit | $ | $ | ||||||
| Restricted cash | $ | $ | ||||||
As of March 31, 2024 and September 30, 2023, restricted cash is certain portion of bank deposit used for pledging or guarantee purpose.
NOTE 4 – ACCOUNTS RECEIVABLE
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Accounts receivable, gross | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The Company’s customers are, for the most part, end-brand customers or their system integrators and display panel manufacturers. The Company’s credit policy typically requires payment within 30 to 120 days, and payments on the vast majority of its sales have been collected within 60 days. The average accounts receivable turnover period was approximately 138 days and 40 days for the six months ended March 31, 2024 and the fiscal years ended September 30, 2023 respectively.
| As of March 31, 2024 | ||||||||||||
| Accounts receivable, | Allowance for credit | Accounts receivable, | ||||||||||
| Gross | losses | Net | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Within 90 days | $ | $ | $ | |||||||||
| 91-180 days | ||||||||||||
| 181-365 days | ( | ) | ||||||||||
| Greater than 1 year | ( | ) | ||||||||||
| Accounts receivable, net | $ | $ | ( | ) | $ | |||||||
F-18
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Beginning balance | $ | $ | ||||||
| Additional reserve through bad debt expense | ||||||||
| Bad debt write-off | ||||||||
| Ending balance | $ | $ | ||||||
Bad
debt expense for doubtful accounts receivables recorded by the Company for the six months ended March 31, 2024 was $
NOTE 5 – INVENTORIES
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Goods in transit | ||||||||
| Inventory provision | ( | ) | ( | ) | ||||
| Total inventories, net | $ | $ | ||||||
Goods
in transit of $
For the six months ended March 31, 2024 and 2023,
the Company recorded an inventory provision of $
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Electronic equipment | ||||||||
| Transportation vehicles | ||||||||
| Office equipment | ||||||||
| Leasehold improvement | ||||||||
| Construction in progress | ||||||||
| Total property plant and equipment, at cost | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation
expense was $
For
the six months ended March 31, 2024 and 2023, the Company purchased new property plant and equipment of $
F-19
For
the six months ended March 31, 2024, the Company disposed machinery, equipment and transportation vehicles with a net book value of $
As of March 31, 2024 and September 30, 2023, the construction in progress assets were related to construction of manufacturing facilities for the Company.
As of March 31, 2024 and September 30, 2023, the Company pledged buildings to secure banking facilities granted to the Company. The carrying values of the pledged buildings to secure bank borrowings by the Company are shown in Note 13.
NOTE 7 – LAND USE RIGHTS, NET
Land use rights as of March 31, 2024 and September 30, 2023 consisted of the following:
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Land use rights, at cost | $ | $ | ||||||
| Less: accumulated amortization | ( |
) | ( |
) | ||||
| Total land use rights, net | $ | $ | ||||||
Amortization expense for land use rights
were $
| 12 months ended March 31, | Amortization expense | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 8 – INTANGIBLE ASSETS, NET
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Purchased software, cost | $ | $ | ||||||
| Purchased patent, cost | ||||||||
| Capitalized software, cost | ||||||||
| Total intangible assets, at cost | ||||||||
| Less: accumulated amortization | ( |
) | ( |
) | ||||
| Intangible assets, net | $ | $ | ||||||
F-20
For the six months ended March 31, 2024, the
Company purchased patent rights of $
Amortization expense for intangible assets
were $
| 12 months ended March 31, | Amortization expense | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 9 – LONG-TERM INVESTMENT
In
July 2022, the Company made an investment in Nanjing Baituo Visual Technology Co., Ltd (“Nanjing Baituo”) by
RMB
NOTE 10 – OTHER LONG-TERM RECEIVABLE
Other long-term receivable as of March 31, 2024 and September 30, 2023 consisted of the following:
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Other long-term receivables | $ | $ | ||||||
| Total | $ | $ | ||||||
The long-term receivables mainly consist
of performance guarantees for project investments and deposits for establishing online stores on various e-commerce platforms. As of March
31, 2024, these long-term receivables, with an age range of
F-21
NOTE 11 – CONVERTIBLE NOTES
On January 19, 2024, the Company entered into
