[PART I](index=6&type=section&id=PART%20I) [Item 1. Identity of Directors, Senior Management and Advisers](index=6&type=section&id=Item%201.%20Identity%20of%20Directors,%20Senior%20Management%20and%20Advisers) This section is not applicable as per the report - The report states that this item is not applicable[8](index=8&type=chunk) [Item 2. Offer Statistics and Expected Timetable](index=6&type=section&id=Item%202.%20Offer%20Statistics%20and%20Expected%20Timetable) This section is not applicable as per the report - The report states that this item is not applicable[8](index=8&type=chunk) [Item 3. Key Information](index=6&type=section&id=Item%203.%20Key%20Information) This section details the company's high-risk investment profile, focusing on its VIE structure, China operations, and HFCA Act implications [Corporate Structure and VIE Arrangements](index=6&type=section&id=Corporate%20Structure%20and%20VIE%20Arrangements) The company operates in China through a Variable Interest Entity (VIE) due to foreign investment restrictions, posing significant regulatory risks - Skillful Craftsman is a Cayman Islands holding company operating in China through a VIE structure due to PRC laws restricting foreign investment in online education services[10](index=10&type=chunk) - The VIE structure is subject to substantial uncertainty, as PRC authorities could deem contractual arrangements non-compliant, potentially leading to severe penalties and a total loss of securities' value[10](index=10&type=chunk) - Cash is transferred from the VIE to the Wholly-Owned Foreign Enterprise (WOFE) as service fees, and then from the WOFE to the parent company as dividends, subject to PRC regulations[14](index=14&type=chunk)[15](index=15&type=chunk)[17](index=17&type=chunk) Intercompany Cash Flows (Fiscal Years 2022-2024) | Cash Flow Description | FY 2022 (US$) | FY 2023 (US$) | FY 2024 (US$) | | :--- | :--- | :--- | :--- | | Cash paid by VIE to WOFE | 2,341 | — | 12,173 | | Cash paid by WOFE to VIE | 503,252 | 509,335 | 2,488 | | Cash paid by Cayman parent to VIE | 464,240 | — | — | | Cash paid by Cayman parent to Hong Kong subsidiary | 2,520,000 | 645,000 | — | | Cash paid by Hong Kong subsidiary to VIE | 2,510,000 | — | — | | Cash paid by Hong Kong subsidiary to WOFE | — | 640,000 | — | [Financial Information Related to the VIE and Parent](index=10&type=section&id=3.A.%20Financial%20Information%20Related%20to%20the%20VIE%20and%20Parent) The VIE, Wuxi Wangdao, is central to the company's financials, contributing 100% of FY2024 consolidated revenue and most assets and liabilities VIE's Contribution to Consolidated Financials | Metric | FY 2022 | FY 2023 | FY 2024 | | :--- | :--- | :--- | :--- | | **Revenue Contribution** | 97.2% | 91.0% | 100% | | **Asset Contribution (Year-End)** | 86% | 82% | 94% | | **Liability Contribution (Year-End)** | 90% | 92% | 98% | Selected Consolidated Statement of Operations (FY 2024) | Item | Amount (US$) | | :--- | :--- | | Revenue | 1,999,056 | | Gross Profit | 169,387 | | Loss from Operations | (2,016,803) | | Net Loss | (4,722,146) | Selected Consolidated Balance Sheet (As of March 31, 2024) | Item | Amount (US$) | | :--- | :--- | | Total Assets | 36,323,083 | | Total Liabilities | 14,824,526 | | Total Shareholders' Equity | 21,498,557 | [Risk Factors](index=15&type=section&id=3.D.%20Risk%20Factors) This section outlines significant risks including business competition, China's regulatory environment, VIE structure legality, and share-related issues - **Business & Industry Risks:** The company faces challenges in attracting and converting non-paying members to fee-paying members (only **0.19%** as of March 31, 2024), alongside intense competition from other online education providers and government platforms[29](index=29&type=chunk)[33](index=33&type=chunk) - **Doing Business in China Risks:** The PRC government may intervene in operations at any time, and the company is subject to complex rules for overseas listings (New Overseas Listing Rules effective March 31, 2023), cybersecurity reviews, and anti-monopoly regulations, creating significant uncertainty[58](index=58&type=chunk)[37](index=37&type=chunk)[60](index=60&type=chunk) - **Corporate Structure Risks:** The VIE contractual arrangements have not been tested in a PRC court and could be deemed non-compliant, leading to severe penalties, loss of control over the VIE, and the shares becoming worthless, with substantial uncertainties regarding the interpretation of the PRC Foreign Investment Law[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - **Risks Related to Ordinary Shares:** The company believes it was classified as a Passive Foreign Investment Company (PFIC) for the taxable year ended March 31, 2024, which could result in adverse U.S. federal income tax consequences for U.S. shareholders, and the share price may be volatile and classified as a 'penny stock'[106](index=106&type=chunk)[103](index=103&type=chunk) [Item 4. Information on the Company](index=56&type=section&id=Item%204.%20Information%20on%20the%20Company) This section provides a comprehensive overview of the company's history, business operations, organizational structure, and properties [History and Development of the Company](index=56&type=section&id=4.A.%20History%20and%20Development%20of%20the%20Company) The company, a Cayman Islands holding entity, details its 2019 incorporation, 2020 IPO, and strategic acquisitions in China - The company was incorporated in the Cayman Islands on June 14, 2019, and conducts its business in China through subsidiaries and its VIE, Wuxi Wangdao, which was formed in 2013[112](index=112&type=chunk)[114](index=114&type=chunk) - Closed its initial public offering on July 27, 2020, with net proceeds of approximately **US$13.36 million**[114](index=114&type=chunk) - Acquired 100% of Jisen Information in June 2021 and amended its acquisition of Wuxi Talent Home to a 35% equity investment in July 2023[114](index=114&type=chunk)[298](index=298&type=chunk) [Business Overview](index=58&type=section&id=4.B.%20Business%20Overview) The company provides online vocational education and technology services in China, operating multiple platforms with declining fee-paying members due to competition - The company's primary business is online vocational education, offering 642 vocational training courses and 12 virtual simulation experimental programs[117](index=117&type=chunk)[118](index=118&type=chunk) - It operates three main platforms: Lifelong Education Public Service Platform (free), Vocational Training Platform (paid), and Virtual Simulation Experimental Training Platform (paid)[118](index=118&type=chunk)[122](index=122&type=chunk) Fee-Paying Member Trend | As of | Number of Fee-Paying Members | | :--- | :--- | | March 31, 2020 | 3.1 million | | March 31, 2022 | 1.2 million | | March 31, 2023 | 0.3 million | | March 31, 2024 | 37,904 | Revenue Breakdown by Source (FY 2022-2024) | Revenue Source | FY 2022 (%) | FY 2023 (%) | FY 2024 (%) | | :--- | :--- | :--- | :--- | | Online Education Services | 96.5% | 93.6% | 98.8% | | Technology & Other Services | 3.5% | 6.4% | 1.2% | [Organizational Structure](index=79&type=section&id=4.C.%20Organizational%20Structure) The company operates through a complex VIE structure in China, controlling its online education business via contractual agreements due to foreign ownership restrictions - The company uses a VIE structure to operate its online education business in China due to foreign ownership restrictions[187](index=187&type=chunk) - Key contractual arrangements that grant control over the VIE include: - **Exclusive Business Cooperation Agreement:** Grants the WOFE exclusive rights to provide services to the VIE for a fee (not less than 90% of the VIE's income)[188](index=188&type=chunk) - **Exclusive Purchasing Right Agreement:** Gives the WOFE the option to purchase all equity in the VIE at the lowest price permitted by law[189](index=189&type=chunk) - **Equity Interest Pledge Agreement:** The VIE's shareholders pledge their equity to the WOFE as security for their contractual obligations[190](index=190&type=chunk) - **Authorization Agreement:** VIE shareholders irrevocably authorize the WOFE to exercise their shareholder rights[191](index=191&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=81&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes the company's financial performance, highlighting revenue decline, net loss trends, and liquidity challenges amid intense market competition [Operating Results](index=82&type=section&id=5.A.%20Operating%20Results) The company's operating results show significant revenue decline and net losses over three fiscal years, driven by reduced fee-paying members and intense competition Key Performance Indicators (FY2022-FY2024) | Metric | FY 2022 | FY 2023 | FY 2024 | | :--- | :--- | :--- | :--- | | Number of Fee-Paying Members | 1,233,832 | 245,941 | 37,904 | | Revenue (US$) | 23,050,619 | 11,323,744 | 1,999,056 | | Net Loss (US$) | (1,400,292) | (20,906,985) | (4,722,146) | - **FY2024 vs. FY2023:** Revenue decreased by **82%** to **US$2.0 million**, primarily due to a decrease in online VIP membership revenue[217](index=217&type=chunk)[218](index=218&type=chunk) - Net loss decreased by **77%** to **US$4.7 million**, driven by a **93%** reduction in cost of revenue and a **47%** decrease in operating expenses[219](index=219&type=chunk)[220](index=220&type=chunk) - **FY2023 vs. FY2022:** Revenue decreased by **51%** to **US$11.3 million**[222](index=222&type=chunk) - Net loss increased by **1393%** to **US$20.9 million**, primarily due to the revenue decline, a **54%** increase in cost of revenue (including significant impairment charges), and higher interest expenses[223](index=223&type=chunk)[224](index=224&type=chunk) [Liquidity and Capital Resources](index=90&type=section&id=5.B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity has weakened, with cash decreasing and operating activities resulting in outflows, compounded by PRC cash transfer restrictions Cash and Cash Equivalents | As of | Amount (US$) | | :--- | :--- | | March 31, 2022 | 23.8 million | | March 31, 2023 | 21.0 million | | March 31, 2024 | 17.8 million | Consolidated Statement of Cash Flows Summary | Cash Flow (US$) | FY 2022 | FY 2023 | FY 2024 | | :--- | :--- | :--- | :--- | | From Operating Activities | 4,828,933 | (2,558,438) | (2,660,100) | | From Investing Activities | (13,595,605) | (300,631) | 4,788 | | From Financing Activities | 14,809,302 | 1,000,000 | — | - The company faces restrictions on moving cash out of the PRC due to government controls on currency conversion and regulations on dividend payments, which require setting aside statutory reserves[230](index=230&type=chunk) [Item 6. Directors, Senior Management and Employees](index=96&type=section&id=Item%206.%20Directors,%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation, board structure, employee count, and concentrated share ownership - Key leadership includes Bin Fu as Chairman and CEO, and Dawei Chen as CFO[248](index=248&type=chunk)[249](index=249&type=chunk) - For the fiscal year ended March 31, 2024, the aggregate cash compensation paid to all directors and senior management was **US$230,093**[252](index=252&type=chunk) - As of the report date, the company had **71** full-time employees, with the largest groups in Research and Development (**33**) and Marketing (**16**)[260](index=260&type=chunk)[262](index=262&type=chunk) - As of August 12, 2024, executive officers, directors, and principal shareholders beneficially owned approximately **50.3%** of the company's outstanding ordinary shares[106](index=106&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=103&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details financial transactions with related parties, including executives and a joint venture, emphasizing the critical VIE structure - The company has engaged in financial transactions with related parties, including loan advances to and from executives like Bin Fu and its joint venture, Medical Star[268](index=268&type=chunk) - The contractual arrangements with the VIE (Wuxi Wangdao) and its shareholders are the most significant related-party transactions, as they are fundamental to the company's ability to control its PRC operations and consolidate financial results[269](index=269&type=chunk) [Item 8. Financial Information](index=104&type=section&id=Item%208.%20Financial%20Information) This section confirms the inclusion of consolidated financial statements, absence of material legal proceedings, and the company's no-dividend policy - The company has never declared or paid dividends and does not plan to in the foreseeable future, retaining earnings for business financing and expansion[273](index=273&type=chunk) - There are no current or recent material legal or administrative proceedings against the company[272](index=272&type=chunk) [Item 9. The Offer and Listing](index=104&type=section&id=Item%209.