Exhibit 99.1
GARDEN STAGE LIMITED
ANNOUNCES UNAUDITED FINANCIAL RESULTS FOR THE FIRST HALF OF FISCAL YEAR 2025
TABLE OF CONTENTS
F-1
Garden Stage Limited
Unaudited Condensed Consolidated Balance Sheets
(Expressed in U.S. Dollars, except for the number of shares)
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Receivables from broker-dealers and clearing organizations | ||||||||
| Receivables from customers, net | ||||||||
| Receivables from customers-related party, net | ||||||||
| Amounts due from related party, net | ||||||||
| Other assets, current, net | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Deferred tax assets, net | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets | ||||||||
| Other assets, non-current, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Payables to customers | $ | $ | ||||||
| Payables to customers-related parties | ||||||||
| Payables to broker-dealers and clearing organizations | ||||||||
| Income tax payable | ||||||||
| Operating lease liabilities, current | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive losses | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
Garden Stage Limited
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in U.S. dollar, except for the number of shares)
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Revenues | ||||||||||||
| Advisory fees | $ | $ | $ | |||||||||
| Brokerage commissions | ||||||||||||
| Brokerage commissions-related parties | ||||||||||||
| Due diligence service fees | ||||||||||||
| Handling income | ||||||||||||
| Handling income-related parties | ||||||||||||
| Introducing and referral income | ||||||||||||
| Investment management fee income | ||||||||||||
| Investment management fee income-related party | ||||||||||||
| Underwriting and placement income | ||||||||||||
| Interest income and others | ||||||||||||
| Interest income and others-related parties | ||||||||||||
| Total revenues | ||||||||||||
| Expenses | ||||||||||||
| Allowance for expected credit losses | ||||||||||||
| Brokerage, clearing and exchange fees | ||||||||||||
| Communications and technology | ||||||||||||
| Compensation and benefits | ||||||||||||
| Deprecation | ||||||||||||
| Loss on disposal of property and equipment | ||||||||||||
| Occupancy costs | ||||||||||||
| Professional fees | ||||||||||||
| Travel and business development | ||||||||||||
| Other administrative expenses | ||||||||||||
| Total expenses | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income tax benefit (expense) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Other comprehensive income (loss) | ||||||||||||
| Foreign currency translation adjustments | ( | ) | ||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Loss per share: | ||||||||||||
| Basic and diluted | $ | $ | $ | |||||||||
| Weighted average number of ordinary shares outstanding: | ||||||||||||
| Ordinary shares - Basic and diluted * | ||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
Garden Stage Limited
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in U.S. dollar, except for the number of shares)
Six months ended September 30, 2022
| Ordinary shares * | Retained earnings | Accumulated other | ||||||||||||||||||||||
| Number issued | Amount | Subscription receivables | (Accumulated deficit) | comprehensive income | Total | |||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustments | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
Six months ended September 30, 2023
| Ordinary shares * | Additional | Accumulated other | ||||||||||||||||||||||
| Number issued | Amount | paid-in capital | Accumulated deficit | comprehensive income | Total | |||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Issuance of ordinary shares | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Six months ended September 30, 2024
| Ordinary shares * | Additional | Accumulated other | ||||||||||||||||||||||
| Number issued | Amount | paid-in capital | Accumulated deficit | comprehensive loss | Total | |||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Share based awards of the Group | - | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
Garden Stage Limited
Unaudited Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollar)
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||
| Depreciation | ||||||||||||
| Allowance for expected credit losses | ||||||||||||
| Amortization of operating lease right-of-use assets and interest of lease liabilities | ||||||||||||
| Loss on disposal of property and equipment | ||||||||||||
| Share based compensation expenses | ||||||||||||
| Deferred tax benefits | ( | ) | ( | ) | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||||||
| Receivables from broker-dealers and clearing organizations | ( | ) | ( | ) | ||||||||
| Receivables from customers | ( | ) | ||||||||||
| Other assets | ( | ) | ( | ) | ||||||||
| Payables to customers | ( | ) | ||||||||||
| Payables to broker-dealers and clearing organizations | ( | ) | ( | ) | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Income tax payable | ||||||||||||
| Accrued expenses and other liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||||||
| Cash flows from investing activity: | ||||||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||||||
| Net cash used in investing activity | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Payments of offering costs related to IPO | ( | ) | ( | ) | ||||||||
| Deposits received related to subscribed shares | ||||||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||||||
| Effect of exchange rate changes on cash and restricted cash | ( | ) | ||||||||||
| Net (decrease) increase in cash and restricted cash | ( | ) | ( | ) | ||||||||
| Cash and restricted cash, beginning of period | ||||||||||||
| Cash and restricted cash, end of period | ||||||||||||
| Reconciliation of cash and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Restricted cash | ||||||||||||
| Total cash and restricted cash | $ | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
1. Organization and Description of Business
Garden Stage Limited (“GSL”) (“the Company”) is a company incorporated in the Cayman Islands with limited liability on August 11, 2022. GSL is an ultimate holding company with no operations.
17 Uno Limited (“17 Uno”), a wholly-owned
subsidiary of GSL, is a company incorporated in the British Virgin Islands with limited liability on August 17, 2022. 17 Uno has a share
capital of US$
I Win Holdings Limited (“IWHL”) is
a company incorporated in Hong Kong with limited liability on March 25, 2020. IWHL has a share capital of HK$
I Win Securities Limited (“IWSL”),
a wholly-owned subsidiary of IWHL, is a company incorporated in Hong Kong with limited liability on November 10, 2016. IWSL has a share
capital of HK$
I Win Asset Management Limited (“IWAML”),
a wholly-owned subsidiary of IWHL, is a company incorporated in Hong Kong with limited liability on March 25, 2020 with a share capital
of HK$
IWSL has one wholly-owned subsidiary, China Union
Financial Holding Limited (“CUFH”) which is a company incorporated in the British Virgin Islands on June 17, 2016. CUFH has
a share capital of US$
GSL together with its subsidiaries (collectively, “the Group”) is primarily engaged in providing investment advisory services, securities brokerage, underwriting and placement, and other financial services to a wide range of customers in Hong Kong. The Group primarily generates advisory fees by acting as investment advisor for its customers, brokerage commissions by enabling its customers to trade on multiple exchanges around the globe and underwriting and placement income by underwriting or arranging placement of securities for its customers.
The Company completed its initial public offering
on the NASDAQ on December 1, 2023, issuing
Reorganization
Reorganization of the legal structure of the Group (“Reorganization”) has been completed on April 3, 2023 by carrying out a sequence of contemplated transactions, where the Company becomes the holding company of all entities discussed above.
