UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of January 2024
Commission File Number:
(Translation of registrant’s name into English)
118 Connaught Road West
Room 1101
Hong Kong
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended September 30, 2023 and 2022 | |
| 99.2 | Unaudited Interim Condensed Consolidated Financial Statements for the Six Months Ended September 30, 2023 and 2022 | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: January 31, 2024 | TOP FINANCIAL GROUP LIMITED | |
| By: | /s/ Ka Fai Yuen | |
| Name: | Ka Fai Yuen | |
| Title: | Chief Executive Officer | |
2
Exhibit 99.1
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
IN CONNECTION WITH THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
The information in this report contains forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere and incorporated by reference in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors.
Except where the context otherwise requires, for purposes of this report, the term:
| ● | “Operating Subsidiaries” refers to WIN100 TECH, WIN100 WEALTH, ZYCL and ZYSL; |
| ● | “TFGL”, “TOP”, the “Company”, “we,” “us,” “or “our” refers to TOP Financial Group Limited, a Cayman Islands exempted company, and, in the context of describing its operation and business, its subsidiaries; |
| ● | “TOP 500” refers to TOP 500 SEC PTY LTD, a company formed under the laws of Australia; |
| ● | “TOP ASSET MANAGEMENT” refers to TOP ASSET MANAGEMENT PTE.LTD., a company formed under the laws of Singapore; |
| ● | “TOP FINANCIAL” refers to TOP FINANCIAL PTE.LTD., a company formed under the laws of Singapore; |
| ● | “WIN100 TECH” refers to WIN100 TECH Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “WIN100 WEALTH” refers to WIN100 WEALTH LIMITED, a company incorporated under the laws of the British Virgin Islands; |
| ● | “Winrich” refers to Winrich Finance Limited, a company incorporated under the laws of the Hong Kong; |
| ● | “ZYAL BVI” refers to ZYAL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “ZYCL” refers to Zhong Yang Capital Limited, a company with limited liability under the laws of Hong Kong. |
| ● | “ZYCL BVI” refers to ZYCL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “ZYFL (BVI)” refers to ZYFL (BVI) Limited, a company incorporated under the laws of the British Virgin Islands; |
| ● | “ZYIL (BVI)” refers to ZYIL (BVI) Limited, a company incorporated under the laws of the British Virgin Islands; |
| ● | “ZYNL (BVI)” refers to ZYNL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “ZYPL (BVI)” refers to ZYPL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “ZYSL” refers to Zhong Yang Securities Limited, a company with limited liability under the laws of Hong Kong. |
| ● | “ZYSL (BVI)” refers to ZYSL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “ZYTL (BVI)” refers to ZYTL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
| ● | “ZYXL (BVI)” refers to ZYXL (BVI) Limited, a company incorporated under the laws of British Virgin Islands. |
Overview
TOP Financial Group Limited (“TFGL”) is a holding company incorporated in the Cayman Islands with operations conducted in Hong Kong by its operating subsidiaries, ZYSL and ZYCL, both incorporated in Hong Kong, and WIN100 TECH and WIN100 WEALTH, both incorporated in the British Virgin Islands (collectively, the “Operating Subsidiaries”). We, through our Operating Subsidiaries, are an online provider of securities and futures trading services founded in Hong Kong by a group of experienced professionals and talents. Our goal is to become the preferred trading platform for Asian investors worldwide. We enable our customers to trade on renowned stock and futures exchanges around the world, including the Chicago Mercantile Exchange (“CME”), Hong Kong Futures Exchange (“HKFE”), The New York Mercantile Exchange (“NYMEX”), The Chicago Board of Trade (“CBOT”), The Commodity Exchange (“COMEX”), Eurex Exchange (“EUREX”), ICE Clear Europe Limited (“ICEU”), Singapore Exchange (“SGX”), Australia Securities Exchange (“ASX”), Bursa Malaysia Derivatives Berhad (“BMD”), and Osaka Exchange (OSE). We create value for our customers by providing reliable trading platforms, user-friendly web and app interface, and 24-hour seamless customer support. Our Operating Subsidiaries generate revenues primarily by charging commission fees on futures transactions at a flat rate for each futures transaction contract, and trading solution services fees charged at a fixed rate per transaction with a minimum monthly fee. Currently our customers are mainly high volume and frequency trading institutional and individual investors.
Our revenues were US$7.1 million and US$5.2 million for the six months ended September 30, 2023 and 2022, respectively. The increase in our revenues for the year 2023 was primarily attributable to our revised business strategy to diversify our services provided to customers, rather than focus on futures brokerage commissions. We believe such changes realigned the revenue generating directives with changes in the macroeconomic conditions. We, through our Operating Subsidiaries, generated net income of US$3.7 million and US$1.8 million for the six months ended September 30, 2023 and 2022, respectively. We plan to keep our business growing by expanding our customer base to include retail investors of a wider range of wealth within the Asian communities across the globe, by increasing the products we offer to include securities and futures from a larger number of stock exchanges, and offering services such as asset management, and over-the-counter (OTC) derivatives trading services business.
Recent Developments
On April 12, 2023, we, through ZYAL, closed an acquisition of 100% equity interest in TOP 500 from the sole shareholder of TOP 500 (the “Seller”). The Seller is a company controlled by Junli Yang, our Chairwoman of the Board of Directors. TOP 500 is a brokerage firm in Australia that owns an Australian Financial Services License (AFSL: 328866). TOP 500 provides financial services in Australia that includes arranging or providing financial advice on financial products such as derivatives, foreign exchange contracts, stock and bond issuance etc.
On December 20, 2023, we held the annual shareholders meeting. As approved by the shareholders, the authorized share capital was increased from US$l50,000.00 divided into 150,000,000 shares of a nominal or par value of US$0.001 each to US$l,000,000.00 divided into 1,000,000,000 shares of a nominal or par value of US$0.001 each, and the Board of Directors was authorized to, at its discretion without further approval of the shareholders, to adopt a dual-class share capital structure to (i) re-classify all Ordinary Shares issued and outstanding into class A ordinary shares with a par value of US$0.001 each with one (1) vote per share and with other rights attached to it in the Second Amended and Restated Memorandum and Articles of Association (the “Class A Ordinary Shares”) on a one for one basis; (ii) re-designate 10,000,000 authorized but unissued Ordinary Shares into 10,000,000 class B ordinary shares with a par value of US$0.001 each with fifty (50) votes per share and with other rights attached to it in the Second Amended and Restated Memorandum and Articles of Association (the “Class B Ordinary Shares”) on a one for one basis; and (iii) re-designate the remaining authorized but unissued Ordinary Shares into Class A Ordinary Shares on a one for one basis. As of the date of this report, our Board of Directors has not adopted a dual-class share capital structure.
2
Operating Results.
Factors Affecting Our Results of Operations
Our business and operating results are influenced by general factors that affect the online securities and futures brokerage industry focusing on Southeast Asian investors, including economic and political conditions, the evolving needs of investors, changes in trading volume, changes in demand for online trading, changes in wealth and availability of funds of our target customers, and regulatory changes governing the online brokerage industry. In addition, the following company specific factors can directly affect our results of operations materially:
Our ability to retain existing customers and attract new customers in a cost-effective manner
We consider customers churn rate to be an important indicator of our attractiveness to customers. Our total registered customer number increased from 296 as of March 31, 2023 to 325 as of September 30, 2023.
In the six months ended September 30, 2023, we had 46 revenue-generating accounts in total, including 8 accounts for futures trading and 29 accounts for securities trading, nil accounts for structured notes subscriber services and 9 accounts for trading solution services. During the six months ended September 30, 2022, we had 26 revenue-generating accounts in total, including 10 accounts for futures trading, 7 accounts for securities trading, nil accounts for structured notes subscriber services and 9 accounts for trading solution services.
Our top five customers accounted for 35% and 77.1% of our total revenues for the six months ended September 30, 2023 and 2022, respectively. Our customers are mainly sourced by referral through our shareholders’ expansive and expanding social and professional networks of high-net-worth individuals. Currently, we have not incurred significant spending on marketing activities. To expand our business, we aim to diversify our customer base by attracting smaller retail customers, whom we can charge higher commission rates. We expect to incur expenses in our promotional efforts through different online and offline media/ channels to increase the number of customer accounts, which can potentially lead to trading volume and revenues.
We currently pursue a niche market strategy in Hong Kong. We have established two subsidiaries in Singapore during the year of 2023, and one subsidiary in Australia in the six months ended September 30, 2023, and planned to expand to Southeast Asia as the first step in achieving the final goal of becoming the preferred online trading platforms for Asian investors worldwide, including the United States. As a relatively young firm new to the market, although we face competition from bigger, better capitalized, and well established companies including other trading firms and banking institutions, our ability to understand and meet our target customers’ needs, coupled with our strong client relationships, allow us to rise to the challenge. Our ability to continuously provide our customers with low-latency trading platforms and high quality services at competitive prices, and the outcome of our advertising and marketing activities, will affect whether we can retain our existing customers and attract new customers.
Our ability to earn commissions from brokerage services
We charge commission fees for the brokerage services we offer. Our ability to earn commission fees, interest income largely depends on the number of customers on our trading platforms and their trading volume, and the commission rates we charge.
It has become increasingly common for online trading platforms to offer free brokerage services. As a provider of brokerage services on chargeable only trading platforms, we are confident that we can differentiate ourselves from our competitors, as we offer low-latency trading platforms, a wide range of products from multiple exchanges, quality customer services and maintain a good relationship with our customers. Most of our customers are professional customers seeking for quality trading platforms to execute their orders timely and accurately rather than cost saving.
We anticipate a future possibility of having to lower our commission rates in order to remain competitive, but we believe that a larger trading volume would make up for the effects of lowered commission rates on our revenues. We also plan to develop new sources of income from asset management, and CFD products and services, as we have seen the demand for these services by our customers.
3
Our ability to effectively improve technology infrastructure
Our technology infrastructure and compliance capabilities are critical for us to offer high quality products and services as well as to retain and attract users and customers. They also enable us to facilitate secure, fast and cost-efficient financial transactions on our platform. We must continue to upgrade and expand our technology infrastructure and to strengthen our compliance system to keep pace with the growth of our business and to develop new features and services for our users and customers. With the continuous improvement of our technology infrastructure and compliance capabilities, we are able to serve more consolidated accounts. We also expect cash segregated for regulatory purposes and payables due to customers on our balance sheet to increase significantly as a result of such growth. We intend to invest more resources on customer verification, record keeping, compliance and trading-related functions for consolidated accounts. Our ability to serve more consolidated accounts, depends on, among other things, our ability to support all aspects of customer verification, record keeping and compliance functions using our technology and human resources.
Our ability to develop a diverse customer base and offer new and innovative products and services
Historically, we have generated a significant portion of our revenues through the provision of online brokerage services including commissions for execution of trades and interest income. Key success factors of the online brokerage industry include expansion of products and services that add value to customers, acquisition of licenses in different jurisdictions and enhancement of user experience. To this end, we intend to continue strengthening the innovation, security, efficiency and effectiveness of our brokerage services, including our user-friendly interface, comprehensive functionalities and customer service capabilities. Particularly, we intend to expand our service offerings to CFD trading and increase the proportion of revenues generated from them.
We also plan to continue integrating value-added services, including asset management services to increase revenues streams. Our ability to maintain and attract new customers principally depends on the quality of our products and services as well as our brand equity. We expect our operating cost and expenses to continue to increase as we provide more innovative and effective products and services.
OTC Derivatives trading services
In November 2023, we engaged in the OTC Derivatives trading services business and considered to set the business as the major development focus for the year 2024. The Company entered into ISDA master agreements and related supplementary agreements with some of the top OTC Derivatives traders. When clients placed an order for OTC Derivatives trades on certain stock, we placed the same order back-to-back with the OTC Derivatives traders for execution and we also facilitate client’s OTC Derivatives trading when an offsetting transaction from another client is not available, we may choose to act as a principal (i.e. market maker) to trade with the client.
The OTC Derivatives trading are short-term contracts between 1 to 3 months, around 80% are 1-month contracts. For every 5-10% of premium of deposit being placed by client, a revenue between 0.5 to 1% of nominal value of income will be generated. The cost of this new business is relatively low.
The Company would assume risks related to the business caused by market fluctuations, operational, and legal and regulatory concerns. It will manage the associated risks through the following policy and procedures:
| ● | Position limit of the business will not exceed the shareholders’ funds. |
| ● | Issuance of structured note to bring in additional Investors to join the Company to act as principal to trade with clients when offsetting transactions from another client is not available. |
| ● | In-house traders are ready to monitor and review on day-to-day operation and execution. |
| ● | Our Chief Executive Officer and Chairwoman would conduct daily review after trading hours, which is one part of the routine monitoring procedure to ensure the relevant procedure to be effective. |
Asset Management Services
Based on our clients’ different needs, we plan to provide personalized investment strategies to optimize their asset allocations. Our clients can purchase a wide variety of investment portfolios, which include assets such as stocks, bonds, ETFs, investment funds and derivatives. We charge management fees based on their assets under management as well as commissions for certain transactions.
4
Our ability to provide stable and low-latency trading platforms to our customers
As an online brokerage service provider, we attract new customers and retain our existing customers by providing them with stable and low-latency trading platforms. Especially when the market is volatile and high trade volume is expected, we are able to avoid delays in execution of customers’ trading orders and assist the customers to accomplish their investment plan.
Our plan to maintain our quality trading platform involves keeping our system hardware and software up to date, conducting regular stress tests, and providing IT training to our staff. We also plan to have regular meetings with our network provider to ensure the stability of internet services in support of our trading platform. We have implemented emergency backup plan in case of system failure. Our backup system is able to support our customers’ trading activities until the core system is fixed. Our stable and low-latency trading platforms are a core part of our strength, and we are committed to continue our efforts in maintaining the reliability and efficiency of our trading platforms.
