UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from to
Commission file number: 333-274944
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
Room 306, NET Building,
Hong Jun Ying South Road, Chaoyang District,
Beijing, China
(Address of principal executive offices)
Jianfei Zhang
Telephone: (86) 010-8481-7665
Email: zhangjianfei@ftzy.com.cn
At the address of the Company set forth above
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Class A ordinary shares | PTHL | The Nasdaq Capital Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or stock as of the close of the period covered by the annual report.
An aggregate of 4,332,000 Class A ordinary shares, par value $0.0001 per share, and 7,668,000 Class B ordinary shares, par value $0.0001 per share, as of the date of this annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☒ | Emerging growth company | ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☒ |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
| * | If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐ |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
EXPLANATORY NOTE
On March 29, 2024, the Securities and Exchange Commission (the “SEC”) declared effective the Registration Statement on Form F-1 (Commission File No. 333-274944) (“Form F-1 Registration Statement”) of Pheton Holdings Ltd, a company incorporated in the Cayman Islands.
Rule 15d-2 (“Rule 15d-2”) under the Securities Exchange Act of 1934, as amended, provides generally that if a company’s registration statement under the Securities Act of 1933, as amended, does not contain certified financial statements for the company’s last full fiscal year preceding the year in which the registration statement becomes effective, then the company must, within the later of 90 days after the effective date of the registration statement or four months following the end of the registrant’s latest full fiscal year, file a special financial report furnishing certified financial statements for the last full fiscal year, meeting the requirements of the form appropriate for annual reports of that company. Rule 15d-2 further provides that the special financial report is to be filed under cover of the facing sheet of the form appropriate for annual reports of the company.
The Form F-1 Registration Statement did not contain the certified financial statements of Pheton Holdings Ltd for the fiscal year ended December 31, 2023; therefore, as required by Rule 15d-2, Pheton Holdings Ltd is hereby filing its certified financial statements with the SEC under cover of the facing page of an annual report on Form 20-F.
1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Pheton Holdings Ltd
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pheton Holdings Ltd (the “Company”) as of December 31, 2022 and 2023, the related consolidated statements of income(loss) and comprehensive income(loss), changes in shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum Asia CPAs LLP
We have served as the Company’s auditor since 2022.
New York, New York
May 2, 2024
F-2
PHETON HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
| December 31, 2022 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepayments and other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-current assets: | ||||||||
| Operating lease right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Deferred tax assets | ||||||||
| Deferred offering cost | ||||||||
| Other non-current assets | ||||||||
| Total Non-current assets | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Currents Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Contract liabilities | ||||||||
| Due to related parties | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total Non-current Liabilities | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 11) | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| *Class A ordinary shares, $ | ||||||||
| *Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Shareholders’ equity | $ | $ | ||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
| * |
F-3
PHETON HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
| For the Year Ended December 31, 2021 | For the Year Ended December 31, 2022 | For the Year Ended December 31, 2023 | ||||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Operating expenses | ||||||||||||
| Selling and marketing | ( | ) | ( | ) | ( | ) | ||||||
| General and administrative | ( | ) | ( | ) | ( | ) | ||||||
| Research and development | ( | ) | ( | ) | ( | ) | ||||||
| Total operating expenses | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Income (loss) from operations | ( | ) | ||||||||||
| Other Income, net | ||||||||||||
| Government subsidy | ||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||
| Total Other income, net | ||||||||||||
| Income (loss) before income taxes | ( | ) | ||||||||||
| Income tax (expense)/benefit | ( | ) | ||||||||||
| Net income (loss) | ( | ) | ||||||||||
| Foreign currency translation adjustments, net of nil tax | ( | ) | ( | ) | ||||||||
| Total comprehensive income (loss) | $ | $ | $ | ( | ) | |||||||
| *Weighted average number of ordinary shares used in per share | ||||||||||||
| calculation: | ||||||||||||
| ( | ) | |||||||||||
| * |
F-4
PHETON HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Class A Ordinary shares | Class B Ordinary shares | Additional paid-in | Statutory | Retained | Accumulated other comprehensive | Total shareholders’ | ||||||||||||||||||||||||||||||
| *Shares | Amount | *Shares | Amount | capital | reserves | earnings | income/(loss) | equity | ||||||||||||||||||||||||||||