a securities purchase agreement with Streeterville Capital, LLC, a Utah limited liability company relating to the issuance and sale of
a senior unsecured convertible note in the principal amount of $
On January 22, 2024, the Company completed its
issuance and sale to the Buyer of the Note pursuant to the Securities Purchase Agreement. The gross proceeds from the sale of the Note
were $
The Note bears a simple interest at a rate of
The Note has a redemption conversion price (the
“Conversion Price”) equal to eighty percent (
Upon the occurrence of a Trigger Event (as defined
in the Note), the Buyer shall have the right to increase the balance of the Note by
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | - | |||||||
| Convertible Notes- Issued in Jan, 2024 | $ | $ | ||||||
| Less debt discount and debt issuance cost | ||||||||
| Less current portion of convertible notes payable | ||||||||
| Long-term convertible notes payable | $ | $ | ||||||
During the six months ended March 31, 2024 and 2023, the Company recognized
interest expense on convertible notes payable of $
On June 24, 2024, the Company repaid the convertible promissory note dated January 19, 2024 in full, and the investor released the Company from any and all obligations and liabilities under the note. As a result, the note was deemed paid in full, canceled and of no further force or effect.
NOTE 12 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Deferred government subsidies | $ | $ | ||||||
| Tax payable | ||||||||
| Wages Payable | ||||||||
| Interest payable | ||||||||
| Other payables and accruals | ||||||||
| Total | $ | $ | ||||||
Deferred government subsidies were government subsidies the Company received from the local governments related to certain assets that will be amortized in the depreciated periods of the assets.
F-22
NOTE 13 – BORROWINGS
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Short-term loans from third-party individuals and entities* | ||||||||
| Total | $ | $ | ||||||
| * |
| Bank Name | Amount - RMB | Amount - USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Bank of Nanjing* | % | |||||||||||||||
| Bank of Nanjing* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Bank of Ningbo* | % | |||||||||||||||
| Bank of Jiangsu* | % | |||||||||||||||
| Bank of Jiangsu* | % | |||||||||||||||
| Bank of Bei Jing* | % | |||||||||||||||
| Bank of Communication | % | |||||||||||||||
| Postal Savings Bank of China* | % | |||||||||||||||
| Bank of Communication* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Bank of Cheng Du | % | |||||||||||||||
| Bank of China | % | |||||||||||||||
| Chengdu Rural Commercial Bank | % | |||||||||||||||
| China Construction Bank | % | |||||||||||||||
| Bank of Zijin Rural Commercial*** | % | |||||||||||||||
| Bank of Zijin Rural Commercial** | % | |||||||||||||||
| Bank of Zijin Rural Commercial** | % | |||||||||||||||
| Total | $ | |||||||||||||||
| * | |
| ** | |
| *** |
For
the six months ended March 31, 2024 and 2023, interest expense on short-term bank borrowings amounted to $
F-23
| Bank Name | Amount - RMB | Amount - USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Bank of Nanjing* | % | |||||||||||||||
| Bank of Nanjing* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Bank of Ningbo | % | |||||||||||||||
| Bank of Jiangsu | % | |||||||||||||||
| Bank of Jiangsu | % | |||||||||||||||
| Agricultural Bank of China | % | |||||||||||||||
| Bank of Beijing | % | |||||||||||||||
| Bank of Nanjing* | % | |||||||||||||||
| Bank of Communications | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Agricultural Bank of China* | % | |||||||||||||||
| Bank of Chengdu* | % | |||||||||||||||
| Bank of China* | % | |||||||||||||||
| Total | $ | |||||||||||||||
| * |
Short-term borrowings also include loans from
various individuals that are unsecured, due on demand, and bear interest of
| March 31, 2024 | September 30, 2023 | |||||||
| Long-term bank loans | $ | $ | ||||||
| Total | $ | $ | ||||||
For the six months ended March 31, 2024 and 2023, interest expense
on all long-term borrowings amounted to and
| Bank Name | Amount - RMB | Amount - USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Bank of Zijin Rural Commercial* | % | |||||||||||||||
| Bank of Zijin Rural Commercial** | % | |||||||||||||||
| Bank of Zijin Rural Commercial** | % | |||||||||||||||
| Total | $ | |||||||||||||||
| * | |
| ** |
F-24
The Company’s bank loans are guaranteed
by the Company’s major shareholder, Mr. Tao Ling and his immediate family members, third-party individuals, and third-party companies. See
Note 16 – Related Party Transactions for more information on guaranty provided by Mr. Tao Ling and his immediate family members.
