CCSC Technology International Holdings(CCTG) - 2024 Q2 - Quarterly Report

Unaudited Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets Total assets decreased to $17.43 million as of September 30, 2024, from $17.94 million on March 31, 2024, driven by reduced cash and a net loss impacting shareholders' equity Condensed Consolidated Balance Sheets (As of Sep 30, 2024 vs. Mar 31, 2024) | Financial Item | As of Sep 30, 2024 (Unaudited) | As of Mar 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $10,961,393 | $11,982,822 | | Total Non-current Assets | $6,463,881 | $5,955,209 | | TOTAL ASSETS | $17,425,274 | $17,938,031 | | Total Current Liabilities | $4,603,029 | $4,442,599 | | Total Non-current Liabilities | $973,704 | $1,197,765 | | TOTAL LIABILITIES | $5,576,733 | $5,640,364 | | Total Shareholders' Equity | $11,848,541 | $12,297,667 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $17,425,274 | $17,938,031 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss For the six months ended September 30, 2024, the company reported a net loss of $744,320, a reversal from prior-year net income, despite 22.8% revenue growth Statement of Operations Highlights (For the six months ended Sep 30) | Metric | 2024 (Unaudited) | 2023 (Unaudited) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Revenue | $9,218,459 | $7,503,520 | +22.8% | | Gross Profit | $2,747,744 | $2,280,361 | +20.5% | | Loss from Operations | ($805,753) | ($284,492) | +183.2% | | Net (Loss)/Income | ($744,320) | $413,614 | N/A | | Basic and Diluted (Loss)/Earnings Per Share | ($0.06) | $0.04 | N/A | Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity Total shareholders' equity decreased from $12.30 million to $11.85 million due to a net loss of $744,320, partially offset by foreign currency translation Reconciliation of Shareholders' Equity (For the six months ended Sep 30, 2024) | Item | Amount (USD) | | :--- | :--- | | Balance as of March 31, 2024 | $12,297,667 | | Net loss | ($744,320) | | Foreign currency translation | $295,194 | | Balance as of September 30, 2024 | $11,848,541 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $1.12 million, a reversal from prior-year cash generation, leading to a $1.74 million decrease in total cash and restricted cash Cash Flow Summary (For the six months ended Sep 30) | Cash Flow Activity | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | ($1,121,034) | $197,804 | | Net cash used in investing activities | ($666,865) | ($71,242) | | Net cash used in financing activities | $0 | ($400,911) | | Net change in cash and restricted cash | ($1,735,319) | ($338,019) | | Cash and restricted cash, end of the period | $3,999,428 | $7,379,596 | - A significant use of cash in investing activities was the purchase of land for $539,513[11] Notes to Unaudited Condensed Consolidated Financial Statements Note 1: Organization and Principal Activities CCSC Technology International Holdings Limited manufactures and sells interconnect products globally, with a new subsidiary established in Serbia for electrical equipment manufacturing - The company's main business is the manufacturing and sale of interconnect products (connectors, cables, wire harnesses) for OEM and ODM clients[13] - A new subsidiary, CCSC Technology Serbia, was incorporated on February 27, 2024, in Serbia to manufacture other electrical equipment[15][20] Company Structure | Entity | Place of Incorporation | Major business activities | | :--- | :--- | :--- | | CCSC Cayman | Cayman Islands | Investment holding (Parent) | | CCSC Group | BVI | Investment holding | | CCSC Technology Group | Hong Kong | Sale of interconnect products | | CCSC Interconnect HK | Hong Kong | Sale of interconnect products | | CCSC Interconnect DG | Mainland China | Manufacturing of interconnect products | | CCSC Interconnect NL | Netherlands | Purchase of components | | CCSC Technology Serbia | Serbia | Manufacture of other electrical equipment | Note 2: Summary of Significant Accounting Policies The company prepares financial statements under U.S. GAAP, recognizing revenue upon delivery, and faces significant customer concentration and geopolitical risks due to its China operations - The company recognizes revenue from product sales at a point in time when control transfers to the customer, which is generally upon delivery[49] - For the six months ended September 30, 2024, three customers accounted for 10.0%, 14.7%, and 11.7% of total revenue, indicating significant customer concentration[81] - The company's operations are substantially in China, exposing it to political, economic, and legal risks, with geopolitical events potentially impacting supply chains[88][90] Note 3: Accounts Receivable Accounts receivable increased to $3.26 million as of September 30, 2024, with 96.7% collected subsequently and no allowance for credit losses recorded Accounts Receivable Aging and Subsequent Collection (as of Sep 30, 2024) | Aging Bucket | Balance (Unaudited) | Subsequent Collection | % of Subsequent Collection | | :--- | :--- | :--- | :--- | | Overdue | $671,953 | $670,188 | 99.7% | | Not yet due | $2,584,734 | $2,478,978 | 95.9% | | Total gross accounts receivable | $3,256,687 | $3,149,166 | 96.7% | Note 4: Inventories