Exhibit 99.2
TOP Financial Group Limited
Condensed Consolidated Balance Sheets
(Expressed in U.S. Dollars, except for the number of shares)
| September
30, 2024 | March
31, 2024 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Receivables from broker-dealers and clearing organizations | ||||||||
| Receivables from customers | ||||||||
| Loans receivable, net | ||||||||
| Loan receivable due from a related party, net | ||||||||
| Securities owned, at fair value | ||||||||
| Foreign currency forward contracts | ||||||||
| Fixed assets, net | ||||||||
| Intangible asset, net | ||||||||
| Right of use assets | ||||||||
| Long-term investments | ||||||||
| Available-for-sale investment | ||||||||
| Income tax recoverable | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Payable to customers | $ | $ | ||||||
| Payable to holders of structured notes | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Lease liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Class A Ordinary shares (par value $ | ||||||||
| Class B Ordinary shares (par value $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
TOP Financial Group Limited
Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
(Expressed in U.S. dollar, except for the number of shares)
| For
the Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | ||||||||
| Futures brokerage commissions | $ | $ | ||||||
| Trading solution service revenues | ||||||||
| Trading gains from OTC business | ||||||||
| Interest income from loan business | ||||||||
| Other service revenues | ||||||||
| Trading gains (losses) | ( | ) | ||||||
| Interest income and other | ||||||||
| Total revenues | ||||||||
| Expenses | ||||||||
| Commission expenses | ||||||||
| Compensation and benefits | ||||||||
| Communications and technology | ||||||||
| Occupancy | ||||||||
| Travel and business development | ||||||||
| Professional fees | ||||||||
| Other administrative expenses | ||||||||
| Total expenses | ||||||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax benefits | ||||||||
| Net (loss) income | ( | ) | ||||||
| Other comprehensive (loss) income | ||||||||
| Total foreign currency translation adjustment | ( | ) | ||||||
| Total comprehensive (loss) income | $ | ( | ) | $ | ||||
| (Loss) earnings per share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ||||
| Weighted average number of ordinary shares outstanding: | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
TOP Financial Group Limited
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in U.S. dollar, except for the number of shares)
| Class
A Ordinary Shares | Class
B Ordinary Shares | Additional Paid-in | Retained | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
| Shares* | Amount | Shares* | Amount | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | - | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||||||||||
| Acquisition of a subsidiary | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | - | $ | $ | $ | $ | |||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | - | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
TOP Financial Group Limited
Unaudited Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollar)
| For
the Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash (used in) provided by operating activities | $ | ( | ) | $ | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of fixed assets | ( | ) | ||||||
| Investment in equity investees | ( | ) | ||||||
| Payment for acquisition of a subsidiary | ( | ) | ||||||
| Loans made to third parties | ( | ) | ||||||
| Collection of loans from third parties | ||||||||
| Collection of loans from customers holding US stocks | ||||||||
| Originated loans disbursements to customers | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | ( | ) | ||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Non-cash operating, investing and financing activities | ||||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes, net of refunds | $ | $ | ||||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
| September 30,
2024 | March
31, 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
1. Organization and description of business
TOP Financial Group Limited (formerly “Zhong Yang Financial Group Limited” and “ZYFGL”) (“TFGL”) is a company incorporated in the Cayman Islands with limited liability on August 1, 2019. TFGL is a parent holding company with no operations. Effective on July 13, 2022, the Company changed its name from “Zhong Yang Financial Group Limited” to “TOP Financial Group Limited” (“Name Change”).
TFGL has two wholly-owned subsidiaries, ZYSL (BVI) Limited (“ZYSL (BVI)”) and ZYCL (BVI) Limited (“ZYCL (BVI)”), both which are investment holding entities formed under the laws and regulations of the British Virgin Islands on August 29, 2019.