| Balance at January 1, 2021 (Unaudited) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Appropriation to statutory reserve | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Appropriation to statutory reserve | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Dividend paid | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Capital contribution | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| * |
F-5
PHETON HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Year Ended December 31, 2021 | For the Year Ended December 31, 2022 | For the Year Ended December 31, 2023 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||||||
| Depreciation of property and equipment | ||||||||||||
| Amortization of right-of-use assets | ||||||||||||
| Provision for doubtful accounts | ||||||||||||
| Deferred income tax | ( | ) | ( | ) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( | ) | ||||||||||
| Inventories | ( | ) | ||||||||||
| Prepayments and other current assets | ( | ) | ( | ) | ( | ) | ||||||
| Other non-current assets | ||||||||||||
| Accounts payable | ( | ) | ( | ) | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||||||
| Due to related parties | ( | ) | ||||||||||
| Contract liabilities | ( | ) | ||||||||||
| Income tax payable | ( | ) | ( | ) | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Capital contribution | — | — | ||||||||||
| Repayments of due from related parties | ||||||||||||
| Advances from related parties | ||||||||||||
| Advances to related parties | ( | ) | ( | ) | ||||||||
| Repayments of due to related parties | ( | ) | ( | ) | ||||||||
| Deferred offering costs | ( | ) | ( | ) | ||||||||
| Dividend paid to shareholders | ( | ) | ||||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||||||
| Effects of exchange rate changes on cash | ( | ) | ( | ) | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||||||
| Cash and restricted cash at beginning of the year | ||||||||||||
| Cash and restricted cash at end of the year | $ | $ | $ | |||||||||
| Cash at end of the year | ||||||||||||
| Restricted cash at end of the year | ||||||||||||
| Total cash and restricted cash at end of the year | ||||||||||||
| Supplemental cash flow information: | ||||||||||||
| Cash paid for income taxes | $ | $ | $ | |||||||||
| Supplemental disclosure of noncash information: | ||||||||||||
| ROU assets obtained in exchange for new operating lease liabilities | $ | $ | $ | |||||||||
| Property and equipment converted from inventory | ||||||||||||
F-6
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATIONAL AND BASIS OF PRESENTATION
Pheton Holdings Ltd (the “Company” or “Pheton”) was established under the laws of the Cayman Islands on November 2, 2022. The Company has no substantive operations other than holding all of the shares of Pheton BVI Ltd (“Pheton BVI”), which entity was established under the laws of the British Virgin Islands on November 22, 2022.
Pheton BVI is a holding Company holding all of the equity of Pheton (HK) Limited (“Pheton HK”), which was established under the laws of Hong Kong on December 14, 2022.
Pheton HK is a holding company holding all of the equity of Beijing Jinruixi Medical Technology Co., Ltd (“Jinruixi”), which was established under the laws of the People’s Republic of China on March 15, 2023.
Jinruixi acquired the entire equity interests in Beijing Feitian Zhaoye Technology Co., Ltd. (“Beijing Feitian”), which was established under the laws of the People’s Republic of China in 1998, is a healthcare solution provider dedicated to the development and commercialization of treatment software used for brachytherapy.
On March 27, 2023, Pheton completed a reorganization
of entities under the common control of its then-existing shareholders, who collectively owned all of the equity interests of Pheton prior
to the reorganization. Pheton, Pheton BVI, Pheton HK and Jinruixi were established as the holding companies of Beijing Feitian. All of
these entities are under common control which results in the consolidation of Beijing Feitian which has been accounted as a reorganization
of entities under common control at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization
became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of Pheton.
| Subsidiaries | Date of incorporation |
Place of incorporation |
Ownership | Principle activities | ||||
| Pheton (BVI) Ltd | ||||||||
| Pheton (HK) Limited | ||||||||
| Beijing Jinruixi Medical Technology Co., Ltd | ||||||||
| Beijing Feitian Zhaoye Technology Co., Ltd. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include
the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation. A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than
F-7
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to, the recoverability of the carrying amounts of right-of-use assets, the assessment of the allowance for doubtful accounts, the realizability of deferred income tax assets, uncertain tax position, revenue recognition, cost of assurance-type warranty and accrual of contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
The Company is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Liquidity
For the years ended December 31, 2021 and 2022,
the Company has generated net income of approximately $
In assessing the liquidity, as of December 31,
2023, our working capital deficit amounted to $
Additionally, Mr. Jianfei Zhang offered a revolving
credit facility of up to $
Considering the above effects, the management concluded that the Company’s available cash and working capital would be sufficient to support its continuous operations and to meet its payment obligations when liabilities fall due within the next twelve months from the date of issuance of these consolidated financial statements. Accordingly, management continues to prepare the Company’s consolidated financial statements on a going concern basis.
