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Jingbo Technology, Inc. 10-K-A Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Jingbo Technology, Inc.

Filing date:

03/14/2025

TLDR:

ELI5:

Jingbo Technology, Inc., a smart parking company in China, had a tough year with less money coming in and more money going out. They also face potential problems with Chinese regulations and being checked by US auditors.

Accession #:

0001493152-25-010349

Published on

Analyst Summary

  • Jingbo Technology, Inc. reported a 53.78% decrease in revenue, from $3,426,492 to $1,583,637.
  • The company experienced a net loss of $5,482,077, a 22.87% improvement compared to the previous year’s net loss of $7,107,559.
  • Total assets decreased by 44.26%, from $23,081,187 to $12,866,660, while total liabilities decreased by 14.77%, from $37,037,567 to $31,568,840.
  • The company’s cash and cash equivalents decreased by 55.15%, from $331,073 to $148,505.
  • Management attributes the revenue decrease to a reduction in the number of parking lots due to contract non-renewals.
  • The auditor’s report includes an explanatory paragraph regarding the company’s ability to continue as a going concern, citing substantial losses and negative working capital.
  • The company relies on VIE agreements to operate in China, which introduces regulatory risks.
  • The company identifies material weaknesses in internal control over financial reporting, including the lack of a functioning audit committee and inadequate segregation of duties.
  • The Gross Profit Margin has improved slightly from -34.4% to -34.0%.
  • The Operating Profit Margin has worsened from -206.5% to -322.6%.
  • The Net Profit Margin has worsened from -207.5% to -346.2%.
  • The ROA has worsened from -30.8% to -42.6%.
  • The ROE has decreased from 50.9% to 29.3%.
  • EPS has increased from -$6.42 to -$1.00.
  • The Current Ratio has decreased from 2.24 to 0.15.
  • The Quick Ratio has decreased from 2.22 to 0.147.
  • The Cash Ratio has decreased from 0.054 to 0.005.
  • The Debt-to-Equity Ratio has increased from -2.65 to -1.69.
  • The Debt-to-Assets Ratio has increased from 1.60 to 2.45.
  • The Interest Coverage Ratio has decreased from N/A to -188.86.
  • The Inventory Turnover has decreased from 74.51 to 12.99.
  • The DSO has increased from 65.7 days to 115.3 days.
  • The DPO has increased from 64.7 days to 110.5 days.
  • The Asset Turnover has decreased from 0.297 to 0.088.
  • The P/E = $38,005,216 / (-$5,482,077) = -6.93
  • The P/B = $38,005,216 / (-$18,702,180) = -2.03
  • The P/S ratio is relatively high, suggesting the company is overvalued relative to its sales.
  • The EV/EBITDA = $69,431,622 / (-$4,640,458) = -14.96
  • Revenue Growth: (Current Revenue – Previous Revenue) / Previous Revenue = ($1,583,637 – $3,426,492) / $3,426,492 = -53.8%
  • Net Income Growth: (Current Net Income – Previous Net Income) / Previous Net Income = (-$5,482,077 – (-$7,107,559)) / (-$7,107,559) = -22.9%
  • EPS Growth: (Current EPS – Previous EPS) / Previous EPS = (-$1.00 – (-$6.42)) / (-$6.42) = -84.4%

Opportunities and Risks

  • Regulatory Risks: The company faces significant regulatory risks due to its VIE structure and operations in China, including potential changes in laws and regulations related to foreign investment, data security, and cybersecurity.
  • Financial Risks: The company’s financial performance is weak, with declining revenue, net losses, and a high level of debt.
  • Operational Risks: The company’s reliance on key personnel and potential conflicts of interest with VIE shareholders pose operational risks.
  • HFCA Act Risks: The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act), which could lead to delisting if the PCAOB is unable to inspect the company’s auditors.
  • Smart Parking Market: The smart parking market in China has growth potential, driven by increasing urbanization and demand for efficient parking solutions.
  • Platform Development: The company’s Any-e Life platform has the potential to generate revenue through parking operations, hardware sales, and e-commerce.
  • Franchising Policies: The company’s franchising policies could drive expansion and user acquisition.

Potential Implications

Company Performance

  • Improve Financial Performance: Focus on increasing revenue and improving operational efficiencies to achieve profitability.
  • Strengthen Internal Controls: Address the identified material weaknesses in internal control over financial reporting.
  • Ensure Regulatory Compliance: Closely monitor and comply with evolving regulations in China, particularly those related to foreign investment, data security, and cybersecurity.
  • Monitor HFCA Act Compliance: Ensure continued compliance with the HFCA Act to avoid potential delisting.
  • Evaluate VIE Structure: Assess the long-term viability of the VIE structure and explore alternative operational models if necessary.

