| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to allowance for uncollectible
accounts receivable and other receivable, inventory valuation and assessment of impaired securities to determine whether or not the securities
are other-than-temporarily impaired. Management believes that the estimates utilized in preparing its consolidated financial statements
are reasonable and prudent. Actual results could differ from these estimates. Risks and uncertainties The main operations of the
Company are located in Hong Kong. Accordingly, the Company’s business, financial condition, and results of operations may be
influenced by political, economic, and legal environments in Hong Kong, as well as by the general state of the economy in Hong Kong.
The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in Hong Kong.
Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations
including its organization and structure disclosed in Note 1, such experience may not be indicative of future results. The Company’s business,
financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions,
health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations. Foreign currency translation and
transaction and Convenience translation The Company’s reporting
currency is the USD. The Company’s operations are principally conducted in Hong Kong where Hong Kong dollar is the
functional currency. Transactions denominated in
other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the
transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated
into the functional currency at the prevailing rates of exchange at the balance date. The resulting exchange differences are reported
in the statements of operations and comprehensive income. The exchanges rates used for
translation from Hong Kong dollar to USD was 7.8000, a pegged rate determined by the linked exchange rate system in Hong Kong.
This pegged rate was used to translate Company’s balance sheets, income statement items and cash flow items for 2024, 2023 and 2022. Concentrations and risks Concentration Significant customers and suppliers
are those that account for greater than 10% if the Company’s revenue and purchase, respectively. During the years ended
March 31, 2024, 2023 and 2022, there were no customer generated revenue which accounted for over 10% of the total revenue generated
for that year, respectively. As of March 31, 2024 and 2023,
there were one and two customers which accounted for over 10% of the total consolidated accounts receivable, respectively. The details
are as follows:
As of
2023 2024
Customer A 15 % 4 %
Customer B 13 % 5 %
Customer C 1 % 24 % For the years ended March 31,
2024, 2023 and 2022, there were three, four and three suppliers which accounted for over 10% of the total purchases, respectively. The
details are as follows:
As of
2022 2023 2024
Supplier A 10 % 11 % 8 %
Supplier B 21 % 22 % 20 %
Supplier C# 27 % 24 % 29 %
Supplier D# 4 % 10 % 2 %
Supplier E 7 % 5 % 11 %
# Those suppliers are related to the Company As of March 31, 2024 and
2023, there were three and four suppliers which accounted for over 10% of the total consolidated accounts payable, respectively. The details
are as follows:
As of
2023 2024
Supplier A 7 % 7 %
Supplier B 18 % 13 %
Supplier C# 10 % 32 %
Supplier D# 34 % 9 %
Supplier E 11 % 17 %
# Those suppliers are related to the Company Credit Risk Credit risk is the potential
financial loss to the Company resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations
to the Company, as and when they fall due. As the Company does not hold any collateral, the maximum exposure to credit risk is the carrying
amounts of accounts and other receivables (exclude prepayments), notes receivable, investment in marketable debt securities, due from
related parties and cash and bank deposits and restricted cash presented on the consolidated statements of financial position. The Company
has no other financial assets which carry significant exposure to credit risk. Interest Rate Risk The Company is exposed to interest
rate risk primarily relates to the variable-rate bank loans and is mainly concentrated on the fluctuation of Hong Kong Prime Rate
arising from the Company’s bank loans. The Company has not used any derivative instruments to mitigate its exposure associated with
interest rate risk. Liquidity Risk Liquidity risk is the risk
that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering
cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Company’s reputation. Typically, the Company ensures
that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial
obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Labor Price Risk Our business requires a substantial
number of personnel. Any failure to retain stable and dedicated labor by us may lead to disruption to our business operations. Although
we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market.
We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits and employee
headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer
competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial
condition and results of operations may be materially and adversely affected. Fair Value Measurement Accounting guidance defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted
to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers
assumptions that market participants would use when pricing the asset or liability. Accounting guidance establishes
a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure
fair value:
● Level 1: Quoted prices in active markets for identical assets or liabilities.
● Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical asset or.
● Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company’s financial
instrument include cash and cash equivalents, restricted cash, accounts receivable, investment in marketable debt securities, other current
assets, notes receivable, accounts payable, accruals and other current liabilities, dividends payable, bank loans, lease liabilities
and due from and to related parties. The carrying amounts of these financial instruments approximate their fair values due to the short-term
nature of these instruments. For lease liabilities, fair value approximates their carrying value at the year end as the interest rates
used to discount the host contracts approximate market rates. The carrying amount of the long-term bank loan approximates its fair value
due to the fact that the related interest rate approximates the interest rates currently offered by financial institutions for similar
debt instruments of comparable maturities. Investment in marketable debt
securities measured at fair value are classified in accordance with a valuation hierarchy that reflects the significance of the inputs
used in determining their fair value, as per ASC 820 Fair Value Measurement as below:
Total Quoted Significant Significant
USD USD USD USD
March 31, 2023
Investment in marketable debt securities 243,284 243,284 — —
Total investment in marketable debt securities 243,284 243,284 — —
Total Quoted Significant Significant
USD USD USD USD
March 31, 2024
Investment in marketable debt securities 2,275 2,275 — —
Total investment in marketable debt securities 2,275 2,275 — — There were no transfers of
marketable debt securities between Level 1, Level 2, and Level 3 during the years ended March 31, 2023 and 2024. Related Parties The Company adopted ASC 850,
Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Cash and Cash Equivalents Cash and cash equivalents consist
of petty cash on hand and cash held in banks, which are highly liquid and have original maturities of three months or less and are
unrestricted as to withdrawal or use. The Company maintains all bank accounts in Hong Kong. Cash balances in bank accounts in Hong Kong
are protected under Deposit Protection Scheme in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up
to HK$500,000 per depositor per Scheme member, including both principal and interest. Restricted cash The restricted cash balance
as of March 31, 2024 was USD$1 million and relates to amounts held in escrow accounts to secure post-closing indemnification obligations
of the Company pursuant to the agreement between underwriter and legal adviser respectively. The escrow account was held in The Hong
Kong and Shanghai Banking Corporation Limited for 12 month period following the closing date January 26, 2024 of the listing. Accounts Receivable Net Accounts receivable represent
trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss. The
Company grant credit to customers, without collateral, under normal payment terms (typically 0 to 30 days after invoicing). Generally,
invoicing occurs together with the products were delivered. The carrying value of such receivables, net of expected credit loss, represents
its estimated realizable value. The Company expect to collect the outstanding balance of current accounts receivables, net within one year. The Company use loss-rate methods to estimate allowance for credit loss. For those past due balances
over 1 year and other higher risk receivables identified by management are reviewed individually for collectability. In establishing an
allowance for credit losses, the Company use reasonable and supportable information, which is based on historical collection experience,
the financial condition of its customers and assumptions for the future movement of different economic drivers and how these drivers will
affect each other. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes
off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not
be collected or if a settlement with respect to a disputed receivable is reached for an amount that is less than the carrying value. Notes receivable Notes receivable represents
bank or commercial drafts that have been arranged with third-party financial institutions by certain customers to settle their purchases
from the Company. These notes with two to three months maturity dates were issued by Shanghai Commercial Bank Limited to repay customer’s
balance to the Company which bears no interest and no discounted or transferred before maturity during the year ended March 31, 2023 and
2024. All notes receivable has been received subsequently. Inventories Inventories are valued using
the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments
to inventory for excess quantities, obsolescence, or impairment, when appropriate, to reflect inventory at net realizable value. These
adjustments are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis
and expected realizable value of the inventory. Investment in marketable debt securities We have designated the Company’s
investments in certain marketable debt securities as available for sale. Available for sale securities are reported at fair
value with unrealized gains or losses recorded as a component of other comprehensive income. Interest income is recorded on an accrual
basis. Discounts and premiums to the face amount of debt securities are accreted and amortized using the effective interest rate method
over the lives of the respective debt securities. In any case where fair value
might fall below amortized cost, we would consider whether that security is other than temporarily impaired using all available information
about the collectability of the security. We would not consider that an other than temporary impairment for a debt security has occurred
if (1) we do not intend to sell the debt security, (2) it is not more likely than not that we will be required to sell the debt
security before recovery of its amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized
cost of the security. We would consider that an other than temporary impairment has occurred if any of the above mentioned three conditions
are not met. For a debt security for which
an other than temporary impairment is considered to have occurred, we would recognize the entire difference between the amortized cost
and the fair value in earnings if we intend to sell the debt security or it is more likely than not that we will be required to sell the
debt security before recovery of its amortized cost basis. If we do not intend to sell the debt security and it is not more likely than
not that we will be required to sell the debt security before recovery of its amortized cost basis, we would separate the difference between
the amortized cost and the fair value of the debt security into the credit loss component and the noncredit loss component. The credit
loss component would be recognized in earnings and the noncredit loss component would be recognized as a component of other comprehensive
income. Deferred Offering Costs Deferred offering costs consist
principally of all direct offering costs incurred by the Company, such as underwriting, legal, accounting, consulting, printing, and other
registration related costs in connection with the initial public Offering (“IPO”) of the Company’s ordinary shares.