Zhong
Yang Securities Limited (“ZYSL”), a wholly-owned subsidiary of ZYSL (BVI), was established in accordance with laws and regulations
of Hong Kong on April 22, 2015 with a registered capital of HKD
Zhong
Yang Capital Limited (“ZYCL”), a wholly-owned subsidiary of ZYCL (BVI), was established in accordance with laws and regulations
of Hong Kong on September 29, 2016 with a registered capital of HKD
Eight subsidiaries, ZYAL (BVI) Limited (“ZYAL (BVI)”), ZYTL (BVI) Limited (“ZYTL (BVI)”), ZYNL (BVI) Limited (“ZYNL (BVI)”), WIN100 Tech Limited (“WIN100 TECH”), ZYPL (BVI) Limited (“ZYPL (BVI)”), ZYXL (BVI) Limited (“ZYXL (BVI)”), ZYIL (BVI) Limited (“ZYIL (BVI)”) and ZYFL (BVI) Limited (“ZYFL (BVI)”) were incorporated under the laws of the British Virgin Islands on January 7, 2021, January 12, 2021, January 20, 2021, May 14, 2021, July 14, 2022, July 14, 2022, November 11, 2022, and November 11, 2022, respectively. These subsidiaries are dormant as of the date of this report, except for WIN100 TECH, which provides trading solutions for clients trading on the world’s major derivatives and stock exchanges.
On
November 28, 2022, ZYPL (BVI) established Top Financial Pte. Ltd. (“Top Fin”) in accordance with laws and regulations of
Republic of Singapore. On the same date, ZYXL (BVI) set up Top Asset Management Pte. Ltd. (“Top AM”) in accordance with laws
and regulations of Republic of Singapore. On February 24, 2023, ZYFL established Winrich Finance Limited in accordance with laws and
regulations of Hong Kong. On February 9, 2023, the Company, through ZYIL (BVI), purchased
On
April 12, 2023, the Company, through ZYAL, closed an acquisition of
5
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
1. Organization and description of business (continued)
TFGL together with its subsidiaries (collectively, the “Company”) are primarily engaged in providing futures brokerage and other financial services in Hong Kong through a trading platform to its customers. The Company generates brokerage commission income by enabling its customer to trade on multiple exchanges around the world.
On October 4, 2024, the Board of the Company approved the reclassification and redesignation of ordinary shares, and adoption of dual-class share capital structure. The details are as follows:
| (i) | reclassify all ordinary shares of the Company issued and outstanding into class A ordinary shares of the Company with a par value of US$ | |
| (ii) | redesignate | |
| (iii) | redesignate the remaining authorized but unissued ordinary shares of the Company into Class A Ordinary Shares on a one for one basis. |
Reorganization
Reorganization of the legal structure of the Company (“Reorganization”) was completed on March 26, 2020 by carrying out a sequence of contemplated transactions, whereby the Company became the holding company of all entities discussed above.
Previous
to the reorganization, both ZYSL and ZYCL were held by Zhong Yang Holdings Company (the “Predecessor Parent Company”), a
company incorporated in Hong Kong with limited liability on April 21, 2015. The Predecessor Parent Company was owned
Before and after the Reorganization, the Company, together with its wholly-owned subsidiaries, are ultimately and effectively controlled by the same shareholders. Hence, the Reorganization is considered to be under common control. The consolidation of the Company and its subsidiaries has been accounted for at historical cost as of the beginning of the first period presented in the accompanying unaudited condensed consolidated financial statements.
6
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies
Basis of presentation and principle of consolidation
The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
The unaudited condensed consolidated balance sheet as of September 30, 2024 and the unaudited condensed consolidated statements of operations and comprehensive (loss) income for the six months ended September 30, 2024 and 2023 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 20-F for the fiscal year ended March 31, 2024, which was filed with the SEC on July 30, 2024.
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended March 31, 2024. The results of operations for the six months ended September 30, 2024 and 2023 are not necessarily indicative of the results for the full years.
