Atlas Trinity Tech Co., Ltd F-1, filed Jun 6, 2025
Atlas Trinity Tech Co., Ltd. (ATTT)
As filed with the Securities and Exchange Commission on June 6, 2025
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
| Not Applicable | ||||
| (State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Tel:
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Telephone:
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With a Copy to:
| Henry Yin, Esq. Benjamin Yao, Esq. Loeb & Loeb LLP 2206-19 Jardine House 1 Connaught Place Central, Hong Kong SAR (852) 3923-1111 |
Joan S. Guilfoyle, Esq. Loeb & Loeb LLP 901 New York Avenue, NW Suite 300 West Washington, DC 20001 (202) 618-5000 |
Morris C. Zarif, Esq. Zarif Law Group P.C. 603 Laurel Avenue Allenhurst, NJ 07711 (917) 232-6547 |
Approximate date of commencement of proposed sale to the public: Promptly after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company
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 7(a)(2)(B)
of the Securities Act
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell the securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting any offer to buy these securities in any jurisdiction where such offer or sale is not permitted.
| Preliminary Prospectus | SUBJECT TO COMPLETION, DATED JUNE 6, 2025 |
30,000,000 Ordinary Shares
RAYTECH HOLDING LIMITED
We are offering on a best efforts basis up 30,000,000 ordinary shares of Raytech Holding Limited (together with its consolidated subsidiaries, the “Company”, “Raytech Holding”, “we”, “us” or “our”), par value $0.00000625 per share (“Ordinary Shares”), at a price of $[●] per share.
Our Ordinary Shares are listed on The Nasdaq Capital Market under the symbol “RAY”. The last reported sale price of our Ordinary Shares on The Nasdaq Capital Market on June 5, 2025 was $1.16 per Ordinary Share.
Investing in Raytech Holding’s Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 26 of this Registration Statement on Form F-1 (this “Registration Statement”) of which this prospectus forms a part for a discussion of factors you should consider in connection with an investment in our securities.
Upon the completion of this offering, Raytech Holding will have 47,613,083 Ordinary Shares issued and outstanding. Each Ordinary Share is entitled to one vote. Raytech Holding’s Chief Executive Officer and Chairman, Mr. Ching Tim Hoi, beneficially owns 12,800,000 Ordinary Shares, representing 26.9% of the total voting power of Raytech Holding’s issued and outstanding share capital immediately following the completing of this offering. Because no individual, group or another company will own more than 50% of the total voting power for the election of directors, upon the completion of this offering, Raytech Holding will not be a “controlled company” as defined under the Nasdaq Stock Market Rules. Prior to this offering, Raytech Holding qualified as a “controlled company.” Notwithstanding its eligibility for certain exemptions from Nasdaq’s corporate governance requirements available to controlled companies during that period, Raytech Holding voluntarily chose to comply with, and historically has complied with, such Nasdaq corporate governance requirements, including those pertaining to a majority independent board and independent board committees. As Raytech Holding will no longer be eligible for the exemptions available to a “controlled company” under the Nasdaq listing rules following this offering, Raytech Holding will continue to be subject to these full corporate governance requirements as mandated by these Nasdaq corporate governance standards.
Raytech Holding is a holding company incorporated in the British Virgin Islands (“BVI”). As a holding company with no material operations of its own, Raytech Holding’s operations are conducted by its wholly-owned subsidiary, Pure Beauty Manufacturing Company Limited (“Pure Beauty”), which is headquartered in Hong Kong, a special administrative region of the People’s Republic of China (the “PRC”). On May 6, 2025, Raytech Holding established another wholly-owned subsidiary, Raytech Innovation Limited (“Raytech Innovation”), also incorporated in Hong Kong; as of the date of this prospectus, Raytech Innovation has not commenced operations and has no assets. This is an offering of the Ordinary Shares of Raytech Holding, the holding company incorporated in BVI, instead of shares of its operating entities in Hong Kong, Pure Beauty or Raytech Innovation. You may never directly hold any equity interest in Raytech Holding’s operating entities.
We are not based in mainland China and do not have operations or generate revenue in mainland China, except that the manufacturers that manufacture our products are located in mainland China. We currently do not have or intend to set up any subsidiary in mainland China, and do not foresee the need to enter into any contractual arrangements with a variable interest entity (“VIE”) to establish a VIE structure in mainland China. For the six months ended September 30, 2024 and the fiscal years ended March 31, 2024, and 2023, we generated all our revenues from Hong Kong through Pure Beauty. Pursuant to the Basic Law of the Hong Kong Special Administrative Region (the “Basic Law”), which is a national law of the PRC and the constitutional document for Hong Kong, national laws of the PRC shall not be applied in Hong Kong except for those listed in Annex III of the Basic Law and applied locally by promulgation or local legislation. The Basic Law expressly provides that the national laws of the PRC which may be listed in Annex III of the Basic Law shall be confined to those relating to defense and foreign affairs as well as other matters outside the autonomy of Hong Kong. The basic policies of the PRC regarding Hong Kong as a special administrative region of the PRC are reflected in the Basic Law, providing Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”.
However, in light of the PRC government’s recent expansion of authority in Hong Kong, we may be subject to uncertainty about any future actions of the PRC government or authorities in Hong Kong, and it is possible that all the legal and operational risks associated with being based in and having operations in mainland China may also apply to operations in Hong Kong in the future. There is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong. The PRC government may intervene or influence our current and future operations in Hong Kong at any time, or may exert more control over offerings conducted overseas and/or foreign investment in issuers like Raytech Holding. Such governmental actions, if and when they occur: (i) could significantly limit or completely hinder our ability to continue our operations; (ii) could significantly limit or completely hinder our ability to offer or continue to offer Raytech Holding’s Ordinary Shares to investors; and (iii) may cause the value of Raytech Holding’s Ordinary Shares to significantly decline or become worthless.
We are also aware that recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland Chinese companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. In addition, due to long arm provisions under the current laws and regulations of mainland China, there remains regulatory uncertainty with respect to whether in the future we will be required to obtain permissions or approvals from the authorities of mainland China to operate our business or to list Raytech Holding’s securities on the U.S. exchanges and offer securities.
As advised by Raytech Holding’s legal counsel in mainland China (“PRC Counsel”), AllBright Law Offices (Fuzhou), as of the date of this prospectus, on the basis that (i) we currently do not have or intend to set up any subsidiary or VIE structure in mainland China, (ii) we do not have any business operations in mainland China, except that we collaborate with manufacturers located in mainland China to manufacture our products, (iii) none of our clients are located in mainland China, and (iv) we possess personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (iv) only, including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC, we believe, we are currently not required to obtain any permission or approval from the Cyberspace Administration of China (the “CAC”) or any other governmental authorities of mainland China to operate our business or offer subsequent securities of the company, nor have we been denied of any permissions or approvals from the authorities of mainland China.
According to the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, promulgated by the China Securities Regulatory Commission (the “CSRC”) on February 17, 2023 and became effective on March 31, 2023, a domestic company in the PRC that seeks to offer and list securities on overseas markets shall fulfill the filing procedures with the CSRC as per requirement of the Overseas Listing Trial Measures. This includes subsequent securities offerings of the company in the same overseas market where it has previously offered and listed securities, which requires a company to file with the CSRC within three working days after the subsequent securities offering is completed. Article 15 of the Overseas Listing Trial Measures provides that if the issuer both meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by a mainland China company and such issuer shall fulfill the CSRC filing procedure: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by mainland China companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. As advised by Raytech Holding’s PRC Counsel, AllBright Law Offices (Fuzhou), based on the facts that (i) we do not operate any entities in mainland China and the operating revenue, total profit, total assets or net assets as documented in Raytech Holding’s audited consolidated financial statements for the most recent fiscal year is accounted for by our Hong Kong subsidiaries, Pure Beauty located outside mainland China;
(ii) we do not have any equity interest in any manufacturer located in mainland China and vice versa; and (iii) we conduct a majority of our business and are headquartered in Hong Kong rather than in mainland China, and our senior management team are not PRC citizens or have their residence located outside mainland China, we believe that this offering will not be regarded as a subsequent securities offering in the same overseas market under the Article 15 of the Overseas Listing Trial Measures, and are not required to fulfill the filing procedures with the CSRC to issue securities to foreign investors. However, as the Overseas Listing Trial Measures were newly published, there are substantial uncertainties that the CSRC may take a view that is contrary to our understanding of the Overseas Listing Trial Measures because the Overseas Listing Trial Measures adopts the principle of “substance over form” regarding the determination of “indirect overseas offering and listing by a domestic company,” over which the CSRC may have substantial discretions.
Based on the foregoing, we do not currently expect the laws and regulations of mainland China to have any material impact on our business, financial conditions or results of operations and we are currently not subject to the government of mainland China’s direct influence or discretion over the manner in which we conduct our business activities outside of mainland China. Furthermore, CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, has advised Raytech Holding that, as of the date of this prospectus, Raytech Holding is not required to obtain any permission or approval from the governmental authorities of Hong Kong to list on the U.S. exchanges and offer securities and we have obtained all necessary licenses, permissions or approvals including the business registration certificate from the governmental authorities of Hong Kong to operate our business through Pure Beauty and to the best of our knowledge, no license, permission or approval has been denied.
Nevertheless, if we (i) do not receive or maintain such permissions or approvals, should such permissions or approvals be required in the future by the government of mainland China or Hong Kong, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, we may be unable to obtain such permissions or approvals in a timely manner, or at all, and may face regulatory actions or other sanctions from the CSRC, the CAC or other PRC or Hong Kong regulatory authorities if we fail to fully comply with any new regulatory requirements. Consequently, our operations and financial condition could be materially adversely affected, and Raytech Holding’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 become worthless. If there is significant change to current political arrangements between mainland China and Hong Kong, the PRC government intervenes or influences operations of companies operated in Hong Kong like us, or exerts more control through change of laws and regulations over offerings conducted overseas and/or foreign investment in issuers like us, it may result in a material change in our operations and/or the value of the securities we are registering for sale or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our Ordinary Shares to significantly decline or become worthless. See “Risk Factors - Risks Related to Our Corporate Structure” beginning on page 37 and “Risk Factors — Risks Related to Doing Business in Hong Kong” beginning on page 40 of this prospectus for more information.
In addition, Raytech Holding’s Ordinary Shares may be prohibited from trading on a national exchange or over-the-counter market under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect Raytech Holding’s auditors for three consecutive years. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years. Pursuant to the HFCA Act, the PCAOB issued a Determination Report on December 16, 2021 (the “Determination Report”) which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (i) mainland China of the PRC, and (ii) Hong Kong; and such report identified the specific registered public accounting firms which are subject to these determinations. On August 26, 2022, a Statement of Protocol was signed by the PCAOB, the CSRC and the Ministry of Finance of the PRC governing inspections and investigations of audit firms based in mainland China and Hong Kong (the “Statement of Protocol”). Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. On December 29, 2022, the Consolidated Appropriations Act, 2023 (the “CAA”) was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. Raytech Holding’s auditor, WWC, P.C., is headquartered in San Mateo, California, and has been inspected by the PCAOB on a regular basis. Raytech Holding’s auditor is not headquartered in mainland China or Hong Kong and was not identified in the Determination Report as a firm subject to the PCAOB’s determinations. Raytech Holding’s auditor is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess Raytech Holding’s auditor’s compliance with the applicable professional standards with the last inspection in December 2021. Notwithstanding the foregoing, in the event that, in the future, the PCAOB determines that it is not able to fully conduct inspections of Raytech Holding’s auditor for three consecutive years beginning in 2022, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, trading of its securities on a national securities exchange or in the over-the counter market may be prohibited under the HFCA Act and Raytech Holding’s access to the U.S. capital markets may be limited or restricted. The delisting of Raytech Holding’s Ordinary Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment. See “Risk Factors — Risks Related to Raytech Holding’s Ordinary Shares and This Offering - Although the audit report included in this prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in Raytech Holding’s securities may be prohibited under the HFCA Act if the SEC subsequently determines Raytech Holding’s audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist Raytech Holding’s securities. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading.” on page 50 and “The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to Raytech Holding’s offering, share price and our business operations and reputation.” on page 50 of this prospectus for more information.
Save for a BVI business company meeting the solvency test set out in section 56 of the BVI Act, Raytech Holding is permitted under the laws of BVI to provide funding to its subsidiary Pure Beauty through loans or capital contributions without restrictions on the amount of the funds. Save for a BVI business company meeting the solvency test set out in section 56 of the BVI Act, there are no restrictions or limitation under the laws of BVI on Raytech Holding’s ability to distribute earnings from its businesses, including subsidiary, to the U.S. investors. Pure Beauty is permitted under the laws of Hong Kong to provide funding to Raytech Holding through dividend distribution out of profits available for distribution without restrictions on the amount of the funds. Raytech Innovation, once operational and profitable, would also be permitted under the laws of Hong Kong to provide funding to Raytech Holding through dividend distribution out of profits available for distribution. Both Raytech Holding and its subsidiaries currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Neither Raytech Holding nor its subsidiaries have any dividend payout policy, and each entity needs to comply with applicable law or regulations with respect to transfer of funds, dividends and distributions with other entities. Any future determination related to Raytech Holding’s dividend policy will be made at the discretion of Raytech Holding’s board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments. If Raytech Holding determines to pay dividends on any of its Ordinary Shares in the future, as a holding company, Raytech Holding will be dependent on receipt of funds from its subsidiaries. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Raytech Holding’s Hong Kong subsidiary, Pure Beauty. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of HKD into foreign currencies and the remittance of currencies out of Hong Kong. See “Dividend Policy” on page 59 and “Risk Factors – Risks Related to Our Corporate Structure – Raytech Holding may rely on dividends and other distributions on equity paid by its subsidiaries to fund any cash and financing requirements it may have, and any limitation on the ability of its subsidiaries to make payments to it could have a material adverse effect on Raytech Holding’s ability to conduct its business.” on page 37 of this prospectus for more information.
Raytech Holding is an “emerging growth company” as defined under the federal securities laws and will be subject to reduced public company reporting requirements. See “Risk Factors” and “Prospectus Summary— Implications of Raytech Holding’s Being an Emerging Growth Company” on pages 26 and 20, respectively.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per Share | Total | |||||
| Public offering price(1) | $ | $ | ||||
Placement agent fees(2) | $ | $ | ||||
| Proceeds to Raytech Holding, before expenses(3) | $ | $ |
| (1) | We have agreed to pay the placement agent a cash fee commission of seven percent (7.0%) of the gross proceeds raised in this offering, or six percent (6.0%) for company-directed or company-introduced investors, in addition to a one percent (1.0%) non-accountable expense allowance. We have also agreed to reimburse the placement agent for certain of its offering-related expenses, including reimbursement for legal fees and other out-of-pocket fees, costs and expenses in the amount of up to $150,000. For more information about the compensation to be received by the placement agent, see “Plan of Distribution.” |
| (2) | Raytech Holding expects its cash expenses for this offering (including cash expenses payable to the placement agent for its out-of-pocket expenses) not to exceed $[●], exclusive of the above fees and non-accountable expenses allowance. For a detailed description of the compensation to be received by the placement agent, see “Plan of Distribution” beginning on page 124 of this prospectus. |
We have engaged the placement agent to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The placement agent has no obligation to purchase any of the ordinary shares from us or to arrange for the purchase or sale of any specific number or dollar amount of the ordinary shares. Because there is no minimum offering amount required as a condition to closing in this offering, the actual public offering amount, placement agent’s fee and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above and throughout this prospectus. We have agreed to pay the placement agent the placement agents fees set forth in the table below. See “Plan of Distribution” beginning on page 124 of this prospectus for more information.
Raytech Holding may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Placement Agent
R. F. Lafferty & Co., Inc.
Prospectus dated June 6, 2025
TABLE OF CONTENTS
Raytech Holding and the placement agent have not authorized any person to give you any supplemental information or to make any representations for Raytech Holding. You should not assume that the information contained in this prospectus or any prospectus supplement are accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus or of any sale of the shares. This prospectus is an offer to sell only the Ordinary Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. Raytech Holding is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. The information in this prospectus is not complete and is subject to change. No person should rely on the information contained in this document for any purpose other than participating in Raytech Holding’s proposed offering, and only prospectus dated hereof, is authorized by Raytech Holding to be used in connection with our proposed offering. The preliminary prospectus will only be distributed by Raytech Holding and no other person has been authorized by Raytech Holding to use this document to offer or sell any of Raytech Holding’s securities.
Until [●] (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as placement agent and with respect to their unsold allotments or subscriptions.
i
COMMONLY USED DEFINED TERMS
Unless otherwise indicated or the context requires otherwise, references in this prospectus to:
| ● | “BVI” are to the “British Virgin Islands”; |
| ● | “BVI Act” are to the BVI Business Companies Act, Revised Edition 2020 (as amended); |
| ● | “China” or the “PRC” are to the People’s Republic of China; |
| ● | the “Company” or “Raytech Holding” are to Raytech Holding Limited, a BVI business company; |
| ● | “mainland China” are to the mainland of the People’s Republic of China excluding Taiwan and the special administrative regions of Hong Kong and Macau for the purposes of this prospectus only; |
| ● | “Pure Beauty” are to Pure Beauty Manufacturing Company Limited, a company incorporated under the laws of Hong Kong on with limited liability on April 15, 2013; |
| ● | “Raytech Innovation” are to Raytech Innovation Limited, a company incorporated under the laws of Hong Kong with limited liability on May 6, 2025; |
| ● | “Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China for the purposes of this prospectus only; |
| ● | “HKD” or “HK Dollar” are to the legal currency of Hong Kong; |
| ● | “$,” “dollars,” “US$” or “U.S. dollars” are to the legal currency of the United States; |
| ● | “shares” or “Ordinary Shares” are to the ordinary shares of Raytech Holding Limited, par value $0.00000625 per share. |
| ● | “U.S. GAAP” are to generally accepted accounting principles in the United States; and |
| ● | “we”, or “us” in this prospectus are to Raytech Holding Limited, a BVI business company and its subsidiaries, Pure Beauty Manufacturing Company Limited and Raytech Innovation Limited, both companies incorporated under the laws of Hong Kong, unless the context otherwise indicates. |
Raytech Holding does not have any material operations of its own and Raytech Holding is a holding company with operations conducted in Hong Kong through its Hong Kong subsidiary Pure Beauty, using Hong Kong dollars, the currency of Hong Kong. Raytech Holding’s reporting currency is Hong Kong dollars. This prospectus contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader.
Translations of amounts in the unaudited interim condensed consolidated balance sheet, unaudited interim condensed consolidated statements of income and unaudited interim condensed consolidated statements of cash flows from HKD into US$ as of and for the six months ended September 30, 2024 are solely for the convenience of the reader and were calculated at the noon buying rate of US$1 = HKD7.7693, as published in H.10 statistical release of the United States Federal Reserve Board.
Translations of amounts in the consolidated balance sheet, consolidated statements of income and consolidated statements of cash flows from HKD into US$ as of and for the year ended March 31, 2023 are solely for the convenience of the reader and were calculated at the noon buying rate of US$1 = HKD7.8499, as published in H.10 statistical release of the United States Federal Reserve Board.
Translations of amounts in the consolidated balance sheet, consolidated statements of income and consolidated statements of cash flows from HKD into US$ as of and for the year ended March 31, 2024 are solely for the convenience of the reader and were calculated at the noon buying rate of US$1 = HKD7.8259, as published in H.10 statistical release of the United States Federal Reserve Board.
No representation is made that the HKD amounts could have been, or could be, converted, realized or settled into US$ at such rate, or at any other rate.
ii
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this prospectus. In addition to this summary, Raytech Holding urges you to read the entire prospectus carefully, especially the risks of investing in Raytech Holding’s Ordinary Shares, discussed under “Risk Factors” before deciding whether to buy Raytech Holding’s Ordinary Shares.
Recent Development
Change of Independent Registered Public Accounting Firm
On April 9, 2025, the audit committee of our Board of Directors approved the dismissal of WWC, P.C. (“WWC”), our former independent registered public accounting firm, and on the same day, approved the appointment of Assentsure PAC (“Assentsure”) as our independent registered public accounting firm for the fiscal year ended March 31, 2025, effective the same day. Subsequently, on May 15, 2025, our Board of Directors (the “Board”) approved and ratified the dismissal of WWC, the engagement of Assentsure, and the entry into an engagement letter with Assentsure. As confirmed by WWC in their letter to Assentsure dated March 28, 2025, WWC stated that they were not aware of any information that would materially bear on the integrity of our management, nor had they any disagreements with our management regarding accounting principles, auditing procedures, or significant disclosure matters during their engagement. For details, see our current report on Form 6-K with the SEC on May 21, 2025.
Change of Director and Committee Members
On May 19, 2025, Mr. Yiu Wing Hei (“Mr. Yiu”) tendered his resignation to the Board from his positions as an Independent Non-executive Director, a member of the nominating and corporate governance committee, a member of the compensation committee, and the chairperson of the audit committee of the Company (the “Resignation”). On the same day, the Nominating and Corporate Governance Committee of the Board (which has the authority to identify and recommend nominees for any vacancy on the Board and/or its committees), having considered the candidacy of Mr. Li Shihua (“Mr. Li”), determined that it was advisable and in the best interests of the Company and its shareholders to recommend to the Board that the Resignation be accepted and that Mr. Li be appointed as the successor to Mr. Yiu’s position as a director of the Board and to serve as a member of all committees of the Board and as the Chair of the audit committee. On May 19, 2025, the Board accepted Mr. Yiu’s resignation and appointed Mr. Li as an Independent Non-executive Director, a member of the nominating and corporate governance committee, a member of the compensation committee, and the chairperson of the audit committee of the Board, effective the same day. Mr. Li also consented to act as a director of the Company on May 19, 2025, effective the same day. For details, see our current report on Form 6-K with the SEC on May 19, 2025, and Management on page 96 of this prospectus.
Business Overview
Leveraging our expertise in the personal care electrical appliance industry, we aim to promote consumer lifestyles and drive the awareness of personal grooming. Through Pure Beauty, we principally engage in the sourcing and wholesaling of personal care electrical appliances for international brand owners. We also provide product design and development collaboration as a value-added service for our customers. Our customers are brand owners of personal care electrical appliances who market and sell their personal care electrical appliances products to end consumers. Commencing our operation in 2013, we have accumulated over 10 years of experience in the industry.
Our Products
Over years of operation, we have sourced and wholesaled a wide range of personal care electrical appliances, which can be broadly classified into six major categories: (i) hair styling series, including hair dryer, hair straightener and curling iron; (ii) trimmer series, including facial shaver, nose trimmer and eyebrow trimmer; (iii) eyelash curler; (iv) nail care series; (v) tooling; and (vi) other personal care appliance series, including body and facial brush, reset brush, callus remover, sonic peeling, handy fan and others. In particular, we are specialized in sourcing and wholesaling hair dryers within our hair styling series which primarily include salon-type hair protection and styling functions or compact design for travel. See “Business – Business Overview – Product Sourcing and Wholesaling” on page 81 of this prospectus.
Hair styling series:
Our sales of hair styling series constituted 62% and 48% of our total revenue for the years ended March 31, 2023 and 2024, respectively. Approximately 44% and 37% of our sale of hair styling series for the years ended March 31, 2023 and 2024, respectively, was derived from the sale of hair dryers.
Our sales of hair styling series constituted 61% and 44% of our total revenue for the six months ended September 30, 2023 and 2024, respectively. Approximately 39% and 28% of our sales of hair styling series for six months ended September 30, 2023 and 2024, respectively, was derived from the sale of hair dryers.
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Major features of the salon-styled hair dryers that we have designed include:
| Negative ion technology | Help eliminate frizzy hair |
| Scirocco fan | Allows to thoroughly dry hair from the roots |
| Removable filter | Washable for easy daily cleaning and detachable for preventing dust and hair from blocking the blades |
| Compact size and lightweight | Handy for travel and home use |
Our sales of hair straighteners represented 36% and 43% of our sale of hair styling series for the years ended March 31, 2023 and 2024, respectively, and 61% and 44% of our sale of hair styling series for the six months ended September 30, 2023 and 2024, respectively. We have focused on designing hair straighteners in compact size with quick USB charging for travel and home use.
Trimmer series:
Designed with compact size and equipped with 2-way head and face shaver and nose hair trimmer on each side, washable components, the 2-in-1 face shaver and nose trimmer sets are more popular than the face shaver and nose trimmer as two separate products.
For the years ended March 31, 2023 and 2024, 19% and 34% of our revenue related to the sale of the trimmer series. Approximately 32% and 15% of our trimmer series sold in the years ended March 31, 2023 and 2024, respectively, were 2-in-1 face shaver and nose trimmer sets.
For the six months ended September 30, 2023 and 2024, 14% and 48% of our revenue related to the sale of the trimmer series. Approximately 53% and 16% of our trimmer series sold in the six months ended September 30, 2023 and 2024, respectively, were 2-in-1 face shaver and nose trimmer sets.
Eyelash curler series:
The eyelash curler is designed with a 2-way comb, either to increase the eyelash volume or to enhance panoramic appearance. The professionally-designed curved comb brush head fits the curve of upper and lower eyelashes to create natural curls. We generated approximately 3% and 1% of our revenue from this series for the years ended March 31, 2023 and 2024, respectively, and approximately 1% and 0.5% of our revenue from this series for the six months ended September 30, 2023 and 2024, respectively.
Nail care series:
Our nail care series consists of an electrical nail polisher. This series contributed 3% and 2%, respectively, to our total revenue for the years ended March 31, 2023 and 2024, and 2% and 2%, respectively, to our total revenue for the six months ended September 30, 2023 and 2024.
Other personal care appliance series:
Our other personal care appliance series comprises of a reset brush, a callus remover, a body and facial brush, sonic peeling device, a handy fan and others.
We generated approximately 7% and 5% of our total revenue from this series for the years ended March 31, 2023 and 2024, respectively, and approximately 2% of our total revenue from this series for each of the six months ended September 30, 2023 and 2024, respectively. The reset brush represented 55% and 65% of the sales of our other personal care appliance series for the years ended March 31, 2023 and 2024, respectively, and 41% and 53% of the sale of our other personal care appliance series for the six months ended September 30, 2023 and 2024, respectively.
Product Sourcing and Wholesaling
We are experienced in design and development in the personal care electrical appliance industry. Our research and development team consists of 2 full-time employees each at least 16 years of industry experience in electrical appliances engineering and supply chain management. We serve our customers through sourcing or arranging the production process of personal care electrical appliance products with the manufacturers. Besides, leveraging our strong design and development capabilities and our experience in anticipating consumer preference, we are able to provide technical recommendations and solutions to or assist our customers in the design and development of the personal care electrical appliance products that meet the needs of our customers. Riding on our extensive experience and product development capability, we continue to expand and strengthen our market position.