Our ability to meet the regulatory requirements to provide brokerage, margin financing and asset management services in Hong Kong
Brokerage services, margin financing and asset management are highly regulated in Hong Kong. While our operations are mainly located in Hong Kong, we are inevitably subject to the relevant laws and regulations, in particular, the Securities and Futures Ordinance (Cap. 571) (“SFO”), under the supervision of the Securities and Futures Commission of Hong Kong (“HKSFC”). Pursuant to the SFO, we have to comply with all application provisions concerning statutory obligations such as maintenance of minimum capital adequacy, specific regulatory reporting, and availability of responsible officers.
We monitor our capital level on daily basis so as to fulfill the statutory requirements. Before making a significant movement of our cash, we will estimate the effect of sub activity on our capital level and make sure to remain compliant with the regulations. Accordingly, we also have statutory obligations to report to the authority on monthly basis about our capital level maintained at the end of the month and if any significant fluctuations occurred that we shall notify the authority.
Besides, as required by the SFO, there must be at least two responsible officers per regulated activity, who will supervise our regulated business and assume greater responsibilities over the SFO compliance. To maintain compliance, we have always maintained two to three experienced responsible officers for each regulated activity. To retain our responsible officers and stay compliant with the availability of responsible officer, we offer attractive remuneration packages and align their interests with the Company’s interests.
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Key Components of Results of Operations
Revenues
Our revenues consist of commissions, trading solution services and other service revenues, trading gains, interest income and others. The following table sets forth the breakdown of our total revenues, both in absolute amount and as a percentage of our total revenues, for the years indicated:
| For the Six Months Ended September 30, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| US$ | % | US$ | % | |||||||||||||
| Revenues: | ||||||||||||||||
| Futures brokerage commissions | 2,330,723 | 32.6 | 2,639,572 | 51.2 | ||||||||||||
| Trading solution services fees | 1,691,441 | 23.7 | 2,369,296 | 45.9 | ||||||||||||
| Other service revenues | 239,503 | 3.4 | 56,778 | 1.1 | ||||||||||||
| Trading gains | 2,252,043 | 31.5 | 6,098 | 0.1 | ||||||||||||
| Interest income and others | 635,610 | 8.8 | 85,664 | 1.7 | ||||||||||||
| Total revenues | 7,149,320 | 100.0 | 5,157,408 | 100.0 | ||||||||||||
Futures brokerage commissions
Futures brokerage commissions represent commission income on futures broking that are charged at a fixed rate for each transaction our customers executed through our online trading platforms, all of which are under the consolidated accounts where the customer information is not disclosed to the third party brokers. We receive commissions from customers and pay the execution and clearing fees to our clearing brokers. The fixed rates applied to the customers vary depending on the type of customer, the type of transaction, the trading method, and the trade volume from the particular customer. Commissions from futures broking make up for most of our revenues, at 32.6% and 51.2% of the total revenues for the six months ended September 2023 and 2022, respectively.
Trading solution services fees
Commencing in the year of 2022, we provided trading solution services to customers (including individuals, proprietary trading companies or brokerage companies) for their trading on derivatives, equity, CFD and financial products, through our internally developed proprietary investment management software. We provide a variety of functions suitable for front-end transaction executions and back-office settlement operations. We charge each customer a fixed amount of initial installation fee and the monthly service fee based on a fixed rate per transaction executed on the platform with a minimum monthly fee. Trading solution services fees accounted for 23.7% and 45.9%, respectively, of total revenues during the six months ended September 30, 2023 and 2022.
Other service revenues
Other service revenues represent the revenues generated from rendering other financial services including securities brokerage, consulting services, and currency exchange services. We generally receive subscription fees calculated with reference to the amount subscribed by our clients of the structured products. For the six months ended September 2023 and 2022, other service revenues accounted for 3.4% and 1.1% of total revenues, respectively.
The margin financing services did not generate any revenue for the six months ended September 30, 2023 and 2022. For options trading, we have the capacity to offer options trading services and they are available to our clients. However, there was no revenue generated from options trading services for the relevant periods.
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Trading gains
We began proprietary trading in US stocks since March 2020, and trading in HK stocks since January 2021. The trading gains mainly consist of realized and unrealized gains and losses from investment in US stocks, which are included in Securities owned, at fair value. Trading gains make up for 31.5% and 0.1% of total revenues for the six months ended September 30, 2023 and 2022.
Interest income and others
For the six months ended September 30, 2023, the interest income was comprised of interest income of $0.1 million charged on loans made to a third party, interest income of $0.2 million charged on our clients who traded US stocks, and interests of $0.3 million earned on bank deposits
For the six months ended September 30, 2022, interest income and others primarily consist of interests earned on bank deposits.
Expenses
The following table sets forth our operating cost and expenses, both in absolute amount and as a percentage of total revenues, for the years indicated:
| For the Six Months Ended September 30, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| US$ | % | US$ | % | |||||||||||||
| Expenses: | ||||||||||||||||
| Commission expenses | 1,521,942 | 21.3 | 1,737,516 | 33.7 | ||||||||||||
| Compensation and benefits | 622,908 | 8.7 | 487,974 | 9.5 | ||||||||||||
| Communications and technology | 376,109 | 5.3 | 309,600 | 6.0 | ||||||||||||
| Occupancy | 70,531 | 1.0 | 62,461 | 1.2 | ||||||||||||
| Travel and business development | 85,156 | 1.2 | 125,704 | 2.4 | ||||||||||||
| Professional fees | 768,626 | 10.8 | 524,574 | 10.2 | ||||||||||||
| Other administrative expenses | 112,337 | 1.6 | 71,396 | 1.4 | ||||||||||||
| Total expenses | 3,557,609 | 49.9 | 3,319,225 | 64.4 | ||||||||||||
Commission expenses
Commission expenses represent the fees we paid to our broker partners, when we place a client order to an exchange market through these partners. We expect that our commission expenses will increase in absolute amount as we expand our brokerage business and offer more products from securities and futures exchanges around the world. We place orders through broker partners except for orders to the Hong Kong Stock Exchange. Commission expenses accounted for 22.6% and 33.7% of our revenues for the six months ended September 30, 2023 and 2022, respectively.
Compensation and benefits
Compensation and benefits represent the salaries, performance based discretionary bonuses and contribution to retirement fund, and share-based compensation expenses to non-executive directors. Compensation and benefits expenses accounted for 9.2% and 9.5% of our revenues for the six months ended September 30, 2023 and 2022, respectively.
Communications and technology
Communications and technology expenses represent fees we paid for the use of third party electronic trading systems, including an online stock trading system, an online futures trading system, and another futures trading system that was a one-time incidental cost pursuant to a customer’s special request, as well as the outsourced trading solution support services. Communications and technology expenses accounted for 5.6% and 6.0% of our revenues for the six months ended September 30, 2023 and 2022, respectively.
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Occupancy
Occupancy expenses are the rental expenses we paid for our office premises, which accounted for around 1.0% and 1.2% of our revenues for the six months ended September 30, 2023 and 2022, respectively.
Travel and business development, Professional fees and Other administrative expenses
Travel and business development expenses include overseas and local travelling, and the entertainment expenses. Professional fees are mainly the service fees for auditing, consulting, legal, and other professional services which are needed during the ordinary course of our business operation. Other administrative expenses primarily consist of fees paid to the Stock Exchange of Hong Kong and Chicago Mercantile Exchange, business entertainment expenses, exchange difference, depreciation expense, finance costs and other miscellaneous expenses such as utilities. All of these expenses accounted for 8.3% and 14.0% of our revenues for the six months ended September 30, 2023 and 2022, respectively.
Taxation
Cayman Islands and British Virgin Islands
Under the current laws of the Cayman Islands and British Virgin Islands, we are not subject to tax on income or capital gains. Neither Cayman Islands nor British Virgin Islands withholding tax will be imposed upon payments of dividends to our shareholders.
Hong Kong
ZYSL and ZYCL are incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. For the years ended March 31, 2023, 2022 and 2021, Hong Kong profits tax is calculated in accordance with the two-tiered profits tax rates regime. The applicable tax rate for the first HKD 2 million of assessable profits is 8.25% and assessable profits above HKD 2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong, effective from the year of assessment 2018/2019. Before that, the applicable tax rate was 16.5% for corporations in Hong Kong. Under Hong Kong tax laws, ZYSL and ZYCL are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
Singapore
TOP Fin, TOP Asset Management are incorporated in Singapore and are subject to Singapore Corporate Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Singapore tax laws. TOP Fin and TOP Asset Management are subject to a flat rate of 17%.
Australia
TOP 500 is incorporated in Australia and are subject to Australian Corporate Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Australian tax laws. TOP 500 is subject to a flat rate of 25%.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations for the six months ended September 30, 2023 and 2022 as indicated, and provides information regarding the dollar and percentage increase or (decrease) during such periods. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future trends.
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Futures brokerage commissions | $ | 2,330,723 | $ | 2,639,572 | ||||
| Trading solution service revenues | 1,691,441 | 2,369,296 | ||||||
| Other service revenues | 239,503 | 56,778 | ||||||
| Trading gains | 2,252,043 | 6,098 | ||||||
| Interest income and other | 635,610 | 85,664 | ||||||
| Total revenues | 7,149,320 | 5,157,408 | ||||||
| Expenses | ||||||||
| Commission expenses | 1,521,942 | 1,737,516 | ||||||
| Compensation and benefits | 622,908 | 487,974 | ||||||
| Communications and technology | 376,109 | 309,600 | ||||||
| Occupancy | 70,531 | 62,461 | ||||||
| Travel and business development | 85,156 | 125,704 | ||||||
| Professional fees | 768,626 | 524,574 | ||||||
| Other administrative expenses | 112,337 | 71,396 | ||||||
| Total expenses | 3,557,609 | 3,319,225 | ||||||
| Income before income taxes | 3,591,711 | 1,838,183 | ||||||
| Income tax expense | 75,422 | - | ||||||
| Net income | $ | 3,667,133 | $ | 1,838,183 | ||||
Revenues
Total revenues increased by 38.6% from US$5.2 million in the six months ended September 30, 2022 to US$7.1 million in six months ended September 30, 2023. The increase was mainly driven by an increase of US$2.2 million in trading gains, an increase of US$0.5 million in interest income and others and an increase of $0.2 million in other service revenues, net off against a decrease of US$0.3 million in futures brokerage commissions and a decrease of US$0.7 million in software service fees.
Futures brokerage commissions – Futures brokerage commissions kept stable for the six months ended September 30, 2023 and 2022. As compared with the futures brokerage commissions for the six months ended September 30, 2022, the futures brokerage commissions decreased by 11.7% for the six months ended September 30, 2023. The decrease in future brokerage commission was caused by a decrease in futures contract volume on our platform from 1.9 million for the six months ended September 30, 2022 to 1.5 million for the six months ended September 30, 2023, with the increase in average commission rate over trading volumes from US$1.43 in the six months ended September 30, 2022 to US$1.58 for the same period of 2023.
Trading solution services fees – The Company commenced trading solution services to customers since May 2021. Trading solution service fees decreased by 28.6% from US$2.4 million for the six months ended September 30, 2022 to US$1.7 million for the six months ended September 30, 2023. The decrease was mainly because of decreased service requirement from our customers due to underperforming condition in Hong Kong stock market. For the six months ended September 30, 2023 and 2022, the Company generated revenues of US$1.7 million and US$2.4 million, respectively, from provision of trading solution services to 9 and 9 customers for both period.
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Trading gains – Trading gains/losses were firstly recognized as proprietary trading business started in March 2020. The Company had trading gains of US$2.3 million in the six months ended September 30, 2023 as compared to trading losses of US$6,098 in the six months ended September 30, 2022, which was mainly driven by the market condition of the US stock market.
Interest income and others – Interest income and others increased from US$3,535 in the six months ended September 30, 2022 to US$0.5 million in the six months ended September 30, 2023. The increase was attributable to interest income of $0.2 million from loans of US$5.0 million to a third party, interest income of $0.3 million charged on receivables due from our clients who traded US Stock markets, and an increase in bank interest income with increase in cash balance.
Expenses
Commission expenses – Commission expenses decreased from US$1.7 million for the first half of 2022 to US$1.5 million for the same period of 2023. The decrease in commission expenses was in line with the decrease in commission income for the six months ended September 30, 2023.
Compensation and benefits – Compensation and benefits increased by 27.7% from US$0.5 million in the six months ended September 30, 2022 to US$0.6 million in the six months ended September 30, 2023, which was mainly caused by increase in headcount for our new office in Singapore.
Communications and technology – Communications and technology expenses increased by 21.5% from US$0.3 million in the six months ended September 30, 2022 to US$0.4 million in the six months ended September 30, 2023. The increase in communications and technology expenses was caused by increased technology expenses to support trading solution services provided to our customers.
Professional fees – Professional fees increased by 46.6% from US$0.5 million in the six months ended September 30, 2022 to US$0.8 million in the six months ended September 30, 2023. The increase in professional fees was primarily incurred for legal and consulting expenses incurred after IPO, while the legal expenses were capitalized during the IPO process.
Income before income taxes
We had an income before income taxes of US$3.6 million and US$1.8 million in the six months ended September 30, 2023 and 2022, respectively. Our operating margin was 53.5% and 35.6% in the six months ended September 30, 2023 and 2022, respectively.
Income tax benefits
Our income tax benefits increased from US$nil in the six months ended September 30, 2022 to US$75,422 in the six months ended September 30, 2023, which was primarily due to reversal of over estimated income tax expenses in the six months ended September 30, 2023.
