Zepp Health (ZEPP) 20-F/A2023 FY Annual report (foreign) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

(Mark One)

¨      REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934

OR 

x      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023.

OR

¨      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 

OR 

¨      SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                                                     

For the transition period from _________ to _________

Commission file number: 001-38369

ZEPP HEALTH CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Huami Global Innovation Center

Building B2, Zhong'an Chuanggu Technology Park

No. 900 Wangjiang West Road

Hefei, 230088

People’s Republic of China

(Address of Principal Executive Offices)

Leon Cheng Deng, Chief Financial Officer

Huami Global Innovation Center

Building B2, Zhong'an Chuanggu Technology Park

No. 900 Wangjiang West Road

Hefei, 230088

People’s Republic of China

Phone: +86 010 5940 3251

Email: ir@zepp.com

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

*Not for trading, but only in connection with the listing of the American depositary shares on the New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

As of December 31, 2023, there were (i) 123,618,904 Class A ordinary shares issued and outstanding, par value US$0.0001 per share (excluding the 4,517,284 Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under the 2015 Share Incentive Plan, the 2018 Share Incentive Plan and the 2023 Share Incentive Plan and the 20,206,944 treasury shares in the form of ADSs that we repurchased under our share repurchase program), and (ii) 117,208,247 Class B ordinary shares issued and outstanding, par value US$0.0001 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes x No

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ¨ Item 17 ¨ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ¨ Yes ¨ No

EXPLANATORY NOTE

This Amendment No. 1 on Form 20-F/A (the “Amendment”) is being filed by Zepp Health Corporation (the “Company,” “we,” “our,” or “us”) to amend the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, originally filed with the U.S. Securities Exchange Commission on April 23, 2024 (the “Original Filing”). This Amendment is being filed for the purpose of complying with Regulation S-X, Rule 3-09. Rule 3-09 requires, among other things, that separate financial statements for unconsolidated subsidiaries and investees accounted for by the equity method to be included in the Form 20-F when such entities are individually significant.

We have determined that our equity method investment in Jiangsu Yitong High-tech Co., Ltd. (hereinafter referred to as “Jiangsu Yitong”), which is not consolidated in our financial statements, was significant under the investment test of Rule 1-02(w) of Regulation S-X in relation to our financial results for the year ended December 31, 2023. This Amendment is therefore filed to supplement the Original Filing with the inclusion of the financial statements and related notes of Jiangsu Yitong as of December 31, 2022 and 2023 and for the fiscal years ended December 31, 2021, 2022 and 2023 (the “Jiangsu Yitong Financial Statements”).

This Form 20-F/A consists of the cover page, this explanatory note, the Jiangsu Yitong Financial Statements, updated certifications of our chief executive officer and chief financial officer, and consent of the independent auditor of Jiangsu Yitong. This Amendment does not affect any other parts of, or exhibits to, the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and with our filings with the U.S. Securities Exchange Commission subsequent to the Original Filing.

TABLE OF CONTENTS

PART III

The following financial statements are included in this Form 20-F/A:

Consolidated financial statements of Jiangsu Yitong High-tech Co., Ltd. as of December 31, 2022 and 2023 and for the fiscal years ended December 31, 2021, 2022 and 2023.

JIANGSU YITONG HIGH-TECH CO., LTD

TABLE OF CONTENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Jiangsu Yitong High-tech Co., Ltd

We have audited the accompanying consolidated balance sheets of Jiangsu Yitong High-tech Co., Ltd. and its subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations, changes in equity, and cash flows for the year ended December 31, 2023 and the related notes.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Convenience translation

Our audit also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2 to the financial statements. Such United States dollar amounts are presented solely for the convenience of readers outside the People’s Republic of China.

Auditor’ Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risk of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Other Matter

The accompanying consolidated balance sheets of Jiangsu High-tech Co., Ltd. and its subsidiaries as of December 31, 2022, and the related consolidated statements of operations, of changes in equity and of cash flow for the years then ended December 31, 2021 and 2022 are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2021 and 2022 financial statements to be audited and they are therefore not covered by this report.

