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: 333-275413
HW ELECTRO Kabushiki Kaisha
(Exact name of Registrant as specified in its charter)
(Translation of Registrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
301, Aomi 2-chome 7-4 the
SOHO, Koto-ku, Tokyo
135-0064 Japan
(+81) 3-6457-1469
(Address of principal executive offices)
Weicheng Hsiao, Chief Executive Officer
Telephone: (+81) 03-6457-1469
Email: weicheng.hsiao@hwelectro.com
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 | ||
| Ordinary Shares | HWEP | 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)
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of September 30, 2023 was: 38,074,888 ordinary shares, no par value.
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 December 29, 2023, the Securities and Exchange Commission (the “SEC”) declared effective the Registration Statement on Form F-1 (Commission File No. 333-275413) (“Form F-1 Registration Statement”) of HW Electro Co., Ltd., a joint-stock corporation with limited liability organized under Japanese law.
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 HW Electro Co., Ltd. for the fiscal year ended September 30, 2023; therefore, as required by Rule 15d-2, HW Electro Co., Ltd. is hereby filing the certified financial statements of HW Electro Co., Ltd. with the SEC under cover of the facing page of an annual report on Form 20-F.
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| To: | The Board of Directors and Shareholders of |
HW Electro Co., Ltd.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of HW Electro Co., Ltd. (the “Company”) as of September 30, 2023 and 2022, and the related statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 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 September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 audit 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.
WWC, P.C.
Certified Public Accountants
PCAOB ID No.1171
We have served as the Company’s auditor since 2023.
San Mateo, California
March 11, 2024, except for 27 and 28 for which the date is March 20, 2024
F-2
HW ELECTRO CO., LTD
BALANCE SHEETS
(Currency expressed in United States Dollars (“$”))
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | ||||||||
| Accounts receivable – related party, net | ||||||||
| Accounts receivable – third parties, net | ||||||||
| Inventories, net | ||||||||
| Prepayments – related party | ||||||||
| Prepayments – third parties | ||||||||
| Amount due from a related party | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Cost method investment | ||||||||
| Deferred tax assets, net | ||||||||
| Deferred initial public offering (“IPO”) costs | ||||||||
| Long-term deposits | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | ||||||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Bank loans – current | ||||||||
| Loans payable – third party | ||||||||
| Loans payable – financial institution, current portion, net | ||||||||
| Accounts payable | ||||||||
| Accruals and other current liabilities | ||||||||
| Contract liabilities | ||||||||
| Amount due to a related party | ||||||||
| Amount due to a shareholder | ||||||||
| Finance lease obligation, current portion | ||||||||
| Operating leases payable – current | ||||||||
| Warranty liabilities – current | ||||||||
| Asset retirement obligations – current | ||||||||
| Refund liability | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Loans Payable – financial institution, net of current portion, net | ||||||||
| Finance lease obligation, net of current portion | ||||||||
| Operating leases payable – non-current | ||||||||
| Warranty liabilities – non-current | ||||||||
| Asset retirement obligations – non-current | ||||||||
| Other non-current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
F-3
HW ELECTRO CO., LTD
BALANCE SHEETS — (Continued)
(Currency expressed in United States Dollars (“$”))
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Series A convertible preferred shares; | ||||||||
| Ordinary Shares, | ||||||||
| Shares to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficits | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| * |
The accompanying notes are an integral part of these financial statements.
F-4
HW ELECTRO CO., LTD
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Currency expressed in United States Dollars (“$”))
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Revenue – third parties | ||||||||||||
| Revenue – related party | ||||||||||||
| Total revenue | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ||||||||
| Gross (loss)/profit | ( | ) | ||||||||||
| Operating expenses: | ||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ||||||
| Selling, general and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Share-based compensation expense | ( | ) | ( | ) | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest income | ||||||||||||
| Interest expenses | ( | ) | ( | ) | ( | ) | ||||||
| Other (expenses)/income, net | ( | ) | ( | ) | ||||||||
| Total other expenses, net | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Current tax expense | ||||||||||||
| Deferred tax expense (benefit) | ( | ) | ( | ) | ||||||||
| Total provision for (benefit from) income taxes | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Other comprehensive (loss) income | ||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Loss per share: | ||||||||||||
| ( | ) | ( | ) | ( | ) | |||||||
| Weighted average shares outstanding used in calculating basic and diluted loss per share | ||||||||||||
| * |
The accompanying notes are an integral part of these financial statements.
F-5
HW ELECTRO CO., LTD
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Currency expressed in United States Dollars (“$”), except for number of shares)
| Convertible Preferred Shares | Ordinary shares | Additional | Accumulated other | Total | ||||||||||||||||||||||||||||||||
| No. of shares* | Par Value | No. of shares* | Par Value | Shares to be issued | paid-in capital | comprehensive income (loss) | Accumulated deficits | shareholders’ equity | ||||||||||||||||||||||||||||
| Balance as of October 1, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Issuance of ordinary shares for cash | — | — | ||||||||||||||||||||||||||||||||||
| Debt-to-equity conversion | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Share based compensation | — | — | — | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||
| Balance as of September 30, 2021 | — | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for cash | — | — | ||||||||||||||||||||||||||||||||||
| Debt-to-equity conversion | — | — | ||||||||||||||||||||||||||||||||||
| Capital contribution | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Share based compensation | — | — | — | |||||||||||||||||||||||||||||||||
| Advance received from investor | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for cash | — | ( | ) | |||||||||||||||||||||||||||||||||
| Debt-to-equity conversion | — | — | ||||||||||||||||||||||||||||||||||
| Convertible preferred shares conversion | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Share based compensation | — | — | — | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these financial statements.