%20The%20Offer%20and%20Listing) This section provides information about the company's ordinary shares, listed on the NASDAQ Capital Market under 'EDTK' since July 2020 - The company's ordinary shares are listed on the NASDAQ Capital Market under the symbol 'EDTK'[275](index=275&type=chunk) [Item 10. Additional Information](index=105&type=section&id=Item%2010.%20Additional%20Information) This section covers corporate governance, material contracts, exchange controls, and taxation, including the company's PFIC status - The company's authorized share capital is **500,000,000** ordinary shares and **1,000,000** preference shares[276](index=276&type=chunk) - As of the report date, **15,929,451** ordinary shares were outstanding[276](index=276&type=chunk) - Material contracts include a March 2023 convertible note for **US$1 million** (subsequently converted to shares), warrants issued in March 2022, and agreements related to the acquisitions of Jisen Information and Wuxi Talent Home[295](index=295&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk) - The company is subject to PRC exchange controls, which regulate the conversion of RMB and the remittance of currency out of China[305](index=305&type=chunk) - Capital account transactions, such as direct investments, require approval from the State Administration of Foreign Exchange (SAFE)[305](index=305&type=chunk) - The company believes it was classified as a Passive Foreign Investment Company (PFIC) for the taxable year ended March 31, 2024, which has significant U.S. federal income tax implications for U.S. Holders[321](index=321&type=chunk) [Item 11. Quantitative and Qualitative Disclosures about Market Risk](index=121&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, including foreign exchange, credit, and inflation risks - **Foreign Exchange Risk:** The company's functional currency is the RMB, but financial statements are presented in USD, so fluctuations in the RMB/USD exchange rate can materially affect reported financial results[330](index=330&type=chunk) - **Credit Risk:** Cash of **US$17.8 million** as of March 31, 2024, is held in financial institutions in the PRC and the U.S. where deposits may not be insured, and accounts receivable are unsecured, exposing the company to customer credit risk[332](index=332&type=chunk) - **Inflation Risk:** Rising costs for products and overhead due to inflation could adversely affect operating results if the company cannot increase its service prices accordingly[333](index=333&type=chunk) [Item 12. Description of Securities other than Equity Securities](index=122&type=section&id=Item%2012.%20Description%20of%20Securities%20other%20than%20Equity%20Securities) This section is not applicable as per the report - The report states that this item is not applicable[333](index=333&type=chunk) [PART II](index=123&type=section&id=PART%20II) [Item 13. Defaults, Dividend Arrearages and Delinquencies](index=123&type=section&id=Item%2013.%20Defaults,%20Dividend%20Arrearages%20and%20Delinquencies) This section is not applicable as per the report - The report states that this item is not applicable[334](index=334&type=chunk) [Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](index=123&type=section&id=Item%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) This section confirms no material modifications to security holder rights and details the full utilization of IPO proceeds for business development and investments - The company has used all of the approximately **US$13.36 million** in net proceeds from its 2020 IPO[335](index=335&type=chunk) - Use of proceeds included approximately **US$3.05 million** for course/platform development and general purposes, **US$8 million** for a temporary investment in a private fund, and approximately **US$2.03 million** for investments in Medical Star and Wuxi Talent Home[335](index=335&type=chunk) [Item 15. Controls and Procedures](index=123&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2024, due to a material weakness in financial reporting - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2024[336](index=336&type=chunk) - A material weakness was identified in internal control over financial reporting due to deficiencies in applying SEC disclosure requirements and documenting the financial reporting process[339](index=339&type=chunk) - The company's remediation plan includes engaging a third-party consultant with U.S. GAAP and SEC reporting experience, reassessing control design, and increasing staff expertise[342](index=342&type=chunk) [Item 16. Other Information](index=125&type=section&id=Item%2016.%20Other%20Information) This section covers corporate governance, audit fees, Nasdaq compliance exemptions, and cybersecurity risk management - The board has determined that Steven Yuan Ning Sim is the 'audit committee financial expert'[344](index=344&type=chunk) Principal Accountant Fees | Fee Type | FY 2024 (US$) | FY 2023 (US$) | | :--- | :--- | :--- | | Audit Fees | 250,000 | 250,000 | - The company follows Cayman Islands home country practice, exempting it from certain Nasdaq rules, including shareholder approval for specific equity issuances and the timing of annual meetings[347](index=347&type=chunk) - A comprehensive cybersecurity risk management framework is in place, and no material cybersecurity incidents occurred during the fiscal year ended March 31, 2024[350](index=350&type=chunk) [PART III](index=127&type=section&id=PART%20III) [Item 18. Financial Statements](index=127&type=section&id=Item%2018.%20Financial%20Statements) This section contains the company's audited consolidated financial statements for fiscal years 2022-2024, prepared under U.S. GAAP Consolidated Balance Sheet Summary (as of March 31) | Account | 2024 (US$) | 2023 (US$) | |---|---|---| | **Total Assets** | **36,323,083** | **43,642,638** | | Cash and cash equivalents | 17,832,991 | 20,998,786 | | Long-term investment | 17,393,830 | 14,296,824 | | **Total Liabilities** | **14,824,526** | **16,688,396** | | Long-term loans | 13,250,516 | 13,681,099 | | **Total Shareholders' Equity** | **21,498,557** | **26,954,242** | Consolidated Statement of Operations Summary (for the year ended March 31) | Account | 2024 (US$) | 2023 (US$) | 2022 (US$) | |---|---|---|---| | Revenue | 1,999,056 | 11,323,744 | 23,050,619 | | Gross (loss) / profit | 169,387 | (15,977,146) | 5,377,420 | | **Net Loss** | **(4,722,146)** | **(20,906,985)** | **(1,400,292)** | | Net loss per share (Basic and diluted) | (0.31) | (1.40) | (0.10) | [Item 19. Exhibits](index=127&type=section&id=Item%2019.%20Exhibits) This section lists all exhibits filed with the annual report, including corporate documents, VIE agreements, and material contracts - The exhibits include foundational corporate documents, all contractual arrangements underpinning the VIE structure, and other material contracts related to acquisitions, financing, and operations[353](index=353&type=chunk)[354](index=354&type=chunk)

[Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2023, the company's total assets were $41.03 million, a decrease from $43.64 million on March 31, 2023, driven by reduced current assets; total liabilities decreased to $15.42 million, and equity fell to $25.61 million due to net loss and currency adjustments Consolidated Balance Sheet Summary (in US$) | Balance Sheet Item | September 30, 2023 (Unaudited) | March 31, 2023 (Audited) | | :--- | :--- | :--- | | **Total Current Assets** | $21,946,955 | $24,530,478 | | **Total Non-current Assets** | $19,080,760 | $19,112,160 | | **TOTAL ASSETS** | **$41,027,715** | **$43,642,638** | | **Total Current Liabilities** | $2,324,190 | $3,003,867 | | **Total Non-current Liabilities** | $13,097,298 | $13,684,529 | | **TOTAL LIABILITIES** | **$15,421,488** | **$16,688,396** | | **TOTAL SHAREHOLDERS' EQUITY** | **$25,606,227** | **$26,954,242** | [Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the six months ended September 30, 2023, revenue declined to $1.49 million, resulting in a gross income of $0.55 million and a net loss of $0.37 million, with total comprehensive loss at $1.35 million primarily due to foreign currency adjustments Statement of Operations Highlights (in US$) | Metric | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Revenue | $1,493,709 | $7,294,700 | | Gross income / (loss) | $549,362 | ($41,725) | | Loss from operations | ($804,717) | ($2,183,117) | | Net loss | ($366,973) | ($2,984,116) | | Total comprehensive loss | ($1,348,015) | ($7,600,848) | | Net loss per share | ($0.02) | ($0.20) | [Consolidated Statements of Changes in Shareholders' Equity](index=4&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity decreased from $26.95 million to $25.61 million due to a $0.37 million net loss and a $0.98 million negative foreign currency translation adjustment, alongside new share issuance from a convertible note conversion Changes in Shareholders' Equity (Six Months Ended Sep 30, 2023) | Item | Amount (in US$) | | :--- | :--- | | Balance as of March 31, 2023 | $26,954,242 | | Net loss for the period | ($366,973) | | Foreign currency translation adjustment | ($981,042) | | **Balance as of September 30, 2023** | **$25,606,227** | - The company issued **549,451 ordinary shares** due to a mandatory conversion of a convertible note[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended September 30, 2023, operating activities used $0.61 million cash, reversing prior-year generation, with negligible investing and no financing cash flow, leading to a $1.27 million overall cash decrease and an ending balance of $19.72 million Cash Flow Summary (in US$) | Cash Flow Activity | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash (used in)/generated from operating activities | ($605,398) | $556,282 | | Net cash generated from/(used in) investing activities | $4,785 | ($304,981) | | Net cash generated from financing activities | $0 | $0 | | **Net increase in cash** | **($1,274,071)** | **($1,289,232)** | | **Cash at end of period** | **$19,724,715** | **$22,544,893** | [Notes to the Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [Note 1. Organization and basis of financial statements](index=6&type=section&id=1.%20Organization%20and%20basis%20of%20financial%20statements) Skillful Craftsman, a Cayman Islands company, operates in PRC vocational online education via a Variable Interest Entity (VIE), Wuxi Wangdao, which is crucial, contributing 100% of revenue and 84% of total assets for the period - The company operates in the PRC's vocational online education sector through a Variable Interest Entity (VIE) structure to comply with local laws restricting foreign investment in education[13](index=13&type=chunk)[17](index=17&type=chunk)[19](index=19&type=chunk) - The VIE is critical to the Group's operations, contributing **100% of revenue** for the six months ended Sep 30, 2023, and representing **84% of total assets** and **93% of total liabilities** as of that date[28](index=28&type=chunk) VIE Financial Highlights (Wuxi Wangdao) | Metric | As of/For Six Months Ended Sep 30, 2023 | As of/For Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total Assets | $34,345,776 | $35,481,771 (as of Mar 31, 2023) | | Total Liabilities | $14,403,576 | $15,409,316 (as of Mar 31, 2023) | | Revenue | $1,493,709 | $6,721,036 | | Net Income / (Loss) | $737,179 | ($1,533,605) | [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are prepared under U.S. GAAP on a going concern basis, despite an 80% revenue decrease and $605,398 negative operating cash flow, with management asserting $19.6 million working capital sufficiency for 12 months - The company experienced a sharp **80% decrease in revenue** (**$5.8 million**) and net cash used in operating activities of **$605,398** for the 6 months ended September 30, 2023[32](index=32&type=chunk) - Despite significant revenue decline and operating cash outflow, management believes the company's working capital of **$19.6 million** is sufficient to meet obligations for the next 12 months, preparing financials on a going concern basis[32](index=32&type=chunk) [Revenue recognition](index=15&type=section&id=2.o)%20Revenue%20recognition) Revenue from online vocational training and virtual simulation services is recognized proportionally over time, with deferred revenue totaling $0.55 million as of September 30, 2023 - The Group's main revenue sources are online vocational training and virtual simulation experimental training, with fees recognized over the service period[57](index=57&type=chunk) Contract Liabilities (Deferred Revenue) in US$ | Deferred Revenue | September 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Current | $551,040 | $1,357,236 | | Non-current | $3,283 | $3,430 | | **Total** | **$554,323** | **$1,360,666** | - As of September 30, 2023, the company has remaining performance obligations of **$551,040**, which it expects to recognize as revenue over the next 12 months[61](index=61&type=chunk) [Concentration of risks](index=20&type=section&id=2.ac)%20Concentration%20of%20risks) The company faces significant exchange rate risk from $19.2 million in RMB-denominated cash, currency convertibility risks due to PRC regulations, and credit risk from cash and receivables - The company faces significant foreign currency risk, holding **$19.2 million** in RMB-denominated cash as of September 30, 2023[82](index=82&type=chunk) - Operations are subject to PRC currency convertibility risks, as the RMB is not freely convertible and foreign exchange transactions require regulatory approval[83](index=83&type=chunk) [Note 3. Business Combination](index=21&type=section&id=3.