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Our product sourcing service is summarized as follows: our sales and marketing team first receives an order from a customer who requests our expertise to examine and advise on the design and manufacturing feasibility of a product sample or design prototype of a product prepared by the customer. We forward the sample or design prototype to a manufacturer who performs a feasibility assessment of the design, specification, materials required, type of engineering and required technology and packaging of the product sample or design prototype provided by the customer. As an auxiliary service, we may suggest modifications to the design, specification, materials to be used, technology and packaging to the customer, or, as requested by our customer, may jointly design and develop the products with our customer in accordance with the requirement, standard and narrative of our customer. Upon the completion of the assessment and receipt of acceptance of the modifications from the customer, our marketing and operation team provides a price quotation to the customer. Once the quotation is accepted by the customer, we forward the finalized design, specification and customer’s requests to the manufacturer and arrange a manufacturing schedule for producing a sample at the manufacturer’s facility. The manufacturer performs an initial evaluation and quality testing on the sample of the finished product. We then provide the tested sample of the finished product to our customer. Upon the acceptance of the sample of the finished product by the customer’s quality control team, we will arrange a manufacturing schedule with the manufacturer for a mass production. After the mass production is completed, our shipping team confirms the shipping destination with our customer, arranges the shipping documents and forwards the instructions to the manufacturer who fulfills the shipment of the finished product to the customer’s destination as instructed. Currently, we are not involved in any pending or threatened claims of intellectual property infringement.
We bear the costs and risks of forwarding the sample or design prototype to a manufacturer, providing suggestions for modifications of product design, sending the tested sample of the finished product to our customer and shipping delay that is otherwise caused by other parties rather than the manufacturer. In the event of manufacturing defaults such as refining the product samples, manufacturing failure or delay, or delay of shipping caused by the manufacturing facility, our collaborating manufacturer bears the relative costs and risks.
We sell our personal care electrical appliances products at wholesale to our customers. As the design, prototype, specification of the personal care electrical appliances and the respective packaging, are developed under the narratives, requirements and standards of our customers, the patents of such design and product prototype are owned by our customers.
Our Customers
Our customers are brand owners of personal care electrical appliances including, (i) Koizumi Seiki Corp., one of the top 10 sellers in terms of retail volume in the personal care electrical appliance market in Japan as stated in “Personal Care Appliances in Japan” by Euromonitor International in December 2023; (ii) another customer, a U.S. home appliance manufacturer. For the years ended March 31, 2023 and 2024, we generated 91.3% and 74.1% of our total revenue, respectively, from Koizumi Seiki Corp. For the six months ended September 30, 2023, we generated 81% and 17% of our total revenue from Koizumi Seiki Corp. and another customer, who is a global distributor of various consumer products, respectively. For the six months ended September 30, 2024, we generated 57.8% and 33.7% of our total revenue from Koizumi Seiki Corp. and another customer, respectively. We maintain long term business relationships with our customers. Leveraging our experience and expertise in the personal care electrical appliances industry, we believe we are well positioned to maintain our relationships with our current customers, and explore our market share in the U.S., Europe and Asia in the near future. See “Expansion of Market” on page 7 of this prospectus.
Collaborating Manufacturers
We have forged long-term relationships with manufacturers specialized in producing personal care electrical appliances for international brand owners who market their personal care electrical appliances globally. When selecting and evaluating manufacturers, we consider a number of business factors such as cost, quality and on-time delivery. Our collaborating manufacturers implemented applicable systems which meets the international or local standards requiring high levels of quality and safety requirements.
Our major collaborating manufacturers include: (i) Zhongshan Raytech Electrical Appliances Manufacturing Co. Ltd. (“Zhongshan Raytech”), a mainland China-based corporation controlled by our founder, Chairman and CEO, Mr. Ching Tim Hoi, and (ii) Zhongshan Leimi Electrical Appliances Company Limited (“Zhongshan Leimi”), a mainland China-based corporation. For the year ended March 31, 2024, payments to Zhongshan Raytech accounted for 88.5% of the total manufacturing costs of the Company. For the year ended March 31, 2023, payments to each of Zhongshan Raytech and Zhongshan Leimi accounted for 83.1% and 10.4%, respectively, of the total manufacturing costs of the Company. For the six months ended September 30, 2023, payments to Zhongshan Raytech accounted for 92.7% of the total manufacturing costs of the Company. For the six months ended September 30, 2024, payments to Zhongshan Raytech accounted for 91.5% of the total manufacturing costs of the Company. The factories operated by our major collaborating manufacturers are located in Zhongshan, Guangdong Province, PRC. The manufacturers have run a well-established supply chain process particularly the procurement of materials and components and manufacturer selection.
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Zhongshan Raytech obtained certifications for its quality management system, environmental management system and occupational safety system under the standards of China Quality Certification Center (“CQC”), which is based in Beijing, PRC and is under control of the China Certification & Inspection Group, which is approved by the State General Administration for Quality Supervision and Inspection and Quarantine and the Certification and Accreditation Administration of the mainland China of the PRC. CQC is a member of IQNet Association, an international certification entity in Switzerland formed by more than 30 certification entities in major countries and those members implemented domestic standards which mirror equivalent standards established by International Organization for Standardization (“ISO”). See “Business – Business Overview – Collaborating Manufacturers” on page 83 of this prospectus.
Market and Industry Overview
As discussed in “Personal Care Electrical Appliances Market Size 2023-28 Market Research Report” by a marketing research firm IMARC Group and in “Personal Care Appliances Global Market Report 2023 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2023-2032 published by The Business Research Company, personal care electrical appliances are grooming products which primarily consist of hair care appliances (e.g. hair dryer, hair straightener, hair clippers, curling irons, hair settler, and others), hair removal appliances (e.g. trimmer, power shaver and epilator), oral care appliances such as powered tooth brush and oral irrigator, and other personal care appliances such as electrical facial brush, electrical facial cleanser, electrical eyebrow trimmer, battery-operated nail polisher. IMARC Group analyzed that the series of hair care appliances plays a major role in the total global market share of personal care appliances currently.
Global Overview
The market size of the global personal care electrical appliances market is expected to expand to US$22.75 billion in 2024 from US$21.27 billion in 2023 based on “Personal Care Appliances Global Market Report 2024 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2024-2033” published by The Business Research Company.
In its “Personal Care Electrical Appliances Market Size 2023-28 Market Research Report,” IMARC Group stated that the market size of the global personal care electrical appliances was about US$21.6 billion in 2022.
According to “Personal Care Appliances Global Market Report 2024 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2024-2033” issued by The Business Research Company, the major sellers in the global personal care appliances sector include: Conair Corporation, Dyson Ltd, Helen of Troy Limited, Colgate-Palmolive Company, Koninklijke Philips N.V., The Procter & Gamble Company, The Wahl Clipper Corporation, Vega Industries Pvt Ltd, Panasonic Corporation, Samsung Electronics Co., Ltd., LG Corporation, and Braun GmbH.
The majority of our customers are international brand owners who predominantly market their personal care electrical appliances in Japan.
A study of personal care appliances in Japan performed by Euromonitor International in December 2023 (“the study”, or “the research”) found that while total retail sales volume flattened by 0.3% in 2023, from 30.7 million in 2022 to 30.8 million in 2023, the overall total sales value of personal care electrical appliances in Japan increased by 10.8% in 2023, from Japanese Yen 277.6 billion in 2022 to Japanese Yen 307.6 billion in 2023 primarily due to a growth in the average unit price and upgrades in product functions, particularly in hair care electrical appliance, in 2023. The study forecasted that retail volume sales are expected to rise to 32 million in 2024.
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Statistics calculated by Euromonitor International identified that Panasonic Corp is the major seller which represented 44.8% of the market share in the personal care electrical appliance industry in Japan in 2023. Koizumi Seiki Corp., Tescom Co. Ltd., Procter & Gamble Far East Inc., Philips Electronics Japan Ltd. and Hitachi Appliances Inc represented 7.6%, 7.6%, 5.9%, 3.6% and 3.3%, respectively, of the total market share in Japanese personal care electrical appliance industry.
Further, the research determined that the development of the personal care appliances includes three aspects:
| ● | brand premiumization and inflation |
| ● | dominance of hair care appliances |
| ● | innovation in body shavers |
Euromonitor analyzed that although retail sales volume of personal care appliances in Japan remained steady in 2023, the sales dollar amount grew by 10.8% in 2023. Rise in unit price and product upgrades are the key factors. Personal care electrical appliance sellers continued to invest in offering high quality, authentic designs and additional value-added and unique product functions in order to justify higher unit prices.
Hair care appliances still represent a major category in personal care electrical appliances in Japan. Many new personal care appliance sellers such as Dyson, Yaman, Refa, I-ne entered the market of hair care appliances in 2016, 2021, 2019 and 2011, respectively. Traditional well-known brands such as Panasonic, Sharp and Tescom continued to elevate the quality and functions of their hair care appliances products with Panasonic retaining its strong presence in this category. The study mentioned that consumers are willing to pay for the higher price for the quality experience.
The study highlighted that the new design in body shavers by Panasonic and Yaman is expected to perform well. The new design integrated with skin care features and the slim size accommodated the needs for business travel and easier storage and portability.
Future Development
In its “Personal Care Electrical Appliances Market Size 2023-28 Market Research Report,” IMARC Group predicted that the global personal care electrical appliances market size could reach US$30.2 billion by 2028 which represents a growth rate (CAGR) of 5.5% during 2023-2028.
“Personal Care Appliances Global Market Report 2024 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2024-2033” published by The Business Research Company anticipated that the global market value for personal care appliances is estimated to grow to US$29.68 billion by 2028, proliferating at a compound annual growth rate (CAGR) of 6.9%. It analyzed that Asia Pacific is anticipated to be the fastest growing market during the forecast period.
Allied Market Research evaluated that the expansion in the global personal care electrical appliances market from 2022 through 2031 is driven by an improvement in economic environment, an uprising in aging population and a surge in disposable income. Moreover, social media also plays an instrumental role in society, and businesses utilized social media as a conduit to promote and market their brands and products. The research indicated that e-commerce channel segment is expected to record the highest CAGR of 7.4% among various distribution channels of this market during 2022 through 2031 owing to the increased association of internet and e-shopping habit of the consumers. In addition, through the advertisements and promotions of brands or products by celebrities or notable individuals, these brands and products tend to increase consumers’ awareness, trust and comfort. These sales channels help fuel the market and create bigger opportunities for personal care electrical appliances market. Allied Market Research also stated that the use of social media, a rise in disposable income, rapid urbanization and an increase in youth population in Asia-pacific regions trigger the demand for personal care appliances which would exhibit the highest CAGR of 8.4% during 2022 through 2031.
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In addition, according to the analysis of Research and Markets on Personal Care Appliances Global Market Report 2024, global personal care appliances market exhibited a growth from US$21.27 billion in 2023 to US$22.75 billion in 2024 at CAGR of 7.0%. It added that the personal care appliances market size is expected to proliferate to US$29.68 billion in 2028 at CAGR of 6.9%. Major drivers include continued popularity of personal care appliances, an increase in consciousness of personal health, personal appearance and personal hygiene, growing aging population and surge in online purchases.
Key Market Drivers and Opportunities
Below is a list of major factors that we believe are key market drivers and opportunities for the industry:
| ● | rise in disposable incomes and expansion of organized retail sector; |
| ● | advertising and promotions through social media and celebrities; |
| ● | rapid technological advances and energy efficiency innovations that offering budget-friendly styling and personal care electrical appliance products, and advanced products with convenience and ease-of-use; and |
| ● | change of lifestyle pattern and fashion trends that drive customers to splurge on styling and aesthetically appealing self-grooming devices for personal care and hygiene. |
Key Market Restraints
We believe the following are major factors that restraint the development of the industry in the near future:
| ● | increasing amount of plastic waste due to disposal of electrical appliances acts as a restraint on the development of these products; and |
| ● | emerging markets are expected to continue to grow slightly slower than the developed markets in the forecast period due to lower priority in personal care and hygiene compared with the developed markets. |
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Competitive Strengths
We possess certain attributes that differentiate us as a personal care electronic appliance provider operating in Hong Kong. Our key competitive strengths include:
| ● | we have a strong presence in the personal care electrical appliances industry with an 11-year operating history and emphasis on hair styling products; |
| ● | we have a quality control system, which allows us to deliver high quality products and maintain market reputation; and |
| ● | we have an experienced management team with a strong commitment to deliver high quality products. |
We believe that the vision, experience, market-awareness, in-depth knowledge in the personal care and lifestyle electrical appliances industry of our management team have been pivotal to the success of our business and our ability to continue to explore new business opportunities and strengthen our position in the market. See “Business – Competitive Strengths” on page 87 of this prospectus.
Growth Strategy
Our goal is to become a leading product design and development company in personal care and lifestyle electrical appliances industry in Asia. To achieve this goal, we intend to:
| ● | explore new product lines; |
| ● | continue to expand our men’s personal care and hair care and styling product lines, such as shavers and electric hair brush; |
| ● | broaden sales through providing technical expertise to the potential and new customers in personal care electrical appliance market; and |
| ● | approach customers who sell and market their personal care electrical appliances in Europe, the US and other Asia markets; |
Expansion of Market
We seek to expand our customer base, geographic presence and improve our local connection with them. We intend to expand our business from Hong Kong to the U.S., Europe and other Asia markets. We have currently only conducted limited market studies of these other markets, but have not started any marketing or sales initiatives for these markets.
We plan to increase our investments in sales and marketing function, within the U.S., Europe and Asia markets in particular, to cope with our business expansion plan, our Company’s sales and marketing activities mainly included handling purchase orders received from our customers, coordinating with our manufacturers which have their production teams for execution of purchase orders, communicating with our customers on their requests and feedbacks exploring with them the potential business opportunities. We believe that one of our keys to success is to achieve customer satisfaction by, among others, demonstrating to our customers that their purchase orders are closely monitored and their requests and feedbacks are timely handled through our delegated sales and marketing team. This helps us to retain our customers and gain more orders from them. Our management has identified the needs to allocate resources to actively promote our aforesaid strengths with a view to attracting potential customers to approach us for our products and services. Upon the completion of this offering, we plan to allocate approximately 20% of the gross proceeds in promoting our brand, services and products, including a portion to be spent on feasibility studies about the potential markets in the U.S., Europe and other Asia markets. See “Use of Proceeds” on page 59 of this prospectus.
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Recruit, Retain and Develop Employees
We will continue hiring highly qualified and experienced staff in the field. In order to expand and grow our business, we must continuously recruit and attract talented employees not only in the sales and marketing side for acquiring new customers, but also the operational staff to manage the interface with the production and manufacturing side. We believe that Raytech Holding being a publicly-traded company will attract more talented people to join us. With the continuous growth of our business and the market expansion plan, Raytech Holding intends to allocate 30% of the proceeds of the offering for recruiting additional experienced staff, including administrative, executive and accounting personnel, marketing and sales as well as designers with solid industry backgrounds that can support the expansion of business, and necessary R&D personnel to support development of new product lines (including oral care and men’s personal care product lines). See “Use of Proceeds” on page 59 of this prospectus.
Competition
The personal care electrical appliance market is relatively fragmented, subject to macro-economic cycles and the entry of new competitors. We are directly competing with other design and development companies in the industry as well as with manufacturers who are located in South Asia.
The majority of our revenue was derived from sales to the Japanese consumer market. We anticipate that customer demand for our Company’s personal care electrical appliances going forward will be primarily affected by the demand and performance in Japan. However, our targeted customer markets are expected to maintain stable growth.
We mainly compete on product quality and research and development capabilities. We believe that we can compete effectively by virtue of our well-established relationships with our customers which are international brand owners, strong presence in the personal care electrical appliances industry, strong and established product design and development capabilities, quality assurance system and our experienced and dedicated management team.
Intellectual Property
We currently do not own any trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property. Regardless of the type of our services, as the design, prototype, specification of the personal care electrical appliances and the respective packaging, are developed under the narratives, requirements and standards of our customers, the patents of such designs and product prototypes are owned by our customers.
As at the date of this prospectus, Pure Beauty has been using certain trademarks on its daily business operations which are currently registered in Japan and owned by Mr. Ching (the “Japan Pure Beauty Trademarks”). On August 1, 2021, a trademark license agreement was entered into between Raytech Holding and Mr. Ching (the “Japan Trademark License Agreement”), pursuant to which Mr. Ching agreed to irrevocably and unconditionally grant Raytech Holding, its subsidiaries and branches an exclusive license to use the Japan Pure Beauty Trademarks on a royalty-free basis, for 10 years commencing from the date of the Japan Trademark License Agreement. See “Risk Factors – Risks Related to Our Business – We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations” on page 31 of this prospectus for more information.
Patent
We do not retain the patent of the finished products we sourced to manufacturers and designed or developed with our customers. Such patents belong to our customers who hired us for the design and development of such products.
Domain
Pure Beauty Manufacturing Company Limited registered the domain name of “www.raytech.com.hk.”
Summary of Risk Factors
Investing in Raytech Holding’s Ordinary Shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in Raytech Holding’s Ordinary Shares. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed in more detail in the section titled “Risk Factors” beginning on page 26 of this prospectus.
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Risks Related to Our Business
Risks and uncertainties related to our business and industry include, but are not limited to, the following:
| ● | Changes in capital markets, merger and acquisition activity, legal or regulatory requirements, general economic conditions and monetary or geopolitical disruptions, as well as other factors beyond our control, could reduce demand for our products, in which case our revenues and profitability could decline. See more detailed discussion of this risk factor on page 26 of this prospectus. |
| ● | Our revenues, operating income and cash flows are likely to fluctuate. See more detailed discussion of this risk factor on page 26 of this prospectus. |
| ● | We have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues. See more detailed discussion of this risk factor on page 27 of this prospectus. |
| ● | We rely on a limited number of manufacturers, some of which we are affiliated with. A loss of any of these manufacturers could significantly negatively affect our business. See more detailed discussion of this risk factor on page 27 of this prospectus. |
| ● | Our major manufacturers are located in mainland China which could adversely affect our business, financial condition and results of operations. See more detailed discussion of this risk factor on page 28 of this prospectus. |
| ● | Inadequate or inaccurate external and internal information, including budget and planning data, could lead to inaccurate financial forecasts and inappropriate financial decisions. See more detailed discussion of this risk factor on page 29 of this prospectus. |
| ● | We may not manage our growth effectively, and our profitability may suffer. See more detailed discussion of this risk factor on page 29 of this prospectus. |
| ● | Our reputation is crucial to our business. Any harm to our reputation or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations. See more detailed discussion of this risk factor on page 30 of this prospectus. |
| ● | We may not be able to continue to grow at our historical rate of growth, and if we fail to manage our growth effectively, our business may be materially and adversely affected. See more detailed discussion of this risk factor on page 30 of this prospectus. |
| ● | If we fail to prevent security breaches, improper access to or disclosure of our data or user data, or other hacking and attacks, we may lose users, and our business, reputation, financial condition and results of operations may be materially and adversely affected. See more detailed discussion of this risk factor on page 30 of this prospectus. |
| ● | We cannot assure you that we could retain effective intellectual property rights. See more detailed discussion of this risk factor on page 30 of this prospectus. |
| ● | We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations. See more detailed discussion of this risk factor on page 31 of this prospectus. |
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| ● | Compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results. See more detailed discussion of this risk factor on page 31 of this prospectus. |
| ● | Increases in labor costs in Hong Kong may adversely affect our business and results of operations. See more detailed discussion of this risk factor on page 32 of this prospectus. |
| ● | Raytech Holding’s principal shareholders have substantial influence over Raytech Holding and their interests may not be aligned with the interests of Raytech Holding’s other shareholders. See more detailed discussion of this risk factor on page 32 of this prospectus. |
| ● | We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. See more detailed discussion of this risk factor on page 32 of this prospectus. |
| ● | Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business. See more detailed discussion of this risk factor on page 33 of this prospectus. |
| ● | Members of our management team may in the future be involved in governmental investigations and civil litigations relating to the business affairs of companies with which they are, were or may in the future be affiliated with. See more detailed discussion of this risk factor on page 33 of this prospectus. |
| ● | If Raytech Holding becomes directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, Raytech Holding may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in Raytech Holding’s stock, especially if such matter cannot be addressed and resolved favorably. See more detailed discussion of this risk factor on page 34 of this prospectus. |
| ● | If we fail to compete effectively, we may miss new business opportunities or lose existing customers, and our revenues and profitability may decline. See more detailed discussion of this risk factor on page 34 of this prospectus. |
| ● | If we are unable to rely on the services and connections of our key personnel, or retain the current key personnel, our business could be adversely affected. See more detailed discussion of this risk factor on page 34 of this prospectus. |
| ● | Certain of our officers or directors may have actual or potential conflicts of interest because of their equity interests in or positions with Raytech Holdings Company Limited and Zhongshan Raytech. See more detailed discussion of this risk factor on page 34 of this prospectus. |
| ● | Our employees may leave to form or join competitors, and we may not have, or may choose not to pursue, legal recourse against such professionals. See more detailed discussion of this risk factor on page 35 of this prospectus. |
| ● | Our business and sales are subject to the business strategies of the brand owners. See more detailed discussion of this risk factor on page 35 of this prospectus. |
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| ● | We cannot assure that our products can meet consumer preferences and needs, and will continue to gain market acceptance and secure market share. See more detailed discussion of this risk factor on page 35 of this prospectus. |
| ● | We rely on external manufacturers for production of all of our products. See more detailed discussion of this risk factor on page 36 of this prospectus. |
| ● | Our operating results may fluctuate due to seasonality and other factors. See more detailed discussion of this risk factor on page 36 of this prospectus. |
| ● | We may be unable to maintain rapid growth and implement our future plans. See more detailed discussion of this risk factor on page 36 of this prospectus. |
| ● | A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition. See more detailed discussion of this risk factor on page 37 of this prospectus. |
| ● | Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and operating results. See more detailed discussion of this risk factor on page 37 of this prospectus. |
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Our results of operations may be adversely affected by significant share-based compensation expenses, and the issuance of shares under our equity incentive plans will dilute existing shareholders. See more detailed discussion of this risk factor on page 37 of this prospectus. |
Risks Related to Our Corporate Structure
We are also subject to risks and uncertainties related to our corporate structure, including, but not limited to, the following:
| ● | Raytech Holding may rely on dividends and other distributions on equity paid by its subsidiaries to fund any cash and financing requirements it may have, and any limitation on the ability of Raytech Holding’s subsidiary to make payments to it could have a material adverse effect on Raytech Holding’s ability to conduct its business. See more detailed discussion of this risk factor on page 37 of this prospectus. |
| ● | Raytech Holding’s lack of effective internal controls over financial reporting may affect its ability to accurately report its financial results or prevent fraud, which may affect the market for and price of Raytech Holding’s Ordinary Shares. See more detailed discussion of this risk factor on page 38 of this prospectus. |
| ● | If Raytech Holding ceases to qualify as a foreign private issuer, it would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and it would incur significant additional legal, accounting and other expenses that it would not incur as a foreign private issuer. See more detailed discussion of this risk factor on page 39 of this prospectus. |
| ● | Raytech Holding is an “emerging growth company” within the meaning of the Securities Act, and if Raytech Holding takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make it more difficult to compare Raytech Holding’s performance with other public companies. See more detailed discussion of this risk factor on page 39 of this prospectus. |
| ● | Raytech Holding incurs increased costs as a result of being a public company which will increase after Raytech Holding ceases to qualify as an “emerging growth company.” See more detailed discussion of this risk factor on page 39 of this prospectus. |
| ● | Raytech Holding’s board of directors may decline to register transfers of Ordinary Shares in certain circumstances. See more detailed discussion of this risk factor on page 40 of this prospectus. |
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Risks Related to Doing Business in Hong Kong
Substantially all of our operations are in Hong Kong; therefore, we face risks and uncertainties relating to doing business in Hong Kong in general, including, but not limited to, the following:
| ● | All of Pure Beauty’s operations are in Hong Kong. However, due to the long arm provisions under the current laws and regulations of mainland China, the government of mainland China may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of Raytech Holding’s Ordinary Shares. The government of mainland China may also intervene or impose restrictions on our ability to move money out of Hong Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations, rules, and the enforcement of laws of the government of mainland China may also be quick with little advance notice and our assertions and beliefs of the risk imposed by the legal and regulatory system of mainland China cannot be certain. See more detailed discussion of this risk factor on page 40 of this prospectus. |
| ● | The enactment of Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong National Security Law”) could impact Raytech Holding’s subsidiaries. See more detailed discussion of this risk factor on page 42 of this prospectus. |
| ● | There are political risks associated with conducting business in Hong Kong. See more detailed discussion of this risk factor on page 43 of this prospectus. |
| ● | There remain some uncertainties as to whether we will be required to obtain approvals from mainland China and Hong Kong authorities to list additional Raytech Holding’s securities on the U.S. exchanges and offer securities in the future, and if required, we cannot assure you that we will be able to obtain such approval. See more detailed discussion of this risk factor on page 44 of this prospectus. |
| ● | Rules for cross-border provision and examination of auditing records and other materials in connection with overseas securities issuance and listing was released by CSRC and became effective The government of mainland China may impose more stringent requirement for domestic Chinese companies to share business and accounting records with foreign auditing firms and other securities service institutions, which could significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer its Ordinary Shares to investors and could cause the value of Raytech Holding’s Ordinary Shares to significantly decline or become worthless. See more detailed discussion of this risk factor on page 47 of this prospectus. |
| ● | It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within mainland China. See more detailed discussion of this risk factor on page 49 of this prospectus. |
| ● | You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Raytech Holding or its management named in the prospectus based on Hong Kong laws. See more detailed discussion of this risk factor on page 49 of this prospectus. |
| ● | We may be affected by the currency peg system in Hong Kong. See more detailed discussion of this risk factor on page 50 of this prospectus. |
Risks Related to Raytech Holding’s Ordinary Shares and This Offering
In addition to the risks described above, we are subject to general risks and uncertainties relating to Raytech Holding’s Ordinary Shares and this offering, including, but not limited to, the following:
| ● | Although the audit report included in this prospectus is prepared by U.S. auditors who are subject to PCAOB inspections on a regular basis, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in Raytech Holding’s securities may be prohibited under the HFCA Act if the SEC subsequently determines Raytech Holding’s audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist Raytech Holding’s securities. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. See more detailed discussion of this risk factor on page 50 of this prospectus. |
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| ● | Raytech Holding’s Ordinary Shares are thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your Shares to raise money or otherwise desire to liquidate your shares. See more detailed discussion of this risk factor on page 52 of this prospectus. |
| ● |
The market price for our Ordinary shares may be volatile and could decline significantly, potentially subjecting us to securities litigation. See more detailed discussion of this risk factor on page 52 of this prospectus. |
| ● | You will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased. See more detailed discussion of this risk factor on page 53 of this prospectus. |
| ● | Substantial future sales of Raytech Holding’s Ordinary Shares or the anticipation of future sales of Raytech Holding’s Ordinary Shares in the public market could cause the price of Raytech Holding’s Ordinary Shares to decline. See more detailed discussion of this risk factor on page 53 of this prospectus. |
| ● | Raytech Holding does not intend to pay dividends for the foreseeable future. See more detailed discussion of this risk factor on page 53 of this prospectus. |
| ● | If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding Raytech Holding’s Ordinary Shares, the price of Raytech Holding’s Ordinary Shares and trading volume could decline. See more detailed discussion of this risk factor on page 53 of this prospectus. |
| ● | You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because Raytech Holding is incorporated under British Virgin Islands law. See more detailed discussion of this risk factor on page 54 of this prospectus. |
| ● | As a foreign private issuer, Raytech Holding is permitted to, and Raytech Holding is, relying on exemptions from certain Nasdaq Stock Exchange corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of Raytech Holding’s shares. See more detailed discussion of this risk factor on page 55 of this prospectus. |
| ● | If Raytech Holding cannot continue to satisfy, the continued listing requirements and other rules of the Nasdaq Capital Market applicable to it, our securities may be delisted, which could negatively impact the price of Raytech Holding’s securities and your ability to sell them. See more detailed discussion of this risk factor on page 55 of this prospectus. |
| ● | Because our business is conducted in Hong Kong dollars and the price of Raytech Holding’s Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments. See more detailed discussion of this risk factor on page 56 of this prospectus. |
| ● | Raytech Holding has broad discretion in the use of the net proceeds from this offering and may not use them effectively. See more detailed discussion of this risk factor on page 56 of this prospectus. |
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| ● | There can be no assurance that Raytech Holding will not be a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of Raytech Holding’s Ordinary Shares. See more detailed discussion of this risk factor on page 56 of this prospectus. |
Corporate History and Holding Company Structure
Pure Beauty was incorporated under the laws of Hong Kong with limited liability on April 15, 2013 and Raytech Holding’s Chairman and CEO, Mr. Ching is the founder. In order to prepare for its initial public offering, a series of restructure actions were taken. In June 2022, Raytech Holding was incorporated under the laws of the British Virgin Islands with the sole purpose being a holding company of Pure Beauty. Upon incorporation, Raytech Holding issued 100 founder shares of ordinary shares, par value $1.00 per share, to Mr. Ching (90 shares) and other minority shareholders (collectively 10 shares) at $1.00 per share. In August 2022, Mr. Ching, as the sole member of Pure Beauty, transferred all outstanding 10,000 shares of Pure Beauty held by him to Raytech Holding, in conjunction with which, Pure Beauty issued additional 790,000 shares to Raytech Holding; resulting in Raytech Holding being the parent company of Pure Beauty, holding a total of 800,000 shares in Pure Beauty. In September 2022, Mr. Ching subsequently transferred 5 shares of Raytech Holding to APTC Holdings Limited, a British Virgin Islands company, and 5 shares of Raytech Holding to Mr. Ling Chun Yin, a director of Raytech Holding and the Assistant to CEO of Pure Beauty at $1.00 per share.