F-6
HW ELECTRO CO., LTD AND ITS SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“$”))
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ||||||
| Adjustment to reconcile net loss to net cash generated from operating activities: | ||||||||||||
| Depreciation | ||||||||||||
| Loss on disposal of property, plant and equipment | ||||||||||||
| Deferred tax provision | ( | ) | ( | ) | ||||||||
| Share-based compensation expense | ||||||||||||
| Provision for warranty liabilities | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable, net | ( | ) | ||||||||||
| Inventories, net | ( | ) | ( | ) | ( | ) | ||||||
| Prepayments – related party | ( | ) | ||||||||||
| Prepayments – third parties | ( | ) | ( | ) | ||||||||
| Amount due from a related party | ( | ) | ||||||||||
| Deferred initial public offering costs | ( | ) | ||||||||||
| Long-term deposits | ( | ) | ( | ) | ||||||||
| Accounts payable | ( | ) | ||||||||||
| Accruals and other current liabilities | ||||||||||||
| Contract liabilities | ||||||||||||
| Amount due to a related party | ( | ) | ( | ) | ||||||||
| Income taxes payable | ( | ) | ||||||||||
| Asset retirement obligations | ||||||||||||
| Refund liability | ||||||||||||
| Prepaid of the operating lease obligations | ( | ) | ||||||||||
| Other non-current liabilities | ( | ) | ||||||||||
| Cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Purchase of cost method investment | ( | ) | ||||||||||
| Proceeds from disposal of property, plant and equipment | ||||||||||||
| Cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| (Repayment of)/proceeds from loans payable – third party | ( | ) | ||||||||||
| Proceed from loans payable to a shareholder | ||||||||||||
| (Repayment of)/proceeds from loan payable – financial institution | ( | ) | ||||||||||
| Proceeds from bank loan – current | ||||||||||||
| Repayments of finance lease obligation | ( | ) | ( | ) | ( | ) | ||||||
| Proceeds from shares to be issued | ||||||||||||
| Proceeds from issuance of preference shares | ||||||||||||
| Proceeds from issuance of shares | ||||||||||||
| Cash provided by financing activities | ||||||||||||
| Foreign currency effect | ( | ) | ||||||||||
| Net change in cash | ( | ) | ||||||||||
F-7
HW ELECTRO CO., LTD AND ITS SUBSIDIARIES
STATEMENTS OF CASH FLOWS — (Continued)
(Currency expressed in United States Dollars (“$”))
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Cash as of beginning of the year | ||||||||||||
| Cash as of the end of the year | ||||||||||||
| Net increase/(decrease) in cash | ( | ) | ||||||||||
| Supplementary disclosure of cash flows information | ||||||||||||
| Cash paid for interest | ||||||||||||
| Cash paid for taxes | ||||||||||||
| Supplementary disclosure on non-cash flows information | ||||||||||||
| Initial recognition of operating lease related to right-of-use assets | ||||||||||||
| * | Giving retroactive effect to the 1 for 2 share split effected on September 1, 2023. |
The accompanying notes are an integral part of these financial statements.
F-8
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
On May 24, 2019, HW Electro Co., Ltd. (the “Company”) was incorporated in Japan. The Company’s principal executive offices are located in Tokyo, of Japan. The Company is principally engaged in the business of importing and selling high-performance fully electric light commercial vehicles. The Company conducts its operations wholly in Japan and has no subsidiary.
2. LIQUIDITY AND GOING CONCERN
The accompanying financial
statements have been prepared in conformity with U.S. GAAP which contemplates continuation of the Company on a going concern basis.
The going concern basis assumes that assets are realized, and liabilities are settled in the ordinary course of business at amounts disclosed
in the financial statements. The Company’s ability to continue as a going concern depends upon its ability to market and sell its
products to generate positive operating cash flows. For the year ended September 30, 2023, the Company reported net loss of $
To sustain its ability to support the Company’s operating activities, the Company may have to consider supplementing its available sources of funds through the following sources:
| ● | cash generated from operations; |
| ● | other available sources of financing from Japan banks and other financial institutions; and |
| ● | financial support from the Company’s related party and shareholders. |
Management had raised additional
funds by performing a series of issuances of Ordinary Shares during the year ended September 30, 2023, resulting in
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| (a) | Basis of presentation |
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the regulations of the Securities and Exchange Commission (the “SEC”).
| (b) | Use of estimates and assumptions |
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. GAAP requires 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 revenue and expenses during the reporting period. The most significant estimates relate to useful lives for property, plant and equipment, assumptions used in assessing right of use assets, allowance for expected credit losses accounts, inventory valuation, impairment of long-lived assets, property, plant and equipment, provision of warranty liabilities, valuation allowance for deferred tax asset and uncertain tax position. Actual results could vary from the estimates and assumptions that were used.
F-9
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| (c) | Risks and uncertainties |
Political and economic risk
All of the Company’s assets were located in Japan and all of the Company’s revenue was generated in Japan. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in Japan, as well as by the general state of Japan economy. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in Japan. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, including its organization and structure disclosed in Note 1, such experience may not be indicative of future results.
Credit risk
As of September 30, 2023
and 2022, $
Accounts receivables are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risks. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.
Concentration of customers
As of September 30, 2023,
one major customer, which is in the automobile inspection and maintenance, was recorded $
For the fiscal year ended September 30,
2023, the most major customer, which is in the automobile manufacture industry, was recorded $
Concentration of suppliers
As of September 30, 2023
and 2022, the most major supplier which are in the automation machinery business, were recorded $
For the fiscal years ended
September 30, 2023, the most major supplier, which is in the automobile manufacture business, was recorded $
(d) Foreign currency translation
The Company maintains its books and record in its local currency, Japanese yen (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations and comprehensive loss.