The unaudited condensed consolidated financial statements include the financial statements of the parent company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
7
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies (continued)
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U. S. (“U.S. GAAP”) requires the use of estimates and assumptions that affect both the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Receivables from broker-dealers and clearing organizations
Receivables arise from the business of dealing in futures or investment securities. Broker-dealers will require balances to be placed with them in order to cover the positions taken by its customers. Clearing house receivables typically represent proceeds receivable on trades that have yet to settle and are usually collected within two days. The balance of receivables from broker-dealers and clearing organizations represents such receivables related to the Company’s customer trading activities and proprietary trading activities.
| September
30, 2024 | March
31, 2024 | |||||||
| (unaudited) | ||||||||
| Receivables from broker-dealers and clearing organizations for futures customer accounts | $ | $ | ||||||
| Receivables from broker-dealers and clearing organizations for securities customer accounts | ||||||||
| Receivables from broker-dealers and clearing organizations for securities proprietary trading | ||||||||
| $ | $ | |||||||
Receivables from customers
Receivables from customers include the trading solution services fees and other amounts due from customers once the transactions have been executed and completed. Receivables from customers are recorded net of allowance for expected credit losses. Revenues earned from the futures brokerage service are included in futures brokerage commission, and revenues earned from trading solution services are included in trading solution services income. The amounts receivable from customers that are determined by management to be uncollectible are recorded as expected credit losses in the consolidated statements of operations. For the six months ended September 30, 2024 and 2023, allowance for expected credit losses were $.
8
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies (continued)
Revenue Recognition
| a) | Revenue from Contracts with Customers |
The Company early adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on April 1, 2018 using the modified retrospective approach. The adoption of this ASC 606 did not have a material impact on the Company’s consolidated financial statements. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenues and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenues to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. In according with ASC 606, revenues are recognized when the Company satisfies the performance obligations by delivering the promised services to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
The Company identified each distinct service as a performance obligation. The recognition and measurement of revenues is based on the assessment of individual contract terms. The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets.
Futures brokerage commissions
The Company earns fees and commissions from futures brokerage services based on a fixed rate for each transaction, all of which are under the consolidated accounts where the customer information are not disclosed to the third party brokers. When a customer executes a futures transaction through the Company’s platform, futures brokerage commission is recognized upon the completion of this transaction. Only a single performance obligation is identified for each futures trading transaction, and the performance obligation is satisfied on the trade date because that is when the underlying financial instrument is identified, the pricing of brokerage service is agreed upon and the promised services are delivered to customers. All of the Company’s revenues from contracts with customers are recognized at a point in time. The futures brokerage service could not be cancelled once it’s executed and is not refundable, so returns and allowances are not applicable. Commissions are charged for each customer trade order executed and cleared by the third-party brokers. The Company recognizes revenues on a gross basis as the Company is determined to be the primary obligor in fulfilling the trade order initiated by the customer. The Company may offer volume rebate as trading incentive to certain customer. The Company will review the customer’s transaction volume monthly and provide volume rebates on the commission charged to specific customers with large volume transactions. The volume rebate offered to such customer is accounted for as a variable consideration and determined based on most-likely amount method, which is recognized as a reduction of revenues. For the six months ended September 30, 2024 and 2023, the Company did not offer the volume rebates offered.
9
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies (continued)
Revenue Recognition (continued)
| a) | Revenue from Contracts with Customers (continued) |
Trading solution services fees
The Company provides trading solution services to customers (e.g. individuals, proprietary trading companies or brokerage companies) for their trading on derivatives, equity, CFD and other financial products, through the internally developed proprietary investment management software. The Company’s trading solution provides a variety of functions suitable for front-end transaction executions to back-office settlement operations. The Company implements the initial installation of such software for each customer and provides hosting services for a period of time, generally two years, as agreed in the contracts. The initial installation is considered as a set-up activity, rather than a promised service to customer, which provides no incremental benefit to customer beyond permitting the access and use the hosted application. The Company identifies a single performance obligation from its contracts with customers. The Company charges each customer a fixed amount of initial installation fee and the monthly service fee based on a fixed rate per each transaction executed on the platform with a minimum monthly fee required. The Company recognizes the trading solution services as satisfied over the time.
Structured note subscription fees
The Company earns subscription service fees from customers by assisting customers to identify and subscribe for structured note products, which is calculated at a fixed percentage of investment amount. The Company identifies a single performance obligation for each subscription service and recognizes subscription fee income when the customers successfully subscribe for the structured note products and underlying contract between the customer and financial institution becomes non-cancellable, which is the point in time when the control of service is completed. The Company recognizes revenue net of discount (if any) on a gross basis as the Company is determined to be the primary obligor in fulfilling the subscription services.
