F-1/A: Youxin Technology Ltd Files Amendment No. 7 to Form F-1, Eyes Nasdaq Listing

Youxin Technology Ltd. is preparing for its initial public offering with an updated registration statement, aiming to list its Class A shares on the Nasdaq Capital Market.

Summary

• Youxin Technology Ltd., a Cayman Islands-based SaaS and PaaS provider, has filed Amendment No. 7 to its Form F-1 registration statement.
• The company is offering 2,300,000 Class A ordinary shares with an expected initial public offering price of $4.00 per share.
• Concurrently, the company is registering 1,875,000 Class A shares for resale by a selling shareholder.
• The company operates its core businesses through a subsidiary in the Peoples Republic of China (PRC).
• The company acknowledges risks associated with operating in Mainland China, including regulatory changes and potential government intervention.
• The company submitted filing materials to the CSRC on June 7, 2023, and received a filing notice on February 7, 2024, indicating completion of required procedures.
• The company is both an emerging growth company and a foreign private issuer, which allows for reduced public company reporting requirements.
• The company's co-founder and CEO, Shaozhang Lin, will control 56.90% of the voting power after the offering, making it a controlled company under Nasdaq rules.
• The company intends to use approximately 50% of the net proceeds for research and development, 30% for general corporate purposes, and 20% for sales and marketing.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights the company's growth strategies and market opportunities, it also acknowledges significant risks and financial challenges, including declining revenue and an auditor's going concern warning.

Positives

• The company's net losses decreased significantly from 2022 to 2023.
• The company has obtained all requisite permissions and approvals that are required and material to engage in the businesses currently conducted in Mainland China.
• The company has a strong emphasis on mid-tier brands.
• The company is part of Tencents Cloud Native Accelerator program.

Negatives

• The company has a limited operating history.
• The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
• 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 is dependent on its subsidiary Guangzhou Youxins PaaS platform to provide cloud services.
• The company depends on a small number of customers to derive a significant portion of its net revenues.

Risks

• The company faces legal and operational risks associated with operating in China, including regulatory uncertainty and potential government intervention.
• The company is subject to PRC laws and regulations governing its business operations, which may change from time to time.
• The company may be required to obtain permission from the PRC government to list on U.S. exchanges in the future.
• The company may encounter difficulties in transferring cash within its organization in the future, if it fails to comply with applicable PRC laws and regulations.
• The company is a holding company and relies on funding from dividend payments from its PRC subsidiaries, which are subject to restrictions under PRC laws.
• The company may experience difficulties in effecting service of process or enforcing foreign judgments against its executive officers and directors residing in Mainland China.
• The company's ordinary shares may be prohibited to trade on a national exchange or over-the-counter markets under the Holding Foreign Companies Accountable Act (the HFCAA) if the Public Company Accounting Oversight Board (PCAOB) is unable to inspect its auditors for three consecutive years beginning in 2021.

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

• We believe our current cash, operational cash flow, and the amount available from future issuances of Class A Shares will be sufficient to fund our 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, particularly for SaaS and PaaS solutions catering to mid-tier brands.

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.

Stakeholder Impact

• Shareholders face risks associated with regulatory changes in China and potential government intervention.
• Shareholders may experience dilution due to the issuance of new shares.
• Shareholders may not receive dividends in the foreseeable future.
• The company's ability to offer securities to investors could be significantly limited or completely hindered and the securities currently being offered may substantially decline in value and be worthless.

Next Steps

• The company aims to list its Class A shares on the Nasdaq Capital Market.
• The company will use the net proceeds from the IPO for research and development, general corporate purposes, and sales and marketing.

Key Dates

Keywords

Initial Public Offering, SaaS, PaaS, China, Regulation, Risk Factors, Youxin Technology, Overseas Listing, CSRC, Cybersecurity, Data Privacy