Certain Company’s assets were also pledged to secure the banks loans.
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Buildings, net | $ | $ | ||||||
| Bank deposit | ||||||||
| Total | $ | $ | ||||||
NOTE 14 – Long-term payables
The company has entered into a contract with a third-party construction
company for the construction of a factory building. As of July 2023, the construction of the factory building has been completed and is
in the expected usable state. According to the terms of the contract,
During the six months ended March 31, 2024, the
Company has two transactions with two third-party for manufacturing facilities where the Company sold certain machinery located in China
and subsequently leased the machinery back for 24 months. In these arrangements, the Company has no obligation to transferring the underlying
asset to an unaffiliated third party or has a bargain purchase option at a price of RMB
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Long- term payable (from guarantee deposit) | $ | $ | ||||||
| Long- term payable (from financial lease ) | ||||||||
| Less unrecognized financing expense | ||||||||
| Less current portion of long-term payable | ||||||||
| $ | $ | |||||||
NOTE 15 – CUSTOMER AND SUPPLIER CONCENTRATIONS
Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases, respectively.
For
the six months ended March 31, 2024, the Company had two significant customers which accounted for
For the six months ended March 31, 2023, the Company
had two significant customers which accounted for
F-25
The loss of any of the Company’s significant customer or the failure to attract new customers could have a material adverse effect on the Company’s business, consolidated results of operations and financial condition.
For the six months ended March 31, 2024, two suppliers
accounted for
For the six months ended March 31, 2023, two suppliers
accounted for
The loss of any of the Company’s significant supplier or the failure to purchase key raw material could have a material adverse effect on our business, consolidated results of operations and financial condition.
NOTE 16 – RELATED PARTY TRANSACTIONS
| 1) |
| Name | Relationship with the Company | |
| Tao Ling | ||
| Xiaohong Yin | ||
| Bozhen Gong | ||
| Yun Tan | ||
| Rongxin Ling | ||
| Peizhen Zhang | ||
| Ying Ling | ||
| Jing Ling | ||
| Nanjing Shun yi Jing Electric Technology Co., Ltd. | ||
| Luzhou Nachuan Investment Limited | ||
| Midea International Co., Ltd* | ||
| Nanjing Aoni Investment Management Partnership (Limited Partnership) ** |
| * |
| ** |
| 2) | Related party borrowings |
For the six months ended March 31, 2024, the Company’s
related parties provided working capital to support the Company’s operations when needed. The borrowings were unsecured, due on
demand, and interest free.
| Borrowing/ | Payment/ | |||||||
| Collecting | Lending | |||||||
| Name of Related Parties | Amount | Amount | ||||||
| Tao Ling | $ | $ | ||||||
| Xiaohong Yin | ||||||||
| Rongxin Ling | ||||||||
| Peizhen Zhang | ||||||||
| Bozhen Gong | ||||||||
| Ying Ling | ||||||||
| Jing Ling | ||||||||
| Yun Tan | ||||||||
| Nanjing Shun yi Jing Electric Technology Co., Ltd. | ||||||||
| Midea International Co., Ltd | ||||||||
| Total | $ | $ | ||||||
For
the six months ended March 31, 2024, a total of $
F-26
For the six months ended March 31, 2023 the Company’s
related parties provided working capital to support the Company’s operations when needed. The borrowings were unsecured, due on
demand, and interest free.