%20Business%20Combination) On September 1, 2021, the company acquired Jisen Information for 2.9 million shares, resulting in $4.58 million goodwill, which decreased to $4.12 million by September 30, 2023, due to foreign currency translation - The company acquired Jisen Information on September 1, 2021, for a consideration of **2.9 million ordinary shares**[92](index=92&type=chunk) Purchase Price Allocation (in USD) | Item | Amount | | :--- | :--- | | Fair value of total consideration transferred | $4,640,000 | | Total identifiable net assets | $8,461 | | **Goodwill** | **$4,581,112** | - The carrying amount of goodwill decreased from **$4.31 million** at March 31, 2023, to **$4.12 million** at September 30, 2023, due to foreign currency translation adjustments of (**$184,804**)[95](index=95&type=chunk) [Note 7. Advance for investment](index=22&type=section&id=7.%20Advance%20for%20investment) The company holds a $1.82 million advance for a 35% equity interest in Wuxi Talent Home Information Technology Co. Ltd., with the equity transfer finalized in October 2023 after the reporting date - The company paid **$1,820,385** (**RMB 13.07 million**) for a 35% equity interest in Wuxi Talent. The transfer of this interest was completed in October 2023, subsequent to the reporting period[103](index=103&type=chunk) [Note 9. Long-term investment](index=24&type=section&id=9.%20Long-term%20investment) Long-term investments totaled $14.61 million, including a fully impaired 20% stake in Medical Star and a 3% stake in Fujian Fishery that generated a $0.94 million gain for the period - The investment in Medical Star was fully impaired during the six months ended September 30, 2023, due to its net loss and poor financing prospects[107](index=107&type=chunk)[108](index=108&type=chunk) - The investment in Fujian Fishery generated a gain of **$0.94 million** for the six months ended September 30, 2023, as the investee was profitable[107](index=107&type=chunk)[109](index=109&type=chunk) [Note 10. Property and equipment, net](index=25&type=section&id=10.%20Property%20and%20equipment,%20net) Net property and equipment was $62,883, with depreciation expense significantly decreasing to $11,827 from $2.05 million in the prior-year period due to a major impairment in fiscal year 2023 Property and Equipment, Net (in US$) | Category | September 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Gross Value | $19,285,755 | $20,262,360 | | Less: Accumulated Depreciation | ($13,709,142) | ($14,420,101) | | Less: Impairment | ($5,513,730) | ($5,760,944) | | **Net Value** | **$62,883** | **$81,315** | - Depreciation expense dropped significantly to **$11,827** for the six months ended Sep 30, 2023, compared to **$2.05 million** for the same period in 2022[113](index=113&type=chunk) [Note 11. Intangible assets, net](index=25&type=section&id=11.%20Intangible%20assets,%20net) Net intangible assets were $208,976, with amortization expense sharply reduced to $35,032 from $3.33 million in the prior-year period, following an $8.1 million impairment in fiscal year 2023 Intangible Assets, Net (in US$) | Category | September 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Gross Value | $46,247,506 | $48,321,062 | | Less: Accumulated Amortization | ($38,317,331) | ($39,999,028) | | Less: Impairment | ($7,721,199) | ($8,067,388) | | **Net Value** | **$208,976** | **$254,646** | - Amortization expense fell sharply to **$35,032** for the six months ended Sep 30, 2023, from **$3.33 million** in the prior-year period, following a major impairment[115](index=115&type=chunk) [Note 15. Long-term loans](index=27&type=section&id=15.%20Long-term%20loans) The company has an outstanding $13.1 million unsecured long-term loan from Fujian Xinqiao Ocean Fishery Group Co., Ltd., bearing a 6% annual interest rate and maturing in January 2027 - The Group has a five-year, unsecured long-term loan of **$13.09 million** from Fujian Xinqiao Ocean Fishery Group Co., Ltd., with a **6% annual interest rate**, due in January 2027[124](index=124&type=chunk) [Note 16. Revenue](index=27&type=section&id=16.%20Revenue) Total revenue for the six months ended September 30, 2023, plummeted to $1.49 million from $7.29 million, with broad-based declines across Online VIP membership and Technology services Disaggregated Revenue by Type (in US$) | Revenue Type | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Online VIP membership revenue | $1,135,548 | $5,284,761 | | Online SVIP membership revenue | $342,925 | $1,395,327 | | Technology services revenue | $15,236 | $614,612 | | **Total** | **$1,493,709** | **$7,294,700** | [Note 17. Cost of revenue](index=27&type=section&id=17.%20Cost%20of%20revenue) Cost of revenue dramatically decreased to $0.94 million from $7.34 million, primarily due to the absence of amortization and depreciation expenses following significant asset impairments Cost of Revenue Breakdown (in US$) | Component | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Amortization expenses | - | $3,310,928 | | Depreciation expenses | - | $2,033,556 | | Resource usage fees | $730,281 | $766,135 | | Website maintenance fee | $121,714 | $766,135 | | **Total** | **$944,347** | **$7,336,425** | [Note 18. Operating expenses](index=28&type=section&id=18.%20Operating%20expenses) Total operating expenses decreased to $1.35 million from $2.14 million, with selling and marketing expenses more than halved and general and administrative expenses reduced due to lower employee compensation Operating Expenses Breakdown (in US$) | Expense Category | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Selling and marketing expenses | $127,586 | $278,988 | | General and administrative expenses | $1,226,493 | $1,862,404 | | **Total Operating Expenses** | **$1,354,079** | **$2,141,392** | [Note 19. Taxation](index=28&type=section&id=19.%20Taxation) The company is tax-exempt in the Cayman Islands, while its PRC entities face a 25% EIT rate, resulting in a $3,988 income tax benefit for the period due to various reconciling factors - The company is not subject to tax in the Cayman Islands. Its PRC subsidiary and VIE are subject to a **25% EIT rate**, while its Hong Kong subsidiary is subject to a **16.5% rate** (**8.25%** on the first HKD 2M of profit)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) Income Tax Reconciliation (Six Months Ended Sep 30, 2023) | Description | Amount (in US$) | | :--- | :--- | | Loss before income taxes | ($370,961) | | Provision at statutory rate (25%) | ($92,740) | | Effect of tax exempt entity | $164,743 | | Effect of tax loss not recognized | $158,607 | | Effect of investment income not recognized | ($232,990) | | **Income tax benefit** | **($3,988)** | [Note 23. Condensed financial information of the Company (Parent Only)](index=32&type=section&id=23.%20Condensed%20financial%20information%20of%20the%20Company%20(Parent%20Only)) The parent company's condensed financial statements, prepared using the equity method, report total assets of $26.3 million and a net loss of $0.37 million for the six-month period - The parent company's condensed financial information is presented using the equity method to account for its investments in subsidiaries and the VIE[153](index=153&type=chunk)[154](index=154&type=chunk) Parent Company Condensed Balance Sheet (in US$) | Item | September 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Investment in subsidiaries and VIE | $22,029,451 | $22,721,204 | | **Total Assets** | **$26,321,038** | **$27,732,222** | | **Total Liabilities** | **$714,811** | **$777,980** | | **Total Shareholders' Equity** | **$25,606,227** | **$26,954,242** | Parent Company Condensed Statement of Income (in US$) | Item | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | General and administrative expenses | ($658,803) | ($1,245,367) | | Share of profit in subsidiaries and VIE | $289,289 | ($1,737,721) | | **Net (loss)/profit** | **($366,973)** | **($2,984,116)** |

PART I [Key Information](index=7&type=section&id=Item%203.%20Key%20Information) The company outlines its VIE corporate structure, key financial data showing declining performance, and significant operational risks - Skillful Craftsman is a **Cayman Islands holding company**, not a Chinese operating company; its operations are conducted through a Variable Interest Entity (VIE) due to PRC restrictions on foreign investment in online education[18](index=18&type=chunk) - The company's access to cash from the VIE is through contractual arrangements and is subject to PRC regulations on profit distribution and foreign exchange controls[23](index=23&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The VIE contributed **94% of consolidated revenue** in FY2023 and represented **86% of consolidated assets** and **88% of consolidated liabilities** as of March 31, 2023[33](index=33&type=chunk) Selected Condensed Consolidated Financial Data (Fiscal Years 2021-2023) | Financial Metric | FY 2023 (USD) | FY 2022 (USD) | FY 2021 (USD) | | :--- | :--- | :--- | :--- | | **Revenue** | 11,323,744 | 23,050,619 | 29,168,546 | | **Gross (Loss) / Profit** | (15,977,146) | 5,377,420 | 14,456,135 | | **Net (Loss) / Profit** | (20,906,985) | (1,400,292) | 3,498,005 | | **Total Assets** | 43,642,638 | 73,092,885 | 59,205,893 | | **Total Liabilities** | 16,688,396 | 22,829,600 | 13,640,721 | [Risk Factors](index=19&type=section&id=3.D.%20Risk%20Factors) The company faces substantial risks from its business model, VIE structure, PRC regulations, and shareholder status - Revenue generation is at risk as only **2% of registered members were fee-paying** as of March 31, 2023, highlighting a critical challenge in converting users[52](index=52&type=chunk) - Intense competition in the PRC online education market has contributed to a **decrease in fee-paying members**[63](index=63&type=chunk)[64](index=64&type=chunk) - The **VIE structure faces significant uncertainty**; if PRC authorities deem it non-compliant, penalties could render the company's shares worthless[191](index=191&type=chunk)[197](index=197&type=chunk) - The company believes it was classified as a **Passive Foreign Investment Company (PFIC)** for FY2023, which has adverse U.S. tax consequences for U.S. shareholders[243](index=243&type=chunk) - New PRC regulations require CSRC filings for future overseas offerings, and **non-compliance could result in significant penalties**[125](index=125&type=chunk) [Information on the Company](index=83&type=section&id=Item%204.%20Information%20on%20the%20Company) The company details its business operations in China, user metrics, technology platforms, and strategic expansions - All business is conducted in China through PRC subsidiaries and the VIE, which contributed **94.0% of consolidated revenue** in FY2023[265](index=265&type=chunk)[269](index=269&type=chunk) - The company has expanded into financial education and flexible employment services and established a Singapore subsidiary for global development[270](index=270&type=chunk)[271](index=271&type=chunk)[273](index=273&type=chunk) - Its proprietary cloud computing system and development of a "Meta-Factory" platform are considered key technological advantages[300](index=300&type=chunk)[301](index=301&type=chunk) User Membership Trends (as of March 31) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Total Registered Members** | 115.1 million | 99.3 million | 83.4 million | | **Fee-Paying Members** | 0.3 million | 1.2 million | 1.6 million | [Operating and Financial Review and Prospects](index=97&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) The company analyzes its significant financial decline in FY2023, driven by falling revenue and rising costs - The number of **fee-paying members decreased by 80%** in FY2023, a primary driver for the 51% revenue decline[415](index=415&type=chunk)[416](index=416&type=chunk) - **Cost of revenue increased by 54%** in FY2023, mainly due to significant impairments of intangible assets and property[423](index=423&type=chunk) - As of March 31, 2023, cash and cash equivalents were **$21.0 million**, down from $23.8 million, with net cash used in operations reversing from the prior year[439](index=439&type=chunk)[447](index=447&type=chunk) Fiscal Year 2023 vs. 2022 Performance | Metric | FY 2023 (USD) | FY 2022 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | 11,323,744 | 23,050,619 | (51)% | | **Cost of Revenue** | (27,300,890) | (17,673,199) | (54)% | | **Gross (Loss)/Profit** | (15,977,146) | 5,377,420 | (397)% | | **Net Loss** | (20,906,985) | (1,400,292) | 1,393% | [Directors, Senior Management and Employees](index=119&type=section&id=Item%206.