Exhibit 99.2
INDEX TO FINANCIAL STATEMENTS
U-BX TECHNOLOGY LTD.
TABLE OF CONTENTS
F-1
U-BX TECHNOLOGY LTD.
UNAUDITED CONSOLIDATED BALANCE SHEETS
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Advance to suppliers | ||||||||
| Prepayments and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Property and equipment, net | ||||||||
| Deferred registration costs | ||||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Short-term loans | $ | $ | ||||||
| Accounts payable | ||||||||
| Advance from customers | ||||||||
| Tax payables | ||||||||
| Accruals and other current payables | ||||||||
| Amounts due to related parties, current | ||||||||
| Total current liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Shareholders’ Equity: | ||||||||
| Ordinary Shares ($ | ||||||||
| Additional paid-in-capital | ||||||||
| Statutory reserves | ||||||||
| Accumulated other comprehensive (loss) | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
U-BX TECHNOLOGY LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
| For the Six Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| (Loss) Income from operations | ( | ) | ||||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Interest (expenses) | ( | ) | ||||||
| Other income, net | ||||||||
| Total other income, net | ||||||||
| (Loss) Income before income taxes | ( | ) | ||||||
| Income tax expense | ( | ) | ( | ) | ||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Comprehensive loss | ||||||||
| Foreign currency translation (loss) | ( | ) | ( | ) | ||||
| Comprehensive (loss) income attributable to shareholders | $ | ( | ) | $ | ||||
| (Loss) Income per ordinary share | ||||||||
| $ | ( | ) | $ | |||||
| Weighted average number of ordinary shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
U-BX TECHNOLOGY LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
| Ordinary shares | Subscription | Additional paid-in | Statutory | Retained earnings | Accumulated other comprehensive | Total shareholders’ | ||||||||||||||||||||||||||
| Shares | Amount | receivable | capital | reserves | (deficit) | income (loss) | Equity | |||||||||||||||||||||||||
| Balance as of July 1, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of July 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of ordinary shares for cash | ||||||||||||||||||||||||||||||||
| Net (loss) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
U-BX TECHNOLOGY LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Bad debt expenses | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Account receivable | ||||||||
| Advance to suppliers | ( | ) | ||||||
| Prepayments and other current assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Advance from customers | ( | ) | ( | ) | ||||
| Taxes payable | ||||||||
| Accruals and other current payables | ( | ) | ||||||
| Amounts due to related parties, current | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of ordinary shares for cash | ||||||||
| Proceeds from short-term loan | ||||||||
| Repayments of short-term loan | ( | ) | ||||||
| Payment of registration costs | ( | ) | ||||||
| Net cash provided by financing activities | ( | ) | ||||||
| Effect of foreign exchange rate on cash | ( | ) | ||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at the beginning of the year | ||||||||
| Cash at the end of the year | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
U-BX TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
U-BX Technology LTD. (“U-BX”) is an exempted company incorporated under the laws of the Cayman Islands on June 30, 2021 as Famingsur Develop Limited. On October 10, 2021, Famingsur Develop Limited filed to change its name to U-BX Technology Ltd. U-BX does not conduct any substantive operations on its own but instead conducts its business operations through its subsidiaries.
Prior to the incorporation of U-BX, the business commenced its operations in March 2018 and mainly through Youjiayoubao (Beijing) Technology Co., Ltd (“U-BX Beijing”) and its wholly owned subsidiaries, Rudongyoujia Smart Technology Co Ltd. (“RDYJ”), YJYC Hainan Technology Co Ltd (“YJYC Hainan”), Wuxi Benjuchezhi Technology Service Co Ltd (“Wuxi BJCZ”), Jiangsu Youjiayouche Technology Co Ltd (“Jiangsu YJYC”), Jiangsu Jingmo Technology Co Ltd (“Jiangsu Jingmo”) and Jiangsu Youchehubao Technology Co Ltd (“Jiangsu YCHB”). Wuxi BJCZ was sold to a third party on May 9, 2020 and has since ceased to be a subsidiary of U-BX Beijing. YJYC Hainan was dissolved voluntarily on August 11, 2020.
In order to raise capital through an IPO in the United States, the Company has undertaken a series of transactions (the “Reorganization”):
On July 14, 2021, the Company formed its wholly owned subsidiary, HK Snailinsur Group Limited (“U-BX HK”) in Hong Kong. On July 23, 2021, U-BX HK formed its wholly owned subsidiary, Beijing Lianghua Technology Co., Ltd. (“WFOE Beijing”) in PRC.
