Garden Stage(GSIW) - 2024 Q4 - Annual Report

FORM 20-F Filing Information General Information Garden Stage Limited, a Cayman Islands-incorporated emerging growth company, files its FY2024 Form 20-F annual report under U.S. GAAP - Garden Stage Limited, incorporated in the Cayman Islands, files its annual report on Form 20-F for the fiscal year ended March 31, 2024[1] - The company is not a well-known seasoned issuer and has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934[2][3] - Garden Stage Limited is an 'emerging growth company' and has elected not to use the extended transition period for new accounting standards[3] - The company prepares its financial statements in accordance with U.S. GAAP and is not a shell company[4][5] Outstanding Shares as of March 31, 2024 | Class of Shares | Number Outstanding | | :---------------- | :----------------- | | Ordinary shares | 15,625,000 | Introduction Definitions This section defines key terms, company entities, financial periods, and regulatory bodies, clarifying reporting currency and exchange rates - Garden Stage Limited (Company) is an exempted company incorporated in the Cayman Islands on August 11, 2022, operating through its subsidiaries in Hong Kong[7][10] - Operating Subsidiaries include I Win Securities and I Win Asset Management, conducting operations in Hong Kong using Hong Kong dollars[8][9][10] - The reporting currency for the annual report is U.S. dollars, with specific average exchange rates provided for FY 2024, FY 2023, and FY 2022[10] Average Exchange Rates (HKD to USD) | Fiscal Year | Average Exchange Rate (HKD to USD) | | :---------- | :--------------------------------- | | FY 2024 | 7.8252 | | FY 2023 | 7.8392 | | FY 2022 | 7.7843 | Forward-Looking Statements This section cautions that forward-looking statements involve risks and uncertainties, and actual results may differ materially - The annual report contains forward-looking statements based on management's beliefs and assumptions, covering future financial and operating results, growth strategies, economic conditions, and regulatory policies[11][12] - Readers are cautioned that actual future results may differ materially from expectations due to known and unknown risks, uncertainties, and other factors, including those detailed under 'Risk Factors'[11][13][15] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by law[14][15] PART I Item 1. Identity of Directors, Senior Management and Advisers This item is marked as 'Not applicable' for annual reports on Form 20-F Item 2. Offer Statistics and Expected Timetable This item is marked as 'Not applicable' for annual reports on Form 20-F Item 3. Key Information 3.A. [Reserved] This sub-item is reserved and contains no information 3.B. Capitalization and Indebtedness This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 3.C. Reasons for the Offer and Use of Proceeds This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 3.D. Risk Factors This section details significant investment risks, including Hong Kong operations, ordinary shares, industry, and business weaknesses - All operations are in Hong Kong, but the company faces regulatory and legal uncertainty due to potential long-arm application of PRC laws, which could materially impact operations and share value[17][19][20] - The company's corporate actions are substantially controlled by Oriental Moon Tree Limited, which beneficially owns 73.44% of outstanding Ordinary Shares, potentially depriving other shareholders of a premium opportunity[57][58] - The company faces risks of delisting if the PCAOB is unable to inspect its auditors for two consecutive years, as required by the HFCAA, potentially affecting share value and capital raising ability[60][64][70] - The trading price of Ordinary Shares may be highly volatile due to various factors, including regulatory developments, financial market fluctuations, and company-specific announcements, potentially leading to substantial losses for investors[71][74][75] - The company relies on a limited number of key customers, with the top five customers accounting for 63%, 54%, and 48% of total revenues for FY2024, FY2023, and FY2022, respectively, posing a concentration risk[135][267] - A material weakness in internal control over financial reporting was identified, related to lack of U.S. GAAP expertise, absence of an internal audit function, and IT deficiencies, which could impact financial reporting accuracy and fraud prevention[170][174] Item 4. Information on the Company 4.A. History and Development of the Company This section outlines Garden Stage Limited's corporate history, reorganization, Nasdaq IPO, and emerging growth company status - Garden Stage Limited was incorporated on August 11, 2022, in the Cayman Islands and became the holding company for I Win Holdings HK and its subsidiaries (I Win Securities and I Win Asset Management) through a reorganization completed in April 2023[177][179][184][185] - I Win Securities was established in November 2016 and licensed for Type 1 (dealing in securities) regulated activity in July 2017; I Win Asset Management was established in March 2020 and licensed for Type 4 (advising on securities) and Type 9 (asset management) regulated activities in January 2021[178][191] - The company completed its IPO on Nasdaq on December 5, 2023, issuing 2,875,000 Ordinary Shares (including over-allotment option) at US$4.00 per share, raising gross proceeds of US$11.5 million[192] - Garden Stage Limited qualifies as an 'emerging growth company' and a 'foreign private issuer', allowing it certain exemptions from U.S. disclosure and corporate governance requirements[194][196] 4.B. Business Overview This section overviews Garden Stage's financial services, strengths, strategies, and Hong Kong's extensive