| 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. For COVID-19 pandemic, its impact on
the Group was generally less significant when compared to previous years. However, any new events or policies on COVID-19 pandemic may
affect the Group’s operations in the future. (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 credit ratings and quality where the Group considers acceptable. (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, 2023, the expected credit loss
provision recorded in accounts receivable was $554 (2022: $51). (g) Loan receivables (h) Inventories (i) Goodwill No impairment expenses were recognized
during the years ended March 31, 2021, 2022 and 2023. (j) Property,
plant and equipment The cost and
accumulated depreciation of property, plant and equipment disposed of or sold are removed from the consolidated balance sheets and resulting
gains and losses are recognized in the consolidated statements of operations. (k) Impairment
or disposal of long-lived assets (other than goodwill) - During the years ended 2021, 2022 and 2023, the Group has
reviewed the long-lived assets for impairment, since there are several indicative events and factors identified, including (1) significant
adverse changes in the business climate, including the possible negative impact of political unrest in Myanmar, (2) operating and/or cash
flow losses, and (3) negative impact on business operations as a result of COVID-19 pandemic and new global human and environmental rights
regulations pending or enacted. Management has compared the carrying value of the long-lived asset to the estimated undiscounted operating
cash flow based on the above factors. (k) Impairment
or disposal of long-lived assets (other than goodwill) (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 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 and from the provision of machinery maintenance services. Product revenue recognition – point of time 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. Revenue
is recognized at that point of time. 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. Service revenue recognition – over time The Group also provides machinery maintenance services to customers,
where revenue is recognized over time. The Group did not recognize any revenue from contracts with customers for performance obligations
satisfied over time during the year ended March 31, 2021. The Group recognized certain revenue from contracts with customers for performance
obligations satisfied over time, consisting principally of machinery maintenance service income, during the years ended March 31, 2022
and 2023. Breakdown of revenue recognition by
product line is as follows:
Year ended March 31,
2021 2022 2023
$ $ $
Sale of products 9,168 12,351 10,201
Maintenance service income - 14 41
9,168 12,365 10,242 Breakdown of revenue recognition at
a point of time / over time is as follows:
Year ended March 31,
2021 2022 2023
$ $ $
Revenue recognized at a point of time 9,168 12,351 10,201
Revenue recognized over time - 14 41
9,168 12,365 10,242 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 15). However, the Group has not been able to obtain the valuations of the collateral. Accordingly, no
value was assigned to the collateral when assessing the provision level of this customer. 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, 2021, 2022 and 2023 amounted to $121,
$133 and $106 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 22 for product revenues by segment. Contract balances The Group did not recognize any contract
asset as of March 31, 2022 and March 31, 2023. 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, 2022 and March 31, 2023, the balances
of the contract liabilities are $79 and nil Movement of contract liabilities are
as follows:
Year ended March 31,
2022 2023
$ $
At the beginning of the year 72 79
Deposits received 71 -
Recognized as revenue (65 ) (78 )
Exchange 1 (1 )
At the end of the year 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 both the Group and the employee to a cap of HK$1,500
(equivalent to $0.19 per month) each by the Group and by the employee respectively. Total amounts of such employee benefit expenses, which
were expensed as incurred, were approximately $44, $48 and $52 for the years ended March 31, 2021, 2022 and 2023, respectively. Full time employees of the Group 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 Group
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 Group 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 $75, $102 and $90 for the years ended March 31,
2021, 2022 and 2023, 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 $0.004) per month. Total amounts
of such employee benefit expenses, which were expensed as incurred, were approximately $6, $4 and $4 for the years ended March 31, 2021,
2022 and 2023, respectively. (o) Foreign currency
translations and transactions Non-monetary assets
and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rates prevailing
on the transaction dates. The transaction date is the date on which the Group initially recognizes such non-monetary assets and liabilities.
Non-monetary assets and liabilities that are stated at fair value are translated using the exchange rates prevailing at the dates the
fair value is measured. The resulting exchange differences are recognized in accumulated other comprehensive income/loss. (o) Foreign currency
translations and transactions Exchange rates used
to translate amounts in Chinese Renminbi and Myanmar Kyat into the U.S. dollars, the reporting currency are as follows:
Year ended March 31,
2021 2022 2023
Items in the consolidated statement of operations:
Chinese Renminbi 6.83 6.44 6.83
Myanmar Kyat 1,365 1,729 1,995
As of March 31,
2022 2023
Balance sheet items, except for equity accounts
Chinese Renminbi 6.35 6.86
Myanmar Kyat 1,768 2,103 Chinese Renminbi and
Myanmar Kyat are not fully convertible currencies. Any restrictions on currency exchange may limit the Group’s ability to convert
Chinese Renminbi and Myanmar Kyat into U.S. dollars or Hong Kong dollars or vice versa. (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 (loss) income per share Diluted net (loss) income 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 (loss)
income 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 (loss) income The Group presents
the components of net (loss) income, the components of other comprehensive (loss) income and total comprehensive (loss) income 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 On February 24, 2023, the Group’s non-wholly owned
dormant subsidiary, Advanced Clean Innovation Asia (“ACIA”) Limited, was de-registered. Gain or loss on deregistration is
calculated as follows:
$
Net liability of ACIA as of April 1, 2022 (4 )
Share of 49% by non-controlling interest as of April 1, 2022 (2 )
Share of profit by non-controlling interest for the year ended March 31, 2023 2
Gain or loss on deregistration (0 ) (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 21. (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, 2023 and March 31, 2022. 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, 2023 and March 31, 2022. (w) Dividends (x) Government grants - (y) Commitments and contingencies
- (z) Recently Adopted Accounting Standards In November 2021, the FASB issued ASU
2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires certain
annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by
analogy. The Company applied the new standard beginning April 1, 2022 and the adoption did not have a material impact on the Group’s
consolidated financial statements (see note 12). (aa) Accounting standards issued
but not adopted as of March 31, 2023 - (aa) Accounting standards issued
but not adopted as of March 31, 2023 In March 2023, the FASB issued ASU No.
2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the
Proportional Amortization Method, that is intended to improve the accounting and disclosures for investments in tax credit structures.
This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method,
regardless of the program giving rise to the related income tax credits. For public business entities, the amendments are effective for
fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption
is permitted for all entities in any interim period. The adoption of ASU 2023-02 is not expected to have any impact on the Group’s
consolidated financial statement presentation or disclosures. |