On August 16, 2021, WFOE Beijing entered into a series of contractual arrangements with the owners of U-BX Beijing. These agreements included a Consulting and Service Agreement, a Business Operation Agreement, an Equity Pledge Agreement, an Exclusive Call Option Agreement and Shareholder Voting Proxy Agreement (collectively “VIE Agreements”). Pursuant to the VIE Agreements, WFOE Beijing has the exclusive right to provide U-BX Beijing with comprehensive technical support, consulting services and other services in relation to the Principal Business during the term of this Agreement. All the above contractual arrangements obligate WFOE Beijing to absorb a majority of the risk of loss from the business activities of U-BX Beijing and entitle WFOE Beijing to receive a majority of their residual returns. In essence, WFOE Beijing has gained effective control over U-BX Beijing.
On February 20, 2022,
with approval of WFOE Beijing and approval of the board of directors of U-BX Beijing, U-BX Beijing issued
U-BX together with its wholly owned subsidiaries U-BX HK, the WFOEs, U-BX Suzhou, U-BX Beijing, and its subsidiaries were effectively controlled by the same shareholders before and after the reorganization and therefore the Reorganization was considered under common control and included at their historical carrying values. The consolidation of the Company has been prepared on the basis as if the reorganization had become effective as of the beginning of the first period presented in the consolidated financial statements.
F-6
U-BX TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (cont.)
U-BX, U-BX HK, the WFOEs, U-BX Suzhou, U-BX Beijing and its subsidiaries (the “Company”) primarily provide value-added services using artificial intelligence-driven technology to businesses within the insurance industry in PRC.
| Name of Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Principal Activities | ||||
| Hong Kong Snailinsur Group Limited (“U-BX HK”) | % | |||||||
| Beijing Lianghua Technology Co Ltd (“WFOE Beijing”) | % | |||||||
| Youjiayoubao (Beijing) Technology Co., Ltd. (“U-BX Beijing”) | % | |||||||
| Rudongyoujia Smart Technology Co., Ltd. (“RDYJ”) | % | |||||||
| Jiangsu Jingmo Technology Co., Ltd. (“Jiangsu Jingmo”) | % | |||||||
| Jiangsu Youjiayouche Technology Co., Ltd. (“Jiangsu YJYC”) | % | |||||||
| Suzhou Lianghua Technology Co., Ltd. (“WFOE Suzhou”) | % | |||||||
| Suzhou Youjiayoubao Technology Co., Ltd. (“U-BX Suzhou”) | % | |||||||
| Zhejiang JZSC Enterprise Management Co., Ltd. (“WFOE Zhejiang”) | % | |||||||
| JZSC Technology Co., Ltd. (“JZSC Technology”) | % |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liquidity
The Company’s liquidity
is based on its ability to enhance its operating cash flow position, obtain capital financing from equity interest investors and borrow
funds for its general operations and capital expenditures. The Company’s ability to continue as a going concern is dependent on
management’s ability to execute its business plan successfully, which includes increasing market acceptance of the Company’s
services to boost its sales volume while applying more effective marketing strategies and cost control measures to better manage its operating
cash flows and obtaining funds from outside sources of financing to generate positive financing cash flows. As of December 31, 2023 and
June 30, 2023, the Company’s balance of cash was $
Management has concluded, after giving consideration to its plans as noted above and its existing balance of cash as of December 31, 2023, that the Company should have sufficient funds for its operations and it should be able to meet its payment obligations from operations and debt related commitments for the next twelve months from the issuance of the unaudited consolidated financial statements. Accordingly, the unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.
Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim consolidated financial statements have been included. The results reported in the consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in elsewhere in this prospectus.
F-7
U-BX TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.
Use of estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates required to be made by management, include, but are not limited to, the assessment of the allowance for doubtful accounts, depreciable lives of property and equipment, and realization of deferred tax assets. Actual results could differ from those estimates.
Functional Currency and Foreign Currency Translation
The functional currencies of the Company are the local currency of the county in which the subsidiaries operate. The Company’s financial statements are reported using U.S. Dollars. The results of operations and the unaudited condensed consolidated statements of cash flows denominated in foreign currencies are translated at the average rates of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect on that date. The equity denominated in the functional currencies is translated at the historical rates of exchange at the time of capital transactions. Because cash flows are translated based on the average translation rates, amounts related to assets and liabilities reported on the unaudited condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component in accumulated other comprehensive income included in unaudited condensed consolidated statements of changes in shareholders ‘equity. Gains and losses from foreign currency transactions are included in the unaudited condensed consolidated statements of operations and comprehensive income.
Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (“RMB”). The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency of U.S. Dollars (“US$”). The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in the translation.
| December 31, | June 30, | For the Six Months Ended December 31, | ||||||||||||||
| 2023 | 2023 | 2023 | 2022 | |||||||||||||
| Foreign currency | Balance Sheet | Balance Sheet | Profits/Loss | Profits/Loss | ||||||||||||
| RMB:1USD | ||||||||||||||||
Cash
Cash include cash on hand and demand deposits in accounts maintained with commercial banks. The Company maintains its bank accounts in Mainland China, which funds are not freely convertible into foreign currencies.
F-8
U-BX TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Accounts receivable, net
Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer payment history, customer’s current creditworthiness, and current economic trends. Accounts are written off against the allowance after unsuccessful collection.
Advances to suppliers
Advances to suppliers consist of advances to suppliers for services that have not been provided or received. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance.
As of December 31, 2023 and
June 30, total advances to suppliers were $
Property and equipment
Property and equipment are
carried at cost and are depreciated on the straight-line basis over the estimated useful lives of the underlying assets. The cost of repairs
and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of,
the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gains or losses are included in
income in the year of disposition. The Company examines the possibility of decreases in the value of its property and equipment, when
events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Depreciation expense was $
| Category | Estimated useful lives | ||
| Office equipment | |||
| Furniture and fixtures |
Deferred registration costs
Deferred registration costs primarily consist of direct costs attributable to a proposed public offering of securities which are deferred and will be charged against the gross proceeds of the offering. If the offering is not successful, these costs will be expensed.
Fair value of financial instruments
FASB ASC Section 825-10 requires certain disclosures regarding the 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 inputs used to measure fair value are as follows:
| ● | Level 1 | — | inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
F-9
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| ● | Level 2 | — | inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. | |
| ● | Level 3 | — | inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, advances to suppliers, prepaid expenses and other current assets, short-term loans, accounts payable, advance from customers, due to related parties, taxes payable, and accrued expenses and other current liabilities approximate their recorded values due to their short-term maturities.
The Company’s non-financial assets, such as property and equipment would be measured at fair value only if they were determined to be impaired.
Revenue recognition
The Company recognizes revenue per FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all periods presented. According to ASC 606, revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. We assess our revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate distinct goods or services. We allocate the transaction price to each performance obligation based on the relative standalone selling price of the goods or services provided.
The Company’s revenues are derived principally from digital promotion services, risk-assessment services and value-added services. Value added taxes (“VAT”) are presented as a reduction of revenues.
Digital promotion services
The Company generates revenues primarily from digital promotion services to insurance companies on its various website channels, including pay for performance marketing services whereby customers are charged based on effective clicks on their insurance product information, and display advertising services that allow customers to place advertisements on various websites.
Pursuant to the digital promotion contracts, the performance obligation of the Company is to provide promotion services for the planning, designing, customizing strategy scheme and promoting for the customer. The Company considers that both of the digital market planning and promotion services are highly interrelated and not separately identifiable. The Company’s overall promise represents a combined output that is a single performance obligation. Revenues are recorded at a point in time when the performance obligation to deliver those digital promotion services is checked and accepted.
For the contracts that involve the third-party vendors, the Company considers itself as provider of the services as it has control of the specified services at any time before it is transferred to the customers which is evidenced by (i) the Company is primarily responsible for the planning and producing the content for the promotion and (ii) having latitude in selecting third party vendors for promotions and establishing pricing. Therefore, the Company acts as the principal of these arrangements and reports revenue earned and costs incurred related to these transactions on a gross basis.
F-10
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Risk-assessment services
The Company generates risk-assessment revenue from service fees of providing assessment reports to the insurance carriers. Utilizing the self-developed proprietary algorithmic model, the Company generates individualized risk reports based on the vehicle brand, model, travel area, and driver’s information.
Pursuant to the risk assessment contracts, the performance obligation of the Company is to utilize its self-developed risk assessment model and to provide risk assessment reports to customers. Consideration received reflects stand-alone selling prices and are settled monthly based on standard unit prices and service volumes rendered during the period. Revenue recognized at a point in time upon the service delivery and acceptance by the customers.
For the contracts that involve technical services provided by third-party vendors, the Company considers itself as provider of the services as it has control of the specified services at any time before it is transferred to the customers which is evidenced by (i) the Company is primarily responsible for the production of the risk assessment report with self-developed models and (ii) having latitude in select outsourced technical services and establish pricing. Therefore, the Company acts as the principal of these arrangements and reports revenue earned and costs incurred related to these transactions on a gross basis.