As of the date hereof, Mr. Ching holds 72.7% of the equity interests in Raytech Holding and other minority shareholders collectively hold 27.3% of the equity interests in Raytech Holding.
On May 10, 2023, we filed our amended and restated memorandum and articles of association with the Registrar of Corporate Affairs to increase our authorized shares from 50,000 Ordinary Shares, par value of $1.00 per share, to 8,000,000,000 Ordinary Shares, par value of $0.00000625 per share and effectuated a forward split of all issued and outstanding shares at a ratio of 160,000-for-1.
In August 2023, Market Tycoon Investments Limited transferred 480,000 Ordinary Shares to Mr. Wong Tai Chi at $0.00000625 per share, and APTC Holdings Limited transferred 800,000 Ordinary Shares to Ms. Look Wai Yi at $0.00000625 per share. In October 2023, Value Classic Global Limited transferred 640,000 Ordinary Shares to Crystal Charm Investments Limited, a British Virgin Islands company, at $0.00000625 per share, Mr. Wong Tai Chi transferred 480,000 Ordinary Shares to Value Crystal Investment Limited, a British Virgin Islands company, at $0.00000625 per share, and Ms. Look Wai Yi transferred 800,000 Ordinary Shares to Ace Challenger Limited, a British Virgin Islands company, at $0.00000625 per share.
On May 17, 2024, we consummated the sale of 1,500,000 Ordinary Shares (the “IPO Shares”) in our initial public offering. The Company completed the IPO on a firm commitment basis pursuant to the Company’s registration statement on Form F-1, as amended (File No. 333-275197), filed with the Securities and Exchange Commission, which was declared effective by the Securities and Exchange Commission on May 13, 2024. The IPO Shares were priced at $4.00 per share. The Company also granted the underwriter a 45-day option to purchase up to an additional 225,000 Ordinary Shares to cover over-allotments, if any (the “Over-Allotment Option”). The Ordinary Shares were approved for listing on The Nasdaq Capital Market on May 13, 2024 and commenced trading under the symbol “RAY” on May 15, 2024.
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On July 5, 2024, upon the underwriter’s partial exercise of the Over-Allotment Option, the Company sold an additional 113,083 Ordinary Shares at $4.00 per share. As a result, the Company has raised gross proceeds of $6,452,332 in the IPO, including the partial exercise of the Over-Allotment Option, before deducting underwriting discounts and offering expenses.
On May 6, 2025, the Company established a new, directly wholly-owned subsidiary, Raytech Innovation Limited, incorporated in Hong Kong. As of the date of this prospectus, Raytech Innovation Limited has not commenced operations and has no assets.
The following diagram illustrates our corporate legal structure:
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Permission Required from the Authorities of Mainland China and Hong Kong for this Offering
As advised by Raytech Holding’s PRC Counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, on the basis that (i) we currently do not have or intend to set up any subsidiary or VIE structure in mainland China,(ii) we do not have any business operations in mainland China, except that we collaborate with manufacturers located in mainland China to manufacture our products, (iii) none of our clients are located in mainland China, and (iv) we possess personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (iv), including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC, we believe, we are currently not required to obtain any permission or approval from the CAC or any other governmental authorities of mainland China to operate our business or offer subsequent securities of the company, nor have we been denied of any permissions or approvals from the authorities of mainland China.
As advised by Raytech Holding’s PRC Counsel, AllBright Law Offices (Fuzhou), based on the facts that (i) we do not operate any entities in mainland China and the operating revenue, total profit, total assets or net assets as documented in Raytech Holding’s audited consolidated financial statements for the most recent fiscal year is accounted for by our Hong Kong subsidiary, Pure Beauty located outside mainland China; (ii) we do not have any equity interest in any manufacturer located in mainland China and vice versa; and (iii) we conduct a majority of our business and are headquartered in Hong Kong rather than in mainland China, and our senior management team are not PRC citizens or have their residence located outside mainland China, we believe that this offering will not be regarded as a subsequent securities offering in the same overseas market under the Article 15 of the Overseas Listing Trial Measures, and are not required to fulfill the filing procedures with the CSRC to issue securities to foreign investors. However, as the Overseas Listing Trial Measures were newly published, there are substantial uncertainties that the CSRC may take a view that is contrary to our understanding of the Overseas Listing Trial Measures because the Overseas Listing Trial Measures adopts the principle of “substance over form” regarding the determination of “indirect overseas offering and listing by a domestic company,” over which the CSRC may have substantial discretions.
Based on the foregoing, we do not currently expect the laws and regulations of mainland China have any material impact on our business, financial condition or results of operations and we are currently not subject to the government of mainland China’s direct influence or discretion over the manner in which we conduct our business activities outside of the mainland China. Furthermore, CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, has advised Raytech Holding that, as of the date of this prospectus, Raytech Holding is not required to obtain any permission or approval from the governmental authorities of Hong Kong to list on the U.S. exchanges and offer securities.
However, if we (i) do not receive or maintain such permissions or approvals, should such permissions or approvals be required in the future by the PRC or Hong Kong government, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, we may be unable to obtain such permissions or approvals in a timely manner, or at all, and may face regulatory actions or other sanctions from the CSRC, the CAC or other PRC or Hong Kong regulatory authorities if we fail to fully comply with any new regulatory requirements. Consequently, our operations and financial condition could be materially adversely affected, and Raytech Holding’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 become worthless.
Nevertheless, we are aware that recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland Chinese companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It is also highly uncertain what potential impact such modified or new laws and regulations will have on our daily business operations, our ability to accept foreign investments and the listing of Raytech Holding’s Ordinary Shares on a U.S. or other foreign exchanges. If there is significant change to current political arrangements between mainland China and Hong Kong, the PRC government intervenes or influences operations of companies operated in Hong Kong like us, or exerts more control through change of laws and regulations over offerings conducted overseas and/or foreign investment in issuers like us, it may result in a material change in our operations, financial condition and/or the value of the securities Raytech Holding is registering for sale or could significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer securities to investors and cause the value of Raytech Holding’s Ordinary Shares to significantly decline or become worthless. See “Risk Factors - Risks Related to Our Corporate Structure” beginning on page 37 and “Risk Factors — Risks Related to Doing Business in Hong Kong” beginning on page 40 of this prospectus for more information.
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Transfers of Cash to and from Our Subsidiary
Raytech Holding is permitted under the laws of British Virgin Islands to provide funding to its subsidiaries in Hong Kong through loans or capital contributions without restrictions on the amount of the funds. There are no restrictions or limitation on Raytech Holding’s ability to distribute earnings from its businesses, including subsidiary, to the U.S. investors.
Our equity structure is a direct holding company structure, that is, the overseas entity that is listed in the U.S., Raytech Holding, directly holds 100% of shares of Pure Beauty, Raytech Holding’s Hong Kong operating entity. Cash is transferred through our organization in the following manner: (i) funds may be transferred from Raytech Holding, the holding company incorporated in the British Virgin Islands to Pure Beauty in the form of capital contributions or shareholder loans, as the case may be; and (ii) dividends or other distributions may be paid by Pure Beauty to Raytech Holding. Pure Beauty is permitted under the laws of Hong Kong to provide funding to Raytech Holding through dividend distribution out of profits available for distribution without restrictions on the amount of the funds or restrictions on foreign exchange. If Raytech Holding intends to distribute dividends to its shareholders, it will depend on payment of dividends from Pure Beauty to Raytech Holding in accordance with the laws and regulations of Hong Kong, and the dividends will be distributed by Raytech Holding to all shareholders respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions. If Pure Beauty incurs debt on its own in the future, the instruments governing such debt may restrict Pure Beauty’s ability to pay dividends, make distribution or transfer funds to Raytech Holding. Subject to the BVI Act and our amended and restated memorandum and articles of association, Raytech Holding’s board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of Raytech Holding’s assets will exceed its liabilities and Raytech Holding will be able to pay its debts as they become due. There is no further BVI statutory restriction on the amount of funds which may be distributed by us by dividend.
Since its IPO, Raytech Holdings has not declared any dividends. Both Raytech Holding and Pure Beauty currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of Raytech Holding’s board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Within our direct holding company structure, the cross-border transfer of funds within our corporate Company is legal and compliant with the laws and regulations of the British Virgin Islands and Hong Kong. In the future, cash proceeds from overseas financing activities, including this offering, can be directly transferred to our subsidiary Pure Beauty via capital contribution or shareholder loans.
In the reporting periods presented in this prospectus, no cash and other asset transfers have occurred among the Company and its subsidiaries.
Currently, substantially all of our operations are in Hong Kong. We do not have or intend to set up any subsidiary or enter into any contractual arrangements to establish a VIE structure with any entity in mainland China. Since Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, providing Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. The laws and regulations of mainland China do not currently have any material impact on transfer of cash from Raytech Holding to Pure Beauty or from Pure Beauty to Raytech Holding and the investors in the U.S.
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There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of HKD into foreign currencies and the remittance of currencies out of Hong Kong.
See “Dividend Policy” on page 59 and “Risk Factors – Risks Related to Our Corporate Structure – Raytech Holding may rely on dividends and other distributions on equity paid by its subsidiaries to fund any cash and financing requirements Raytech Holding may have, and any limitation on the ability of its subsidiaries to make payments to Raytech Holding could have a material adverse effect on Raytech Holding’s ability to conduct its business.” on page 37 of this prospectus for more information.
Raytech Holding’s Corporate Information
Raytech Holding’s principal executive offices are located at Unit 609, 6/F, Nan Fung Commercial Centre, No.19 Lam Lok Street, Kowloon Bay, Hong Kong, and its telephone number is +852 2117 0236. Raytech Holding’s registered office in the British Virgin Islands is at Aegis Chambers, 1st Floor, Ellen Skelton Building, 3076 Sir Francis Drake’s Highway, Road Town, Tortola, VG1110, British Virgin Islands. Raytech Holding maintains a website at www.raytech.com.hk. The information contained in, or accessible from, Raytech Holding’s website or any other website does not constitute a part of this prospectus.
Recent Regulatory Development in PRC
We are not based in mainland China and do not have operations in mainland China, except that we collaborate with manufacturers located in mainland China to manufacture the products. We currently do not have or intend to set up any subsidiary in mainland China, or do not foresee the need to enter into any contractual arrangements with a VIE to establish a VIE structure in mainland China. For the six months ended September 30, 2024 and the fiscal years ended March 31, 2024, and 2023, we generated all our revenues from Hong Kong. Pursuant to the Basic Law, which is a national law of the PRC and the constitutional document for Hong Kong, national laws of the PRC shall not be applied in Hong Kong except for those listed in Annex III of the Basic Law and applied locally by promulgation or local legislation. The Basic Law expressly provides that the national laws of the PRC which may be listed in Annex III of the Basic Law shall be confined to those relating to defense and foreign affairs as well as other matters outside the autonomy of Hong Kong. The basic policies of the PRC regarding Hong Kong as a special administrative region of the PRC are reflected in the Basic Law, providing Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”.
However, in light of the PRC government’s recent expansion of authority in Hong Kong, we may be subject to uncertainty about any future actions of the PRC government or authorities in Hong Kong, and it is possible that all the legal and operational risks associated with being based in and having operations in the PRC may also apply to operations in Hong Kong in the future. There is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong. The PRC government may intervene or influence our current and future operations in Hong Kong at any time, or may exert more control over offerings conducted overseas and/or foreign investment in issuers like Raytech Holding. Such governmental actions, if and when occur: (i) could significantly limit or completely hinder our ability to continue our operations; (ii) could significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer its Ordinary Shares to investors; and (iii) may cause the value of Raytech Holding’s Ordinary Shares to significantly decline or be worthless.
We are also aware that, recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland-China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued the Opinions on Strictly and Lawfully Cracking Down Illegal Securities Activities to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over mainland-China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
On December 28, 2021, the CAC and other authorities of mainland China promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. In addition, the Cybersecurity Law, which was adopted by the Standing Committee of the National People’s Congress on November 7, 2016 and came into force on June 1, 2017, and the Cybersecurity Review Measures, or the “Review Measures”, provide that personal information and important data collected and generated by a critical information infrastructure operator, or a “CIIO”, in the course of its operations in mainland China must be stored mainland China, and if a CIIO purchases internet products and services that affect or may affect national security, it should be subject to national security review by the CAC together with competent departments of the State Council. On November 14, 2021, the CAC published the Regulations on the Network Data Security Administration Draft, or the “Network Data Security Regulations Draft”, to solicit public opinion and comments. Under the Network Data Security Regulations Draft, an overseas initial public offering to be conducted by a data processor processing the personal information of more than one million individuals shall apply for a cybersecurity review. Data processor means an individual or organization that independently makes decisions on the purpose and manner of processing in data processing activities, and data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision, disclosure, or deletion of data.
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We do not currently expect the Review Measures to have an impact on our business, operations or this offering as we do not believe either Pure Beauty, our current operating subsidiary, or Raytech Innovation, our newly formed non-operational subsidiary is deemed to be a “CIIO” or a “data processor” controlling personal information of no less than one million users. Hence, as advised by our PRC Counsel, AllBright Law Offices (Fuzhou), we are not required to file for cybersecurity review, because (i) our subsidiaries, Pure Beauty and Raytech Innovation, are incorporated and operating in Hong Kong without any subsidiary or VIE structure in mainland China and the Review Measures remains unclear whether it shall be applied to a Hong Kong company; (ii) as of the date of this prospectus, neither Pure Beauty nor Raytech Innovation did not collect and store any personal information of individual customers of mainland China and possess personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (ii), including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC; and (iii) as of the date of this prospectus, neither Pure Beauty nor Raytech Innovation has not been informed by any governmental authority of mainland China of any requirement that it file for a cybersecurity review. However, there remains significant uncertainty in the interpretation and enforcement of relevant cybersecurity laws and regulations of mainland China. If either Pure Beauty or Raytech Innovation is deemed to be a “CIIO” or a “data processor” controlling personal information of no less than one million users in the future, Pure Beauty’s operations and the listing of Raytech Holding’s Ordinary Shares in the U.S. could be subject to CAC’s cybersecurity review. If the authorized PRC regulatory body subsequently determines that we are required to go through such cybersecurity review or if any other PRC government authorities promulgate any interpretation or implementation rules before Raytech Holding’s listing that would require us to go through a cybersecurity review for this offering, we may fail to complete such cybersecurity review procedures in a timely manner, or at all. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, reputational damage as well as legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations.
We are also aware that recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland Chinese companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Nevertheless, since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will have on Pure Beauty’s daily business operations, its ability to accept foreign investments and the listing of Raytech Holding’s Ordinary Shares on a U.S. or other foreign exchange. As advised by Raytech Holding’s PRC Counsel, AllBright Law Offices (Fuzhou), and to the knowledge of the management, on the basis that (i) our subsidiaries, Pure Beauty and Raytech Innovation, are incorporated and operating in Hong Kong without any subsidiary or VIE structure, or any intent to set up subsidiary or VIE structure in mainland China, and (ii) Pure Beauty does not have any business operations in mainland China, except for its collaboration with manufacturers located in mainland China to manufacture our products, (iii) none of Pure Beauty’s clients are located in mainland China, and (iv) we possess personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (iv), including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC, our subsidiaries are not required to obtain regulatory approval for this offering of Raytech Holding’s Ordinary Shares to foreign investors from the authorities of mainland China, nor have our subsidiaries been denied of any permissions or approvals from the authorities of mainland China. Furthermore, CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, has advised Raytech Holding that, as of the date of this prospectus, neither Pure Beauty nor Raytech Innovation is required to obtain regulatory approval for this offering of Raytech Holding’s Ordinary Shares to foreign investors from the authorities of Hong Kong. However, if there is significant change to current political arrangements between mainland China and Hong Kong, or the applicable laws, regulations, or interpretations change, and our subsidiaries are required to obtain such approval in the future, and our subsidiaries do not receive or maintain the approvals or are denied permission from the authorities of mainland China or Hong Kong, we will not be able to continue our listing of Raytech Holding’s Ordinary Shares on Nasdaq or any other U.S. exchange, or continue to offer securities to investors, which would materially affect the interests of the investors and cause significant depreciation of the price of Raytech Holding’s Ordinary Shares. However, if our subsidiaries (i) do not receive or maintain such permissions or approvals, should such permissions or approvals be required in the future by the PRC or Hong Kong government, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and our subsidiaries are required to obtain such permissions or approvals in the future, our subsidiaries may be unable to obtain such permissions or approvals in a timely manner, or at all, and may face regulatory actions or other sanctions from the CSRC, the CAC or other PRC or Hong Kong regulatory authorities if our subsidiaries fail to fully comply with any new regulatory requirements. Consequently, our operations and financial condition could be materially adversely affected, and Raytech Holding’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 become worthless. See “Risk Factors - Risks Related to Doing Business in Hong Kong – There remain some uncertainties as to whether we will be required to obtain approval from authorities of mainland China and Hong Kong authorities to list additional Raytech Holding’s securities on U.S. exchanges in the future, and if required, we cannot assure you that we will be able to obtain such approval.” on page 44 of this prospectus.
In addition, we rely on two major manufacturers, Zhongshan Raytech and Zhongshan Leimi, which are located in Zhongshan, mainland China. For the year ended March 31, 2023, payments to each of Zhongshan Raytech and Zhongshan Leimi accounted for 83.1% and 10.4%, respectively, of the total manufacturing costs of the Company. For the year ended March 31, 2024, payments to Zhongshan Raytech accounted for 88.5% of the total manufacturing costs of the Company. For the six months ended September 30, 2023, payments to Zhongshan Raytech accounted for 92.7% of the total manufacturing costs of the Company. For the six months ended September 30, 2024, payments to Zhongshan Raytech accounted for 91.5% of the total manufacturing costs of the Company.
Certain risks associated with our major manufacturers in mainland China, including political and economic instability, global or regional adverse conditions, the financial stability of our manufacturers, our manufacturers’ ability to meet our standards, labor problems experienced by such manufacturers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, and other factors relating to our manufacturers are beyond our control, could adversely affect our business, financial condition and results of operations. See “Risk Factors - Risks Related to Our Business – Our major manufacturers are located in mainland China which could adversely affect our business, financial condition and results of operations.” on page 28 of this prospectus.
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Implications of the HFCA Act
On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. An issuer will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. In June 2021, the Senate passed the AHFCAA, which would reduce the time period for the delisting of foreign companies under the HFCA Act to two consecutive years instead of three years. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC and Hong Kong; and such report identified the specific registered public accounting firms which are subject to these determinations. On August 26, 2022, a Statement of Protocol was signed by the PCAOB, the CSRC and the Ministry of Finance of the PRC governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. On December 29, 2022, the CAA was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
Raytech Holding’s auditor, WWC, P.C., is headquartered in San Mateo, California, and has been inspected by the PCAOB on a regular basis. Raytech Holding’s auditor is not headquartered in mainland China or Hong Kong and was not identified in the Determination Report as a firm subject to the PCAOB’s determinations. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit WWC, P.C. to provide audit work papers located in mainland China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, Raytech Holding’s investors may be deprived of the benefits of such inspection which could result in limitation or restriction to Raytech Holding’s access to the U.S. capital markets and trading of its securities on a national exchange or “over-the-counter” markets may be prohibited under the HFCA Act. See “Risk Factors — Risks Related to Raytech Holding’s Ordinary Shares and This Offering — Although the audit report included in this prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in Raytech Holding’s securities may be prohibited under the HFCA Act if the SEC subsequently determines Raytech Holding’s audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist Raytech Holding’s securities. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading.” on page 50 of this prospectus.
Implications of Being an “Emerging Growth Company”
As a company with less than $1.235 billion in revenue during our last fiscal year, Raytech Holding qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, Raytech Holding:
| ● | may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; |
| ● | is not required to provide a detailed narrative disclosure discussing Raytech Holding’s compensation principles, objectives and elements and analyzing how those elements fit with Raytech Holding’s principles and objectives, which is commonly referred to as “compensation discussion and analysis”; |
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| ● | is not required to obtain an attestation and report from Raytech Holding’s independent registered accounting firm on its management’s assessment of Raytech Holding’s internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; |
| ● | is not required to obtain a non-binding advisory vote from Raytech Holding’s shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes); |
| ● | is exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure; |
| ● | is eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and |
| ● | will not be required to conduct an evaluation of our internal control over financial reporting for two years. |
Raytech Holding has opted to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Raytech Holding’s election to use the phase-in periods may make it difficult to compare its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.
Under the JOBS Act, Raytech Holding is able to take advantage of the above-described reduced reporting requirements and exemptions for up to five years after Raytech Holding’s initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, herein referred to as the Securities Act, or such earlier time that we no longer meet the definition of an emerging growth company.
Raytech Holding will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which its annual gross revenue exceeds $1.235 billion; (ii) the last day of the fiscal year during which the fifth anniversary of the date of this offering occurs; (iii) the date that Raytech Holding becomes a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, herein referred to as the Exchange Act, which would occur if the market value of Raytech Holding’s Ordinary Shares that are held by non-affiliates exceeds $700 million as of the last business day of Raytech Holding’s most recently completed second fiscal quarter; or (iv) the date on which Raytech Holding has issued more than $1.00 billion in non-convertible debt securities during any three-year period.
Raytech Holding is subject to the periodic reporting requirements under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after Raytech Holding no longer qualifies as an emerging growth company, as long as Raytech Holding qualifies as a foreign private issuer under the Exchange Act it will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
| ● | the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
| ● | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
| ● | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specific information, or current reports on Form 8-K, upon the occurrence of specified significant events. |
Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if Raytech Holding no longer qualifies as an emerging growth company, but remain a foreign private issuer, Raytech Holding will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.
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Implications of Being a Foreign Private Issuer
Raytech Holding is incorporated in the British Virgin Islands and more than 50% of its outstanding voting securities are not directly or indirectly held by residents of the United States. Therefore, Raytech Holding is a “foreign private issuer,” as defined in Rule 405 under the Securities Act and Rule 3b-4(c) under the Exchange Act. As a result, Raytech Holding is not subject to the same reporting requirements as U.S. domestic issuers. Under the Exchange Act, Raytech Holding is subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example:
| ● | Raytech Holding is not required to provide as many Exchange Act reports or provide periodic and current reports as frequently, as a domestic public company; |
| ● | for interim reporting, Raytech Holding is permitted to comply solely with Raytech Holding’s home country requirements, which are less rigorous than the rules that apply to domestic public companies; |
| ● | Raytech Holding is not required to provide the same level of disclosure on certain issues, such as executive compensation; |
| ● | Raytech Holding is exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; |
| ● | Raytech Holding is not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and |
| ● | Raytech Holding is not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction. |
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THE OFFERING
| Ordinary Shares offered by Raytech Holding | 30,000,000 Ordinary Shares. See “Description of Shares” in this prospectus for more information. | |
| Price per Ordinary Share | $[●] per Ordinary Share. | |
| Ordinary Shares outstanding prior to completion of this offering | 17,613,083 Ordinary Shares. | |
| Ordinary Shares outstanding immediately after this offering |
47,613,083 Ordinary Shares | |
| Transfer Agent | Transhare Corporation, with its offices located at 17755 North US Highway 19, Suite # 140, Clearwater, FL 33764. | |
| Listing | Our Ordinary Shares are listed on the Nasdaq Capital Market under the symbol “RAY”. | |
| Use of proceeds | Raytech Holding intends to use the proceeds from this offering for potential acquisitions and investments, trading business expansion plans, marketing, sales and product development, and general working capital. See “Use of Proceeds” on page 59 of this prospectus for more information. | |
| Lock-up | Pursuant to the placement agency agreement, the Company has agreed that for a period of three (3) months after the closing date of this offering, it will not, without the prior written consent of the Placement agent, offer, issue, sell, contract to sell, encumber, grant any option for the sale of, or otherwise issue any securities, subject to certain customary exceptions, including the issuance of shares of Ordinary Shares upon the exercise of currently outstanding options approved by the Placement agent. Additionally, each of the Company’s directors and officers has agreed that for a period of twenty (20) days after the closing date of this offering, they will not, without the prior written consent of the Placement agent, offer, issue, sell, contract to sell, encumber, or otherwise dispose of any securities of the Company held by them. See “Shares Eligible for Future Sale” on page 115 and “Plan of Distribution” beginning on page 124 of this prospectus for more information. | |
| Risk factors | The Ordinary Shares offered hereby involve a high degree of risk. You should read “Risk Factors,” beginning on page 26 of this prospectus for a discussion of factors to consider before deciding to invest in Raytech Holding’s Ordinary Shares. |
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables summarize our consolidated financial data for the periods and as of the dates indicated. The summary consolidated statements of income for the years ended March 31, 2023 and 2024 and the summary consolidated balance sheets as of March 31, 2023 and 2024 have been derived from our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and included elsewhere in this prospectus. The summary consolidated statements of income for the six months ended September 30, 2023 and 2024 and the summary consolidated balance sheet data as of September 30, 2023 and 2024 are derived from our unaudited interim condensed consolidated financial statements that are included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements included elsewhere in this prospectus.