Prior to the reorganization, all entities discussed
above were all effectively controlled by Smark Holding Limited (“Smark”), a company incorporated in the British Virgin Islands,
and Lobster Financial Holdings Limited (“Lobster”), a company incorporated in the British Virgin Islands, which together held
more than
The Reorganization was to eventually transfer
F-6
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
1. Organization and Description of Business (Continued)
Reorganization on June 24, 2022
With the approval obtained from HKSFC,
Before and after the Reorganization at IWHL’s
level, IWHL, IWSL and IWAML, were ultimately and effectively controlled by the same group of controlling shareholders who collectively
hold more than
Reorganization on April 3, 2023
Subsequent to the Reorganization at IWHL’s
level, the Company was incorporated on August 11, 2022 with the only aim and purpose to become the holding company of the Group and the
issuer in connection with its planned initial public offering in the United States. With further approval obtained from HKSFC, via 17
Uno which has been the wholly owned subsidiary of the Company since incorporation,
Before and after the Reorganization at the Company’s
level, the Company and IWHL, had exactly the same shareholding structure and were ultimately and effectively controlled by the same group
of controlling shareholders who collectively hold more than
The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying unaudited condensed consolidated financial statements. Results of operations for the periods presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions.
| Date of | Place of | % of | Principal | ||||||
| Name of Entity | Incorporation | Incorporation | Ownership | Activities | |||||
| 17 Uno Limited (“17 Uno”) | |||||||||
| I Win Holdings Limited (“IWHL”) | |||||||||
| I Win Securities Limited (“IWSL”) | |||||||||
| I Win Asset Management Limited (“IWAML”) | |||||||||
| China Union Financial Holding Limited (“CUFH”) |
F-7
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies
Basis of presentation and principle of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements as of and for the six months ended September 30, 2024, 2023 and 2022 include all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flows for such interim periods. The results of operations for the six months ended September 30, 2024, 2023 and 2022 are not necessarily indicative of results to be expected for the full year ending March 31, 2025, 2024 and 2023. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the years ended March 31, 2024, 2023 and 2022.
The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
Use of estimates and assumptions
The preparation of unaudited condensed consolidated 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 financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates required to be made by management include, but not limited to, allowance for expected credit losses, determination of the useful lives of long-lived assets, impairment of long-lived assets, allowance for deferred tax assets, recognition and measurement of operating lease right-of-use assets, operating lease liabilities, and fair value and estimation of forfeiture of share based payment. Actual results could differ from the estimates, and as such, differences could be material to the unaudited condensed consolidated financial statements.
Adoption of new accounting standard
In March, 2022, the FASB issued ASU 2022-02 — Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This standard eliminates the accounting guidance on TDRs for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for any entities that have adopted ASU 2016-13 — Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Group adopted the ASU prospectively on April 1, 2023. The adoption of this standard did not have a material impact on the unaudited condensed consolidated financial statements.
Cash
Cash include balances maintained with banks in Hong Kong that can be added or withdrawn without limitation.
Restricted cash
Restricted cash represents bank balances the Group holds on behalf of its customers. The Group maintains segregated accounts with banks in Hong Kong to hold customers’ monies arising from its normal course of business. These segregated customers’ monies are strictly restricted for customers’ transactions and governed by the Securities and Futures (Client Money) Rules under the HKSFO. Such regulations are promulgated to protect customers’ assets. The Group has classified such segregated customers’ monies as restricted cash. Corresponding payables to customers are recorded upon receipt of cash from or for the customers.
F-8
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Receivables from broker-dealers and clearing organizations
Receivables from broker-dealers and clearing organizations represent balances due from broker-dealers and clearing organizations, including cash deposits placed, net commission receivables, receivables arising from unsettled trades on trade-date basis.
Receivables from broker-dealers and clearing organizations are measured at amortized cost less an allowance for expected credit loss as needed. The allowance for expected credit loss is the Group’s best estimate of the amount of probable credit losses in the Group’s existing receivables from broker-dealers and clearing organizations. The Group assesses collectability by reviewing receivables from broker-dealers and clearing organizations on a collective basis where similar characteristics exist or on an individual basis when the Group identifies specific broker-dealers and clearing organizations with known disputes or collectability issues. In determining the amount of the allowance for expected credit losses, the Group considers historical collectability based on past due status, the age of the balances of receivables from broker-dealers and clearing organizations, credit quality of the Group’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Group’s ability to collect from counterparties. Under this accounting guidance, the Group measures credit losses on its receivables from broker-dealers and clearing organizations using the current expected credit loss model under ASC 326. Balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2024 and March 31, 2024, no allowance for expected credit losses were recorded, respectively.
Receivables from customers
Receivables from customers include (i) amounts due on brokerage transactions on trade-date basis and those not yet settled by customers on settlement dates; (ii) fee receivables related to advisory services, due diligence services, introducing and referral services, investment management services and underwriting and placement services provided.
Receivables from customers are measured at amortized
cost less an allowance for expected credit loss as needed. The allowance for expected credit loss is the Group’s best estimate of
the amount of probable credit losses in the Group’s existing receivables from customers. The Group assesses collectability by reviewing
receivables from customers on a collective basis where similar characteristics exist, primarily based on similar business line, service
or product offerings and on an individual basis when the Group identifies specific customers with known disputes or collectability issues.
In determining the amount of the allowance for expected credit losses, the Group considers historical collectability based on past due
status, the age of the balances of receivables from customers, credit quality of the Group’s customers based on ongoing credit evaluations,
current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the
Group’s ability to collect from counterparties. Under this accounting guidance, the Group measures credit losses on its receivables
from customers using the current expected credit loss model under ASC 326. Balances are charged off against the allowance after all means
of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2024 and March 31, 2024, the
Group provided allowance for expected credit losses of $
Expected credit loss
ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology will result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. The Group adopted the new standard effective April 1, 2023, the first day of the Group’s fiscal year and applied to receivables from customers, amounts due from a related party and other financial instruments. The adoption of this guidance did not materially impact the net earning and financial position and has no impact on the cash flows.
F-9
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Leases
The Group is a lessee of non-cancellable operating leases for corporate office premises. The Group determines if an arrangement is 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 Group are currently classified as operating leases. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Group’s unaudited condensed consolidated balance sheets.
ROU assets represent the Group’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term.
When determining the lease term, at lease commencement date, the Group considers options to extend or terminate the lease when it is reasonably certain that it will exercise or not exercise that option. The interest rate used to determine the present value of future lease payments is the Group’s incremental borrowing rate based on the information available at the lease commencement date.