The deferred costs are offset against the offering proceeds upon the completion of the IPO during the year. Property, plant and equipment Property, plant and equipment
is stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Subsequent costs are included
in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance
are charged to the consolidated statements of operations and comprehensive income during the financial period in which they are incurred. Property, plant and equipment
is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives at the
annual rate as follows:
Estimated
Building 2 %
Plant and machinery 20 %
Furniture and fixtures 20 %
Motor vehicles 20 % The assets’ useful lives
are reviewed, and adjusted if appropriate, at the end of each reporting period. An item of property, plant
and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the item) is included in consolidated statements of operations and comprehensive income in the period in which the item is derecognized. Gains or losses on disposals
are determined by comparing proceeds with carrying amount and are recognized within “Other income (expense)” in the consolidated
statements of operations and comprehensive income. Impairment of long lived assets The Company accounts
for impairment of long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360, Property, Plant
and Equipment. (“ASC 360”). Long-lived assets consist primarily of property, plant and equipment. In accordance
with ASC 360, the Company evaluates the carrying value of long-lived assets when it determines a triggering event has occurred,
or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When indicators
exist, recoverability of assets is measured by a comparison of the carrying value of the asset group to the estimated undiscounted
future net cash flows expected to be generated by the asset. Examples of such triggering events include a significant disposal of a
portion of such assets, and adverse change in the market involving the business employing the related assets. If such assets are
determined not to be recoverable, the Company performs an analysis of the fair value of the asset group and will recognize an
impairment loss when the fair value is less than the carrying amounts of such assets. The fair value, based on reasonable and
supportable assumptions and projections, require subjective judgments. Depending on the assumptions and estimates used, the
appraised fair value projected in the evaluation of long-lived assets can vary within a range of outcomes. The Company considers the
likelihood of possible outcomes in determining the best estimate for the fair value of the assets. The Company did not record any
impairment charges for the years ended March 31, 2023 and 2024. There can be no assurance that future events will not have
impact on company revenue or financial position which could result in impairment in the future. Contract liabilities Contract liabilities were recognized
when the Company receives prepayment from customers resulting from purchase order. Contract liabilities will be recognized as revenue
when the products are shipped or delivered according to contract term. Contract liabilities were USD260,132 USD360,475 USD226,761 Commitments and contingencies In the normal course of business,
the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of
matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated. If the assessment of a contingency
indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability
is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not
probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered
remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Revenue recognition The Company complies with ASC
Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”) for revenue recognition. Based on the requirements
of ASC Topic 606, revenue is recognized when control of the promised goods or services is transferred to the customers in an amount
that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. The Company offer
a wide range of apparel solution services to cater to the customers’ needs for reflective and non-reflective garment trims, ranging
from market trend analysis, product design and development and production to quality control. Revenue is recognized when the following
5-step revenue recognition criteria are met:
1) Identify the contract with a customer
2) Identify the performance obligations in the contract
3) Determine the transaction price
4) Allocate the transaction price
5) Recognize revenue when or as the entity satisfies a performance
obligation Revenue
from product sales is recognized at the point in time control of the products is transferred, generally upon customer receipt based upon
the standard contract terms. Shipping and handling activities are considered to be fulfillment activities rather than promised services
and are not, therefore, considered to be separate performance obligations (cost, insurance and
freight) and DAP (delivered at place) price term In determining the transaction
price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company
expects to be entitled. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient
under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company generally requests customer to check
the goods within 7 days upon receipt and do not accept shortage or claim beyond that period. Further, the Company’s liability is
limited to either a credit equal to the purchase price or replacement of the defective part. For the years ended March 31, 2024,
2023 and 2022, the Company was not aware of any material claims against the Company in relation to defective products, nor any material