Net income
As a result of the foregoing, our net income increased by 99.5% from US$1.8 million in the six months ended September 30, 2022 to US$3.7 million in the six months ended September 30, 2023.
10
Discussion of Certain Balance Sheet Items
The following table sets forth selected information from our consolidated balance sheets as of September 30, 2023 and March 31, 2023. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus.
|
September 30, 2023 |
March 31, 2023 |
|||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 24,522,035 | $ | 15,966,421 | ||||
| Restricted cash | 662,346 | 1,879,472 | ||||||
| Loans receivable | 3,561,155 | 8,855,220 | ||||||
| Receivables from customers for trading activities | 516,858 | - | ||||||
| Receivables from broker-dealers and clearing organizations | 2,302,866 | 3,212,777 | ||||||
| Receivables from customers | 2,573,095 | 3,773,982 | ||||||
| Receivables from customers – related parties | 1,326,537 | 1,523,259 | ||||||
| Securities owned, at fair value | 5,218,914 | 2,741,178 | ||||||
| Fixed assets, net | 472,231 | 482,130 | ||||||
| Intangible asset, net | 63,850 | 63,695 | ||||||
| Right of use assets | 126,716 | 156,656 | ||||||
| Long-term investment in a joint venture | 256,420 | 256,420 | ||||||
| Deposit for long-term investment | - | 200,000 | ||||||
| Available-for-sale investment | 1,000,000 | 1,000,000 | ||||||
| Income tax recoverable | 89,852 | 14,386 | ||||||
| Other assets | 220,492 | 158,300 | ||||||
| Total assets | $ | 42,913,367 | $ | 40,283,896 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Payable to customers | $ | 3,166,888 | $ | 3,500,690 | ||||
| Payable to customers – related parties | 101,313 | 43,127 | ||||||
| Accrued expenses and other liabilities | 528,021 | 638,617 | ||||||
| Lease liabilities | 128,403 | 150,139 | ||||||
| Total liabilities | $ | 3,924,625 | $ | 4,332,573 | ||||
Cash and cash equivalents
Cash and cash equivalents consist of funds deposited with banks, which are highly liquid and are unrestricted as to withdrawal or use. The total balance of cash and cash equivalents increased from US$16.0 million as of March 31, 2023 to US$24.5 million as of September 30, 2023, because we generated cash inflows of US$6.3 million from operating activities, and cash inflows of US$0.4 million from investing activities.
Restricted cash
Restricted cash mainly represents the amount of cash deposited by our customers that have been segregated as obligated by the rules mandated by the primary regulators of our certain subsidiaries. A corresponding payable due to customers is recorded upon receipt of the cash from the customer. Our restricted cash decrease from US$1.9 million as of March 31, 2023 to US$0.7 million as of September 30, 2023. The decrease in restricted cash is in line with the decrease in decrease service request from our customers.
11
Loans receivable
As of September 30 and March 31, 2023, loans receivable consisted for the following:
September 30, | March
31, | |||||||
| Loans receivable (i) | $ | 2,000,000 | $ | 5,000,000 | ||||
| Receivable due customers holding US stocks (ii) | 1,561,155 | 3,855,220 | ||||||
| $ | 3,561,155 | $ | 8,855,220 | |||||
| (i) | In October 2022, the Company and a third party entity entered into a loan agreement, pursuant to which the Company made a loan of $5,000,000 to the borrower at the interest rate of 0.67% per month. The borrower repaid the outstanding principal and interest in June 2023. |
In August 2023, the Company and another third party entered into a promissory note agreement, pursuant to which the Company made a loan of $2,000,000 to the borrower. The promissory note bears a monthly interest rate of 0.67% with a maturity date of six months anniversary of the date of the note.
| (ii) | As of September 30, 2023 and March 31, 2023, loans of $1,561,155 and $3,885,220 due from customers holding US stocks represented the purchase price of stock exceeding the deposits paid by customers which traded these US stocks through the Company’s platform. The US stocks were under custodian of the Company, and the customers shall fully paid the balance to the Company after they sold these stocks. As of the date of this report, US$0.5 million, or 35.8% of the receivable as of September 30, 2023 were repaid by the customers. |
Receivables from customers
Receivables from customers include the trading solution services fees due from customers once the transactions have been executed and completed.
As compared with the balance as of March 31, 2023, the receivables due from trading solution services decreased by 31.8% to US$2.6 million as of September 30, 2023. The decrease in the balance as of September 30, 2023 was mainly because the Company generate decreased revenues in trading solution services in the six months ended September 30, 2023.
Receivables from broker-dealers and clearing organizations
Receivables from broker-dealers and clearing organizations arise from the business of dealing in futures or investment securities. Broker-dealers will require balances to be placed with them in order to cover the positions taken by its customers, which are repayable on demand subsequent to settlement date. Clearing house receivables typically represent proceeds receivable on trades that have yet to settle and are usually collected within two days. Generally, our receivables from broker-dealers and clearing organizations change daily depending on various factors, including the trading volume in net buy/sell transactions, futures contracts, long/short position and frequency of transactions on each specific day. Our receivables from broker-dealers and clearing organizations decreased by 28.3% from US$3.2 million as of March 31, 2023 to US$2.3 million as of September 30, 2023, mainly due to such daily fluctuations.
Securities owned, at fair value
Securities owned, at fair value, mainly represented investments in both US stocks, all of which are on S&P500 index, and in HK stocks.
Payables to customers
Payables to customers represent payables related to the Company’s customer trading activities, which include the cash deposits received by the Company as requested by third party broker-dealers to place with them in order to cover the positions taken by its customers, clearing house payables due on pending trades and payable on demand, as well as the bank balances held on behalf of customers. Our payables to customers change daily depending on various factors, including the trading volume, net buy/sell transactions, futures contracts, long/short position and frequency of transactions on each specific day. The balances as of September 30, 2023 and March 31, 2023 kept stable at US$3.2 million and US$3.5 million, respectively.
12
Liquidity and Capital Resources.
Prior to our initial public offering in June 2022, our principal sources of liquidity to finance our operating activities have been net cash generated from operating activities.
As of September 30, 2023, we had US$25.2 million in cash, cash equivalents and restricted cash, out of which US$18.6 million was held in U.S. dollars and the rest was held in Hong Kong dollars and other currencies. Our cash, cash equivalents and restricted cash primarily consist of general bank balances and segregated clients’ bank account balances.
We believe that our current cash, cash equivalents and restricted cash and our anticipated cash flows from operations will be sufficient to meet our cash needs for general corporate purposes for at least the next 12 months. We may decide in the future to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increasing fixed obligations and could result in operating covenants that would restrict our operations.
Regulatory Capital Requirements
Subject to certain exemptions specified under the Securities and Futures (Financial Resources) Rules of Hong Kong (the “HK Financial Resources Rules”), two of our Hong Kong subsidiaries, ZYSL and ZYCL, are securities dealers and asset management companies registered with the Securities and Futures Commission of Hong Kong (the “HKSFC”), an independent statutory body set up in accordance with the Securities and Futures Ordinance of the law of Hong Kong, and thus are required to maintain minimum paid-up share capital and required liquid capital in accordance with the HK Financial Resources Rules. The following table sets forth a summary of the key requirements under the HK Financial Resources Rules that are applicable to ZYSL and ZYCL:
| Company | Type of regulated activities governed by the HKSFC | Minimum amount of paid-up capital | Required liquid capital | |||||||||
| ZYSL | Type 1 and 2 | HKUS$ | 10,000,000 | HKUS$ | 3,000,000 or | (i) | ||||||
| ZYCL | Type 4, 5 and 9 | HKUS$ | 5,000,000 | HKUS$ | 3,000,000 or | (i) | ||||||
| (i) | for company licensed for any regulated activities other than Type 3 regulated activities, its variable required liquid capital, which means 5% of the aggregate of (a) its adjusted liabilities, (b) the aggregate of the initial margin requirements in respect of outstanding futures contracts and outstanding options contracts held by it on behalf of its clients, and (c) the aggregate of the amounts of margin required to be deposited in respect of outstanding futures contracts and outstanding options contracts held by it on behalf of its clients, to the extent that such contracts are not subject to the requirement of payment of initial margin requirements. |
As of September 30, 2023 and March 31, 2023, all of our operating subsidiaries were in compliance with their respective regulatory capital requirements.
13
Cash Flows
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | 2,479,914 | $ | (4,721,077 | ) | |||
| Net cash provided by (used in) investing activities | 4,800,230 | (200,000 | ) | |||||
| Net cash provided by financing activities | - | 22,651,029 | ||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | 58,344 | (13,398 | ) | |||||
| Net increase in cash, cash equivalents and restricted cash | 7,338,488 | 17,716,554 | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | 17,845,893 | 7,956,759 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 25,184,381 | $ | 25,673,313 | ||||
Operating activities
Net cash provided by operating activities in the six months ended September 30, 2023 was US$2.5 million, as compared to the net profit of US$3.7 million. The difference was primarily attributable to (i) a decrease of US$1.2 million in accounts receivable due from customers as a result of accelerated collections form our customers, and (ii) an increase of US$2.5 million in securities owned, at fair value as we increased investments.
Net cash used in operating activities in the six months ended September 30, 2022 was US$4.7 million, as compared to the net profit of US$1.8 million. The difference was primarily attributable to (i) an increase of US$1.6 million in receivables due from customers as a result of increase in revenues from trading solution services, (ii) an increase of US$4.1 million in payments on behalf of customers for trading securities, including both third parties and related parties, and (iii) an increase of US$0.9 million in other assets.
Investing activities
Net cash provided by investing activities in the six months ended September 30, 2023 was US$4.8 million, which was comprised of collection of loans from a third party of US$5.0 million, and collection of loans from third party security customers of $2.3 million, partially net off against loans made to a third party customer of US$2.0 million, payment of $0.5 million to the seller for acquisition of a subsidiary and purchase of property and equipment of US$2,973.
Net cash used in investing activities in the six months ended September 30, 2022 was US$0.2 million, which was fully used in payments of deposits for long-term investments.
Financing activities
No cash flows resulted from financing activities in the six months ended September 30, 2023.
Net cash provided by financing activities in the six months ended September 30, 2022 was US$22.7 million, which was provided by net proceeds of US$22.7 million from issuance of ordinary shares in the initial public offering.
Off-Balance Sheet Commitments and Arrangements
We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Moreover, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
14
Research and Development, Patent and Licenses, etc.
As of the date of this report, we had registered one trademark under the jurisdiction of Hong Kong. The trademark application was filed on October 29, 2016 and we received the trademark approval on December 23, 2016.
Our trademark is important to us as it distinguishes our brand and services from other competitors in the market.
Trend Information.
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition or results of operations.
Critical Accounting Estimates.
An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the unaudited condensed consolidated financial statements.
We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.
The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our unaudited condensed consolidated financial statements and other disclosures included in this prospectus. When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.
Credit Losses Against Receivables from Customers
On April 1, 2023, we adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, we changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable.
After the adoption of ASU 2016-13, we maintain an allowance for credit losses and records the allowance for credit losses as an offset to receivables from customers and the estimated credit losses charged to the allowance is classified as operating expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. We assess collectability by reviewing receivables from customers on an individual basis because we had limited customers and each of them has difference characteristics, primarily based on business line and geographical area. In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status, the age of the balances, credit quality of our customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
For the six months ended September 30, 2023 and 2022, no allowance for doubtful accounts were recorded.
15
Revenue recognition
| a) | Revenue from Contracts with Customers |
ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenues and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenues to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. In accordance with ASC 606, revenues are recognized when we satisfy the performance obligations by delivering the promised services to the customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We identified each distinct service as a performance obligation. The recognition and measurement of revenues is based on the assessment of individual contract terms. We applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. We have no material incremental costs of obtaining contracts with customers that we expect the benefit of those costs to be longer than one year, which need to be recognized as assets.
Futures brokerage commissions
We earn fees and commissions from futures brokerage services based on a fixed rate for each transaction, all of which are under the consolidated accounts where the customer information is not disclosed to the third party brokers. When a customer executes a futures transaction through our platform, future brokerage commission is recognized upon the completion of this transaction. Only a single performance obligation is identified for each future trading transaction, and the performance obligation is satisfied on the trade date because that is when the underlying financial instrument is identified, the pricing of brokerage service is agreed upon and the promised services are delivered to customers. All of our revenues from contracts with customers are recognized at a point in time. The future brokerage service could not be cancelled once it is executed and is not refundable, so returns and allowances are not applicable. Commissions are charged for each customer trade order executed and cleared by the third-party brokers. We recognize revenues on a gross basis as we are determined to be the primary obligor in fulfilling the trade order initiated by the customer. The Company may offer volume rebates as trading incentives to certain customers. The Company will review the customer’s transaction volume monthly and provide volume rebate on the commission charge to specific customer with large volume transactions. The volume rebate offered to such customer is accounted for as a variable consideration and determined based on most-likely amount method, which is recognized as a reduction of revenues. We did not offer the volume rebates offered during the six months ended September 30, 2023 and 2022, respectively.
Trading solution services fees
We provide trading solution services to customers (including individuals, proprietary trading companies or brokerage companies) for their trading on derivatives, equity, CFD and other financial products, through the internally developed proprietary investment management software. Our trading solution provides a variety of functions suitable for front-end transaction executions and back-office settlement operations. We implement the initial installation of such software for each customer and provides hosting services for a period of time, generally two years, as agreed in the contracts. The initial installation is considered as a set-up activity, rather than a promised service to customer, which provides no incremental benefit to customer beyond permitting the access and use the hosted application. We identify a single performance obligation from the contracts with customers. We charge each customer a fixed amount of initial installation fee and the monthly service fee based on a fixed rate per transaction executed on the platform with a minimum monthly fee. We recognize the trading solution services as satisfied over the time.