Other service revenues
The
Company also provides other financial services including securities brokerage, consulting services, and currency exchange services, and
earns securities brokerage commissions, consultancy fee income and other revenues, which are recognized when the service is rendered
according to the relevant contracts. For the six months ended September 30, 2024 and 2023, other revenues accounted for
10
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies (continued)
Revenue Recognition (continued)
| a) | Revenue from Contracts with Customers (continued) |
Sources of revenue
The
Company has one revenue generating reportable geographic segment under ASC Topic 280 “Segment Reporting” and derives its
revenues primarily from its futures brokerage service.
| For
the Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Futures brokerage commissions | ||||||||
| Commission on futures broking earned from Hong Kong Exchange | $ | $ | ||||||
| Commission on futures broking from overseas Exchanges | ||||||||
| Trading solution service revenues | ||||||||
| Other service revenues | ||||||||
| $ | $ | |||||||
| b) | Trading gains, interest income and other |
Trading
gains and losses, interest income from loan business and other interest income fall within the scope of ASC Topic 825, Financial Instruments,
which is excluded from the scope of ASC Topic 606. Trading gains and losses mainly consist of realized and unrealized gains and losses
from the (1) investment in OTC derivative business.
For the six months ended September 30, 2024, the Company provided the loan business to third party customers. The business was approved by Hong Kong Licensing Court under the Money Lenders Ordinance. The Company disbursed loans to customers for a fixed period and charged interests from the customers. The principal and interest are repayable upon the maturity of the loans.
Interest and other income primarily consist of interests earned on bank deposit.
11
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies (continued)
Translation of foreign currencies
The functional currencies are the U.S. dollar for the Company’s Cayman Islands operations, Hong Kong dollar for Hong Kong subsidiaries’ operations, Australian dollar for Australian subsidiaries’ operations, and Singapore dollar for Singapore subsidiaries’ operations. The Company’s reporting currency is the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated at year-end exchange rates, income statement accounts are translated at average rates of exchange for the year and equity is translated at historical exchange rates. Any translation gains or losses are recorded in other comprehensive (loss) income. Gains or losses resulting from foreign currency transactions are included in net income.
| September
30, 2024 | March
31, 2024 | |||||||
| HKD exchange rate for balance sheet items, except for equity accounts | ||||||||
| AUD exchange rate for balance sheet items, except for equity accounts | ||||||||
| SGD exchange rate for balance sheet items, except for equity accounts | ||||||||
| For
the Six Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| HKD exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | ||||||||
| AUD exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | ||||||||
| SGD exchange rate for items in the statements of income and comprehensive income, and statements of cash flows | ||||||||
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy are described below:
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets included (i) money market funds which was included in cash and cash equivalents, (ii) US treasury notes which were recorded in the account of available-for-sale investment and (iii) securities owned, at fair value.
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. As of September 30, 2024 and March 31, 2024 and for the six months ended September 30, 2024, foreign currency forward contracts were categorized in Level 2 of the fair value hierarchy.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. Warrants were measured at fair value using unobservable inputs and categorized in Level 3 of the fair value hierarchy (Note 11).
As of September 30, 2024 and March 31, 2024, financial instruments of the Company comprised primarily current assets and current liabilities including cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, securities owned, at fair value, payables to customers and payables to holders of structured notes. The carrying amount of cash and cash equivalents, restricted cash, loans receivable, receivables from customers, both third parties and related party, receivables from broker-dealers and clearing organizations, payables to customers and payables to holders of structured notes approximate their fair values because of the short-term nature of these instruments. Securities owned, at fair value as of September 30, 2024 and March 31, 2024, mainly consist of common stock investments and are based upon quoted market price.