regulatory environment - Garden Stage, through its operating subsidiaries I Win Securities and I Win Asset Management, provides placing and underwriting, securities dealing and brokerage, asset management, and investment advisory services in Hong Kong[198] Revenue Breakdown by Service (FY2024, FY2023, FY2022) | Service Category | FY2024 Revenue (%) | FY2023 Revenue (%) | FY2022 Revenue (%) | | :------------------------------- | :----------------- | :----------------- | :----------------- | | Underwriting and Placing Services | 10.84% | 48.31% | 15.41% | | Securities Dealing and Brokerage | 56.16% | 47.55% | 80.81% | | Advisory Services | 29.88% | 0% | 0% | | Asset Management Services | 0% | 1.03% | 1.00% | - Key competitive strengths include an experienced management team, established client relationships, and synergies among diverse service lines[204][206][210] - Growth strategies involve strengthening placing and underwriting, expanding U.S. exchange market presence, developing securities margin financing, enhancing asset management, and upgrading IT systems[212][213][216][219][221] - The company's operations are subject to extensive regulation by the HKSFC and SEHK, requiring various licenses and compliance with rules like minimum capital requirements and anti-money laundering guidelines[282][283][286][307][309][328] Top 5 Customer Revenue Concentration | Fiscal Year | Top 5 Customers Revenue Concentration (%) | | :---------- | :---------------------------------------- | | FY2024 | 63% | | FY2023 | 54% | | FY2022 | 48% | Placing and Underwriting Services I Win Securities offers placing and underwriting for IPOs and fundraising, with revenue decreasing sharply in FY2024 - I Win Securities acts as bookrunner, lead manager, underwriter, or placing agent for IPOs and other fundraising activities, charging commissions based on the aggregate placing price or underwriting commitment[224][225][227] Placing and Underwriting Service Income | Fiscal Year | Income (US$) | % of Total Revenue | | :---------- | :----------- | :----------------- | | FY2024 | 153,000 | 10.84% | | FY2023 | 1,575,000 | 48.31% | | FY2022 | 355,000 | 15.41% | - The company completed 8, 14, and 8 placing and underwriting exercises for FY2024, FY2023, and FY2022, respectively, with no undersubscribed projects[228] Securities Brokerage and Dealing Services I Win Securities provides securities brokerage for Hong Kong and U.S. exchanges, with 2,313 trading accounts - I Win Securities offers securities dealing and brokerage services for trading on the Hong Kong Stock Exchange and U.S. exchanges (via external brokers), along with ancillary services like nominee and custodian services[235][236][237] Securities Brokerage Income and Active Accounts | Metric | FY2024 | FY2023 | FY2022 | | :----------------------------------- | :----------- | :----------- | :----------- | | Brokerage Income (US$) | 790,000 | 1,550,000 | 1,860,000 | | % of Total Revenue | 56.16% | 47.55% | 80.81% | | Total Trading Accounts (as of Mar 31)| 2,313 | 1,818 | N/A | | Active Accounts (as of Mar 31) | 1,232 | N/A | N/A | - Trading orders can be placed by phone, in-office, or through an online trading platform; accounts are categorized as House Accounts (walk-in/management referrals) and Referred Accounts (sourced by AEs/staff dealers)[238][243] - Brokerage commission rates vary, with standard online trading at 0.15% (min HK$50) and phone trading at 0.25% (min HK$100) for House Accounts, and negotiated rates for Referred Accounts[248][249] Brokerage Commission Income by Exchange | Exchange | FY2024 Revenue (%) | FY2023 Revenue (%) | FY2022 Revenue (%) | | :------------------- | :----------------- | :----------------- | :----------------- | | Hong Kong Stock Exchange | 59.00% | 50.60% | 40.00% | | U.S. exchanges | 41.00% | 49.30% | 59.00% | | Other exchanges | 0% | 0.10% | 1.00% | Asset Management Services I Win Asset Management offers discretionary and fund management services, with nil AUM and fees for FY2024 - I Win Asset Management provides discretionary account management and fund management services, including managing the I Win Growth SPC fund[254] - Discretionary account management services do not charge direct management or performance fees; instead, I Win Asset Management charges custodian banks a commission and referral fee[256] - The I Win Growth SPC fund executed a full redemption in January 2023, leading to nil AUM and management/performance fees for FY2024[260] Asset Management Service Income | Fiscal Year | Income (US$) | | :---------- | :----------- | | FY2024 | 0 | | FY2023 | 33,462 | | FY2022 | 23,161 | Advisory Services I Win Securities provides investment advisory services, generating significant revenue in FY2024 after being nil in prior years - I Win Securities offers investment advisory services, including incidental advice for securities trading and dedicated investment consultancy, for a fixed monthly fee[263][264] Advisory Service Income | Fiscal Year | Income (US$) | % of Total Revenue | | :---------- | :----------- | :----------------- | | FY2024 | 420,918 | 29.88% | | FY2023 | 0 | 0% | | FY2022 | 0 | 0% | Regulations Related to our Business Operation in Hong Kong The company's Hong Kong operations are highly regulated, requiring strict licensing, capital, and AML/data privacy compliance - The Hong Kong securities market is highly regulated by the SFO and HKSFC, which sets standards for market fairness, efficiency, and investor protection[286][289] - Licensed corporations (I Win Securities, I Win Asset Management) must maintain minimum paid-up share capital and liquid capital, comply with client money and securities rules, and submit regular financial returns[307][310] - Individuals performing regulated functions must be licensed as Responsible Officers