The following table presents our summary consolidated statements of income for the years ended March 31, 2023 and 2024, and for the six months ended September 30, 2023 and 2024:
For the Year Ended March 31, | (Unaudited) For the Six Months Ended September 30, | |||||||||||||||||||||||
| 2023 | 2024 | 2024 | 2023 | 2024 | 2024 | |||||||||||||||||||
| HKD | HKD | US$ | HKD | HKD | US$ | |||||||||||||||||||
| REVENUE | ||||||||||||||||||||||||
| Sales of products | 42,382,764 | 59,966,287 | 7,662,542 | 26,011,185 | 42,101,829 | 5,418,999 | ||||||||||||||||||
| Sales of tooling | 3,135,475 | 7,006,014 | 895,234 | 7,006,014 | 1,147,077 | 147,642 | ||||||||||||||||||
| Total revenue | 45,518,239 | 66,972,301 | 8,557,776 | 33,017,199 | 43,248,906 | 5,566,641 | ||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Merchandise costs | (34,046,287 | ) | (52,067,436 | ) | (6,653,220 | ) | (24,305,564 | ) | (34,100,724 | ) | (4,389,163 | ) | ||||||||||||
| Selling, general and administrative expenses | (4,277,677 | ) | (3,545,369 | ) | (453,030 | ) | (1,751,531 | ) | (5,229,459 | ) | (673,093 | ) | ||||||||||||
| Total operating expenses | (38,323,964 | ) | (55,612,805 | ) | (7,106,250 | ) | (26,057,095 | ) | (39,330,183 | ) | (5,062,256 | ) | ||||||||||||
| INCOME FROM OPERATIONS | 7,194,275 | 11,359,496 | 1,451,526 | 6,960,104 | 3,918,723 | 504,385 | ||||||||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||
| Interest income | 143,352 | 1,416,354 | 180,983 | 615,405 | 1,431,474 | 184,248 | ||||||||||||||||||
| Interest expense | (7,151 | ) | (2,028 | ) | (259 | ) | (1,657 | ) | - | - | ||||||||||||||
| Gain (loss) from foreign currency exchange | 143,450 | (20,846 | ) | (2,664 | ) | (16,334 | ) | (407,242 | ) | (52,417 | ) | |||||||||||||
| Government grants | - | - | - | - | - | - | ||||||||||||||||||
| Other income, net | - | 818 | 105 | - | - | - | ||||||||||||||||||
| Total other income, net | 279,651 | 1,394,298 | 178,165 | 597,414 | 1,024,232 | 131,831 | ||||||||||||||||||
| INCOME BEFORE INCOME TAX PROVISION | 7,473,926 | 12,753,794 | 1,629,691 | 7,557,518 | 4,942,955 | 636,216 | ||||||||||||||||||
| PROVISION FOR INCOME TAXES | (1,181,056 | ) | (2,817,000 | ) | (359,959 | ) | (1,139,449 | ) | (290,920 | ) | (37,445 | ) | ||||||||||||
| NET INCOME | 6,292,870 | 9,936,794 | 1,269,732 | 6,418,069 | 4,652,035 | 598,771 | ||||||||||||||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||||||||||||||||||
| Basic and diluted (1) | 16,000,000 | 16,000,000 | 16,000,000 | 16,000,000 | 17,184,908 | 17,184,908 | ||||||||||||||||||
| EARNINGS PER SHARE | ||||||||||||||||||||||||
| Basic and diluted | 0.39 | 0.62 | 0.08 | 0.40 | 0.27 | 0.03 | ||||||||||||||||||
| (1) | Giving retroactive effect to the 160,000-for-1 share split effected on May 10, 2023. 1,500,000 ordinary shares were issued on May 15, 2024, and 113,083 ordinary shares were issued on July 5, 2024. |
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The following table presents our summary consolidated balance sheets as of March 31, 2023 and 2024 and September 30, 2024:
| As of March 31, | (Unaudited) As of September 30, | |||||||||||||||||||
| 2023 | 2024 | 2024 | 2024 | 2024 | ||||||||||||||||
| HKD | HKD | US$ | HKD | US$ | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| CURRENT ASSETS | ||||||||||||||||||||
| Cash and cash equivalents | 21,362,580 | 35,885,666 | 4,585,500 | 81,047,102 | 10,431,712 | |||||||||||||||
| Accounts receivable, net | 6,787,330 | 14,557,523 | 1,860,172 | 13,476,241 | 1,734,550 | |||||||||||||||
| Amount due from a director | 992,026 | 145,166 | 18,550 | - | - | |||||||||||||||
| Merchandise inventories, net | - | 1,855,686 | 237,121 | 1,135,068 | 146,096 | |||||||||||||||
| Taxes receivables | 514,007 | 395,005 | 50,474 | 104,085 | 13,397 | |||||||||||||||
| Prepayments | 95,000 | 5,000 | 639 | 5,000 | 644 | |||||||||||||||
| TOTAL CURRENT ASSETS | 29,750,943 | 52,844,046 | 6,752,456 | 95,767,496 | 12,326,399 | |||||||||||||||
| NON-CURRENT ASSETS | ||||||||||||||||||||
| Property and equipment, net | 4,868 | - | - | - | - | |||||||||||||||
| Right-of-use assets - operating lease | 85,477 | - | - | |||||||||||||||||
| Deferred initial public offering costs | 3,176,871 | 5,252,768 | 671,203 | - | - | |||||||||||||||
| Long-term deposits | 34,200 | 16,200 | 2,070 | 16,200 | 2,085 | |||||||||||||||
| TOTAL NON-CURRENT ASSETS | 3,301,416 | 5,268,968 | 673,273 | 16,200 | 2,085 | |||||||||||||||
| TOTAL ASSETS | 33,052,359 | 58,113,014 | 7,425,729 | 95,783,696 | 12,328,484 | |||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||||||||
| Accounts payable | 735,528 | 732,340 | 93,579 | 1,098,929 | 141,445 | |||||||||||||||
| Accounts payable - related party | 8,768,420 | 24,278,340 | 3,102,306 | 20,418,181 | 2,628,059 | |||||||||||||||
| Accruals | 616,078 | 1,018,618 | 130,160 | 920,901 | 118,531 | |||||||||||||||
| Contract liabilities | 1,705,854 | 1,008,415 | 128,856 | - | - | |||||||||||||||
| Operating lease obligation, current portion | 87,972 | - | - | - | - | |||||||||||||||
| TOTAL CURRENT LIABILITIES | 11,913,852 | 27,037,713 | 3,454,901 | 22,438,011 | 2,888,035 | |||||||||||||||
| OTHER LIABILITIES | ||||||||||||||||||||
| Operating lease obligation, net of current portion | - | - | - | - | - | |||||||||||||||
| TOTAL LIABILITIES | 11,913,852 | 27,037,713 | 3,454,901 | 22,438,011 | 2,888,035 | |||||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
| Ordinary Shares, US$0.00000625 par value, 8,000,000,000 Ordinary Shares authorized, and 16,000,000 Ordinary Shares issued and outstanding as of March 31, 2023 and 2024, respectively (1) | 783 | 783 | 100 | 862 | 110 | |||||||||||||||
| Additional paid-in capital | 99,217 | 99,217 | 12,678 | 37,717,487 | 4,854,683 | |||||||||||||||
| Retained earnings | 21,038,507 | 30,975,301 | 3,958,050 | 35,627,336 | 4,585,656 | |||||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | 21,138,507 | 31,075,301 | 3,970,828 | 73,345,685 | 9,440,449 | |||||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 33,052,359 | 58,113,014 | 7,425,729 | 95,783,696 | 12,328,484 | |||||||||||||||
| (1) | Giving retroactive effect to the 160,000-for-1 share split effected on May 10, 2023. 1,500,000 ordinary shares were issued on May 15, 2024, and 113,083 ordinary shares were issued on July 5, 2024. |
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RISK FACTORS
An investment in Raytech Holding’s Ordinary Shares involves a high degree of risk. Before deciding whether to invest in Raytech Holding’s Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of Raytech Holding’s Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in Raytech Holding’s Ordinary Shares if you can bear the risk of loss of your entire investment.
Risks Related to Our Business
Changes in capital markets, merger and acquisition activity, legal or regulatory requirements, general economic conditions and monetary or geopolitical disruptions, as well as other factors beyond our control, could reduce demand for our products, in which case our revenues and profitability could decline.
Different factors outside of our control could affect demand for our products. These include:
| ● | fluctuations in global economies, including economic downturns or recessions and the strength and rate of any general economic recoveries; | |
| ● | level of leverage incurred by countries or businesses; | |
| ● | merger and acquisition activity; | |
| ● | frequency and complexity of significant commercial litigation; | |
| ● | over expansion by businesses causing financial difficulties; | |
| ● | business and management crises, including the occurrence of alleged fraudulent or illegal activities and practices; | |
| ● | new and complex laws and regulations, repeals of existing laws and regulations or changes of enforcement of laws, rules and regulations, including antitrust/competition reviews of proposed merger and acquisition transactions; | |
| ● | other economic, geographic or political factors; and | |
| ● | general business conditions. |
We are not able to predict the positive or negative effects that future events or changes to global economies will have on our business. Fluctuations, changes and disruptions in financial, credit, merger and acquisition and other markets, political instability and general business factors could impact various segments’ operations and could affect such operations differently. Changes to factors described above, as well as other events, including by way of example, contractions of regional economies, or the economy of a particular country, trade restrictions, monetary systems, banking, real estate and retail or other industries; debt or credit difficulties or defaults by businesses or countries; new, repeals of or changes to laws and regulations, including changes to the bankruptcy and competition laws of the U.S. or other countries; tort reform; banking reform; a decline in the implementation or adoption of new laws or regulation, or in government enforcement, litigation or monetary damages or remedies that are sought; or political instability may have adverse effects on our business.
Our revenues, operating income and cash flows are likely to fluctuate.
We experience fluctuations in our revenues and cost structure and the resulting operating income and cash flows and expect that this will continue to occur in the future. We may experience fluctuations in our annual and quarterly financial results, including revenues, operating income and earnings per share, for reasons that may include: (i) the types and complexity, number, size, timing and duration of customer engagements; (ii) the timing of revenue recognition under U.S. GAAP; (iii) the utilization of revenue-generating professionals, including the ability to adjust staffing levels up or down to accommodate the business and prospects of the applicable segment and practice; (iv) the geographic locations of our customers or the locations where services are rendered; (v) billing rates and fee arrangements, including the opportunity and ability to successfully reach milestones and complete, and collect success fees and other outcome-contingent or performance-based fees; (vi) the length of billing and collection cycles and changes in amounts that may become uncollectible; (vii) changes in the frequency and complexity of government regulatory and enforcement activities; (viii) business and asset acquisitions; (ix) fluctuations in the exchange rates of various currencies against the U.S. dollar; (x) fee adjustments upon the renewal of expired service contracts or acceptance of new customers due to the adjusted scope per our refined business strategy; and (xi) economic factors beyond our control.
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The results of our business operation may be affected differently by the above factors. The positive effects of certain events or factors on our business may not be sufficient to overcome the negative effects of those same events or factors on other parts of our business.
Our results are subject to seasonal and other similar factors. While we assess our annual guidance at the end of each quarter and update such guidance when we think it is appropriate, unanticipated future volatility can cause actual results to vary significantly from our guidance, even where that guidance reflects a range of possible results and has been updated to take account of partial-year results.
We have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.
We engaged in developing, manufacturing and selling products relating to home electric appliances. We derive a significant portion of our revenues from a few major customers. We currently have two major customers: (i) Koizumi Seiki Corp., a Japanese company, having been doing business for over 300 years since 1716, which is one of the leading corporations specialized in small appliance market in Japan; the current contract we have with Koizumi Seiki Corp. was executed on July 1, 2014, automatically renewable on annual basis unless otherwise terminated by either party with a notice given at least six months prior to the expiration of then existing term of the contract; (ii) another customer, a U.S. home appliance manufacturer; and (iii) a global distributor of various consumer products.
For the year ended March 31, 2023, sales to Koizumi Seiki Corp. represented 91.3% of our revenue. For the year ended March 31, 2024, sales to Koizumi Seiki Corp. represented 74.1% of our revenue and another customer represented 16.5% of our revenue. For the six months ended September 30, 2023, we generated 81% and 17% of our total revenue from Koizumi Seiki Corp. and another customer, who is a global distributor of various consumer products, respectively. For the six months ended September 30, 2024, we generated 57.8% and 33.7% of our total revenue from Koizumi Seiki Corp. and another customer, respectively.
Inherent risks exist whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for the products of these customers in the marketplace or the future demand for our products and services by these customers. If any of these customers experience declining or delayed sales due to market, economic or competitive conditions, we could be pressured to reduce our prices or they could decrease the purchase quantity of our products, which could have an adverse effect on our margins and financial position, and could negatively affect our revenues and results of operations. If any of our major largest customers stop coming to us for customized products, such suspension would materially negatively affect our revenues, results of operations and financial condition.
We rely on a limited number of manufactures, some of which we are affiliated with. A loss of any of these manufactures could significantly negatively affect our business.
We rely on a limited number of manufacturers who are responsible for manufacturing hair care and skincare products. For the years ended March 31, 2023 and 2024, and for the six months ended September 30, 2023 and 2024, we relied on two major manufacturers, (i) Zhongshan Raytech Electrical Appliances Manufacturing Co. Ltd. (“Zhongshan Raytech”), a factory located in Zhongshan, China, and is owned by Mr. Ching Tim Hoi, who is also our CEO, Chairman and controlling shareholder, and (ii) Zhongshan Leimi Electrical Appliances Company Limited (“Zhongshan Leimi”), a factory located in Zhongshan, China. The current contracts we have with Zhongshan Raytech and Zhongshan Leimi were executed on January 1, 2021 and are automatically renewable on an annual basis unless otherwise terminated by either party with a notice given at least six months prior to the expiration of the then-existing term of the contract. Pursuant to each contract with Zhongshan Raytech and Zhongshan Leimi, we place orders with the manufacturer based on orders from our customers and the manufacturer is responsible to manufacture the products according to the requirements of each order.
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For the year ended March 31, 2023, payments to each of Zhongshan Raytech and Zhongshan Leimi accounted for 83.1% and 10.4%, respectively, of the total manufacturing costs of the Company. For the year ended March 31, 2024, payments to Zhongshan Raytech accounted for 88.5% of the total manufacturing costs of the Company. For the six months ended September 30, 2023, payments to Zhongshan Raytech accounted for 92.7% of the total manufacturing costs of the Company. For the six months ended September 30, 2024, payments to Zhongshan Raytech accounted for 91.5% of the total manufacturing costs of the Company.
We do not currently have other reliable alternatives or replacements for these manufacturers. This reliance on a limited number of manufactures increases our risks. If we experience a significant increase in demand of our products, or if we need to replace an existing manufacturer, we may not be able to supplement service or replace them on acceptable terms, which may undermine our ability to deliver products to our customers in a timely manner. Identifying and approving suitable manufacturers could be an extensive process that requires us to become satisfied with their quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices. Accordingly, a loss of any significant manufacturer would have an adverse effect on our business, financial condition and results of operations. In addition, our manufacturers may face supply chain risks and constraints of their own, which may impact the availability and pricing of our products and delay for the deliveries of our products.
Our major manufacturers are located in mainland China which could adversely affect our business, financial condition and results of operations.
We rely on two major manufacturers, Zhongshan Raytech and Zhongshan Leimi, which are located in Zhongshan, mainland China. For the year ended March 31, 2024, payments to Zhongshan Raytech accounted for 88.5% of the total manufacturing costs of the Company. For the year ended March 31, 2023, payments to each of Zhongshan Raytech and Zhongshan Leimi accounted for 83.1% and 10.4%, respectively, of the total manufacturing costs of the Company. For the six months ended September 30, 2024, payments to Zhongshan Raytech accounted for 91.5% of the total manufacturing costs of the Company. For the six months ended September 30, 2023, payments to Zhongshan Raytech accounted for 92.7% of the total manufacturing costs of the Company. Our significant dependence on these manufacturers, concentrated geographically in mainland China, exposes us to various risks. We depend on our ability to provide our customers with a wide range of products from our major manufacturers in a timely and efficient manner. Political and economic instability in the region, global or regional adverse conditions, such as pandemics or other disease outbreaks or natural disasters, the financial stability of our manufacturers, our manufacturers’ ability to meet our standards, labor problems experienced by such manufacturers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, inflation, and other factors relating to manufacturing in mainland China are largely beyond our control. As an example, the COVID-19 pandemic could adversely impact such manufacturers facilities and operations due to extended holidays, factory closures and risks of labor shortages, among other things, which may materially and adversely affect our business, financial condition and results of operations. As at the date of this prospectus, our two major manufacturers, Zhongshan Raytech and Zhongshan Leimi, have not experienced material impacts imposed by the COVID-19 pandemic.
Furthermore, we are unable to predict whether our manufacturers in the future will be subject to new, different, or additional trade restrictions imposed by the PRC or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from manufacturers based in mainland China, including the imposition of additional export restrictions, restrictions on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of products available to our customers and materially adversely affect our financial performance as well as our reputation. Furthermore, our manufacturers operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries and regions, restrictions on the transfer of funds or other trade disruptions.
We also are unable to predict whether our manufacturers in the future will be subject to new, different, or additional trade restrictions imposed by the PRC or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from manufacturers, including the imposition of additional export restrictions, restrictions on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of products available to our customers and materially adversely affect our financial performance as well as our reputation. Furthermore, our manufacturers operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries and regions, restrictions on the transfer of funds or other trade disruptions.
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Additionally, the economy of mainland China differs from the economies of most developed countries in many respects, including the extent of government involvement, its level of development, its growth rate and its control over foreign exchange. In recent years, the government of mainland China has implemented measures emphasizing market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises. However, a significant portion of productive assets in mainland China is still owned by the government of mainland China. The government of mainland China continues to play a significant role in regulating industrial development. It also exercises significant control over mainland China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policies, restricting the inflow and outflow of foreign capital and providing preferential treatment to particular industries or companies. The government of China also has significant authority to exert influence on the ability of a China-based company, such as our manufacturers, to conduct their business. Any adverse change in the economic conditions in mainland China, policies of the government or laws and regulations in mainland China could have a material adverse effect on the overall economic growth of China and, in turn, on the business of our major manufacturers in mainland China. As a result, we may lose our major manufacturers in mainland China, and we may not have other reliable alternatives or replacements for these manufacturers. A loss of our major manufacturers in mainland China would have an adverse effect on our business, financial condition and results of operations, and may cause Raytech Holding’s Ordinary Shares to significantly decline in value.
Inadequate or inaccurate external and internal information, including budget and planning data, could lead to inaccurate financial forecasts and inappropriate financial decisions.
Our financial forecasts are dependent on estimates and assumptions regarding budget and planning data, market growth, foreign exchange rates and our ability to generate sufficient cash flow to reinvest in the business, fund internal growth, and meet our debt obligations. Our financial projections are based on historical financial data and seasonal effect and on various other assumptions and foreseeable market trend that our management believes to be reasonable under the circumstances and at the time they are made. However, if our external and internal information is inadequate, our actual results may differ materially from our forecasts and cause us to make inappropriate financial decisions. Any material variation between our financial forecasts and our actual results may also adversely affect our future profitability, stock price and shareholder confidence.
We may not manage our growth effectively, and our profitability may suffer.
We experience fluctuations in growth rates and across our different product segments, including periods of rapid or declining growth. While we have experienced expansion overall in the past 10 years, this growth has not always been uniform across segments or consistent year-over-year. However, to manage growth successfully, we may need to add qualified managers and employees and periodically update our operating, financial and other systems, as well as our internal procedures and controls. We also must effectively motivate, train and manage our research and development staff. If we fail to add or retain qualified managers, employees and contractors when needed, estimate costs, or manage our growth effectively, our business, financial results and financial condition may suffer.
We cannot assure that we can successfully manage growth and maintain profitability as we grow. In periods of declining growth, underutilized employees and contractors may result in expenses and costs representing a greater percentage of revenues. In such situations, we will have to weigh the benefits of decreasing our workforce or limiting our service offerings and saving costs against the detriment that we could experience from losing valued professionals and their industry expertise and customers.
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Our reputation is crucial to our business. Any harm to our reputation or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations.
Our reputation, which depends on earning and maintaining the trust and confidence of our current or potential customers, is critical to our business. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by customers or other third parties, employee misconduct, perceptions of conflicts of interest and rumors, among other things, could substantially damage our reputation, even if they are baseless or satisfactorily addressed. Moreover, any negative media publicity about our industry in general or product or service quality problems of other firms in the industry, including our competitors, may also negatively impact our reputation and brand. If we are unable to maintain a good reputation or further enhance our brand recognition, our ability to attract and retain customers and key employees could be harmed and, as a result, our business and revenues would be materially and adversely affected.
We may not be able to continue to grow at our historical rate of growth, and if we fail to manage our growth effectively, our business may be materially and adversely affected.
We anticipate continued growth in the foreseeable future. However, past results of operations achieved by us should not be taken as indicative of our future prospects and results of operations, and we cannot assure you that we will grow at the historical rate of growth, or at all. Our rapid growth has placed, and will continue to place, a significant strain on our management, personnel, systems and resources. To accommodate our growth, we will need to implement a variety of new and upgraded operational and systems procedures and controls, including the improvement of our accounting and other internal management systems. We also will need to recruit, train, manage and motivate employees and manage our relationships with an increasing number of customers. Moreover, as we introduce new products or enter into new markets, we may face unfamiliar market and operational risks and challenges which we may fail to successfully address. We may be unable to manage our growth effectively, which could have a material adverse effect on our business.
As a result, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in a rapidly evolving and increasingly competitive market.
If we fail to prevent security breaches, improper access to or disclosure of our data or user data, or other hacking and attacks, we may lose users, and our business, reputation, financial condition and results of operations may be materially and adversely affected.
We have privacy and data security policies in place that are designed to prevent security breaches and we are looking for resources to assist us to develop our security measures against breaches. Although we have not experienced any security breaches or cybersecurity issues, however, as newer technologies evolve, and the portfolio of the service providers with which the Company shares confidential information with grows, we could be exposed to increased risk of breaches in security and other illegal or fraudulent acts, including cyberattacks. The evolving nature of such threats, in light of new and sophisticated methods used by criminals and cyberterrorists, including computer viruses, malware, phishing, misrepresentation, social engineering and forgery, is making it increasingly challenging to anticipate and adequately mitigate these risks.
We are likely in the future to be subject to these types of attacks. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liabilities, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us, our manufacturers, customers or other participants, or the internet infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. As we do not carry cybersecurity insurance, we will not be able to mitigate such risks to any third party. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income.
We cannot assure you that we could retain effective intellectual property rights.
We cannot make assurances that the steps we have taken or will take in the future to protect our intellectual property rights are or will be adequate to deter misappropriation of proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. As at the date of this prospectus, neither we nor Pure Beauty own any registered trademarks in any jurisdiction. We intend to register Pure Beauty’s trademarks in Hong Kong to secure trademark protection after seeking professional advice. However, whilst registration will usually confirm ownership and subsistence of rights, some registrations can still be challenged due to prior existing rights. We cannot assure you that in the future our intellectual property rights registrations will be complete or invulnerable.
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We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such rights against us in Hong Kong, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert some resources from our business and operations to defend against these claims, regardless of their merits.
Additionally, the application and interpretation of Hong Kong’s intellectual property rights laws and the procedures and standards for granting trademarks, copyrights, know-how or other intellectual property rights in Hong Kong are still evolving and are uncertain, and we cannot ensure that Hong Kong courts or regulatory authorities would agree with our analysis. If we were found to be in violation of the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and operating results may be materially and adversely affected.
As at the date of this prospectus, we have been using certain trademarks on Pure Beauty’s daily business operations which are currently registered in Japan and owned by Mr. Ching (the “Japan Pure Beauty Trademarks”). On August 1, 2021, a trademark license agreement was entered into between us and Mr. Ching (the “Japan Trademark License Agreement”), pursuant to which Mr. Ching agreed to irrevocably and unconditionally grant us, our subsidiaries and branches an exclusive license to use the Japan Pure Beauty Trademarks on a royalty-free basis, for 10 years commencing from the date of the Japan Trademark License Agreement. There is no guarantee that we will be able to successfully renew the Japan Trademark License Agreement upon expiration of its current term and that the same will not be revoked or early terminated by Mr. Ching. In the absence of a valid Japan Trademark License Agreement, the use of the Japan Pure Beauty Trademarks by us or Pure Beauty in Japan may subject us or Pure Beauty to trademark infringement claims, and we may be forced to divert some resources from our business and operations to defend against these claims, regardless of their merits. As a result, our business and operating results may be materially and adversely affected.
Compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results.
Our own confidential and proprietary information and that of our customers could be compromised, whether intentionally or unintentionally, by our employees, consultants or manufacturers. A compromise of the security of our information technology systems leading to theft or misuse of our own or our customers’ proprietary or confidential information, or the public disclosure or use of such information by others, could result in losses, third-party claims against us and reputational harm, including the loss of customers. The theft or compromise of our or our customers’ information could negatively impact our reputation, financial results and prospects. In addition, if our reputation is damaged due to a data security breach, our ability to attract new engagements and customers may be impaired or we may be subjected to damages or penalties, which could negatively impact our businesses, financial results or financial condition.
