Company: SCAG
Filing Date: 2025-07-03
Form Type: 20-F
Source: 0001213900-25-061408
Chunk: 41

Company: Scage Future
Filing Date: 2025-07-03
Form: 20-F
Item: Item 1
Chunk 41
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Inventories, primarily consisting
of raw materials, work in progress and finished goods, are stated at the lower of cost or net realizable value, with net realized value
represented by estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation.
Cost of inventory is determined using the weighted average cost method. Inventories are written down to estimated net realizable value,
which could be impacted by certain factors including historical usage, expected demand, anticipated sales price, new product development
schedules, product obsolescence, and other factors. If business or economic conditions change, estimates and assumptions may be adjusted
as deemed appropriate. Historically, actual required adjustments have not varied materially from estimated amounts. Inventory write-downs
of US$93,451, US$0.9 million and US$0.2 million were recorded during the six months ended December 31, 2024, and the fiscal years ended
June 30, 2024 and 2023, respectively.

Warranty reserve

We provided a manufacturer’s
standard warranty on all vehicles and components sold. We accrued a warranty reserve for the vehicles sold by us, which included our best
estimate of the future costs to be incurred in order to repair or replace items under warranties and recalls when identified. These estimates
were made based on actual claims incurred to date and an estimate of the nature, frequency and magnitude of future claims with reference
made to the past claim history. These estimates are inherently uncertain given our relatively short history of sales, and changes to our
historical or projected warranty experience may cause material changes to the warranty reserve in the future. Warranty expense is recorded
as a component of cost of sales in the consolidated statements of operations and comprehensive loss. Warranty reserve of US$0.4 million,
US$0.1 million and US$25,597 were recorded as of December 31, 2024, and as of June 30, 2024 and 2023, respectively.

Quantitative and Qualitative Disclosures about
Market Risk

Credit risk

Credit risk is controlled
by the application of credit approvals, limits and monitoring procedures. We manage credit risk through in-house research and analysis
of the worldwide economy and the underlying obligors and transaction structures. We consider many factors in assessing the collectability
of our receivables, such as the age of the amounts due, the customer’s payment history, credit-worthiness and other specific circumstances
related to the accounts.