or Licensed Representatives, meeting competence and 'fit and proper' requirements[292][297][303] - The company must comply with extensive anti-money laundering (AMLO, DTROP, OSCO, UNATMO, WMDO) and personal data privacy (PDPO) regulations, with non-compliance risking significant penalties and reputational harm[328][330][331][332][334] HKSFC Licenses Held by Operating Subsidiaries | Company | Type of Regulated Activities | | :--------------------- | :--------------------------- | | I Win Securities Limited | Type 1 (Dealing in securities) | | I Win Asset Management Limited | Type 4 (Advising on securities), Type 9 (Asset management) | 4.C. Organizational structure This section illustrates Garden Stage Limited's corporate structure, detailing subsidiary ownership and controlling shareholder - Garden Stage Limited is the parent company, with 17 Uno Limited (BVI) as a wholly-owned intermediate holding company[339] - I Win Holdings Limited (Hong Kong) is a wholly-owned subsidiary of 17 Uno Limited, and in turn, I Win Securities Limited and I Win Asset Management Limited (both Hong Kong) are wholly-owned subsidiaries of I Win Holdings Limited[339] - Oriental Moon Tree Limited is the controlling shareholder of Garden Stage Limited, holding 73.44% of its equity[339] 4.D. Property, Plant and Equipment This section details the company's leased principal executive office in Hong Kong, its lack of owned property, and its registered trademarks - The company's principal executive office is leased in Hong Kong at 30th Floor, China Insurance Group Building, with a lease term from March 1, 2024, to February 28, 2027, at a monthly rent of HK$80,000 (approximately US$10,240)[341] - The company does not own any property[341] - The company has registered trademarks for its company logo and names (I Win Securities, I Win Asset Management) in Hong Kong, covering classes 35 and 36[342] Item 4A. Unresolved Staff Comments This item confirms the absence of any unresolved staff comments Item 5. Operating and Financial Review and Prospects 5.A. Operating Results Total revenues decreased to US$1.4 million in FY2024, resulting in a US$4.6 million net loss - Total revenues decreased by 56.8% from US$3.3 million in FY2023 to US$1.4 million in FY2024, primarily due to significant decreases in underwriting and placement income and brokerage commissions[390] - Net loss increased by 2,115.3% from US$0.2 million in FY2023 to US$4.6 million in FY2024, driven by revenue decline and increased expenses for IT systems and marketing[390][405][407] - Advisory fees, a new service launched in FY2024, contributed US$0.4 million, offsetting some revenue declines[391] - Brokerage commissions decreased by 55.8% in FY2024, mainly due to reduced demand in the U.S. market (95.0% drop in trading volume) and a decline in Hong Kong trading volume[392][393] - Underwriting and placement income decreased by 90.3% in FY2024 due to fewer engagements (8 vs. 14 projects) and lower weighted average fee rates (3.97% to 2.11% for equity shares)[394] - Compensation and benefits expenses increased by 56.3% in FY2024, primarily due to a US$1.9 million share option compensation cost[400] - Communications and technology expenses sharply increased by 275.9% in FY2024 due to investments in financial community networks and advanced IT operation systems[401] - Travel and business development expenses surged by 582.5% in FY2024, driven by US$0.9 million in public relations/marketing and US$0.5 million for a NASDAQ closing bell ceremony[403] Consolidated Statements of Operations and Comprehensive Loss Summary | Metric (US$) | FY2024 | FY2023 | FY2022 | | :------------------------------------------ | :------------ | :------------ | :------------ | | Total Revenues | 1,408,469 | 3,259,296 | 2,306,436 | | Total Expenses | 5,984,588 | 3,466,989 | 2,816,549 | | Loss before income taxes | (4,576,119) | (207,693) | (510,113) | | Income tax (expenses) income | (13,359) | 524 | (792) | | Net Loss | (4,589,478) | (207,169) | (510,905) | | Basic and Diluted Loss per Share | 0.34 | 0.02 | 0.06 | | Weighted Average Ordinary Shares Outstanding| 13,611,189 | 11,475,000 | 9,203,579 | 5.B. Liquidity and Capital Resources This section details the company's liquidity from IPO proceeds, US$8.9 million cash, and regulatory capital compliance - The company's primary liquidity sources include net proceeds of US$10.1 million from its IPO on NASDAQ in December 2023 and prior financings from related parties[428][429][443] Cash, Cash Equivalents and Restricted Cash | As of March 31, | Amount (US$) | | :---------------- | :----------- | | 2024 | 8,938,202 | | 2023 | 6,317,200 | - The company believes its current cash and anticipated cash flows are sufficient for general corporate purposes for at least the next 12 months[431] - All operating subsidiaries were in compliance with HKSFC's regulatory capital requirements as of March 31, 2024, 2023, and 2022, maintaining capital levels significantly above minimums[435] Regulatory Capital Requirements (as of March 31, 2024) | Entity | Minimum Required (US$) | Capital Maintained (US$) | Excess Net Capital (US$) | % of Requirement Maintained | | :----------------------- | :--------------------- | :----------------------- | :----------------------- | :-------------------------- | | I Win Securities Limited | 383,345 | 1,640,332 | 1,256,987 | 428% | | I Win Asset Management Limited | 12,778 | 72,452 | 59,674 | 567% | | Total | 396,123 | 1,712,784 | 1,316,661 | 432% | Cash Flow Summary (US$) | Activity | FY2024 | FY2023 | FY2022 | | :----------------------- | :------------ | :------------ | :------------ | | Net cash used in operating activities | (7,090,770) | (1,876,296) | (6,920,029) | | Net cash used in investing activities | (1,448) | (22,194) | (18,313) | | Net cash