The lease standard (ACS 842) provides practical expedients for an entity’s ongoing accounting. The Group elects to apply short-term lease exception for leases with a lease term of 12 months or less at commencement. Accordingly, ROU assets and operating lease liabilities do not include leases with a lease term of 12 months or less.
The Group also elects to adopt the practical expedient that allows lessee to treat the lease and non-lease components of a lease as a single lease component. Non-lease components include building management fees, utility expenses and property taxes included and payable in the lease contract. These non-lease components are not separated from the lease components to which they relate and are collectively reflected as occupancy costs in the unaudited condensed consolidated statement of operations and comprehensive loss.
The Group evaluates the impairment of its ROU assets consistently with the approach applied for its other long-lived assets. The Group reviews the recoverability of its long-lived assets when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the assets from the expected undiscounted future pre-tax cash flows of the related operations. For the six months ended September 30, 2024, 2023 and 2022, the Group did not recognize any impairment loss against its ROU assets.
Property and equipment, net
Property and equipment are stated at cost
less accumulated depreciation and impairment losses. Depreciation is provided using the straight-line method based on the estimated useful
life.
| Computer equipment | |
| Furniture and office equipment | |
| Leasehold improvements | Shorter of lease term or |
Expenditures for repairs and maintenance, which do not materially extend the useful lives of the assets, are expensed as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets disposed of or retired are removed from the accounts, and any resulting gain or loss is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss under other income or expenses.
Intangible assets
Intangible assets are originally recognized at cost. The useful lives of intangible assets are assessed to either be finite or indefinite based on the nature of the intangible assets. The Group’s intangible assets represent eligibility rights to trade on or through SEHK. Management has determined that such assets have indefinite useful lives. These intangible assets are not amortized and are tested for impairment annually either individually or at the cash-generating unit level. These intangible assets are also evaluated annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.
F-10
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Impairment of long-lived assets
The Group reviews long-lived assets, including property and equipment, ROU assets and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future pre-tax cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is generally determined by discounting the cash flows expected to be generated by the asset (asset group), when the market prices are not readily available. The adjusted carrying amount of the asset is the new cost basis and is depreciated over the asset’s remaining useful life. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For the six months ended September 30, 2024, 2023 and 2022, no impairment of long-lived assets was recognized.
Payables to customers
Payables to customers arise from the Group’s brokerage business and include cash deposits received by the Group from the customers and payables arising from unsettled trades on trade-date basis.
Payables broker-dealers and clearing organizations
Payables broker-dealers and clearing organizations represent balances due to broker-dealers and clearing organizations, including net commission payables and payables arising from unsettled trades on trade-date basis.
Revenue recognition
a) Revenue from contracts with customers
The Group follows the rules and guidance set out under ASC 606, Revenue from Contracts with Customers (“ASC 606”), when recognizing revenue from contracts with customers. The core principle of ASC 606 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 Group satisfies the performance obligations by delivering the promised services to the customers, in an amount that reflects the consideration the Group expects to be entitled to in exchange for those services. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation.
The Group identifies each distinct service as a performance obligation. The recognition and measurement of revenues is based on the assessment of individual contract terms. The Group applies a practical expedient to expense costs as incurred for those suffered in order to obtain a contract with a customer when the amortization period would have been one year or less. The Group has no material incremental costs of obtaining contracts with customers that the Group expects the benefit of those costs to be longer than one year, which need to be recognized as assets.
F-11
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
The Group’s principal revenue streams include:
Advisory fees
The Group provides investment advisory services by acting as advisor for its customers in return for advisory fees. The Group enters into distinct agreements with its customers for the provision of financial advisory services. The financial advisory service is distinct and identified as one performance obligation. Revenue from advisory fees is recognized over time when the performance is satisfied throughout the contract terms and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods.
According to the agreement, the customer is required to pay a monthly fee for investment advisory services. The payment is due from the date of billing.
Brokerage commissions
The Group earns fees and commissions from securities brokerage services based on a fixed rate for each transaction. When a customer executes a securities trading transaction with the Group, brokerage commission is recognized upon the completion of the transaction. Only a single performance obligation is identified for each securities trading transaction, and the performance obligation is satisfied on the trade date because this is when the underlying financial instrument is identified, the pricing of brokerage service is agreed upon and the promised services are delivered to customers. Brokerage commissions are recognized at a point in time on the trade date. The securities trading transaction could not be cancelled once it is executed and is not refundable, so returns and allowances are not applicable.
The customer is required to pay a fixed rate of the brokerage commissions for each securities brokerage transaction and payment is due within two days from the trade date.
Due diligence service fees
The Group enters into a distinct due diligence services agreement with its customers for providing them with due diligence report in return for a one-time fixed due diligence service fee. The Group is obligated to deliver its customers due diligence reports. The due diligence services the Group promises to provide to its customers are considered distinct and are therefore considered to be a single performance obligation. Before the full and complete delivery of the services, the customers cannot benefit from the performance and cannot control the work in progress. The Group controls the rights to the services, which are not associated with any progress payments. As a result, revenue from providing business due diligence services does not meet the criteria of recognizing revenue over time. The revenue is therefore recognized at a point in time when the transaction is completed and the Group’s performance obligation is fulfilled, as evidenced by the delivery of the complete due diligence report.
Payment is due from the date of billing and all due diligence services were completed prior to September 30, 2024.
Handling income
The Group provides other financial services including dividend collection and custodian services, and earns handling income in return for these services provided.
Custodian services – The Group enters into distinct custodian agreements with its customers for the provision of custodian and administration services. Among all other services provided, the Group earns a fee by assisting its customers in transferring the physical shares certificates they hold into Central Clearing and Settlement System (CCASS), a centralized electronic book-entry clearing and settlement system for transactions of securities listed in SEHK, for custodian purposes. The Group earns a fee based on a fixed rate of the value of shares in concern. The custodian agreement is distinct and is identified as one performance obligation. Revenue is recognized at a point in time upon the completion of the transaction.
Dividend collection – When the securities held by its customers have any corporate action, the Group may act as the agent of its customers in processing and collecting the related dividends. The Group earns a fee based on a fixed rate of the amount of dividend in concern. Only a single performance obligation is identified in the contract and income from dividend collection services is recognized at a point in time upon the completion of the transaction.
According to the agreement, the customer is required to pay a handling fee for custodian service at fixed amount and a fee for dividend collection at a fixed percentage on the dividends collected for each transaction. Payment is due upon completion of services.