/s/ BROOK & PARTNERS CPAs

We have served as the Company’s auditor since 2023.

Beijing, the People’s Republic of China

June 27, 2024

JIANGSU YITONG HIGH-TECH CO., LTD
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

JIANGSU YITONG HIGH-TECH CO., LTD
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

The accompanying notes are an integral part of these consolidated financial statements.

JIANGSU YITONG HIGH-TECH CO., LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

The accompanying notes are an integral part of these consolidated financial statements.

JIANGSU YITONG HIGH-TECH CO., LTD
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

The accompanying notes are an integral part of these consolidated financial statements.

JIANGSU YITONG HIGH-TECH CO., LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

JIANGSU YITONG HIGH-TECH CO., LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

The accompanying notes are an integral part of these consolidated financial statements.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION

Jiangsu Yitong High-tech Co., Ltd (“the Company”, formerly known as Jiangsu Yitong Electronics Co., Ltd) is a company with limited liability incorporated under the laws of the People’s Republic of China (the “PRC” or the “China”) in November 1999.

The Company’s shares have been listed in Shenzhen Stock Exchange since May 2011 (“the Listing”).

On January 5, 2021, the controlling shareholder entered the agreement with Anhui Shunyuan Xinke Management Consulting Partnership (Limited Partnership) (“Anhui Shunyuan”) to transfer 29.99% equity interest of the Company with an aggregate cash consideration of RMB959.7 million. Anhui Shunyuan is a subsidiary of Zepp Health Corporation (“Zepp”). In May 2022, Anhui Shunyuan acquired another 0.01% equity interest of the Company through Stock Exchange Trading System. After the transaction, Anhui Shunyuan accounted for 30.0% equity interest of the Company. As of December 31, 2023, Anhui Shunyuan accounted for 29.88% equity interest of the Company.

The Company and its subsidiaries (together “the Group”) are primarily engaged in the business of developing, manufacturing and sells of cable television network equipment, providing services to intelligent video monitoring engineering and developing, designing and sells of chips and sensors.

Zepp accounted for its investment in the Group using the equity method. As the Group is considered to be a significant equity method investee of Zepp for the fiscal year of 2023, its financial statements are included as an exhibit to the Annual Report of Zepp on Form 20-F in accordance with Securities and Exchange Commission (“SEC”) Rule 3-09 of Regulation S-X.

As of December 31, 2023, details of the Group’s major subsidiaries were as follows:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of consolidation

The consolidated financial statements include the financial statements of the Group and its wholly-owned subsidiaries. All transactions and balances between the Group and its subsidiaries have been eliminated upon consolidation.

Use of estimates

In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to, the assessment of the allowance for doubtful accounts, inventory valuation, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, incremental borrowing rate for leases, uncertain tax position and valuation allowance for deferred tax assets. Actual results could differ from those estimates.

Fair value

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Authoritative literature provides a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Fair value - continued

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Group’s financial instruments consist primarily of cash and cash equivalents, restricted cash, accounts receivable, amounts due from a related party, installment payment receivables, notes payable, accounts payable, and amounts due to related parties. The carrying amounts of current portion of these financial instruments approximates their fair values due to the short-term maturities of these instruments.

The non-financial assets, such as property and equipment would be measured at FV as they were determined to be impaired.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and demand deposits placed with commercial banks with an original maturity of three months or less, which are unrestricted from withdrawal or use, or which have original maturities of three months or less when purchases. The Group maintains all of the bank accounts in mainland China.

Restricted cash

Restricted cash consists of guarantee and deposits made to the bank for bank acceptance notes (or notes payable) issued by the Group. When the Group issues the bank acceptance notes, the banks require the Group to make a deposit for 30% of the face value of the bank acceptance notes issued as collateral. The deposits for unsettled bank acceptance notes were recorded as restricted cash in the consolidated balance sheets as of December 31, 2022 and 2023.