%20Directors,%20Senior%20Management%20and%20Employees) This section profiles the company's leadership, compensation, board structure, and employee base - Executive officers and directors as a group beneficially owned approximately **30.9% of outstanding ordinary shares** as of August 11, 2023[500](index=500&type=chunk) - For FY2023, the aggregate cash compensation paid to all directors and senior management was **$989,847**[482](index=482&type=chunk) - The company has **71 full-time employees**, with the largest group (33 employees) dedicated to Research and Development[495](index=495&type=chunk)[496](index=496&type=chunk) - The Board of Directors consists of five members and currently has **no members who self-identify as female, an underrepresented minority, or LGBTQ+**[489](index=489&type=chunk)[494](index=494&type=chunk) [Major Shareholders and Related Party Transactions](index=128&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) The company discloses its key related party transactions, including with executives and its VIE - In FY2023, the company engaged in loan transactions with executives, with a total amount of **$42,946 due to related parties** as of March 31, 2023[504](index=504&type=chunk)[505](index=505&type=chunk) - The company extended **loan advances of $61,120** to its minority-owned joint venture, Medical Star, and provided it with courseware services[505](index=505&type=chunk) - The contractual arrangements with the **VIE are fundamental related party transactions** essential for operational control and financial consolidation[505](index=505&type=chunk) [Financial Information](index=129&type=section&id=Item%208.%20Financial%20Information) This section confirms the location of financial statements and outlines dividend policy and legal proceedings - The company's full consolidated financial statements are located at the end of the Form 20-F report, starting on page F-1[507](index=507&type=chunk) - The company has **never paid dividends** and does not plan to in the foreseeable future, retaining all earnings for operations[509](index=509&type=chunk) - The company is **not currently a party to any material legal** or administrative proceedings[508](index=508&type=chunk) [The Offer and Listing](index=129&type=section&id=Item%209.%20The%20Offer%20and%20Listing) This section provides details on the public trading of the company's ordinary shares - The company's ordinary shares are listed on the **NASDAQ Capital Market under the ticker symbol "EDTK"** since July 23, 2020[512](index=512&type=chunk) [Additional Information](index=130&type=section&id=Item%2010.%20Additional%20Information) This section covers corporate structure, material contracts, exchange controls, and taxation details - The company's authorized share capital consists of **500,000,000 ordinary shares**, with 15,449,451 outstanding as of the report date[515](index=515&type=chunk) - On March 2, 2023, the company entered into a **US$1 million convertible note agreement** which was mandatorily converted on March 31, 2023[562](index=562&type=chunk)[563](index=563&type=chunk) - As a Cayman Islands exempted company, its corporate law **differs significantly from U.S. law** regarding shareholder rights and director duties[524](index=524&type=chunk)[535](index=535&type=chunk)[550](index=550&type=chunk) - The company is subject to a **25% Enterprise Income Tax rate** for its PRC entities and faces risks of being classified as a PRC resident enterprise[584](index=584&type=chunk)[586](index=586&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=157&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company discusses its primary market risk exposures, including foreign exchange, credit, and inflation - The company faces **foreign exchange risk** as its functional currency is the RMB while reporting is in USD[619](index=619&type=chunk) - **Credit risk** exists from cash balances of $21.0 million held in PRC financial institutions, where deposits are not insured[621](index=621&type=chunk) - **Inflationary factors** could adversely affect operating results by increasing costs and potentially impacting gross profit margins[622](index=622&type=chunk) [Description of Securities other than Equity Securities](index=159&type=section&id=Item%2012.%20Description%20of%20Securities%20other%20than%20Equity%20Securities) This section is not applicable as the company has no other relevant securities to describe PART II [Defaults, Dividend Arrearages and Delinquencies](index=125&type=section&id=Item%2013.%20Defaults,%20Dividend%20Arrearages%20and%20Delinquencies) This section is not applicable as the company reports no such events [Material Modifications to the Rights of Security Holders and Use of Proceeds](index=125&type=section&id=Item%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) The company provides an update on the use of its 2020 IPO proceeds - From its **$13.36 million net IPO proceeds**, the company has used approximately $3.05 million for development and $2.03 million for investments[628](index=628&type=chunk) - The company intends to use the **remaining IPO proceeds** for developing online courses, virtual simulation programs, and a mobile application[628](index=628&type=chunk) [Controls and Procedures](index=125&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concludes that internal controls were not effective due to a material weakness in financial reporting - Management concluded that the company's **disclosure controls and procedures were not effective** as of March 31, 2023[629](index=629&type=chunk) - A **material weakness was identified** in internal control over financial reporting due to a lack of sufficient personnel with U.S. GAAP and SEC reporting expertise[633](index=633&type=chunk)[634](index=634&type=chunk)[635](index=635&type=chunk) - The company is implementing a **remediation plan** that includes engaging a third-party consultant and increasing staffing levels to address the weakness[638](index=638&type=chunk)[639](index=639&type=chunk) [Other Information](index=127&type=section&id=Item%2016.%20Other%20Information) This section covers corporate governance matters, including the audit committee, accountant fees, and code of ethics - The Audit Committee consists of three independent directors, with **Steven Yuan Ning Sim designated as the financial expert**[641](index=641&type=chunk) - The company has adopted a **code of ethics**, which is publicly available on its website[642](index=642&type=chunk) - As a foreign private issuer, the company follows Cayman Islands home country practice in lieu of the Nasdaq rule requiring an **annual shareholder meeting**[648](index=648&type=chunk) Principal Accountant Fees | Fee Type | FY 2023 (USD) | FY 2022 (USD) | | :--- | :--- | :--- | | Audit Fees | 210,000 | 432,100 | PART III [Financial Statements](index=129&type=section&id=Item%2017.%20Financial%20Statements) This section is not applicable as financial statements are provided under Item 18 [Financial Statements](index=129&type=section&id=Item%2018.%20Financial%20Statements) This section contains the company's audited consolidated financial statements for the past three fiscal years - The consolidated financial statements and the report of the independent registered public accounting firm are included starting on page F-1[507](index=507&type=chunk)[664](index=664&type=chunk) [Exhibits](index=129&type=section&id=Item%2019.%20Exhibits) This section lists all exhibits filed with the annual report, including corporate and contractual documents - A comprehensive list of exhibits is provided, including foundational corporate documents, all **VIE-related contractual agreements**, and other material contracts[653](index=653&type=chunk)[659](index=659&type=chunk)

[Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) The company's total assets and liabilities decreased, leading to a reduction in shareholders' equity due to net loss and currency adjustments Consolidated Balance Sheet Highlights (in US$) | Account | As of September 30, 2022 (Unaudited) | As of March 31, 2022 (Audited) | | :----------------------------------------- | :----------------------------------- | :----------------------------- | | **Total Assets** | **$61,142,847** | **$73,092,885** | | Total Current Assets | $25,395,387 | $27,523,924 | | Total Non-current Assets | $35,747,460 | $45,568,961 | | **Total Liabilities** | **$18,480,410** | **$22,829,600** | | Total Current Liabilities | $5,177,680 | $8,016,585 | | Total Non-current Liabilities | $13,302,730 | $14,813,015 | | **Total Shareholders' Equity** | **$42,662,437** | **$50,263,285** | [Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Revenue significantly declined, resulting in a gross loss and a substantial increase in net loss for the period Statement of Operations Highlights (in US$) | Metric | For the six months ended Sep 30, 2022 (Unaudited) | For the six months ended Sep 30, 2021 (Unaudited) | | :----------------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | **Revenue** | **$7,294,700** | **$11,851,792** | | Cost of revenue | ($7,336,425) | ($8,255,007) | | **Gross (Loss) / Income** | **($41,725)** | **$3,596,785** | | Total operating expenses | ($2,141,392) | ($3,013,202) | | **Net Loss** | **($2,984,116)** | **($43,364)** | | Net earnings per share, basic and diluted | ($0.20) | $0.00 | | **Total Comprehensive (Loss) / Income** | **($7,600,848)** | **$486,542** | [Consolidated Statements of Changes in Shareholders' Equity](index=4&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity declined due to net loss and negative foreign currency translation adjustments during the six-month period Reconciliation of Shareholders' Equity (Six Months Ended Sep 30, 2022, in US$) | Description | Amount | | :---------------------------------------- | :------------ | | Balance as of March 31, 2022 | $50,263,285 | | Net loss for the period | ($2,984,116) | | Foreign currency translation adjustment | ($4,616,732) | | **Balance as of September 30, 2022** | **$42,662,437** | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow sharply decreased, and investing activities resulted in an overall decline in cash and cash equivalents Cash Flow Highlights (in US$) | Cash Flow Activity | For the six months ended Sep 30, 2022 | For the six months ended Sep 30, 2021 | | :----------------------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash generated from operating activities | $556,282 | $1,765,733 | | Net cash (used in)/generated from investing activities | ($304,981) | $4,447,027 | | Net cash generated from financing activities | $— | $— | | **Net (decrease)/increase in cash** | **($1,289,232)** | **$6,258,999** | | Cash and cash equivalents at end of period | $22,544,893 | $23,712,359 | [Notes to the Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Detailed disclosures cover the company's organization, accounting policies, business combinations, and financial account specifics [Note 1: Organization and basis of financial statements](index=6&type=section&id=1.