Cash
Cash includes cash on hand and demand deposits placed with commercial banks, which have original maturities of three months or less and are readily convertible to known amounts of cash. The Company maintains most of the bank accounts in mainland China.
Restricted Cash
Restricted cash represents cash that cannot be withdrawn without the permission of third parties. The Company’s restricted cash is substantially cash balance in designated bank accounts as security for payment processing. Restriction on the use of such cash and the interest earned thereon is imposed by the banks and remains effective throughout the term of the security period. Upon maturities of the security period, the bank’s deposits are available for general use by the Company.
Fair value measurements
The Company applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1 — Observable inputs such as quoted prices for identical instruments in active markets; |
| ● | Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; |
| ● | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
F-8
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, due from related party, prepaid expenses and other current assets, accounts payable, taxes payable, and accrued expenses and other current liabilities approximate their recorded values due to their short-term maturities. The fair value of longer-term leases approximates their recorded values as their stated interest rates approximate the rates currently available.
Accounts Receivable, net
Accounts receivable are recognized and carried
at original invoiced amount net of allowance for doubtful accounts. Receivables are considered overdue after 90 days. We review accounts
receivable on a periodic basis and make general and specific allowances when there is doubt as to the collectability of individual balances
after due date. In evaluating the collectability of individual receivable balances, we consider many factors, including the age of the
balance, customer payment history, customer’s current creditworthiness, and current economic trends. As for
As for the year ended December 31, 2023, the Company maintains an allowance for doubtful amounts for estimated losses. Starting from January 1, 2023, the Company adopted ASU No.2016-13 “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”).” The Company used a modified retrospective approach, and the adoption does not have an impact on our consolidated financial statements. The Company estimates allowances for credit losses using relevant available information from both internal and external sources. In establishing the allowances, management considers historical losses, the financial condition, the accounts receivables aging, the payment patterns and the forecasted information in pooling basis upon the use of the Current Expected Credit Loss Model (“CECL Model”) in accordance with ASC topic 326, Financial Instruments - Credit Losses. The allowance is based on the current expected credit loss (“CECL”) model, which involves categorizing accounts receivable into age buckets (e.g., less than 1 year, 1 – 2 years and longer than 2 years), assessing the credit loss risk for each category.
Amounts are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company recognized no written-off amount recognized on accounts receivable for the fiscal years ended December 31, 2022 and 2023.
The Company made provisions for doubtful debts
of $
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost elements of inventories comprise the purchase price of products, and shipping charges to receive products from the suppliers when they are embedded in the purchase price. Cost is determined using the first-in-first-out (FIFO) method. Provisions are made for excessive, slow moving, expired and obsolete inventories as well as for inventories with carrying values in excess of market. Certain factors could impact the realizable value of inventory, so the Company continually evaluates the recoverability based on assumptions about customer demand and market conditions. The evaluation may take into consideration historical usage, inventory aging, expiration date, expected demand, anticipated sales price, product obsolescence and other factors. The reserve or write-down is equal to the difference between the cost of inventory and the estimated net realizable value based upon the assumptions about future demand and market conditions.
Leases
The Company early adopted Accounting Standards Update (“ASU”) 2016-02, Leases (as amended by ASU 2018-01, 2018-10, 2018-11, 2018-20, and 2019-01, collectively “ASC 842”) on January 1, 2019 using a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allows the Company to carry forward certain historical conclusions reached under ASC Topic 840 regarding lease identification, classification, and the accounting treatment of initial direct costs. The Company elected not to record assets and liabilities on its consolidated balance sheet for new or existing lease arrangements with terms of 12 months or less. The Company recognizes lease expenses for such lease on a straight-line basis over the lease term.
F-9
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets for office space leases. At the commencement date of a lease, the Company recognizes a lease liability for future fixed lease payments and a right-of-use (“ROU”) asset representing the right to use the underlying asset during the lease term. The lease liability is initially measured as the present value of the future fixed lease payments that will be made over the lease term. The lease term includes periods for which it’s reasonably certain that the renewal options will be exercised and periods for which it’s reasonably certain that the termination options will not be exercised. The future fixed lease payments are discounted using the rate implicit in the lease, if available, or the incremental borrowing rate (“IBR”). The Company will evaluate the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations.
In addition, the carrying amount of a lease liability is subject to remeasurement in certain circumstances including lease modifications, changes in the lease term, or changes in the in-substance fixed lease payments. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in consolidated statement of income and other comprehensive income if the carrying amount of the right-of-use asset has been reduced to zero.