product returns from the Company’s customers. As such, the Company does not record a specific warranty reserve or consider activities
related to such warranty, if any, to be a separate performance obligation. The Company typically incurs
incremental costs to acquire customer contracts related to the Company’s sales in the form of sales commissions; however, because
the expected benefit from these contracts is less than one year,the Company follows the ASC Topic 606 practical expedient and expenses
these amounts as incurred. Disaggregation of revenue The Company disaggregates its
revenue by sales term, product categories, and geographic areas which the Company believes best depicts how the nature, amount, timing,
and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the years
ended March 31, 2024, 2023 and 2022 is as following: Revenues by sales term
For the year ended
2022 2023 2024
USD USD USD
CIF 86,453 154,702 141,728
CNF/CFR 1,189,002 3,373,730 751,136
EX WORK 31,196,398 31,912,608 22,159,531
DAP 2,752,862 865,744 2,382,159
FOB 3,067,697 1,985,613 2,944,115
Total Revenues 38,292,412 38,292,397 28,378,669 Revenues by product categories
For the year ended
2022 2023 2024
USD USD USD
Heat Transfers 25,225,769 26,351,727 20,214,664
Fabrics 4,367,087 5,036,939 3,334,810
Woven Labels and Tapes 3,522,661 1,671,058 975,868
Sewing Badges 1,750,529 1,259,289 757,465
Piping 835,951 672,075 446,701
Zipper Pullers 1,364,567 657,601 451,703
Drawcords 89,677 176,751 185,683
Non-Reflective Film - - 898,252
Others 1,136,171 2,466,957 1,113,523
Total Revenues 38,292,412 38,292,397 28,378,669 Revenue by geographic areas
For the year ended
2022 2023 2024
USD USD USD
Asia (excluded Hong Kong and China) 13,677,980 13,618,640 12,481,669
Hong Kong 14,822,478 12,536,891 8,117,692
China 5,096,557 3,900,174 2,770,967
Non-Asia 4,695,397 8,236,692 5,008,341
38,292,412 38,292,397 28,378,669 Cost of sales Cost of products sold is primarily
comprised of direct materials and sub-contractor fee. Cost of products sold also includes the cost for products inspection, lease expense
for warehouse, packing and design. Selling and marketing expenses Selling expenses mainly consists
of commission paid, out-bound shipping cost, travel expenses, exhibition and promotion fees, and staff costs. General and administrative expenses General
and administrative expenses mainly consist of administrative , depreciation of property, plant and equipment, and other miscellaneous administrative
expenses. Leases The Company determines whether
an arrangement is or contain a lease at inception. A lease for which substantially all the benefits and risks incidental to ownership
remain with the lessor is classified by the lessee as an operating lease. All leases of the Company are currently classified as operating
leases. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liability, current,
and operating lease liability, non- current in the Company’s consolidated balance sheets. ROU assets represent the Company’s
right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from
the lease. The operating lease ROU assets and lease liabilities are recognized at lease commencement date based on the present value of
lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental
borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The operating
lease ROU assets also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options
to extend or terminate the lease. Renewal options are considered within the ROU assets and lease liabilities when it is reasonably certain
that the Company will exercise that option. Lease expenses for lease payments are recognized on a straight-line basis over the lease term. For operating leases with a
term of one year or less, the Company has elected not to recognize a lease liability or ROU asset on its consolidated balance sheets.
Instead, it recognizes the lease payments as expenses on a straight-line basis over the lease term. The Company has operating lease agreements
with insignificant non-lease components and have elected the practical expedient to combine and account for lease and non-lease components
as a single lease component. Income taxes The Company accounts for income
taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The provisions of ASC 740-10-25,
“Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement
recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance
on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting
for interest and penalties associated with tax positions, and related disclosures. The Company did not accrue
any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line of its consolidated
statements of income for the years ended March 31, 2024, 2023 and 2022, respectively. The Company does not expect that
its assessment regarding unrecognized tax positions will materially change over the next 12 months. Earnings per share Basic earnings per share is
computed by dividing net earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding
during the year. Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average
number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares are not included in the
denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive. Recent accounting pronouncements The Company is an “emerging
growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until
such time as those standards apply to private companies. Other accounting standards
that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated
financial statements upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are
unrelated to its consolidated financial condition, results of operations, cash flows or disclosures. |