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Increases in labor costs in Hong Kong may adversely affect our business and results of operations.
The economy in Hong Kong has experienced increases in inflation and labor costs in recent years. As a result, average wages in Hong Kong are expected to continue to increase. In addition, we are required by Hong Kong laws and regulations to maintain various statutory employee benefits, including mandatory provident fund scheme and work-related injury insurance, to provide statutorily required paid sick leave, annual leave and maternity leave, and pay severance payments or long service payments. The relevant government agencies may examine whether an employer has complied with such requirements, and those employers who fail to comply commit a criminal offence and may be subject to fines and/or imprisonment. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and operating results may be adversely affected.
Raytech Holding’s principal shareholders have substantial influence over Raytech Holding and their interests may not be aligned with the interests of Raytech Holding’s other shareholders.
Mr. Ching Tim Hoi is currently the beneficial owner of 12,800,000 Ordinary Shares or 72.7% of Raytech Holding’s outstanding Ordinary Shares. Mr. Ching will own approximately 26.9% of Raytech Holding’s Ordinary Shares following the offering. Mr. Ching will be able to exert significant voting influence over Raytech Holding’s business, including decisions regarding mergers, consolidations and the sale of all or substantially all of Raytech Holding’s assets, election of directors and other significant corporate actions. These actions may be taken even if they are opposed by Raytech Holding’s other shareholders, including our public shareholders. Moreover, this concentration of ownership may discourage, delay or prevent a change in control of Raytech Holding, which could deprive Raytech Holding’s shareholders of an opportunity to receive a premium for their shares as part of a sale of Raytech Holding and might reduce the price of Raytech Holding’s Ordinary Shares.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, wars, riots, terrorist attacks or similar events may give rise to supply chain disruptions, shipment delays, manufacturing breakdowns, and demand shifts, which could cause adversely affect our ability to provide products and services to our customers. In addition, our results of operations could be adversely affected to the extent that any health epidemic harms the Hong Kong economy in general. A prolonged outbreak of any illnesses or other adverse public health developments in Hong Kong or elsewhere in the world could have a material adverse effect on our business operations. Such outbreaks could severely disrupt our operations and adversely affect our business, financial condition and results of operations. Our headquarters are located in Hong Kong, where our management and employees currently reside. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Hong Kong or cause travel restriction in or out of Hong Kong or its surrounding areas, our operation may experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations. On February 24, 2022, the Russian Federation launched an invasion of Ukraine that has had an immediate impact on the global economy resulting in higher energy prices and higher prices for certain raw materials and goods and services which in turn is contributing to higher inflation in the United States and other countries across the globe with significant disruption to financial markets. We do not have any operation or business in Russia or Ukraine, however, we may potentially be indirectly adversely impacted any significant disruption it has caused and may continue to escalate. Any one or more of these events may impede our operation and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations.
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Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business.
Our business is subject to regulation by various governmental agencies in Hong Kong, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as intellectual property laws, employment and labor laws, workplace safety, governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in Hong Kong. These laws and regulations impose added costs on our business. Noncompliance with applicable regulations or requirements could subject us to:
| ● | investigations, enforcement actions, and sanctions; | |
| ● | mandatory changes to our network and products; | |
| ● | disgorgement of profits, fines, and damages; | |
| ● | civil and criminal penalties or injunctions; | |
| ● | claims for damages by our customers or channel partners; | |
| ● | termination of contracts; | |
| ● | failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and | |
| ● | temporary or permanent debarment from sales to public service organizations. |
If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations, and financial condition.
Any reviews by regulatory agencies or legislatures may result in substantial regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations. Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect our business and results of operations in material ways.
Moreover, we are exposed to the risk of misconduct, errors and failure to functions by our management, employees and parties with whom we collaborate, who may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance with applicable laws and regulations, which could harm our reputation and business.
Members of our management team may in the future be involved in governmental investigations and civil litigations relating to the business affairs of companies with which they are, were or may in the future be affiliated with.
Members of our management team may in the future be involved in governmental investigations and civil litigations relating to the business affairs of companies with which they are, were or may in the future be affiliated with. Any such investigations or litigations may divert our management team’s attention and resources away from managing our business affairs and operations, may be detrimental to our reputation, and thus may negatively affect our business and financial performance.
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If Raytech Holding becomes directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter, which could harm our business operations, stock price and reputation and could result in a loss of your investment in Raytech Holding’s stock, especially if such matter cannot be addressed and resolved favorably.
Recently, U.S. public companies that have substantially all of their operations in China, including Hong Kong, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on Raytech Holding, its business and its stock price. Although substantially all of our operations are based in Hong Kong and none of our customers are based in mainland China, if Raytech Holding becomes the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our business.
If we fail to compete effectively, we may miss new business opportunities or lose existing customers, and our revenues and profitability may decline.
The market for some of our products is highly competitive. We do not compete against the same companies for all of our products and services or in all geographic regions. Instead, we compete with different companies or depending on the particular types of requested products and services and the location of the customer or delivery of the products and services. Our operations are highly competitive.
Our competitors include large organizations, such as the international personal care electronic design and development organizations, which offer niche products and services that are the same or similar to products or services offered by us; and small firms and independent contractors that focus on specialized products and services. Some of our competitors have significantly more financial resources, a larger national or international presence, larger professional staffs and greater brand recognition than we do. Some have lower overhead and other costs.
If we cannot compete effectively or if the costs of competing, including the costs of hiring and retaining professionals, become too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations.
If we are unable to rely on the services and connections of our key personnel, or retain the current key personnel, our business could be adversely affected.
Our growth has been heavily dependent on the services provided by our management team. They manage our business operation, develop and execute our business strategies and manage the relationship with our key product manufacturers and corporate customers. Therefore, our future success relies on our ability to retain the services of these key management personnel. If any of these key personnel are unable or unwilling to continue to provide services to us, and we are unable to find suitable replacements, we may not be able to continue our operations effectively and efficiently, and our business and financial conditions could be adversely affected.
Certain of our officers or directors may have actual or potential conflicts of interest because of their equity interests in or positions with Raytech Holdings Company Limited and Zhongshan Raytech.
Raytech Holding’s CEO and Chairman, Mr. Ching, and Raytech Holding’s director and the Assistant to CEO of Pure Beauty, Mr. Ling, currently serve as, and will continue to serve as (i) Executive Director and Supervisor respectively of one of our collaborating manufacturers, Zhongshan Raytech, and (ii) Director and Assistant to CEO respectively of Raytech Holdings Company Limited. Mr. Ching’s positions at and ownership of Zhongshan Raytech and Raytech Holdings Company Limited, and Mr. Ling’s positions at Zhongshan Raytech and Raytech Holdings Company Limited, on which we rely for manufacturing collaboration, create, or may create the appearance of, conflicts of interest when these officers or directors are faced with decisions that could have different implications for Zhongshan Raytech and Raytech Holdings Company Limited than for us. These potential conflicts could arise, for example, over matters such as the desirability of changes in our business and operations, funding and capital matters, regulatory matters, and contractual arrangements.
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Our employees may leave to form or join competitors, and we may not have, or may choose not to pursue, legal recourse against such professionals.
Our employees typically have close relationships with the customers they serve, based on their expertise and bonds of personal trust and confidence. Therefore, the barriers to our employees pursuing independent business opportunities or joining our competitors should be considered low. Although our customers generally contract for services with us as a company, and not with an individual employee, in the event that an employee leaves, such customers may decide that they prefer to continue working with a specific person rather than with us. In the event an employee departs and acts in a way that we believe violates his or her non-competition or non-solicitation agreement, we will consider any legal remedies we may have against such person on a case-by-case basis. We may decide that preserving cooperation and a professional relationship with a former employee or customer, or other concerns, outweighs the benefits of any possible legal recourse. We may also decide that the likelihood of success does not justify the costs of pursuing a legal remedy. Therefore, there may be times we may decide not to pursue legal action, even if it is available to us.
Our business and sales are subject to the business strategies of the brand owners.
For the years ended March 31, 2024 and March 31, 2023 and six months ended September 30, 2024 and, September 30, 2023, our revenue was attributed to sales of branded products sourced from brand owners by our customers in Japan, U.S., Europe and Australia. Our business and sales are heavily dependent on the market receptiveness of, and demand for, the products being provided by various brand owners. The overall business strategies and product development plans adopted by these brand owners and their ability to maintain and develop the brands are therefore essential to our business.
As we have limited or no influence on the decisions made by the brand owners in relation to their business strategies, in particular, the production of their existing products and development of new products, we cannot assure that the brand owners will be able to maintain and further develop their brands and/or products, or that our customers will continue to show preferences to their brands and/or products. If the strategies of the brand owners turn out to be unsuccessful or due to any other reasons the marketability of the brands falls substantially, the profitability of our business would be materially and adversely affected.
We cannot assure that our products can meet consumer preferences and needs, and will continue to gain market acceptance and secure market share.
We sell and distribute a variety of beauty device products to the general public through our customers’ sales network. The general acceptance by consumers of the brands and products designed and provided by us is of vital importance to our success and it hinges on a number of factors such as brand image, product quality and customer loyalty. Our success also depends, to a large extent, on our ability to offer a diversified portfolio of products that can meet the changing consumer preferences and needs. There is no assurance that the existing products designed and provided by us will be able to satisfy changes in consumer preferences and needs.
We may also fail to anticipate, identify or respond to the constant changes in relation to consumer preferences and needs on a timely basis, nor can we assure that we will be able to gain or increase market receptiveness and market share for our products.
Consumer preferences and needs for products and brands can change from time to time for various reasons, including negative publicity regarding our products, emergence of competitive products and brands, or a general decrease in demand for the beauty device products distributed and sold us. Any of these events could adversely affect our competitive advantage and market share, which in turn could materially and adversely affect our business, financial condition and results of operation.
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We rely on external manufacturers for production of all of our products.
We do not have any production facilities or production lines of our own. Our products are sourced from related and independent external manufacturers in mainland China. For the year ended March 31, 2023, payments to each of Zhongshan Raytech and Zhongshan Leimi accounted for 83.1% and 10.4%, respectively, of the total manufacturing costs of the Company. For the year ended March 31, 2024, payments to Zhongshan Raytech accounted for 88.5% of the total manufacturing costs of the Company. For the six months ended September 30, 2023, payments to Zhongshan Raytech accounted for 92.7% of the total manufacturing costs of the Company. For the six months ended September 30, 2024, payments to Zhongshan Raytech accounted for 91.5% of the total manufacturing costs of the Company.
Our control over these external manufacturers in respect of their production process and quality of products is limited. We cannot assure that (i) there will not be any unexpected interruption of supply of products by these external manufacturers due to any reason beyond our control or expectation, such as introduction of new regulatory requirements, import restrictions, revocation of business licenses, power interruptions, fires or other force majeure; or (ii) the products provided to us by these external manufacturers can meet our quality requirements. Any such problems in relation to the supply of our products by external manufacturers could have a material adverse impact on our business.
Our operating results may fluctuate due to seasonality and other factors.
Our sales are subject to certain degree of seasonal fluctuations. Generally, demand for our beauty device products is relatively higher during the spring season from March to June. Sales may also fluctuate during the course of a fiscal year for a number of other reasons, including the timing of launching new products and advertising and promotional campaigns. As a result, these seasonal consumption patterns may cause our operating results to fluctuate from period to period.
We may be unable to maintain growth and implement our future plans.
Our future business growth primarily depends on the successful implementation of our business objectives, business strategies and future plans. These business objectives are based on our existing plans and intentions, most of which are at initial stages and have not been proceeded to the stage of actual implementation and are therefore subject to high degree of risks and uncertainties. Furthermore, we may not be able to achieve the projected growth and expansion of our business due to factors which are beyond our control, such as changes in economic environment, market demands, government policies and relevant laws and regulations. As such, there is no assurance that our business objectives, business strategies and future plans will be accomplished, whether in whole or in part or be implemented within the estimated timeline. In the event that our future plans are not implemented and our business objectives are not accomplished, our business, profitability and financial positions in the future may be materially and adversely affected.
Furthermore, our future business plans may be hindered by other factors beyond our control, such as competition from other retailers and distributors selling similar products. Therefore, there is no assurance that our future business plans will materialize, or result in the conclusion or execution of any agreement within the planned time frame, or that our objectives will be fully or partially accomplished.
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A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition.
Any slowdown in the Chinese or global economy may have a negative impact on our business, results of operations and financial condition. There is uncertainty over the global economic condition such as the trade war between the United States and China. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. There have also been concerns about the economic effect of the tensions in the relationship between China and surrounding Asian countries. Adverse economic conditions could also reduce the number of customers and interests in our services and products. Should any of these situations occur, our net revenues will decline, and our business and financial conditions will be negatively impacted. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.
Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and operating results.
The U.S. government has recently made statements and taken certain actions that may lead to potential changes to U.S. and international trade policies. For example, on October 28, 2024, the U.S. Department of the Treasury issued a final rule on outbound investment to implement the executive order of August 9, 2023. The final rule became effective on January 2, 2025. The final rule imposes investment prohibition and notification requirements on U.S. persons for a wide range of investments in entities associated with China (including Hong Kong and Macau) that are engaged in activities relating to three sectors: (i) semiconductors and microelectronics, (ii) quantum information technologies, and (iii) artificial intelligence systems, collectively defined as Covered Foreign Persons. U.S. persons subject to the final rule are prohibited from making, or required to report, certain investments in Covered Foreign Persons, which are defined as Covered Transactions. If we were to be deemed a Covered Foreign Person due to changes in our business operations or amendments to relevant laws and regulations, our ability to raise capital would be significantly and negatively affected. In such case, the trading price of the Ordinary Shares may be materially and adversely affected.
In addition, the U.S. has imposed significant tariffs on a wide range of goods imported from China and could impose additional tariffs or increase existing ones. The U.S. government has also implemented export control restrictions affecting certain products and technologies related to China, imposed certain sanctions and restrictions, and indicated the potential for enhanced review of companies with significant China-based operations or restrictions on U.S. investment in certain companies operating in China. Furthermore, policies regarding low-value shipments entering the U.S. are under scrutiny, and changes could impact the cost-effectiveness of certain imports from China. The Chinese government has, from time to time, responded, and may continue to respond, by imposing its own tariffs, trade restrictions, or other regulations. Our business and financial performance are substantially dependent on the general conditions of the global economy and the level of international trade and commerce, particularly between the U.S. and China. The adoption and expansion of trade restrictions, tariffs, quotas, embargoes, sanctions, export controls, investment restrictions, the occurrence of a trade war, or other governmental actions related to tariffs or trade agreements or policies by the U.S., China, or other countries, has the potential to adversely impact trade flows, costs, our suppliers, our customers, and the world economy in general. Current and future trade tensions, geopolitical events, and international trade disputes could harm or disrupt international commerce and the global economy. These factors could have a material adverse effect on our business, results of operations, and financial condition.
Our results of operations may be adversely affected by significant share-based compensation expenses, and the issuance of shares under our equity incentive plans will dilute existing shareholders
To attract, retain, and motivate highly skilled employees, directors, and consultants, which is critical in a competitive talent market, we utilize share-based
awards. Consequently, on September 24, 2024, our Board of Directors adopted, and on October 23, 2024, our shareholders approved, the 2024 Equity Incentive Plan (the “2024 Plan”). The 2024 Plan, which has a ten-year term and authorizes the issuance of up to 2,500,000 of our ordinary shares, allows for the grant of various types of equity awards, including Incentive Share Options, Non-statutory Share Options, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units, and Performance Shares. While these awards are intended to promote our long-term success and align interests with shareholder value, they require us to recognize share-based compensation expenses in our consolidated financial statements.
Significant share-based compensation expenses could materially and adversely affect our reported net income (or increase our net loss). Furthermore, any issuance of ordinary shares upon the exercise of options or the vesting of other equity awards granted under the 2024 Plan or any future equity incentive plans will result in the dilution of the ownership interests of our existing shareholders, which could also adversely affect the market price of our ordinary shares.
Risks Related to Our Corporate Structure
Raytech Holding may rely on dividends and other distributions on equity paid by its subsidiaries to fund any cash and financing requirements it may have, and any limitation on the ability of Raytech Holding’s subsidiary to make payments to it could have a material adverse effect on Raytech Holding’s ability to conduct its business.
Raytech Holding is a holding company incorporated in the British Virgin Islands, and it may rely on dividends and other distributions on equity paid by its subsidiaries for its cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to Raytech Holding’s shareholders and service any debt it may incur. If any of Raytech Holding’s subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to Raytech Holding.
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Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid to us. See “Taxation — Hong Kong Profits Taxation” on page 121 of this prospectus. Any limitation on the ability of Raytech Holding’s Hong Kong subsidiaries to pay dividends or make other distributions to Raytech Holding could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to Raytech Holding’s business, pay dividends, or otherwise fund and conduct its business.
Raytech Holding’s lack of effective internal controls over financial reporting may affect its ability to accurately report its financial results or prevent fraud, which may affect the market for and price of Raytech Holding’s Ordinary Shares.
To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Prior to the IPO, Raytech Holding was a private company with limited accounting personnel and other resources for addressing Raytech Holding’s internal control over financial reporting. Raytech Holding’s management has not completed an assessment of the effectiveness of Raytech Holding’s internal control over financial reporting and its independent registered public accounting firm has not conducted an audit of Raytech Holding’s internal control over financial reporting. However, in connection with the audits of Raytech Holding’s consolidated financial statements as of March 31, 2023 and 2024, Raytech Holding and its independent registered public accounting firm identified material weaknesses in Raytech Holding’s internal control over financial reporting as well as other control deficiencies for the above mentioned periods. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Raytech Holding’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to i) inadequate segregation of duties for certain key functions due to limited staff and resources; ii) a lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to formalize key controls over financial reporting and to prepare consolidated financial statements and related disclosures; and iii) a lack of independent directors and an audit committee to establish formal risk assessment process and internal control framework.
In connection with its IPO, Raytech Holding appointed independent directors, established an audit committee and strengthened corporate governance. In addition, Raytech Holding is actively implementing other measures designed to improve its internal control over financial reporting to address the underlying causes of these material weaknesses, including i) hiring more qualified staff to fill up the key roles in the operations; and ii) setting up a financial and system control framework with formal documentation of polices and controls in place.
As a public company, Raytech Holding is subject to the requirement that it maintains internal controls and that management performs periodic evaluation of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a result, Raytech Holding’s business, financial condition, results of operations and prospects, as well as the market for and trading price of Raytech Holding’s Ordinary Shares, may be materially and adversely affected if Raytech Holding does not have effective internal controls. The absence of internal controls over financial reporting may inhibit investors from purchasing Raytech Holding’s Ordinary Shares and may make it more difficult for Raytech Holding to raise funds in a debt or equity financing.
Additional material weaknesses or significant deficiencies may be identified in the future. If Raytech Holding identifies such issues or if Raytech Holding is unable to produce accurate and timely financial statements, its stock price may decline and it may be unable to maintain compliance with the Nasdaq Listing Rules.
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If Raytech Holding ceases to qualify as a foreign private issuer, it would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and it would incur significant additional legal, accounting and other expenses that it would not incur as a foreign private issuer.
As a foreign private issuer, Raytech Holding is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and Raytech Holding’s officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, Raytech Holding is not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and it will not be required to disclose in its periodic reports all of the information that United States domestic issuers are required to disclose. However, Raytech Holding may cease to qualify as a foreign private issuer in the future.
Raytech Holding is an “emerging growth company” within the meaning of the Securities Act, and if Raytech Holding takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make it more difficult to compare Raytech Holding’s performance with other public companies.
Raytech Holding is an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Raytech Holding has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, Raytech Holding, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Raytech Holding’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. If some investors find Raytech Holding’s Ordinary Shares less attractive as a result, there may be a less active trading market for Raytech Holding’s Ordinary Shares and Raytech Holding’s share price may be more volatile.
Raytech Holding incurs increased costs as a result of being a public company which will increase after Raytech Holding ceases to qualify as an “emerging growth company.”
Raytech Holding incurs significant legal, accounting and other expenses as a public company that Raytech Holding did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. Raytech Holding is an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the public initial offering of the Company, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of Raytech Holding’s Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior fiscal year end, and (2) the date on which Raytech Holding has issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
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Compliance with these rules and regulations increases Raytech Holding’s legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After Raytech Holding is no longer an “emerging growth company,” or until five years following the completion of Raytech Holding’s initial public offering, whichever is earlier, Raytech Holding expects to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, Raytech Holding is required to have independent directors and adopt policies regarding internal controls and disclosure controls and procedures. Raytech Holding may incur additional costs in obtaining director and officer liability insurance. In addition, Raytech Holding incurs additional costs associated with its public company reporting requirements. Raytech Holding cannot predict or estimate with any degree of certainty the amount of additional costs it incur as a public company or the timing of such costs.
Risks Related to Doing Business in Hong Kong
All of Pure Beauty’s operations are in Hong Kong. However, due to the long arm provisions under the current laws and regulations of mainland China, the government of mainland China may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of Raytech Holding’s Ordinary Shares. The government of mainland China may also intervene or impose restrictions on Raytech Holding’s ability to move money out of Hong Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations, rules, and the enforcement of laws of the government of mainland China may also be quick with little advance notice and our assertions and beliefs of the risk imposed by the legal and regulatory system of mainland China cannot be certain.
We are not based in mainland China and do not have operations in mainland China except that our manufacturers are located in mainland China. We currently do not have or intend to set up any subsidiary in mainland China, or do not foresee the need to enter into any contractual arrangements with a VIE to establish a VIE structure in mainland China. For the six months ended September 30, 2024, and September 30, 2023 and the fiscal years ended March 31, 2024, and 2023, we generated all our revenues from Hong Kong.
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As advised by our PRC counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, on the basis that (i) we currently do not have or intend to set up any subsidiary or VIE structure in mainland China, and we do not have any business operations in mainland China, except that we collaborate with manufacturers located in mainland China to manufacture our products, (iii) none of our and our subsidiaries’ clients are located in mainland China, and (iv) we and our subsidiary possess personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (iv), including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC, we do not expect to be materially affected by recent statements by the government of mainland China indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in mainland China-based issuers. However, due to long arm provisions under the current laws and regulations of mainland China, there remains regulatory uncertainty with respect to the implementation and interpretation of laws and regulations in mainland China.
Pursuant to the Basic Law, which is a national law of the PRC and the constitutional document for Hong Kong, national laws of the PRC shall not be applied in Hong Kong except for those listed in Annex III of the Basic Law and applied locally by promulgation or local legislation. The Basic Law expressly provides that the national laws of the PRC which may be listed in Annex III of the Basic Law shall be confined to those relating to defense and foreign affairs as well as other matters outside the autonomy of Hong Kong. The basic policies of the PRC regarding Hong Kong as a special administrative region of the PRC are reflected in the Basic Law, providing Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”.
However, as the government of mainland China may choose to exercise significant oversight and discretion, and the policies, regulations, rules, and the enforcement of laws of the government of mainland China to which we are subject may change rapidly and with little advance notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in mainland China are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and may be inconsistent with our current policies and practices. New laws, regulations, and other government directives in mainland China may also be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may:
| ● | delay or impede our development; |
| ● | result in negative publicity or increase our operating costs; |
| ● | require significant management time and attention; and/or |
| ● | subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices. |
We are aware that recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on a U.S. or other foreign exchange.
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The PRC government may intervene or influence our operations at any time or may exert control over offerings conducted overseas and foreign investment in Hong Kong-based issuers, which may result in a material change in our operations and/or the value of Raytech Holding’s Ordinary Shares. For example, there is currently no restriction or limitation under the laws of Hong Kong on the conversion of HK dollar into foreign currencies and the transfer of currencies out of Hong Kong and the laws and regulations of the PRC on currency conversion control do not currently have any material impact on the transfer of cash between Raytech Holding, the ultimate holding company, and Pure Beauty, the wholly-owned operating subsidiary in Hong Kong. However, the PRC government may, in the future, impose restrictions or limitations on our ability to move money out of Hong Kong to distribute earnings and pay dividends to and from the other entities within our organization or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business outside of Hong Kong and may affect our ability to receive funds from Pure Beauty. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact the ability or way we conduct our business, could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our products and services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected and such measures could materially decrease the value of Raytech Holding’s Ordinary Shares, potentially rendering it worthless.
The enactment of Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong National Security Law”) could impact our Hong Kong subsidiaries.
On June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories of offences — secession, subversion, terrorist activities, and collusion with a foreign or overseas force to endanger national security — and their corresponding penalties. On July 14, 2020, the former U.S. President Donald Trump signed the Hong Kong Autonomy Act (the “HKAA”), into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020 the U.S. government imposed HKAA-authorized sanctions on eleven individuals, including former and current HKSAR chief executives Carrie Lam and John Lee. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our Hong Kong subsidiaries are determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our business operations, financial position and results of operations could be materially and adversely affected.
The PRC government may intervene or influence our operations at any time or may exert more control over offerings conducted overseas and foreign investment in China-based issuers, which may result in a material change in our operations and/or the value of Raytech Holding’s Ordinary Shares. Additionally, the governmental and regulatory interference could significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
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There are political risks associated with conducting business in Hong Kong.
Substantially all our operations are based in Hong Kong. Accordingly, our business operations and financial condition will be affected by the political and legal developments in Hong Kong. During the period covered by the financial information included in this prospectus, we derive substantially all of our revenue from operations in Hong Kong. Any adverse economic, social and/or political conditions, material social unrest, strike, riot, civil disturbance or disobedience, as well as significant natural disasters, may adversely affect our business operations. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. However, there is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future. Since a substantial part of our operations is based in Hong Kong, any change of such political arrangements may pose an immediate threat to the stability of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financial position.
If the PRC attempts to alter its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong’s common law legal system and may in turn bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operations. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers.
Under the Basic Law of the Hong Kong Special Administrative Region of PRC, Hong Kong is exclusively in charge of its internal affairs and external relations, while the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory, Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent developments including the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region issued by the Standing Committee of the PRC National People’s Congress in June 2020, the U.S. State Department has indicated that the United States no longer considers Hong Kong to have significant autonomy from China and President Trump signed an executive order and the HKAA to remove Hong Kong’s preferential trade status and to authorize the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. The United States may impose the same tariffs and other trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other recent actions may represent an escalation in political and trade tensions involving the U.S, mainland China and Hong Kong, which could potentially harm our business.
Our revenue is susceptible to the ongoing incidents or factors which affect the stability of the social, economic and political conditions in Hong Kong. Any drastic events may adversely affect our business operations. Such adverse events may include changes in economic conditions and regulatory environment, social and/or political conditions, civil disturbance or disobedience, as well as significant natural disasters. Given the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our business operations, which could in turn adversely and materially affect our business, results of operations and financial condition. It is difficult to predict the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore, legislative or administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including Raytech Holding, and the market price of Raytech Holding’s Ordinary Shares could be adversely affected.