12
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
2. Summary of significant accounting policies (continued)
Concentration
For
the six months ended September 30, 2024, one customer accounted for approximately
For the six months ended September 30, 2024, two brokers accounted for approximately
As
of September 30, 2024, the payable balance due to four customers accounted for approximately
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — codification amendments in response to SEC’s disclosure Update and Simplification initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows—Overall, 250-10 Accounting Changes and Error Corrections— Overall, 260-10 Earnings Per Share— Overall, 270-10 Interim Reporting— Overall, 440-10 Commitments—Overall, 470-10 Debt—Overall, 505-10 Equity—Overall, 815-10 Derivatives and Hedging—Overall, 860-30 Transfers and Servicing—Secured Borrowing and Collateral, 932-235 Extractive Activities— Oil and Gas—Notes to Financial Statements, 946-20 Financial Services— Investment Companies— Investment Company Activities, and 974-10 Real Estate—Real Estate Investment Trusts—Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of income and cash flows.
13
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
3. Receivables from customers
| September
30, 2024 | March
31, 2024 | |||||||
| (unaudited) | ||||||||
| Receivable due from trading solution services | $ | $ | ||||||
| Less: allowance for credit losses | ||||||||
| $ | $ | |||||||
As of September 30, 2024 and March 31, 2024, the Company assessed collection from customers and did not deem it necessary to reserve for credit losses against receivables from customers.
4. Loans receivable
| September
30, 2024 | March
31, 2024 | |||||||
| (unaudited) | ||||||||
| Receivable due from customers holding US stocks (i) | $ | $ | ||||||
| Less: allowance for expected credit loss on receivable due from customers holding US stocks | ( | ) | ( | ) | ||||
| Loans receivable (ii) | ||||||||
| $ | $ | |||||||
| (i) |
| (ii) |
For
the six months ended September 30, 2024, the Company recognized interest income of $
14
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
5. Fixed assets, net
| September
30, 2024 | March
31, 2024 | |||||||
| (unaudited) | ||||||||
| Investment properties | $ | $ | ||||||
| Computer and electronic equipment | ||||||||
| Software | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense was $
6. Employee benefits
All
salaried employees of the Company in Hong Kong are enrolled in a Mandatory Provident Fund Scheme (“MPF scheme”) scheme under
the Hong Kong Mandatory Provident Fund Schemes Ordinance, within two months of employment. The MPF scheme is a defined contribution retirement
plan administered by an independent trustee. The Company makes regular contributions of
7. Fair value
The following table presents information about the Company’s assets by major category measured at fair value on a recurring basis as of September 30, 2024 and March 31, 2024 and indicates the fair value hierarchy of the valuation technique utilized by the Company to determine such fair value.
| September 30, 2024 | ||||||||||||||||||||
| Carrying | Fair Value | |||||||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Securities owned, at fair value | $ | $ | $ | $ | $ | |||||||||||||||
| Money market fund | ||||||||||||||||||||
| US Treasury notes | ||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | $ | |||||||||||||||
| March 31, 2024 | ||||||||||||||||||||
| Carrying | Fair Value | |||||||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Securities owned, at fair value | $ | $ | $ | $ | $ | |||||||||||||||
| Money market fund | ||||||||||||||||||||
| US Treasury notes | ||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | $ | |||||||||||||||
There was no transfer between any levels during the six months ended September 30, 2024 and 2023, respectively.
15
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
8. Operating lease
As of September 30, 2024, the Company had two non-cancelable office operating lease agreements with third-party lessors, with lease terms ranging between two years and three years. The lease agreements mature from March 2025 through September 2027. The Company considers the renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
| September 30, 2024 | March 31, 2024 | |||||||
| (unaudited) | ||||||||
| Rights of use lease assets | $ | $ | ||||||
| Operating lease liabilities | $ | $ | ||||||
| September 30, 2024 | March 31, 2024 | |||||||
| (unaudited) | ||||||||
| Remaining lease term and discount rate | ||||||||
| Weighted average remaining lease term (years) | $ | $ | ||||||
| Weighted average discount rate | % | % | ||||||
During
the six months ended September 30, 2024 and 2023, the Company incurred total operating lease expense of $
| Six months ending March 31, 2025 | $ | |||
| Twelve months ending March 31, 2026 | ||||
| Twelve months ending March 31, 2027 | ||||
| Twelve months ending March 31, 2028 | ||||
| Total lease payment | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
16
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
9. Long-term investments
| September
30, 2024 | March
31, 2024 | |||||||
| (unaudited) | ||||||||
| Investment in a partnership | $ | $ | ||||||
| Investment in cost-method investees | ||||||||
| $ | $ | |||||||
On
June 24, 2022, the Company entered into a partnership agreement to invest $
As of September 30, 2024 and March 31, 2024, the investments in cost-method investees represented investments in four and three privately held companies, respectively, over which the Company owned equity interest of neither has control nor significant influence through investment in ordinary shares. The Company accounted for the investment in these privately held companies using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuers. These privately held companies incurred minimal losses through September 30, 2024. For the six months ended September 30, 2024 and 2023, the Company did not record upward adjustments or downward adjustments on the investment. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of the equity security. As of September 30, 2024 and March 31, 2024, the Company did not recognize impairment against the investment security.