F-10
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statement,” assets and liabilities of the Company are translated into US$, using the exchange rate on the balance sheet date. Revenue and expenses are translated at the average rates prevailing during the period. Shareholders’ equity is translated at the historical exchange rate at the time of transaction. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
The value of foreign currencies including, the JPY, may fluctuate against the U.S. Dollar. Any significant variations of the aforementioned currencies relative to the U.S. Dollar may materially affect the Company’s financial condition in terms of reporting in U.S. Dollar.
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ to JPY Year-end Spot Rate | ||||||||
| $ to JPY Average Rate | ||||||||
(e) Fair value of financial instruments
Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:
| ● | Level 1 applies to assets or liabilities for which there are quoted prices, in active markets for identical assets or liabilities. |
| ● | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical asset or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
| ● | Level 3 applies to asset or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
Cash, accounts receivable, net, bank loans, loans payable — third party, loans payable — financial institution, accounts payable, accruals and other current liabilities, amount due to a related party, amount due to a shareholder, other non-current liabilities are financial assets and liabilities and are subject to fair value measurement; however, because of their being short period of time between the origination of such instruments and their expected realization and their current market rates of interest management believes their carrying values approximate their fair value.
(f) Related parties
We adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
F-11
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(g) Cash
Cash consists of cash on hand,
the Company’s demand deposit placed with financial institutions, which have original maturities of less than three months and
unrestricted as to withdrawal and use. Deposits are held at highly liquid and well capitalized financial institutions. Risk of loss is
not expected by management. The Company maintains all of its bank accounts in Japan. Cash balances in bank accounts in Japan are insured
by the Deposit Insurance Corporation of Japan subject to certain limitations. The cash balance was $
(h) Accounts Receivable and allowance for expected credit losses accounts
Accounts receivable, net are stated at the original amount less an allowance for expected credit loss on such receivables. The allowance for expected credit loss is estimated based upon the Company’s assessment of various factors including historical experience, the age of the accounts receivable balances, current general economic conditions, future expectations and customer specific quantitative and qualitative factors that may affect the Company’s customers’ ability to pay. Accounts are considered overdue after 30 days. An allowance is also made when there is objective evidence for the Company to reasonably estimate the amount of probable loss. As of September 30, 2023 and 2022, the Company made allowance for expected credit losses accounts.
(i) Prepayments
Prepayments are mainly payments made to vendors or services providers for future services that have not been provided and prepaid rent. These amounts are refundable and bear no interest. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. As of September 30, 2023 and 2022, no allowance was deemed necessary.
(j) Inventories, net
Inventories are measured at
the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less
cost to sell, and considers general market and economic conditions, periodic reviews of current profitability of vehicles. The cost of
inventories is based on the first-in-first-out method, and includes expenditure incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and
work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. The Company records adjustments
to its inventories for estimated obsolescence or diminution in net realizable value equal to the difference between the cost of the inventories
and the estimated net realizable value. At the point of loss recognition, the Company may need to consider if any impairment of the inventories
at year end, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established
cost basis. As of September 30, 2023 and 2022, the Company made $
(k) Property, plant and equipment, net
Property, plant and equipment,
net are stated at cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis or declining balance
method over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring
the asset into its intended use. Property under finance leases and the related obligation for future lease payments are recorded at an
amount equal to the initial present value of those lease payments, and the depreciation on a straight-line method over the lease term.
| Category | Estimated useful life | |
| Buildings | ||
| Leasehold improvements | ||
| Machinery and equipment | ||
| Motor vehicle |
F-12
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Expenditure for repair and maintenance costs, which do not materially extend the useful lives of the assets, are charged to expenses as incurred, whereas the expenditure for major renewals and betterment that substantially extends the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation and impairment with any resulting gain or loss recognized in the statements of operations and comprehensive loss.
The cost of construction-in-progress includes the cost directly attributable to the construction of showroom. Construction in progress is not depreciated.
(l) Cost method investment
The Company accounts for investment
with less than
Cost method investment are evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investment is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary.
The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investment; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. No event had occurred and indicated that other-than-temporary impairment existed and therefore the Company did not record any impairment charges for its investment for the fiscal years ended September 30, 2023 and 2022.
(m) Impairment of long-lived assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. No impairment of long-lived assets was recognized for the fiscal years ended of September 30, 2023 and 2022, respectively.
(n) Warranties liabilities
The estimated costs related to product warranties are accrued at the time products are sold and are charged to cost of revenue in the financial statement. These estimates are established using historical information on the nature, frequency and average cost of claims of each vehicle line or each model year of the vehicle line and assumptions about future activity and events. Revisions are made when necessary and are based on changes in these factors.
(o) Contract liabilities
A contract liability is recognized when the customer pays non-refundable consideration before the Company recognizes the related revenue. A contract liability would also be recognized if the Company has an unconditional right to receive nonrefundable considerations before the Company recognizes the related revenue. In such cases, a corresponding receivable would also be recognized.
F-13
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(p) Commitments and contingencies
In the normal course of business, the Company is subject to commitments and contingencies, including operating lease commitments, legal proceedings and claims arising out of its business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss will occur, and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments on liability for contingencies, including historical and the specific facts and circumstances of each matter.
(q) Revenue recognition
The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), for reporting periods beginning.
The Company recognizes revenue as it satisfies a performance obligation when its customer obtains control of promised goods in an amount that reflects the consideration the entity expects to receive in exchange for those goods. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods it transfers to the customer.
The Company is a principal and records revenue on a gross basis when the Company is primarily responsible for fulfilling the delivery of goods, has discretion in establishing pricing, and controls the promised good before transferring those goods to customers.