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There remain some uncertainties as to whether we will be required to obtain approvals from mainland China and Hong Kong authorities to list additional Raytech Holding’s securities on the U.S. exchanges and offer securities in the future, and if required, we cannot assure you that Raytech Holding will be able to obtain such approval.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors (the “M&A Rules”), adopted by six regulatory agencies of mainland China in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China-based companies and controlled by mainland China-based companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
We are also aware that recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over mainland China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
On December 28, 2021, the CAC and other PRC authorities promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. In addition, the Cybersecurity Law, which was adopted by the Standing Committee of the National People’s Congress on November 7, 2016 and came into force on June 1, 2017, and the Cybersecurity Review Measures, or the “Review Measures”, provide that personal information and important data collected and generated by a critical information infrastructure operator, or a “CIIO”, in the course of its operations in mainland China must be stored in mainland China, and if a CIIO purchases internet products and services that affect or may affect national security, it should be subject to national security review by the CAC together with competent departments of the State Council. On November 14, 2021, CAC published the Regulations on the Network Data Security Administration Draft, or the “Data Security Regulations Draft”, to solicit public opinion and comments. Under the Data Security Regulations Draft, an overseas initial public offering to be conducted by a data processor processing the personal information of more than one million individuals shall apply for a cybersecurity review. Data processor means an individual or organization that independently makes decisions on the purpose and manner of processing in data processing activities, and data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision, disclosure, or deletion of data.
Currently we do not expect the Review Measures to have an impact on the business and operations of Raytech Holding’s Hong Kong subsidiaries, Pure Beauty and Raytech Innovation, or this offering, because (i) Our Hong Kong subsidiaries are incorporated and operating in Hong Kong without any subsidiary or VIE structure in mainland China, and it is unclear whether the Review Measures shall be applied to a Hong Kong company; (ii) as of the date of this prospectus, Pure Beauty has not collected and stored personal information of any individual customers of mainland China and possesses personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (ii), including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC; and (iii) as of the date of this prospectus, neither Pure Beauty nor Raytech Innovation has not been informed by any governmental authority of mainland China of any requirement that it file for a cybersecurity review for the offering. Based on the foregoing and the advice of Raytech Holding’s PRC legal counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, we believe our Hong Kong subsidiaries are not required to pass the cybersecurity review of the CAC in order to list Raytech Holding’s Ordinary Shares in the U.S. Nonetheless, if the authorized PRC regulatory body subsequently determines that we are required to go through such cybersecurity review or if any other PRC government authorities promulgate any interpretation or implementation rules before Raytech Holding’s listing that would require us to go through a cybersecurity review for this offering, we may fail to complete such cybersecurity review procedures in a timely manner, or at all. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, reputational damage as well as legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations.
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In addition, on December 24, 2021, the CSRC issued the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures”), collectively, the Draft Rules Regarding Overseas Listings. The Draft Rules Regarding Overseas Listing aim to lay out the filing regulation arrangement for both direct and indirect overseas listing by mainland China-based companies and clarify the determination criteria for indirect overseas listing in overseas markets. According to the Draft Rules Regarding Overseas Listings, among other things, after making initial applications with overseas stock markets for initial public offerings or listings, all mainland China-based companies shall file with the CSRC within three working days.
On February 17, 2023, the CSRC promulgated the Overseas Listing Trial Measures and relevant five guidelines, which became effective on March 31, 2023. The Overseas Listing Trial Measures comprehensively improve and reform the existing regulatory regime for overseas offering and listing of PRC domestic companies’ securities and will regulate both direct and indirect overseas offering and listing of mainland China-based companies’ securities by adopting a filing-based regulatory regime.
According to the Overseas Listing Trial Measures, mainland China-based companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if: (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (v) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial Measures also provides that if the issuer both meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.
As advised by Raytech Holding’s PRC Counsel, AllBright Law Offices (Fuzhou), based on the facts that (i) we do not operate any entities in mainland China and the operating revenue, total profit, total assets or net assets as documented in Raytech Holding’s audited consolidated financial statements for the most recent fiscal year is accounted for by our Hong Kong subsidiary, Pure Beauty located outside mainland China; (ii) we do not have any equity interest in any manufacturer located in mainland China and vice versa; and (iii) we conduct a majority of our business and are headquartered in Hong Kong rather than in mainland China, and our senior management team are not PRC citizens or have their residence located outside mainland China, we believe that, this offering will not be regarded as a subsequent securities offering in the same overseas market under the Article 15 of the Overseas Listing Trial Measures, and are currently not required to complete the filing procedure with the CSRC or to obtain regulatory approval from the CSRC. However, as the Overseas Listing Trial Measures were newly promulgated and there exists substantial uncertainty that the CSRC may take a view that is contrary to our understanding of the Overseas Listing Trial Measures because the Overseas Listing Trial Measures adopts the principle of “substance over form” regarding the determination of “indirect overseas offering and listing by a domestic company,” over which the CSRC may have substantial discretions. If we are required to complete the filing procedures with the CSRC in connection with this offering, we cannot assure you that we will be able to complete such filings in a timely manner, or at all, in the future. Any failure by us to comply with such filing could impact our operations materially and adversely, subject us to order to rectify, warnings and fines, and significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.
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As advised by Raytech Holding’s PRC counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, on the basis that (i) we currently do not have or intend to set up any subsidiary or VIE structure in mainland China, (ii) we do not have any business operations in mainland China, except that we collaborate with manufacturers located in mainland China to manufacture the products, (iii) none of our clients are located in mainland China, and (iv) we possess personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (iv), including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC, we believe, we are currently not required to obtain any permission or approval from the CAC, or other governmental authorities of mainland China to operate our business or to list Raytech Holding’s securities on the U.S. exchanges and to issue securities to foreign investors, nor have we been denied of any permissions or approvals from the authorities of mainland China. Furthermore, CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, has advised Raytech Holding that, as of the date of this prospectus, Raytech Holding is not required to obtain any permission or approval from the governmental authorities of Hong Kong to list on the U.S. exchanges and offer securities and we have obtained all necessary licenses, permissions or approvals including the business registration certificate from the governmental authorities of Hong Kong to operate our business and to the best of our knowledge, no license, permission or approval has been denied.
However, if we (i) do not receive or maintain such permission or approval, should the permission or approval be required in the future by the government of mainland China or Hong Kong, (ii) inadvertently conclude that such permission or approval is not required, or (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permission or approval in the future, we may be unable to obtain such permissions or approvals in a timely manner, or at all, and may face regulatory actions or other sanctions from the CSRC, the CAC or other PRC or Hong Kong regulatory authorities if we fail to fully comply with any new regulatory requirements. Consequently, our operations and financial condition could be materially adversely affected, and Raytech Holding’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 become worthless.
We are aware that recently, the government of mainland China initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Nevertheless, since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It is also highly uncertain what potential impact such modified or new laws and regulations will have on Pure Beauty’s daily business operations, Raytech Holding’s ability to accept foreign investments and the listing of Raytech Holding’s Ordinary Shares on a U.S. or other foreign exchanges. If there is significant change to current political arrangements between mainland China and Hong Kong, the PRC government intervenes or influences operations of companies operated in Hong Kong like us, or exerts more control through change of laws and regulations over offerings conducted overseas and/or foreign investment in issuers like Raytech Holding, it may result in a material change in our operations and/or the value of the securities Raytech Holding is registering for sale or could significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer securities to investors and cause the value of Raytech Holding’s Ordinary Shares to significantly decline or become worthless.
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Rules for cross-border provision and examination of auditing records and other materials in connection with overseas securities issuance and listing was released by CSRC and became effective The government of mainland China may impose more stringent requirement for domestic Chinese companies to share business and accounting records with foreign auditing firms and other securities service institutions, which could significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer its Ordinary Shares to investors and could cause the value of Raytech Holding’s Ordinary Shares to significantly decline or become worthless.
On April 2, 2022, the CSRC, in conjunction with the Ministry of Finance, the National Administration of State Secret Protection and the National Archives Administration, issued the Regulations on Enhancing Confidentiality and File Management in Relation to Overseas Securities Issuance and Listing by Domestic Enterprises (Draft for Comments, the “Draft Regulations”), an amendment to the original regulation of the same name published in 2009. The Draft Regulations extend the scope of application of the regulations to indirectly listed enterprises, and expand the definition of “domestic enterprises” to encompass domestic corporations directly listed on overseas exchanges as well as the domestic operating subsidiaries of indirectly listed companies. The Draft Regulations requires that, before providing or publicly disclosing documents and materials involving state secrets or government work secrets to security brokers, security service providers, or overseas regulators, the domestic enterprises shall seek approval from the relevant government regulators, and make filings with the local secret protection regulators at the same government level.
The Draft Regulations expand the scope of the regulations from “state secrets” to “state secrets and work secrets of government agencies”. However, the Draft Regulations do not define the scope of such secrets, but merely state that “in case where it is unclear or disputed as to whether state secrets are involved, the issue shall be submitted to the relevant secret protection regulator for determination; in case where it is unclear or disputed as to whether government work secrets are involved, the issue shall be submitted to the relevant government regulator for determination.”
The Draft Regulations mandates that domestic enterprises need to follow the prescribed procedures before furnishing “accounting records or copies of accounting records of significant state or societal storage value” to relevant security brokers, security service providers, and overseas regulators. If it is necessary to transmit such materials of significance out of mainland China, the relevant enterprises need to follow the prescribed procedures for advance approval. Similarly, if an overseas accounting firm intends to provide auditing work on a domestic enterprise seeking overseas listing, the accounting firm shall follow the prescribed procedures under the relevant state laws and regulations. A domestic enterprise shall not provide accounting records to an overseas accounting firm or network who has not satisfied the prescribed procedures.
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On February 24, 2023, the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which took effect on March 31, 2023. Pursuant to the Archives Rules, domestic companies that seek for overseas offering and listing shall strictly abide by applicable laws and regulations of the PRC and the Archives Rules, enhance legal awareness of keeping state secrets and strengthening archives administration, institute a sound confidentiality and archives administration system, and take necessary measures to fulfill confidentiality and archives administration obligations. Such domestic companies shall not leak any state secret and working secret of government agencies, or harm national security and public interest. Furthermore, a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any document and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level. Moreover, a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. The Archives Rules also stipulate that a domestic company that provides accounting archives or copies of accounting archives to any entities including securities companies, securities service providers and overseas regulators and individuals shall fulfill due procedures in compliance with applicable national regulations. As we are not domestic companies, and do not plan to leak any state secret and working secret of government agencies, or harm national security or public interest in connection with provision of documents, materials and accounting archives, we believe we may not be required to obtain relevant approval or file with the secrecy administrative department in accordance with the Archives Rules with respect to the offering. However, as the Archives Rules was newly published, there are substantial uncertainties as to the implementation and interpretation, if we are required to perform additional procedures in connection with the provision of accounting archives or other documents, we cannot assure you that we will be able to fulfill such procedures in a timely manner, or even at all. Any failure by us to comply with the Archives Rules may materially adversely affected, our ability to offer securities to investors to become significantly limited or completely hindered.
On August 26, 2022, a Statement of Protocol was signed by the PCAOB, the CSRC and the Ministry of Finance of the PRC governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. On December 29, 2022, the CAA was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
We cannot guarantee that we will be able to obtain any approval or authorization from relevant secret protection regulator or other government authorities in a timely manner, or any such approval or authorization can be obtained at all if we are required to obtain any approval or authorization. Failure to obtain the necessary approvals or complete the required filings in a timely manner may result in the failure to complete the listing or subject us to fines, penalties or other sanctions, which may have a significant adverse impact on our financial position and operations.
In addition, the Archives Rules take into account the international practice of cross-border audit regulatory co-operation and requires that “on-site inspections should be conducted mainly by CSRC and Chinese regulators, or rely on the inspection results of Chinese regulators” stated in the Regulations on Enhancing Confidentiality and File Management in Relation to Overseas Securities Issuance and Listing published in 2009. The Archives Rules make it clear that the CSRC or Chinese regulators shall provide necessary support through multilateral or bilateral cooperation mechanism for cross-border investigation and examination carried out by overseas securities administrative authorities and regulators on mainland China enterprises seeking overseas listings and security brokers or security service providers providing securities services for such domestic enterprises in respect of their activities relating to such overseas issuance and listings. However, there is no existing tried-and-proved mechanisms for cross-border regulatory cooperation, and it is difficult to carry out shareholder claims or regulatory investigations in mainland China similar to those in the United States, due to various legal and practical problems.
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Although we do not believe that we are currently prohibited from providing its accounting records to our auditor or that we or our auditor would be required to go through any prescribed procedures for approval under current laws and regulations of mainland China, we may be subject to additional compliance requirements in the future. Since the Archive Rules are newly promulgated, and the interpretation and implementation are not very clear, we cannot assure you that we will be able to receive clearance of such regulatory requirements in a timely manner, or at all, in the future. If the CSRC, the state secret protection regulator or any other relevant government regulator require that we obtain approval or complete relevant procedure prior to the completion of this offering, the offering will be delayed until we have obtained such approval or completed such procedure. There is also the possibility that we may not be able to obtain or maintain such approval, complete such procedure or that we inadvertently concluded that such approval or procedure was not required. If prior approval or procedure was required while we inadvertently concluded that such approval or procedure was not required or if applicable laws and regulations or the interpretation of such were modified to require us to obtain such approval or procedure in the future, we may face regulatory actions or other sanctions from the CSRC or other regulatory authorities of mainland China. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder Raytech Holding’s ability to offer or continue to offer the Ordinary Shares, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations, and cause the Ordinary Shares to significantly decline in value or become worthless.
It may be difficult for overseas shareholders and/or regulators to conduct investigations or collect evidence within mainland China.
Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in mainland China. For example, in mainland China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside mainland China. Although the authorities in mainland China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanisms. Furthermore, according to Article 177 of the PRC Securities Law of mainland China of the PRC, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the mainland China. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.
Our principal business operation is conducted in Hong Kong. In the event that the U.S. regulators carry out investigation on Raytech Holding and there is a need to conduct investigation or collect evidence within the territory of the mainland China, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in mainland China under the laws and regulations of mainland China. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of mainland China by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of mainland China.
You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Raytech Holding or its management named in the prospectus based on Hong Kong laws.
Currently, all of our operations are conducted outside the United States, and all of our assets are located outside the United States. All of Raytech Holding’s directors and officers are Hong Kong nationals or residents and a substantial portion of their assets are located in Hong Kong. You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against Raytech Holding or its management named in the prospectus, as judgments entered in the United States can be enforced in Hong Kong only at common law. If you want to enforce a judgment of the United States in Hong Kong, it must be a final judgment conclusive upon the merits of the claim, for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts. For more information regarding the relevant laws of the British Virgin Islands and Hong Kong, see “Enforceability of Civil Liabilities” beginning on page 58 of this prospectus.
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We may be affected by the currency peg system in Hong Kong.
Since 1983, Hong Kong dollars have been pegged to the U.S. dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that this policy will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase. This would in turn adversely affect the operations and profitability of our business.
Risks Related to Raytech Holding’s Ordinary Shares and This Offering
Although the audit report included in this prospectus is prepared by U.S. auditors who are subject to PCAOB inspections on a regular basis, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in Raytech Holding’s securities may be prohibited under the HFCA Act if the SEC subsequently determines Raytech Holding’s audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist Raytech Holding’s securities. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading.
As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, Raytech Holding’s auditor is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. The PCAOB is currently unable to conduct inspections without the approval of the PRC government authorities. Raytech Holding’s U.S. auditor is subject to PCAOB inspections on a regular basis, and we have no operations in mainland China. However, if there is significant change to current political arrangements between mainland China and Hong Kong, companies operated in Hong Kong like us may face similar regulatory risks as those operated in mainland China and we cannot assure you that Raytech Holding’s auditor’s work will continue to be able to be inspected by the PCAOB.
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As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular mainland China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges such as the Nasdaq of issuers included on the SEC’s list for three consecutive years, thus reducing the time period for triggering the prohibition on trading. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. Raytech Holding will be required to comply with these rules if the SEC identifies Raytech Holding as having a “non-inspection” year (as defined in the interim final rules) under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above. Under the HFCA Act, Raytech Holding’s securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if Raytech Holding’s auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in Raytech Holding’s Ordinary Shares being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On September 22, 2021, the PCAOB adopted a final rule implementing the AHFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the AHFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the SEC announced that the PCAOB designated mainland China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated under the HFCA Act. On August 26, 2022, a Statement of Protocol was signed by the PCAOB, the CSRC and the Ministry of Finance of the PRC governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. On December 29, 2022, the CAA was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. Raytech Holding’s auditor is based in the United States, and therefore is not currently subject to the determinations announced by the PCAOB on December 16, 2021. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit WWC, P.C. to provide audit work papers located in mainland China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, the trading in Raytech Holding’s securities may be prohibited under the HFCA Act, ultimately resulting in a determination by a securities exchange to delist our securities. Delisting of Raytech Holding’s Ordinary Shares would force holders of Raytech Holding’s Ordinary Shares to sell their Ordinary Shares. The market price of Raytech Holding’s Ordinary Shares could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance.
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The SEC is assessing how to implement other requirements of the AHFCAA, including the listing and trading prohibition requirements described above. Future developments in respect of increasing U.S. regulatory access to audit information are uncertain, as the legislative developments are subject to the legislative process and the regulatory developments are subject to the rule-making process and other administrative procedures.
Raytech Holding’s Ordinary Shares are thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Raytech Holding’s Ordinary Shares are “thinly-traded”, meaning that the number of persons interested in purchasing Raytech Holding’s Ordinary Shares at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that Raytech Holding is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if Raytech Holding came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as Raytech Holding or purchase or recommend the purchase of Raytech Holding’s shares until such time as Raytech Holding became more seasoned. As a consequence, there may be periods of several days or more when trading activity in Raytech Holding’s shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broad or active public trading market for Raytech Holding’s Ordinary Shares may not develop or be sustained.
The market price for our Ordinary Shares may be volatile and could decline significantly, potentially subjecting us to securities litigation.
The trading price of our Ordinary Shares is likely to be volatile and could fluctuate widely due to factors both specific to our company and related to broader market conditions, many of which are beyond our control.
As a company with a relatively recent IPO and potentially a smaller public float compared to seasoned issuers, we may experience significant price volatility. There have been instances of extreme stock price run-ups followed by rapid price declines and strong volatility with a number of recent initial public offerings, especially among companies with relatively smaller public floats. Our status may contribute to greater stock price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-up, may be unrelated or disproportionate to our actual or expected operating performance, financial condition, or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares.
Furthermore, the trading performances and market perceptions of other companies based in Hong Kong or China that have listed their securities in the United States may significantly impact the trading performance of our Ordinary Shares, regardless of our actual operating performance. This can happen due to broad market and industry factors, such as the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of these other companies. Any negative news or perceptions about inadequate corporate governance practices, fraudulent accounting, corporate structure, or other matters relating to other Hong Kong or Chinese companies may also negatively affect investor attitudes towards Hong Kong or Chinese companies in general, including us, regardless of whether we have engaged in any inappropriate activities.
In addition, if the trading volume of our Ordinary Shares is low, persons buying or selling in relatively small quantities may easily influence the market price. Low trading volume could also cause the price of our Ordinary Shares to fluctuate greatly, with large percentage changes potentially occurring in a single trading day. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our Ordinary Shares. Securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance.
Specific factors that may cause the price and trading volume of our Ordinary Shares to be highly volatile include, but are not limited to:
| ● | Regulatory developments affecting us, our customers, or our industry; |
| ● | Announcements of studies and reports relating to our service offerings or those of our competitors; |
| ● | Actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; |
| ● | Changes in financial estimates by securities research analysts; |
| ● | Announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures, or capital commitments; |
| ● | Additions to or departures of our senior management; |
| ● | Detrimental negative publicity about us, our management, or our industry; |
| ● | Fluctuations of exchange rates between relevant currencies (e.g., the Hong Kong dollar and the U.S. dollar); |
| ● | Release or expiry of lock-up or other transfer restrictions on our outstanding Ordinary Shares; and |
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| ● | Sales or perceived potential sales of additional Ordinary Shares by us or our shareholders. |
| ● | As a result of this potential volatility, investors may experience losses on their investment. Holders of our Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading or sharp price declines. A decline in the market price of our Ordinary Shares could also adversely affect our ability to issue additional Ordinary Shares or other securities and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Ordinary Shares will develop or be sustained. |
In the past, plaintiffs have often initiated securities class action litigation against companies following periods of volatility in the market price of their securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
You will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased.
The offering price of Raytech Holding’s Ordinary Shares is substantially higher than the (pro forma) net tangible book value per share of its Ordinary Shares. Consequently, when you purchase Raytech Holding’s Ordinary Shares in the offering and upon completion of the offering, you will incur immediate dilution of $[*] per share, at an initial public offering price of $[*]. See “Dilution” on page 61 of this prospectus.
Substantial future sales of Raytech Holding’s Ordinary Shares or the anticipation of future sales of Raytech Holding’s Ordinary Shares in the public market could cause the price of Raytech Holding’s Ordinary Shares to decline.
Sales of substantial amounts of Raytech Holding’s Ordinary Shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of Raytech Holding’s Ordinary Shares to decline. An aggregate of 17,613,083 Ordinary Shares are outstanding before the consummation of this offering and 47,613,083 Ordinary Shares will be outstanding immediately after the consummation of this offering. Sales of these shares into the market could cause the market price of Raytech Holding’s Ordinary Shares to decline.
Raytech Holding does not intend to pay dividends for the foreseeable future.
Raytech Holding currently intends to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to Raytech Holding’s dividend policy will be made at the discretion of Raytech Holding’s board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Since its IPO, Raytech Holdings has not declared any dividends. If Raytech Holding determines to pay dividends on any of Raytech Holding’s Ordinary Shares in the future, as a holding company, it will be dependent on receipt of funds from its Hong Kong subsidiaries. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Raytech Holding.
If securities or industry analysts do not publish research or reports about Raytech Holding’s business, or if they publish a negative report regarding Raytech Holding’s Ordinary Shares, the price of Raytech Holding’s Ordinary Shares and trading volume could decline.
The trading market for Raytech Holding’s Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about Raytech Holding or its business. We do not have any control over these analysts. If one or more of the analysts who cover Raytech Holding downgrade Raytech Holding, the price of Raytech Holding’s Ordinary Shares would likely decline. If one or more of these analysts cease coverage of Raytech Holding or fail to regularly publish reports on Raytech Holding, Raytech Holding could lose visibility in the financial markets, which could cause the price of Raytech Holding’s Ordinary Shares and the trading volume to decline.
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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because Raytech Holding is incorporated under British Virgin Islands law.
Raytech Holding is a company incorporated under the laws of the British Virgin Islands. Raytech Holding’s corporate affairs are governed by its memorandum and articles of association, the BVI Act and the common law of the British Virgin Islands. The rights of shareholders to take action against Raytech Holding’s directors, actions by its minority shareholders and the fiduciary duties of Raytech Holding’s directors to it under the British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the British Virgin Islands. The rights of Raytech Holding’s shareholders and the fiduciary duties of its directors under the British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the British Virgin Islands. In addition, British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Certain corporate governance practices in the British Virgin Islands, where Raytech Holding was incorporated, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. As a foreign private issuer, Raytech Holding is permitted to follow home country practice in lieu of certain corporate governance requirements applicable to U.S. domestic issuers. As further described below, Raytech Holding is relying on certain of these exemptions. If Raytech Holding chooses to follow additional British Virgin Islands’ practices in the future, or continues to rely on current exemptions, its shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. See “Risk Factors – Risks Related to Raytech Holding’s Ordinary Shares and This Offering – As a foreign private issuer, Raytech Holding is permitted to, and Raytech Holding is relying on exemptions from certain Nasdaq Stock Exchange corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of Raytech Holding’s shares.” on page 55 of this prospectus.
As a result of all of the above, public shareholders may have more difficulties in protecting their interests in the face of actions taken by Raytech Holding’s management, or members of its board of directors, than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the BVI Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Shares—Differences in Corporate Law.” beginning on page 109 of this prospectus.
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As a foreign private issuer, Raytech Holding is permitted to, and Raytech Holding is, relying on exemptions from certain Nasdaq Stock Exchange corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of Raytech Holding’s shares.
Raytech Holding is exempted from certain corporate governance requirements of the Nasdaq listing rules by virtue of being a foreign private issuer. Raytech Holding is required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by domestic U.S. companies listed on the Nasdaq. The standards applicable to Raytech Holding are considerably different than the standards applied to domestic U.S. issuers. For instance, Raytech Holding is not required to:
| ● | have a majority of the board be independent (although all of the members of the audit committee must be independent under the Exchange Act); |
| ● | have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors; |
| ● | have regularly scheduled executive sessions with only independent directors; or |
| ● | have executive sessions of solely independent directors each year. |
Raytech Holding is relying on some or all of these exemptions and may continue to do so. As a result, you may not be provided with the benefits of certain corporate governance requirements of the Nasdaq.
If Raytech Holding cannot continue to satisfy, the continued listing requirements and other rules of the Nasdaq Capital Market applicable to it, our securities may be delisted, which could negatively impact the price of Raytech Holding’s securities and your ability to sell them.
The Ordinary Shares commenced trading on The Nasdaq Capital Market under the symbol “RAY” on May 15, 2024. However, we cannot assure you that Raytech Holding’s securities will continue to be listed on the Nasdaq Capital Market.
In order to maintain Raytech Holding’s listing on the Nasdaq Capital Market, Raytech Holding is required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum share price and certain corporate governance requirements. Although Raytech Holding has initially met the listing requirements and other applicable rules of the Nasdaq Capital Market, it may not be able to continue to satisfy these requirements and applicable rules. If Raytech Holding is unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, its securities could be subject to delisting.
If the Nasdaq Capital Market delists Raytech Holding’s securities from trading, Raytech Holding could face significant consequences, including:
| ● | a limited availability for market quotations for Raytech Holding’s securities; |
| ● | reduced liquidity with respect to Raytech Holding’s securities; |
| ● | a determination that Raytech Holding’s Ordinary Shares are a “penny stock,” which will require brokers trading in Raytech Holding’s Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for Raytech Holding’s Ordinary Shares; |
| ● | limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
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Because our business is conducted in Hong Kong dollars and the price of Raytech Holding’s Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.