F-12
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Introducing and referral income
The Group derives introducing and referral income from the introduction of customers to other financial service providers or other interested parties. The Group enters into distinct referral agreements with these parties in relation to the introducing and referral services rendered and the fee is crystalized at the point when the referees executed a transaction with these parties. Under the distinct referral agreements the Group has in place, the Group is not subject to any minimum referral numbers, any committed targets nor any other obligations once the referral is made. No claw back or adjustments to the income are allowed under these agreements. Revenue from providing introducing and referral services is recognized at a point in time when the transaction and the performance is completed.
According to the agreement, the customer is required to pay an introducing and referral fee on a monthly basis. The payment is due from the date of billing.
Investment management fee income
The Group provides investment management service by acting as investment manager for its customers in return for investment management fee income. The Group enters into distinct investment management agreements with its customers for the provision of investment management service. The investment management service is distinct and is identified as one performance obligation. Revenue from investment management service is recognized over time when the performance is satisfied throughout the contract terms and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods.
According to the agreement, the customer is required to pay a monthly fee for investment management services. The payment is due from the date of billing.
Underwriting and placement income
The Group provides underwriting and placement services by acting as an underwriter, global coordinator, book runner or lead manager for securities issuances and bonds placements, in return for underwriting and placement income.
The Group enters into a distinct underwriting or placement agreement with its customers, i.e. corporate issuers, for the provision of underwriting and placement services. The underwriting and placement service is distinct and is identified as one performance obligation. As stipulated in the underwriting and placement agreement, the Group will charge an underwriting and placement income based on certain percentage of the funds raised in the transaction, either initial public offerings or other fundraising or placement activities.
Revenue from providing underwriting and placement services to customers is recognized at a point in time when the transaction and the performance is completed, which is generally at the completion of the public offering, i.e., listing of the securities on relevant exchanges, or the completion of a placement.
For certain underwriting and placement projects, the Group will reduce its commitments and exposures by having sub-underwriting and sub-placement arrangements with other broker-dealers. Generally, the terms of these sub-underwriting and sub-placement arrangements would mirror the master underwriting and placement agreements the Group has in place with its customers but give a concession fee to these broker-dealers for services rendered under the sub-underwriting and sub-placement arrangements.
The Group follows the rules and guidance set out under ASC 606 when determining whether it is acting as a principal or an agent in the contract with its customers. The core principle of ASC 606 requires an entity to determine whether the nature of its promise is a performance obligation to provide the services itself (that is, the entity is a principal) or to arrange for those services to be provided by the other party (that is, the entity is an agent). The following steps are applied to achieve that core principle:
Step 1: Identify the specified services to be provided to the customer
Step 2: Assess whether it controls each specified service before that service is transferred to the customer
Under the underwriting and placement agreements the Group has in place with its customers, the Group has a primary responsibility in rendering the underwriting and placement services and meeting the specific requirements set out in these agreements. The whole process is primarily controlled by the Group who decides to whom the offering shares it may sell and, if it thinks fit, has the full discretionary authority in engaging any broker-dealer for such sub-underwriting and sub-placement arrangements without the consent from its customers. The Group has the primary responsibility in the function. The Group also has full authority in negotiating and setting the fees with its customers and broker-dealers and deciding the margin on each project without the consent from other parties. Accordingly, the Group has full control on the underwriting and placement services it offers to the customers and is a principal in the contracts. The Group recognizes revenue at the gross amount it is entitled to from its customers.
The agreement of underwriting and placement services requires payment following the completion of services.
F-13
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Sources of revenue
For the Six Months Ended September 30, 2024 | ||||||||||||
| Third parties | Related parties | Total | ||||||||||
| Revenue from contracts with customers recognized at a point in time | ||||||||||||
| Brokerage commissions related to | ||||||||||||
| exchange in Hong Kong | $ | $ | $ | |||||||||
| exchanges in United States | ||||||||||||
| Due diligence service fees | ||||||||||||
| Handling income on | ||||||||||||
| custodian services | ||||||||||||
| dividend collection | ||||||||||||
| Introducing and referral income | ||||||||||||
| Underwriting and placement income related to | ||||||||||||
| equity securities | ||||||||||||
| Revenue from contracts with customers recognized over time | ||||||||||||
| Investment management fee income | ||||||||||||
| Revenue from other sources | ||||||||||||
| Interest income and others (note) | ||||||||||||
| $ | $ | $ | ||||||||||
For the Six Months Ended September 30, 2023 | ||||||||||||
| Third parties | Related parties | Total | ||||||||||
| Revenue from contracts with customers recognized at a point in time | ||||||||||||
| Brokerage commissions related to | ||||||||||||
| exchange in Hong Kong | $ | $ | $ | |||||||||
| exchanges in United States | ||||||||||||
| Handling income on | ||||||||||||
| custodian services | ||||||||||||
| dividend collection | ||||||||||||
| Introducing and referral income | ||||||||||||
| Underwriting and placement income related to | ||||||||||||
| equity securities | ||||||||||||
| Revenue from contracts with customers recognized over time | ||||||||||||
| Advisory fees | ||||||||||||
| Revenue from other sources | ||||||||||||
| Interest income and others (note) | ||||||||||||
| $ | $ | $ | ||||||||||
F-14
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
For the Six Months Ended September 30, 2022 | ||||||||||||
| Third parties | Related parties | Total | ||||||||||
| Revenue from contracts with customers recognized at a point in time | ||||||||||||
| Brokerage commissions related to | ||||||||||||
| exchange in Hong Kong | $ | $ | $ | |||||||||
| exchanges in United States | ||||||||||||
| other exchanges | ||||||||||||
| Handling income on | ||||||||||||
| custodian services | ||||||||||||
| dividend collection | ||||||||||||
| Introducing and referral income | ||||||||||||
| Underwriting and placement income related to | ||||||||||||
| equity securities | ||||||||||||
| bonds and others | ||||||||||||
| Revenue from contracts with customers recognized over time | ||||||||||||
| Investment management fee income | ||||||||||||
| Revenue from other sources | ||||||||||||
| Interest income and others (note) | ||||||||||||
| $ | $ | $ | ||||||||||
Note:
Interest income and others primarily consist of interests earned on bank deposits and a customers’ overdue, which are not within the scope ASC 606.