Deferred offering cost
Pursuant to ASC 340-10-S99-1, costs directly attributable
to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional
paid-in capital. These costs consist of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that
are directly related to the initial public offering. These costs, together with the underwriting discounts and commissions, will be charged
to permanent equity upon completion of the initial public offering. As of December 31, 2023, the Company had not completed its initial
public offering, or IPO. As of December
31, 2022 and 2023, the accumulated deferred offering cost was $
Revenue recognition
The Company adopted ASC Topic 606, Revenue from Contracts with Customers, effective as of January 1, 2020. Accordingly, the audited consolidated financial statements for the years ended December 31, 2021, 2022 and 2023 are presented under ASC 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is the transaction price the Company expects to be entitled to in exchange for the promised services in a contract in the ordinary course of the Company’s activities and is recorded net of value-added tax (“VAT”). To achieve that core principle, the Company applies the following steps:
Step 1: Identify the contract (s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract;
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company is primarily engaged in the industry of medical instrumental software with required medical instruments such software operates. Our main business during the reporting periods are sales of Particle Implantation Radiotherapy Treatment Planning System (FTTPS), sales of Medical Auxiliary Supplies, and others. No practical expedients were used when adoption ASC 606. Revenue recognition policies for each type of revenue stream are as follows:
Sales of FTTPS:
The Company sells FTTPS with computers, monitors or other medical equipment required by customers’ specific needs. The FTTPS sales contracts are primarily on a fixed price basis, which require the Company to provide core software, a set of hardware as peripherals to operate the software, and related services, including transportation, packaging, installation and training based on customers’ specific needs. The execution timeline of these sales contracts is typically within three months.
F-10
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The hardware, software and services are considered as a single performance obligation, because the complete functionality required for brachytherapy is achieved only when these components are used in conjunction with one another. The customers cannot benefit from the hardware, software or services alone, but only upon the integration of software, hardware, installation and training. Typically, installation and training can be completed within two days after delivery. Revenue from sales of FTTPS is recognized at a point in time after the Company transferred control of the Company’s products and provided the services, generally upon the customer’s acceptance of the products and services. Beijing Feitian has not entered into any loss contracts to date.
In certain sales agreements, the Company provides an assurance-type warranty to the customers’ warranty. This type of warranty promises to repair or replace a delivered good or service if it does not perform as expected. Since an assurance-type warranty guarantees the functionality of a product, the warranty is not accounted for as a separate performance obligation, and thus no transaction price is allocated to it. Rather, to account for an assurance-type warranty the vendor should estimate and accrue a warranty liability when the promised products or service is delivered to the customer under ASC 460. Generally, the estimated claim rates of warranty are based on actual warranty experience or Company’s best estimate. There were no such reserves for the fiscal years ended December 31, 2021, 2022 and 2023 because the Company’s historical warranty expenses were immaterial to the Company’s consolidated financial statements.
Sales of Medical Auxiliary Supplies:
The Company sells Medical Auxiliary Supplies to customers for the operation of FTTPS system. The promised goods are considered as a single performance obligation because the sales of Medical Auxiliary Supplies are independent and irrelated to sales of FTTPS. Revenue from sales of Medical Auxiliary Supplies is recognized at the point in time when the goods are delivered and the customer has accepted the delivery.
Others:
Others normally contain sales of FTTPS-related technical advisories or provisions of consulting services. The duration of the services is usually less than three days. The Company recognizes revenue at a point in time when services are completed and received by the customer.
| Year Ended December 31, 2021 | Year Ended December 31, 2022 | Year Ended December 31, 2023 | ||||||||||
| Sales of FTTPS | $ | $ | $ | |||||||||
| Sales of Medical Auxiliary Supplies | ||||||||||||
| Others | — | — | ||||||||||
| Total revenues | $ | $ | $ | |||||||||
Contract balance
The Company recognizes accounts receivable in
its consolidated balance sheets when it performs a service in advance of receiving consideration and it has the unconditional right to
receive consideration. Payments received from its customers are based on the payment terms established in its contracts. Such payments
are initially recorded to contract liabilities and are recognized into revenue as the Company satisfies its performance obligations. As
of December 31, 2022 and 2023, the balance of contract liabilities amounted to $
During the years
ended December 31, 2021, 2022 and 2023, the Company recognized , and $
Cost of revenue
The cost of revenue consists primarily of finished goods and personnel-related costs for employees responsible for training, advisory, and technical customer support.
F-11
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Selling expenses
Selling expenses consist primarily of express
fees, staff costs, promotion and advertising expenses, and other daily expenses which are related to the selling and marketing departments.