16
Structured note subscription fees
We earn subscription service fees from customers by assisting customers to identify and subscribe for structured note products, which is calculated at a fixed percentage of investment amount. We identify a single performance obligation for each subscription service, and recognize subscription fee income when the customers successfully subscribe for the structured note products and underlying contract between the customer and financial institution becomes non-cancellable, which is the point in time when the control of service is completed. The Company recognizes revenue net of discount (if any) on a gross basis as the Company is determined to be the primary obligor in fulfilling the subscription services.
Other service revenues
We provide other financial services including securities brokerage, consulting services, and currency exchange services, and earn securities brokerage commissions, consultancy fee income and other revenues, which are recognized when the service is rendered according to the relevant contracts.
Contract liabilities
Our contract liabilities include payments received in advance of performance under structured note subscription service contracts which will be recognized as revenue as we executed the subscription service with brokers under the contract, as well as the deferred installation service fee received from trading solution services.
b) Trading gains, interest income and other
Trading gains and losses along with interest income fall within the scope of ASC Topic 825, Financial Instruments, which is excluded from the scope of ASC Topic 606. Trading gains and losses mainly consist of realized and unrealized gains and losses from the investment in US common stocks, which are included in Securities owned, at fair value. Interest and other income primarily consist of interests earned on bank deposit.
Income tax expenses
We account for income taxes in accordance with the U.S. GAAP. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.
17
The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax assets are recognized to the extent that it is probable that taxable income to be utilized with prior net operating loss carried forwards. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. 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.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
Holding Company Structure
TFGL is a holding company incorporated in the Cayman Islands with no material operations of its own. We conduct our operations primarily in Hong Kong through our subsidiaries in Hong Kong.
As a result, TFGL’s ability to pay dividends may depend upon dividends paid by our Hong Kong subsidiaries. If our existing Hong Kong subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.
Inflation
Inflation in Hong Kong has not materially affected our results of operations in recent years. According to the Census and Statistics Department of Hong Kong, the year-over-year percent changes in the consumer price index was 1.7% for fiscal years ended March 31, 2023 and 2022. Although we have not been affected by inflation in the past, we may be affected if Hong Kong and any other jurisdiction where we operate in the future experience higher rates of inflation in the future.
18
Exhibit 99.2
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Condensed Consolidated Balance Sheets
(Expressed in U.S. Dollars, except for the number of shares)
| September 30, 2023 | March 31, 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Loans receivable | ||||||||
| Receivables from customers for trading activities | ||||||||
| Receivables from broker-dealers and clearing organizations | ||||||||
| Receivables from customers | ||||||||
| Receivables from customers – related parties | ||||||||
| Securities owned, at fair value | ||||||||
| Fixed assets, net | ||||||||
| Intangible asset, net | ||||||||
| Right of use assets | ||||||||
| Long-term investment in a joint venture | ||||||||
| Deposit for long-term investment | ||||||||
| Available-for-sale investment | ||||||||
| Income tax recoverable | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Payable to customers | $ | $ | ||||||
| Payable to customers – related parties | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income
(Expressed in U.S. dollar, except for the number of shares)
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Futures brokerage commissions | $ | $ | ||||||
| Trading solution service revenues | ||||||||
| Other service revenues | ||||||||
| Trading gains | ||||||||
| Interest income and other | ||||||||
| Total revenues | ||||||||
| Expenses | ||||||||
| Commission expenses | ||||||||
| Compensation and benefits | ||||||||
| Communications and technology | ||||||||
| Occupancy | ||||||||
| Travel and business development | ||||||||
| Professional fees | ||||||||
| Other administrative expenses | ||||||||
| Total expenses | ||||||||
| Income before income taxes | ||||||||
| Income tax expense | ||||||||
| Net income | ||||||||
| Other comprehensive income (loss) | ||||||||
| Total foreign currency translation adjustment | ( | ) | ||||||
| Total comprehensive income | $ | $ | ||||||
| Earnings per share: | ||||||||
| $ | $ | |||||||
| Weighted average number of ordinary shares outstanding: | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in U.S. dollar, except for the number of shares)
| Ordinary Shares | Additional Paid-in | Retained | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares* | Amount | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Acquisition of a subsidiary | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common shares pursuant to initial public offering (“IPO”), net of offering cost of | ||||||||||||||||||||||||
| Issuance of common shares to a service provider for successful IPO | ( | ) | ||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Unaudited Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollar)
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of right of use assets | ||||||||
| Share-based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Receivables from customers | ( | ) | ||||||
| Receivables from customers – related party | ( | ) | ||||||
| Receivables from customers for trading activities | ( | ) | ( | ) | ||||
| Receivables from broker-dealers and clearing organizations | ||||||||
| Securities owned, at fair value | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Payable to customers | ( | ) | ||||||
| Payables to customers – related party | ||||||||
| Accrued expenses and other liabilities | ( | ) | ||||||
| Income tax recoverable and payable | ( | ) | ( | ) | ||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of fixed assets | ( | ) | ||||||
| Collection of loans from customers holding US stocks | ||||||||
| Collection of loans from a third party | ||||||||
| Loans made to a third party | ( | ) | ||||||
| Payment for acquisition of a subsidiary | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common shares pursuant to IPO, net of issuance cost | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | ( | ) | ||||||
| Net increase in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||
| September 30, 2023 | March 31, 2023 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
| Non-cash operating, investing and financing activities | ||||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes, net of refunds | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
1. Organization and Description of Business
TOP Financial Group Limited (the “Company”, formerly “Zhong Yang Financial Group Limited” and “ZYFGL”) (“ZYFGL”) is a company incorporated in Cayman Islands with limited liability on August 1, 2019. ZYFGL is a parent holding company with no operations. Effective on July 13, 2022, the Company changed its name from “Zhong Yang Financial Group Limited” to “TOP Financial Group Limited” (“Name Change”).
ZYFGL has two wholly-owned subsidiaries, ZYSL (BVI) Limited (“ZYSL (BVI)”) and ZYCL (BVI) Limited (“ZYCL (BVI)”), both which are investment holding entities formed under the laws and regulations of the British Virgin Islands on August 29, 2019.
Zhong Yang Securities Limited
(“ZYSL”), a wholly-owned subsidiary of ZYSL (BVI), was established in accordance with laws and regulations of Hong Kong on
April 22, 2015 with a registered capital of HKD
Zhong Yang Capital Limited
(“ZYCL”), a wholly-owned subsidiary of ZYCL (BVI), was established in accordance with laws and regulations of Hong Kong on
September 29, 2016 with a registered capital of HKD
Eight subsidiaries, ZYAL (BVI) Limited (“ZYAL (BVI)”), ZYTL (BVI) Limited (“ZYTL (BVI)”), ZYNL (BVI) Limited (“ZYNL (BVI)”), WIN100 Tech Limited (“WIN100 TECH”), ZYPL (BVI) Limited (“ZYPL (BVI)”), ZYXL (BVI) Limited (“ZYXL (BVI)”), ZYIL (BVI) Limited (“ZYIL (BVI)”) and ZYFL (BVI) Limited (“ZYFL (BVI)”) were incorporated under the laws of British Virgin Islands on January 7, 2021, January 12, 2021, January 20, 2021, May 14, 2021, July 14, 2022, July 14, 2022, November 11, 2022 and November 11, 2022, respectively. These subsidiaries are dormant as of the date of this report, except for WIN100 TECH, which provides trading solutions for clients trading on the world’s major derivatives and stock exchanges.
On November 28, 2022, ZYPL
established Top Financial Pte. Ltd. (“Top Fin”) in accordance with laws and regulations of Republic of Singapore. On the same
date, ZYXL set up Top Asset Management Pte. Ltd. (“Top AM”) in accordance with laws and regulations. On February 24, 2023,
ZYFL established Winrich Finance Limited in accordance with laws and regulations of Hong Kong. On February 9, 2023, the Company, through
ZYIL, purchased
On April 12, 2023, the Company,
through ZYAL, closed an acquisition of
5
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
1. Organization and Description of Business (Continued)
ZYFGL together with its subsidiaries (collectively, the “Company”) are primarily engaged in providing futures brokerage and other financial services in Hong Kong through a trading platform to its customers. The Company generates brokerage commission income by enabling its customer to trade on multiple exchanges around the world.
On June 3, 2022, the Company
completed its initial public offering on the National Association of Securities Dealers Automated Quotations (“NASDAQ”). In
this offering,
Reorganization
Reorganization of the legal structure of the Company (“Reorganization”) has been completed on March 26, 2020 by carrying out a sequence of contemplated transactions, where the Company became the holding company of all entities discussed above.
Previous
to the reorganization, both ZYSL and ZYCL were held by Zhong Yang Holdings Company (the “Predecessor Parent Company”), a company
incorporated in Hong Kong with limited liability on April 21, 2015. The Predecessor Parent Company was owned
Before and after the Reorganization, the Company, together with its wholly-owned subsidiaries, are ultimately and effectively controlled by the same shareholders. Hence, the Reorganization is considered under common control. The consolidation of the Company and its subsidiaries has been accounted for at historical cost as of the beginning of the first period presented in the accompanying consolidated financial statements.
6
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies
Basis of presentation and principle of consolidation
The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
The unaudited condensed consolidated balance sheets as of September 30, 2023 and for the unaudited condensed consolidated statement of operations and comprehensive loss for the six months ended September 30, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 20-F for the fiscal year ended March 31, 2023, which was filed with the SEC on June 30, 2023.
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s unaudited condensed consolidated financial statements for the year ended March 31, 2023. The results of operations for the six months ended September 30, 2023 and 2022 are not necessarily indicative of the results for the full years.
The unaudited condensed consolidated financial statements include the financial statements of parent company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
7
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U. S. requires the use of estimates and assumptions that affect both the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Receivables from broker-dealers and clearing organizations
Receivables arise from the
business of dealing in futures or investment securities. Broker-dealers will require balances to be placed with them in order to cover
the positions taken by its customers. Clearing house receivables typically represent proceeds receivable on trades that have yet to settle
and are usually collected within two days. The balance of receivables from broker-dealers and clearing organizations represents such receivables
related to the Company’s customer trading activities and proprietary trading activities.
September 30, | March
31, | |||||||
| (unaudited) | ||||||||
| Receivables from broker-dealers and clearing organizations for futures customer accounts | $ | $ | ||||||
| Receivables from broker-dealers and clearing organizations for securities customer accounts | ||||||||
| Receivables from broker-dealers and clearing organizations for securities proprietary trading | ||||||||
| $ | $ | |||||||
8
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Receivables from customers
Receivables from customers include i) the trading solution services fees and other amounts due from customers once the transactions have been executed and completed, and ii) the amount due from customers whose holdings of US stocks exceeded their deposits in the Company. Receivables from customers are recorded net of allowance for doubtful accounts. Revenues earned from the futures brokerage service are included in futures brokerage commission, and revenues earned from trading solution services are included in trading solution services income.
On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable.
Prior to the Company’s adoption of ASU 2016-13, receivables from customers are presented net of allowance for doubtful accounts. 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. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of operations and comprehensive loss. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
After the adoption of ASU 2016-13, The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to receivables from customers and the estimated credit losses charged to the allowance is classified as operating expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company assesses collectability by reviewing receivables from customers on an individual basis because the Company had limited customers and each of them has difference characteristics, primarily based on business line and geographical area. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
For the six months ended September 30, 2023 and 2022, no allowance for doubtful accounts were recorded.
9
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Investment in a joint venture
The Company accounts for
the investment in a limited partnership in which the Company holds more than minor equity interest (
The Company applies the equity method to account for investment in a limited partnership and other investees, according to ASC 323 “Investments — Equity Method and Joint Ventures”, over which it has significant influence but does not own a controlling financial interest.
Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of operations and comprehensive income. The Company records its share of the results of the equity investees on a one quarter in arrears basis. The excess of the carrying amount of the investment over the underlying equity in net assets of the equity investee generally represents goodwill and intangible assets acquired. When the Company’s share of losses of the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee.
The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value. No impairment of was recognized for the six months ended September 30, 2023 and 2022.
10
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for the six months ended September 30, 2023 and 2022.
Operating leases
Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company leases its office from a third-party lessor since September 2021, before that the Company leased the same office from the Predecessor Parent Company, which is classified as an operating lease in accordance with Topic 842.
At the commencement date of the lease agreement between the Company and the third party lessor, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. There was no impairment for right-of-use lease assets as of September 30, 2023 and March 31, 2023.
The Company also elected the short-term lease recognition exemption and will not recognize right of use assets or lease liabilities for leases with a term less than 12 months.
11
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Revenue Recognition
| a) | Revenue from Contracts with Customers |
The Company early adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on April 1, 2018, using the modified retrospective approach. The adoption of this ASC 606 did not have a material impact on the Company’s consolidated financial statements. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenues and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenues to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. In according with ASC 606, revenues are recognized when the Company satisfies the performance obligations by delivering the promised services to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
The Company identified each distinct service as a performance obligation. The recognition and measurement of revenues is based on the assessment of individual contract terms. The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets.