Automotive net sales and revenue represents the amount of consideration to which we expect to be entitled in exchange for vehicle. The consideration recognized represents the amount received, typically shortly after the sale to a customer, net of estimated dealer and customer sales incentives we reasonably expect to pay. Significant factors in determining our estimates of incentives include forecasted sales volume, product mix and the rate of customer acceptance of incentive programs, all of which are estimated based on historical experience and assumptions concerning future customer behavior and market conditions. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time. A portion of the consideration received is deferred for separate performance obligations, such as maintenance, services and vehicle connectivity, that will be provided to our customers at a future date. Taxes assessed by various government entities, such as sales, use and value-added taxes, collected at the time of the vehicle sale are excluded from Automotive net sales and revenue. Costs for shipping and handling activities that occur after control of the vehicle transfers to the dealer are recognized at the time of sale and presented in Automotive and other cost of sales.
Revenue from sales of goods in the ordinary course of business is recognized when the Company satisfies a performance obligation (“PO”) by transferring control of a promised good to the customer. The amount of revenue recognized is the amount of the transaction price allocated to the satisfied PO.
The transaction price is allocated to each PO in the contract on the basis of the relative stand-alone selling prices of the promised goods. The individual standalone selling price of a good that has not previously been sold on a stand-alone basis, or has a highly variable selling price, is determined based on the residual portion of the transaction price after allocating the transaction price to goods with observable stand-alone selling price. A discount or variable consideration is allocated to one or more, but not all, of the performance obligations if it relates specifically to those performance obligations.
Transaction price is the amount of consideration in the contract to which the Company expects to be entitled in exchange for transferring the promised goods. The transaction price may be fixed or variable and is adjusted for time value of money if the contract includes a significant financing component. Consideration payable to a customer is deducted from the transaction price if the Company does not receive a separate identifiable benefit from the customer.
F-14
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
When consideration is variable, if applicable, the estimated amount is included in the transaction price to the extent that it is highly probable that a significant reversal of the cumulative revenue will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue may be recognized at a point in time or over time following the timing of satisfaction of the PO. If a PO is satisfied over time, revenue is recognized based on the percentage of completion reflecting the progress towards complete satisfaction of that PO. Typically, POs for products where the process is described as below, the PO is satisfied at point in time.
For the sales of electric light commercial vehicle products, the Company typically receives purchase orders from its customers which will set forth the terms and conditions including the transaction price, products to be delivered, terms of delivery, and terms of payment. The terms serve as the basis of the performance obligations that the Company must fulfill in order to recognize revenue. The key performance obligation is the delivery of the EV to the customer at their location at which point the title to that asset passes to the customer.
The Company has entered into agreements with certain customers that allow full or partial refunds if we are unable to ultimately meet requirements regarding quality set forth in the agreement. For these agreements, our management estimates an expected liability for potential refunds. Our management develops this estimate based on actual historical refund data and the probability of product defects. Refund liabilities are settled in cash with customers. The actual amount of customer returns, which is inherently uncertain, may differ from the Company’s estimates. If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it established, it will record a reduction or increase, as appropriate, to net sales in the period in which it makes such a determination. Provisions for customer-specific discounts are based on contractual obligations with certain customers. The Company records, on a gross basis, a refund liability and an asset, which represents the right to receive goods (inventory) back from the customer for recovery, in the balance sheets. The refund liability is remeasured at the balance sheet date to reflect changes in the estimate of returns, with a corresponding adjustment to revenue. The asset is initially measured at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value.
(r) Cost of revenue
Cost of revenue mainly consists of raw material costs, labor costs, sub-contracting costs, warranty costs, impairment costs and production overhead.
(s) Research and development expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including licensing fees, cost of salaries, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including Testing, modifying costs and professional services. All costs associated with research and development are expensed as incurred.
(t) Selling and general and administrative expenses
Selling, general and administrative expenses mainly consist of staff cost, agents service fee, commission fee, depreciation, office supplies and upkeep expenses, travelling and entertainment, legal and professional fees, advertisement fee, operating lease expense and related expenses, other miscellaneous administrative expenses.
(u) Asset retirement obligations
The Company accounts for asset retirement obligations in accordance with ASC 410-20, Asset Retirement Obligations. ASC 410-20 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets that result from the operation use of the leased assets. Asset retirement obligations consists of estimated restoration costs to be incurred by the Company in the future once the economic life of its leased assets is reached. The estimated fair value of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability is capitalized as part of the cost of the related asset and amortized over its useful life. The liability is accreted until the Company settles the obligation.
F-15
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(v) Leases
The Company adopted ASC 842 on October 1, 2020. The Company determines if an arrangement is a lease at inception.
Operating leases
Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liability, and operating lease liability, non-current in the Company’s balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option, if any. As the Company’s leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company has elected to adopt the following lease policies in conjunction with the adoption of ASU 2016-02: (i) for leases that have lease terms of 12 months or less and does not include a purchase option that is reasonably certain to exercise, the Company elected not to apply ASC 842 recognition requirements; and (ii) the Company elected to apply the package of practical expedients for existing arrangements entered into prior to October 1, 2020 to not reassess (a) whether an arrangement is or contains a lease, (b) the lease classification applied to existing leases, and(c) initial direct costs.
Finance leases
Finance lease assets are subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the Finance lease assets are amortized over the useful life of the underlying asset. Accordingly, the assets leased under the finance leases are included in rental equipment and property and equipment, and depreciation thereon is recognized in operating expenses and cost of revenue in the financial statement. When the Company makes its contractually required payments under finance leases, the Company allocates a portion to reduce the finance lease obligation and a portion is recognized as interest expenses.
(w) Income taxes
The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
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. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures.
The Company did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line of its statements of operations and comprehensive loss for the fiscal years ended September 30, 2023 and 2022, respectively. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
F-16
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(x) Loss per share
Loss per share is computed by dividing net earnings attributable to Ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue Ordinary Shares were exercised or converted into Ordinary Shares.