provided by (used in) financing activities | 9,693,950 | 388,346 | (35,431) | | Net increase (decrease) in cash and restricted cash | 2,621,002 | (1,525,602) | (7,059,213) | - Operating activities used US$7.1 million in FY2024, primarily due to US$6.3 million in advance payments for IT and marketing services, and changes in customer/broker-dealer receivables and payables[439] - Contractual obligations as of March 31, 2024, primarily consist of operating lease commitments totaling US$306,675 over three years[444] 5.C. Research and Development, Patent and Licenses, etc. This section refers to 'Item 4. Information on the Company – B. Business Overview' for details on R&D, patents, and licenses 5.D. Trend Information The company is unaware of any material adverse trends or events for FY2024 beyond those already disclosed in this report - The company is not aware of any material adverse trends, uncertainties, demands, commitments, or events for FY2024 beyond those already disclosed in the annual report[447] 5.E. Critical Accounting Estimates This section highlights critical accounting estimates for revenue, receivables, share-based compensation, and deferred tax assets - Critical accounting estimates include revenue recognition, receivables from customers and broker-dealers, share-based compensation expenses, and valuation allowance against deferred tax assets[450] - The company adopted ASU No. 2016-13 (CECL model) for credit losses on receivables from broker-dealers and customers starting April 1, 2023, with no material impact on initial adoption[451][453][699] - Share-based compensation expenses are measured using the fair value method with a binomial option-pricing model, recognizing US$1,871,499 in FY2024[454] - A 100% valuation allowance was provided against deferred tax assets on net operating losses (US$214,543 in FY2024) due to successive years of losses by Hong Kong subsidiaries, making future utilization uncertain[458] - The company is evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) on its financial statements and disclosures[700][701] Item 6. Directors, Senior Management and Employees 6.A. Directors and Senior Management This section lists directors and senior management, detailing their experience and confirming no family relationships - The board of directors includes Sze Ho CHAN (Director, CEO, Interim CFO), Ngan Sammy SHUM (Director), and four independent directors: Sheung Chi Steven WU (Chair of Audit Committee), B Ray Billy TAM (Chair of Compensation Committee), Kevin GUAN (Chair of Nominating Committee), and Kit Wa TO[459][494][497][498][499] - Sze Ho CHAN has over 11 years of experience in financial services, and Ngan Sammy SHUM has over 18 years, with both holding Responsible Officer licenses for various regulated activities[459][461] - Wai Lok Raymond FONG, a former director, now serves as a consultant and has over 22 years of experience in the financial services industry[462][479] - No family relationships exist among the directors or executive officers, and none have been involved in significant legal proceedings in the past ten years[468][469] 6.B. Compensation This section details director and executive officer compensation, including cash and equity-based share options - Named Directors and Officers (Mr. Chan and Mr. Shum) receive cash compensation (salary, bonus, commission) from I Win Securities, not Garden Stage directly, based on employment agreements and commission split arrangements[471][486] - Mr. Sze Ho CHAN, as Interim CFO, receives a cash compensation of HKD 60,000 per month from Garden Stage[478] - Independent directors (Mr. Guan, Mr. Wu, Dr. To, Mr. Tam) receive an annual salary of US$18,000 from Garden Stage, effective upon NASDAQ listing[480][481][482][487] - Share options were granted to Mr. Chan (590,000 shares) and Mr. Fong (737,500 shares), vesting over three years from the NASDAQ listing date at an exercise price of US$2.00; Mr. Lee's options (147,500 shares) were forfeited upon his resignation[490][491][492][493] Aggregate Cash Compensation to Directors and Executive Officers | Fiscal Year | Aggregate Cash Compensation (US$) | | :---------- | :-------------------------------- | | FY2024 | 630,000 | | FY2023 | 950,000 | 6.C. Board Practices The board comprises six members, including four independent directors, with established committees - The board of directors comprises six directors, with Mr. Kevin GUAN, Dr. Kit Wa TO, Mr. Sheung Chi Steven WU, and Mr. B Ray Billy TAM satisfying Nasdaq's independence requirements[494] - The board has established an Audit Committee (chaired by Mr. Sheung Chi Steven WU), a Compensation Committee (chaired by Mr. B Ray Billy TAM), and a Nominating Committee (chaired by Mr. Kevin GUAN), all composed of independent directors[497][498][499] - Directors owe fiduciary duties under Cayman Islands law, including loyalty, good faith, and acting in the company's best interests, and may be indemnified against liabilities[500][507] - There are no specific membership or shareholding qualifications for directors, and they generally hold office until a successor is elected[504][505] Board Diversity Matrix (As of Report Date) | Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender | | :-------------- | :----- | :--- | :--------- | :---------------------- | | Directors | 1 | 5 | 0 | 0 | 6.D. Employees The company had 17 employees and 8 self-employed Account Executives, maintaining good working relationships and no significant labor disputes - The company had 17 employees and 8 self-employed Account Executives (AEs) as of the report date[509][511] - Employees receive salaries, bonuses, and statutory social security benefits, while AEs are compensated solely on a commission basis[510][511] - All AEs are Licensed Representatives of I Win