| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (a)
Principles of consolidation (b)
Use of estimates The
trade controversies between China and the United States 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. (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, 2024, the expected credit loss provision recorded in accounts receivable was $43 (2023: $554). The
Group accounts for balance sheet offsetting in accordance with ASC 210, Balance Sheet. When all the following conditions are met and
when the Group and the counterparty both consent, accounts receivable balances and account payable balances set off each other and the
Group presents the asset and liability as a net amount on the balance sheet: Each of the two parties owes the other determinable amounts,
the Group has the right to set off the amount owed with the amount owed by the other party, the Group intends to set off and the right
of set off is enforceable at law. (g)
Loan receivables (h)
Inventories (i)
Goodwill (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 and ROU
assets (other than goodwill) - At
each year end as of March 31 2022, 2023 and 2024, the Group has reviewed the long-lived assets and ROU 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 trade controversies between China and the United States and new global human and environmental rights regulations pending
or enacted. (k)
Impairment or disposal of long-lived assets and ROU assets (other than goodwill) For
the year ended March 31, 2024, as a result of the comparison, management has identified the sum of estimated undiscounted future cashflow
of long-lived assets and ROU assets are lower than their carrying values. Accordingly, an impairment loss of $335 for long-lived assets
and an impairment loss of $527 for ROU assets are recognized, which are the amounts by which the carrying values of the assets exceed
their fair value. (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 the sales of metal stamping, mechanical OEM and electric OEM products,
from the sub-contracting income from the provision of electronic products assembly service, 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. Sub-contracting
income recognition – point of time The Group’s performance obligation is to provide sub-contracting
services on electronic products assembly to one customer. When the Group satisfies a performance obligation, it will recognize as revenue
the sub-contracting income it earns from the provision of electronic products assembly service. The Group’s revenue from sub-contracting
income was nil nil Service
revenue recognition – over time The Group also provides machinery maintenance services to
customers, where revenue is recognized over time. 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, 2023 and 2024. Breakdown
of revenue recognition by product line is as follows:
Year ended March 31,
2022 2023 2024
$ $ $
Sale of products 12,351 10,201 5,503
Sub-contracting income - - 818
Maintenance service income 14 41 -
12,365 10,242 6,321 Breakdown
of revenue recognition at a point of time / overtime is as follows:
Year ended March 31,
2022 2023 2024
$ $ $
Revenue recognized at a point of time 12,351 10,201 6,321
Revenue recognized over time 14 41 -
12,365 10,242 6,321 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, 2022, 2023 and 2024 amounted to $133, $106 and $85 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, 2023 and March 31, 2024. 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, 2023 and March 31, 2024, the balances
of the contract liabilities are nil Movement
of contract liabilities are as follows:
Year ended March 31,
2023 2024
$ $
At the beginning of the year 79 -
Deposits received - 10
Recognized as revenue (78 ) -
Exchange (1 ) -
At the end of the year - 10 (n)
Retirement and other post-retirement benefits Accounting rules covering defined benefit pension plans and
other post-retirement benefits require that amounts recognized in financial statements be determined on an actuarial basis. Management
develops the actuarial assumptions used by its international defined benefit pension plan obligations based upon the circumstances of
each particular plan. The determination of the defined benefit pension plan obligations requires the use of estimates. During the year ended March 31, 2024, the Group initially recognizes
defined benefit obligation to be made by the Group to its Hong Kong employees upon the termination of services under post-retirement benefits.
The cost of providing benefits is measured using projected unit credit method with actuarial valuations to determine its present value
and service cost. The discount rate is an estimate of the interest rate at which the retirement benefits could be effectively settled.
In estimating the discount rate, the Group looks to rates of return on Hong Kong Government Bonds currently available and expected to
be available during the period to maturity of the retirement benefits. The net defined benefit liabilities recognized in the balance sheet
represent the present value of the obligation under defined benefit plan minus the fair value of plan assets. The Group carried out comprehensive
actuarial valuation at the end of reporting period. The remeasurement of the net defined benefit liabilities during a period is recognized
as cost of defined benefit plan during the period. As of March 31, 2024, $23 was recognized as defined benefit
obligation in the consolidated balance sheets as “Long term accrued expense”. Upon initiation of the plan during March 31,
2024, the amount is fully recognized as prior service cost in the consolidated statement of operations under “selling, general and
administrative expenses”. The Group also 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. Contributions are made by the Group to the MPF at a rate of 5% based on each employee’s relevant
compensation, subject to a cap of HK$1,500 (equivalent to $0.19) per month. 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. 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. (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. The
books and records of the Company’s major subsidiaries are maintained in their respective local currencies, the Hong Kong dollars,
Myanmar Kyat and Chinese Renminbi, which are also their respective functional currencies. The financial statements of the Group’s
entities of which the functional currency is not U.S. dollars are translated from their respective functional currency into U.S. dollars.
Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the rates of exchange prevailing at the
balance sheet date. Equity accounts other than earnings generated in current period are translated into U.S. dollars at the appropriate
historical rates. Income and expense items are translated into U.S. dollars at the average rates of exchange over the year. All exchange
differences arising from the translation of subsidiaries’ financial statements are recorded as a component of comprehensive income
(loss). 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,
2022 2023 2024
Items in the consolidated statement of operations:
Chinese Renminbi 6.44 6.83 7.15
Myanmar Kyat 1,729 1,995 2,103
As of March 31,
2023 2024
Balance sheet items, except for equity accounts
Chinese Renminbi 6.86 7.27
Myanmar Kyat 2,103 2,103 (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. The fair value guidance describes
three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach.
The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets
and liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement
is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that
would currently be required to replace an asset. When available, the Group uses quoted
market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure
fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as
interest rates and currency rates. (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; (b) for share options or restricted shares granted with only service conditions, using the straight-line method, over the
vesting period; and (c) for restricted shares granted with performance conditions, over the vesting period only for the portion that is
reasonably probable to vest based on the annual assessment at each reporting date. Further, ASC Topic 718 requires the Group to estimate
forfeitures in calculating the expense related to stock-based compensation. Compensation expenses recognized relating to post-vesting
cancellation or termination will not be reversed. 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. Lease payments may be fixed or variable, however, only fixed
payments or in-substance fixed payments are included in the Group’s lease liability calculation. Variable lease payments are recognized in operating expenses
in the period in which the obligation for those payments are incurred. As disclosed in note 2(k), the Group reviews its long-lived
assets and ROU assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no
longer be recoverable. The Group recognized an impairment loss of $527 on ROU assets as of March 31, 2024 (2023: nil 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, 2024. (w) Dividends Dividends paid on equity-classified awards are often
subject to the same vesting conditions as the underlying awards. Dividends are forfeited if the award is forfeited. When the dividend
is declared, the Group accounts for forfeitures when they occur and recognize a debit to retained earnings and a credit to dividend payable
for all awards. If an award is ultimately forfeited, that entry is reversed with a debit to dividends payable and a credit to retained
earnings. The reversal entry would be made in the period in which the forfeitures occur. Dividends recognized for unvested restricted shares for the
years ended March 31, 2022, 2023 and 2024 were nil nil (x) Government grants - Government grants and subsidies received by the Group for
the years ended March 31, 2022, 2023 and 2024 were nil (y) Commitments and contingencies - (z) Accounting standards issued but not adopted as of
March 31, 2024 - In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic
842): Common Control Arrangements that is intended to improve the guidance for applying Topic 842 to arrangements between entities under
common control. This ASU requires all entities (that is, including public companies) to amortize leasehold improvements associated with
common control leases over the useful life to the common control group. The standard will be effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial
statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt
them as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2023-01 is not expected to have any
impact on the Group’s consolidated financial statement presentation or disclosures. (z) Accounting standards issued but not adopted as of
March 31, 2024 In October 2023, the FASB issued Accounting Standards Update
No. 2023-06 to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily
compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements,
and align the requirements in the FASB accounting standard codification with the SEC’s regulations. The Group does not anticipate
that the adoption of this guidance will have a material impact on the consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting
(Topic 280), Improvements to Reportable Segment Disclosures, which improves the disclosures about a public entity’s reportable segments
and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The standard
shall be applied retrospectively to all prior periods presented in the financial statements. The standard is effective for fiscal years
beginning after December 15, 2023. Early adoption is permitted. A public entity should apply the amendments in this update retrospectively
to all prior periods presented in the financial statements. The Group is currently evaluating the impact of the amendments on its consolidated
financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes
(Topic 740) - Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax
rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU
requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be
adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted. Entities may apply the amendments prospectively
or may elect retrospective application. The Group is currently evaluating the impact of the amendments on its consolidated financial statements. |