Value-added bundled benefits services
The Company enters into value added benefits contracts with insurance companies. Pursuant to the value added benefits contracts, the Company provides the digital code with value added bundled benefits to customers. The bundled benefits including but not limited to auto maintenance service, auto value added service, vehicle moving notification services and other services. The Company is primarily responsible for selecting out-sourced vendors, integrating out-sourced services and services provided in house to generate various bundled benefits digital code and providing technical supports for the code. The Company’s overall promise represents a combined output that is a single performance obligation; there is no multiple performance obligations.
For the contracts that involve the third-party vendors, the Company considers itself as principal of the services as it has control of the specified services at any time before it is transferred to the customers which is evidenced by (i) the Company is primarily responsible for the generation of the code and integrating various services provided by itself and outsourced vendors with the Company’s promise to provide products and services according to the contract entered into with customers and (ii) having latitude in select third party vendors for some value added services and establish pricing. Therefore, the Company acts as the principal of these arrangements and reports revenue earned and costs incurred related to these transactions on a gross basis. Revenue from value-added bundled benefits is recognized at a point in time when the Company satisfies the performance obligation by transferring promised services upon acceptance by customers.
Disaggregation of revenue
| For the six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Digital promotion services | $ | $ | ||||||
| Risk-assessment services | ||||||||
| Value-added services | ||||||||
| Total | $ | $ | ||||||
F-11
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Contract balance
Accounts receivables are recorded when the Company performs a service in advance of receiving consideration and it has the unconditional right to receive consideration. Contract liabilities are recognized as advance from customers if the Company receives consideration but has not transferred the related goods or services to the customer.
Value Added Tax
The
Company is subject to value-added-tax (“VAT”) on the revenues earned for services provided in the PRC. The applicable
rate of value added tax is
Cost of revenue
Cost of revenues consists primarily of expenses incurred in connection with the third-party cloud infrastructure expenses, outsourcing services paid to suppliers and third-party procurement costs are recognized as incurred.
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period including the enactment date. Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount expected to be realized.
An
uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax
examination. The amount recognized is the largest amount of tax benefit that is greater than
Value added tax
Sales
revenue represents the invoiced value of goods, net of VAT. The VAT is based on gross sales price and the VAT rate is approximately
Earnings (loss) per share
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing net income (loss) by the weighted average ordinary shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. When the Company has a loss or dilutive shares would increase EPS or decrease loss per share, dilutive shares are not included. As of December 31, 2023 and June 30, 2023, there were no dilutive shares.
F-12
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Comprehensive income (loss)
Comprehensive income consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains, and losses that under U.S. GAAP are recorded as an element of shareholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustments from the Company not using the U.S. dollar as its functional currency.
Concentration and Risks
Currency risk
The revenues and expenses of the Company’s entities in the PRC are generally denominated in RMB and their assets and liabilities are denominated in RMB. The RMB is not freely convertible into foreign currencies. Remittances of foreign currencies into the PRC or remittances of RMB out of the PRC as well as exchange between RMB and foreign currencies require approval by foreign exchange administrative authorities with certain supporting documentation. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into other currencies.
Concentration and credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The
Company maintains its bank accounts in the PRC. On May 1, 2015, China’s new Deposit Insurance Regulation came into effect,
pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance
for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete
protection for the Company’s accounts, as its aggregate deposits are much higher than the compensation limit, which is RMB
The Company conducts credit evaluations on its customers prior to delivery its services. The assessment of customer creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site visits by senior management. Based on this analysis, the Company determines what credit terms, if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Company will not deliver the services to the customer or require the customer to pay cash, post letters of credit to secure payment or to make significant down payments.
Major customers
For
the six months ended December 31, 2023, no customer accounted for over
As
of December 31, 2023, four customers accounted for
Major suppliers
For
the six months ended December 31, 2023, four suppliers accounted for
F-13
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
As
of December 31, 2023, five suppliers accounted for
Recently adopted or issued accounting pronouncements
The Company qualifies as an “emerging growth company”, or EGC, pursuant to the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an EGC, the Company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize a lease liability and a “right of use” lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. The standard is effective for the Company in the for fiscal years beginning after December 15, 2021 and interim periods within the fiscal years beginning after December 15, 2022, with early adoption permitted. The Company does not believe the adoption of this standard will have a material effect on its financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses. ASU 2016-13 also changes how entities measure credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for the Company in the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this ASU on July 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740, and also improves consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The Company adopted this ASU on July 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial position, statements of operations and cash flows.