Futures brokerage commissions
The Company earns fees and commissions from futures brokerage services based on a fixed rate for each transaction, all of which are under the consolidated accounts where the customer information are not disclosed to the third party brokers. When a customer executes a futures transaction through the Company’s platform, futures brokerage commission is recognized upon the completion of this transaction. Only a single performance obligation is identified for each futures trading transaction, and the performance obligation is satisfied on the trade date because that is when the underlying financial instrument is identified, the pricing of brokerage service is agreed upon and the promised services are delivered to customers. All of the Company’s revenues from contracts with customers are recognized at a point in time. The futures brokerage service could not be cancelled once it’s executed and is not refundable, so returns and allowances are not applicable. Commissions are charged for each customer trade order executed and cleared by the third-party brokers. The Company recognizes revenues on a gross basis as the Company is determined to be the primary obligor in fulfilling the trade order initiated by the customer. The Company may offer volume rebate as trading incentive to certain customer. The Company will review the customer’s transaction volume monthly and provide volume rebates on the commission charged to specific customers with large volume transactions. The volume rebate offered to such customer is accounted for as a variable consideration and determined based on most-likely amount method, which is recognized as a reduction of revenues. The Company did not offer the volume rebates offered during the six months ended September 30, 2023 and 2022, respectively.
12
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Revenue Recognition (continued)
| a) | Revenue from Contracts with Customers (continued) |
Trading solution services fees
The Company provides trading solution services to customers (e.g. individuals, proprietary trading companies or brokerage companies) for their trading on derivatives, equity, CFD and other financial products, through the internally developed proprietary investment management software. The Company’s trading solution provides a variety of functions suitable for front-end transaction executions to back-office settlement operations. The Company implements the initial installation of such software for each customer and provides hosting services for a period of time, generally two years, as agreed in the contracts. The initial installation is considered as a set-up activity, rather than a promised service to customer, which provides no incremental benefit to customer beyond permitting the access and use the hosted application. The Company identifies a single performance obligation from its contracts with customers. The Company charges each customer a fixed amount of initial installation fee and the monthly service fee based on a fixed rate per each transaction executed on the platform with a minimum monthly fee required. The Company recognizes the trading solution services as satisfied over the time.
Structured note subscription fees
The Company earns subscription service fees from customers by assisting customers to identify and subscribe for structured note products, which is calculated at a fixed percentage of investment amount. The Company identifies a single performance obligation for each subscription service, and recognizes subscription fee income when the customers successfully subscribe for the structure note products and underlying contract between the customer and financial institution becomes non-cancellable, which is the point in time when the control of service is completed. The Company recognizes revenue net of discount (if any) on a gross basis as the Company is determined to be the primary obligor in fulfilling the subscription services.
Other service revenues
The Company also provides other
financial services including securities brokerage, consulting services, and currency exchange services, and earns securities brokerage
commissions, consultancy fee income and other revenues, which are recognized when the service is rendered according to the relevant contracts.
For the six months ended September 30, 2023 and 2022, other revenues accounted for
13
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Revenue Recognition (continued)
| a) | Revenue from Contracts with Customers (continued) |
Sources of revenue
The Company has one revenue
generating reportable geographic segment under ASC Topic 280 “Segment Reporting” and derives its revenues primarily from its
futures brokerage service.
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Futures brokerage commissions | ||||||||
| Commission on futures broking earned from Hong Kong Exchange | $ | $ | ||||||
| Commission on futures broking from overseas Exchanges | ||||||||
| Trading solution service revenues | ||||||||
| Other service revenues | ||||||||
| Total comprehensive income | $ | $ | ||||||
| b) | Trading gains, interest income and other |
Trading gains and losses along with interest income fall within the scope of ASC Topic 825, Financial Instruments, which is excluded from the scope of ASC Topic 606. Trading gains and losses mainly consist of realized and unrealized gains and losses from the investment in US common stocks, which are included in Securities owned, at fair value. Interest and other income primarily consist of interests earned on bank deposit.
14
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Income taxes
The Company accounts for income taxes in accordance with the U.S. GAAP. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.
The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax assets are recognized to the extent that it is probable that taxable income to be utilized with prior net operating loss carried forwards. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. 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.
An uncertain tax position is
recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
Translation of foreign currencies
The functional currency is U.S. dollar for the Company’s Cayman Island operations, Hong Kong dollar for Hong Kong subsidiaries’ operations, and Singapore dollar for Singapore subsidiaries’ operations. The Company’s reporting currency is the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated at year-end exchange rates, income statement accounts are translated at average rates of exchange for the year and equity is translated at historical exchange rates. Any translation gains or losses are recorded in other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in net income.
15
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Translation of foreign currencies (continued)
September 30, | March
31, | |||||||
| HKD exchange rate for balance sheet items, except for equity accounts | ||||||||
| SGD exchange rate for balance sheet items, except for equity accounts | ||||||||
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| HKD exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | ||||||||
| SGD exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | ||||||||
Fair value of financial instruments
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 the fair value hierarchy are described below:
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets included securities owned, at fair value.
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. As of September 30, 2023 and March 31, 2023, and for the six months ended September 30, 2023 and 2022, there was no Level 2 assets owned.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. As of September 30, 2023 and March 31, 2023, and for the six months ended September 30, 2023 and 2022, there was no Level 3 assets owned.
As of September 30, 2023 and March 31, 2023, financial instruments of the Company comprised primarily current assets and current liabilities including cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, securities owned, at fair value, and payables to customers. The carrying amount of cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, and payables to customers approximate their fair values because of the short-term nature of these instruments. Securities owned, at fair value as of September 30, 2023 and March 31, 2023, mainly consist of common stock investments and are based upon quoted market price.
16
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the “CODM”), which is comprised of certain members of the Company’s management team. Consequently, the Company has determined that it has only one reportable operating segment.
Concentration
For the six months ended September
30, 2023, 3 customers accounted for approximately
For
the six months ended September 30, 2023, 2 brokers accounted for approximately
As
of September 30, 2023, the payable balance due to 2 customers accounted for approximately
17
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
3. Receivables from customers
| September 30, 2023 | March 31, 2023 | |||||||
| Receivable due from trading solution services | $ | $ | ||||||
| $ | $ | |||||||
For the six months ended September 30, 2023 and 2022, no allowance against receivables from customers were recorded.
4. Loans receivable
September 30, | March
31, | |||||||
| Loans receivable (i) | $ | $ | ||||||
| Receivable due customers holding US stocks (ii) | ||||||||
| $ | $ | |||||||
| (i) | In October 2022, the Company and a third party entity entered into a loan agreement, pursuant to which
the Company made a loan of $ |
In August 2023, the Company and another
third party entity entered into a promissory note agreement, pursuant to which the Company made a loan of $
| (ii) |
18
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
5. Employee Benefits
All salaried employees of the
Company in Hong Kong are enrolled in a Mandatory Provident Fund Scheme (“MPF scheme”) scheme under the Hong Kong Mandatory
Provident Fund Schemes Ordinance, within two months of employment. The MPF scheme is a defined contribution retirement plan administered
by an independent trustee. The Company makes regular contributions of
6. Fair Value
The following table present information about the Company’s assets by major category measured at fair value on a recurring basis as of September 30, 2023 and March 31, 2023, and indicates the fair value hierarchy of the valuation technique utilized by the Company to determine such fair value.
| September 30, 2023 | ||||||||||||||||||||
| Carrying | Fair Value | |||||||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Securities owned, at fair value | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | $ | |||||||||||||||
| March 31, 2023 | ||||||||||||||||||||
| Carrying | Fair Value | |||||||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Securities owned, at fair value | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | $ | |||||||||||||||
There was no transfer between any levels during the six months ended September 30, 2023 and 2022.
19
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
7. Operating lease
As of September 30, 2023, the Company had two non-cancelable office operating lease agreements with two third-party lessors, with lease term of two years and three years, respectively. The lease agreements matured in September 2024 and March 2025, respectively. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
September
30, | March
31, | |||||||
| Rights of use lease assets | $ | $ | ||||||
| Operating lease liabilities | $ | $ | ||||||
| September 30, 2023 | March 31, 2023 | |||||||
| Remaining lease term and discount rate | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
During the six months ended
September 30, 2023 and 2022, the Company incurred total operating lease expenses of $
| Twelve months ended March 31, 2024 | $ | |||
| Twelve months ended March 31, 2025 and thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
20
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
8. Investment in a joint venture
On June 24, 2022, the Company
entered into a partnership agreement to invest $
9. Share-based compensation
Effective on May 31, 2022,
the Company employed three non-executive directors. As part of compensation expenses, the Company agreed to issue ordinary shares to the
three directors. On quarterly basis, each director would receive ordinary shares with a fair value of $
For the six months ended September
30, 2023, the Company issued an aggregation of
10. Equity
Ordinary shares
The Company’s authorized
share capital is
On
September 9, 2021, the sole shareholder of the Company surrendered
On
April 12, 2023 and July 5, 2023, the Company issued an aggregation of
As of September 30, 2023 and
March 31, 2023, the Company had
21
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
10. Equity (continued)
Cancellation of warrants
In connection with the IPO,
the Company also agreed to sell warrants (the “Underwriters’ Warrants”) to the underwriters, for a nominal consideration
of US$
In February 2023, the
Company and the underwriter entered into an agreement, pursuant to which the underwriter agreed to cancel the warrants in exchange
for cash consideration of $
22
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
11. Related Party Transaction and Balance
| Name | Relationship with the Company | |
| Sunx Global Limited | ||
| Mr. Huaixi Yang | ||
| WSYQR Limited |
b. Related parties transactions
For the six months ended September 30, 2023 and 2022, the Company did not enter into any transactions with related parties.
| Nature | September 30, 2023 | March 31, 2023 | ||||||||
| Mr. Huaixi Yang | Receivable due from customers – related parties | $ | $ | |||||||
| WSYQR Limited | Payable to customers - related parties | $ | $ | |||||||
| Sunx Global Limited | Payable to customers - related parties | $ | $ | |||||||
23
TOP Financial Group Limited
(formerly “Zhong Yang Financial Group Limited”)
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2023 and 2022
12. Regulatory Requirements
The following table illustrates the minimum regulatory capital as established by the Hong Kong Securities and Futures Commission that the Company’s subsidiaries were required to maintain as of September 30, 2023 and March 31, 2023, and the actual amounts of capital that were maintained.
| Minimum | ||||||||||||||||
| Regulatory | Capital | Excess | Percent of | |||||||||||||
| Capital | Levels | Net | Requirement | |||||||||||||
| Requirements | Maintained | Capital | Maintained | |||||||||||||
| Zhong Yang Securities Limited | $ | $ | $ | % | ||||||||||||
| Zhong Yang Capital Limited | % | |||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
Capital requirements as of March 31, 2023
| Minimum | ||||||||||||||||
| Regulatory | Capital | Excess | Percent of | |||||||||||||
| Capital | Levels | Net | Requirement | |||||||||||||
| Requirements | Maintained | Capital | Maintained | |||||||||||||
| Zhong Yang Securities Limited | $ | $ | $ | % | ||||||||||||
| Zhong Yang Capital Limited | % | |||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
13. Subsequent Events
24
Document And Entity Information |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Document Information Line Items | |
| Entity Registrant Name | TOP FINANCIAL GROUP LIMITED |
| Document Type | 6-K |
| Current Fiscal Year End Date | --03-31 |
| Amendment Flag | false |
| Entity Central Index Key | 0001848275 |
| Document Period End Date | Sep. 30, 2023 |
| Document Fiscal Year Focus | 2024 |
| Document Fiscal Period Focus | Q2 |
| Entity File Number | 001-41407 |
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 150,000,000 | 150,000,000 |
| Common stock, shares issued | 35,008,829 | 35,004,635 |
| Common stock, shares outstanding | 35,008,829 | 35,004,635 |
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income (Parentheticals) - $ / shares |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Statement [Abstract] | ||
| Earnings per share, Diluted | $ 0.10 | $ 0.06 |
| Weighted average number of ordinary shares outstanding, Diluted | 35,007,821 | 33,280,055 |
Organization and Description of Business |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization and Description of Business [Abstract] | |
| Organization and Description of Business | 1. Organization and Description of Business
TOP Financial Group Limited (the “Company”, formerly “Zhong Yang Financial Group Limited” and “ZYFGL”) (“ZYFGL”) is a company incorporated in Cayman Islands with limited liability on August 1, 2019. ZYFGL is a parent holding company with no operations. Effective on July 13, 2022, the Company changed its name from “Zhong Yang Financial Group Limited” to “TOP Financial Group Limited” (“Name Change”).
ZYFGL has two wholly-owned subsidiaries, ZYSL (BVI) Limited (“ZYSL (BVI)”) and ZYCL (BVI) Limited (“ZYCL (BVI)”), both which are investment holding entities formed under the laws and regulations of the British Virgin Islands on August 29, 2019.
Zhong Yang Securities Limited (“ZYSL”), a wholly-owned subsidiary of ZYSL (BVI), was established in accordance with laws and regulations of Hong Kong on April 22, 2015 with a registered capital of HKD 41,400,000 (approximately $5.3 million). ZYSL is a limited liability corporation licensed with the Hong Kong Securities and Futures Commission (“HKSFC”) to carry out regulated activities including Type 1 Dealing in Securities and Type 2 Dealing in Futures Contracts.
Zhong Yang Capital Limited (“ZYCL”), a wholly-owned subsidiary of ZYCL (BVI), was established in accordance with laws and regulations of Hong Kong on September 29, 2016 with a registered capital of HKD 5,000,000 (approximately $0.6 million). ZYCL is a limited liability corporation licensed with the HKSFC to carry out regulated activities Type 4 Advising on Securities, Type 5 Advising on Futures Contracts and Type 9 Asset Management.
Eight subsidiaries, ZYAL (BVI) Limited (“ZYAL (BVI)”), ZYTL (BVI) Limited (“ZYTL (BVI)”), ZYNL (BVI) Limited (“ZYNL (BVI)”), WIN100 Tech Limited (“WIN100 TECH”), ZYPL (BVI) Limited (“ZYPL (BVI)”), ZYXL (BVI) Limited (“ZYXL (BVI)”), ZYIL (BVI) Limited (“ZYIL (BVI)”) and ZYFL (BVI) Limited (“ZYFL (BVI)”) were incorporated under the laws of British Virgin Islands on January 7, 2021, January 12, 2021, January 20, 2021, May 14, 2021, July 14, 2022, July 14, 2022, November 11, 2022 and November 11, 2022, respectively. These subsidiaries are dormant as of the date of this report, except for WIN100 TECH, which provides trading solutions for clients trading on the world’s major derivatives and stock exchanges.