Accounts receivable

Accounts receivables represent those receivables derived in the ordinary course of business, net of allowance for doubtful accounts.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Allowance for doubtful accounts

The Group maintains an allowance for doubtful accounts for estimated losses on uncollected accounts receivable. Management considers the following factors when determining the collectability of specific accounts: creditworthiness of customers, aging of the receivables, past transaction history with customers and their current condition, changes in customer payment terms, specific facts and circumstances, and the overall economic climate in the industries the Group serves. The Group evaluates its receivable for expected credit losses on a regular basis. The Group maintains an estimated allowance for credit loss to reduce its receivables to the amount that it believes will be collected. The Group uses the creditworthiness of customers, aging of the receivables, past transaction history with customers and their current condition, changes in customer payment terms, specific facts and circumstances, and the overall economic climate in the industries the Group serves to monitor the Group’s receivables within the scope of expected credit losses model and use these as a basis to develop the Group’s expected loss estimates. As of December 31, 2022 and 2023, the Group had RMB4,584 and RMB3,884 allowance for doubtful account recorded in accounts receivable.

Inventories, net

Inventories of the Group consist of raw materials, finished goods, work in process and inventoried costs relating to long-term contracts. Inventories are stated at the lower of cost or net realizable value on a weighted average basis. Inventory costs include expenses that are directly or indirectly incurred in the purchase, including shipping and handling costs charged to the Group by suppliers, and production of manufactured product for sale, such as include the cost of materials and supplies used in production, direct labor costs and allocated overhead costs such as depreciation, insurance, employee benefits, and indirect labor. Cost is determined using the weighted average method. The Group assesses the valuation of inventory and periodically writes down and writes off the value for estimated excess and obsolete inventory based upon the product life cycle.

Installment payment receivables, net

Installment receivables consist of receivables in relation to installment receivables resulting from engineering services provided by the Group. Installment receivables is recorded upon the revenue recognized and consists net of the unearned interest income and allowance for doubtful accounts. It is recognized as current or non-current assets in the balance sheets based on the remaining collection terms.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Property, plant and equipment, net

Property and equipment are carried at cost, net of accumulated depreciation and impairment, if any. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. 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. When assets are retired or disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

Estimated useful lives are as follows:

Intangible assets, net

Intangible assets purchased from third parties and related parties are initially recorded at cost and amortized on a straight-line basis over their estimated economic useful lives. Estimated useful lives are as follows:

Revenue recognition

The Group’s revenues are derived principally from developing, manufacturing and sells of broadcasting and television equipment, providing services to intelligent video monitoring engineer and developing and sells of chips and sensors. Value added taxes (“VAT”) are presented as a reduction of revenues.

Revenue recognition on product sales

For all products sales, the Group requires a contract or purchase order which quantifies pricing, quantity and product specifications. The Group’s sales arrangements generally do not contain variable considerations and are short-term in nature. The Group recognizes revenue at a point in time when the customer obtains control of the products. Revenue is recognized as performance obligation under the terms of a contract with the customer are satisfied and control of the product has been transferred to the customer. Sales of goods do not include multiple products and/or service elements.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Revenue recognition - continued

Revenue from engineering services and others

The Group provides intelligent video monitoring engineering services to customers and revenue of engineering services is recognized over time by measuring the progress towards complete satisfaction of that performance obligation. The progress towards complete satisfaction of the performance obligation is measured based on the Group’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contracts cost incurred up to the end of reporting period as a percentage of total estimated costs for each contract. The Group also generates other revenue from repairment and rental services, which are immaterial.

Cost of revenue

Cost of revenues consists primarily of material costs, salaries and benefits for staff engaged in production and engineering activities, depreciation and amortization, outsourced services and related expenses which are directly attributable to the production of products. The shipping and handling fees billed to the customers are presented as part of cost of revenues as well.