| Borrowing/ | Payment/ | |||||||
| Collecting | Lending | |||||||
| Name of Related Parties | Amount | Amount | ||||||
| Tao Ling | $ | $ | ||||||
| Xiaohong Yin | ||||||||
| Bozhen Gong | ||||||||
| Total | $ | $ | ||||||
For the six months ended March 31, 2023, a total
of $
| 3) |
| Sales | Sales | |||||||
| Name of Related Parties | March 31, 2024 | March 31, 2023 | ||||||
| Midea International Co., Ltd | ||||||||
| Total | $ | $ | ||||||
On January 9, 2024, Sichuan Ausheet entered
into an equity transfer agreement with Nanjing Aoni, a related party. Pursuant to the equity transfer agreement, Sichuan Ausheet
transferred RMB
| 4) | Related party balances |
| Accounts | Name of Related Parties | March 31, 2024 | September 30, 2023 | |||||||
| Due from related parties | Midea International Co., Ltd | |||||||||
| Total due from related parties | $ | $ | ||||||||
| Accounts | Name of Related Parties | March
31, 2024 | September 30, 2023 | |||||||
| Due to related parties | Xiaohong Yin | $ | $ | |||||||
| Due to related parties | Bozhen Gong | |||||||||
| Due to related parties | Yun Tan | |||||||||
| Due to related parties | Rongxin Ling | |||||||||
| Due to related parties | Peizhen Zhang | |||||||||
| Due to related parties | Ying Ling | |||||||||
| Due to related parties | Jing Ling | |||||||||
| Due to related parties | Nanjing Shun yi Jing Electric Technology Co., Ltd. | |||||||||
| Due to related parties | Midea International Co., Ltd | |||||||||
| Total due to related parties | $ | $ | ||||||||
F-27
NOTE 17 – STOCKHOLDERS’ EQUITY
Ordinary Shares
Based on the shareholder meeting held on March
28, 2024, the company decided to adjust its authorized share capital from
Additionally, the company re-designated
Private placement
On January 31, 2024, the company entered into
a Subscription Agreement for a private placement with MIDEA INTERNATIONAL CO., LIMITED. Pursuant to the Subscription Agreement, the company
agreed to issue and sell
On March 28, 2024, according to the resolution
of the shareholders’ meeting, the company issued
F-28
Dividends
Dividends declared by the Company are based on the distributable profits as reported in its statutory financial statements reported in accordance with PRC GAAP, which may differ from the results of operations reflected in the consolidated financial statements prepared in accordance with US GAAP. The Company’s ability to pay dividends is primarily from cash received from its operating activities in the PRC. No dividends were declared or paid by the Company for the six months ended March 31, 2024 and 2023.
Statutory Reserve
The Company is required to make appropriations
to certain reserve funds, comprising the statutory reserve and the discretionary reserve, based on after-tax net income determined in
accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory reserve
are required to be at least
Under PRC laws and regulations, paid-in capital and statutory reserves are restricted to set-off against losses, expansion of production and operation and increasing registered capital of the respective company, and are not distributable other than upon liquidation. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor allowed for distribution except under liquidation.
Non-controlling Interests
Non-controlling interests represent the interest of non-controlling
shareholders in the Company’s subsidiaries based on their proportionate interests in the equity of that company adjusted for its
proportionate share of income or losses from operations. The non-controlling interests were $
NOTE 18 – OTHER INCOME (EXPENSES), NET
| For the six months | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Government subsidies* | $ | $ | ||||||
| Other miscellaneous non-business income (loss) | ||||||||
| Total other income (expenses), net | $ | $ | ||||||
| * |
F-29
NOTE 19 – LEASE
From the Perspective as a Lessee
The company entered into lease agreements for production, manufacturing,
and office space in September 2017 and November 2022, respectively, with lease durations ranging from
In determining whether a contract contained a lease, we determined whether an arrangement was or included a lease at contract inception. Operating lease right-of-use asset and liability were recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term.