Our business is conducted in Hong Kong, our books and records are maintained in Hong Kong dollars, which is the currency of Hong Kong, and the financial statements that Raytech Holding files with the SEC and provide to its shareholders are presented in United States dollars. Changes in the exchange rate between the Hong Kong dollar and U.S. dollar affect the value of our assets and the results of our operations in United States dollars. The value of the Hong Kong dollar against the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in Hong Kong’s political and economic conditions and perceived changes in the economy of Hong Kong and the United States. Any significant revaluation of the Hong Kong dollar may materially and adversely affect our cash flows, revenue and financial condition. Further, although Raytech Holding’s Ordinary Shares offered by this prospectus are denominated in United States dollars, Raytech Holding will need to convert the net proceeds it receives into Hong Kong dollars in order to use the funds for our business. Changes in the conversion rate between the United States dollar and the Hong Kong dollar will affect that amount of proceeds Raytech Holding will have available for our business.
Raytech Holding has broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Raytech Holding’s management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine Raytech Holding’s use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by Raytech Holding’s management to apply these funds effectively could harm our business.
There can be no assurance that Raytech Holding will not be a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of Raytech Holding’s Ordinary Shares.
A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of “passive” income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income, or the asset test. Based on Raytech Holding’s current and expected income and assets (taking into account the expected cash proceeds and our anticipated market capitalization following this offering), Raytech Holding does not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether Raytech Holding is or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of Raytech Holding’s income and assets. In addition, there can be no assurance that the Internal Revenue Service, or IRS, will agree with Raytech Holding’s conclusion or that the IRS would not successfully challenge Raytech Holding’s position. Fluctuations in the market price of Raytech Holding’s Ordinary Shares may cause Raytech Holding to become a PFIC for the current or subsequent taxable years because the value of Raytech Holding’s total assets for purposes of the asset test generally will be determined by reference to the market price of Raytech Holding’s Ordinary Shares. The composition of Raytech Holding’s income and assets may also be affected by how, and how quickly, it uses its liquid assets and the cash raised in this offering. If Raytech Holding were to be or become a PFIC for any taxable year during which a U.S. Holder holds Raytech Holding’s Ordinary Shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder and such U.S. Holder may be subject to additional reporting requirements and increased U.S. federal income tax liability. Our status as a PFIC is a fact-intensive determination made on an annual basis. Accordingly, our U.S. counsel expresses no opinion with respect to our PFIC status and also expresses no opinion with regard to our expectations regarding our PFIC status. For a more detailed discussion of the application of the PFIC rules to Raytech Holding and the consequences to U.S. taxpayers if Raytech Holding were or are determined to be a PFIC, see “Taxation— Passive Foreign Investment Company.” beginning on page 119 of this prospectus.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | future financial and operating results, including revenues, income, expenditures, cash balances and other financial items; |
| ● | our ability to execute our growth, expansion and acquisition strategies, including our ability to meet our goals; |
| ● | current and future economic and political conditions; |
| ● | our expectations regarding demand for and market acceptance of our products and services; |
| ● | our expectations regarding our customer base; |
| ● | our ability to procure the applicable regulatory licenses in the relevant jurisdictions that we operate in; |
| ● | competition in our industry; |
| ● | relevant government policies and regulations relating to our industry; |
| ● | our capital requirements and our ability to raise any additional financing which we may require; |
| ● | our ability to retain effective intellectual property rights and secure the right to use other intellectual property that we deem to be essential or desirable to the conduct of our business; |
| ● | our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business; |
| ● | impact of COVID-19 pandemic on our business, results of operations, financial condition and cash flows; |
| ● | overall industry and market performance; and |
| ● | other assumptions described in this prospectus underlying or relating to any forward-looking statements. |
We describe material risks, uncertainties and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors” Beginning on page 26 of this prospectus. We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.
Industry Data and Forecasts
This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. personal care electrical device industries in Hong Kong and greater Asia, may not grow at the rate projected by market data, or at all. Failure of this industry to grow at the projected rate may have a material and adverse effect on our business and the market price of Raytech Holding’s Ordinary Shares. In addition, the new and rapidly changing nature of the personal care electrical appliance industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our industry. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
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ENFORCEABILITY OF CIVIL LIABILITIES
Raytech Holding is incorporated in the British Virgin Islands to take advantage of certain benefits associated with being a British Virgin Islands business company, such as:
| ● | political and economic stability; |
| ● | an effective judicial system; |
| ● | a favorable tax system; |
| ● | the absence of exchange controls or currency restrictions; and |
| ● | the availability of professional and support services. |
However, certain disadvantages accompany incorporation in the British Virgin Islands. These disadvantages include, but are not limited to:
| ● | the British Virgin Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors as compared to the United States; and |
| ● | British Virgin Islands companies may not have standing to sue before the federal courts of the United States. |
Raytech Holding’s amended and restated memorandum and articles of association do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, Raytech Holding’s officers, directors and shareholders, be arbitrated.
All of Raytech Holding’s assets are located in Hong Kong. In addition, all of Raytech Holding’s directors and officers are nationals or residents of Hong Kong. As a result, it may be difficult for investors to effect service of process within the United States upon Raytech Holding or these persons, or to enforce against Raytech Holding or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
Raytech Holding has appointed Puglisi & Associates as its agent to receive service of process upon whom process may be served in any action brought against us under the securities laws of the United States.
Harney Westwood & Riegels, Raytech Holding’s British Virgin Islands counsel, and CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, have advised Raytech Holding that there is uncertainty as to whether the courts of the BVI or Hong Kong would (i) recognize or enforce judgments of United States courts obtained against Raytech Holding or its directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in the British Virgin Islands or Hong Kong against Raytech Holding or its directors or officers predicated upon the securities laws of the United States or any state in the United States.
Raytech Holding’s has been advised by Harney Westwood & Riegels that the United States and the BVI do not have a treaty providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters and that a final judgment for the payment of money rendered by any general or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically enforceable in the BVI. Raytech Holding has also been advised by Harney Westwood & Riegels that the courts of the BVI would treat a final and conclusive monetary judgment for a definitive sum obtained against us in the U.S. federal or state courts as a cause of action in itself and sued upon as a debt at common law so that no retrial of the issues would be necessary provided that (a) such U.S. federal or state courts had jurisdiction in the matter and we either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process, (b) the judgment given by such U.S. federal or state courts was not in respect of penalties, fines, taxes or similar fiscal or revenue obligations, (c) in obtaining judgment there was no fraud on the part of the person in whose favour judgment was given or on the part of such U.S. federal or state courts, (d) recognition or enforcement in the BVI would not be contrary to public policy, and (e) the proceedings pursuant to which judgment was obtained were not contrary to the principles of natural justice.
CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, has further advised Raytech Holding that foreign judgments of United States courts will not be directly enforced in Hong Kong as there are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States. However, the common law permits an action to be brought upon a foreign judgment. That is to say, a foreign judgment itself may form the basis of a cause of action since the judgment may be regarded as creating a debt between the parties to it. In a common law action for enforcement of a foreign judgment in Hong Kong, the enforcement is subject to various conditions, including but not limited to, that the foreign judgment is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in civil matter and not in respect of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts. The defenses that are available to a defendant in a common law action brought on the basis of a foreign judgment include lack of jurisdiction, breach of natural justice, fraud, and contrary to public policy. However, a separate legal action for debt must be commenced in Hong Kong in order to recover such debt from the judgment debtor. As a result, subject to the conditions with regard to enforcement of judgments of United States courts being met, including but not limited to the above, a foreign judgment of the United States of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United States could be enforceable in Hong Kong.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately $[●], assuming the sale of 30,000,000 Ordinary Shares we are offering, after deducting the Placement agent’s fees, the non-accountable expense allowance, and estimated offering expenses payable by us.
Raytech Holding plans to use the net proceeds we receive from this offering for the following purposes:
| Use of Proceeds | Percentage of the net proceeds | |||
| Potential Acquisitions and Investments | 30 | % | ||
| Trading Business Expansion Plans | 30 | % | ||
| Marketing, Sales and Product Development | 20 | % | ||
| General Working Capital | 20 | % | ||
As of this prospectus date, we have no specific acquisition or investment targets, agreements, or commitments. We intend to seek complementary businesses, technologies, or assets that expand our market reach or offer other strategic benefits, primarily focusing on targets within the personal care industry.
The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this Offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this Offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this Offering differently than as described in this prospectus. To the extent that the net proceeds Raytech Holding receive from this Offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.
In relation to our IPO of 1,500,000 Class A Ordinary Shares which were sold at an offering price of $4.00 per share, we received aggregate gross proceeds of $6.0 million from the IPO, before deducting underwriting discounts and other related expenses.
We have earmarked and have been using the proceeds of the IPO as follows: 25% on brand promotion and marketing; 25% on recruitment of talented personnel; 25% on strategic investments and acquisitions; and 25% on general working capital.
DIVIDEND POLICY
Subject to the BVI Act and Raytech Holding’s amended and restated memorandum and articles of association, Raytech Holding’s board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of Raytech Holding’s assets will exceed its liabilities and Raytech Holding will be able to pay its debts as they become due. There is no further BVI statutory restriction on the amount of funds which may be distributed by us by dividend.
Since its IPO, Raytech Holdings has not declared any dividends. If Raytech Holding determines to pay dividends on any of Raytech Holding’s Ordinary Shares in the future, as a holding company, Raytech Holding will be dependent on receipt of funds from its Hong Kong subsidiary Pure Beauty. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Raytech Holding.
Raytech Holding currently intends to retain all available funds and future earnings, if any, for the operation and expansion of our business and does not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to Raytech Holding’s dividend policy will be made at the discretion of Raytech Holding’s board of directors after considering Raytech Holding’s financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
If Raytech Holding determines to pay dividends on any of Raytech Holding’s Ordinary Shares in the future, as a holding company, Raytech Holding will be dependent on receipt of funds from its Hong Kong subsidiary, Pure Beauty.
Cash dividends, if any, on Raytech Holding’s Ordinary Shares will be paid in U.S. dollars.
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Raytech Holding. See “Taxation - Hong Kong Profits Taxation.” on page 121 of this prospectus.
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CAPITALIZATION
The following table sets forth Raytech Holding’s capitalization as of September 30, 2024:
| ● | on an actual basis; |
| ● | on an actual basis, in US dollars; and |
| ● | on an as adjusted basis to reflect the issuance and sale of the Ordinary Shares by us in this offering, after deducting placement agent fees, the non-accountable expense allowance, and estimated offering expenses payable by Raytech Holding. |
The pro forma information below is illustrative only, and our capitalization following the completion of this offering is subject to adjustment based on the actual net proceeds to us from the offering. You should read this capitalization table in conjunction with “Use of Proceeds” in this prospectus, and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.
| (unaudited) As of September 30, 2024 | ||||||||||||
| Actual | Actual | Adjusted(1) | ||||||||||
| HKD | US$ | US$ | ||||||||||
| Shareholders’ equity: | ||||||||||||
| Ordinary Shares, US$0.00000625 par value, 8,000,000,000 Ordinary Shares authorized, 16,000,000 shares and 17,613,083 shares issued and outstanding as of March 31, 2024 and September 30, 2024, respectively, as adjusted (2) | 862 | 110 | [●] | |||||||||
| Additional paid-in capital | 37,717,487 | 4,854,683 | [●] | |||||||||
| Retained earnings | 35,627,336 | 4,585,656 | [●] | |||||||||
| Total shareholders’ equity | 73,345,685 | 9,440,449 | [●] | |||||||||
| (1) | The as-adjusted information discussed above is illustrative only. Our additional paid-in capital, total shareholders’ equity, and total capitalization following the completion of this offering are subject to adjustment based on the actual public offering price and other terms of this offering determined at pricing. |
| (2) | The number of ordinary shares to be outstanding after the offering is based on 17,613,083, which is the number of shares outstanding on September 30, 2024. |
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DILUTION
If you invest in our Ordinary Shares in this offering, your interest will be diluted immediately to the extent of the difference between the offering price per Ordinary Share you pay and the pro forma as adjusted net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to Raytech Holding’s existing shareholders for our presently issued and outstanding Ordinary Shares.
Raytech Holding’s net tangible book value as of September 30, 2024 was approximately $9,440,449, or $0.54 per Ordinary Share. Net tangible book value per Ordinary Share represents the amount of Raytech Holding’s total consolidated tangible assets, less the amount of our total consolidated liabilities, divided by the total number of Raytech Holding’s Ordinary Shares outstanding as of September 30, 2024.
After giving further effect to Raytech Holding’s sale of 30,000,000 Ordinary Shares in this offering at a price $[●], and after deducting estimated offering expenses payable by Raytech Holding, Raytech Holding’s pro forma as adjusted net tangible book value as of September 30, 2024 is $[●], or $[●] per Ordinary Share. This represents an immediate increase in as adjusted net tangible book value per Ordinary Share of $[●] to our existing shareholders and an immediate dilution in as adjusted net tangible book value per Ordinary Share of $[●] to new investors purchasing Ordinary Shares in this offering.
The following table illustrates this dilution on a per Ordinary Share basis.
| Per Share Post-Offering (1) | ||||
| Assumed public offering price per ordinary share | $ | [● | ] | |
| Net tangible book value per Ordinary Share as of September 30, 2024 | $ | 0.54 | ||
| Increase in pro forma as adjusted net tangible book value per Ordinary Share attributable to new investors purchasing Ordinary Shares in this offering | $ | [● | ] | |
| Pro forma as adjusted net tangible book value per Ordinary Share after this offering | $ | [● | ] | |
| Dilution per Ordinary Share to new investors in this offering | $ | [● | ] | |
| (1) | Assumes net proceeds of $[●] from this offering of 30,000,000 Ordinary Shares, calculated as follows: $[●] gross offering proceeds, less placement agent fees of $[●], the non-accountable expense allowance of $[●], accountable out-of-pocket expenses of $[●], and other offering expenses of approximately $[●]. |
To the extent that we issue additional Ordinary Shares in the future, there will be further dilution to new investors participating in this offering.
The following table summarizes, on an as adjusted basis as of September 30, 2024, the differences between existing shareholders and the new investors, the total consideration paid and the average price per Ordinary Share before deducting the estimated fees to the placement agent and the estimated offering expenses payable by Raytech Holding:
| Ordinary Shares purchased |
Total consideration | Average price per ordinary |
||||||||||||||||||
| Number | Percent | Amount | Percent | share | ||||||||||||||||
| Existing shareholders | 17,613,083 | 37.0 | % | $ | 22,452,332 | [● | ]% | $ | 1.27 | |||||||||||
| New investors | 30,000,000 | 63.0 | % | $ | [● | ] | [● | ]% | $ | [● | ] | |||||||||
| Total | 47,613,083 | 100 | % | $ | [● | ] | 100 | % | $ | [● | ] | |||||||||
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CORPORATE HISTORY AND STRUCTURE
Our Corporate History
Pure Beauty was incorporated under the laws of Hong Kong with limited liability on April 15, 2013 and Raytech Holding’s Chairman and CEO, Mr. Ching is the founder. In order to prepare for its initial public offering, a series of restructure actions were taken. In June 2022, Raytech Holding was incorporated under the laws of the British Virgin Islands with the sole purpose being a holding company of Pure Beauty. Upon incorporation, Raytech Holding issued 100 founder shares of ordinary shares, par value $1.00 per share, to Mr. Ching (90 shares) and other minority shareholders (collectively 10 shares) at $1.00 per share. In August 2022, Mr. Ching, as the sole member of Pure Beauty, transferred all outstanding 10,000 shares of Pure Beauty held by him to Raytech Holding, in conjunction with which, Pure Beauty issued additional 790,000 shares to Raytech Holding; resulting in Raytech Holding being the parent company of Pure Beauty, holding a total of 800,000 shares in Pure Beauty. In September 2022, Mr. Ching subsequently transferred 5 shares of Raytech Holding to APTC Holdings Limited, a British Virgin Islands company, and 5 shares of Raytech Holding to Mr. Ling Chun Yin, a director of Raytech Holding and the Assistant to CEO of Pure Beauty at $1.00 per share.
On May 10, 2023, we filed our amended and restated memorandum and articles of association with the Registrar of Corporate Affairs in the British Virgin Islands to increase our authorized shares from 50,000 Ordinary Shares, par value of $1.00 per share, to 8,000,000,000 Ordinary Shares, par value of $0.00000625 per share and effectuated a forward split of all issued and outstanding shares at a ratio of 160,000-for-1.
In August 2023, Market Tycoon Investments Limited transferred 480,000 Ordinary Shares to Mr. Wong Tai Chi at $0.00000625 per share, and APTC Holdings Limited transferred 800,000 Ordinary Shares to Ms. Look Wai Yi at $0.00000625 per share. In October 2023, Value Classic Global Limited transferred 640,000 Ordinary Shares to Crystal Charm Investments Limited, a British Virgin Islands company, at $0.00000625 per share, Mr. Wong Tai Chi transferred 480,000 Ordinary Shares to Value Crystal Investment Limited, a British Virgin Islands company, at $0.00000625 per share, and Ms. Look Wai Yi transferred 800,000 Ordinary Shares to Ace Challenger Limited, a British Virgin Islands company, at $0.00000625 per share.
On May 17, 2024, we consummated the sale of 1,500,000 Ordinary Shares (the “IPO Shares”) in our initial public offering. The Company completed the IPO on a firm commitment basis pursuant to the Company’s registration statement on Form F-1, as amended (File No. 333-275197), filed with the Securities and Exchange Commission, which was declared effective by the Securities and Exchange Commission on May 13, 2024. The IPO Shares were priced at $4.00 per share. The Company also granted the underwriter a 45-day option to purchase up to an additional 225,000 Ordinary Shares to cover over-allotments, if any (the “Over-Allotment Option”). The Ordinary Shares were approved for listing on The Nasdaq Capital Market on May 13, 2024 and commenced trading under the symbol “RAY” on May 15, 2024.
On July 5, 2024, upon the underwriter’s partial exercise of the Over-Allotment Option, the Company sold an additional 113,083 Ordinary Shares at $4.00 per share. As a result, the Company has raised gross proceeds of $6,452,332 in the IPO, including the partial exercise of the Over-Allotment Option, before deducting underwriting discounts and offering expenses.
On May 6, 2025, the Company established a new, directly wholly-owned subsidiary, Raytech Innovation Limited, incorporated in Hong Kong. As of the date of this prospectus, Raytech Innovation Limited has not commenced operations and has no assets.
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Corporate Structure
The following diagram illustrates our corporate structure as of the date of this prospectus:
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Raytech Holding’s consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and assumptions. Raytech Holding’s actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
Leveraging our expertise in the personal care electrical appliance industry, we aim to promote consumer lifestyles and drive the awareness of personal grooming. Through Raytech Holding’s wholly-owned subsidiary in Hong Kong, Pure Beauty, we principally engage in the sourcing and wholesaling of personal care electrical appliances for international brand owners. We also provide product design and development collaboration as a value-added service for our customers. Our customers are brand owners of personal care electrical appliances who market and sell their personal care electrical appliances products to end consumers. Commencing our operation in 2013, we have accumulated over 10 years of experience in the industry.
Over years of operation, we have sourced and wholesaled a wide range of personal care electrical appliances, which can be broadly classified into six major categories: (i) hair styling series, including hair dryer, hair straightener and curling iron; (ii) trimmer series, including facial shaver, nose trimmer and eyebrow trimmer; (iii) eyelash curler; (iv) nail care series; (v) tooling; and (vi) other personal care appliance series, including body and facial brush, reset brush, callus remover, sonic peeling, handy fan and others. In particular, we are specialized in sourcing and wholesaling hair dryers within our hair styling series which primarily include salon-type hair protection and styling functions or compact design for travel.
Our customers are brand owners of personal care electrical appliances including, Koizumi Corporation Inc, one of the top 10 sellers in terms of retail volume in the personal care electrical appliance market in Japan as stated in “Personal Care Appliances in Japan” by Euromonitor International in December 2023. We maintain long term business relationships with our customers. Leveraging our substantial experience and expertise in the personal care electrical appliances industry, we believe we are well positioned to maintain our relationships with our current customers, and explore our market share in the U.S., Europe and other Asia markets in the near future.
Since our inception, our business has continued to generate revenues and positive profits. Our revenue increased significantly from HKD33,017,199 for the six months ended September 30, 2023 to HKD43,248,906 (US$5,566,641) for the six months ended September 30, 2024, representing an increase of 31.0%. Our net income decreased from HKD6,418,069 for the six months ended September 30, 2023 to HKD4,652,035 (US$598,771) for the six months ended September 30, 2024, representing a decrease of 27.5%, mainly due to an increase in IPO related professional expenses.
Key Factors that Affect Results of Operations
Our results of operations have been and will continue to be affected by a number of factors, including those set out below:
Competition from other sellers in the market
The personal care electric appliances sourcing market is relatively fragmented and competitive. We primarily compete with other sourcing offices in the industry and indirectly compete with manufacturers based in South Asia. We compete based on our product quality, research and development capabilities, established customer relationships and our experienced management team. Our current and future competitors may have longer operating histories, larger and more established customer bases, better manufacturer relationships, better supply chain capabilities, or greater financial, technical, or marketing resources than we do. Competitors may leverage their experience and resources to compete with us in a variety of ways, including investing more heavily in sales and marketing, adopting more aggressive pricing strategies, and making acquisitions for the expansion of their products. There can be no assurance that we will be able to compete successfully against current or future competitors, and such competition may have a material adverse impact on our business, financial condition, and results of operation.
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Our ability to retain existing customers and attract new customers
Our success depends on our ability to maintain good relationships with our existing customers and increase sales to them over time, as a significant amount of current net revenue is generated from sales to a limited number of existing customers. If we are unable to satisfy our existing customer needs in terms of product quality or service level, our business transactions with our customers may decline, and our operating results and financial conditions would be adversely impacted in a material manner.
In addition, our future success depends in part on our ability to attract new customers and continue to expand our customer base. In order to attract new customers, we must increase our investment in sales and marketing function across markets and recruit the right talent to drive the expansion efforts. Such investment and recruitment activities may not necessarily yield an increase in revenue, and even if they do, the expenses we will incur may more than offset any increase in revenue, which would harm our business, financial condition, and growth prospects.
Our ability to manage costs of raw materials or transportation
Changes in the costs of raw materials or transportation indirectly affect our cost structure. Any increase in production costs may be passed on to us, but we might not be able to pass on all or any part of the subsequent increase in costs to our customers, which may have a material adverse effect on our financial performance. We do not have long-term contracts with third-party contract manufacturers and raw material vendors. We usually enter into fixed-price contracts with vendors and agree on raw materials pricing concurrently with our acceptance of each customer order, but in some cases a short time gap may be inevitable. Where market forces drive up raw material costs, we may from time to time fail to negotiate price terms that are advantageous to us and hence put pressure on our profit margin.
A downturn in general economic conditions
The majority of our revenue was derived from sales to the Japanese consumer market, with future expansion strategies into the U.S., Europe and Asia market. In recent years, the global economic indicators have shown mixed signs, and the future growth of the economies are subject to many factors beyond our control. A downturn in the economy could adversely impact consumer purchases of discretionary items such as personal care electric appliances. Factors that could affect consumers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates and tax rates, the availability of consumer credit, and consumer confidence in future economic conditions. In the event of an economic downturn, we could experience lower than expected net sales, which could force us to delay or slow our growth strategy and have a material adverse effect on our business, financial condition, profitability, and cash flow.
Economic, political and social conditions in mainland China and Hong Kong, as well as its government policies, laws and regulations
Our key operations are in Hong Kong. However, due to the long arm provisions under the current laws and regulations of mainland China, the PRC government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of Raytech Holding’s Ordinary Shares. Accordingly, our business, prospects, financial condition, and results of operations may be influenced to a significant degree by the political, economic, and social conditions in the PRC generally and by the continued economic growth in mainland China as a whole. Accordingly, our results of operations and prospects are, to a significant degree, subject to economic, political, and legal developments in the PRC.
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Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. However, there is no assurance that there will not be any changes in the economic, political, and legal environment in Hong Kong in the future. Since our operation is based in Hong Kong, any change of such political arrangements may pose immediate threat to the stability of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financial positions.
Results of Operations
For the Six Months ended September 30, 2024, compared to Six Months Ended September 30, 2023
The following table sets forth a summary of the consolidated results of operations of us for the periods indicated, both in absolute amount and as a percentage of its total revenues.
| (Unaudited) For the six months ended September 30, | ||||||||||||||||||||
| 2023 | 2024 | |||||||||||||||||||
| HKD | % of revenue | HKD | US$ | % of revenue | ||||||||||||||||
| Revenue | ||||||||||||||||||||
| Sales of products | 26,011,185 | 78.8 | % | 42,101,829 | 5,418,999 | 97.3 | % | |||||||||||||
| Sales of tooling | 7,006,014 | 21.2 | % | 1,147,077 | 147,642 | 2.7 | % | |||||||||||||
| 33,017,199 | 100.0 | % | 43,248,906 | 5,566,641 | 100.0 | % | ||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Merchandise costs | (24,305,564 | ) | (73.6 | )% | (34,100,724 | ) | (4,389,163 | ) | (78.8 | )% | ||||||||||
| Selling, general and administrative expenses | (1,751,531 | ) | (5.3 | )% | (5,229,459 | ) | (673,093 | ) | (12.1 | )% | ||||||||||
| Total operating expenses | (26,057,095 | ) | (78.9 | )% | (39,330,183 | ) | (5,062,256 | ) | (90.9 | )% | ||||||||||
| Income from operations | 6,960,104 | 21.1 | % | 3,918,723 | 504,385 | 9.1 | % | |||||||||||||
| Other income (expenses) | ||||||||||||||||||||
| Interest income | 615,405 | 1.9 | % | 1,431,474 | 184,248 | 3.3 | % | |||||||||||||
| Interest expenses | (1,657 | ) | * | - | - | * | ||||||||||||||
| Loss from foreign currency exchange | (16,334 | ) | * | (407,242 | ) | (52,417 | ) | (0.9 | )% | |||||||||||
| Total other income, net | 597,414 | 1.8 | % | 1,024,232 | 131,831 | 2.4 | % | |||||||||||||
| Income before income taxes | 7,557,518 | 22.9 | % | 4,942,955 | 636,216 | 11.4 | % | |||||||||||||
| Income tax expense | (1,139,449 | ) | (3.5 | )% | (290,920 | ) | (37,445 | ) | (0.7 | )% | ||||||||||
| Net income | 6,418,069 | 19.4 | % | 4,652,035 | 598,771 | 10.8 | % | |||||||||||||
| * | Less than 0.1% |
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Revenue
| (Unaudited) For the Six Months ended September 30, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Sales of products | ||||||||||||
| Hair styling series | 20,112,210 | 19,096,339 | 2,457,923 | |||||||||
| Trimmer series | 4,507,626 | 20,856,897 | 2,684,527 | |||||||||
| Eyelash curler | 165,148 | 210,330 | 27,072 | |||||||||
| Nail care series | 525,825 | 898,966 | 115,707 | |||||||||
| Other personal care appliances | 700,376 | 1,039,297 | 133,770 | |||||||||
| 26,011,185 | 42,101,829 | 5,418,999 | ||||||||||
| Sales of tooling | 7,006,014 | 1,147,077 | 147,642 | |||||||||
| Total | 33,017,199 | 43,248,906 | 5,566,641 | |||||||||
For the six months ended September 30, 2023, and 2024, we generated our revenue primarily through sales of personal care products.