Selling and marketing expenses

Selling and marketing expenses consist primarily of promotion and advertising expenses, staff costs and other daily expenses which are related to the selling and marketing departments. These expenses are charged to the consolidated statements of operations as incurred.

General and administrative expenses

General and administrative expenses consist primarily of salaries and welfare expenses and related expenses for employees involved in general corporate functions, including accounting, legal and human resources; and costs associated with use by these functions of facilities and equipment, such as traveling and general expenses, professional service fees and other related expenses. These expenses are charged to the consolidated statements of operations as incurred.

Research and development expenses

Research and development expenses consist primarily of salaries and benefits for research and development personnel, materials, office expenses, amortization and depreciation expenses associated with research and development activities.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Income taxes

Income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred tax assets and liabilities are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized.

The Group accounts for uncertain tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Tax benefits are recognized from uncertain tax positions when the Group believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The Group recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expenses.

Value added tax (“VAT”)

The Group’s PRC subsidiaries are subject to value added tax (“VAT”) and related surcharges based on gross sales or service price depending on the type of services provided in the PRC (“output VAT”), and the VAT may be offset by VAT paid by the Group on service purchases (“input VAT”). The applicable rate of output VAT or input VAT for the Group is 2%, 5%, 6%, 9% and 13%. Gross sales or service price charged to customers is subject to output VAT at the rate and subsequently paid to PRC tax authorities after netting input VAT on purchases incurred during the period. The Group’s revenues are presented net of VAT collected on behalf of PRC tax authorities and its related surcharges; the VAT is not included in the consolidated statements of operations. All of the VAT returns filed by the Group’s subsidiaries in the PRC, have been and remain subject to examination by the tax authorities for five years from the date of filing.

Share-based payment

Share-based payment transactions with employees are measured based on the grant date value of the equity instrument. The Group that grants awards with graded, that is with multiple, vesting dates elect to recognize the awards on a straight-line basis as if it were several separate awards. The requisite service period is generally the vesting period of the award. The Group elects to recognize forfeitures then they occur.

Foreign currencies

The reporting currency of the Group is RMB. The Group’s principal country of operations is the PRC. The financial position and results of its operations are determined using the RMB, the local currency, as the functional currency.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Convenience translation

Translations of balances in the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows from RMB into US$ as of and during the year ended December 31, 2023 is solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB7.0999, representing the rate as certified by the statistical release of the Federal Reserve Board of United States on December 29, 2023. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollar at that rate on December 31, 2023, or at any other rate.

Net income per share

Basic net income per ordinary share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted income per ordinary share reflects the potential dilution that would occur if securities were exercised or converted into ordinary shares. The Group had restricted shares which could potentially dilute basic income per ordinary share in the future. To calculate the number of shares for diluted income per ordinary shares, the effect of the restricted shares is computed using the treasury stock method.

Concentration of credit risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable. The Group places its cash and cash equivalents with financial institutions with high credit ratings and quality.

The Group conducts credit evaluations of third-party customers and related parties, and generally does not require collateral or other security from its third-party customers and related parties. The Group establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific third-party customers and related parties.

Major Customers

Accounts receivable concentration of credit risk is as below:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Concentration of credit risk - continued

Major Customers - continued

Amounts due from related parties’ concentration of credit risk is as below:

Revenue concentration of credit risk is as below:

Major Suppliers

Accounts payable concentration of credit risk is as below:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Concentration of credit risk - continued

Major Suppliers – continued

Amounts due to related parties, current and non-current concentration of credit risk is as below:

Purchase concentration of credit risk is as below:

Recent accounting pronouncements not yet adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)- Improvements to Reportable Segment Disclosures. ASU No. 2023-07 requires an enhanced disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, on an annual and interim basis. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of this guidance should be applied retrospectively to all prior periods presented. Early adoption is permitted. The Group is currently in the process of evaluating the disclosure impact of adopting ASU 2023-07.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)- Improvements to Income Tax Disclosures. ASU No. 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Group is currently in the process of evaluating the disclosure impact of adopting ASU 2023-09.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 3 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following:

NOTE 4 — INVENTORIES, NET

Inventories, net consisted of the following:

During the years ended December 31, 2021, 2022 and 2023, the Group recorded a provision for the excess and obsolete inventories amounting to RMB23, RMB601 and RMB803 respectively.