SEC Filing Report: Jingbo Technology, Inc. (10-K/A)

Executive Summary

This report analyzes Jingbo Technology, Inc.’s Form 10-K/A, an amendment to their annual report for the fiscal year ended February 29, 2024. The company operates in the smart parking application software and platform business ecosystem, primarily in China. Key findings include a decrease in revenue, a net loss, and significant reliance on VIE structures, which introduces regulatory and enforcement risks. The company also faces risks associated with the Holding Foreign Companies Accountable Act (HFCA Act) and the complex regulatory environment in China. Overall, the company’s financial performance and operational structure warrant caution. A Hold rating is suggested, pending further clarification on regulatory compliance and improved financial performance.

Company Overview

Jingbo Technology, Inc. (formerly SavMobi Technology, Inc.) is a Cayman Islands holding company with its primary operations conducted in mainland China through its subsidiaries and Variable Interest Entities (VIEs). The company focuses on smart parking solutions, including application software, cloud platforms, and hardware sales. The company’s business model involves contracting parking operations, payment processing, platform development, and equipment sales. The company faces significant competition and is subject to evolving regulations in the Chinese market.

Detailed Analysis

Financial Statement Analysis

The following table summarizes key financial data from the 10-K/A filing:

Metric Year Ended February 29, 2024 Year Ended February 28, 2023 Change
Revenue $1,583,637 $3,426,492 -53.78%
Cost of Revenue $2,121,929 $4,603,742 -53.91%
Gross Loss $538,292 $1,177,250 -54.27%
Net Loss $5,482,077 $7,107,559 -22.87%
Total Assets $12,866,660 $23,081,187 -44.26%
Total Liabilities $31,568,840 $37,037,567 -14.77%
Cash and Cash Equivalents $148,505 $331,073 -55.15%

Key Ratios:

  • Gross Margin: Negative for both years, indicating operational inefficiencies.
  • Liquidity: Low cash position relative to liabilities raises concerns about short-term solvency.
  • Leverage: High liabilities compared to assets suggest a highly leveraged financial structure.

Management’s Discussion and Analysis (MD&A) Insights

  • Revenue Decline: Management attributes the revenue decrease to a reduction in the number of parking lots due to contract non-renewals.
  • Cost Reduction: The decrease in cost of revenues is primarily due to reduced salary and rental expenses.
  • Going Concern: The auditor’s report includes an explanatory paragraph regarding the company’s ability to continue as a going concern, citing substantial losses and negative working capital.
  • VIE Structure: The company relies on VIE agreements to operate in China, which introduces regulatory risks.

Red Flags and Uncommon Metrics

  • Material Weaknesses in Internal Control: The company identifies material weaknesses in internal control over financial reporting, including the lack of a functioning audit committee and inadequate segregation of duties.
  • Related Party Transactions: Significant related party transactions, including loans and transfers, require careful scrutiny.
  • Tax Treatment Decisions: The company was subject to certain adjustments on taxations and was required to pay back certain value-added taxes, city maintenance and construction taxes, the enterprise income taxes, as well as the respective late payment fees, due to our failure to file the correct taxable income as required by relevant laws and regulations during the period from January 1, 2016, to June 30, 2019.

Risk and Opportunity Assessment

Risks

  • Regulatory Risks: The company faces significant regulatory risks due to its VIE structure and operations in China, including potential changes in laws and regulations related to foreign investment, data security, and cybersecurity.
  • Financial Risks: The company’s financial performance is weak, with declining revenue, net losses, and a high level of debt.
  • Operational Risks: The company’s reliance on key personnel and potential conflicts of interest with VIE shareholders pose operational risks.
  • HFCA Act Risks: The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act), which could lead to delisting if the PCAOB is unable to inspect the company’s auditors.

Opportunities

  • Smart Parking Market: The smart parking market in China has growth potential, driven by increasing urbanization and demand for efficient parking solutions.
  • Platform Development: The company’s Any-e Life platform has the potential to generate revenue through parking operations, hardware sales, and e-commerce.
  • Franchising Policies: The company’s franchising policies could drive expansion and user acquisition.

Conclusion and Actionable Insights

Jingbo Technology, Inc. faces significant challenges, including declining revenue, net losses, and regulatory risks associated with its VIE structure and operations in China. The company’s financial performance and operational structure warrant caution. The company’s ability to address its material weaknesses in internal control and navigate the complex regulatory environment in China will be critical to its future success.