When determining the discount rate, we consider
the average interest rate (
| March 31, 2024 | September 30, 2023 | |||||||
| Assets | ||||||||
| Operating leases | $ | $ | ||||||
| Total right-of-use asset | $ | $ | ||||||
| March 31, 2024 | September 30, 2023 | |||||||
| Liabilities | ||||||||
| Operating leases | $ | $ | ( | ) | ||||
| Lease Liability-current | ( | ) | ||||||
| Lease Liability-Non current | ( | |||||||
| Total lease liability | $ | $ | ( | ) | ||||
As
of March 31, 2024, and September 30, 2023, the total cash payments for operating leases amounted to $
The Company reviews its ROU assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. No impairment loss on ROU assets was recorded as of March 31, 2024 and September 30, 2023.
From the Perspective as a Lessor
The company leased a building to a third party for a period of 3 years starting in June 2021, without a purchase option at the end of the lease term. The company classified this lease as an operating lease. As per ASC 842, the lease income is recognized on a monthly basis throughout the lease term, as the company has provided the lessee with the right to use the building. The company chose to exclude sales taxes and other similar taxes collected from the lessee from revenue. There is no option for lease renewal stated in the lease agreement, and any contract renewal would be based on negotiations prior to the expiration of the lease. This lease agreement expires on December 31, 2023.
F-30
NOTE 20 – INCOME TAXES
Enterprise Income Taxes (“EIT”)
The Company is incorporated in Cayman Island as an offshore holding company and is not subject to tax on income or capital gain under the laws of Cayman Island.
Ostin BVI is incorporated in BVI as an offshore holding company and is not subject to tax on income or capital gain under the laws of BVI.
Ostin HK and Austin Optronics are established
in Hong Kong and are subject to statutory income tax rate at
The PRC subsidiaries of the Company are subject
to statutory income tax rate at
The Company’s main operating subsidiary
in PRC was certified as a High and New Technology Enterprise (“HNTE”) and enjoys a preferential tax rate of
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of September 30, 2023 and 2022, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income tax expenses for the six months ended March 31, 2024 and 2023, respectively, and also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from March 31, 2024.
| For the six months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Income before taxes excluded the amounts of loss incurring entities | $ | $ | 12,877 | |||||
| PRC EIT tax rates | % | 25%,15 | % | |||||
| Tax at the PRC EIT tax rates | $ | $ | 1,062 | |||||
| Tax effect of R&D expenses deduction | ( | ) | (165,682 | ) | ||||
| Tax effect of deferred tax recognized | 7,534 | |||||||
| Tax effect of non-deductible expenses | 48,896 | |||||||
| Income tax (benefit) provision | $ | $ | (108,189 | ) | ||||
| For the six months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current income tax | $ | ( | ) | $ | ( | ) | ||
| Deferred income tax | ||||||||
| Total income tax (benefit) provision | $ | $ | ( | ) | ||||
F-31
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of March 31, 2024 and September 30, 2023 are presented below:
| March 31, | September 30, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Deferred tax assets: | ||||||||
| Allowance for credit losses | $ | $ | ||||||
| Inventory impairment provision | ||||||||
| Other deductible temporary difference | ( | ) | ( | ) | ||||
| Net operating loss carry-forward | ||||||||
| valuation allowance for deferred income tax assets | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
As
of March 31, 2024 and September 30, 2023, allowance for the deferred tax assets was $
NOTE 21 – COMMITMENT AND CONTINGENCIES
| Future payments | Capital commitments | |||
| April 2024 to September 2024 | $ | |||
| October 2024 to September 2025 | ||||
| October 2025 to September 2026 | ||||
| Thereafter | ||||
| Total | $ | |||
From time to time, the Company is involved in various legal proceedings, claims and other disputes arising from commercial operations, employees, and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity. As of March 31, 2024 and September 30, 2023, the Company had no pending legal proceedings outstanding.
F-32
NOTE 22 – DISAGGREGATED REVENUE
| March 31, 2024 | March 31, 2023 | |||||||||||||||
| Revenues Amount | As % of Revenues | Revenues Amount | As % of Revenues | |||||||||||||
| (In USD) | (In USD) | |||||||||||||||
| Revenue Category | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Display modules | $ | % | $ | % | ||||||||||||
| Polarizers | % | % | ||||||||||||||
| Others (repair services) | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
The revenue under category of others, are mostly from repairing services and mold product sales that have not become significant portion of the revenue for the six months ended March 31, 2024 and 2023.