Interest income is recognized as it accrues using
the effective interest method. Interests on customers’ overdue represent interests charged on overdue receivables from customers
arising from brokerage transactions. According to the contracts entered into between the Group and
its customers, the Group shall charge its customers on amounts overdue, i.e. amounts due on brokerage transactions which are not yet settled
on settlement dates, at an interest at Hong Kong Prime Lending Rate plus
Government subsidies primarily relate to one-off entitlement granted by the Hong Kong Government under the Employment Support Scheme of the Anti-epidemic Fund. The Group recognizes government subsidies as other income when the conditions are met.
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Interests on bank deposits | $ | $ | $ | |||||||||
| Interests on customers’ overdue | ||||||||||||
| Government subsidies | ||||||||||||
| Sundry income | ||||||||||||
| $ | $ | $ | ||||||||||
F-15
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Brokerage, clearing and exchange fees
Brokerage, clearing and exchange fees primary relate to transaction costs paid to broker-dealers and clearing organizations on securities brokerage services which are expensed as incurred.
Employee benefit plan
Employees of the Group located in Hong Kong participate
in a compulsory retirement benefit scheme as required by the local laws in Hong Kong. Contributions are required by both the Group and
its employees at a rate of
Share based compensation expenses
The Group uses the fair value method of accounting
for the share options granted to directors and employees to measure the cost services received in exchange for share based awards. The
Group has selected the binominal option-pricing model as the most appropriate fair value method for its option awards. The Binomial model
takes into account variables such as volatility, dividend yield rate, and risk-free interest rate and also allows for the use of dynamic
assumptions and considers the contractual term of the option, and the probability that the option will be exercised prior to the end of
its contractual life. The Group estimates the forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. These inputs are subjective and generally require significant judgment. The resulting cost is
recognized over the period during which directors and employees are required to provide service in exchange for the awards. Share-based
compensation expense is recognized on a graded vesting basis, net of estimated forfeitures. For the six months ended September 30, 2024,
2023 and 2022, the total amount charged to the unaudited condensed consolidated statements of operations and comprehensive loss in respect
of the Group’s share based compensation expenses were $
In accordance with ASC 718, modifications to stock-based awards are accounted for as exchanges of the original awards for new awards. The incremental fair value, which is the difference between the fair value of the modified award and the original award immediately before modification, is measured at the modification date. This incremental fair value is recognized immediately as compensation cost for vested awards. For unvested awards, the incremental compensation cost, along with any remaining unrecognized compensation cost of the original award, is recognized over the remaining requisite vesting period.
Income taxes
The Group accounts for income taxes under ASC 740, Income Taxes. Provision for income taxes consists of current taxes and deferred taxes.
Current tax is recognized based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognized in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
Segment reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Group’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Group’s business segments.
The Group uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Group does not distinguish revenues, costs and expenses between segments in its internal reporting, but instead reports costs and expenses by nature as a whole.
F-16
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Loss per share
Loss per share (“EPS”) is calculated in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of shares outstanding during the period.
Diluted EPS is calculated by dividing net loss attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Ordinary share equivalents are excluded from the computation of diluted loss per share if their effect would be antidilutive. With a net loss attributable to ordinary shareholders, the inclusion of dilutive potential common shares would be antidilutive, the diluted EPS is computed the same as basic EPS.
Basic and diluted EPS are presented in the Group’s unaudited condensed consolidated statements of operations and comprehensive loss.
Translation of foreign currencies
The Group’s principal place of operations is Hong Kong. The financial position and results of its operations are determined using Hong Kong Dollars (“HK$”), the local currency, as the functional currency. The Company’s unaudited condensed consolidated financial statements are presented using the U.S. Dollars (“US$” or “$”). The results of operations and the unaudited condensed consolidated statements of cash flows denominated in functional currency are translated to US$ at the average rate of exchange during the reporting period. Assets and liabilities denominated in functional currency at the balance sheet date are translated to US$ at the applicable rates of exchange in effect at balance sheet date. The equity denominated in functional currency is translated to US$ at the historical rate of exchange at the time of transaction. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the unaudited condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income included in unaudited condensed consolidated statements of changes in shareholders’ equity. Gains and losses from foreign currency transactions are included in the Group’s unaudited condensed consolidated statements of operations and comprehensive loss.
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Period-end spot rate | ||||||||
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Average rate | ||||||||||||
Fair value of financial instruments
The fair value of a financial instrument is defined as the exchange price that would be received from an asset or paid to transfer a liability (as exit price) in the principal or most advantageous market for the asset or 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 inputs used to measure fair value are as follows:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
As of September 30, 2024 and March 31, 2024, financial instruments of the Group comprised primarily cash, restricted cash, receivables from broker-dealers and clearing organizations, receivables from customers, amounts due from related party, other assets, payables to customers, payables to broker-dealers and clearing organizations, accrued expenses and other liabilities. The Group concludes that the carrying amounts of these financial instruments approximate their fair values because of the short-term nature of these instruments.
F-17
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence of the same party, such as a family member or relative, shareholder, or a related corporation.
Commitments and contingencies
In the normal course of business, the Group 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 Group’s unaudited condensed consolidated 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.
Recent accounting pronouncements
The Group considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Group meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280)” (“ASU 2023-07”). The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision useful financial analyses. Topic 280 requires a public entity to report a measure of segment profit or loss that the chief operating decision maker (CODM) uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in ASU 202307 do not change or remove those disclosure requirements. The amendments in ASU 2023-07 also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, adopted retrospectively. Management considers that the guidance will not have a significant impact on the disclosures set out in these unaudited condensed consolidated financial statements.
In December 2023, FASB issued Accounting Standards
Update (“ASU”) 2023-09, “Income Taxes (Topic 740)” (“ASU 2023-09”). The amendments in ASU 2023-09
address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily
related to the rate reconciliation and income taxes paid information. One of the amendments in ASU 2023-09 includes disclosure of, on
an annual basis, a tabular rate reconciliation of (i) the reported income tax expense (or benefit) from continuing operations, to (ii)
the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate
of the jurisdiction of domicile using specific categories, including separate disclosure for any reconciling items within certain categories
that are equal to or greater than a specified quantitative threshold of
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income (Topic 220-40): Expense Disaggregation Disclosures (“ASU 2024-03”). This update requires, among other things, more detailed disclosure about types of expenses in commonly presented expense captions such as cost of sales and selling, general, and administrative expenses, and is intended to improve the disclosures about an entity’s expenses including purchases of inventory, employee compensation, depreciation and amortization. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Group is currently evaluating the impact of the on its unaudited condensed consolidated financial statements and related disclosures.
F-18
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
2. Summary of Significant Accounting Policies (Continued)
Except for the above-mentioned pronouncements, there are no new recently issued accounting standards that will have a material impact on the Group’s unaudited condensed consolidated financial statements.