On November 28, 2022, ZYPL established Top Financial Pte. Ltd. (“Top Fin”) in accordance with laws and regulations of Republic of Singapore. On the same date, ZYXL set up Top Asset Management Pte. Ltd. (“Top AM”) in accordance with laws and regulations. On February 24, 2023, ZYFL established Winrich Finance Limited in accordance with laws and regulations of Hong Kong. On February 9, 2023, the Company, through ZYIL, purchased 100% equity interest in Win100 Wealth Limited (“Win100 Wealth”) from an entity controlled by the controlling shareholder of the Company.
On April 12, 2023, the Company, through ZYAL, closed an acquisition of 100% equity interest in TOP 500 SEC PTY LTD (“Top 500”) from the sole shareholder of Top 500 (the “Seller”). The Seller is a company controlled by Junli Yang, the Chairwoman of the Board of Directors of the Company. The cash consideration was agreed at $700,000. In August 2022, ZYAL paid $200,000 upon signing of the share purchase agreement and recorded the investment as “deposit of long-term investment”. The remaining $500,000 was paid upon closing of the acquisition. Top 500 is a brokerage firm in Australia that owns an Australian Financial Services License (AFSL: 328866). Top 500 provides financial services in Australia that includes arranging or providing financial advice on financial products such as derivatives, foreign exchange contracts, stock and bond issuance etc. Top 500 did not commence operation as of the closing of the acquisition.
ZYFGL together with its subsidiaries (collectively, the “Company”) are primarily engaged in providing futures brokerage and other financial services in Hong Kong through a trading platform to its customers. The Company generates brokerage commission income by enabling its customer to trade on multiple exchanges around the world.
On June 3, 2022, the Company completed its initial public offering on the National Association of Securities Dealers Automated Quotations (“NASDAQ”). In this offering, 5,000,000 ordinary shares were issued at a price of $5.00 per share. The gross proceeds received from the initial public offering totaled US$ 25 million. The Offering closed on June 3, 2022 and the Ordinary Shares began trading on June 1, 2022 on The Nasdaq Capital Market under the ticker symbol “TOP.”
Reorganization
Reorganization of the legal structure of the Company (“Reorganization”) has been completed on March 26, 2020 by carrying out a sequence of contemplated transactions, where the Company became the holding company of all entities discussed above.
Previous to the reorganization, both ZYSL and ZYCL were held by Zhong Yang Holdings Company (the “Predecessor Parent Company”), a company incorporated in Hong Kong with limited liability on April 21, 2015. The Predecessor Parent Company was owned 55.5% by Ms. Yang Junli, 20.2% by Ms. Ji An, 10% by Mr. Chen Tseng Yuan, 8.3% by Ms. Lo Yung Yung, 4% by Ms. Chen Hong, and 2% by Mr. Li Jian. The first step of the Reorganization was incorporating TFGL, which had then incorporated ZYSL (BVI) and ZYCL (BVI) on August 29, 2019. With the approval obtained from HKSFC, the ownership interests in ZYSL and ZYCL were transferred from the Predecessor Parent Company to ZYSL (BVI) and ZYCL (BVI), respectively on March 26, 2020.
Before and after the Reorganization, the Company, together with its wholly-owned subsidiaries, are ultimately and effectively controlled by the same shareholders. Hence, the Reorganization is considered under common control. The consolidation of the Company and its subsidiaries has been accounted for at historical cost as of the beginning of the first period presented in the accompanying consolidated financial statements. |
Summary of Significant Accounting Policies |
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| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies
Basis of presentation and principle of consolidation
The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
The unaudited condensed consolidated balance sheets as of September 30, 2023 and for the unaudited condensed consolidated statement of operations and comprehensive loss for the six months ended September 30, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 20-F for the fiscal year ended March 31, 2023, which was filed with the SEC on June 30, 2023.
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s unaudited condensed consolidated financial statements for the year ended March 31, 2023. The results of operations for the six months ended September 30, 2023 and 2022 are not necessarily indicative of the results for the full years.
The unaudited condensed consolidated financial statements include the financial statements of parent company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U. S. requires the use of estimates and assumptions that affect both the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Receivables from broker-dealers and clearing organizations
Receivables arise from the business of dealing in futures or investment securities. Broker-dealers will require balances to be placed with them in order to cover the positions taken by its customers. Clearing house receivables typically represent proceeds receivable on trades that have yet to settle and are usually collected within two days. The balance of receivables from broker-dealers and clearing organizations represents such receivables related to the Company’s customer trading activities and proprietary trading activities. As of September 30, 2023 and March 31, 2023, receivables from broker-dealers and clearing organizations consisted of the following:
Receivables from customers
Receivables from customers include i) the trading solution services fees and other amounts due from customers once the transactions have been executed and completed, and ii) the amount due from customers whose holdings of US stocks exceeded their deposits in the Company. Receivables from customers are recorded net of allowance for doubtful accounts. Revenues earned from the futures brokerage service are included in futures brokerage commission, and revenues earned from trading solution services are included in trading solution services income.
On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable.
Prior to the Company’s adoption of ASU 2016-13, receivables from customers are presented net of allowance for doubtful accounts. 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. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of operations and comprehensive loss. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
After the adoption of ASU 2016-13, The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to receivables from customers and the estimated credit losses charged to the allowance is classified as operating expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company assesses collectability by reviewing receivables from customers on an individual basis because the Company had limited customers and each of them has difference characteristics, primarily based on business line and geographical area. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
For the six months ended September 30, 2023 and 2022, no allowance for doubtful accounts were recorded.
Investment in a joint venture
The Company accounts for the investment in a limited partnership in which the Company holds more than minor equity interest (3% - 5%) in accordance with ASC 970-323-25-6 under the equity method of accounting.
The Company applies the equity method to account for investment in a limited partnership and other investees, according to ASC 323 “Investments — Equity Method and Joint Ventures”, over which it has significant influence but does not own a controlling financial interest.
Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of operations and comprehensive income. The Company records its share of the results of the equity investees on a one quarter in arrears basis. The excess of the carrying amount of the investment over the underlying equity in net assets of the equity investee generally represents goodwill and intangible assets acquired. When the Company’s share of losses of the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee.
The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value. No impairment of was recognized for the six months ended September 30, 2023 and 2022.
Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for the six months ended September 30, 2023 and 2022.
Operating leases
Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company leases its office from a third-party lessor since September 2021, before that the Company leased the same office from the Predecessor Parent Company, which is classified as an operating lease in accordance with Topic 842.
At the commencement date of the lease agreement between the Company and the third party lessor, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. There was no impairment for right-of-use lease assets as of September 30, 2023 and March 31, 2023.
The Company also elected the short-term lease recognition exemption and will not recognize right of use assets or lease liabilities for leases with a term less than 12 months.
Revenue Recognition
The Company early adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on April 1, 2018, using the modified retrospective approach. The adoption of this ASC 606 did not have a material impact on the Company’s consolidated financial statements. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenues and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenues to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. In according with ASC 606, revenues are recognized when the Company satisfies the performance obligations by delivering the promised services to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
The Company identified each distinct service as a performance obligation. The recognition and measurement of revenues is based on the assessment of individual contract terms. The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets.
Futures brokerage commissions
The Company earns fees and commissions from futures brokerage services based on a fixed rate for each transaction, all of which are under the consolidated accounts where the customer information are not disclosed to the third party brokers. When a customer executes a futures transaction through the Company’s platform, futures brokerage commission is recognized upon the completion of this transaction. Only a single performance obligation is identified for each futures trading transaction, and the performance obligation is satisfied on the trade date because that is when the underlying financial instrument is identified, the pricing of brokerage service is agreed upon and the promised services are delivered to customers. All of the Company’s revenues from contracts with customers are recognized at a point in time. The futures brokerage service could not be cancelled once it’s executed and is not refundable, so returns and allowances are not applicable. Commissions are charged for each customer trade order executed and cleared by the third-party brokers. The Company recognizes revenues on a gross basis as the Company is determined to be the primary obligor in fulfilling the trade order initiated by the customer. The Company may offer volume rebate as trading incentive to certain customer. The Company will review the customer’s transaction volume monthly and provide volume rebates on the commission charged to specific customers with large volume transactions. The volume rebate offered to such customer is accounted for as a variable consideration and determined based on most-likely amount method, which is recognized as a reduction of revenues. The Company did not offer the volume rebates offered during the six months ended September 30, 2023 and 2022, respectively.
Trading solution services fees
The Company provides trading solution services to customers (e.g. individuals, proprietary trading companies or brokerage companies) for their trading on derivatives, equity, CFD and other financial products, through the internally developed proprietary investment management software. The Company’s trading solution provides a variety of functions suitable for front-end transaction executions to back-office settlement operations. The Company implements the initial installation of such software for each customer and provides hosting services for a period of time, generally two years, as agreed in the contracts. The initial installation is considered as a set-up activity, rather than a promised service to customer, which provides no incremental benefit to customer beyond permitting the access and use the hosted application. The Company identifies a single performance obligation from its contracts with customers. The Company charges each customer a fixed amount of initial installation fee and the monthly service fee based on a fixed rate per each transaction executed on the platform with a minimum monthly fee required. The Company recognizes the trading solution services as satisfied over the time.
Structured note subscription fees
The Company earns subscription service fees from customers by assisting customers to identify and subscribe for structured note products, which is calculated at a fixed percentage of investment amount. The Company identifies a single performance obligation for each subscription service, and recognizes subscription fee income when the customers successfully subscribe for the structure note products and underlying contract between the customer and financial institution becomes non-cancellable, which is the point in time when the control of service is completed. The Company recognizes revenue net of discount (if any) on a gross basis as the Company is determined to be the primary obligor in fulfilling the subscription services.
Other service revenues
The Company also provides other financial services including securities brokerage, consulting services, and currency exchange services, and earns securities brokerage commissions, consultancy fee income and other revenues, which are recognized when the service is rendered according to the relevant contracts. For the six months ended September 30, 2023 and 2022, other revenues accounted for 3.6% and 1.1% of total revenues from Contracts with Customers, respectively.
Sources of revenue
The Company has one revenue generating reportable geographic segment under ASC Topic 280 “Segment Reporting” and derives its revenues primarily from its futures brokerage service. The following table presents revenues from contracts with customers, in accordance with ASC Topic 606, by major source:
Trading gains and losses along with interest income fall within the scope of ASC Topic 825, Financial Instruments, which is excluded from the scope of ASC Topic 606. Trading gains and losses mainly consist of realized and unrealized gains and losses from the investment in US common stocks, which are included in Securities owned, at fair value. Interest and other income primarily consist of interests earned on bank deposit.
Income taxes
The Company accounts for income taxes in accordance with the U.S. GAAP. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.
The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax assets are recognized to the extent that it is probable that taxable income to be utilized with prior net operating loss carried forwards. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. 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.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company does not believe that there was any uncertain tax position as of September 30, 2023 and March 31, 2023.
Translation of foreign currencies
The functional currency is U.S. dollar for the Company’s Cayman Island operations, Hong Kong dollar for Hong Kong subsidiaries’ operations, and Singapore dollar for Singapore subsidiaries’ operations. The Company’s reporting currency is the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated at year-end exchange rates, income statement accounts are translated at average rates of exchange for the year and equity is translated at historical exchange rates. Any translation gains or losses are recorded in other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in net income.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
Fair value of financial instruments
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 the fair value hierarchy are described below:
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets included securities owned, at fair value.
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. As of September 30, 2023 and March 31, 2023, and for the six months ended September 30, 2023 and 2022, there was no Level 2 assets owned.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. As of September 30, 2023 and March 31, 2023, and for the six months ended September 30, 2023 and 2022, there was no Level 3 assets owned.
As of September 30, 2023 and March 31, 2023, financial instruments of the Company comprised primarily current assets and current liabilities including cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, securities owned, at fair value, and payables to customers. The carrying amount of cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, and payables to customers approximate their fair values because of the short-term nature of these instruments. Securities owned, at fair value as of September 30, 2023 and March 31, 2023, mainly consist of common stock investments and are based upon quoted market price.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the “CODM”), which is comprised of certain members of the Company’s management team. Consequently, the Company has determined that it has only one reportable operating segment.
Concentration
For the six months ended September 30, 2023, 3 customers accounted for approximately 47%, 25% and 10% of the total revenue, respectively. For the six months ended September 30, 2022, three customers accounted for approximately 31%, 23% and 10% of the total revenue, respectively.
For the six months ended September 30, 2023, 2 brokers accounted for approximately 71%, and 22% of the total commission expenses, respectively. For the six months ended September 30, 2022, two brokers accounted for 74% and 25% the total commission expenses, respectively.
As of September 30, 2023, the payable balance due to 2 customers accounted for approximately 26 %, and 22 % of the total balance of payable to customers, respectively. As of March 31, 2023, the payable balance due to 2 customers accounted for approximately 27%, and 19% of the total balance of payable to customers, respectively. |
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Receivables from customers |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||
| Receivables from Customers [Abstract] | |||||||||||||||||||||||||||||||||||||
| Receivables from customers | 3. Receivables from customers
As of September 30, 2023 and March 31, 2023, receivables from customers consisted of the following:
For the six months ended September 30, 2023 and 2022, no allowance against receivables from customers were recorded. |
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Loans Receivable |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Receivable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans receivable | 4. Loans receivable
As of September 30, 2023 and March 31, 2023, loans receivable consisted of the following:
In August 2023, the Company and another third party entity entered into a promissory note agreement, pursuant to which the Company made a loan of $2,000,000 to the borrower. The promissory note bears a monthly interest rate of 0.67%.