Securities and are subject to the company's Code of Conduct and internal control policies[511] - The company maintains good working relationships with its employees and has not experienced significant labor disputes[510] 6.E. Share Ownership Oriental Moon Tree Limited is the major shareholder, beneficially owning 73.44% of outstanding Ordinary Shares Major Shareholder Beneficial Ownership (as of Report Date) | Name of Beneficial Owner | Number of Ordinary Shares | Percentage of Ordinary Shares | | :----------------------- | :------------------------ | :---------------------------- | | Oriental Moon Tree Limited | 11,475,000 | 73.44% | - Ms. Kam Yan Karen LAU is the sole director of Oriental Moon Tree Limited and is deemed the beneficial owner of all Ordinary Shares held by it[514] - As of the report date, none of the individual directors or executive officers directly hold Ordinary Shares[514] - The calculations are based on 15,625,000 Ordinary Shares issued and outstanding as of the date of this annual report[513] Item 7. Major Shareholders and Related Party Transactions 7.A. Major Shareholders This section refers to 'Item 6.E. Share Ownership' for information on major shareholders 7.B. Related Party Transactions This section refers to 'Item 6.C. Board Practices' and 'Item 6.B. Compensation' for related party transaction details Item 8. Financial Information 8.A. Consolidated Statements and Other Financial Information This section refers to 'Item 18. Financial Statements' and addresses legal proceedings and the company's dividend policy - The company is not a party to any material legal or administrative proceedings and is not aware of any threats that would materially affect its business, financial condition, or operations[516] - Garden Stage Limited has not made any dividends or distributions to shareholders and does not expect to pay cash dividends in the foreseeable future, intending to retain earnings for business growth[519] - Dividend payments are at the board's discretion, subject to Cayman Islands law (out of profits or share premium, provided debts can be paid), and rely on dividends from Hong Kong subsidiaries[520][521] - There are no current restrictions under Hong Kong laws on currency conversion or remittance of earnings from subsidiaries to Garden Stage Limited or U.S. investors[521] 8.B. Significant Changes No significant changes have occurred since the audited consolidated financial statements, except as otherwise disclosed Item 9. The Offer and Listing 9.A. Offer and listing details This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 9.B. Plan of distribution This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 9.C. Markets The company's Ordinary Shares are listed on the Nasdaq Capital Market under the ticker symbol 'GSIW' - Garden Stage Limited's Ordinary Shares are listed on the Nasdaq Capital Market under the ticker symbol 'GSIW'[522] 9.D. Selling shareholders This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 9.E. Dilution This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 9.F. Expenses of the issue This sub-item is marked as 'Not applicable' for annual reports on Form 20-F Item 10. Additional Information 10.A. Share capital This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 10.B. Memorandum and articles of association This section summarizes key provisions of the company's memorandum and articles of association and the Cayman Islands Companies Act - Shareholder meetings require a quorum of two shareholders (or one if only one shareholder of record), and directors' meetings require a quorum of two (or one if a sole director)[527][528] - Upon winding up, assets are distributed proportionally to paid-up capital, with any excess or insufficient funds handled accordingly[529] - The company may redeem or repurchase its own shares, subject to the Companies Act and stock exchange rules, provided it can pay its debts[533] - Rights attached to any class of shares can be varied with written consent of three-fourths of that class or by special resolution[534] - The company is an exempted company under Cayman Islands law, which provides certain exemptions, such as not having to file an annual return of shareholders or hold an annual general meeting[541] - Holders of Ordinary Shares have no general right under Cayman Islands law to inspect corporate records, except as conferred by the Companies Act or authorized by directors/shareholders[538] 10.C. Material contracts The company has not entered into any material agreements outside the ordinary course of business, other than those described 10.D. Exchange controls The Cayman Islands, British Virgin Islands, and Hong Kong currently have no exchange control regulations or currency restrictions - The Cayman Islands, British Virgin Islands, and Hong Kong currently have no exchange control regulations or currency restrictions[544] 10.E. Taxation This section summarizes tax considerations in the Cayman Islands, Hong Kong, and the U.S., including potential PFIC implications for U.S. Holders - The Cayman Islands currently levies no taxes on individuals or corporations based on profits, income, gains, or appreciation, and no inheritance tax or estate duty[545] - In Hong Kong, capital gains from the sale of Ordinary Shares are not subject to profit tax, and dividends are not subject to any Hong Kong tax; revenue gains from sales by persons carrying on a trade in Hong Kong are subject to profits tax (16.5% for corporations, max 15% for individuals)[547][548] - For U.S. Holders, cash distributions are generally treated as dividend income; gain or loss on sale/disposition is typically capital gain/loss[558][561] - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for the current or foreseeable future, but this determination is factual and subject to change, potentially leading to significantly increased U.S. income tax consequences for U.S. Holders[555][556][557] 10.F. Dividends and paying agents This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 10.G. Statement by experts This sub-item is marked as 'Not applicable' for annual reports on Form 20-F 10.H. Documents on display The company files reports with the SEC, which are available for public inspection at the Public Reference Room and on the SEC's website - The company files reports and other information with the SEC, which are available for public inspection at the SEC's Public Reference Room and on its website (http://www.sec.gov)[566](index=566&type=chunk) 10.I. Subsidiary Information This sub-item is marked as 'Not applicable' Item 11. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's market risk exposures, including currency, credit, and interest rate risks - Currency risk is considered not significant due to the Hong Kong Dollar (HKD) peg to the U.S. Dollar (US$)[566][703] - Credit risks arise from cash, restricted cash, and receivables from broker-dealers and customers; these risks are managed through regular credit assessments of counterparties and, for brokerage transactions, the ability to liquidate security positions in case of default[567][569][704][707] - Cash is deposited with reputable banks in Hong Kong, with balances potentially exceeding the Deposit Protection Scheme's insured limits (US$63,891 per depositor)[568][706] - Interest rate risk on bank deposits and overdue customer balances is considered not material, and the company does not use derivatives to manage this risk[570][711] - The company is not currently exposed to market price risk as it does not hold financial instruments subject to fair value fluctuations[571] Allowance for Expected Credit Losses | As of March 31, | Amount (US$) | | :---------------- | :----------- | | 2024 | 7,668 | | 2023 | 0 | Item 12. Description of Securities Other than Equity Securities This item states that sections 12.A, 12.B, 12.C, and 12.D, covering non-equity securities, are all 'Not applicable' PART II Item 13. Defaults, Dividend Arrearages and Delinquencies The company has no material defaults in payment of principal, interest, or sinking/purchase fund installments - The company has no material defaults in the payment of principal, interest, or any installments under a sinking or purchase fund[574] Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 14.A. – 14.D. Material Modifications to the Rights of Security Holders This section refers to 'Item 10. Additional Information' for a description of unchanged shareholders' rights 14.E. Use of Proceeds This section details the allocation of US$10.2 million net IPO proceeds for capital, IT, research, and working capital - Net proceeds from the initial public offering totaled approximately US$10.2 million, after deducting US$1.92 million in expenses[576] Allocation of IPO Proceeds (Approximate) | Purpose | Amount (US$ million) | | :------------------------------------------ | :------------------- | | Increasing capital base | 0.66 | | Enhancing IT infrastructure | 1.8 | | Enhancing research capabilities (asset management) | 1.5 | | Working capital and general corporate purposes | 4.1 | - None of the IPO proceeds were paid, directly or indirectly, to any directors, officers, or affiliated purchasers[577] Item 15. Controls and Procedures Disclosure controls were ineffective as of March 31, 2024, due to material weaknesses in internal control - As of March 31, 2024, the CEO and interim CFO concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting[577] - Identified material weaknesses include: (1) lack of financial reporting and accounting personnel with U.S. GAAP understanding; (2) absence of an internal audit function; and (3) IT deficiencies (e.g., lack of formal IT policies, risk assessments, recovery management, system security)[578] - Remediation measures include engaging qualified financial/accounting advisory teams, establishing a comprehensive policy manual, hiring independent directors, and strengthening corporate governance[579] - As an 'emerging growth company', the company is exempt from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting[580][583] - No other material changes in internal controls over financial reporting occurred during the period covered by this annual report[584] ITEM 16. RESERVED This item is reserved and contains no information Item 16A. Audit Committee Financial Expert Mr. Sheung Chi Steven WU is the audit committee financial expert, and all members meet independence requirements - Mr. Sheung Chi Steven WU qualifies as an 'audit committee financial expert'[585] - All members of the audit committee (Mr. Kevin GUAN, Dr. Kit Wa TO, Mr. Sheung Chi Steven WU, and Mr. B Ray Billy TAM) satisfy the independence requirements of Nasdaq Stock Market rules and Rule 10A-3 under the Exchange Act[585] Item 16B. Code of Ethics The company has adopted a Code of Business Conduct and Ethics applicable to its directors, officers, employees, and advisors - The company has adopted a Code of Business Conduct and Ethics that applies to its directors, officers, employees, and advisors[585] Item 16C. Principal Accountant Fees and Services This section details audit fees paid to independent accounting firms for FY2022-2024, with all services pre-approved by the audit committee Principal Accountant Fees and Services (US$) | Services | FY2022 | FY2023 | FY2024 | | :------- | :----- | :------ | :------ | | Audit Fees (Marcum Asia CPAs LLP) | 0 | 475,286 | 252,101 | | Audit Fees (J&S Associate PLT) | 0 | 0 | 140,000 | | Total | 0 | 475,286 | 392,101 | - The audit committee's policy is to pre-approve all audit and non-audit services provided by the independent