%20Organization%20and%20basis%20of%20financial%20statements) The company operates its PRC vocational education business through a VIE structure, posing regulatory risks and significantly impacting financials - The company operates its primary business of vocational online education in the PRC through a VIE structure to comply with PRC legal restrictions on foreign ownership in the education and telecommunication sectors[20](index=20&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - The VIE structure carries significant risks, as PRC regulatory authorities could find the contractual agreements in violation of laws, potentially leading to severe penalties, including the revocation of business licenses or the inability to continue consolidating the VIE[32](index=32&type=chunk) VIE Contribution to Consolidated Financials | Metric | Six Months Ended Sep 30, 2022 | As of Sep 30, 2022 | | :----------------------------------- | :---------------------------- | :----------------- | | **Revenue Contribution** | 92% | N/A | | **Total Asset Contribution** | N/A | 87% | | **Total Liabilities Contribution** | N/A | 95% | [Note 2: Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Key accounting policies cover US GAAP, VIE consolidation, revenue recognition, intangible asset amortization, and ASC 842 lease accounting - Revenue from membership services is recognized proportionally over the contract period, as the company has a stand-ready obligation to provide services, with unamortized fees recorded as deferred revenue[62](index=62&type=chunk) - Intangible assets, including software, courseware, and copyrights, are amortized on a straight-line basis over an estimated useful life of **5 years**[48](index=48&type=chunk)[49](index=49&type=chunk) - The company adopted lease accounting standard ASC 842 using a modified retrospective approach, which had an immaterial impact on its financial position[53](index=53&type=chunk) - The Group's functional currency is the Chinese Renminbi (RMB), and the financial statements are presented in U.S. Dollars (USD), with translation adjustments recorded in other comprehensive income[82](index=82&type=chunk) [Note 3: Business Combination](index=22&type=section&id=3.%20Business%20Combination) The company acquired Shenzhen Jisen Information Tech Limited for **$4.64 million**, resulting in **$4.58 million** in non-tax-deductible goodwill Purchase Price Allocation for Jisen Information Acquisition (in US$) | Item | Amount | | :------------------------------------------------ | :---------- | | Equity instrument (2.9 million common shares) | $4,640,000 | | Cash acquired from business combination | ($50,427) | | **Subtotal** | **$4,589,573** | | Total identifiable net assets | $8,461 | | **Goodwill** | **$4,581,112** | - The goodwill was generated from expected synergies, including lowering platform construction costs and gaining potential customer resources from Jisen Information's existing cooperation with five Chinese colleges and universities[101](index=101&type=chunk) [Note 4: Cash and cash equivalents](index=24&type=section&id=4.%20Cash%20and%20cash%20equivalents) Cash and cash equivalents decreased to **$22.54 million** as of September 30, 2022, primarily consisting of bank balances Cash and Cash Equivalents Breakdown (in US$) | Component | September 30, 2022 | March 31, 2022 | | :-------------- | :----------------- | :------------- | | Bank balances | $22,544,298 | $23,833,460 | | **Total** | **$22,544,893** | **$23,834,125** | [Note 7: Advance for investment](index=25&type=section&id=7.%20Advance%20for%20investment) An advance for investment of **$1.84 million** represents a down payment for the pending acquisition of Wuxi Talent Home - The company made a down payment of **$1.84 million** (RMB 13,070,000) for the acquisition of Wuxi Talent Home Information Technology Co Ltd, with the transaction incomplete as of September 30, 2022[110](index=110&type=chunk) [Note 9: Long-term investment](index=25&type=section&id=9.%20Long-term%20investment) Long-term investments, primarily in Hunan Medical Star and Fujian Fishery, decreased to **$13.27 million** due to losses and currency adjustments Changes in Long-term Investment (in US$) | Description | Total | | :--------------------------------------- | :------------ | | Balance as of March 31, 2022 | $14,956,443 | | Share of Loss of Equity method investees | ($104,354) | | Foreign currency translation adjustments | ($1,578,728) | | **Balance as of September 30, 2022** | **$13,273,361** | - The company holds a **20%** stake in Hunan Medical Star (cost **$281,698**) and a **3%** stake in Fujian Fishery (cost **$13,241,558**), both providing significant influence through board representation[113](index=113&type=chunk)[115](index=115&type=chunk) [Note 10: Goodwill](index=26&type=section&id=10.%20Goodwill) Goodwill decreased to **$4.17 million** due to negative foreign currency translation adjustments, with no impairment recorded Goodwill Reconciliation (in US$) | Description | Amount | | :--------------------------------------- | :---------- | | Balance as of March 31, 2022 | $4,581,112 | | Foreign currency translation adjustments | ($412,893) | | **Balance as of September 30, 2022** | **$4,168,219** | [Note 11: Property and equipment, net](index=26&type=section&id=11.%20Property%20and%20equipment%2C%20net) Net property and equipment, primarily server hardware, decreased to **$7.61 million**, with **$2.05 million** in depreciation expense Property and Equipment, Net (in US$) | Category | September 30, 2022 | March 31, 2022 | | :------------------------ | :----------------- | :------------- | | Server hardware | $19,406,241 | $21,703,857 | | Less: accum. depreciation | ($12,000,901) | ($11,234,271) | | **Net Value** | **$7,610,476** | **$10,699,010** | - Depreciation expense was **$2,045,964** for the six months ended September 30, 2022, compared to **$2,051,081** for the same period in 2021[120](index=120&type=chunk) [Note 12: Intangible assets, net](index=26&type=section&id=12.%20Intangible%20assets%2C%20net) Net intangible assets decreased to **$10.53 million**, with **$3.33 million** in amortization expense for the period Intangible Assets, Net (in US$) | Category | September 30, 2022 | March 31, 2022 | | :------------------------ | :----------------- | :------------- | | Gross Value | $46,768,619 | $52,302,731 | | Less: accum. amortization | ($36,237,781) | ($36,970,335) | | **Net Value** | **$10,530,838** | **$15,332,396** | - Amortization expense was **$3,327,665** for the six months ended September 30, 2022, compared to **$3,948,391** for the same period in 2021[122](index=122&type=chunk) [Note 17: Long-term loans](index=29&type=section&id=17.%20Long-term%20loans) The company holds a **$13.24 million** long-term loan from Fujian Xinqiao Ocean Fishery Group, maturing in January 2027 - The Group has a five-year long-term loan of **$13.24 million** (RMB 94,012,410) from Fujian Xinqiao Ocean Fishery Group Co Ltd, with a **6%** annual interest rate, maturing in January 2027[131](index=131&type=chunk) [Note 19: Cost of revenue](index=30&type=section&id=19.%20Cost%20of%20revenue) Cost of revenue decreased to **$7.34 million**, driven by lower amortization of intangible assets and server hardware depreciation Cost of Revenue Breakdown (in US$) | Component | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :--------------------------------------- | :---------------------------- | :---------------------------- | | Amortization expenses | $3,310,928 | $3,948,391 | | Depreciation expenses of server hardware | $2,033,556 | $2,051,081 | | Resource usage fees | $766,135 | $806,014 | | **Total** | **$7,336,425** | **$8,255,007** | [Note 20: Operating expenses](index=31&type=section&id=20.%20Operating%20expenses) Total operating expenses decreased to **$2.14 million**, driven by reductions in selling and marketing and G&A costs Operating Expenses Breakdown (in US$) | Category | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :------------------------------------ | :---------------------------- | :---------------------------- | | Selling and marketing expenses | $278,988 | $720,191 | | General and administrative expenses | $1,862,404 | $2,293,011 | | **Total Operating Expenses** | **$2,141,392** | **$3,013,202** | [Note 21: Taxation](index=31&type=section&id=21.%20Taxation) The company recorded an income tax benefit of **$8,112** for the period, with PRC entities subject to a **25%** EIT rate - The company is tax-exempt in the Cayman Islands, while its PRC entities are subject to a **25%** statutory EIT rate, with dividends from PRC subsidiaries to non-PRC resident enterprises subject to a **10%** withholding tax[139](index=139&type=chunk)[142](index=142&type=chunk) Income Tax (Benefit) / Expense (in US$) | Component | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Current | $378,849 | $550,933 | | Deferred | ($386,961) | $734 | | **Income Tax (Benefit) / Expense** | **($8,112)** | **$551,667** | [Note 24: Subsequent events](index=33&type=section&id=24.%20Subsequent%20events) No significant subsequent events were identified through January 5, 2023, the date of financial statement issuance - No significant subsequent events were noted through January 5, 2023[154](index=154&type=chunk) [Note 25: Condensed financial information of the Company](index=34&type=section&id=25.%20Condensed%20financial%20information%20of%20the%20Company) The parent company's condensed financials show a net loss of **$2.98 million**, reflecting its share of subsidiary and VIE losses - The parent company's financial information is presented on a condensed basis, with its investment in subsidiaries and VIEs accounted for under the equity method[162](index=162&type=chunk)[163](index=163&type=chunk) Parent Company Condensed Statement of Income (Unaudited, in US$) | Description | Six Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2021 | | :---------------------------------------- | :---------------------------- | :---------------------------- | | General and administrative expenses | ($1,245,367) | ($1,587,311) | | Share of (loss)/profit in subsidiaries and VIE | ($1,737,721) | $1,600,703 | | **Net (Loss)/Profit** | **($2,984,116)** | **($43,364)** |

[Introduction and Forward-Looking Statements](index=5&type=section&id=INTRODUCTION) [Introduction](index=5&type=section&id=INTRODUCTION) This section defines key terms, entities, and the currency conversion rate used for financial reporting - The report refers to Skillful Craftsman Education Technology Limited, its subsidiaries, and VIE as "we," "us," or "our company"[9](index=9&type=chunk) - All translations from RMB to USD were made at an exchange rate of **RMB6.3393 to $1.00** as of March 31, 2022[10](index=10&type=chunk) [Forward-Looking Statements](index=6&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions that the report contains forward-looking statements subject to significant risks and uncertainties - The report contains forward-looking statements based on management's beliefs and projections about future events[11](index=11&type=chunk)[12](index=12&type=chunk) - Readers are warned not to treat forward-looking statements as guarantees, as actual results may differ materially[13](index=13&type=chunk) [PART I](index=7&type=section&id=PART%20I) [Key Information](index=7&type=section&id=Item%203.%20Key%20Information) This section details the company's VIE structure, significant China-related risks, and key financial performance - The company operates through a **VIE structure** because PRC laws restrict foreign investment in online education services[16](index=16&type=chunk) - The VIE contributed **100% of consolidated revenue** for fiscal years 2020-2022 and represented **86% of consolidated assets** as of March 31, 2022[30](index=30&type=chunk) - The company's auditor, TPS Thayer, LLC, is US-based and not currently subject to PCAOB inspection restrictions, but a change could lead to delisting under the **Holding Foreign Companies Accountable Act (HFCAA)**[20](index=20&type=chunk) Selected Financial Data (Fiscal Years Ended March 31) | Metric | 2022 (USD) | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | :--- | | **Revenue** | 23,050,619 | 29,168,546 | 28,601,071 | | **Gross Profit** | 5,377,420 | 14,456,135 | 16,803,201 | | **Net (Loss)/Profit** | (1,400,292) | 3,498,005 | 9,975,225 | | **Net (Loss)/Earnings Per Share** | (0.10) | 0.32 | 1.11 | Cash Flow Summary (Fiscal Years Ended March 31) | Cash Flow | 2022 (USD) | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | :--- | | **From Operating Activities** | 4,828,933 | 10,754,484 | 11,480,117 | | **From Investing Activities** | (13,595,605) | (20,864,698) | (10,401,263) | | **From Financing Activities** | 14,809,302 | 13,243,554 | — | [Risk Factors](index=19&type=section&id=3.D.%20Risk%20Factors) Key risks include intense competition, VIE unenforceability, regulatory uncertainty, and potential PFIC classification - The company faces **intense competition** from other online education platforms, including a free national smart education platform[66](index=66&type=chunk) - The **VIE structure's contractual arrangements** have not been tested in a PRC court and could be deemed non-compliant, rendering shares worthless[17](index=17&type=chunk)[192](index=192&type=chunk) - The company believes it was classified as a **passive foreign investment company (PFIC)** for FY2022, which may result in adverse U.S. tax consequences[244](index=244&type=chunk)[599](index=599&type=chunk) - As of March 31, 2022, only approximately **2% of the VIE's total registered members were fee-paying**, highlighting user conversion risk[54](index=54&type=chunk) [Information on the Company](index=83&type=section&id=Item%204.