Skillful Craftsman(US:EDTK)2025-08-08 20:31VIE Contributions and Financial Impact - The VIE contributed 91%, 100%, and 13% of the consolidated revenue for the fiscal years ended March 31, 2023, 2024, and 2025, respectively[40]. - As of March 31, 2023, the VIE accounted for 82% of the consolidated assets and 92% of the consolidated liabilities[40]. - The VIE structure was deconsolidated on March 17, 2025, contributing 0% of the consolidated assets and liabilities as of March 31, 2025[40]. - Total revenue for the year ended March 31, 2025, was $1,024,305, a significant decrease from $1,999,056 in the previous year[41]. - Gross income for the year ended March 31, 2025, was a loss of $567,912, compared to a gross income of $169,387 for the year ended March 31, 2024[41]. - The company reported a net income loss of $7,581,452 for the year ended March 31, 2025, compared to a net income loss of $4,722,146 for the year ended March 31, 2024[41]. - Total operating expenses increased to $2,465,299 for the year ended March 31, 2025, from $2,186,191 in the previous year[41]. - The impairment loss for the year ended March 31, 2025, was $1,819,678, significantly impacting overall financial performance[41]. - The share of profit in subsidiaries and VIE resulted in a loss of $7,581,452 for the year ended March 31, 2025, compared to a loss of $4,629,553 in the previous year[41]. - Total comprehensive income for the year ended March 31, 2025, was a loss of $7,473,754, compared to a loss of $5,455,685 for the year ended March 31, 2024[41]. Cash Flow and Dividend Policies - Cash paid by the VIE to the WOFE was $12,173 in 2024, while cash paid by the WOFE to the VIE was $2,488 in the same year[31]. - Cumulatively, the WOFE transferred RMB 4.0 million (approximately $582,098) to the VIE by the end of March 31, 2025, as repayment of the VIE's loan[31]. - The company has never declared or paid any dividends on its ordinary shares and does not anticipate doing so in the future[38]. - Current PRC regulations permit the WOFE to pay dividends only out of its accumulated profits, which are subject to certain reserve fund requirements[35]. - The company relies on dividend payments from Craftsman Wuxi to fund cash and financing requirements[35]. Assets and Liabilities - Total assets as of March 31, 2025, amounted to $15,257,761, a decrease from $36,323,083 as of March 31, 2024[43][44]. - Current assets totaled $1,396,098 as of March 31, 2025, compared to $18,874,823 as of March 31, 2024, reflecting a significant decline[43][44]. - Cash and cash equivalents were $1,217,968 as of March 31, 2025, down from $17,832,991 as of March 31, 2024, indicating a reduction of approximately 93.2%[43][44]. - Total liabilities as of March 31, 2025, were $1,511,786, a decrease from $14,824,526 as of March 31, 2024[43][44]. - Shareholders' equity stood at $13,745,975 as of March 31, 2025, compared to $21,498,557 as of March 31, 2024, representing a decline of approximately 36.1%[43][44]. - The company reported accumulated deficits of $4,232,288 as of March 31, 2025, compared to $13,522,922 as of March 31, 2024[43][44]. Regulatory and Compliance Challenges - The company is subject to various regulatory requirements, including the Cybersecurity Law of the PRC, which mandates that personal information must be stored within China[61]. - The company has implemented a complaint and reporting system for network information security to comply with existing laws and regulations[59]. - The Data Security Law of the PRC, effective September 2021, imposes strict regulations on data handling activities, with potential penalties for non-compliance[58]. - The company faces significant challenges regarding cybersecurity and data privacy, including the storage and transmission of confidential user information[57]. - Increased regulation of data privacy in China may affect the company's operations and compliance costs[54]. Market and Competitive Landscape - The company is transitioning to educational technology innovation and AI skills training, emphasizing the importance of attracting new customers for future growth[48]. - The company faces significant competition in the AI skills training sector, which may impact its market share and profitability[50]. - Fluctuations in operating results may occur due to various factors, including customer acquisition and market conditions in China[49]. Corporate Governance and Shareholder Rights - The dual-class share structure allows the holder of Series A Preference Shares to have significant control over corporate matters, potentially limiting the influence of ordinary shareholders[166]. - Mr. Bin Fu, the Chairman and CEO, holds 76.2% of the voting power, significantly influencing corporate decisions, which may not align with other shareholders' interests[170]. - The company has adopted anti-takeover provisions that may limit shareholders' opportunities to sell shares at a premium[179]. - Shareholders have limited rights under Cayman Islands law to inspect corporate records, which may hinder their ability to gather necessary information[183]. Future Growth and Strategic Initiatives - The company plans to terminate the VIE Agreements effective March 17, 2025, due to decreased demand and changes in the market environment for online education services in China[204]. - Following the termination of the VIE Agreements, the company will no longer control the VIE and its subsidiaries, shifting its business focus primarily through Jisen Information[205]. - In November 2024, the company established Giga Learning as a wholly-owned subsidiary in the United States to explore market opportunities in educational technology[208]. - The Company launched the 'Sesame Chat' app on iOS platforms in China, utilizing proprietary AI technology for communication enhancement[216]. - The Company established a 75% owned subsidiary in Singapore, Le First Skillland Pte. Ltd, to support global business development in vocational education[217].