DIJIYA ENERGY SAVING TECHNOLOGY INC.
Financial Statements
December 31, 2023 and 2022
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DIJIYA ENERGY SAVING TECHNOLOGY INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2023 and 2022
(Amounts Expressed in New Taiwan Dollars unless otherwise stated)
1.Organization and activities
DIJIYA ENERGY SAVING TECHNOLOGY INC. (the "Company") was incorporated as a company limited by shares under the provision of the Company Law of the Republic of China (ROC) on August 20, 2009. As of December 31, 2023 and 2022, the number of employees of the Company were approximately 32 and 38 employees.
The principal activities of the Company are the manufacturing and sale of LiFePO4 Battery Cell & Power Battery Packs.
2.The date of authorization for issuance of the financial statements and procedures for authorization
These financial statements were authorised for issuance by the Board of Directors on May 31, 2024.
3.Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09 on Improvements to Income Tax Disclosures that require greater disaggregation of income tax disclosures to the income rate tax rate reconciliation and income taxes paid. The Updates are effective for annual periods beginning after December 15, 2024. The Company will adopt and apply the guidance in fiscal year 2025. There is no material impact expected to our results of operations, cash flows and financial condition at the time of adoption, however the Company is still assessing the disclosure impact.
4.Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all reporting periods, unless otherwise stated.
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(1)Basis of preparation
The financial statements and accompanying notes of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP").
(2)Foreign currency
The functional currency of the Company is determined by the primary economic environment in which the Company operates.
The financial statements are presented in New Taiwan dollars, which is the Company's functional currency.
A.Foreign currency transactions are translated into the functional currency using spot exchange rate at the dates of the transactions.
B.Monetary items denominated in foreign currencies are translated at the closing rate at the balance sheet date. Exchange differences arising upon translation at the balance sheet date are recognised in profit or loss.
C.Non-monetary items denominated in foreign currencies held at fair value through profit or loss are translated at closing rate at the balance sheet date; their translation differences are recognised in profit or loss.
Non-monetary items denominated in foreign currencies held at fair value through other comprehensive income are translated at the closing rate at the balance sheet date; their translation differences are recognised in other comprehensive income.
Non-monetary items denominated in foreign currencies that are measured at cost are translated using the historical exchange rates at the dates of the transactions.
D.All foreign exchange gains and losses are presented in the statement of comprehensive income within 'other gains and losses.'
(3)Going Concern Consideration
For the year ended December 31, 2023, the Company had a negative cash flow from operating activities of $51,950,664, and net loss of $196,320,172. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Therefore, the Company may be unable to realize its assets and discharge its liabilities in normal course of business.
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The borrowings of the Company as of December 31, 2023 were from the related parties, which will not repayable within the next 12 months and are subject to renewal. Management is confident that these borrowings can be renewed upon expiration.
Management believes that there is sufficient working capital to sustain operations longer than twelve months.
(4)Classification of current and non-current items
A.Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a)Assets that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
(b)Assets held mainly for trading purposes;
(c)Assets that are expected to be realised within twelve months from the balance sheet date;
(d)Cash or cash equivalents, excluding cash and cash equivalents that are restricted from being exchanged, used to settle liabilities for at least twelve months after the balance sheet date or restricted by other factors.
B.Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a)Liabilities that are expected to be settled within the normal operating cycle;
(b)Liabilities held mainly from trading activities;
(c)Liabilities that are to be settled within twelve months after the balance sheet date;
(d)Liabilities for which the repayment date cannot be deferred unconditionally for at least twelve months after the balance sheet date.
(5)Cash and Cash equivalents
Cash equivalents refer to short-term, highly liquid time deposits or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
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(6)Accounts and other receivables
Accounts receivable are loans that are created by the entity by selling goods or providing services to customers and are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition. Accounts receivable are subsequently measured at amortised cost using the effective interest method, less impairment loss. Interest amortised using the straight-line method is recognised in profit or loss.
Recently adopted accounting guidance:
Allowance for Credit Losses
In June 2016, the FASB issued guidance (FASB ASC 326) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity's exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 were notes and account receivable and other receivable - related parties.
We adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in enhanced disclosures only.