For the fiscal years ended December 31, 2021, 2022 and 2023, advertising expense was nil, $
General and administrative expenses
General and administrative expenses consist primarily of operating lease expenses, salary and welfare expenses and related expenses for employees involved in general corporate functions, including accounting, legal and human resources, and expenses associated with the operation of these functions, such as traveling and general expenses, professional service fees and other related expenses.
Research and Development Expenses
Research and development expenses include outsourcing research expenses, salary, employee benefits, and related expenses for product development.
Income tax and deferred income taxation
The Company follows the liability method of accounting for income taxes in accordance with ASC 740 (“ASC 740”), 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 income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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. The amount recognized
is the largest amount of tax benefit that is greater than
The Company’s operating subsidiary in
the PRC is subject to examination by the relevant tax authorities. According to the PRC Tax Administration and Collection Law, the
statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the
withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of
taxes is more than RMB
No significant penalties or interest relating to income taxes have been incurred for the fiscal years ended December 31, 2021, 2022 and 2023.
Value added tax (“VAT”)
The Company sells goods and renders services within
the region of mainland China, and such business activities are subject to Value Added Tax (“VAT”) at
F-12
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Comprehensive income (loss)
Comprehensive income (loss) is defined as the changes in shareholders’ equity during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive income (loss) is reported in the consolidated statements of income (loss) and comprehensive income (loss). Accumulated other comprehensive income (loss), as presented on the accompanying consolidated balance sheets, consists of accumulated foreign currency translation adjustments.
Earnings (loss) per share
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings (loss) per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing income (loss) available to ordinary shareholders of the Company 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. As of December 31, 2021, 2022 and 2023, there were no dilution impacts.
Foreign currency translation and transactions
The reporting currency of the Company is U.S. dollars (“$”) and the accompanying consolidated financial statements have been expressed in U.S. dollars. The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using the Chinese Yuan (“RMB”), the local currency, as the functional currency. The Company’s consolidated financial statements has been translated into the reporting currency U.S. dollars. The results of operations and the consolidated statements of cash flows denominated in foreign currency are translated at the average rate 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 at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the 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 of accumulated other comprehensive income included in consolidated statements of changes in shareholders equity. Gains and losses from foreign currency transactions and balances are included in the results of operations.
| December 31, 2021 | December 31, 2022 | December 31, 2023 | ||||||||||
| Year-end spot rate | $ | $ | $ | |||||||||
| Average rate | $ | $ | $ |
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
F-13
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Employee benefit expenses
Full-time employees of the Company in the PRC
participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care,
unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require
that the Company make contributions to the government for these benefits based on a certain percentage of the employee’s salary.
The Company has no legal obligation for the benefits beyond the contributions. The Company recognized expenses for employee benefits of
$
Statutory reserves
The Company is required to allocate at least
Segment reporting
In accordance with ASC 280, Segment Reporting, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer. The Company’s CODM reviews the consolidated results of operations when making decisions about allocating resources and assessing performance of the Company. The Company operates and manages its business as a single segment. The Company does not distinguish between markets for the purpose of making decisions about resources allocation and performance assessment. Hence, the Company has only one operating segment and one reportable segment. No geographical segments are presented as substantially all of the Company’s long-lived assets are located in China.
Certain Risks and Concentration
Exchange Rate Risks
The Company operates in PRC, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB.
Currency Convertibility Risks
Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts.
Concentration of Credit Risks
Financial instruments that potentially subject
the Company to the concentration of credit risks consist primarily of cash. The Company places its cash in good credit quality financial
institutions in the PRC. The concentration of credit risks with respect to accounts receivable is linked to the concentration of
revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers’ financial condition. Cash balances
in bank accounts in mainland China are insured by the People’s Bank of China Financial Stability Department (“FSD”)
where there is an RMB
F-14
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Risks and Uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, including its organization and structure disclosed in Note1, this may not be indicative of future results.
Major Customers
For the fiscal year ended December 31, 2023, the
Company’s top three customers accounted for approximately
As of December 31, 2023, the balance due from
the top three customers accounted for approximately
Major Suppliers
For the fiscal year ended December 31, 2023, three
major suppliers accounted for approximately
As of December 31, 2023, one supplier accounted for the balance of all accounts payable. As of December 31, 2022, one supplier accounted for the balance of all accounts payable.