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Employee Benefits |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Employee Benefits [Abstract] | |
| Employee Benefits | 5. Employee Benefits
All salaried employees of the Company in Hong Kong are enrolled in a Mandatory Provident Fund Scheme (“MPF scheme”) scheme under the Hong Kong Mandatory Provident Fund Schemes Ordinance, within two months of employment. The MPF scheme is a defined contribution retirement plan administered by an independent trustee. The Company makes regular contributions of 5% of the employee’s relevant income to the MPF scheme, subject to a maximum of $192 per month. Contributions to the plan vest immediately. The Company recorded MPF expense of $9,385 and $8,936 for the six months ended September 30, 2023 and 2022, respectively. |
Fair Value |
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| Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | 6. Fair Value
The following table present information about the Company’s assets by major category measured at fair value on a recurring basis as of September 30, 2023 and March 31, 2023, and indicates the fair value hierarchy of the valuation technique utilized by the Company to determine such fair value.
Assets measured at fair value on a recurring basis as of September 30, 2023 and March 31, 2023:
There was no transfer between any levels during the six months ended September 30, 2023 and 2022. |
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Operating Lease |
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| Operating lease [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease | 7. Operating lease
As of September 30, 2023, the Company had two non-cancelable office operating lease agreements with two third-party lessors, with lease term of two years and three years, respectively. The lease agreements matured in September 2024 and March 2025, respectively. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The table below presents the operating lease related assets and liabilities recorded on the balance sheets.
The weighted average remaining lease terms and discount rates for the above operating lease were as follows as of September 30, 2023 and March 31, 2023:
During the six months ended September 30, 2023 and 2022, the Company incurred total operating lease expenses of $60,941 and $55,312, respectively.
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2023:
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Investment in a joint venture |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Investment in a joint venture [Abstract] | |
| Investment in a joint venture | 8. Investment in a joint venture
On June 24, 2022, the Company entered into a partnership agreement to invest $256,420 (HKD 2,000,000), for 20% partnership interest in the limited partnership. The funds raised by the limited partnership are invested in biological entities. As of September 30, 2023, the limited partnership has not commenced operation, and the Company did not record its share of the operating loss of the limited partnership for the six months ended September 30, 2023 and 2022. As of September 30, 2023 and March 31, 2023, no significant impairment indicators have been noted in connection with the investment. |
Share-Based Compensation |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Share-Based Compensation [Abstract] | |
| Share-based compensation | 9. Share-based compensation
Effective on May 31, 2022, the Company employed three non-executive directors. As part of compensation expenses, the Company agreed to issue ordinary shares to the three directors. On quarterly basis, each director would receive ordinary shares with a fair value of $5,000, and the number of ordinary shares is determined by the closing market price on issuance dates.
For the six months ended September 30, 2023, the Company issued an aggregation of 4,194 ordinary shares to the three directors, and recognized share-based compensation expenses of $11,742 in the account of “compensation and benefits” in the unaudited consolidated statements of income and comprehensive income. |
Equity |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Equity [Abstract] | |
| Equity | 10. Equity
Ordinary shares
The Company’s authorized share capital is 50,000,000 ordinary shares, par value $0.001 per share. On August 1, 2019, the Company issued 50,000,000 ordinary shares, which issuance was considered as being part of the reorganization of the Company.
On September 9, 2021, the sole shareholder of the Company surrendered 20,000,000 ordinary shares of US$0.001 par value each for no consideration. On September 9, 2021 the Company’s shareholders and Board of Directors approved to amend the authorized share capital from US$50,000, divided into 50,000,000 ordinary shares of a par value of US$0.001 per share, to US$150,000, divided into 150,000,000 ordinary shares of a par value of US$0.001 per share. The Company believes it is appropriate to reflect the such changes in share structure on a retroactive basis pursuant to ASC 260. The Company has retroactively restated all shares and per share data for all periods presented.
On April 12, 2023 and July 5, 2023, the Company issued an aggregation of 2,598 and 1,596 ordinary shares, respectively, to three non-executive directors as part of their compensation.
As of September 30, 2023 and March 31, 2023, the Company had 35,008,829 and 35,004,635 ordinary shares issued and outstanding, respectively.
Cancellation of warrants
In connection with the IPO, the Company also agreed to sell warrants (the “Underwriters’ Warrants”) to the underwriters, for a nominal consideration of US$0.01 per warrant, to purchase a number of Ordinary Shares equal to 6% of the total number of Ordinary Shares sold in the IPO. The Underwriters’ Warrants shall have an exercise price equal to 120% of the offering price of the Ordinary Shares sold in the IPO. The Underwriters’ Warrants may be exercised in cash or via cashless exercise, will be exercisable for three (3) years from the commencement of sales of this offering and will terminate on the third anniversary of the commencement of sales of this offering in compliance with FINRA Rule 5110(g)(8)(A). The Underwriters’ Warrants can be exercised in whole or in part.
In February 2023, the Company and the underwriter entered into an agreement, pursuant to which the underwriter agreed to cancel the warrants in exchange for cash consideration of $300,000. The Company made initial payment of $150,000 in February 2023. Accordingly, the Company made cash consideration and recorded the transaction as a reduction against additional paid-in capital. The remaining balance was paid in December 2023. Accordingly, the Company accrued the payment with corresponding accounts as a reduction against additional paid-in capital. |
Related Party Transaction and Balance |
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| Related Party Transaction and Balance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transaction and Balance | 11. Related Party Transaction and Balance
a. Nature of relationships with related parties
b. Related parties transactions
For the six months ended September 30, 2023 and 2022, the Company did not enter into any transactions with related parties.
c. Balance with related parties
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Regulatory Requirements |
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| Regulatory Requirements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Regulatory Requirements | 12. Regulatory Requirements
The following table illustrates the minimum regulatory capital as established by the Hong Kong Securities and Futures Commission that the Company’s subsidiaries were required to maintain as of September 30, 2023 and March 31, 2023, and the actual amounts of capital that were maintained.
Capital requirements as of September 30, 2023
Capital requirements as of March 31, 2023
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Subsequent Events |
6 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 13. Subsequent Events
On December 20, 2023, the annual shareholders meeting passed a resolution to change the authorized share capital from US$l50,000.00 divided into 150,000,000 shares of a nominal or par value of US$0.001 each to US$l,000,000.00 divided into 1,000,000,000 shares of a nominal or par value of US$0.001 each (the “Ordinary Shares”). The Company also authorized the Board of Director to, at its discretion without further approval of the shareholders, to adopt a dual-class share capital structure to (i) re-classify all Ordinary Shares issued and outstanding into class A ordinary shares with a par value of US$0.001 each with one (1) vote per share and with other rights attached to it in the Second Amended and Restated Memorandum and Articles of Association (the “Class A Ordinary Shares”) on a one for one basis; (ii) re-designate 100,000,000 authorized but unissued Ordinary Shares into 100,000,000 class B ordinary shares with a par value of US$0.001 each with fifty (50) votes per share and with other rights attached to it in the Second Amended and Restated Memorandum and Articles of Association (the “Class B Ordinary Shares”) on a one for one basis; and (iii) re-designate the remaining authorized but unissued Ordinary Shares into Class A Ordinary Shares on a one for one basis. As of the date of this statement, the Board of Directors has not adopted a dual-class share capital structure. |
Accounting Policies, by Policy (Policies) |
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| Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation and principle of consolidation | Basis of presentation and principle of consolidation The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The unaudited condensed consolidated balance sheets as of September 30, 2023 and for the unaudited condensed consolidated statement of operations and comprehensive loss for the six months ended September 30, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 20-F for the fiscal year ended March 31, 2023, which was filed with the SEC on June 30, 2023. In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s unaudited condensed consolidated financial statements for the year ended March 31, 2023. The results of operations for the six months ended September 30, 2023 and 2022 are not necessarily indicative of the results for the full years. The unaudited condensed consolidated financial statements include the financial statements of parent company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
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| Emerging Growth Company | Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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| Use of estimates | Use of estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U. S. requires the use of estimates and assumptions that affect both the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. |
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| Receivables from broker-dealers and clearing organizations | Receivables from broker-dealers and clearing organizations Receivables arise from the business of dealing in futures or investment securities. Broker-dealers will require balances to be placed with them in order to cover the positions taken by its customers. Clearing house receivables typically represent proceeds receivable on trades that have yet to settle and are usually collected within two days. The balance of receivables from broker-dealers and clearing organizations represents such receivables related to the Company’s customer trading activities and proprietary trading activities. As of September 30, 2023 and March 31, 2023, receivables from broker-dealers and clearing organizations consisted of the following:
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| Receivables from customers | Receivables from customers Receivables from customers include i) the trading solution services fees and other amounts due from customers once the transactions have been executed and completed, and ii) the amount due from customers whose holdings of US stocks exceeded their deposits in the Company. Receivables from customers are recorded net of allowance for doubtful accounts. Revenues earned from the futures brokerage service are included in futures brokerage commission, and revenues earned from trading solution services are included in trading solution services income. On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable. Prior to the Company’s adoption of ASU 2016-13, receivables from customers are presented net of allowance for doubtful accounts. 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. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of operations and comprehensive loss. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. After the adoption of ASU 2016-13, The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to receivables from customers and the estimated credit losses charged to the allowance is classified as operating expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company assesses collectability by reviewing receivables from customers on an individual basis because the Company had limited customers and each of them has difference characteristics, primarily based on business line and geographical area. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. For the six months ended September 30, 2023 and 2022, no allowance for doubtful accounts were recorded.
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| Investment in a joint venture | Investment in a joint venture The Company accounts for the investment in a limited partnership in which the Company holds more than minor equity interest (3% - 5%) in accordance with ASC 970-323-25-6 under the equity method of accounting. The Company applies the equity method to account for investment in a limited partnership and other investees, according to ASC 323 “Investments — Equity Method and Joint Ventures”, over which it has significant influence but does not own a controlling financial interest. Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of operations and comprehensive income. The Company records its share of the results of the equity investees on a one quarter in arrears basis. The excess of the carrying amount of the investment over the underlying equity in net assets of the equity investee generally represents goodwill and intangible assets acquired. When the Company’s share of losses of the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee. The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value. No impairment of was recognized for the six months ended September 30, 2023 and 2022.
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| Impairment of long-lived assets | Impairment of long-lived assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for the six months ended September 30, 2023 and 2022. |
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| Operating leases | Operating leases Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company leases its office from a third-party lessor since September 2021, before that the Company leased the same office from the Predecessor Parent Company, which is classified as an operating lease in accordance with Topic 842. At the commencement date of the lease agreement between the Company and the third party lessor, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. There was no impairment for right-of-use lease assets as of September 30, 2023 and March 31, 2023. The Company also elected the short-term lease recognition exemption and will not recognize right of use assets or lease liabilities for leases with a term less than 12 months.
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| Revenue Recognition | Revenue Recognition
The Company early adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on April 1, 2018, using the modified retrospective approach. The adoption of this ASC 606 did not have a material impact on the Company’s consolidated financial statements. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenues and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenues to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. In according with ASC 606, revenues are recognized when the Company satisfies the performance obligations by delivering the promised services to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company identified each distinct service as a performance obligation. The recognition and measurement of revenues is based on the assessment of individual contract terms. The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets. Futures brokerage commissions The Company earns fees and commissions from futures brokerage services based on a fixed rate for each transaction, all of which are under the consolidated accounts where the customer information are not disclosed to the third party brokers. When a customer executes a futures transaction through the Company’s platform, futures brokerage commission is recognized upon the completion of this transaction. Only a single performance obligation is identified for each futures trading transaction, and the performance obligation is satisfied on the trade date because that is when the underlying financial instrument is identified, the pricing of brokerage service is agreed upon and the promised services are delivered to customers. All of the Company’s revenues from contracts with customers are recognized at a point in time. The futures brokerage service could not be cancelled once it’s executed and is not refundable, so returns and allowances are not applicable. Commissions are charged for each customer trade order executed and cleared by the third-party brokers. The Company recognizes revenues on a gross basis as the Company is determined to be the primary obligor in fulfilling the trade order initiated by the customer. The Company may offer volume rebate as trading incentive to certain customer. The Company will review the customer’s transaction volume monthly and provide volume rebates on the commission charged to specific customers with large volume transactions. The volume rebate offered to such customer is accounted for as a variable consideration and determined based on most-likely amount method, which is recognized as a reduction of revenues. The Company did not offer the volume rebates offered during the six months ended September 30, 2023 and 2022, respectively.
Trading solution services fees The Company provides trading solution services to customers (e.g. individuals, proprietary trading companies or brokerage companies) for their trading on derivatives, equity, CFD and other financial products, through the internally developed proprietary investment management software. The Company’s trading solution provides a variety of functions suitable for front-end transaction executions to back-office settlement operations. The Company implements the initial installation of such software for each customer and provides hosting services for a period of time, generally two years, as agreed in the contracts. The initial installation is considered as a set-up activity, rather than a promised service to customer, which provides no incremental benefit to customer beyond permitting the access and use the hosted application. The Company identifies a single performance obligation from its contracts with customers. The Company charges each customer a fixed amount of initial installation fee and the monthly service fee based on a fixed rate per each transaction executed on the platform with a minimum monthly fee required. The Company recognizes the trading solution services as satisfied over the time. Structured note subscription fees The Company earns subscription service fees from customers by assisting customers to identify and subscribe for structured note products, which is calculated at a fixed percentage of investment amount. The Company identifies a single performance obligation for each subscription service, and recognizes subscription fee income when the customers successfully subscribe for the structure note products and underlying contract between the customer and financial institution becomes non-cancellable, which is the point in time when the control of service is completed. The Company recognizes revenue net of discount (if any) on a gross basis as the Company is determined to be the primary obligor in fulfilling the subscription services. Other service revenues The Company also provides other financial services including securities brokerage, consulting services, and currency exchange services, and earns securities brokerage commissions, consultancy fee income and other revenues, which are recognized when the service is rendered according to the relevant contracts. For the six months ended September 30, 2023 and 2022, other revenues accounted for 3.6% and 1.1% of total revenues from Contracts with Customers, respectively.