(y) Share-based compensation
The Company applies ASC 718, Compensation — Stock Compensation (“ASC 718”), to account for its employee share-based payments. In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a liability award or equity award. All the Company’s share-based awards to employees were classified as equity awards and are recognized in the financial statements based on their grant date fair values. In accordance with ASC 718, the Company recognizes share-based compensation cost for equity awards to employees with a performance condition based on the probable outcome of that performance condition. Compensation cost is recognized using the accelerated method if it is probable that the performance condition will be achieved. The Company accounts for forfeitures as they occur in accordance with ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting.
(z) Deferred initial public offering (“IPO”) costs
The Company complies with the
requirement of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses
of Offering”. Initial public offering expenses directly attributable to the offering of securities are deferred and should be charged
against the gross proceeds of the offering, as a reduction in share capital. These deferred expenses mainly consist of underwriting, legal
and other expenses incurred through the balance sheet date that are directly related to the intended IPO. Should the IPO close, these
deferred initial public offering costs, as well as additional expenses to be incurred, will be charged to operations. As of September 30,
2023 and 2022, the Company capitalized $
(aa) Segment reporting
ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s business segments. Based on the criteria established by ASC 280, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. As a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. As the Company’s long-lived assets are substantially located in Japan, no geographical segments are presented.
(bb) Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jump start Our Business Start-ups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In October 2021, the FASB issued ASU 2021-08, Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2021-08 is effective for the Company for annual and interim reporting periods beginning July 1, 2021. Early application is not permitted. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The Company is currently evaluating the impact of this new standard on Company’s financial statements and related disclosures.
F-17
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In October 2021, the FASB issued ASU 2021-10, Codification Improvements. The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2021-10 is effective for annual periods beginning after December 15, 2021 for public business entities. Early application is permitted. The amendments in this Update should be applied retrospectively. The Company does not expect the adoption of this standard to have a material impact on its 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 balance sheets, statements of operations and comprehensive loss and statements of cash flows.
4. ACCOUNTS RECEIVABLE, NET
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Accounts receivable – third party | ||||||||
| Accounts receivable – related party | ||||||||
| Less: allowance for expected credit losses accounts | ||||||||
| Accounts receivable, net | ||||||||
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Within 30 days | ||||||||
| Accounts receivable, net | ||||||||
5. INVENTORIES, NET
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Raw materials | ||||||||
| Work-in-progress | ||||||||
| Finished goods | ||||||||
| Subtotal | ||||||||
| Less: inventory valuation allowance | ( | ) | ||||||
| Total inventories, net | ||||||||
For the fiscal years ended
September 30, 2023, 2022 and 2021, the Company recognized the impairment loss in inventories of $
F-18
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
6. PREPAYMENTS
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Prepayments – related party | ||||||||
| Prepayments – third parties | ||||||||
| Total prepayments | ||||||||
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Downpayment to supplier for the purchase of electric vehicles | ||||||||
| Prepaid outsourcing agency services fee | ||||||||
| Prepaid advertisement agency fee and exhibition | ||||||||
| Prepaid office and store rental and car leasing | ||||||||
| Prepaid prototype and system design and development fee | ||||||||
| Others | ||||||||
As of September 30, 2022,
the Company had prepaid $
7. COST METHOD INVESTMENT
The Company holds an investment
of
8. LONG-TERM DEPOSITS
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Security deposits | ||||||||
The security deposits are for the leases of headquarters, parking spaces, employee dormitories, and showrooms.
F-19
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
9. PROPERTY, PLANT AND EQUIPMENT, NET
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Buildings | ||||||||
| Leasehold improvements | ||||||||
| Finance lease right-of-use assets | ||||||||
| Machinery and Equipment | ||||||||
| Motor vehicle | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | ||||||||
Depreciation expenses were
approximately $
10. ROU ASSETS AND LEASE LIABILITIES
The Company determines if a contract contains a lease at inception. U.S. GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which results in an economic penalty.
The right-of-use assets relate to factory, offices, dormitories, equipment, commercial vehicles and parking lots.
| As of September 30, 2023 | As of September 30, 2022 | |||||||||
| $ | $ | |||||||||
| Assets | Classification on the Balance Sheet | |||||||||
| Finance lease assets, net | Property, plant and equipment, net | |||||||||
| Operating lease assets | Operating lease right-of-use assets | |||||||||
| Total lease assets | ||||||||||
F-20
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
10. ROU ASSETS AND LEASE LIABILITIES (cont.)
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Liabilities | ||||||||
| Current | ||||||||
| Finance leases | ||||||||
| Operating leases | ||||||||
| Total | ||||||||
| Non-current | ||||||||
| Finance leases | ||||||||
| Operating leases | ||||||||
| Total | ||||||||
| Finance leases | Operating leases | |||||||
| $ | $ | |||||||
| Future payment | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Thereafter | ||||||||
| Total future lease payment | ||||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Present value of operating lease liabilities | ||||||||
| Lease liabilities, current portion | ||||||||
| Lease liabilities, non-current portion | ||||||||
| Weighted average discount rate | ||||
| Weighted average remaining lease term (years) |
F-21
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
11. BANK LOAN — CURRENT
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Bank loan – current | ||||||||
SCHEDULE OF BANK LOANS
| Bank loan | Currency | Period | Interest rate | Third Party guarantee | Directors’ Personal guarantee | Carrying amount | ||||||||||
| Shoko Chukin Bank | October 2023* | % | ||||||||||||||
| September 30, 2023 | ||||||||||||||||
| * |
| Bank loan | Currency | Period | Interest rate | Third Party guarantee | Directors’ Personal guarantee | Carrying amount | ||||||||||
| Mizuho Bank | December 2022 | % | ||||||||||||||
| September 30, 2022 | ||||||||||||||||
| Carrying amount | Within 1 year | 2024 | 2025 | 2026 | 2027 | Thereafter | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Shoko Chukin Bank | ||||||||||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||||||
| Carrying amount | Within 1 year | 2024 | 2025 | 2026 | 2027 | Thereafter | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Mizuho Bank | ||||||||||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||||||
12. ACCRUALS AND OTHER CURRENT LIABILITIES
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Accrued professional fee | ||||||||
| Accrued prototype and application development fee | ||||||||
| Accrued compensation and employee benefits | ||||||||
| Accrued non-income taxes | ||||||||
| Accrued interest expenses | ||||||||
| Others | ||||||||
F-22
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
13. CONTRACT LIABILITIES
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Beginning balance | ||||||||
| Deposits received from customers | ||||||||
| Amount recognized to revenue | ( | ) | ( | ) | ||||
| Less: refunds to customers | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Ending balance | ||||||||
Contract liabilities primarily relate to the advance consideration received from customers prior to transferring the products to the customer or other conditions under terms of a sales contract.