F-15
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326). The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecast information incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. This ASU is effective for annual and interim periods beginning after September 15, 2019 for issuers and September 15, 2020 for non-issuers. Early adoption is permitted for all entities for annual periods beginning after September 15, 2018, and interim periods therein. In May 2019, the FASB issued ASU 2019-05, Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief. This ASU adds optional transition relief for entities to elect the fair value option for certain financial assets previously measured at amortized cost basis to increase comparability of similar financial assets. The ASUs should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach). On November 19, 2019, the FASB issued ASU 2019-10 to amend the effective date for ASU 2016-13 to be fiscal years beginning after September 15, 2022 and interim periods therein. From January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments — Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology, and the adoption did not have a material impact on the Company’s consolidated financial statements.
In September 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 September 15, 2020. For all other entities, the amendments in this update are effective for fiscal years beginning after September 15, 2022, and interim periods within fiscal years beginning after September 15, 2023. Early adoption of the amendments is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
Except as mentioned above, 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 consolidated balance sheets, statements of operations and comprehensive loss and statements of cash flows.
The ASU 2023-07: Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple measures of segment profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. The ASU should be adopted retrospectively to all periods presented in the financial statements unless it is impracticable to do so. The adoption of ASU 2023-07 is not expected to materially impact the Company’s consolidated balance sheets, statements of income and comprehensive income, cash flows or disclosures.
Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its consolidated balance sheets, statements of income and comprehensive income, cash flows or disclosures.
3. ACCOUNTS RECEIVABLE, NET
| As of | ||||||||
| December 31, 2022 | December 31, 2023 | |||||||
| Accounts Receivable(i) | $ | $ | ||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
| (i) |
| Year Ended December 31, 2022 | Year Ended December 31, 2023 | |||||||
| Balance at beginning of the year | $ | ( | ) | $ | ( | ) | ||
| Provision | ( | ) | ( | ) | ||||
| Exchange rate effect | ||||||||
| Balance at end of the year | $ | ( | ) | $ | ( | ) | ||
F-16
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
4. PREPAYMENT AND OTHER ASSETS
| As of | ||||||||
| December 31, 2022 | December 31, 2023 | |||||||
| Current: | ||||||||
| Recoverable value-added taxes(a) | $ | $ | ||||||
| Prepayment | ||||||||
| Others | ||||||||
| Prepayments and other current assets | $ | $ | ||||||
| Non-current: | ||||||||
| Deferred offering cost | ||||||||
| Deposits(b) | ||||||||
| Non-current assets | $ | $ | ||||||
| (a) | |
| (b) |
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| As of | ||||||||
| December 31, 2022 | December 31, 2023 | |||||||
| Salary and welfare payables | $ | $ | ||||||
| Deposits from customers | ||||||||
| Other tax payable | ||||||||
| Others | ||||||||
| Total | $ | $ | ||||||
6. LEASES
Operating leases as lessee
The Company’s leasing activities primarily consist of one operating lease for offices. ASC 842 requires leases to recognize right-of-use assets and lease liabilities on the balance sheet. The Company has elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet.
For the fiscal years ended December 31, 2021,
2022 and 2023, the Company incurred operating lease expenses of $
| As of | ||||||||
| December 31, 2022 | December 31, 2023 | |||||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Operating Lease liabilities, current | ||||||||
| Operating Lease liabilities, non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Remaining lease terms | ||||||||
| Discount rate | % | % | ||||||
F-17
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
6. LEASES (cont.)
| As of | ||||||||||||
| December 31, 2021 | December 31, 2022 | December 31, 2023 | ||||||||||
| Cash paid for amounts in the measurement of lease liabilities | $ | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for new lease liabilities | $ | $ | $ | |||||||||
| As of December 31, 2023 | ||||
| FY2024 | $ | |||
| FY2025 | ||||
| FY2026 | ||||
| Total lease payment | ||||
| Less: imputed interest | ||||
| Total lease liabilities | $ | |||
7. INCOME TAX EXPENSE
Corporation Income Tax (“CIT”)
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
British Virgin Islands (“BVI”)
Under the current laws of the BVI, the Company’s subsidiary incorporated in BVI is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the BVI company to its respective shareholder, no BVI withholding tax will be imposed.