(7)Inventories
At the end of year, inventories are evaluated at the lower of cost or net realizable value. The individual item approach is used in the comparison of cost and market, except where it may be appropriate to group similar or related items. The calculation of net realizable value should be based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses. A provision is made for obsolete or slow-moving items and is charged against current cost of sales.
(8)Property, plant and equipment
A.Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B.In case of replacement of one part of the property, plant and equipment, the new part is capitalised to the extent that it is probable that future economic benefits associated with the item will flow to the Company, and the carrying amount of the part replaced is derecognised. All other repairs and maintenance are charged to profit or loss when incurred.
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C.Property, plant and equipment are measured at cost model subsequently. Land is not depreciated. Other property, plant and equipment are depreciated using the straight-line method over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately, unless it is impracticable. The estimated useful lives of property, plant and equipment are as follows:
Machinery5-8 years
Transportation equipment5 years
Operation facilities2-5 years
Other equipment2-5 years
(9)Impairment of non-financial assets
Management evaluates the Company's long-lived assets, excluding goodwill, that consist of property, plant and equipment and intangible assets, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying amount of the asset over the estimated fair value of the asset. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisers, as considered necessary.
(10)Employee benefits
A.Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid and are recognised as expenses in the period in which the employees render service.
B.The amount that the Company shall appropriate in a designated pension account according to law is recognised as pension expenses on an accrual basis.
(11)Revenue recognition
The Company accounts for revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standard Codification("ASC") Topic 606, Revenue from Contracts with Customers(" ASC Topic 606"). The standard did not affect the Company's financial position, or cash flows. There were no changes to the timing of revenue recognition as a result of the adoption.
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which provided a five-step model for recognizing revenue from contracts with customers as follows:
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·Identify the contract with a customer.
·Identify the performance obligations in the contract.
·Determine the transaction price.
·Allocate the transaction price to the performance obligations in the contract
·Recognize revenue when or as performance obligations are satisfied.
(12)Lease
The Company has elected the adoption under ASC Topic 842, Leases, which allows the Company to apply the transition provision at the Company's adoption date instead of at the earliest comparative period presented in the financial statements. The Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing leases upon adoption.
For a lessee, a lease is recognized as a right-of-use asset with a corresponding liability at lease commencement date. The lease liability is calculated at the present value of the lease payments not yet paid by using the lease term and discount rate determined at lease commencement. The right-of-use asset is calculated as the lease liability, increased by any initial direct costs, and prepaid lease payments, reduced by any lease incentives received before lease commencement.
The right-of-use asset itself is amortized on a straight-line basis unless another systematic method better reflects how the underlying asset will be used by and benefits the lessee over the lease term.
As of January 1, 2022, the Company adopted ASC Topic 842, Leases, which allows the Company to apply the transition provision at the Company's adoption date instead of at the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2022 but without retrospective application. In addition, the Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing leases upon adoption. No impact was recorded to the beginning retained earnings for ASC Topic 842.
(13)Income tax
A.The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
B.The current income tax liabilities are calculated based on the tax rate enacted at the balance sheet date.
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C.Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the balance sheet. Deferred tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
D.Deferred tax asset are recorded net of a valuation allowance when, based on the weight of available evidence, it is more likely than not that all or some portion of the recorded deferred tax balances will not be realized in future periods. Decrease to the valuation allowance are recorded as reductions to the Companys's provision for income taxes and increases to the valuation allowance result in addintional provision for income taxes.
E.A deferred tax asset is recognised for the carryforward of unused tax credits resulting from unused taxable loss, acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.
5.Critical estimates and key sources of assumption uncertainty
The preparation of these financial statements requires management to make critical assumptions and estimates concerning future events based on the conditions existing at the balance sheet date. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:
(1)Impairment assessment of tangible and intangible assets
The Company assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Company strategy might cause material impairment on assets in the future.
(2)Realisability of deferred tax assets
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Assessment of the realisability of deferred tax assets involves critical accounting judgements and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred tax assets.
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(3)Evaluation of inventories
As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.
6.The contents of statements of major accounting items
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10.Losses on catastrophic disasters: None.
11.Significant subsequent event: None.
12.Others: None.
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