NOTE 5 — INSTALLMENT RECEIVABLES, NET

Installment receivables relating to the installment for engineering services consisted of the following:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 5 — INSTALLMENT RECEIVABLES, NET - CONTINUED

As of December 31, 2023, the due date of installment receivables is as follows:

NOTE 6 — PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:

The Group has recorded depreciation expenses of RMB14,898, RMB8,986 and RMB11,223 during the years ended December 31, 2021, 2022 and 2023, respectively. No impairment was recorded during the years ended December 31, 2021, 2022 and 2023.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 7 — INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

Amortization expenses for the intangible assets for the years ended December 31, 2021, 2022 and 2023, were RMB1,408, RMB3,071 and RMB6,219, respectively. Future amortization expenses relating to the existing intangible assets amounted to RMB8,792 for the next year, RMB8,573 for the second year, RMB6,720 for the third year, RMB4,996 for the fourth year, RMB3,070 for the fifth year and RMB8,549 thereafter.

NOTE 8 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 9 — RELATED PARTY TRANSACTIONS AND BALANCES

Nature of relationships with related parties:

Transactions with related parties

Balances with related parties

As of December 31, 2022 and 2023, the balances with related parties were as follows:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 9 — RELATED PARTY TRANSACTIONS AND BALANCES - CONTINUED

Balances with related parties - continued

NOTE 10 — REVENUE

Disaggregation of revenue

The following table summarized disaggregated revenue for the years ended December 31, 2021, 2022 and 2023:

Contract balances

The following table provides information about receivables, contract assets, installment payment receivables and advance from customers from contracts with customers:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 10 — REVENUE - CONTINUED

Contract balances - continued

The Group recognizes accounts receivable, contracts assets, amounts due from a related party, installment receivables in its consolidated balance sheets when it performs a service in advance of receiving consideration and it has the unconditional right to receive consideration. Contract assets is unbilled amount related to the progress towards complete satisfaction under engineering services agreements. Payments received from customers are based on the payment terms established in its contracts. Such payments are initially recorded to advance from customers and are recognized into revenue as the Group satisfies its performance obligations. Substantially all of advance from customers will be recognized as revenue during the Group’s following fiscal year.

NOTE 11 — INCOME TAXES

The Group are subject to the 25% standard enterprise income tax rate except for the Group and Whale Microelectronics that qualify as a high and new technology enterprise (“HNTE”), which are subject to a tax rate of 15%. The Group began to qualify as HNTE in 2020 and renewed the HNTE certificate in November 2023. Accordingly, the Group was subject to a tax rate of 15% during the year ended December 31, 2021, 2022 and 2023. Whale Microelectronics qualified as a HNTE in November 2023 and is subject to a tax rate of 15% during the year ended December 31, 2023.

The provision for income tax consisted of the following:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 11 — INCOME TAXES – CONTINUED

The significant components of the Group’s deferred tax assets were as follows:

Reconciliation between the tax expense computed by applying the PRC enterprise tax rate of 25% to income/(loss) before income tax and the actual tax expense were as follows:

If the Group did not enjoy the tax holidays, tax expense would have increased by RMB1,837, RMB1,936 and decreased by RMB721 for the year ended December 31, 2021, 2022 and 2023, respectively. The (decrease)/increase in basic and diluted net income per ordinary share would be RMB (0.006), RMB (0.006) and RMB0.002 for the year ended December 31, 2021, 2022 and 2023, respectively.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 12 — SHARE-BASED COMPENSATION

2021 Share Incentive Plan

In August 2021, the Group adopted the 2021 share incentive plan (the “2021 Plan”) that provides for grant of restricted shares to employees. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2021 Plan is 4,243,750 shares. The 2021 Plan permits the awards of restricted shares. The restricted shares are not transferable and may not be sold or pledged and the holder has no voting or dividend right the non-vested shares. On February 28, 2022, the Group has amended the Plan so as to increase the number of shares to 220,000 in accordance with rules of the 2021 Plan.