Hong Kong, PRC
Under the current Hong Kong Inland Revenue
Ordinance, a two-tier corporate income tax system was implemented in Hong Kong, which is
Mainland, PRC
The Company’s subsidiary, Beijing Feitian,
was incorporated in the PRC and is subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the
relevant PRC income tax laws. On March 16, 2007, the National People’s Congress enacted a new enterprise income tax law, which
took effect on January 1, 2008. The law applies a uniform
F-18
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
7. INCOME TAX EXPENSE (cont.)
According to Caishui [2019] No.13, Caishui [2021]
No.12, small and low-profit enterprises shall meet three conditions for enjoying preferential tax conditions, including
According to Caishui [2021] No.8, which became
effective on January 1, 2021 and until December 31, 2021, small, low-profit enterprises whose annual taxable income exceed RMB
According to Caishui [2022] No.13, which became
effective on January 1, 2022 and until December 31, 2024, small, low-profit enterprises whose annual taxable income exceed RMB
In accordance with the announcement of the Ministry
of Finance and the State Taxation Administration [2023] No.6, which was effective from January 1, 2023 to December 31, 2024, the preferential
tax rate became
Our loss for the financial year 2023 is $
| Year Ended December 31, 2021 | Year Ended December 31, 2022 | Year Ended December 31, 2023 | ||||||||||
| Income tax expense: | ||||||||||||
| Current income tax expense | $ | $ | ( | ) | $ | |||||||
| Deferred income tax benefit | ( | ) | ( | ) | ( | ) | ||||||
| Total | $ | $ | ( | ) | $ | ( | ) | |||||
| 1) | Current tax |
| Year Ended December 31, 2021 | Year Ended December 31, 2022 | Year Ended December 31, 2023 | ||||||||||
| Profit/(loss) before income tax | $ | $ | $ | ( | ) | |||||||
| PRC statutory income tax rate | % | % | % | |||||||||
| Income tax expense/(benefit) computed at the PRC statutory tax rate | ( | ) | ||||||||||
| Tax benefit from return-to-provision adjustment | ( | ) | ||||||||||
| Effect of preferential tax rate | ( | ) | ( | ) | ||||||||
| Additional deduction for R&D expenses | ( | ) | ( | ) | ||||||||
| Non-deductible expenses | ||||||||||||
| Impact of changes in tax rates | ( | ) | ||||||||||
| Income tax expense/(benefit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Effective tax rates | % | ( | )% | % | ||||||||
F-19
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
7. INCOME TAX EXPENSE (cont.)
2) Deferred tax
| As of | ||||||||
| December 31, 2022 | December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for doubtful accounts | $ | $ | ||||||
| Operating lease liabilities | ||||||||
| Net operating loss carried forward | ||||||||
| Balance at the end of the year | ||||||||
| Deferred tax liabilities: | ||||||||
| Operating lease right-of-use assets | ( | ) | ( | ) | ||||
| Balance at the end of the year | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
According to PRC tax regulations, the PRC net
operating loss can generally be carried forward for a maximum of
The Company evaluates each uncertain tax position, including the potential application of interest and penalties, based on the technical merits and measures the unrecognized benefits associated with the tax positions. As of December 31, 2021, 2022 and 2023, the Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefits. The Company does not anticipate significant changes in its uncertain tax benefits position over the next twelve months.
The Company considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, and the duration of statutory carry-forward periods. The Company has not established any valuation allowances for deferred tax assets as the Company determined it was more likely than not that the deferred tax assets would be realized before expiration.
8. RELATED PARTY AND TRANSACTION AND BALANCES WITH RELATED PARTIES
| Name of related parties | Relationship with the Company | |
| Mr. Jianfei Zhang | ||
| Beijing Erhua Technology Co., LTD | ||
| Beijing Zhongshi Cuican Culture Development Co., LTD | ||
| Xizang Huasheng Intelligent IOT Industrial Development Co., LTD | ||
| Beijing Xuantong Zhenghe Technology Co., LTD | ||
| Beijing Zhibo International Culture Media Co., LTD | ||
| Qomolangma Shengquan (Beijing) Trading Co., LTD | ||
| Juesheng (Beijing) Enterprise Management Consulting Co., LTD | ||
| Jinxu (Hainan) Investment Partnership (Limited Partnership) |
F-20
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
8. RELATED PARTY AND TRANSACTION AND BALANCES WITH RELATED PARTIES (cont.)
Balances with related parties
| As of | ||||||||
| Due to related parties | December 31, 2022 | December 31, 2023 | ||||||
| Mr. Jianfei Zhang(a) | $ | $ | ||||||
| Jinxu (Hainan) Investment Partnership (Limited Partnership) (a) | ||||||||
| (a) |
9. SHAREHOLDER’S EQUITY
Ordinary shares
The Company’s authorized share capital is
$
Statutory reserves
The Company is required to make appropriations
to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory
surplus reserve are required to be at least
Restricted net assets
The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by Beijing Feitian only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC subsidiaries included in the Company’s consolidated net assets are also non-distributable for dividend purposes. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Beijing Feitian. The Company is required to set aside at least
