| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles
of consolidation (b) Use of estimates The COVID-19 pandemic
and the political unrest in Myanmar have created and may continue to create significant uncertainty in macroeconomic conditions, which
may cause further business slowdowns and adversely impact the Group’s results of operations. While operations at the Myanmar factory
have mostly returned to the pre-political unrest level, the COVID-19 pandemic has forced brief closure of one week for the Group’s
factories in Yangon, Myanmar and Shenzhen, China in July 2021 and March 2022, respectively. For fiscal 2021, the factory in Myanmar was
closed for about two weeks in March 2021 because of COVID-19. These closures did not have significant impact on the Group’s results
of operations. (b) Use of estimates (c) Investments
under equity method When the estimated amount to be realized
from the investments falls below its carrying value, an impairment charge is recognized in the consolidated statements of operations when
the decline in value is considered other than temporary. (d) Cash and cash equivalents Cash equivalents are
placed with financial institutions with high credit ratings and quality. (e) Time deposits (f) Accounts
receivable - (f) Accounts receivable To estimate expected credit losses,
the Group has identified the relevant risk characteristics of its customers and the related receivables, other current assets (note 7)
and loan receivables which include size, type of the services or the products the Group provides, or a combination of these characteristics.
Receivables with similar risk characteristics have been grouped into pools. For each pool, the Group considers the past collection experience,
current economic conditions, future economic conditions (external data and macroeconomic factors) and changes in the Group’s customer
collection trends. Other key factors that influence the expected credit loss analysis include customer demographics, payment terms offered
in the normal course of business to customers, and industry-specific factors that could impact the Group’s receivables. Additionally,
external data and macroeconomic factors are also considered. This is assessed at each quarter based on the Group’s specific facts
and circumstances. No significant impact of changes in the assumptions since adoption. As of March 31, 2022, the expected credit loss
provision recorded in accounts receivable was $51 (2021: $ nil (g) Loan receivables (h) Inventories (i) Goodwill (i) Goodwill The gross amount of
goodwill and accumulated impairment losses as of March 31, 2021 and 2022 are as follows:
Kayser
Myanmar
$
Gross as of April 1, 2020, March 31, 2021 and 2022 77
Accumulated impairment loss as of April 1, 2020 (77 )
Accumulated impairment loss as at March 31, 2021 and 2022 (77 )
Net as of March 31, 2021 and 2022 - (i) Goodwill As a result of the two-step impairment
test, the Group has recognized a $77 impairment loss of Kayser Myanmar goodwill in selling, general and administrative expenses during
the year ended March 31, 2019, due to margin and revenue from contracts from customers declines as well as the lower growth and margin
expectation. No impairment expenses were recognized
during the years ended March 31, 2020, 2021 and 2022. (j) Property,
plant and equipment (k) Impairment
or disposal of long-lived assets (other than goodwill) - (k) Impairment
or disposal of long-lived assets (other than goodwill) As a result of the comparison, management
has identified the sum of expected undiscounted cashflow of multiple types of machinery and equipment are more likely than not below their
fair value. The Group did not recognize any impairment of long-lived assets during the years ended March 31, 2020, 2021 and 2022. The
impairment has been recorded in cost of sales and selling, general and administrative expenses, based on the nature of the impaired long-lived
assets. (l) Concentration
of credit risk The risks with respect to accounts receivables
are mitigated by credit evaluations performed on the customers or debtors and ongoing monitoring of outstanding balances. (m) Revenue recognition Product revenue recognition The Group’s revenue from contracts
with customers is derived from product revenue principally from the sales of metal stamping and mechanical OEM and electric OEM products
directly to other consumer electronics product manufacturers. The Group sell goods to the customer under sales contracts or by purchase
orders. The Group has determined there to be one performance obligation for each of the sales contracts and purchase orders. The performance
obligations are considered to be met and revenue is recognized when the customer obtains control of the goods. The Group has two major
goods delivery channels, included:
(1) Delivering goods to customers’ predetermined location, the Group has satisfied the contracts’
performance obligations when the goods have been delivered and relevant shipping documents have been collected by the Group; and
(2) Picking up goods by customers in the Group’s warehouse, the Group has satisfied the contracts’
performance obligations when the goods have been picked up and the acceptance document has been signed by the customers. The Group did not recognize any revenue
from contracts with customers for performance obligations satisfied overtime during the years ended March 31, 2020, 2021 and 2022. The transaction price is generally in
the form of a fixed price which is agreed with the customer at contract inception. The transaction price is recorded net of sales return,
surcharges and value-added tax of gross sales. The Group has allocated the transaction price to each performance obligation based on the