3. Significant Risks
Currency risk
The Group’s operating activities are transacted in HK$. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. The Group considers the foreign exchange risk in relation to transactions denominated in HK$ with respect to US$ as not significant as HK$ is pegged to US$.
Concentration and credit risks
Financial instruments that potentially subject the Group to the credit risks consist of cash, restricted cash, receivables from broker-dealers and clearing organizations, receivables from customers and amounts due from related party. The maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates.
The Group deposits its cash with reputable
banks located in Hong Kong. As of September 30, 2024 and March 31, 2024, $
For the credit risk related to receivables
from broker-dealers and clearing organizations and receivables from customers, the Group performs regular and ongoing credit assessments
of the counterparts’ financial conditions and credit histories. The Group also assesses historical collection trends, aging of receivables,
securities it holds on hand of these counterparts. Further, for receivables from customers related to brokerage transactions, of which,
under the contracts entered into between the Group and the customers, the Group is entitled to liquidate
the security positions it holds on behalf of the particular customers in order to recover the receivable balances in case of default,
the Group generally holds no collateral or security against other receivables. The Group considers that it has adequate controls
over these receivables in order to minimize the related credit risk. As of September 30, 2024 and March 31, 2024, the balances of allowance
for expected credit losses were $
For the six months ended September 30, 2024, 2023 and 2022, most of the Group’s assets were located in Hong Kong. At the same time, the Group considers that it is exposed to the following concentrations of risk:
| (a) | Major customers |
| For the six months ended September 30, 2024 | As of September 30, 2024 | |||||||||||||||
| Customer | Revenue | Percentage of revenue | Receivables from customers, gross | Percentage of receivables from customers, gross | ||||||||||||
| Customer A | $ | % | $ | | % | |||||||||||
F-19
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
3. Significant Risks (Continued)
| For the six months ended September 30, 2023 | As of September 30, 2023 | |||||||||||||||
| Customer | Revenue | Percentage of revenue | Receivables from customers, gross | Percentage of receivables from customers, gross | ||||||||||||
| Customer B | $ | % | $ | | % | |||||||||||
| Customer C | % | |||||||||||||||
| Total: | $ | % | $ | % | ||||||||||||
| For the six months ended September 30, 2022 | As of September 30, 2022 | |||||||||||||||
| Customer | Revenue | Percentage of revenue | Receivables from customers, gross | Percentage of receivables from customers, gross | ||||||||||||
| Customer D | $ | % | $ | % | ||||||||||||
| Customer E | % | |||||||||||||||
| Total: | $ | % | $ | % | ||||||||||||
| (b) | Major vendors |
For the six months ended September
30, 2024, there was one vendor of the Group who accounted for 10% or more of the Group’s revenues. Cost of revenue of this vendor
for the six months ended September 30, 2024 was $
| (c) | Receivables |
As of September 30, 2024, there were
two counterparties whose receivables accounted for 10% or more of the Group’s total balances of receivables from broker-dealers
and clearing organizations and receivables from customers before allowance for expected credit losses. These receivables accounted for
approximately
Interest rate risk
Fluctuations in market interest rates may negatively affect the Group’s financial conditions and results of operations. The Group is exposed to floating interest rate risk on bank deposits and overdue customers, in particular during a period when the interest rate is expected to change significantly. Nevertheless, with the amounts of bank deposits and overdue customers in concern, the Group considers its interest rate risk is not material and the Group has not used any derivatives to manage or hedge its interest risk exposure.
F-20
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
4. Receivables from Customers, Net
| As of | ||||||||
| September 30, | March 31, | |||||||
| Third parties | 2024 | 2024 | ||||||
| Receivables related to securities brokerage services | ||||||||
| Unsettled trades on trade-date basis | $ | $ | ||||||
| Overdue balances on settlement dates (1) | ||||||||
| Receivables related to advisory services | ||||||||
| Receivables related to due diligence services | ||||||||
| Receivables related to introducing and referral services | ||||||||
| Receivables related to investment management services | ||||||||
| Receivables related to underwriting and placement services | ||||||||
| Less: Allowance for expected credit losses | ( | ) | ( | ) | ||||
| Total receivables from customers, net | $ | $ | ||||||
| Related party | ||||||||
| Receivables related to securities brokerage services | ||||||||
| Overdue balances on settlement dates (1) | $ | $ | ||||||
| Less: Allowance for expected credit losses | ( | ) | ||||||
| Total receivables from customers-related party, net | $ | $ | ||||||
| (1) |
Subsequent to the six months ended September
30, 2024, receivables from customers amounted to $
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Balance at beginning of the period/year | $ | $ | ||||||
| Provision for expected credit losses | ||||||||
| Exchange difference | ||||||||
| Balance at end of the period/year | $ | $ | ||||||
The Group adopted ASU 2016-13 from April 1, 2023 using modified-retrospective transition approach with a cumulative-effect adjustment to shareholders’ equity amounting to recognized as of April 1, 2023.
F-21
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
5. Amounts Due from Related Party, Net
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Amounts due from related party | $ | $ | ||||||
| Less: Allowance for expected credit losses | ( | ) | ( | ) | ||||
| Total amounts from related party, net | $ | $ | ||||||
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Balance at beginning of the period/year | $ | | $ | |||||
| Provision for expected credit losses | ||||||||
| Exchange difference | ||||||||
| Balance at end of the period/year | $ | $ | ||||||
The Group adopted ASU 2016-13 from April 1, 2023 using modified-retrospective transition approach with a cumulative-effect adjustment to shareholders’ equity amounting to being recognized as of April 1, 2023.
