F-1/A: Youxin Technology Ltd Files Amendment No. 4 to Form F-1 for Initial Public Offering

Youxin Technology Ltd has filed Amendment No. 4 to its Form F-1 registration statement for an initial public offering of 2,000,000 Class A ordinary shares.

Summary

• Youxin Technology Ltd, a Cayman Islands company, is planning an initial public offering (IPO) of 2,000,000 Class A ordinary shares.
• The expected IPO price is $4.00 per share.
• The company has applied to list its Class A Shares on The Nasdaq Capital Market under the symbol YAAS.
• Concurrently, the company is registering 1,750,000 Class A Shares for resale by certain shareholders.
• Youxin Technology operates its core businesses through a subsidiary in the Peoples Republic of China (PRC).
• The company's ability to pay dividends depends on dividends received from its PRC subsidiary, which is subject to PRC laws and regulations.
• The company is an emerging growth company and a foreign private issuer, which allows for reduced public company reporting requirements.
• Immediately following the offering, Shaozhang Lin, the co-founder and CEO, will own 20.46% of the ordinary shares and control 56.90% of the voting power.
• The company is subject to legal and operational risks associated with having operations in Mainland China, including risks related to the legal, political and economic policies of the PRC government.
• The company submitted filing materials to the CSRC on June 7, 2023, and received comments on July 11, 2023, submitting responses on July 25, 2023.
• The company's ordinary shares may be prohibited from trading on a national exchange or over-the-counter markets under the Holding Foreign Companies Accountable Act (HFCAA) if the Public Company Accounting Oversight Board (PCAOB) is unable to inspect its auditors for three consecutive years beginning in 2021.
• The underwriters have the right to purchase up to 15% additional Class A Shares to cover over-allotments.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights the company's growth potential and strategic advantages, it also acknowledges significant financial losses and risks associated with operating in China.

Positives

• The company is positioned to provide cloud-based SaaS products and a PaaS platform to meet the needs of mid-tier brands in Mainland China.
• The company is one of 38 member companies in the world selected for Tencents Cloud Native Accelerator, allowing it to leverage cooperation in multiple dimensions.
• The company's net losses decreased from approximately RMB46.58 million ($6.46 million) for the year ended September 30, 2022 to approximately RMB16.53 million ($2.34 million) for the year ended September 30, 2023.

Negatives

• The company's revenues decreased by 30% from RMB8.37 million ($1.28 million) in fiscal year 2022 to RMB6.32 million ($0.90 million) in fiscal year 2023.
• The company's gross profit decreased from RMB4.58 million ($0.70 million) in fiscal year 2022 to RMB3.83 million ($0.54 million) in fiscal year 2023.
• The company's independent registered public accounting firms report contains an explanatory paragraph that expresses substantial doubt about the company's ability to continue as a going concern.

Risks

• The company is dependent on its subsidiary Guangzhou Youxins PaaS platform to provide cloud services.
• The company has a limited operating history, making it difficult to forecast future results of operations.
• The company may have insufficient computing resources, transmission bandwidth and storage space, which could result in disruptions.
• The company is subject to PRC laws and regulations governing its current business operations, which may change from time to time.
• The CSRC may exert more oversight and control over offerings that are conducted overseas and in foreign investment in China-based issuers, especially those in the technology field.
• The CAC has recently increased oversight over data security, particularly for companies seeking to list on a foreign exchange.
• The recent policy pronouncements by the PRC government regarding business activities of U.S.-listed PRC businesses may negatively impact the company's Hong Kong subsidiary.
• The company may experience difficulties in effecting service of process or enforcing foreign judgments against the company, its respective executive officers and directors residing in Mainland China.
• The company is a holding company, and it relies on funding on dividend payments from WFOE and Guangzhou Youxin, which are subject to restrictions under PRC laws.
• The PRC governments control over currency conversion may limit the company's foreign exchange transactions, including dividend payments on its Shares.
• The company's ordinary shares may be prohibited from being traded on a national exchange or over-the-counter markets under the HFCAA if the PCAOB is unable to inspect its auditors.
• The market price of the company's ordinary shares may be volatile or may decline regardless of its operating performance, and investors may not be able to resell their shares at or above the initial public offering price.

Future Outlook

The company anticipates that retailers will increasingly turn to public cloud services to streamline their operations, reduce costs, and enhance their overall performance.

Management Comments

• Management plans to address the need for capital through this offering.
• Management believes that the company's current cash, operational cash flow, and the amount available from future issuances of Class A Shares will be sufficient to fund its working capital requirements beyond the next 12 months.

Industry Context

The document highlights the growth potential of the retail public cloud services market in China and the increasing demand for cloud-based solutions among retailers.

Comparison to Industry Standards

• The document mentions that the penetration rate of SaaS in the Chinese retail industry was only 11.3% in 2022 and PaaS penetration was even lower at less than 5%.
• The document mentions that the company is one of 38 member companies in the world selected for Tencents Cloud Native Accelerator.

Related Party Transactions

• Baiyan and Jinhou Sun agreed to loan the Company up to $1,456,113 (RMB 10,000,000) to be used for a portion of the expenses of the Proposed Public Offering.
• These loans are non-interest bearing, unsecured and are due at the earlier of October 16, 2024 or the closing of the Proposed Public Offering.

Stakeholder Impact

• Shareholders will be subject to risks associated with operating in China.
• Shareholders may experience dilution due to the issuance of new shares.
• Shareholders may not receive dividends for the foreseeable future.
• The company's ability to operate in China is subject to changes in laws and regulations, which could impact its operations and the value of its securities.

Next Steps

• The company needs to complete the CSRC filing procedures.
• The company needs to secure Nasdaq approval for listing its Class A Shares.
• The company intends to use the net proceeds from the offering for research and development, general corporate purposes, and sales and marketing.

Key Dates

Keywords

IPO, Youxin Technology, Class A Shares, SaaS, PaaS, China, CSRC, PCAOB, HFCAA, Regulation