%20Information%20on%20the%20Company) This section describes the company's history, business operations, organizational structure, and properties - The company operates through its VIE (online vocational training) and subsidiaries (financial education and flexible employment services)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - The company is developing a **'Meta-Factory' platform** using Metaverse technology for online simulation training[277](index=277&type=chunk)[305](index=305&type=chunk) - The company's organizational structure centers on **VIE agreements** that allow it to control and consolidate its PRC operating entity[377](index=377&type=chunk)[378](index=378&type=chunk)[380](index=380&type=chunk) User Statistics (as of March 31) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Total Registered Members** | 99.3 million | 83.4 million | 68.5 million | | **Fee-Paying Members** | 1.2 million | 1.6 million | 3.1 million | [Operating and Financial Review and Prospects](index=116&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Management discusses the financial results, attributing the FY2022 revenue decline and net loss to intensified competition - The **21% revenue decrease** in FY2022 was primarily due to a 23% drop in online education service revenue from intensified competition[422](index=422&type=chunk) - **Cost of revenue increased by 20%** in FY2022, driven by a $1.3 million maintenance fee and $1.0 million in increased depreciation[423](index=423&type=chunk) - As of March 31, 2022, the company had cash of **$23.8 million** and believes it has sufficient liquidity for the next 12 months[440](index=440&type=chunk)[446](index=446&type=chunk) Fiscal Year 2022 vs. 2021 Performance | Metric | FY 2022 (USD) | FY 2021 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 23,050,619 | 29,168,546 | (21%) | | Cost of Revenue | 17,673,199 | 14,712,411 | 20% | | Gross Profit | 5,377,420 | 14,456,135 | (63%) | | Net (Loss)/Profit | (1,400,292) | 3,498,005 | N/A | [Directors, Senior Management and Employees](index=139&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section provides information on leadership, compensation, board structure, and employee composition - For FY2022, the aggregate cash compensation paid to all directors and senior management was **$989,847**[486](index=486&type=chunk) - As of June 30, 2022, all directors and executive officers as a group beneficially owned approximately **32.0%** of outstanding shares[504](index=504&type=chunk) - The company has **71 full-time employees**, with the largest group (33 employees) in Research and Development[499](index=499&type=chunk)[500](index=500&type=chunk) - The board has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee[493](index=493&type=chunk)[495](index=495&type=chunk)[496](index=496&type=chunk) [Major Shareholders and Related Party Transactions](index=147&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details the company's major shareholders and transactions with related parties - The company engaged in **loan transactions with directors** Xiaofeng Gao and Bin Fu for working capital purposes during FY2022[507](index=507&type=chunk) - As of March 31, 2022, the company had an aggregate amount of **$46,649 due to related parties**[509](index=509&type=chunk) - The **contractual arrangements with the VIE** and its shareholders are considered fundamental related party transactions[510](index=510&type=chunk) [Financial Information](index=149&type=section&id=Item%208.%20Financial%20Information) This section directs to the full financial statements and outlines the company's dividend policy - The company's audited consolidated financial statements are included at the end of the annual report, beginning on page F-1[511](index=511&type=chunk) - The company has **never declared or paid dividends** and does not intend to do so in the foreseeable future[513](index=513&type=chunk) [Additional Information](index=150&type=section&id=Item%2010.%20Additional%20Information) This section provides detailed corporate information, including material contracts, exchange controls, and tax analysis - The company's authorized share capital consists of 500,000,000 ordinary shares, with **14,900,000 ordinary shares outstanding**[515](index=515&type=chunk) - Material contracts include **acquisition agreements** for Wuxi Talent Home and Jisen Information and key partnership agreements[561](index=561&type=chunk)[562](index=562&type=chunk)[565](index=565&type=chunk)[568](index=568&type=chunk) - The company is subject to a **25% Enterprise Income Tax rate in the PRC**, with a potential 5% to 10% withholding tax on dividends[579](index=579&type=chunk)[580](index=580&type=chunk)[584](index=584&type=chunk) - For U.S. tax purposes, the company believes it was a **Passive Foreign Investment Company (PFIC)** for FY2022[599](index=599&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=177&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to foreign exchange, credit, and inflation risks - The company's primary market risk is **foreign exchange risk**, as its functional currency (RMB) differs from its reporting currency (USD)[614](index=614&type=chunk)[615](index=615&type=chunk) - **Credit risk** exists as cash balances are held at financial institutions in the PRC where deposits are not insured[616](index=616&type=chunk) [Material Modifications to the Rights of Security Holders and Use of Proceeds](index=179&type=section&id=Item%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) This section reports on the use of proceeds from the company's Initial Public Offering - From its IPO, the company received net proceeds of approximately **$13.36 million**[620](index=620&type=chunk) - As of March 31, 2022, proceeds have been used for course development, platform improvements, an **$8 million fund investment (subsequently divested)**, and acquisitions[620](index=620&type=chunk) [Controls and Procedures](index=179&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that internal controls over financial reporting were not effective as of March 31, 2022 - Management concluded that the company's **disclosure controls and procedures were not effective** as of March 31, 2022[621](index=621&type=chunk) - A **material weakness in internal control** was identified, related to applying SEC disclosure requirements and financial reporting documentation[624](index=624&type=chunk)[626](index=626&type=chunk) - The company's remediation plan includes **hiring and training accounting personnel** on U.S. GAAP and SEC reporting[629](index=629&type=chunk) [Corporate Governance and Other Disclosures](index=182&type=section&id=Item%2016G.Corporate%20Governance) This section covers corporate governance practices, including audit committee details and auditor changes - The company follows its home country practice and is **exempt from the Nasdaq rule requiring an annual shareholder meeting**[639](index=639&type=chunk) - In April 2021, the company appointed **TPS Thayer, LLC** as its new independent registered public accounting firm[638](index=638&type=chunk) Principal Accountant Fees | Fee Type | FY 2022 (USD) | FY 2021 (USD) | | :--- | :--- | :--- | | Audit Fees | 432,100 | 152,925 | [Financial Statements](index=185&type=section&id=Item%2018.%20Financial%20Statements) [Consolidated Financial Statements](index=191&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's audited consolidated financial statements and accompanying notes for the last three fiscal years - The company adopted **ASC 606** and recognizes revenue from membership services proportionally over the service period[718](index=718&type=chunk)[720](index=720&type=chunk) - On September 1, 2021, the company acquired 100% of Jisen Information, resulting in the recognition of **$4,581,112 in goodwill**[756](index=756&type=chunk)[760](index=760&type=chunk) Consolidated Balance Sheet Summary (as of March 31) | Account | 2022 (USD) | 2021 (USD) | | :--- | :--- | :--- | | **Total Current Assets** | 27,523,924 | 25,035,069 | | **Total Assets** | 73,092,885 | 59,205,893 | | **Total Current Liabilities** | 8,016,585 | 13,327,825 | | **Total Liabilities** | 22,829,600 | 13,640,721 | | **Total Shareholders' Equity** | 50,263,285 | 45,565,172 | Consolidated Statement of Operations Summary (for the year ended March 31) | Account | 2022 (USD) | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | :--- | | Revenue | 23,050,619 | 29,168,546 | 28,601,071 | | Gross Profit | 5,377,420 | 14,456,135 | 16,803,201 | | Income from Operations | (561,391) | 8,994,554 | 13,243,832 | | Net (Loss)/Profit | (1,400,292) | 3,498,005 | 9,975,225 |

```markdown Unaudited Consolidated Financial Statements [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$61.3 million**, liabilities decreased, and shareholders' equity grew to **$50.7 million** Consolidated Balance Sheet Highlights (in US$) | Account | September 30, 2021 (Unaudited) | March 31, 2021 (Audited) | | :--- | :--- | :--- | | **Total Current Assets** | $26,852,463 | $25,035,069 | | Cash and cash equivalents | $23,712,359 | $17,453,360 | | **Total Non-current Assets** | $34,494,126 | $34,170,824 | | Goodwill | $4,581,112 | $— | | **TOTAL ASSETS** | **$61,346,589** | **$59,205,893** | | **Total Current Liabilities** | $10,654,875 | $13,327,825 | | Deferred revenue-current | $9,270,561 | $11,456,667 | | **TOTAL LIABILITIES** | **$10,654,875** | **$13,640,721** | | **TOTAL SHAREHOLDERS' EQUITY** | **$50,691,714** | **$45,565,172** | [Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Revenue declined **22.6%** to **$11.9 million**, swinging from **$4.4 million** net income to a **$43,364** net loss Statement of Operations Highlights (in US$) | Metric | Six Months Ended Sep 30, 2021 (Unaudited) | Six Months Ended Sep 30, 2020 (Unaudited) | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $11,851,792 | $15,313,780 | -22.6% | | Gross Income | $3,596,785 | $8,486,901 | -57.6% | | Income from operations | $583,583 | $6,107,315 | -90.4% | | Net (loss)/income | $(43,364) | $4,392,693 | N/A | | Net earnings per share, basic and diluted | $0.00 | $0.44 | N/A | [Consolidated Statements of Changes in Shareholders' Equity](index=4&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity grew from **$45.6 million** to **$50.7 million**, primarily due to a **$4.64 million** share issuance - Issued **2,900,000** ordinary shares for a business combination, increasing common stock by **$580** and additional paid-in capital by **$4,639,420**[12](index=12&type=chunk) - The period's net loss of **$43,364** reduced accumulated profits[12](index=12&type=chunk) - A foreign currency translation adjustment added **$529,906** to accumulated other comprehensive income[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash and cash equivalents increased by **$6.3 million** to **$23.7 million**, despite lower operating cash flow Consolidated Cash Flow Highlights (in US$) | Cash Flow Activity | Six Months Ended Sep 30, 2021 (Unaudited) | Six Months Ended Sep 30, 2020 (Unaudited) | | :--- | :--- | :--- | | Net cash generated from operating activities | $1,765,733 | $6,584,842 | | Net cash generated from/(used in) investing activities | $4,447,027 | $(14,242,349) | | Net cash generated from financing activities | $— | $13,243,554 | | **Net increase in cash and cash equivalents** | **$6,258,999** | **$5,518,925** | | **Cash and cash equivalents at end of period** | **$23,712,359** | **$17,450,639** | - A significant non-cash transaction involved the issuance of ordinary shares valued at **$4,640,000** for a business combination[16](index=16&type=chunk) [Notes to the Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Detailed notes provide context for financial statements, covering accounting policies, business combinations, and key financial items [Note 1: Organization and basis of financial statements](index=6&type=section&id=1.