Overall Assessment: Hold

Recommendations:

  • Improve Financial Performance: Focus on increasing revenue and improving operational efficiencies to achieve profitability.
  • Strengthen Internal Controls: Address the identified material weaknesses in internal control over financial reporting.
  • Ensure Regulatory Compliance: Closely monitor and comply with evolving regulations in China, particularly those related to foreign investment, data security, and cybersecurity.
  • Monitor HFCA Act Compliance: Ensure continued compliance with the HFCA Act to avoid potential delisting.
  • Evaluate VIE Structure: Assess the long-term viability of the VIE structure and explore alternative operational models if necessary.

1. Commentary

Jingbo Technology, Inc. is facing significant financial challenges. The company experienced a decrease in revenue and a gross loss, leading to a substantial net loss for the year ended February 29, 2024. The company’s liabilities significantly outweigh its assets, resulting in a negative equity position. While operating expenses decreased, they were not enough to offset the decline in revenue. The company’s cash position has decreased, and it relies heavily on related-party transactions.

2. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: (Net Revenues – Cost of Revenues) / Net Revenues = ($1,583,637 – $2,121,929) / $1,583,637 = -34.0%
    • Trend: In 2023, Gross Profit Margin = ($3,426,492 – $4,603,742) / $3,426,492 = -34.4%. The Gross Profit Margin has improved slightly from -34.4% to -34.0%.
    • Industry: The industry average gross profit margin varies significantly depending on the specific sector. However, a negative gross profit margin is generally unsustainable in the long term.
  • Operating Profit Margin

    • Metric: Operating Income / Net Revenues = (-$5,108,648) / $1,583,637 = -322.6%
    • Trend: In 2023, Operating Profit Margin = (-$7,073,922) / $3,426,492 = -206.5%. The Operating Profit Margin has worsened from -206.5% to -322.6%.
    • Industry: A negative operating profit margin indicates that the company’s core business operations are not profitable.
  • Net Profit Margin

    • Metric: Net Loss / Net Revenues = (-$5,482,077) / $1,583,637 = -346.2%
    • Trend: In 2023, Net Profit Margin = (-$7,107,559) / $3,426,492 = -207.5%. The Net Profit Margin has worsened from -207.5% to -346.2%.
    • Industry: A negative net profit margin indicates the company is not profitable after accounting for all expenses and revenues.
  • Return on Assets (ROA)

    • Metric: Net Loss / Total Assets = (-$5,482,077) / $12,866,660 = -42.6%
    • Trend: In 2023, ROA = (-$7,107,559) / $23,081,187 = -30.8%. The ROA has worsened from -30.8% to -42.6%.
    • Industry: A negative ROA indicates the company is not effectively using its assets to generate profit.
  • Return on Equity (ROE)

    • Metric: Net Loss / Total Equity = (-$5,482,077) / (-$18,702,180) = 29.3%
    • Trend: In 2023, ROE = (-$7,107,559) / (-$13,956,380) = 50.9%. The ROE has decreased from 50.9% to 29.3%.
    • Industry: A positive ROE in this case is misleading due to the negative equity. It doesn’t reflect efficient use of equity to generate profit.
  • Earnings Per Share (EPS)

    • Metric (Basic and Diluted): -$1.00
    • Trend: In 2023, EPS (Basic and Diluted) = -$6.42. EPS has increased from -$6.42 to -$1.00.
    • Industry: Negative EPS indicates the company is not profitable on a per-share basis.

Liquidity

  • Current Ratio

    • Metric: Current Assets / Current Liabilities = $4,255,988 / $28,635,745 = 0.15
    • Trend: In 2023, Current Ratio = $13,206,188 / $5,903,572 = 2.24. The Current Ratio has decreased from 2.24 to 0.15.
    • Industry: A current ratio below 1 suggests the company may have difficulty meeting its short-term obligations.
  • Quick Ratio (Acid-Test Ratio)

    • Metric: (Current Assets – Inventories) / Current Liabilities = ($4,255,988 – $203,752) / $28,635,745 = 0.147
    • Trend: In 2023, Quick Ratio = ($13,206,188 – $123,450) / $5,903,572 = 2.22. The Quick Ratio has decreased from 2.22 to 0.147.
    • Industry: A quick ratio below 1 suggests the company may have difficulty meeting its short-term obligations without relying on inventory sales.
  • Cash Ratio

    • Metric: (Cash and Cash Equivalents) / Current Liabilities = $142,434 / $28,635,745 = 0.005
    • Trend: In 2023, Cash Ratio = $321,289 / $5,903,572 = 0.054. The Cash Ratio has decreased from 0.054 to 0.005.
    • Industry: A very low cash ratio indicates the company has very limited cash to cover its immediate liabilities.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: Total Liabilities / Total Equity = $31,568,840 / (-$18,702,180) = -1.69
    • Trend: In 2023, Debt-to-Equity Ratio = $37,037,567 / (-$13,956,380) = -2.65. The Debt-to-Equity Ratio has increased from -2.65 to -1.69.
    • Industry: The negative ratio is due to negative equity.
  • Debt-to-Assets Ratio