registered public accounting firm[587] Item 16D. Exemptions from the Listing Standards for Audit Committees This item is marked as 'Not applicable' Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers This item is marked as 'Not applicable' Item 16F. Change in Registrant's Certifying Accountant Marcum Asia CPAs LLP was dismissed and J&S Associate PLT appointed as independent auditor on January 26, 2024 - On January 26, 2024, Marcum Asia CPAs LLP was dismissed, and J&S Associate PLT was appointed as the independent registered public accounting firm for the fiscal year ending March 31, 2024[587] - No disagreements on accounting principles, financial statement disclosure, or auditing scope occurred with Marcum Asia or Friedman (former auditor), except for identified material weaknesses in internal control over financial reporting[589] - J&S Associate PLT was not consulted on specific accounting or auditing issues prior to its appointment[591] Item 16G. Corporate Governance As a foreign private issuer, the company may follow home country corporate governance practices, potentially affording less shareholder protection - As a foreign private issuer listed on Nasdaq Capital Market, the company is permitted to follow home country corporate governance practices (Cayman Islands)[592] - Currently, the company does not plan to rely on home country practice, but if it chooses to in the future, shareholders may be afforded less protection than under Nasdaq standards[592][593] Item 16H. Mine Safety Disclosure This item is marked as 'Not applicable' Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. This item is marked as 'Not applicable' PART III Item 17. Financial Statements This item refers to 'Item 18. Financial Statements' for the company's consolidated financial statements Item 18. Financial Statements The consolidated financial statements are included at the end of this annual report, beginning with page F-1 - The consolidated financial statements are included at the end of this annual report, beginning with page F-1[595] Item 19. Exhibits This section lists all exhibits filed as part of the annual report, including corporate governance documents, agreements, and certifications - The exhibits include corporate governance documents (Memorandum and Articles of Association, Code of Business Conduct and Ethics), employment agreements for key personnel, investment agreements, and certifications by principal executive and financial officers[596][597] SIGNATURES Garden Stage Limited certifies Form 20-F compliance, signed by Sze Ho CHAN on July 31, 2024 - The registrant, Garden Stage Limited, certifies compliance with Form 20-F requirements, with the report signed by Sze Ho CHAN (Chief Executive Officer, Director, and Interim Chief Financial Officer) on July 31, 2024[598] INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB: 6743) J&S Associate PLT issued an unqualified opinion on FY2024 financial statements, identifying revenue and share-based compensation as critical audit matters - J&S Associate PLT issued an unqualified opinion on the consolidated financial statements for the year ended March 31, 2024, in conformity with U.S. GAAP[600] - Revenue recognition and share-based compensation expenses were identified as critical audit matters due to their complexity and the significant judgment involved in applying ASC 606 and ASC 718, respectively[605][609] - Audit procedures for revenue included assessing ASC 606 application, identifying performance obligations, and testing revenue items; for share-based compensation, procedures included inspecting agreements, evaluating ASC 718 application, and assessing the independent appraiser's valuation model and assumptions[608][611] Report of Independent Registered Public Accounting Firm (PCAOB: 5395) Marcum Asia CPAs LLP issued an unqualified opinion on FY2023 financial statements, auditing FY2022 share split adjustments - Marcum Asia CPAs LLP issued an unqualified opinion on the consolidated financial statements for the year ended March 31, 2023[613] - The report notes that the March 31, 2022 financial statements were audited by another auditor and retrospectively adjusted for share splits, with Marcum Asia auditing these retrospective adjustments[617][618] Report of Independent Registered Public Accounting Firm (PCAOB: 711) Friedman LLP issued an opinion on I Win Holdings Limited's FY2022 financial statements, prior to share split adjustments - Friedman LLP issued an opinion on I Win Holdings Limited's consolidated financial statements for the year ended March 31, 2022, before the effects of retrospective adjustments for share splits[619] - The opinion states that, except for the share split adjustments (audited by another auditor), the financial statements presented fairly in all material respects[619][620] Consolidated Balance Sheets as of March 31, 2024 and 2023 Total assets increased to US$16.58 million in 2024, with equity rising to US$9.29 million from IPO proceeds Consolidated Balance Sheets Summary (US$) | Metric | March 31, 2024 | March 31, 2023 | | :-------------------------------------- | :------------- | :------------- | | Total Assets | 16,583,833 | 13,130,831 | | Total Liabilities | 7,298,345 | 11,183,825 | | Total Shareholders' Equity | 9,285,488 | 1,947,006 | | Cash | 2,665,852 | 828,689 | | Restricted cash | 6,272,350 | 5,488,511 | | Receivables from broker-dealers and clearing organizations | 609,939 | 4,607,918 | | Receivables from customers, net | 248,063 | 1,505,627 | | Other assets, current, net | 2,452,655 | 71,893 | | Payables to customers | 6,135,327 | 8,135,442 | | Payables to broker-dealers and clearing organizations | 138,513 | 2,030,523 | | Additional paid-in capital | 14,033,722 | 2,024,327 | | Accumulated deficit | (4,668,973) | (79,495) | - Total