Sources of revenue The Company has one revenue generating reportable geographic segment under ASC Topic 280 “Segment Reporting” and derives its revenues primarily from its futures brokerage service. The following table presents revenues from contracts with customers, in accordance with ASC Topic 606, by major source:
Trading gains and losses along with interest income fall within the scope of ASC Topic 825, Financial Instruments, which is excluded from the scope of ASC Topic 606. Trading gains and losses mainly consist of realized and unrealized gains and losses from the investment in US common stocks, which are included in Securities owned, at fair value. Interest and other income primarily consist of interests earned on bank deposit.
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| Income taxes | Income taxes The Company accounts for income taxes in accordance with the U.S. GAAP. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes. The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax assets are recognized to the extent that it is probable that taxable income to be utilized with prior net operating loss carried forwards. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. 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. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company does not believe that there was any uncertain tax position as of September 30, 2023 and March 31, 2023. |
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| Translation of foreign currencies | Translation of foreign currencies The functional currency is U.S. dollar for the Company’s Cayman Island operations, Hong Kong dollar for Hong Kong subsidiaries’ operations, and Singapore dollar for Singapore subsidiaries’ operations. The Company’s reporting currency is the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated at year-end exchange rates, income statement accounts are translated at average rates of exchange for the year and equity is translated at historical exchange rates. Any translation gains or losses are recorded in other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in net income.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
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| Fair value of financial instruments | Fair value of financial instruments 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 the fair value hierarchy are described below: Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets included securities owned, at fair value. Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. As of September 30, 2023 and March 31, 2023, and for the six months ended September 30, 2023 and 2022, there was no Level 2 assets owned. Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. As of September 30, 2023 and March 31, 2023, and for the six months ended September 30, 2023 and 2022, there was no Level 3 assets owned. As of September 30, 2023 and March 31, 2023, financial instruments of the Company comprised primarily current assets and current liabilities including cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, securities owned, at fair value, and payables to customers. The carrying amount of cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, and payables to customers approximate their fair values because of the short-term nature of these instruments. Securities owned, at fair value as of September 30, 2023 and March 31, 2023, mainly consist of common stock investments and are based upon quoted market price.
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| Segment reporting | Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the “CODM”), which is comprised of certain members of the Company’s management team. Consequently, the Company has determined that it has only one reportable operating segment. |
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| Concentration | Concentration For the six months ended September 30, 2023, 3 customers accounted for approximately 47%, 25% and 10% of the total revenue, respectively. For the six months ended September 30, 2022, three customers accounted for approximately 31%, 23% and 10% of the total revenue, respectively. For the six months ended September 30, 2023, 2 brokers accounted for approximately 71%, and 22% of the total commission expenses, respectively. For the six months ended September 30, 2022, two brokers accounted for 74% and 25% the total commission expenses, respectively. As of September 30, 2023, the payable balance due to 2 customers accounted for approximately 26 %, and 22 % of the total balance of payable to customers, respectively. As of March 31, 2023, the payable balance due to 2 customers accounted for approximately 27%, and 19% of the total balance of payable to customers, respectively. |
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Summary of Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Receivables from Broker-Dealers and Clearing Organizations | As of September 30, 2023 and March 31,
2023, receivables from broker-dealers and clearing organizations consisted of the following:
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| Schedule of Revenues from Contracts with Customers | The following table presents revenues from contracts with customers, in accordance with ASC Topic 606, by major
source:
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| Schedule of Currency Exchange Rates | The following table outlines
the currency exchange rates that were used in creating the consolidated financial statements in this report:
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Receivables from customers (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||
| Receivables from Customers [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Receivables from Customers | As of September 30, 2023 and
March 31, 2023, receivables from customers consisted of the following:
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Loans Receivable (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Receivable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Loans Receivable | As of September 30, 2023 and
March 31, 2023, loans receivable consisted of the following:
In August 2023, the Company and another third party entity entered into a promissory note agreement, pursuant to which the Company made a loan of $2,000,000 to the borrower. The promissory note bears a monthly interest rate of 0.67%.
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Fair Value (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Assets Measured at Fair Value on a Recurring Basis | Assets measured at fair value
on a recurring basis as of September 30, 2023 and March 31, 2023:
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Operating Lease (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Operating Lease Related Assets and Liabilities | The table below presents the
operating lease related assets and liabilities recorded on the balance sheets.
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| Schedule of Weighted Average Remaining Lease Terms and Discount Rates | The weighted average remaining
lease terms and discount rates for the above operating lease were as follows as of September 30, 2023 and March 31, 2023:
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| Schedule of Maturities of Lease Liabilities | The following is a schedule,
by years, of maturities of lease liabilities as of September 30, 2023:
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Related Party Transaction and Balance (Tables) |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transaction and Balance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Nature of Relationships with Related Parties | a. Nature of relationships with related parties
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| Schedule of Balance with Related Parties | c. Balance with related parties
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Regulatory Requirements (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Regulatory Requirements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Capital Requirements | Capital requirements as of
September 30, 2023
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Summary of Significant Accounting Policies (Details) - Schedule of Revenues from Contracts with Customers - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Futures brokerage commissions | ||
| Commission on futures broking earned | $ 2,330,723 | $ 2,639,572 |
| Trading solution service revenues | 1,691,441 | 2,369,296 |
| Other service revenues | 239,503 | 56,778 |
| Total comprehensive income | 4,261,667 | 5,065,646 |
| Hong Kong Exchange [Member] | ||
| Futures brokerage commissions | ||
| Commission on futures broking earned | 429,708 | 449,699 |
| Overseas Exchanges [Member] | ||
| Futures brokerage commissions | ||
| Commission on futures broking earned | $ 1,901,015 | $ 2,189,873 |
Summary of Significant Accounting Policies (Details) - Schedule of Currency Exchange Rates |
Sep. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
|---|---|---|---|
| HKD [Member] | |||
| Intercompany Foreign Currency Balance [Line Items] | |||
| Exchange rate for balance sheet items, except for equity accounts | 7.8308 | 7.8499 | |
| Exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | 7.8317 | 7.8472 | |
| SGD [Member] | |||
| Intercompany Foreign Currency Balance [Line Items] | |||
| Exchange rate for balance sheet items, except for equity accounts | 1.3656 | 1.3294 | |
| Exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | 1.3443 |
Receivables from customers (Details) - Schedule of Receivables from Customers - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Schedule of Receivables from Customers [Abstract] | ||
| Receivable due from trading solution services | $ 2,573,095 | $ 3,773,982 |
| Total | $ 2,573,095 | $ 3,773,982 |
Loans Receivable (Details) - USD ($) |
1 Months Ended | |
|---|---|---|
Aug. 31, 2023 |
Oct. 31, 2022 |
|
| Loans receivable [Line Items] | ||
| Loan amount | $ 5,000,000 | |
| Bears interst rate | 0.67% | 0.67% |
| Interest income | $ 2,000,000 | |
Loans Receivable (Details) - Schedule of Loans Receivable - USD ($) |
6 Months Ended | |||||
|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|||||
| Schedule of Loans Receivable [Abstract] | ||||||
| Loans receivable | [1] | $ 2,000,000 | $ 5,000,000 | |||
| Receivable due customers holding US stocks | [2] | 1,561,155 | 3,855,220 | |||
| Total | $ 3,561,155 | $ 8,855,220 | ||||
| ||||||
Employee Benefits (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Employee Benefits [Abstract] | ||
| Percentage of employee's contribution | 5.00% | |
| Maximum amount of employee's contribution | $ 192 | |
| Mandatory provident fund expense | $ 9,385 | $ 8,936 |
Fair Value (Details) - Schedule of Assets Measured at Fair Value on a Recurring Basis - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Assets: | ||
| Securities owned, at fair value | $ 5,218,914 | $ 2,741,178 |
| Total assets at fair value | 5,218,914 | 2,741,178 |
| Carrying Value [Member] | ||
| Assets: | ||
| Securities owned, at fair value | 5,218,914 | 2,741,178 |
| Total assets at fair value | 5,218,914 | 2,741,178 |
| Level 1 [Member] | ||
| Assets: | ||
| Securities owned, at fair value | 5,218,914 | 2,741,178 |
| Total assets at fair value | 5,218,914 | 2,741,178 |
| Level 2 [Member] | ||
| Assets: | ||
| Securities owned, at fair value | ||
| Total assets at fair value | ||
| Level 3 [Member] | ||
| Assets: | ||
| Securities owned, at fair value | ||
| Total assets at fair value |
Operating Lease (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Operating lease [Abstract] | ||
| Operating lease expenses | $ 60,941 | $ 55,312 |
Operating Lease (Details) - Schedule of Operating Lease Related Assets and Liabilities - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Schedule of operating lease related assets and liabilities [Line Items] | ||
| Rights of use lease assets | $ 126,716 | $ 156,656 |
| Operating lease liabilities | $ 128,403 | $ 150,139 |
Operating Lease (Details) - Schedule of Weighted Average Remaining Lease Terms and Discount Rates |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Remaining lease term and discount rate | ||
| Weighted average remaining lease term (years) | 11 months 23 days | 1 year 5 months 15 days |
| Weighted average discount rate | 5.00% | 5.00% |
Operating Lease (Details) - Schedule of Maturities of Lease Liabilities - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Schedule of Maturities of Lease Liabilities [Line Items] | ||
| Twelve months ended March 31, 2024 | $ 84,011 | |
| Twelve months ended March 31, 2025 and thereafter | 53,442 | |
| Total lease payments | 137,453 | |
| Less: imputed interest | (9,050) | |
| Present value of lease liabilities | $ 128,403 | $ 150,139 |
Investment in a joint venture (Details) - Jun. 24, 2022 |
USD ($) |
HKD ($) |
|---|---|---|
| Investment in a joint venture (Details) [Line Items] | ||
| Partnership agreement | $ 256,420 | $ 2,000,000 |
| Limited Partnership Interest [Member] | ||
| Investment in a joint venture (Details) [Line Items] | ||
| Partnership interest, percentage | 20.00% |
Share-Based Compensation (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
May 31, 2022 |
Sep. 30, 2023 |
|
| Share-Based Compensation [Abstract] | ||
| Ordinary shares with a fair value | 5,000 | |
| Share-based compensation shares | 4,194 | |
| Share-based compensation expenses (in Dollars) | $ 11,742 |
Related Party Transaction and Balance (Details) - Schedule of Nature of Relationships with Related Parties |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Sunx Global Limited [Member] | |
| Related Party Transaction and Balance (Details) - Schedule of Nature of Relationships with Related Parties [Line Items] | |
| Nature of relationships with related parties | Predecessor Parent Company owns 95% of Sunx Global Limited |
| Mr. Huaixi Yang [Member] | |
| Related Party Transaction and Balance (Details) - Schedule of Nature of Relationships with Related Parties [Line Items] | |
| Nature of relationships with related parties | Immediate family member of Ms. Junli Yang, the Chairwoman of the Board |
| WSYQR Limited [Member] | |
| Related Party Transaction and Balance (Details) - Schedule of Nature of Relationships with Related Parties [Line Items] | |
| Nature of relationships with related parties | Wholly owned by Mr. Huaixi Yang before March 2023. WSYQR was not a related party of the Company since April 2023. |
Related Party Transaction and Balance (Details) - Schedule of Balance with Related Parties - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Mr. Huaixi Yang [Member] | ||
| Related Party Transaction [Line Items] | ||
| Balance with related parties | $ 1,326,537 | $ 1,523,259 |
| WSYQR Limited [Member] | ||
| Related Party Transaction [Line Items] | ||
| Balance with related parties | 12,577 | |
| Sunx Global Limited [Member] | ||
| Related Party Transaction [Line Items] | ||
| Balance with related parties | $ 101,313 | $ 30,550 |
Subsequent Events (Details) - $ / shares |
1 Months Ended | |||
|---|---|---|---|---|
Dec. 20, 2023 |
Dec. 20, 2023 |
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Subsequent Events [Line Items] | ||||
| Ordinary shares par value | $ 0.001 | $ 0.001 | ||
| Annual shareholders description | On December 20, 2023, the annual shareholders meeting passed a resolution to change the authorized share capital from US$l50,000.00 divided into 150,000,000 shares of a nominal or par value of US$0.001 each to US$l,000,000.00 divided into 1,000,000,000 shares of a nominal or par value of US$0.001 each (the “Ordinary Shares”). | |||
| Common Class A [Member] | ||||
| Subsequent Events [Line Items] | ||||
| Vote per share | one | |||
| Common Class A [Member] | Subsequent Event [Member] | ||||
| Subsequent Events [Line Items] | ||||
| Ordinary shares par value | $ 0.001 | $ 0.001 | ||
| Unissued ordinary shares | 100,000,000 | 100,000,000 | ||
| Common Class B [Member] | ||||
| Subsequent Events [Line Items] | ||||
| Vote per share | fifty | |||
| Common Class B [Member] | Subsequent Event [Member] | ||||
| Subsequent Events [Line Items] | ||||
| Ordinary shares par value | $ 0.001 | $ 0.001 | ||
| Unissued ordinary shares | 100,000,000 | 100,000,000 |
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