During the years ended December 31, 2021, 2022 and 2023, the Group granted 3,355,000, 220,000 and nil restricted shares to personnel under the 2021 Plan.

2022 Share Incentive Plan

On April 28, 2022, the Group adopted the 2022 share incentive plan (the “2022 Plan”). The maximum aggregate number of shares which may be issued pursuant to all awards under the 2022 Plan is 5,250,000 shares. The 2022 Plan permits the awards of restricted shares. For those awards, evaluations are made as of each reporting period to assess the likelihood of performance criteria being met. On November 24, 2022, the Group has amended the Plan so as to increase the number of shares to 150,000 in accordance with the rules of the 2022 Plan.

During the years ended December 31, 2022 and 2023, the Group granted 4,350,000 and nil restricted shares to personnel under the 2022 Plan.

The Group calculated the estimated fair value of the restricted shares on the grant dates using the Black-Scholes option pricing model. Assumptions used to determine the fair value of restricted share granted during the years ended December 31, 2021 and 2022 are summarized in the following table, no shares were granted in 2023:

Risk-free interest was estimated based on the yield to maturity of China international government bonds with a maturity period close to the contractual term of the shares.

Expected life of option (years) represents the expected years to vest the restricted shares.

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 12 — SHARE-BASED COMPENSATION - CONTINUED

The volatility of the underlying restricted share during the life of the shares was estimated based on the historical stock price volatility of comparable listed companies over a period comparable to the contractual term of the shares.

The dividend yield was estimated by the Group based on its expected dividend policy over the contractual term of the restricted shares.

During the years ended December 31, 2023, the fair value of the underlying restricted share was determined based on the Black-Scholes option pricing model of the shares.

A summary of the restricted shares activity during the year ended December 31, 2023 is presented below:

The following table summarizes information regarding the restricted share as of December 31, 2023:

JIANGSU YITONG HIGH-TECH CO., LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)

NOTE 12 — SHARE-BASED COMPENSATION – CONTINUED

The total intrinsic value of restricted shares exercised during the years ended December 31, 2021, 2022 and 2023 amounted nil, nil and RMB3,045 respectively.

The weighted average grant date fair value of restricted share granted during the year ended December 31, 2021, 2022 and 2023 was RMB5.94, RMB0.95 and nil per share, respectively.

As of December 31, 2023, there was RMB2,001 of unrecognized compensation expenses related to the shares which will be recognized within three years.

Total share-based compensation recognized during the years ended December 31, 2021, 2022 and 2023 was as follows:

NOTE 13 — ORDINARY SHARES

In 2023, the exercise of restricted shares was 1,231,250 ordinary shares with the total amount of RMB7,365. As a result, the ordinary shares of the Group are 302,675,973 and 303,907,223 as of December 31, 2022 and 2023, respectively.

NOTE 14 — STATUTORY RESERVE

In accordance with the PRC Company Laws, the Group’s subsidiaries in the PRC are required to provide for statutory reserves, which are appropriated from net profit as reported in the Group’s PRC statutory accounts. They are required to allocate 10% of their after-tax profits to fund statutory reserves until such reserves have reached 50% of their respective registered capital. These reserve funds, however, may not be distributed as cash dividends. During the years ended December 31, 2021, 2022 and 2023, the Group accrued an additional RMB2,849, RMB2,509 and RMB1,396 statutory reserve from the new appropriable profit earned by certain PRC entities.

*            Filed with this Amendment No. 1 to Annual Report on Form 20-F.

**          Furnished with this Amendment No. 1 to Annual Report on Form 20-F.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F, and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: June 27, 2024