assets increased by US$3.45 million (26.5%) from US$13.13 million in 2023 to US$16.58 million in 2024[624] - Total liabilities decreased by US$3.88 million (34.7%) from US$11.18 million in 2023 to US$7.30 million in 2024[624] - Total shareholders' equity increased significantly by US$7.34 million (377.0%) from US$1.95 million in 2023 to US$9.29 million in 2024[624] Consolidated Statements of Operations and Comprehensive Loss for the Years Ended March 31, 2024, 2023 and 2022 FY2024 saw a US$4.59 million net loss due to revenue decline and expense increase Consolidated Statements of Operations Summary (US$) | Metric | FY2024 | FY2023 | FY2022 | | :------------------------------------ | :------------ | :------------ | :------------ | | Total Revenues | 1,408,469 | 3,259,296 | 2,306,436 | | Total Expenses | 5,984,588 | 3,466,989 | 2,816,549 | | Loss before income taxes | (4,576,119) | (207,693) | (510,113) | | Income tax (expenses) income | (13,359) | 524 | (792) | | Net Loss | (4,589,478) | (207,169) | (510,905) | | Basic and Diluted Loss per Share | 0.34 | 0.02 | 0.06 | | Weighted Average Ordinary Shares Outstanding | 13,611,189 | 11,475,000 | 9,203,579 | - Total revenues decreased by 56.8% in FY2024 compared to FY2023, primarily due to a significant drop in underwriting and placement income and brokerage commissions[626] - Total expenses increased by 72.6% in FY2024 compared to FY2023, largely driven by higher compensation and benefits (due to share-based compensation), communications and technology, and travel and business development costs[626] - Net loss for FY2024 was US$4.59 million, a substantial increase from US$0.21 million in FY2023[626] Consolidated Statements of Changes in Shareholders' Equity for the Years Ended March 31, 2024, 2023 and 2022 Shareholders' equity increased to US$9.29 million in FY2024, driven by IPO proceeds and share-based compensation Consolidated Statements of Changes in Shareholders' Equity Summary (US$) | Metric | March 31, 2024 | March 31, 2023 | March 31, 2022 | | :------------------------------------ | :------------- | :------------- | :------------- | | Ordinary shares | 1,563 | 1,148 | 1,148 | | Additional paid-in capital | 14,033,722 | 2,024,327 | 0 | | Accumulated deficit | (4,668,973) | (79,495) | 127,674 | | Accumulated other comprehensive (loss) income | (80,824) | 1,026 | 1,028 | | Total Shareholders' Equity | 9,285,488 | 1,947,006 | 128,702 | - Total shareholders' equity increased by US$7.34 million in FY2024, primarily due to US$9.34 million from IPO proceeds and US$1.87 million from share-based compensation, despite a net loss[629][630] - In FY2023, additional paid-in capital increased by US$2.03 million due to forgiveness of debt by major shareholders[629][736] Consolidated Statements of Cash Flows for the Years Ended March 31, 2024, 2023 and 2022 FY2024 saw a US$2.62 million net increase in cash, driven by financing activities Consolidated Statements of Cash Flows Summary (US$) | Activity | FY2024 | FY2023 | FY2022 | | :-------------------------------------- | :------------ | :------------ | :------------ | | Net cash used in operating activities | (7,090,770) | (1,876,296) | (6,920,029) | | Net cash used in investing activities | (1,448) | (22,194) | (18,313) | | Net cash provided by (used in) financing activities | 9,693,950 | 388,346 | (35,431) | | Effect of exchange rates on cash and restricted cash | 19,270 | (15,458) | (85,440) | | Net increase (decrease) in cash and restricted cash | 2,621,002 | (1,525,602) | (7,059,213) | | Cash and restricted cash, end of year | 8,938,202 | 6,317,200 | 7,842,802 | - Net cash provided by financing activities was US$9.69 million in FY2024, primarily from US$10.13 million in IPO proceeds[443][632] - Net cash used in operating activities was US$7.09 million in FY2024, mainly due to US$6.3 million in advance payments for IT and marketing services, and changes in receivables/payables[439][632] - Investing activities consistently used minimal cash for property and equipment purchases across all periods[442][632] Notes to Consolidated Financial Statements for the Years Ended March 31, 2024, 2023 and 2022 These notes detail the company's organization, accounting policies, and financial statement items - Garden Stage Limited completed a reorganization in April 2023, making it the holding company for its Hong Kong operating subsidiaries (I Win Securities and I Win Asset Management), which is accounted for at historical cost as a common control transaction[638][640][641] - The company adopted ASC 606 for revenue recognition, identifying distinct performance obligations for advisory fees (over time), brokerage commissions (point in time), underwriting/placement income (point in time), introducing/referral income (point in time), and handling income (point in time)[661][664][665][666][669][670][671] - The company adopted ASU 2016-13 (CECL model) for receivables from broker-dealers and customers from April 1, 2023, recognizing an allowance for expected credit losses of US$6,641 for customers and US$37 for related parties as of March 31, 2024[647][648][713][716] - Share-based compensation expenses of US$1,871,499 were recognized in FY2024, related to options granted to directors and employees, valued using the Binomial Option Pricing Model[682][739] - The company's Hong Kong subsidiaries are subject to Hong Kong Profits Tax (8.25% on first HK$2M, 16.5% thereafter); a 100% valuation allowance is provided against deferred tax assets on net operating losses due to uncertainty of utilization[684][685][743][747] - As of March 31, 2024, the company had 17 employees and 8 self-employed Account Executives; subsequent to year-end, share options for 156,250 ordinary shares were forfeited due to an employee's resignation[509][511][759]