6. ROU Assets and Operating Lease Liabilities
| Description of lease | Lease term | |
| Office at China Insurance Group Building, Hong Kong | ||
| Office at China Insurance Group Building, Hong Kong |
| (a) |
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Right-of-use assets | $ | $ | ||||||
| Operating lease liabilities | ||||||||
| Current | ||||||||
| Non-current | ||||||||
| $ | $ | |||||||
| Weighted average remaining lease terms (in years) | ||||||||
| (b) |
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Amortization of ROU assets | $ | $ | $ | |||||||||
| Interest on operating lease liabilities | ||||||||||||
| Total operating lease expenses, included within Occupancy Costs | $ | $ | $ | |||||||||
F-22
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
6. ROU Assets and Operating Lease Liabilities (Continued)
| (c) |
During the period ended September 30,
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total future lease payments | $ | |||
| Less: imputed interest | ( | ) | ||
| Present value of lease obligations | $ |
The weighted-average discount rate
used to determine the operating lease liabilities as of September 30, 2024 and March 31, 2024 was
7. Property and Equipment, Net
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Computer equipment | $ | $ | ||||||
| Furniture and office equipment | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
For the six months ended September 30, 2024, the
Group incurred $
Depreciation expense was $
8. Other Assets, Net
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Deposits | $ | $ | ||||||
| Prepayments | ||||||||
| Less: Allowance for expected credit losses | ( | ) | ( | ) | ||||
| Other assets, net | ||||||||
| Less: Amounts classified as non-current assets | ( | ) | ( | ) | ||||
| Amounts classified as current assets | $ | $ | ||||||
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Balance at beginning of the period/year | $ | $ | ||||||
| (Reversal of) Provision for expected credit losses | ( | ) | ||||||
| Exchange difference | ||||||||
| Balance at end of the period/year | $ | $ | ||||||
The Group adopted ASU 2016-13 from April 1, 2023 using modified-retrospective transition approach with a cumulative-effect adjustment to shareholders’ equity amounting to being recognized as of April 1, 2023.
F-23
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
9. Shareholders’ Equity
Ordinary shares
The Company was established under the laws of
Cayman Islands on August 11, 2022. The authorized and outstanding numbers of ordinary shares were
On November 21, 2022, the shareholders of the
Company resolved to subdivide each authorized share of par value of $
Subsequently, on April 3, 2023,
Further on April 20, 2023,
In respect of the subdivision of shares on November
21, 2022, shares allotments of
By recognizing the above transactions on a retroactive
basis, authorized share capital of the Company was $
Contrary to share split and nominal issuance,
the share allotments of
On December 1, 2023, the Company completed its
initial public offering on NASDAQ, under the ticker symbol “GSIW”. Under this offering,
On December 1, 2023, upon the completion of IPO
of the Company, IPO costs capitalized as of March 31, 2023 amounted to $
At the date these unaudited condensed consolidated
financial statements were issued, a total of
Forgiveness of debt by major shareholders
On November 25, 2022, the Group entered into deeds
of waiver of debts with its shareholders under which the shareholders agreed to waive the debts due to them by the Group with an amount
totaling HK$
F-24
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
10. Share Based Compensation Expenses
On April 24, 2023, and subsequently on August
31, 2023, the Company approved a share option plan where options were granted to grantees to acquire
The Group has adopted a policy of estimating the
number of forfeitures expected to occur and bases initial accruals of compensation cost on the estimated number of instruments for which
service is expected to be rendered (i.e. awards that are not expected to be forfeited). If subsequent information indicates that the actual
number of instruments is likely to differ from previous estimates, the Group revises the estimate accordingly, with any cumulative effect
on current and prior periods resulting from a change in the estimated number of instruments for which service is expected to be or has
been rendered is recognized in compensation cost in the period of the change. As of September 30, 2024 and March 31, 2024, the Company
has share options which allow grantees to acquire
| Expected dividend yield | ||||
| Expected volatility | % | |||
| Risk-free interest rate (per annum) | % | |||
| Time to maturity (in years) | ||||
The share options have a service condition and
an initial public offering performance condition. For share options granted with performance condition, the share-based compensation expenses
are recorded when the performance condition is considered probable. As a result, the cumulative share-based compensation expenses for
these options that have satisfied the service condition were recorded upon the completion of the initial public offering on December 1,
2023. For the six months ended September 30, 2024, 2023 and 2022, the Group recognized $
Number of
| Weighted Average Exercise Price | |||||||
| Granted | $ | $ | | |||||
| Forfeiture | ( | ) | ||||||
| Outstanding as of September 30, 2024 | $ | $ | ||||||
| Exercisable as of September 30, 2024 | ||||||||
11. Income Taxes
Cayman Islands and British Virgin Islands
Under the current and applicable laws of Cayman Islands and British Virgin Islands, the Group is not subject to tax on income or capital gains under these jurisdictions.
F-25
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
11. Income Taxes (Continued)
Hong Kong
IWHL, IWSL and IWAM are incorporated in Hong Kong
and are subject to Hong Kong Profits Tax on the taxable income as reported in their respective statutory financial statements adjusted
in accordance with relevant Hong Kong tax laws. For the six months ended September 30, 2024, 2023 and 2022, Hong Kong Profits Tax was
calculated in accordance with the two-tiered profits tax rates regime. For eligible entities, the applicable income tax rate for the first
HK$
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Current taxes | $ | $ | $ | |||||||||
| Deferred taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income tax (benefit) expense | $ | ( | ) | $ | $ | ( | ) | |||||
For the Six Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Applicable income tax rate | % | % | % | |||||||||
| Income tax benefits at applicable income tax rate | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Non-deductible expenses (1) | ||||||||||||
| Income not subject to tax | ( | ) | ( | ) | ( | ) | ||||||
| Tax effect of two-tiered profits tax rates | ( | ) | ( | ) | ||||||||
| Under-provision in previous years | ||||||||||||
| Change in valuation allowance | ||||||||||||
| Income tax (benefit) expense | $ | ( | ) | $ | $ | ( | ) | |||||
| (1) |
Deferred tax
The Group measures deferred tax assets and liabilities
based on the difference between the financial statement and tax bases of assets and liabilities at the applicable tax rates.
| As of | ||||||||
| September 30, | March 31, | |||||||
| 2024 | 2024 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for credit loss | $ | $ | ||||||
| Net operating loss carry forwards | ||||||||
| Depreciation and amortization | ||||||||
| Less: valuation allowances | ( | ) | ( | ) | ||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Depreciation and amortization | ( | ) | ||||||
| Total deferred tax liabilities | ( | ) | ||||||
| Deferred tax assets, net | $ | $ | ||||||
F-26
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
11. Income Taxes (Continued)
Valuation allowance is provided against deferred
tax assets when the Group determines that it is more-likely-than-not that the deferred tax assets will not be utilized in the future.