%20Organization%20and%20basis%20of%20financial%20statements) The company operates its PRC vocational online education via a VIE structure, facing regulatory risks from foreign ownership restrictions - The company operates its primary business in the PRC through a VIE, Wuxi Kingway Technology Co., Ltd. ("Wuxi Wangdao"), due to legal restrictions on foreign ownership in the education and telecommunication sectors[18](index=18&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - On September 1, 2021, the VIE acquired **100%** of Shenzhen Jisen Information Tech Limited ("Jisen Information") through an issuance of **2,900,000** new ordinary shares[19](index=19&type=chunk) VIE Financial Contribution | Metric | As of/For Six Months Ended Sep 30, 2021 | | :--- | :--- | | Contribution to Group Revenue | 100% | | % of Consolidated Total Assets | 86% | | % of Consolidated Total Liabilities | 95% | - The VIE structure is subject to risks from the PRC legal system, where regulatory authorities could find the arrangements in violation of laws, potentially leading to severe penalties and the inability to consolidate the VIE[31](index=31&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to US GAAP, consolidating the VIE, recognizing membership revenue proportionally, and noting RMB exchange risks - Revenue from membership services is treated as a single performance obligation and recognized proportionally over the service period, as it is considered a stand-ready obligation[57](index=57&type=chunk) Contract Liabilities (Deferred Revenue) (in US$) | Account | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Total Deferred Revenue | $9,270,561 | $11,769,563 | | Revenue recognized from deferred revenue balance (for the six months ended) | $11,015,146 | $11,941,674 (for period ended Sep 30, 2020) | - The company has only one reportable segment as the CEO reviews consolidated results to allocate resources and assess performance. All revenue is generated in the PRC[80](index=80&type=chunk) - The company is exposed to exchange rate risks as its PRC operations use RMB, and currency convertibility risks as RMB is not freely convertible[81](index=81&type=chunk) [Note 3: Business Combination](index=23&type=section&id=3.%20Business%20Combination) The VIE acquired Jisen Information for **$4.64 million** in shares, resulting in **$4.58 million** goodwill from synergies and new customer resources - Acquired **100%** of Jisen Information for **2,900,000** newly issued ordinary shares valued at **$1.60** per share, for a total consideration of **$4,640,000**[90](index=90&type=chunk)[93](index=93&type=chunk) Purchase Price Allocation (in US$) | Item | Amount | | :--- | :--- | | Total Consideration Transferred | $4,640,000 | | Fair Value of Net Identifiable Assets Acquired | $8,659 | | **Goodwill** | **$4,581,112** | - Goodwill is attributed to expected synergies, Jisen's complementary cloud education technology, and access to its established cooperation with five Chinese colleges and universities[93](index=93&type=chunk) [Note 4: Cash and cash equivalents](index=25&type=section&id=4.%20Cash%20and%20cash%20equivalents) Cash and cash equivalents increased to **$23.7 million** from **$17.5 million**, primarily composed of bank balances Composition of Cash and Cash Equivalents (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Cash on hand | $433 | $42 | | Bank balances | $23,711,695 | $17,453,318 | | **Total** | **$23,712,359** | **$17,453,360** | [Note 5: Accounts receivable, net](index=26&type=section&id=5.%20Accounts%20receivable,%20net) Net accounts receivable decreased to **$50,246** from **$83,980**, with no allowance for doubtful accounts recorded Accounts Receivable, Net (in US$) | Account | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Accounts receivable, gross | $50,246 | $83,980 | | Less: allowance for doubtful accounts | $— | $— | | **Accounts receivable, net** | **$50,246** | **$83,980** | [Note 6: Prepayments](index=26&type=section&id=6.%20Prepayments) Total prepayments increased to **$2.9 million** from **$1.8 million**, driven by higher prepaid service fees Composition of Prepayments (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Prepaid service fees | $2,787,311 | $1,708,093 | | Prepaid insurance fee | $116,222 | $68,110 | | **Total** | **$2,903,533** | **$1,784,537** | [Note 7: Other receivables](index=26&type=section&id=7.%20Other%20receivables) Other receivables decreased from **$5.7 million** to **$186,325** due to the divestment of **$5.56 million** in financial assets - The company fully divested its investment in financial assets held for trading, which amounted to **$5,563,191** as of March 31, 2021[101](index=101&type=chunk)[102](index=102&type=chunk) [Note 8: Long-term investment](index=26&type=section&id=8.%20Long-term%20investment) The company invested **$308,385** for a **20%** stake in Hunan Medical Star Technology Co., Ltd., accounted for using the equity method - Invested **$308,385** in cash for a **20%** shareholding interest in the joint venture Hunan Medical Star Technology Co., Ltd. ("Medical Star")[105](index=105&type=chunk) Long-term Investment Activity (in US$) | Description | Amount | | :--- | :--- | | Balance as of March 31, 2021 | $— | | Investment made | $308,385 | | Loss from long-term investment | $(1,897) | | **Balance as of September 30, 2021** | **$306,498** | [Note 9: Property and equipment, net](index=27&type=section&id=9.%20Property%20and%20equipment,%20net) Net property and equipment decreased to **$12.5 million**, with depreciation increasing to **$2.1 million** and additions significantly lower YoY Property and Equipment, Net (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Server hardware | $21,240,348 | $22,242,229 | | Less: accumulated depreciation | $(8,896,823) | $(8,633,295) | | **Property and equipment, net** | **$12,462,098** | **$13,725,957** | - Depreciation expenses were **$2,051,081** for the six months ended Sep 30, 2021, compared to **$1,657,961** for the same period in 2020[108](index=108&type=chunk) - Additions to property and equipment were **$653,189** for the six months ended Sep 30, 2021, a sharp decrease from **$3,988,249** in the prior year period[108](index=108&type=chunk) [Note 10: Intangible assets, net](index=27&type=section&id=10.%20Intangible%20assets,%20net) Net intangible assets decreased to **$17.1 million** due to amortization, with **$7.0 million** projected for fiscal 2022 Intangible Assets, Net (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Gross Intangible Assets | $49,580,955 | $48,552,546 | | Less: accumulated amortization | $(32,436,537) | $(28,136,085) | | **Intangible assets, net** | **$17,144,418** | **$20,416,461** | - Amortization expenses were **$3,948,391** for the six months ended Sep 30, 2021, compared to **$3,157,605** for the same period in 2020[111](index=111&type=chunk) Future Amortization Schedule (in US$) | Year | Amount | | :--- | :--- | | 2022 | $7,006,241 | | 2023 | $4,265,070 | | 2024 | $3,046,814 | | 2025 | $2,150,571 | | Thereafter | $675,722 | | **Total** | **$17,144,418** | [Note 11: Accounts payable](index=28&type=section&id=11.%20Accounts%20payable) Accounts payable remained stable at **$122,119**, primarily owed to a virtual simulation software supplier Accounts Payable Breakdown (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Payable to a supplier of virtual simulation software | $116,877 | $108,381 | | **Total** | **$122,119** | **$113,707** | [Note 12: Accrued expenses](index=28&type=section&id=12.%20Accrued%20expenses) Accrued expenses decreased to **$920,665** from **$1.05 million**, mainly due to the settlement of a **$200,000** financing consultant fee Accrued Expenses Breakdown (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Accrued payroll | $545,781 | $544,183 | | Accrued rental fee | $274,074 | $227,076 | | Financing consultant fee payable | $— | $200,000 | | **Total** | **$920,665** | **$1,051,929** | [Note 13: Revenue](index=28&type=section&id=13.%20Revenue) Total revenue was **$11.85 million**, down from **$15.31 million**, driven by a **28%** drop in Online VIP membership revenue Disaggregated Revenue by Type (in US$) | Revenue Type | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Online VIP membership revenue | $9,390,420 | $13,026,851 | | Online SVIP membership revenue | $2,348,454 | $2,147,052 | | Technology services revenue | $112,918 | $139,877 | | **Total** | **$11,851,792** | **$15,313,780** | [Note 14: Cost of revenue](index=29&type=section&id=14.%20Cost%20of%20revenue) Cost of revenue increased to **$8.26 million** from **$6.83 million**, primarily due to higher amortization and depreciation expenses (**73%** of total) Cost of Revenue Components (in US$) | Component | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Amortization expenses | $3,948,391 | $3,157,605 | | Depreciation expenses of server hardware | $2,051,081 | $1,657,961 | | Resource usage fees | $806,014 | $1,297,077 | | Virtual simulation fee | $604,727 | $— | | **Total** | **$8,255,007** | **$6,826,879** | [Note 15: Operating expenses](index=29&type=section&id=15.%20Operating%20expenses) Total operating expenses rose to **$3.01 million** from **$2.38 million**, driven by increased general and administrative expenses from higher employee and professional fees Operating Expenses Breakdown (in US$) | Expense Category | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | **Selling and marketing expenses** | **$720,191** | **$879,812** | | Promotion expenses | $373,535 | $478,881 | | **General and administrative expenses** | **$2,293,011** | **$1,499,774** | | Employee compensation | $1,399,552 | $1,113,316 | | Audit fee | $352,100 | $12,119 | | **Total Operating Expenses** | **$3,013,202** | **$2,379,586** | [Note 16: Taxation](index=30&type=section&id=16.%20Taxation) The company is subject to a **25%** PRC EIT rate, with income tax expense of **$551,667** on pre-tax income of **$508,303** - The company's PRC subsidiaries are subject to a statutory EIT rate of **25%**[123](index=123&type=chunk) Income Tax Expense (in US$) | Component | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Current | $550,933 | $1,744,005 | | Deferred | $734 | $— | | **Total Income tax expense** | **$551,667** | **$1,744,005** | Taxes Payable (in US$) | Component | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Income tax payable | $244,373 | $375,467 | | VAT payable | $36,848 | $54,961 | | **Total** | **$292,532** | **$448,485** | [Note 17: Related parties](index=31&type=section&id=17.%20Related%20parties) Amounts due to Chairman and CEO Xiaofeng Gao decreased significantly from **$257,037** to **$5,764** following repayments - The primary related party is Xiaofeng Gao, the Chairman, CEO, and **25.97%** beneficial owner of the Company[129](index=129&type=chunk) Related Party Transactions with Xiaofeng Gao (in US$) | Transaction | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Expense paid by Xiaofeng Gao | $1,297 | $1,256,522 | | Repayment to Xiaofeng Gao | $252,602 | $750,181 | [Note 18: Commitments and Contingencies](index=31&type=section&id=18.%20Commitments%20and%20Contingencies) The company had a **$58,439** capital commitment for hardware and **$20,408** in future minimum operating lease payments - The company has an unpaid hardware purchase commitment of **$58,439** (RMB 379,000) due in February 2022[132](index=132&type=chunk) - Future minimum payments under non-cancelable operating leases total **$20,408**, all due within one year[134](index=134&type=chunk) [Note 19: Subsequent events](index=32&type=section&id=19.%20Subsequent%20events) No significant subsequent events were noted after the financial statements' issuance date - No significant subsequent events were noted[135](index=135&type=chunk) [Note 20: Condensed financial information of the Company (Parent)](index=32&type=section&id=20.%20Condensed%20financial%20information%20of%20the%20Company) The parent company's condensed financial statements show a net loss of **$43,364**, with assets primarily investments in subsidiaries and VIE - The parent company's financial information is presented on a condensed basis, using the equity method to account for its investment in subsidiaries and the VIE[143](index=143&type=chunk)[144](index=144&type=chunk) Parent Company Condensed Balance Sheet (in US$) | Account | September 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Investment in subsidiaries and VIE | $42,852,027 | $38,701,420 | | **TOTAL ASSETS** | **$51,977,651** | **$47,278,324** | | **TOTAL LIABILITIES** | **$1,285,937** | **$1,713,152** | | **Total shareholders' equity** | **$50,691,714** | **$45,565,172** | Parent Company Condensed Statement of Income (in US$) | Account | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Share of profit in subsidiaries and VIE | $1,600,703 | $5,400,957 | | General and administrative expenses | $(1,587,311) | $(1,008,264) | | **Net (loss)/profit** | **$(43,364)** | **$4,392,693** | ```

