YSX Tech. Co., Ltd(YSXT) - 2024 Q2 - Quarterly Report

Unaudited Consolidated Financial Statements Condensed Consolidated Balance Sheets Total assets grew to $31.7 million, driven by an increase in current assets, while total shareholders' equity rose to $21.2 million Condensed Consolidated Balance Sheets Summary (in thousands) | Account | September 30, 2024 (Unaudited) | March 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $31,366 | $27,515 | | Total Noncurrent Assets | $351 | $356 | | Total Assets | $31,718 | $27,871 | | Total Current Liabilities | $8,653 | $7,206 | | Total Noncurrent Liabilities | $1,899 | $2,030 | | Total Liabilities | $10,552 | $9,236 | | Total Shareholders' Equity | $21,166 | $18,635 | | Total Liabilities and Shareholders' Equity | $31,718 | $27,871 | Condensed Consolidated Statements of Income and Comprehensive Income Revenue increased by 28.7% to $34.1 million, but higher costs led to a decrease in net income and earnings per share Income Statement Highlights (in thousands) | Metric | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Total Revenue | $34,094 | $26,498 | | Gross Profit | $3,601 | $3,379 | | Income from Operations | $2,356 | $2,818 | | Net Income | $1,927 | $2,472 | | Comprehensive Income | $2,531 | $1,552 | | Earnings Per Share (Basic and Diluted) | $0.09 | $0.11 | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased to $21.2 million, primarily driven by net income and a positive foreign currency translation adjustment Changes in Shareholders' Equity (Six Months Ended Sep 30, 2024) | Description | Amount (in thousands) | | :--- | :--- | | Balance at March 31, 2024 | $18,635 | | Net Income | $1,927 | | Foreign currency translation adjustment | $604 | | Appropriation to statutory reserve | $0 | | Balance at September 30, 2024 | $21,166 | Condensed Consolidated Statements of Cash Flows The company's cash position improved with a net increase of $1.16 million, reversing a prior year decrease of $1.35 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(689) | $(3,723) | | Net cash provided by (used in) investing activities | $1,682 | $(209) | | Net cash (used in) provided by financing activities | $(4) | $2,775 | | Net increase (decrease) in cash | $1,161 | $(1,350) | | Cash, end of period | $5,445 | $2,037 | Notes to Unaudited Condensed Consolidated Financial Statements NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION YSX Tech provides auto insurance aftermarket services in China through a Variable Interest Entity (VIE) structure established in December 2022 - The company's primary business is providing auto insurance aftermarket value-added services, software development, and other customized services to insurance companies and brokerages in the PRC[13] - The company completed a reorganization on December 31, 2022, establishing a VIE structure through contractual arrangements, which gives it effective control over the YSX Operating Companies for accounting purposes[17][18][20] Financial Highlights of Consolidated VIEs (Six Months Ended Sep 30, 2024) | Metric | Amount (in thousands) | | :--- | :--- | | Net Revenue | $34,094 | | Net Income | $2,190 | | Total Assets (as of Sep 30, 2024) | $31,904 | | Total Liabilities (as of Sep 30, 2024) | $10,068 | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared under U.S. GAAP, with key policies covering VIE consolidation and revenue recognition under ASC 606 - The company's main operations are in the PRC, exposing it to political, economic, and legal risks; the COVID-19 pandemic's impact has diminished[36][38] - Revenue is recognized based on ASC 606 and is disaggregated by service type, with the company acting as a principal in its service arrangements[58][63] Disaggregation of Revenue by Service Type (in thousands) | Service Type | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Auto insurance aftermarket value-added services | $28,210 | $21,411 | | Other scenario-based customized services | $5,579 | $4,254 | | Software development and IT services | $305 | $834 | | Total Revenue | $34,094 | $26,498 | NOTE 3 — ACCOUNTS RECEIVABLE, NET Net accounts receivable increased to $9.86 million, with 63.2% of the gross balance subsequently collected as of the report date Accounts Receivable, Net (Third-Party) | Description | September 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Gross Accounts Receivable | $10,515,108 | $9,546,483 | | Less: Allowance for doubtful account | $(657,014) | $(382,731) | | Net Accounts Receivable | $9,858,094 | $9,163,752 | - Approximately 63.2% ($6.6 million) of the gross accounts receivable balance as of September 30, 2024, has been subsequently collected[92][93] NOTE 4 —ADVANCES TO VENDORS Advances to vendors for outsourced services increased to $10.7 million, with management considering the balance fully realizable - Advances to vendors are primarily for outsourcing value-added services and prepayments to media channel operators[95] - No allowance for credit loss was recorded as management considers the balances fully realizable, with 99.9% of the September 30, 2024 balance subsequently realized[95][96] NOTE 5 —LEASES The company's operating lease liabilities for office space totaled $209,463 with a weighted average remaining term of 2.18 years Operating Lease Balances | Account | September 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Operating lease right-of-use assets, net | $190,240 | $224,835 | | Total operating lease liabilities | $209,463 | $244,183 | Future Minimum Lease Payments (as of Sep 30, 2024) | Period | Amount | | :--- | :--- | | Twelve months ending Sep 30, 2025 | $99,576 | | 2026 | $84,582 | | 2027 | $13,901 | | Thereafter | $25,797 | | Total lease payments | $223,856 | NOTE 6— DEBT Total debt includes short-term loans, long-term bank loans, and a $1.35 million long-term loan from the CEO, Mr. Jie Xiao - Short-term loans outstanding as of September 30, 2024, totaled $1,635,887, primarily from China Construction Bank (CCB)[102] - Long-term loans from Bank of China (BOC) totaled $569,996, with a non-current portion of $427,497[108] - The company has a long-term loan of $1,353,739 from its CEO, Mr. Jie Xiao, with terms mirroring a loan he secured for the company's benefit[110] NOTE 7 — TAXES The company benefits from preferential tax policies, resulting in an effective income tax rate of 18.4% for the period - Certain PRC subsidiaries enjoy preferential tax rates (10-15%) and tax holidays, which reduced PRC corporate income taxes by $155,773 for the six months ended September 30, 2024[114][117] Effective Income Tax Rate Reconciliation | Description | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | China statutory income tax rate | 25.0% | 25.0% | | Effect of tax holiday and preferential tax rate | (7.9)% | (7.9)% | | Other adjustments | 1.3% | (0.7)% | | Effective income tax rate | 18.4% | 16.4% | NOTE 8 — RELATED PARTY TRANSACTIONS The company engages in significant transactions with related parties, including substantial revenue from one entity and a loan from its CEO Transactions with Guangzhou Dayong Insurance Agency Co. Ltd. | Metric | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Revenue | $9,346,622 | $4,298,763 | | Accounts Receivable (as of period end) | $4,024,951 | N/A | - The company borrowed RMB 10 million (approx. $1.4 million) from its CEO, Mr. Jie Xiao, under the same terms he received from a bank loan that the company guaranteed[128][129] NOTE 9— Risks and Concentration The company faces significant customer and vendor concentration risks, with four customers accounting for 86% of total revenue - Customer Concentration: For the six months ended Sep 30, 2024, four customers (three third-party, one related party) accounted for 22.4%, 19.7%, 16.8%, and 27.4% of total revenues, respectively[136] - Vendor Concentration: For the six months ended Sep 30, 2024, four vendors accounted for 21.8%, 21.8%, 14.1%, and 11.3% of total purchases, respectively[138] - Credit Risk: As of September 30, 2024, $4.86 million of the company's $5.4 million cash balance held in PRC financial institutions was not covered by deposit insurance[131] NOTE 10 — SHAREHOLDERS' EQUITY The company maintains a dual-class share structure and is subject to PRC regulations requiring appropriations to a statutory surplus reserve - The company has authorized 470 million Class A shares (1 vote/share) and 30 million Class B shares (5 votes/share), with 20.8 million Class A and 1.2 million Class B shares outstanding[144] - PRC subsidiaries and VIEs must allocate at least 10% of after-tax profits to a statutory reserve, which totaled approximately $818,465 as of September 30, 2024[146] - As of September 30, 2024, approximately $6.2 million in assets of the PRC entities are considered restricted from being transferred to the parent company[149] NOTE 11 — COMMITMENTS AND CONTINGENCIES The company has provided loan guarantees totaling approximately $4.2 million for two customers and its CEO, with management deeming the risk of loss remote Loan Guarantees Provided by Xinjiang YSX (as of Sep 30, 2024) | Party Being Guaranteed | Relationship | Maximum Guarantee Amount | Bank Loans Guaranteed | | :--- | :--- | :--- | :--- | | Tanbao Network Technology | Third-party customer | $1,424,989 | $1,399,339 | | Guangzhou Zhuohang Info Tech | Third-party customer | $1,424,989 | $1,382,239 | | Mr. Jie Xiao (CEO) | Related party | $2,137,483 | $1,424,989 | - Management has not accrued any liability for these guarantees, concluding that the likelihood of having to make payments is remote[154] NOTE 12 — SEGMENT REPORTING The company operates across three segments, with the Auto Insurance Aftermarket Value-added Services segment being the largest contributor to revenue and profit Segment Performance (Six Months Ended Sep 30, 2024) | Segment | Revenues | Gross Profit | Net Income | Total Assets | | :--- | :--- | :--- | :--- | :--- | | Auto Insurance Aftermarket Services | $28,210,396 | $2,795,299 | $1,594,602 | $26,243,951 | | Other Scenario-based Customized Services | $5,579,468 | $737,506 | $315,381 | $5,190,543 | | Software Development & IT Services | $304,504 | $67,709 | $17,212 | $283,278 | | Total | $34,094,368 | $3,600,514 | $1,927,195 | $31,717,772 | NOTE 13 — SUBSEQUENT EVENTS Post-period, the company completed its IPO on the Nasdaq, raising gross proceeds of approximately $5.75 million - The company commenced trading on the Nasdaq Capital Market on December 18, 2024, under the ticker symbol "YSXT"[160] - The IPO closed on December 19, 2024, raising gross proceeds of $5 million from 1,250,000 Class A ordinary shares, plus an additional $750,000 from the over-allotment option[161] NOTE 14 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY The parent company is a holding entity whose primary asset is its investment in subsidiaries, with no standalone cash or liabilities - Condensed parent company financial information is provided because restricted net assets of consolidated subsidiaries exceeded 25% of consolidated net assets[163] - The parent company's sole asset is its 'Investment in subsidiaries and VIEs', which was $21.2 million as of September 30, 2024, and it has no liabilities[170] - The parent company's net income of $1.9 million for the period represents its equity in the earnings of its subsidiaries and VIEs[173]