The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more-likely-than-not
be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of future
profitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans
and estimates the Group is using to manage the underlying businesses. The statutory tax rates of
As of September 30, 2024 and March 31, 2024, the
Group had net operating loss carryforwards indefinitely of $
Due to the successive years of losses recognized
by the Hong Kong subsidiaries, the Group is uncertain when these net operating losses can be utilized. As a result, the Group provided
a
| Balance at April 1, 2022 | $ | |||
| Increase recognized in the income statement | ||||
| Exchange difference | ( | ) | ||
| Balance at September 30, 2022 | $ |
| Balance at April 1, 2023 | $ | |||
| Increase recognized in the income statement | ||||
| Exchange difference | ||||
| Balance at September 30, 2023 | $ |
| Balance at April 1, 2024 | $ | |||
| Increase recognized in the income statement | ||||
| Exchange difference | ||||
| Balance at September 30, 2024 | $ |
Under relevant Hong Kong tax laws, tax case is
normally subject to investigation by the tax authority for up to
12. Related Party Transaction and Balance
| Name | Relationship with the Company | |
| Chan Sze Ho | ||
| Cheung Yuk Shan | ||
| Fong Wai Lok, Raymond | ||
| I Win Growth SPC — Fund 1 SP | ||
| Lau Kam Yan, Karen | ||
| Lobster Financial Holdings Limited | ||
| Oriental Moon Tree Limited | ||
| Tse Tim | ||
| Wu Hin Lun | ||
| Zhu Jian Guo | ||
| Zhu Yun |
F-27
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
12. Related Party Transaction and Balance (Continued)
For the Six Months Ended September 30 | ||||||||||||||||
| Name | Nature | 2024 | 2023 | 2022 | ||||||||||||
| Chan Sze Ho | (1) | Brokerage commission | $ | $ | $ | |||||||||||
| Cheung Yuk Shan | (1) | Brokerage commission | ||||||||||||||
| I Win Growth SPC – Fund 1 SP | (1) | Brokerage commission | ||||||||||||||
| Lau Kam Yan, Karen | (1) | Brokerage commission | ||||||||||||||
| Lobster Financial Holdings Limited | (1) | Brokerage commission | ||||||||||||||
| Tse Tim | (1) | Brokerage commission | ||||||||||||||
| Wu Hin Lun | (1) | Brokerage commission | ||||||||||||||
| Zhu Yun | (1) | Brokerage commission | ||||||||||||||
| Total | $ | $ | $ | |||||||||||||
| Cheung Yuk Shan | (2) | Handling income on custodian service | $ | $ | $ | |||||||||||
| Tse Tim | (3) | Handling income on dividend collection | ||||||||||||||
| Total | $ | - | $ | $ | ||||||||||||
| I Win Growth SPC – Fund 1 SP | (4) | Investment management fee income | $ | $ | $ | |||||||||||
| I Win Growth SPC – Fund 1 SP | (5) | Interest income and other | $ | $ | $ | |||||||||||
| Lau Kam Yan, Karen | (5) | Interest income and other | ||||||||||||||
| Lobster Financial Holdings Limited | (5) | Interest income and other | ||||||||||||||
| Tse Tim | (5) | Interest income and other | ||||||||||||||
| Wu Hin Lun | (5) | Interest income and other | ||||||||||||||
| Zhu Yun | (5) | Interest income and other | ||||||||||||||
| Total | $ | $ | $ | |||||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| As of | ||||||||||||
| September 30, | March 31, | |||||||||||
| Name | Nature | 2024 | 2024 | |||||||||
| Tse Tim | (1) | Receivables from customers | $ | $ | ||||||||
| Oriental Moon Tree Limited | (2) | Amounts due from related party | $ | $ | ||||||||
| Chan Sze Ho | (3) | Payables to customers | $ | $ | ||||||||
| Cheung Yuk Shan | (3) | Payables to customers | ||||||||||
| Fong Wai Lok, Raymond | (3) | Payables to customers | ||||||||||
| Lau Kam Yan, Karen | (3) | Payables to customers | ||||||||||
| Tse Tim | (3) | Payables to customers | ||||||||||
| Wu Hin Lun | (3) | Payables to customers | ||||||||||
| Zhu Jian Guo | (3) | Payables to customers | ||||||||||
| Zhu Yun | (3) | Payables to customers | ||||||||||
| Total | $ | $ | ||||||||||
| (1) |
| (2) |
| (3) |
F-28
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
13. Regulatory Requirements
The following table illustrates the minimum regulatory capital as established by HKSFC that the Company’s subsidiaries were required to maintain as of September 30, 2024 and March 31, 2024 and the actual amounts of capital maintained.
| Minimum Regulatory Capital Requirements |
Capital Levels Maintained |
Excess Net Capital |
Percent of Requirement Maintained | |||||||||||||
| I Win Securities Limited | $ | $ | $ | % | ||||||||||||
| I Win Asset Management Limited (1) | % | |||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
| Minimum Regulatory Capital Requirements |
Capital Levels Maintained |
Excess Net Capital |
Percent of Requirement Maintained | |||||||||||||
| I Win Securities Limited | $ | $ | $ | % | ||||||||||||
| I Win Asset Management Limited (1) | % | |||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
| (1) |
14. Commitments and Contingencies
Commitments
As of September 30, 2024 and March 31, 2024, other than lease commitment disclosed elsewhere in these unaudited condensed consolidated financial statements, the Group had neither significant financial nor capital commitment.
Contingencies
As of September 30, 2024 and March 31, 2024, the Group was not a party to any material legal or administrative proceedings. From time to time, the Group is involved in various other legal and regulatory proceedings arising in the normal course of business. While the Group cannot predict the occurrence or outcome of these proceedings with certainty, it does not believe that an adverse result in any pending legal or regulatory proceeding, individually or in the aggregate, would be material to the Group’s unaudited condensed consolidated financial condition or cash flows; however, an unfavorable outcome could have a material adverse effect on the Group’s results of operations.
F-29
Garden Stage Limited
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended September 30, 2024, 2023 and 2022
15. Segment information
The Group uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance.
The Group does not distinguish revenues, costs and expenses between segments in its internal reporting, but instead reports costs and expenses by nature as a whole. Based on the management’s assessment, the Group determines that it has only one operating segment and therefore one reportable segment as defined by ASC 280. Furthermore, all of the Group’s revenue are derived in or from Hong Kong with all operation being carried out in Hong Kong. Therefore, no geographical segments are presented. The Group concludes that it has only one reportable segment. As such, all financial segment information required by the authoritative guidance can be found in the unaudited condensed consolidated financial statements.
16. Subsequent Events
The Group evaluates all events and transactions that occur after September 30, 2024 up through the date the Group issues the unaudited condensed consolidated financial statements. There is no other subsequent event occurred that would require recognition or disclosure in the Group’s unaudited condensed consolidated financial statements.
Forward-Looking Statements
All statements other than statements of historical fact in this announcement are forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy, and financial needs. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and in its other filings with the SEC.
For more information, please contact:
Garden Stage Limited
Phone: +852 2688 6333
Email: cs@iwinsec.com
F-30