[Consolidated Financial Statements](index=1&type=section&id=Consolidated%20Financial%20Statements) The company's financial position, operations, cash flows, and equity changes are presented in accordance with U.S. GAAP, along with detailed explanatory notes [Report of Independent Registered Public Accounting Firm](index=2&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an **unqualified opinion** on the March 31, 2019 financial statements, confirming **fair presentation** under U.S. GAAP and **PCAOB standards** - The auditor issued an **unqualified opinion**, stating the financial statements **present fairly** the consolidated financial position of the Company as of March 31, 2019[5](index=5&type=chunk) - The audit was conducted in accordance with **PCAOB standards**. The auditor's responsibility is to express an opinion on the financial statements, which are the responsibility of the Company's management[6](index=6&type=chunk)[7](index=7&type=chunk) - TPS Thayer, LLC has served as the Company's auditor **since 2020**[8](index=8&type=chunk) [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2019, total assets were **$43.5 million**, liabilities **$24.5 million**, and equity **$19.0 million**, driven by intangible assets and deferred revenue Consolidated Balance Sheet as of March 31, 2019 (in USD) | Category | Amount ($) | | :--- | :--- | | **Total Current Assets** | **11,716,226** | | Cash and cash equivalents | 10,362,283 | | Accounts receivable, net | 451,132 | | **Total Non-current Assets** | **31,821,447** | | Property and equipment, net | 14,022,240 | | Intangible assets, net | 17,799,207 | | **TOTAL ASSETS** | **43,537,673** | | **Total Current Liabilities** | **15,845,805** | | Deferred revenue-current | 15,308,898 | | **Total Non-current Liabilities** | **8,672,836** | | Deferred revenue-noncurrent | 8,672,836 | | **TOTAL LIABILITIES** | **24,518,641** | | **TOTAL SHAREHOLDERS' EQUITY** | **19,019,032** | [Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the fiscal year ended March 31, 2019, the company reported **$24.7 million** revenue, **$15.2 million** gross profit, **$11.5 million** income from operations, and **$8.7 million** net income Statement of Operations for the year ended March 31, 2019 (in USD) | Item | Amount ($) | | :--- | :--- | | **Revenue** | **24,668,840** | | Cost of revenue | (9,458,559) | | **Gross income** | **15,210,281** | | Total operating expenses | (3,731,116) | | **Income from operations** | **11,479,165** | | Income before income taxes | 11,567,558 | | Income tax expense | (2,892,500) | | **Net income** | **8,675,058** | | **Total comprehensive income** | **7,939,866** | | **Net earnings per ordinary share, basic and diluted** | **0.96** | [Consolidated Statements of Changes in Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity increased from **$11.1 million** to **$19.0 million** as of March 31, 2019, primarily due to **$8.7 million** net income, offset by foreign currency translation Changes in Shareholders' Equity for the year ended March 31, 2019 (in USD) | Description | Amount ($) | | :--- | :--- | | **Balance as of March 31, 2018** | **11,079,166** | | Net income for the year | 8,675,058 | | Foreign currency translation adjustment | (735,192) | | **Balance as of March 31, 2019** | **19,019,032** | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the year ended March 31, 2019, the company generated **$20.3 million** from operations, used **$15.7 million** in investing, resulting in a **$5.5 million** cash increase to **$10.4 million** Statement of Cash Flows for the year ended March 31, 2019 (in USD) | Category | Amount ($) | | :--- | :--- | | **Net cash generated from operating activities** | **20,292,760** | | Net income | 8,675,058 | | Depreciation & Amortization | 7,246,894 | | Change in Deferred revenue | 13,423,585 | | **Net cash used in investing activities** | **(15,746,284)** | | Purchase of property and equipment | (13,963,669) | | Purchase of intangible assets | (1,782,615) | | **Net cash flows from financing activities** | **-** | | **Net increase in cash and cash equivalents** | **5,466,216** | | **Cash and cash equivalents at end of period** | **10,362,283** | [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on the company's organization, accounting policies, and specific financial statement items, including VIE structure, revenue, taxes, and subsequent events [Note 1: Organization and basis of financial statements](index=7&type=section&id=1.%20Organization%20and%20basis%20of%20financial%20statements) Skillful Craftsman operates its vocational online education business in the PRC through a **VIE (Wuxi Wangdao)** due to foreign investment restrictions, controlling it via **contractual agreements** - The Company conducts its primary business of vocational online education in the PRC through a **VIE structure** to comply with PRC legal restrictions on foreign ownership[22](index=22&type=chunk)[26](index=26&type=chunk) - Control over the VIE (**Wuxi Wangdao**) is maintained through a series of **contractual arrangements**, including an Exclusive Business Cooperation Agreement, Equity Interest Pledge Agreement, and Authorization Agreement[28](index=28&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The company acknowledges risks related to the **VIE structure**, as PRC authorities could find the arrangements in violation of laws, potentially leading to severe penalties[37](index=37&type=chunk) VIE Financial Data Contribution (FY 2019) | Item | Contribution | Amount ($) | | :--- | :--- | :--- | | Revenue | **100%** | 24,668,840 | | Total Assets | **100%** | 43,535,830 | | Total Liabilities | **100%** | 24,518,641 | | Net cash from operating activities | **100%** | 20,292,760 | [Note 2: Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to U.S. GAAP, with revenue recognized proportionally under **ASC 606**, intangible assets amortized over **5 years**, and all revenue generated in the PRC as a **single segment** - The company adopted **ASC 606** "Revenue from Contracts with Customers" on April 1, 2018. Revenue from online education services is recognized proportionally over the service period[60](index=60&type=chunk)[62](index=62&type=chunk) - Intangible assets, including acquired software, purchased courseware, and copyrights, are amortized on a straight-line basis over an estimated useful life of **5 years**[51](index=51&type=chunk) - The company operates as a **single reportable segment** as the CEO reviews consolidated results to allocate resources. All revenue is generated in the PRC[87](index=87&type=chunk) - The company adopted new lease accounting standards (**ASC 842**) but had **no right-of-use assets or lease liabilities** as of March 31, 2019, as it had no lease agreements with terms over 12 months[97](index=97&type=chunk) [Note 3: Cash and cash equivalents](index=22&type=section&id=3.%20Cash%20and%20cash%20equivalents) As of March 31, 2019, the company's cash and cash equivalents totaled **$10,362,283**, consisting almost entirely of bank balances Cash and Cash Equivalents as of March 31, 2019 (in USD) | Component | Amount ($) | | :--- | :--- | | Cash on hand | 110 | | Bank balances | 10,362,173 | | **Total** | **10,362,283** | [Note 6: Property and equipment, net](index=23&type=section&id=6.%20Property%20and%20equipment%2C%20net) Net property and equipment was **$14.0 million** as of March 31, 2019, primarily server hardware and development in progress, with **$922,770** in depreciation expense Property and Equipment, Net as of March 31, 2019 (in USD) | Item | Amount ($) | | :--- | :--- | | Server hardware | 8,479,493 | | Vehicles | 114,204 | | Less: accumulated depreciation | (1,997,016) | | Server development in progress | 7,425,559 | | **Property and equipment, net** | **14,022,240** | - Depreciation expenses for the year ended March 31, 2019, were **$922,770**[113](index=113&type=chunk) [Note 7: Intangible assets, net](index=23&type=section&id=7.%20Intangible%20assets%2C%20net) Net intangible assets totaled **$17.8 million** as of March 31, 2019, with purchased courseware as the largest component, and **$6.3 million** in amortization expense Intangible Assets, Net as of March 31, 2019 (in USD) | Item | Gross Amount ($) | | :--- | :--- | | Software | 1,567,387 | | Courseware | 27,355,662 | | Copyrights | 3,118,735 | | **Total Gross** | **32,041,784** | | Less: accumulated amortization | (14,242,577) | | **Intangible assets, net** | **17,799,207** | - Amortization expenses for the year ended March 31, 2019, were **$6,324,124**[114](index=114&type=chunk) [Note 10: Revenue](index=24&type=section&id=10.%20Revenue) For the year ended March 31, 2019, total revenue was **$24.7 million**, primarily from online VIP and SVIP membership fees, all generated in the PRC Disaggregation of Revenue for the year ended March 31, 2019 (in USD) | Category | Amount ($) | | :--- | :--- | | Online VIP membership revenue | 19,271,739 | | Online SVIP membership revenue | 5,054,983 | | Technical service revenue | 342,118 | | **Total** | **24,668,840** | [Note 11: Cost of revenue](index=24&type=section&id=11.%20Cost%20of%20revenue) Cost of revenue for fiscal year 2019 was **$9.5 million**, mainly comprising **$6.3 million** in intangible asset amortization and **$1.6 million** in resource usage fees Cost of Revenue for the year ended March 31, 2019 (in USD) | Component | Amount ($) | | :--- | :--- | | Amortization expenses | 6,324,124 | | Resource usage fees | 1,573,653 | | Depreciation expenses of server hardware | 900,608 | | Website maintenance fee | 356,523 | | Other | 303,651 | | **Total** | **9,458,559** | [Note 13: Taxes Payable](index=25&type=section&id=13.%20Taxes%20Payable) PRC operations are subject to a **25%** EIT rate, resulting in **$2.9 million** income tax expense for FY2019, with total taxes payable of **$375,337** as of March 31, 2019 - The Company's PRC subsidiaries and VIEs are subject to a statutory EIT rate of **25%**[127](index=127&type=chunk) Income Tax Expense for the year ended March 31, 2019 (in USD) | Item | Amount ($) | | :--- | :--- | | Current | 2,892,500 | | Deferred | - | | **Total Income tax expense** | **2,892,500** | Taxes Payable as of March 31, 2019 (in USD) | Component | Amount ($) | | :--- | :--- | | Income tax payable | 224,882 | | VAT payable | 134,172 | | Other tax payables | 16,283 | | **Total** | **375,337** | [Note 15: Commitments and Contingencies](index=27&type=section&id=15.%20Commitments%20and%20Contingencies) As of March 31, 2019, the company had a **$7.0 million** capital commitment for website construction with Jimei University and minimal operating lease commitments of **$58,677** - The company has a capital commitment of **$6,972,599** for the construction and maintenance of a website with Jimei University[136](index=136&type=chunk) - Future minimum payments under non-cancelable operating leases were **$58,677**, all due within one year[137](index=137&type=chunk)[138](index=138&type=chunk) [Note 16: Subsequent events](index=28&type=section&id=16.%20Subsequent%20events) Post-fiscal year, the company completed a **$13.4 million IPO**, agreed to acquire Jisen Information, incurred a **$2.4 million** investment loss, and assessed new PRC data regulations - On July 27, 2020, the Company closed its initial public offering (**IPO**) of 3,000,000 ordinary shares, raising net proceeds of **$13,357,409**[141](index=141&type=chunk) - In May 2021, the Group announced a definitive agreement to acquire **100%** of Shenzhen Jishen Information Tech Limited for **2,900,000** newly issued ordinary shares[142](index=142&type=chunk) - In August 2020, the Company invested **$8,000,000** in financial assets. The fund was redeemed in March 2021, resulting in a loss of **$2,436,809**[143](index=143&type=chunk) - The company evaluated new PRC data regulations and concluded it would **not be subject to cybersecurity review** as it is not a "critical information infrastructure operator" or a "data processor" affecting national security[146](index=146&type=chunk) [Note 17: Condensed financial information of the Company](index=29&type=section&id=17.%20Condensed%20financial%20information%20of%20the%20Company) This note presents the parent company's condensed financial information, showing **$19.0 million** in total assets and **$8.7 million** net income from its investment in subsidiaries and VIE Parent Company Condensed Balance Sheet (as of March 31, 2019) | Item | Amount ($) | | :--- | :--- | | Investment in subsidiaries and VIE | 19,017,189 | | **Total assets** | **19,019,032** | | **Total shareholders' equity** | **19,019,032** | Parent Company Condensed Statement of Income (for year ended March 31, 2019) | Item | Amount ($) | | :--- | :--- | | Share of profit in subsidiaries and VIE | 8,675,058 | | **Net income** | **8,675,058** |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2020 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _____________. OR ¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 ...