Inventories slightly decreased to $1.97 million as of September 30, 2024, with a shift in composition and increased inventory write-downs to $108,257 Inventory Composition | Category | Sep 30, 2024 (Unaudited) | Mar 31, 2024 | | :--- | :--- | :--- | | Raw materials | $1,048,039 | $1,374,648 | | Work in process | $113,537 | $235,194 | | Finished goods | $226,465 | $77,310 | | Inventory in transit | $579,783 | $336,304 | | Total Inventories | $1,967,824 | $2,023,456 | - Inventory write-downs increased to $108,257 for the six months ended Sep 30, 2024, compared to $73,643 for the same period in 2023[30] Note 6: Property, Plant and Equipment, Net Net property, plant, and equipment increased substantially to $681,342 as of September 30, 2024, primarily due to the acquisition of agricultural land in Serbia - In June 2024, the company's Serbian subsidiary signed an agreement to purchase 4 lots of agricultural land in Serbia[99] Property, Plant and Equipment, Net | Category | Sep 30, 2024 (Unaudited) | Mar 31, 2024 | | :--- | :--- | :--- | | Subtotal | $4,074,075 | $3,424,768 | | Less: accumulated depreciation | ($3,392,733) | ($3,225,867) | | Property, plant and equipment, net | $681,342 | $198,901 | Note 10: Leases As of September 30, 2024, the company held operating leases with $1.44 million in ROU assets and $1.48 million in liabilities, with a weighted average remaining term of 2.83 years Lease Balances (as of Sep 30, 2024) | Lease Type | ROU Assets, Net | Lease Liabilities (Current + Non-current) | | :--- | :--- | :--- | | Operating Lease | $1,441,593 | $1,479,950 | | Finance Lease | $15,915 | $16,421 | Maturity of Lease Liabilities (as of Sep 30, 2024) | Twelve months ending September 30, | Operating lease | Finance lease | | :--- | :--- | :--- | | 2025 | $294,148 | $2,648 | | 2026 | $551,533 | $5,296 | | 2027 | $517,393 | $5,296 | | 2028 | $215,580 | $4,414 | | Total lease payments | $1,578,654 | $17,654 | Note 11: Bank Loan and Loan Facilities The company had no outstanding bank loans or credit facility balances as of September 30, 2024, having ceased their use post-Nasdaq listing - The company had no outstanding loan balances as of September 30, 2024, and March 31, 2024[113][114] - The company ceased using its Bank of China (HK) line of credit facilities in May 2024 after its Nasdaq listing[115] Note 12: Taxation The company recorded an income tax benefit of $191,820, benefiting from a preferential PRC tax rate and holding significant net operating loss carryforwards in China and Hong Kong - The PRC subsidiary, CCSC Interconnect DG, qualifies as an HNTE, enjoying a 15% preferential tax rate through 2024, resulting in a tax saving of $83,039[122] - As of September 30, 2024, the company had net operating loss carryforwards of $1.41 million in PRC and $1.92 million in Hong Kong subsidiaries[127] - A valuation allowance of $114,764 was recorded against deferred tax assets of the CCSC Technology Group subsidiary in Hong Kong due to a history of net operating losses[126] Note 14: Equity The company completed its Nasdaq IPO in January 2024, raising $3.6 million in net proceeds, and subsequently adopted a dual-class share structure in September 2024 - The company completed its IPO on the Nasdaq Capital Market on January 17, 2024, with net proceeds of $3.6 million after expenses[141] - On September 10, 2024, the company adopted a dual-class share structure, creating Class A and Class B Ordinary Shares[142] Note 15: Restricted Net Assets As of September 30, 2024, $2.41 million of the company's net assets, or 20% of total consolidated net assets, were restricted by PRC regulations - As of September 30, 2024, net assets of the PRC subsidiary restricted from transfer were approximately $2,411,781, or 20% of the company's total net assets[145] Note 16: Segment Information Operating as a single segment, the company's revenue for the six months ended September 30, 2024, was primarily from 'Cable and wire harness' products ($8.60 million), with Europe as the largest market (61%) Revenue by Product (Six months ended Sep 30) | Product | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Cable and wire harness | $8,604,502 | $6,887,303 | | Connectors | $613,957 | $616,217 | | Total | $9,218,459 | $7,503,520 | Revenue by Geographic Area (Six months ended Sep 30) | Region | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Europe | $5,626,272 | $4,336,284 | | Asia | $2,736,289 | $2,388,511 | | Americas | $855,847 | $778,725 | | Total | $9,218,459 | $7,503,520 | Note 17: Revision The company revised prior period financial statements to correct an immaterial VAT accounting error, reducing prepaid assets and retained earnings by $427,746 without impacting operations or cash flows - A revision was made to correct a $427,746 overstatement of prepaid and other current assets and a corresponding overstatement of retained earnings from prior periods due to improper VAT accounting[150][151] Note 18: Subsequent Events On October 15, 2024, the company registered 2,200,000 Class A ordinary shares for issuance under its 2024 Performance Incentive Plan - On October 15, 2024, the Company registered 2,200,000 Class A ordinary shares issuable pursuant to the 2024 Performance Incentive Plan[155]