14. ASSET RETIREMENT OBLIGATIONS
| Asset Retirement Obligations | ||||
| $ | ||||
| As of October 1, 2022 | ||||
| Liabilities incurred in the current period | ||||
| Accretion of liability | ||||
| Foreign currency translation adjustment | ( | ) | ||
| As of September 30, 2023 | ||||
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Asset retirement obligations | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
| Total | ||||||||
15. REFUND LIABILITY — CURRENT
As of September 30, 2023,
the Company has a refund liability-current of $
F-23
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
16. OTHER NON-CURRENT LIABILITIES
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Deposits received – non-current | ||||||||
17.
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Loans payable – third party | ||||||||
| Loans payable | Currency | Period | Interest rate | Third Party guarantee | Directors’ Personal guarantee | Carrying amount | ||||||||
| $ | ||||||||||||||
| Cenntro Automotive Group Limited(1) | June 2023 | % | ||||||||||||
| September 30, 2022 | ||||||||||||||
| (1) |
18. LOANS PAYABLE — FINANCIAL INSTITUTION
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Loans payable – Financial Institution | ||||||||
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Loans payable – Financial Institution | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
| Total | ||||||||
| Loans payable – Financial Institution | Currency | Period | Interest rate | Third Party guarantee | Directors’ Personal guarantee | Carrying amount | ||||||||
| $ | ||||||||||||||
| Japan Finance Corporation | December 2028 | % | ||||||||||||
| September 30, 2023 | ||||||||||||||
F-24
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
18. LOANS PAYABLE — FINANCIAL INSTITUTION (cont.)
Loans payable – Financial Institution | Currency | Period | Interest rate | Third Party guarantee | Directors’ Personal guarantee | Carrying amount | ||||||||
| $ | ||||||||||||||
| Japan Finance Corporation | % | |||||||||||||
| September 30, 2022 | ||||||||||||||
| Carrying amount | Within 1 year | 2025 | 2026 | 2027 | 2028 | Thereafter | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Japan Finance Corporation | ||||||||||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||||||
| Carrying amount | Within 1 year | 2024 | 2025 | 2026 | 2027 | Thereafter | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Japan Finance Corporation | ||||||||||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||||||
19. AMOUNT DUE TO A SHAREHOLDER
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Amount due to a shareholder | ||||||||
| Loans payable | Currency | Period | Interest rate | Third Party guarantee | Directors’ Personal guarantee | Carrying amount | ||||||||
| $ | ||||||||||||||
| Mr. Kimoto Yasuya # | % | |||||||||||||
| September 30, 2023 | ||||||||||||||
| # |
F-25
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
20. WARRANTY LIABILITIES
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Warranty liabilities | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
| Total | ||||||||
The warranty liabilities during the fiscal years ended September 30, 2023 and 2022 mainly represented the provision for warranty for electric light commercial vehicle products sold, which usually covers a 36-month period from the date on which the electric light commercial vehicle products are delivered and accepted by the customers. The warrant liability is based on estimates made from a third party’s simulated warranty data associated with repairs estimated for defects identified during the pre-delivery inspection process. The Company will re-evaluate the provision for warranty liabilities based on the estimates made timely to match with the actual claims and expects to make use of the accrued liability over the next operating period.
21. OTHER EXPENSES (INCOME), NET
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Loss on disposal of property, plant and equipment | ||||||||||||
| Restoration fee of leasehold improvement | ||||||||||||
| Penalty for early termination | ||||||||||||
| Foreign exchange loss | ||||||||||||
| Other incomes | ( | ) | ( | ) | ( | ) | ||||||
| Other expenses | ||||||||||||
| Total other expenses/(income), net | ( | ) | ||||||||||
22. INCOME TAXES
The Company is considered Japan
tax resident enterprise under Japan tax laws; accordingly, they are subject to enterprise income tax on their taxable income as determined
under Japan tax laws and accounting standards at a statutory tax rate of
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Current income tax expense | ||||||||||||
| Deferred tax expense (benefit) | ( | ) | ( | ) | ||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ||||||||
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Loss before tax expenses: | ( | ) | ( | ) | ( | ) | ||||||
| Tax at the domestic income tax rate | ( | ) | ( | ) | ( | ) | ||||||
| Tax effect of expenses that are not deductible in determining taxable profit | ||||||||||||
| Valuation allowance recognized deferred tax assets recognized | ||||||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ||||||||
F-26
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
22. INCOME TAXES (cont.)
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Deferred tax assets | ||||||||
| Less: Valuation allowance | ( | ) | ||||||
| Deferred tax assets, net of valuation allowance | ||||||||
| Net operating loss carry-forwards | ||||
| $ | ||||
| As of October 1, 2020 | ||||
| Recognized in statements of operations and comprehensive loss | ||||
| Foreign currency translation adjustment | ( | ) | ||
| As of September 30, 2021 | ||||
| As of October 1, 2021 | ||||
| Recognized in statements of operations and comprehensive loss | ||||
| Foreign currency translation adjustment | ( | ) | ||
| As of September 30, 2022 | ||||
| As of October 1, 2022 | ||||
| Recognized in statements of operations and comprehensive loss | ||||
| Valuation allowance recognized | ( | ) | ||
| Foreign currency translation adjustment | ||||
| As of September 30, 2023 | ||||
23. EQUITY
Unless otherwise indicated, all share amounts and per share amounts issued and outstanding prior to August 31, 2023 in this subsection are not presented to give effect to a 1-for-2 share split of the Ordinary Shares and Series A convertible preferred shares, which was effected on September 1, 2023.