    • Metric: Total Liabilities / Total Assets = $31,568,840 / $12,866,660 = 2.45
    • Trend: In 2023, Debt-to-Assets Ratio = $37,037,567 / $23,081,187 = 1.60. The Debt-to-Assets Ratio has increased from 1.60 to 2.45.
    • Industry: A high debt-to-assets ratio indicates the company is highly leveraged and relies heavily on debt financing.
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric: Operating Income / Interest Expense = (-$5,108,648) / $27,050 = -188.86
    • Trend: In 2023, Interest Expense was $0. The Interest Coverage Ratio cannot be calculated. The Interest Coverage Ratio has decreased from N/A to -188.86.
    • Industry: A negative interest coverage ratio indicates the company is not generating enough operating income to cover its interest expenses.

Activity/Efficiency

  • Inventory Turnover

    • Metric: Cost of Revenues / Average Inventory = $2,121,929 / (($203,752 + $123,450)/2) = 12.99
    • Trend: In 2023, Inventory Turnover = $4,603,742 / (($123,450 + $0)/2) = 74.51. The Inventory Turnover has decreased from 74.51 to 12.99.
    • Industry: The inventory turnover ratio measures how efficiently a company is managing its inventory.
  • Days Sales Outstanding (DSO)

    • Metric: (Accounts Receivable / Net Revenues) * 365 = ($500,564 / $1,583,637) * 365 = 115.3 days
    • Trend: In 2023, DSO = ($617,809 / $3,426,492) * 365 = 65.7 days. The DSO has increased from 65.7 days to 115.3 days.
    • Industry: A higher DSO indicates the company is taking longer to collect payment from its customers.
  • Days Payable Outstanding (DPO)

    • Metric: (Accounts Payable / Cost of Revenues) * 365 = ($643,192 / $2,121,929) * 365 = 110.5 days
    • Trend: In 2023, DPO = ($816,203 / $4,603,742) * 365 = 64.7 days. The DPO has increased from 64.7 days to 110.5 days.
    • Industry: A higher DPO indicates the company is taking longer to pay its suppliers.
  • Asset Turnover

    • Metric: Net Revenues / Average Total Assets = $1,583,637 / (($12,866,660 + $23,081,187) / 2) = 0.088
    • Trend: In 2023, Asset Turnover = $3,426,492 / (($23,081,187 + $0) / 2) = 0.297. The Asset Turnover has decreased from 0.297 to 0.088.
    • Industry: A lower asset turnover ratio indicates the company is not efficiently using its assets to generate revenue.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: Market Cap / Net Income. Market Cap = $7.15 * 5,315,412 = $38,005,216. Net Income = -$5,482,077. P/E = $38,005,216 / (-$5,482,077) = -6.93
    • Industry: A negative P/E ratio is not meaningful and indicates the company is not profitable.
  • Price-to-Book Ratio (P/B)

    • Metric: Market Cap / Book Value of Equity. Book Value of Equity = -$18,702,180. P/B = $38,005,216 / (-$18,702,180) = -2.03
    • Industry: A negative P/B ratio is unusual and reflects the company’s negative equity.
  • Price-to-Sales Ratio (P/S)

    • Metric: Market Cap / Net Revenues = $38,005,216 / $1,583,637 = 24.0
    • Industry: The P/S ratio is relatively high, suggesting the company is overvalued relative to its sales.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents = $38,005,216 + $31,568,840 – $142,434 = $69,431,622. EBITDA = Net Income + Interest Expense + Taxes + Depreciation and Amortization = -$5,482,077 + $27,050 + $0 + $814,569 = -$4,640,458. EV/EBITDA = $69,431,622 / (-$4,640,458) = -14.96
    • Industry: A negative EV/EBITDA ratio is not meaningful and indicates the company’s EBITDA is negative.

Growth Rates

  • Revenue Growth

    • Metric: (Current Revenue – Previous Revenue) / Previous Revenue = ($1,583,637 – $3,426,492) / $3,426,492 = -53.8%
    • Industry: A negative revenue growth rate indicates the company’s sales are declining.
  • Net Income Growth

    • Metric: (Current Net Income – Previous Net Income) / Previous Net Income = (-$5,482,077 – (-$7,107,559)) / (-$7,107,559) = -22.9%
    • Industry: A negative net income growth rate indicates the company’s profitability is declining.
  • EPS Growth

    • Metric: (Current EPS – Previous EPS) / Previous EPS = (-$1.00 – (-$6.42)) / (-$6.42) = -84.4%
    • Industry: A negative EPS growth rate indicates the company’s earnings per share are declining.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️