sales contracts and purchase orders. Normally, the Group would request a
deposit from certain customers upon receiving the purchase order and issue bills to customers upon transfer control of goods and relevant
acceptance documents have been collected. Customers’ deposits would be settled part of the outstanding bill upon receiving an acknowledgement
from customers. For the remaining balance of outstanding bills, Customers are required to pay over an agreed upon credit period, usually
between 30 to 75 days. During fiscal 2022, the Group deviated from its customary credit terms and entered into a contractual deferred
payment arrangement with a new significant customer. Under the agreement, the customer has provided the Group with collateral for the
rolling credit facility (see note 14). Return Rights The Group does not provide its customers
with the right of return (except for product quality issue) or production protection. Customer is required to perform product quality
check before acceptance of goods delivery. The Group did not recognize for any refund liability according to the product return on the
consolidated balance sheets. Value-added taxes and surcharges The Group presents revenue net of VAT
and surcharges incurred. The surcharge is sales related taxes representing the City Maintenance and Construction Tax and Education Surtax.
The Group incurs expenses or pays fees to external delivery service providers, respectively, and records such expenses and fees like shipping
and handling expenses. Total VAT and surcharges paid by the Group during the years ended March 31, 2020, 2021 and 2022 amounted to $90,
$121 and $133 respectively. Principals vs. agent accounting The Group records all product revenue
on a gross basis. To determine whether the Group is an agent or principal in the sale of products, the Group considers the following indicators:
the Group is primarily responsible for fulfilling the promise to provide the specified goods or services, is subject to inventory risks
before the specified goods have been transferred to a customer or after transfer of control to the customers, and has discretion in establishing
the price of the specified goods. Disaggregation of revenue The Group disaggregates its revenue
from different types of contracts with customers by principal product categories, as the Group believes it best depicts the nature, amount,
timing and uncertainty of its revenue and cash flows. See note 21 for product revenues by segment. Contract balances The Group did not recognize any contract
asset as of March 31, 2021 and March 31, 2022. The timing between the recognition of revenue and receipt of payment is not significant. The
Group’s contract liabilities consist of deposits received from customers. As of March 31, 2021 and March 31, 2022, the balances
of the contract liabilities are $72 and $79 including deposits received from customers. All contract liabilities at the beginning of
the year ended March 31, 2022 were recognized as revenue during the year ended March 31, 2022 and all contract liabilities as of year
ended March 31, 2022 are expected to be realized in the following year. Movement of contract liabilities are
as follows:
Year ended March 31,
2021 2022
$ $
At the beginning of the year 39 72
Deposits received 57 71
Recognized as revenue (26 ) (65 )
Exchange 2 1
At the end of the year 72 79 (n) Retirement and other post-retirement
benefits The Group operates a Mandatory Provident
Fund (“MPF”) scheme for all qualifying employees in Hong Kong. The MPF is a defined contribution scheme and the assets of
the scheme are managed by a trustee independent of the Group. The MPF is available to all employees aged 10 to 64 with a least 60 days
of service under the employment of the Group in Hong Kong. Contributions are made by the Group to a cap of HK$1,500 (equivalent to $0.19
per month). Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $99, $88 and $95 for
the years ended March 31, 2020, 2021 and 2022, respectively. Full time employees of the Company in
the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee
housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiary of the Company
make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up to a maximum
amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions made. Total amounts
of such employee benefit expenses, which were expensed as incurred, were approximately $124, $75 and $102 for the years ended March 31,
2020, 2021 and 2022, respectively. The Group was required registration
of its employee in Myanmar with the Social Security Board. Contributions are made by the Group to the social security plan at a rate of
3% based on each employee’s relevant compensation, subject to a cap of 9,000 Kyat (equivalent to $0.005) per month. Total amounts
of such employee benefit expenses, which were expensed as incurred, were approximately $8, $6 and $4 for the years ended March 31, 2020,
2021 and 2022, respectively. (o) Foreign currency translations
and transactions (o) Foreign currency
translations and transactions (p) Income taxes The Group recognizes
the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions
are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected
in the period in which the change in judgment occurs. The Group records interest related to unrecognized tax benefits and penalties, if
any, within income tax expenses. (q) Net income (loss) per share Diluted net income (loss) per share
is computed similar to basic net income per share except that the denominator is increased to include the number of additional common