The Company has performed a
series of issuance of Ordinary Shares resulting in
F-27
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
23. EQUITY (cont.)
| Ordinary shares | Amount | Amount | ||||||||||||||
| Issued Date | Issued | Accumulated | JPY | US$ | ||||||||||||
| May 24, 2019 | ||||||||||||||||
| June 30, 2021 | ||||||||||||||||
| December 28, 2021 | ||||||||||||||||
| February 28, 2022 | ||||||||||||||||
| March 28, 2022 | ||||||||||||||||
| December 15, 2022 | ||||||||||||||||
| January 31, 2023 | ||||||||||||||||
| February 28, 2023 | ||||||||||||||||
| March 29, 2023 | ||||||||||||||||
| March 30, 2023 | ||||||||||||||||
| March 31, 2023 | ||||||||||||||||
| April 1, 2023 | ||||||||||||||||
| April 3, 2023 | ||||||||||||||||
| April 10, 2023 | ||||||||||||||||
| April 11, 2023 | ||||||||||||||||
| April 12, 2023 | ||||||||||||||||
| April 24, 2023 | ||||||||||||||||
| April 25, 2023 | ||||||||||||||||
| April 28, 2023 | ||||||||||||||||
| August 31, 2023* | ||||||||||||||||
| August 31, 2023** | ||||||||||||||||
| September 30, 2023*** | ||||||||||||||||
| * |
| ** |
| *** |
Pursuant to the Company’s
articles of incorporation, on August 31, 2023, Autobacs Seven requested the Company to convert its
| Ordinary shares | Amount | Amount | ||||||||||||||
| Issued Date | Issued | Accumulated | JPY | US$ | ||||||||||||
| October 20, 2021 | ||||||||||||||||
| March 31, 2023* | ||||||||||||||||
| October 21, 2023** | ||||||||||||||||
| * | Giving retroactive effect to the 1 for 2 share split effected on September 1, 2023. |
| ** |
F-28
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
23. EQUITY (cont.)
The Company believes it is appropriate to reflect the above transactions on a retroactive basis similar to share split or dividend pursuant to ASC 260. All references made to share or per share amounts in the accompanying financial statements and applicable disclosures have been retroactively adjusted to reflect the 1 for 2 share split.
Shares to be issued relate to advances from third parties and are non-trade, unsecured, interest-free and quasi equity in nature.
24. SHARE-BASED COMPENSATION
Trust-Type Share Option Plan
On June 9, 2021, the Company
awarded options to purchase an aggregate of
The fair value of stock option awards with only service and/or performance conditions is estimated on the grant or offering date using the Black-Scholes option-pricing model with the assistance of a third-party valuation appraiser. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally years for stock options. Share-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period. Share-based compensation expense is recorded in the statements of operations.
The stock options vested on June 10, 2023 with the expiration date on June 9, 2036.
| Stock Options | ||||||||||||||
| Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (years) | ||||||||||||
| Outstanding as of October 1, 2020 | ||||||||||||||
| Granted | JPY | |||||||||||||
| Exercised | — | |||||||||||||
| Forfeited/cancelled | — | |||||||||||||
| Outstanding as of September 30, 2021 | JPY | |||||||||||||
| Granted | — | |||||||||||||
| Exercised | — | |||||||||||||
| Forfeited/cancelled | — | |||||||||||||
| Outstanding as of September 30, 2022 | JPY | |||||||||||||
| Granted | — | |||||||||||||
| Exercised | — | |||||||||||||
| Forfeited/cancelled | — | |||||||||||||
| Outstanding as of September 30, 2023 | JPY | |||||||||||||
F-29
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
24. SHARE-BASED COMPENSATION (cont.)
| For the fiscal years ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Expected volatility | % | % | ||||||
| Dividend yield | % | % | ||||||
The expected volatility is calculated based on the annualized standard deviation of the daily return embedded in historical share prices of comparable companies.
The risk-free interest rate is estimated based on the yield to maturity of Japanese treasury bonds based on the expected term of the incentive shares.
The company estimates the stock option will be granted two years after the trust-type stock option is funded.
For the fiscal years
ended September 30, 2023, 2022 and 2021, the Company recognized share-based compensation expenses related to the options of $
25. RELATED PARTY TRANSACTIONS
| Name of entity or individual | Relationship to the Company | |
| Mr. Weicheng Hsiao | ||
| Goodride Japan INC. | ||
| Delta Co. Ltd. | ||
| Mr. Taisuke Otsubo | ||
| Mr. Takayuki Tokoroda | ||
| B.H Co., Ltd |
In the ordinary course of business,
during the fiscal years ended September 30, 2023 and 2022, the Company was involved in certain transactions, either at
cost or current market prices, and on the normal commercial terms with related parties.