F-21
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
9. SHAREHOLDER’S EQUITY (cont.)
As of December 31, 2022 and 2023, the Company
had net assets restricted in the aggregate, which include additional paid-in capital and statutory reserve of the Company’s PRC
subsidiary that are included in the Company’s consolidated net assets, of approximately $
10. EARNINGS (LOSS) PER SHARE
| Year Ended December 31, 2021 | Year Ended December 31, 2022 | Year Ended December 31, 2023 | ||||||||||
| Numerator: | ||||||||||||
| Net income (loss) attributable to ordinary shareholders | $ | $ | $ | ( | ) | |||||||
| Denominator: | ||||||||||||
| $ | $ | $ | ( | ) | ||||||||
11. COMMITMENTS AND CONTINGENCIES
The Company is subject to some legal proceedings in the ordinary course of its business with respect to its commercial relationships, all of which have been settled by the Company. In the opinion of management, such proceedings did not result in a material adverse effect on the Company’s financial condition.
The Company accrues for loss contingencies when it is deemed probable that a loss has been incurred and that loss is estimable. While uncertainty exists, the Company does not believe there are any pending legal proceedings that would have a material impact on the Company’s financial position, cash flows or results of operations.
12. SUBSEQUENT EVENTS
The Company has evaluated all events and transactions that occurred after December 31, 2023 up through the date of the issuance of these consolidated financial statements. The Company concluded that no material subsequent events have occurred that would require recognition or disclosure in the Company's consolidated financial statements.
13. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
The Company performed a test on the restricted net assets of consolidated subsidiary in accordance with Rule 4-08 (e)(3) of Regulation S-X, “General Notes to Financial Statements” and concluded that it was applicable to the Company; and, therefore, the financial statements for the parent company are included herein.
The Company did not pay any dividend to the shareholders for the periods presented. For presenting parent only financial information, the Company records its investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income of the subsidiary is presented as “Income from subsidiary”. Certain information and footnote disclosures are generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.
F-22
PHETON HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
13. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (cont.)
| December 31,
2022 | December 31,
2023 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | ||||||||
| Prepayments and other current assets | ||||||||
| Total current Assets | ||||||||
| Non-current assets | ||||||||
| Investment in subsidiary | $ | $ | ||||||
| Total Non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Due to related parties | ||||||||
| Total Current liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Shareholders’ Equity | ||||||||
| *Class A ordinary shares, $ | $ | $ | ||||||
| *Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Shareholders’ equity | $ | $ | ||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
| * |
| Year Ended
December 31, 2021 | Year Ended
December 31, 2022 | Year Ended
December 31, 2023 | ||||||||||
| General and administrative expenses | ( | ) | ||||||||||
| Loss from operations | ( | ) | ||||||||||
| Other loss | ( | ) | ||||||||||
| Income (loss) from subsidiaries | $ | $ | $ | ( | ) | |||||||
| Net income (loss) | ( | ) | ||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||
| Comprehensive Income (Loss) | $ | $ | $ | ( | ) | |||||||
| Year Ended December 31, 2021 | Year Ended December 31, 2022 | Year Ended December 31, 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | |||||||
| Adjustments to reconcile net income (loss) to cash provided by operating activities | ||||||||||||
| Prepaid expenses and other current assets | — | — | ( | ) | ||||||||
| Equity (loss) income of subsidiary | ( | ) | ( | ) | ||||||||
| Net cash provided by operating activities | — | — | ( | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Capital contribution | — | — | ||||||||||
| Advances from related parties | — | — | ||||||||||
| Net cash provided by financing activities | — | — | ||||||||||
| CHANGES IN CASH | ||||||||||||
| Net increase in cash | — | $ | — | $ | ||||||||
| Cash at beginning of the year | — | — | ||||||||||
| Cash at end of the year | $ | — | $ | — | $ | |||||||
F-23
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| Pheton Holdings Ltd | ||
| By: | /s/ Jianfei Zhang | |
| Jianfei Zhang | ||
| Chief Executive Officer and Chairman of the Board of Directors | ||
| (Principal Executive Officer) | ||
| Date: May 3, 2024 | ||
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EXHIBIT INDEX
| Exhibit No. | Description | |
| 12.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 12.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 13.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 13.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101 | The following financial statements from the Company’s Annual Report on Form 20-F for the year ended December 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), (iii) Consolidated Statements of Changes in Shareholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
3