shares that would have been outstanding if all the potential common shares pertaining to stock options and similar instruments had been
issued and if the additional common shares were dilutive. Diluted net income
(loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution
is computed by applying the treasury stock method for the outstanding unvested restricted stock and options, and the if-converted method
for the outstanding convertible instruments. Under the treasury stock method, options are assumed to be exercised at the beginning of
the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market
price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock
at the beginning of the period (or at the time of issuance, if later). Anti-dilutive potential ordinary shares
are not considered in the calculation of the diluted earnings per share. Potential ordinary shares are anti-dilutive when the conversion
of ordinary shares increases the earnings per share or decreases the net loss per share. (r) Comprehensive income (loss) The Group presents
the components of net income (loss), the components of other comprehensive income (loss) and total comprehensive income (loss) in two
separate but consecutive statements. (s) Fair value
measurement and financial instruments
● Level 1 applies to assets or liabilities for
which there are quoted prices in active markets for identical assets or liabilities.
● Level 2 applies to assets or liabilities for
which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical asset or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
● Level 3 applies to assets or liabilities for
which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets
or liabilities. Determining which category an asset
or liability falls within the hierarchy requires significant judgment. The carrying amounts
of financial instruments, which consist of cash and cash equivalents, time deposits, accounts receivable, other current assets, accounts
payable and other liabilities approximate their fair values due to the short-term nature of these instruments. (t) Non-controlling interest (u) Stock-based compensation The fair value of each option award
is estimated on the date of grant using the Black-Scholes Option Valuation Model, and recognized as expenses (a) immediately at the grant
date if no vesting conditions are required; and (b) for share options or restricted shares granted with only service conditions, using
the straight-line vesting method, over the vesting period. The expected volatility was based on the historical volatilities of the Company’s
listed common stocks in the United States and other relevant market information. The Group uses historical data to estimate share option
exercises and employee departure behavior used in the valuation model. The expected terms of share options granted is derived from the
output of the option pricing model and represents the period of time that share options granted are expected to be outstanding. Since
the share options once exercised will primarily trade in the U.S. capital market, the risk-free rate for periods within the contractual
term of the share option is based on the U.S. Treasury yield curve in effect at the time of grant. Details of grants of restricted shares
to non-employee consultants after the effectiveness of ASU 2018-07 -Compensation - stock compensation (Topic 718) - Improvements to nonemployee
share-based payment accounting are disclosed in note 20. (v) Leases The Group determines if a contract contains
a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset which
the Group does not own and whether it has the right to direct the use of an identified asset in exchange for consideration. Right of use
(“ROU”) assets represent the Group’s right to use an underlying asset for the lease term and lease liabilities represent
the Group’s obligation to make lease payments arising from the lease. ROU assets are recognized as the amount of the lease liability,
adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease
commencement date. The interest rate used to determine the present value of the future lease payments is the Group’s incremental
borrowing rate (“IBR”), because the interest rate implicit in most of the Group’s leases is not readily determinable. (v) Leases Variable lease payments are recognized
in operating expenses in the period in which the obligation for those payments are incurred. The Group recognized no impairment
of ROU assets as of March 31, 2022 and March 31, 2021. The operating lease is included in operating
lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current in the consolidated balance
sheets at March 31, 2022 and March 31, 2021. (w) Dividends (x) Recently Adopted Accounting Standards In August 2020, the FASB issued ASU
2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).
ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models.
Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that
is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification
will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings
per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. (x) Recently Adopted Accounting Standards In March 2020, the FASB issued ASU 2020-04,
Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related
activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over
time as reference rate reform activities occur. The Company applied the new standard beginning April 1, 2021 and the adoption did not
have a material impact on the Group’s financial statements. (y) Accounting standards issued but
not adopted as of March 31, 2022 - (y) Accounting standards issued but
not adopted as of March 31, 2022 - |