10. Share-based compensation
Effective
on May 31, 2022, the Company employed three non-executive directors. As part of compensation expenses, the Company agreed to issue ordinary
shares to the three directors. On quarterly basis, each director would receive ordinary shares with a fair value of $
For
the six months ended September 30, 2023, the Company issued an aggregate of
For
the six months ended September 30, 2024, the Company issued an aggregate of
17
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
11. Equity
Ordinary shares
The
Company’s authorized share capital is
On
September 9, 2021, the sole shareholder of the Company surrendered
On
June 3, 2022, the Company completed its IPO on NASDAQ. In this offering,
On
June 17, 2022, the Company issued
On
February 11, 2024, the Company entered into a securities purchase agreement (“Private Placement”) with an investor providing
for the issuance and sale of (i)
For
the six months ended September 30, 2024 and 2023, the Company issued an aggregate of
As
of September 30, 2024 and March 31, 2024, the Company had
18
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
11. Equity (continued)
Registered Warrants
In
connection with the Private Placement on February 11, 2024, the Company issued Registered Warrants to purchase up to an aggregate of
As the warrants meet the criteria for equity classification under ASC 815-40, the warrants are classified as equity.
12. Income taxes
The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the six months ended September 30, 2024 and 2023, the Company had no unrecognized tax benefits. Due to uncertainties surrounding future utilization, the Company estimates there will not be sufficient future income to realize the deferred tax assets arising from net operating losses for the Company’s subsidiaries. The Company maintains a full valuation allowance on its net deferred tax assets arising from net operating losses as of September 30, 2024 and March 31, 2024.
The Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.
For
the six months ended September 30, 2024 and 2023, the Company had a current income tax benefits of $ and $
13. Related party transaction and balance
a.
| Name | Relationship with the Company | |
| Mr. Huaixi Yang | ||
| PRO800 Limited (“PRO800”) |
b. Related parties transactions
On
April 12, 2023, the Company, through ZYAL, closed an acquisition of
19
TOP Financial Group Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024 and 2023
13. Related party transaction and balance (continued)
c.
| Nature | September 30, 2024 | March 31, 2024 | ||||||||
| Mr. Huaixi Yang | $ | $ | ||||||||
The balance due from Mr. Huaixi Yang represented the purchase price of stock exceeding the deposits paid by customers which traded these US stocks through the Company’s platform. The US stocks were under custody of the Company, and the related parties shall fully settle the balance to the Company before they sell these stocks.
14. Regulatory requirements
The following table illustrates the minimum regulatory capital as established by the Hong Kong Securities and Futures Commission that the Company’s subsidiaries were required to maintain as of September 30, 2024 and March 31, 2024 and the actual amounts of capital that were maintained.
| Minimum | ||||||||||||||||
| Regulatory | Capital | Excess | Percent of | |||||||||||||
| Capital | Levels | Net | Requirement | |||||||||||||
| Requirements | Maintained | Capital | Maintained | |||||||||||||
| Zhong Yang Securities Limited | $ | $ | $ | % | ||||||||||||
| Zhong Yang Capital Limited | % | |||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
| Minimum | ||||||||||||||||
| Regulatory | Capital | Excess | Percent of | |||||||||||||
| Capital | Levels | Net | Requirement | |||||||||||||
| Requirements | Maintained | Capital | Maintained | |||||||||||||
| Zhong Yang Securities Limited | $ | $ | $ | % | ||||||||||||
| Zhong Yang Capital Limited | % | |||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
20