NOTE 3 — ACCOUNTS RECEIVABLE
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Trade accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ||||||||
| Accounts receivable, net | $ | $ | ||||||
F-14
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 4 — PREPAYMENTS AND OTHER CURRENT ASSETS
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Loan receivable* | $ | $ | ||||||
| Value-added Tax (“VAT”) recoverable | ||||||||
| Prepaid expenses and others current assets | ||||||||
| Less: allowance for doubtful accounts | ||||||||
| Prepaid expenses and other current assets, net | $ | $ | ||||||
| * |
NOTE 5 — BANK LOANS
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Bank of Communications | $ | $ | ||||||
| Industrial and Commercial Bank of China | ||||||||
| Total short-term bank loan | $ | $ | ||||||
On
March 13, 2023, U-BX China entered into a loan agreement with Bank of Communications to obtain a loan of RMB
On
July 5, 2023, U-BX China entered into a loan agreement with Industrial and Commercial Bank of China to obtain a loan of RMB
NOTE 6 — TAXES PAYABLE
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Income tax payable | $ | $ | ||||||
| Withholding tax payable | ||||||||
| VAT tax payable | ||||||||
| Tax payables | $ | $ | ||||||
NOTE 7 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Payroll and welfare payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Accrued expenses and other current liabilities | $ | $ | ||||||
F-15
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 8 — RELATED PARTY TRANSACTIONS
| Name of related parties | Relationship with the Company | |
| Jian Chen |
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Amounts due to related parties, current* | ||||||||
| Jian Chen | $ | $ | ||||||
| * |
NOTE 9 — TAXATION
Income Taxes
Cayman Islands
The Company was incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
Under
the current Hong Kong Revenue Ordinance, the Company’s subsidiary in Hong Kong is subject to
PRC
The
Company’s subsidiaries established in the PRC are mainly subject to the statutory income tax at a rate of
| For the six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Income tax expense computed at applicable tax rates ( | % | % | ||||||
| Effect of PRC preferential tax rate and tax exemption | ( | )% | — | % | ||||
| Non-deductible expenses | % | % | ||||||
| Change of Valuation Allowance | ( | )% | % | |||||
| Effective tax rate | ( | )% | % | |||||
F-16
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 9 — TAXATION (cont.)
| For the six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Current income tax expense | $ | $ | ||||||
| Deferred tax expense (benefits) | ||||||||
| Income tax provision | $ | $ | ||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Deferred tax assets | ||||||||
| Net operating loss carry forwards | $ | $ | ||||||
| Less: valuation allowances | ( | ) | ( | ) | ||||
| Total deferred tax assets | $ | $ | ||||||
As
of December 31, 2023, the Company has net operating loss carryforwards of approximately $
NOTE 10 — SHAREHOLDERS’ EQUITY
Ordinary shares
The
Company was established under the laws of the Cayman Islands on June 30, 2021. The authorized number of ordinary shares is
On
January 24, 2022, the Company issued
On
May 5, 2022, the Company issued an aggregated
F-17
U-BX
TECHNOLOGY LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, except for number of shares, or otherwise noted)
NOTE 10 — SHAREHOLDERS’ EQUITY (cont.)
On
May 5, 2022, the Company issue an aggregated
On October 25, 2023,
the Company issue an aggregated
As
a result, the Company had
Statutory reserves and restricted net assets
Relevant
PRC laws and regulations permit payments of dividends by the Company’s entities only out of their retained earnings, if any, as
determined in accordance with PRC accounting standards and regulations. In addition, the Company’s PRC subsidiaries are required
to annually appropriate
As
a result of these PRC laws and regulations and the requirement that distributions by the PRC entities can only be paid out of distributable
profits computed in accordance with PRC accounting standards and regulations, the PRC entities are restricted from transferring a portion
of their net assets. Amounts restricted include paid-in capital and statutory reserves of the Company’s PRC subsidiaries. As of
December 31, 2023 and June 30, 2023, the aggregate amounts of restricted net assets of the relevant PRC entities amounted to $
NOTE 11 — SUBSEQUENT EVENTS
Management has evaluated subsequent events through May 29, 2024, the date the consolidated financial statements were available for issuance.
Closing of IPO
On April 1, 2024, the
Company closed its IPO of
In connection with the IPO, the Company issued a press release on March 27, 2024 announcing the pricing of the IPO and a press release on April 1, 2024 announcing the closing of the IPO, respectively. Copies of each press release are attached as Exhibit 99.1 and Exhibit 99.2 in FORM 6-K.
Loan transaction
On April 12, 2024, the Company
entered into an unsecured short-term loan agreement with Suzhou Wuzhong Branch of Bank of Communications Co., Ltd. with principal amount
of RMB
F-18