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| Nature of transactions | $ | $ | ||||||
| Accounts receivable – related party, net* | ||||||||
| Goodride Japan INC. | ||||||||
| Prepayments** | ||||||||
| Goodride Japan INC. | ||||||||
| * |
| ** |
F-30
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
25. RELATED PARTY TRANSACTIONS (cont.)
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| Amount due from a related party | ||||||||
| Mr. Weicheng Hsiao*** | ||||||||
| Amount due to a related party | ||||||||
| Mr. Weicheng Hsiao**** | ||||||||
| *** |
| **** |
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Accruals and other current liabilities | ||||||||
| Delta Co. Ltd. | ||||||||
| Goodride Japan INC. | ||||||||
| B.H Co., Ltd | ||||||||
| Mr. Weicheng Hsiao | ||||||||
| Mr. Taisuke Otsubo | ||||||||
F-31
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
25. RELATED PARTY TRANSACTIONS (cont.)
| For the Fiscal Years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Revenue-related party(1) | ||||||||||||
| Goodride Japan INC. | ||||||||||||
| Commission fee(2) | ||||||||||||
| Goodride Japan INC. | ||||||||||||
| Delta Co. Ltd. | ||||||||||||
| B.H Co., Ltd | ||||||||||||
| Mr. Taisuke Otsubo | ||||||||||||
| Research and development expenses(3) | ||||||||||||
| Goodride Japan INC. | ||||||||||||
| Rent expense(4) | ||||||||||||
| Goodride Japan INC | ||||||||||||
| Purchases(5) | ||||||||||||
| Goodride Japan INC | ||||||||||||
| Interest income(6) | ||||||||||||
| Mr. Weicheng Hsiao | ||||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
Apart from the transactions and balances detailed elsewhere in these accompanying financial statements, the Company has no other significant or material related party transactions during the years presented.
26. CONCENTRATIONS AND RISKS
Concentrations
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with financial institutions with high-credit ratings and quality.
Accounts receivable primarily comprise of amounts receivable from the customers. To reduce credit risk, the Company performs on-going credit evaluations of the financial condition of these customers. The Company conducts credit evaluations of its customers, and generally requires advance consideration from customers prior to transferring the products to the customer or other conditions under terms of a sales contract from them. The Company evaluates its collection experience and long outstanding balances to determine the need for an allowance for expected credit losses accounts. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.
F-32
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
26. CONCENTRATIONS AND RISKS (cont.)
Concentration of customers
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Amount of the Company’s revenue | ||||||||||||
| Customer A(1) | ||||||||||||
| Customer B(2) | ||||||||||||
| Customer C(3) | ||||||||||||
| Customer D(4) | ||||||||||||
The following table sets forth
a summary of single customers who represent
| As of September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Amount of the Company’s accounts receivable | ||||||||
| Customer E(5) | ||||||||
| Customer F(6) | ||||||||
| Customer G(7) | ||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
Concentration of suppliers
The following table sets forth
a summary of single supplier who represent
| As of September 30, 2023 | As of September 30, 2022 | |||||||
| $ | $ | |||||||
| Amount of the Company’s accounts payable | ||||||||
| Supplier A(8) | ||||||||
The following table sets forth
a summary of suppliers who represent
| For the fiscal years ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Amount of the Company’s purchase | ||||||||||||
| Supplier A(8) | ||||||||||||
| (8) |
F-33
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
26. CONCENTRATIONS AND RISKS (cont.)
Credit Risk
Credit risk is the potential financial loss to the Company resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the Company, as and when they fall due. As the Company does not hold any collateral, the maximum exposure to credit risk is the carrying amounts of trade and other receivables (excluding prepayments) and cash presented on the statements of financial position. The Company has no other financial assets which carry significant exposure to credit risk.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of JPY converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
Interest rate risk
As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.
The Company’s interest-rate risk arises from bank borrowings and long-term loan from financial Institution. The Company manages interest rate risk by varying the issuance and maturity dates of variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates. As of September 30, 2023 and 2022, the bank loans and long-term loans were at fixed interest rates.
Economic and political risk
The Company’s major operations are conducted in Japan. Accordingly, the political, economic, and legal environments in Japan, as well as the general state of Japan’s economy may influence the Company’s business, financial condition, and results of operations.
27. COMMITMENTS AND CONTINGENCIES
Contingencies
In the ordinary course of business, the Company may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from such claims, when a loss is assessed to be probable, and the amount of the loss is reasonably estimable. In the opinion of management, there were no pending or threatened claims and litigation as of September 30, 2023 and up through March 20, 2024, date of these financial statements were available to the issued.
28. SUBSEQUENT EVENTS
Pursuant to the Company’s
articles of incorporation, on August 31, 2023, Autobacs Seven requested the Company to convert its
During the fiscal year ended
September 30, 2023, the Chief Executive Officer, Mr. Weicheng Hsiao, borrowed a series of short-term loans from the Company and the
balance as of September 30, 2023 was $
F-34
HW ELECTRO CO., LTD
NOTES TO FINANCIAL STATEMENTS
28. SUBSEQUENT EVENTS (cont.)
The Company has rescheduled
the repayment date of the loan of $
The Company borrowed short-term
unsecured loans with an aggregate amount of $
Between December 8, 2023
to March 20, 2024, the Company borrowed a series of short-term loans in the aggregate amount of $
On December 19, 2023,
the Company borrowed a short-term loan with an amount of $
On January 10, 2024, the Company complied with the terms of an agreement with a customer that allow a full or partial refund should the customer be unsatisfied with the Company’s product by taking back the product and initiating the process of the refund to the customer.
Except for the above, the Company has assessed all events from October 1, 2023 through March 20, 2024, which is the date that these financial statements are available to be issued, there are not any material subsequent events that require disclosure in these financial statements.
F-35
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.
| HW Electro Co., Ltd. | ||
| By: | /s/ Weicheng Hsiao | |
| Name: | Weicheng Hsiao | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Dated: | March 20, 2024 | |
1
EXHIBIT INDEX
| Description | ||
| 12.1 | Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended. | |
| 12.2 | Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended. | |
| 13.1 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
2