NOTE 23 – SEGMENT REPORTING
ASC 280, “Segment Reporting”, establishes
standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure
as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s
business segments. The Company uses the “management approach” in determining reportable operating segments. The management
approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating
decisions and assessing performance as the source for determining the Company’s reportable segments. All of the Company’s
operating facilities and long-lived assets are in China, although the Company sells its products across different geographic regions.
Based on management’s assessment, the Company has determined that it has only
| March 31, 2024 | March 31, 2023 | |||||||||||||||
| Revenues Amount | As % of Revenues | Revenues Amount | As % of Revenues | |||||||||||||
| (In USD) | (In USD) | |||||||||||||||
| Country/Region | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Mainland China | $ | % | $ | % | ||||||||||||
| Hong Kong and Taiwan | % | % | ||||||||||||||
| Southeast Asia | ||||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
NOTE 24 – SUBSEQUENT EVENTS
On June 21, 2024, the company entered into a securities
purchase agreement with Streeterville Capital, LLC, a Utah limited liability company relating to the issuance and sale of a senior unsecured
convertible note in the principal amount of $
The Company issued
On November 20, 2023, Beijing Su Hong Yuan
Da Technology Co., Ltd. entered into an equity transfer agreement with Shenzhen Ou Xun Electronics Co., Ltd., under which Suhong Yuanda agreed to transfer
The Company has evaluated subsequent events to the balance sheet date of March 31, 2024 through August 23 2024, the issuance of the consolidated financial statements. No other material subsequent events except for the disclosed above.
F-33
NOTE 25 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (UNAUDITED)
OSTIN TECHNOLOGY GROUP CO., LTD.
PARENT COMPANY BALANCE SHEETS (IN U.S. DOLLARS) (UNAUDITED)
| As of March 31, | As of September 30, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepayments, deposits and other current assets | ||||||||
| Investment in subsidiaries | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Convertible notes | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Class A ordinary share, $ | ||||||||
| Class B ordinary share, $ | ||||||||
| Preference share, $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ||||||||
| Total equity of the Company’s shareholders | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
F-34
OSTIN TECHNOLOGY GROUP CO., LTD.
CONDENSED PARENT COMPANY STATEMENTS OF OPERATIONS
AND
OTHER COMPREHENSIVE INCOME (UNAUDITED)
(IN U.S. DOLLARS)
| For the six months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses: | ||||||||
| General and administrative expenses | $ | ( | ) | $ | ( | ) | ||
| Bank charges and others | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Other non-business income | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss: | ||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
F-35
OSTIN TECHNOLOGY GROUP CO., LTD.
CONDENSED PARENT COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN U.S. DOLLARS)
| For the six months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other receivables | ( | ) | ||||||
| Accrued expenses and current liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Long-term investment | ||||||||
| Net cash used in investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Net proceeds from private placement | ||||||||
| Payments to related parties | ||||||||
| Convertible notes | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of changes in currency exchange rates | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash at the beginning of year | ||||||||
| Cash and cash equivalents and restricted cash at the end of year | $ | $ | ||||||
(a) Basis of Presentation
Condensed financial information is used for the presentation of the Company, or the parent company. The condensed financial information of the parent company has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company used the cost method to account for investment in its subsidiaries.
The parent company’s condensed financial statements should be read in conjunction with the Company’s consolidated financial statements.
F-36
(b) Shareholders’ Equity
The Company is authorized to issue
Share Surrender
In December 2020, an aggregate of
Initial Public Offering
On April 29, 2022, the Company consummated its
initial public offering of
Private placement
On January 31, 2024, OST entered into a Subscription
Agreement for a private placement with MIDEA INTERNATIONAL CO., LIMITED. Pursuant to the Subscription Agreement, OST has agreed to issue
and sell to the Purchaser
On March 28, 2024, according to the resolution
of the shareholders’ meeting, the company issued
F-37