10-K: Jingbo Technology Reports Fiscal Year 2024 Results, Revenue Declines Amidst Contract Issues

Jingbo Technology's annual report reveals a decrease in revenue and a net loss, alongside a change in fiscal year end and a reverse stock split.

Summary

• Jingbo Technology, Inc. reported a revenue of $1,583,637 for the fiscal year ended February 29, 2024, a decrease from $3,426,492 in the previous year.
• The company's cost of revenues also decreased to $2,121,929 from $4,603,742 in the prior year.
• The gross loss for the year was $538,292, compared to $1,177,250 in the previous year.
• Selling and marketing expenses were $295,609, down from $501,892.
• General and administrative expenses decreased to $3,888,621 from $4,775,932.
• Research and development expenses were $334,029, a decrease from $428,076.
• The net loss for the year was $5,482,077, compared to $7,107,559 in the previous year.
• Total assets decreased to $12,866,660 from $23,081,187.
• Total liabilities were $31,568,840, down from $37,037,567.
• The company conducted a 1-for-200 reverse stock split, resulting in 5,315,412 shares outstanding as of July 2, 2024.
• The company changed its fiscal year end from May 31 to the last day of February.

Sentiment

Score: 3

Explanation: The document presents a challenging financial picture with declining revenue, significant losses, and going concern issues. While there are some improvements in cost control, the overall sentiment is negative due to the company's financial instability and operational challenges.

Positives

• The company's net loss decreased from $7,107,559 to $5,482,077 year-over-year.
• Cost of revenues decreased from $4,603,742 to $2,121,929 year-over-year.
• Selling and marketing expenses decreased from $501,892 to $295,609 year-over-year.
• General and administrative expenses decreased from $4,775,932 to $3,888,621 year-over-year.
• Research and development expenses decreased from $428,076 to $334,029 year-over-year.

Negatives

• The company's revenue decreased from $3,426,492 to $1,583,637 year-over-year.
• The company experienced a gross loss of $538,292.
• The company's total assets decreased from $23,081,187 to $12,866,660.
• The company's total liabilities decreased from $37,037,567 to $31,568,840, but still significantly exceed assets.
• The company has a going concern consideration due to substantial losses and negative working capital.

Risks

• The company's ability to continue as a going concern is dependent on long-term loans and the ability to obtain additional financing.
• The company's revenue decreased due to failure to renew contracts with landlords.
• The company's internal controls over financial reporting were deemed ineffective.
• The company is subject to risks associated with operating in the PRC, including political, economic, and legal environment changes.
• The company's operations are dependent on contractual agreements with variable interest entities (VIEs), which carry regulatory risks.
• The company has a significant accumulated deficit of $18,702,180.

Future Outlook

The company expects to derive revenue from parking operations, platform ecosystem development, hardware and software sales, and project construction. They also intend to expand into Asian and European markets in the next three years.

Management Comments

• Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on the Companys financial results.
• Management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Companys board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures can result in the Companys determination to its financial statements for the future years.
• Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Companys Board.
• Management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes.
• Management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department.

Industry Context

The document highlights the challenges in China's parking industry, including a shortage of parking spaces, low utilization rates, and a lack of standardized systems. The company aims to address these issues with its smart parking solutions, aligning with the trend of integrating technology into urban infrastructure.

Comparison to Industry Standards

• The document mentions that the average utilization rate of parking spaces in China is about 40%, with major cities like Beijing, Shanghai, and Guangzhou in the 40-50% range. This indicates that Jingbo Technology is operating in a market with significant inefficiencies.
• The document notes that the coverage rate of intelligent parking lots in major Chinese cities is less than 10%, suggesting a large potential market for Jingbo's smart parking solutions.
• The document references a car to parking space ratio of 1:1.3 in developed countries, while China's average is less than 1:0.5, highlighting the imbalance and need for improved parking infrastructure.
• The document mentions that internet companies like Ant Group, Tencent, and Baidu have invested in smart parking platforms, indicating a trend of technology integration in the industry. Jingbo Technology is competing with these larger players.
• The document states that the mainstream smart parking operation platform has access to Alipay, WeChat payment and other mobile payment technologies. Jingbo Technology is also using these technologies.

Management Changes

Corporate Governance

Legal Proceedings

• There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.

Related Party Transactions

• The company has significant related party transactions, including loans from and to related parties, and transfers of debt to related entities.
• Advances from Guowei Zhang were unsecured, non-interest bearing and due on demand.
• The company entered into a three-year loan with Beijing Zhibo Innovation Technology Co., Ltd (Zhibo) on September 20, 2019. The agreement commenced on October 1, 2019.
• Due to business restructure, Zhibo was deregistered at the beginning of 2023. Before deregistration, on January 15, 2023, Zhibo transferred the debts to a number of companies/partnerships with the clauses unchanged.
• For helping the Company consolidate debts and providing financial support to the Company, Shaoxin Keqiao Zhuyi Technology Co., Ltd., whose sole shareholder is Xiujuan Chen, took over the debts from the businesses mentioned in the table.

Stakeholder Impact

• Shareholders have experienced a significant decrease in the value of their investment due to the company's poor financial performance and reverse stock split.
• Employees may be affected by the company's financial instability and potential restructuring.
• Customers may be impacted by the company's ability to provide services due to financial constraints.
• Creditors face increased risk due to the company's going concern issues and high liabilities.

Next Steps

• The company intends to improve its internal controls over financial reporting.
• The company plans to hire additional personnel with technical accounting expertise.
• The company will appoint one or more outside directors to the board and audit committee.
• The company will prepare and implement written policies and procedures for accounting and financial reporting.
• The company intends to expand into Asian and European markets in the next three years.

Key Dates

Keywords

smart parking, parking management, technology, software, cloud platform, revenue, financial results, China, Intellegence Parking Group, reverse stock split