Our revenue increased by 31.0% to HKD43,248,906 (US$5,566,641) for the six months ended September 30, 2024 from HKD33,017,199 for the six months ended September 30, 2023. The increase was principally driven by an increase in sales in our trimmer series within our personal care products, which are mostly driven by engaging new customers.
For the six months ended September 30, 2023, and 2024, we generated significant sales to our two key customers. These customers are a Japanese corporation and a multi-national corporation, respectively, both with established global brands across a myriad of sectors, including but not limited to, beauty, audio and electric cooking and home appliances.
Merchandise costs
The following table shows segregated merchandise costs by major cost items for the six months ended September 30, 2023 and 2024, respectively:
| (Unaudited) For the six months ended September 30, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Purchases | 18,468,714 | 32,178,642 | 4,141,769 | |||||||||
| Tooling costs | 4,907,700 | 705,890 | 90,856 | |||||||||
| Commissions | 869,796 | 1,149,916 | 148,008 | |||||||||
| Freight, transport, and testing and inspection | 59,354 | 66,276 | 8,530 | |||||||||
| Total | 24,305,564 | 34,100,724 | 4,389,163 | |||||||||
Our merchandise costs increased by 40.3% to HKD34,100,724 (US$4,389,163) for the six months ended September 30, 2024 from HKD24,305,564 for the six months ended September 30, 2023. The increase was in line with our increase in sales of products.
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Selling, general and administrative expenses
For the six months ended September 30, 2023 and 2024, our selling, general and administrative expenses consisted of staff costs, rental expenses, transport and travelling, selling and marketing, depreciation, legal and professional fees and auditor’s remuneration. The following table sets forth a breakdown of our selling, general and administrative expenses for the six months ended September 30, 2023 and 2024:
| (Unaudited) For the six months ended September 30, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Staff costs | 135,684 | 1,659,978 | 213,659 | |||||||||
| Rental expenses | 150,000 | 150,000 | 19,307 | |||||||||
| Transport and travelling | 206,606 | 421,656 | 54,272 | |||||||||
| Selling and marketing | 46,167 | 12,206 | 1,571 | |||||||||
| Depreciation | 54,214 | - | - | |||||||||
| Legal and professional fees | 5,305 | 1,187,649 | 152,864 | |||||||||
| Auditor’s remuneration | 1,084,767 | 1,724,497 | 221,963 | |||||||||
| Others | 68,788 | 73,473 | 9,457 | |||||||||
| Total | 1,751,531 | 5,229,459 | 673,093 | |||||||||
Staff costs
Our staff costs increased by 1,123.4% to HKD1,659,978 (US$213,659) for the six months ended September 30, 2024 from HKD135,684 for the six months ended September 30, 2023 mainly due to an increase in salaries and the addition of compensation fees for audit committee members.
Rental expenses
Our rental expenses mainly represented rental expenses for Hong Kong office. Our rental and office expenses were HKD150,000 and HKD150,000 (US$19,307) for the six months ended September 30, 2023 and 2024, respectively.
Transport and travelling
For the six months ended September 30, 2023, and 2024, our transport and travelling consisted of motor vehicle running cost, travel and communication expenses and other travel related expenses. Our transport and travelling expenses increased by 104.1%, primarily due to an increase in business travel for professional parties relating to the IPO.
Selling and marketing
For the six months ended September 30, 2023 and 2024, our selling and marketing expenses decreased by 73.6% from HKD46,167 for the six months ended September 30, 2023 to HKD12,206 (US$1,571) for the six months ended September 30, 2024. The decrease was principally driven by lower marketing expenses.
Depreciation
Our depreciation mainly represented depreciation for our property and equipment. Our depreciation for our property and equipment decreased from HKD54,214 for the six months ended September 30, 2023 to nil for the six months ended September 30, 2024 due to our property and equipment having fully depreciated.
Legal and professional fees
Our legal and professional fees increased by 22287.4% to HKD1,187,649 (US$152,864) for the six months ended September 30, 2024 from HKD5,305 for the six months ended September 30, 2023, primarily due to an increase in IPO-related expenses, such as service fees for legal counsel and investor relations service provider.
Others
Our other general and administrative expenses mainly consisted of bank charges, cleaning charges, courier and postage, insurance, printing and stationery and other miscellaneous expenses. Our other general and administrative expenses increased to HKD73,473 (US$9,457) for the six months ended September 30, 2024 from HKD68,788 for the six months ended September 30, 2023 due primarily to an increase in bank charges.
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Income from operations and margin
Our overall income from operations decreased by 43.7% to HKD3,918,723 (US$504,385) for the six months ended September 30, 2024 from HKD6,960,104 for the six months ended September 30, 2023, primarily due to the increase in IPO-related expenses. Our overall gross profit margin decreased by 5.2% to 21.2% for the six months ended September 30, 2024 from 26.4% for the six months ended September 30, 2023, primarily due to the lower margin profiles for a new customer and fewer sales of tooling.
Provision for income tax expense
Our income tax expenses amounted to HKD290,920 (US$37,445) for the six months ended September 30, 2024 and amounted to HKD1,139,449 for the six months ended September 30, 2023. We are subject only to the Hong Kong corporate tax regime. Starting with the fiscal year commencing on April 1, 2018, the two-tiered profits tax regime in Hong Kong took effect, under which the tax rate is 8.25% for assessable profits on the first HKD2,000,000 profit generated by the Company in a fiscal year and 16.5% for any assessable portion of our profits exceeding HKD2,000,000 in a fiscal year.
Net income
Our net income decreased by 27.5% to HKD4,652,035 (US$598,771) for the six months ended September 30, 2024 as compared to HKD6,418,069 for the six months ended September 30, 2023. The decrease in net income was predominantly due to an increase in selling, general and administrative expenses.
For the year ended March 31, 2023 compared to year ended March 31, 2024
The following table sets forth a summary of the consolidated results of operations of us for the periods indicated, both in absolute amount and as a percentage of our total revenues.
| For the years ended March 31, | ||||||||||||||||||||
| 2023 | 2024 | |||||||||||||||||||
| HKD | % of revenue | HKD | US$ | % of revenue | ||||||||||||||||
| Revenue | 45,518,239 | 100.0 | % | 66,972,301 | 8,557,776 | 100.0 | % | |||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Merchandise costs | (34,046,287 | ) | (74.8 | )% | (52,067,436 | ) | (6,653,220 | ) | (77.7 | )% | ||||||||||
| Selling, general and administrative expenses | (4,277,677 | ) | (9.4 | )% | (3,545,369 | ) | (453,030 | ) | (5.3 | )% | ||||||||||
| Total operating expenses | (38,323,964 | ) | (84.2 | )% | (55,612,805 | ) | (7,106,250 | ) | (83.0 | )% | ||||||||||
| Income from operations | 7,194,275 | 15.8 | % | 11,359,496 | 1,451,526 | 17.0 | % | |||||||||||||
| Interest income | 143,352 | 0.3 | % | 1,416,354 | 180,983 | 2.1 | % | |||||||||||||
| Interest expense | (7,151 | ) | * | (2,028 | ) | (259 | ) | * | ||||||||||||
| Gain (loss) from foreign currency exchange | 143,450 | 0.3 | % | (20,846 | ) | (2,664 | ) | * | ||||||||||||
| Other income, net | - | * | 818 | 105 | * | |||||||||||||||
| Total other income, net | 279,651 | 0.6 | % | 1,394,298 | 178,165 | 2.1 | % | |||||||||||||
| Income before income taxes | 7,473,926 | 16.4 | % | 12,753,794 | 1,629,691 | 19.0 | % | |||||||||||||
| Income tax expense | (1,181,056 | ) | (2.6 | )% | (2,817,000 | ) | (359,959 | ) | (4.2 | )% | ||||||||||
| Net income | 6,292,870 | 13.8 | % | 9,936,794 | 1,269,732 | 14.8 | % | |||||||||||||
| * | Less than 0.1% |
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Revenue
| For the years ended March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Sales of products | ||||||||||||
| Hair styling series | 28,202,591 | 31,833,932 | 4,067,766 | |||||||||
| Trimmer series | 8,573,741 | 22,684,148 | 2,898,599 | |||||||||
| Eyelash curler | 1,407,342 | 804,863 | 102,846 | |||||||||
| Neck care series | - | - | - | |||||||||
| Nail care series | 1,217,577 | 1,413,106 | 180,568 | |||||||||
| Other personal care appliances | 2,981,513 | 3,230,238 | 412,763 | |||||||||
| 42,382,764 | 59,966,287 | 7,662,542 | ||||||||||
| Sales of tooling | 3,135,475 | 7,006,014 | 895,234 | |||||||||
| Total | 45,518,239 | 66,972,301 | 8,557,776 | |||||||||
For the years ended March 31, 2023 and 2024, we generated our revenue primarily through sales of personal care products.
Our revenue increased by 47.1% to HKD66,972,301 (US$8,557,776) for the year ended March 31, 2024 from HKD45,518,239 for the year ended March 31, 2023. The increase was principally driven by a significant increase in sales in our hair styling series and new tooling revenue generated from manufacturing multiple tools, molds and assembly equipment as part of tooling program for our customers, which are mostly driven by engaging new customers.
For the years ended March 31, 2023 and 2024, we generated significant sales to our key customer. This key customer is a Japanese corporate with established global brands across a myriad of sectors, including but not limited to, beauty, audio and electric cooking and home appliances.
Merchandise costs
The following table shows disaggregated merchandise costs by major cost items for the years ended March 31, 2023 and 2024, respectively:
| For the years ended March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Purchases | 29,657,771 | 44,859,554 | 5,732,191 | |||||||||
| Tooling cost | 2,196,780 | 4,907,700 | 627,110 | |||||||||
| Commissions | 2,051,518 | 2,123,786 | 271,379 | |||||||||
| Freight, transport, and testing and inspection | 140,218 | 176,396 | 22,540 | |||||||||
| Total | 34,046,287 | 52,067,436 | 6,653,220 | |||||||||
Our merchandise costs increased by 52.9% to HKD52,067,436 (US$6,653,220) for the year ended March 31, 2024 from HKD34,046,287 for the year ended March 31, 2023. The increase was in line with the increase in our revenue.
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Selling, general and administrative expenses
For the years ended March 31, 2023 and 2024, our selling, general and administrative expenses consisted of staff costs, rental expenses, transport and travelling, selling and marketing, depreciation, legal and professional fees, auditor’s fees and consulting fees. The following table sets forth a breakdown of our general and administrative expenses for the years ended March 31, 2023 and 2024:
| For the years ended March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Staff costs | 724,693 | 717,506 | 91,684 | |||||||||
| Rental expenses | 300,000 | 300,000 | 38,334 | |||||||||
| Transport and travelling | 183,875 | 428,962 | 54,813 | |||||||||
| Selling and marketing | 124,641 | 123,820 | 15,822 | |||||||||
| Depreciation | 116,496 | 90,345 | 11,544 | |||||||||
| Legal and professional fees | 31,322 | 72,003 | 9,201 | |||||||||
| Auditor’s remuneration | 2,670,548 | 1,665,093 | 212,767 | |||||||||
| Others | 126,102 | 147,640 | 18,865 | |||||||||
| Total | 4,277,677 | 3,545,369 | 453,030 | |||||||||
Staff costs
Our staff costs decreased by 1.0% to HKD717,506 (US$91,684) for the year ended March 31, 2024 from HKD724,693 for the year ended March 31, 2023 mainly due to that there was a resignation during the year.
Rental expenses
Our rental expenses mainly represented rental expenses for our Hong Kong office. Our rental and office expenses remain unchanged at HKD300,000 (US$38,334) for the years ended March 31, 2023 and 2024.
Transport and travelling
For the years ended March 31, 2023 and 2024, our transport and travelling expenses increased by 133.3%, from HKD183,875 to HKD428,962 (US$54,813), primarily due to an increase in business travel.
Selling and marketing
For the years ended March 31, 2023 and 2024, our selling and marketing expenses decreased by 0.7% from HKD124,641 for the years ended March 31, 2023 to HKD123,820 (US$15,822) for the year ended March 31, 2024. The decrease was principally driven by lower marketing expenses.
Depreciation
Our depreciation mainly represented depreciation for our property and equipment. Our depreciation for our property and equipment decreased from HKD116,496 for the year ended March 31, 2023 to HKD90,345 (US$11,544) for the year ended March 31, 2024 due to the lower depreciation of our property and equipment for the current period.
Legal and professional fees
Our legal and professional fees increased by 129.9% to HKD72,003 (US$9,201) for the year ended March 31, 2024 from HKD31,322 for the year ended March 31, 2023, primarily due to incurring expenses in connection with the business restructuring for the preparation of public listing.
Others
Our other general and administrative expenses mainly consisted of bank charges, cleaning charges, courier and postage, insurance, printing and stationery and other miscellaneous expenses. Our other general and administrative expenses increased to HKD147,640 (US$18,865) for the year ended March 31, 2024 from HKD126,102 for the year ended March 31, 2023 due primarily to an increase in printing and stationery expenses, insurance, utilities and bank charges caused by inflation.
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Income from operations
Our overall income from operations increased by 57.9% to HKD11,359,496 (US$1,451,526) for the year ended March 31, 2024 from HKD7,194,275 for the year ended March 31, 2023. The increase was principally driven by a significant increase in sales in our hair styling series and new tooling revenue generated from manufacturing multiple tools, molds and assembly equipment as part of tooling program for our customers as well as engaged new customers.
Provision for income tax expense
We are subject only to Hong Kong corporate tax regime. Hong Kong’s corporate tax rate is 16.5% for taxable income earned in Hong Kong. Our income tax expenses amounted to HKD2,817,000 (US$359,959) for the year ended March 31, 2024 and amounted to HKD1,181,056 for the year ended March 31, 2023.
Net income
Our net income increased by 57.9% to HKD9,936,794 (US$1,269,732) for the year ended March 31, 2024 as compared to HKD6,292,870 for the year ended March 31, 2023. The increase in net income was predominantly due to an increase in revenue and interest income and a decrease in selling, general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth a breakdown of our current assets and liabilities as of the dates indicated.
| As of March 31, | (Unaudited) As of September 30, | |||||||||||
| 2024 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| CURRENT ASSETS | ||||||||||||
| Cash and cash equivalents | 35,885,666 | 81,047,102 | 10,431,712 | |||||||||
| Accounts receivable, net | 14,557,523 | 13,476,241 | 1,734,550 | |||||||||
| Merchandise inventories, net | 1,855,686 | 1,135,068 | 146,096 | |||||||||
| Amount due from a director | 145,166 | - | - | |||||||||
| Taxes receivables | 395,005 | 104,085 | 13,397 | |||||||||
| Prepayments | 5,000 | 5,000 | 644 | |||||||||
| TOTAL CURRENT ASSETS | 52,844,046 | 95,767,496 | 12,326,399 | |||||||||
| CURRENT LIABILITIES | ||||||||||||
| Accounts payable | 732,340 | 1,098,929 | 141,445 | |||||||||
| Accounts payable - related party | 24,278,340 | 20,418,181 | 2,628,059 | |||||||||
| Accruals | 1,018,618 | 920,901 | 118,531 | |||||||||
| Contract liabilities | 1,008,415 | - | - | |||||||||
| TOTAL CURRENT LIABILITIES | 27,037,713 | 22,438,011 | 2,888,035 | |||||||||
| NET CURRENT ASSETS | 25,806,333 | 73,329,485 | 9,438,364 | |||||||||
Accounts receivable, net
Accounts receivable represented receivables from our customers arising from our sales. We generally grant our customers a credit period ranging from 30 to 120 days, depending on their reputation, transaction history and the products purchased. Our accounts receivable decreased by 7.4% to HKD13,476,241 (US$1,734,550) as of September 30, 2024 from HKD14,557,523 as of March 31, 2024, which was primarily driven by a decrease in the number of orders near September.
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During the period from April 1, 2024 to September 30, 2024, we have not recorded any provision for doubtful accounts as our customers have always settled full payments within the credit periods or short extended credit periods.
Our management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. When collection of the original invoice amounts is no longer probable, we will either partially or fully write-off the balance against the allowance for doubtful accounts. In establishing the required allowance for doubtful accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history and financial conditions of the customers. Our management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after all means of collection have been exhausted and that the likelihood of collection is not probable.
Merchandise inventories, net
Our inventories represented products that we sourced and sell to our customers. Our inventories increased to HKD1,135,068 (US$146,096) as of September 30, 2024 from HKD1,855,686 as of March 31, 2024. We record goods in transit based on freight on board destination.
Taxes receivables
Our taxes receivables were HKD104,085 (US$13,397) as of September 30, 2024, compared to our taxes receivables of HKD395,005 as of March 31, 2024.
Amount due from a director
The amounts are due from a shareholder, Mr. Ching Tim Hoi. The amounts due from a shareholder decreased to nil as of September 30, 2024 from HKD145,166 as of March 31, 2024 due to the shareholder having fully repaid the amount.
The receivable represented payments made on behalf of the director and shareholder by Pure Beauty. The loan agreement provides that borrowings are interest free and are payable on demand.
Prepayments
Our prepayments remained HKD5,000 (US$644) as of September 30, 2024 from HKD5,000 as of March 31, 2024.
Accounts payable and account payable – related party
Our total accounts payable are mainly related to the purchase of apparel products from our collaborating manufacturers and a related party. Our collaborating manufacturers usually granted us a credit period of 120 days.
Our total accounts payable decreased by 14.0% to HKD21,517,110 (US$2,769,504) as of September 30, 2024 from HKD25,010,680 as of March 31, 2024 due to fasten payment to related party during the six months ended September 30, 2024 for cost of tooling.
Accruals
Our accruals decreased to HKD920,901 (US$118,531) as of September 30, 2024 from HKD1,018,618 as of March 31, 2024, principally due to a decrease in provision for commissions.
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Contract liabilities
Contract liabilities are recognized if the Company receives consideration in advance of performance, which is mainly in relation to emerging and other services. As of March 31, 2024 and September 30, 2024, the contract liabilities of the Company were HKD1,008,415 and nil.
Cash Flows
Our use of cash is primarily related to operating activities and payment of dividends. We have historically financed our operations primarily through the cash flow generated from our operations.
The following table sets forth a summary of our cash flows information for the years indicated:
| (Unaudited) Six months ended September 30, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Cash at the beginning of the period | 21,362,580 | 35,885,666 | 4,618,906 | |||||||||
| Net cash generated from operating activities | 16,412,961 | 2,621,059 | 337,361 | |||||||||
| Net cash generated from investing activities | 210,702 | 145,166 | 18,684 | |||||||||
| Net cash (used in) generated from financing activities | (257,702 | ) | 42,772,241 | 5,505,289 | ||||||||
| Effect of foreign exchange on cash | 35,039 | (377,030 | ) | (48,528 | ) | |||||||
| Cash at the end of the period | 37,763,580 | 81,047,102 | 10,431,712 | |||||||||
Cash generated from operating activities
Our cash inflow from operating activities was principally from receipt of sales. Our cash outflow used in operating activities was principally for payment of purchases of manufactured goods, staff costs and other operating expenses.
For the six months ended September 30, 2023, net cash generated from operating activities of HKD16,412,961 was primarily resulted from our net income of HKD6,418,069, as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property and equipment of HKD2,928, amortization of right-of-use asset of HKD51,286 and loss from unrealized foreign currency translation of HKD17,918. Changes in operating assets and liabilities mainly included: (i) a decrease in prepayments of HKD54,000; (ii) an increase in accounts payable to a related party of HKD12,178,316; and (iii) an increase in taxes payables of HKD1,139,449; and partially offset by (i) an increase in accounts receivable of HKD654,485; (ii) an increase in merchandise inventories of HKD681,683; (iii) a decrease in accounts payable of HKD150,807; (iv) a decrease in accruals of HKD203,832; (v) a decrease in contract liabilities of HKD1,705,854; and (vi) a decrease in operating lease obligation of HKD52,344.
For the six months ended September 30, 2024, net cash generated from operating activities of HKD2,621,059 (US$337,361) was primarily resulted from our net income of HKD4,652,035 (US$598,771), as adjusted for non-cash items and change in operating activities. Adjustments for loss from unrealized foreign currency translation accounted for HKD406,530 (US$52,325). Changes in operating assets and liabilities mainly included: (i) a decrease in accounts receivable of HKD978,597 (US$125,957); (ii) a decrease in merchandise inventories of HKD720,618 (US$92,752); (iii) an increase in accounts payable of HKD372,876 (US$47,994) and (iv) a decrease in taxes receivables of HKD290,920 (US$37,445); and partially offset by (i) a decrease in accounts payable to a related party of HKD3,694,385 (US$475,511), (ii) a decrease in contract liabilities of HKD1,008,415 (US$129,795) and(ii) decrease in accruals of HKD97,717 (US$12,577).
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Cash generated from investing activities
For the six months ended September 30, 2023, net cash generated from investing activities was HKD210,702, which is driven by a repayment of shareholder.
For the six months ended September 30, 2024, net cash generated from investing activities was HKD145,166 (US$18,684), which is driven by a repayment of shareholder.
Net cash (used in) generated from financing activities
For the six months ended September 30, 2023, net cash used in financing activities was HKD257,702, which was primarily related to the deferred IPO costs.
For the six months ended September 30, 2024, net cash generated from financing activities was HKD42,772,241 (US$5,505,289), which was primarily related to the proceed from Initial Public Offering of shares.
Capital Expenditures
We did not incur any capital expenditures for the six months ended September 30, 2023 and 2024.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, including arrangements that would affect its liquidity, capital resources, market risk support, and credit risk support or other benefits.
The following table sets forth a breakdown of our current assets and liabilities as of the dates indicated.
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| CURRENT ASSETS | ||||||||||||
| Cash and cash equivalents | 21,362,580 | 35,885,666 | 4,585,500 | |||||||||
| Accounts receivable, net | 6,787,330 | 14,557,523 | 1,860,172 | |||||||||
| Amount due from a director | 992,026 | 145,166 | 18,550 | |||||||||
| Merchandise inventories | - | 1,855,686 | 237,121 | |||||||||
| Taxes receivables | 514,007 | 395,005 | 50,474 | |||||||||
| Prepayments | 95,000 | 5,000 | 639 | |||||||||
| Total current assets | 29,750,943 | 52,844,046 | 6,752,456 | |||||||||
| CURRENT LIABILITIES | ||||||||||||
| Accounts payable | 735,528 | 732,340 | 93,579 | |||||||||
| Accounts payable - related party | 8,768,420 | 24,278,340 | 3,102,306 | |||||||||
| Contract liabilities | 1,705,854 | 1,008,415 | 128,856 | |||||||||
| Accruals | 616,078 | 1,018,618 | 130,160 | |||||||||
| Operating lease obligation, current portion | 87,972 | - | - | |||||||||
| Total current liabilities | 11,913,852 | 27,037,713 | 3,454,901 | |||||||||
| Net current assets | 17,837,091 | 25,806,333 | 3,297,555 | |||||||||
Accounts receivable, net
Accounts receivable represented receivables from our customers arising from our sales. We generally grant our customers a credit period ranging from 30 to 120 days, depending on their reputation, transaction history and the products purchased. Our accounts receivable increased by 114.5% to HKD14,557,523 (US$1,860,172) as of March 31, 2024 from HKD6,787,330 as of March 31, 2023, which was primarily driven by an increase in number of orders as well as engaged new customers.
During the period from April 1, 2020 to March 31, 2024, we have not recorded any provision for doubtful accounts as our customers have always settled full payments within the credit periods or short extended credit periods.
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Our management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. When collection of the original invoice amounts is no longer probable, we will either partially or fully write-off the balance against the allowance for doubtful accounts. In establishing the required allowance for doubtful accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history and financial conditions of the customers. Our management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after all means of collection have been exhausted and the likelihood of collection is not probable.
Merchandise inventories, net
Our inventories represented products that we sourced and sold to our customers. Our inventories increased to HKD1,855,686 (US$237,121) as of March 31, 2024 from Nil balance as of March 31, 2023. The stock level is Nil as of March 31, 2023 as there were no shipments received from our manufacturers since we turned over our last stocks to our customers. We record goods in transit based on freight on board destination.
Taxes receivables and taxes payables
Our taxes receivables were HKD395,005 (US$50,474) as of March 31, 2024, compared to our taxes payables of HKD514,007 as of March 31, 2023.
Prepayments
Our prepayments were HKD 5,000 (US$639) as of March 31, 2024, primarily attributable to a prepayment for administrative expenses. This represents a decrease of 94.7% compared to the previous period, as all rental prepayments for office expenses were recognized as rental expenses last year. There were no such prepayments for the current year.
Amount due from a director
The amounts are due from our CEO, Chairman, director and controlling shareholder, Mr. Ching Tim Hoi. The amounts due from Mr. Ching decreased by 85.4% to HKD145,166 (US$18,550) as of March 31, 2024 from HKD992,026 as of March 31, 2023 due to repayment from Mr. Ching.
The receivable represented payments made on behalf of Mr. Ching by Pure Beauty. The loan agreement provides that borrowings are interest-free and are payable on demand. The amount has been fully settled on June 28, 2024.
Accounts payable and account payable - related party
Our total accounts payable are mainly related to the purchase of apparel products from our collaborating manufacturers and a related party. Our collaborating manufacturers usually granted us a credit period of 120 days.
Our total accounts payable increased by 163.2% to HKD25,010,680 (US$3,195,885) as of March 31, 2024 from HKD9,503,948 as of March 31, 2023 principally due to slower payment to related parties during the year ended March 31, 2024 compared with corresponding period in 2023.
Accruals
Our accruals increased to HKD1,018,618 (US$130,160) as of March 31, 2024 from HKD616,078 as of March 31, 2023, principally due to an increase in provision for commissions which is in line with the increase in sales.
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Cash Flows
Our use of cash is primarily related to operating activities and deferred initial public offering costs. We have historically financed our operations primarily through the cash flow generated from our operations.
The following table sets forth a summary of our cash flows information for the years indicated:
| For the years ended March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Cash and cash equivalents at the beginning of the period | 12,290,472 | 21,362,580 | 2,729,728 | |||||||||
| Net cash generated from operating activities | 10,961,832 | 15,748,279 | 2,012,329 | |||||||||
| Net cash generated from investing activities | 1,444,872 | 846,860 | 108,212 | |||||||||
| Net cash used in financing activities | (3,176,871 | ) | (2,075,897 | ) | (265,260 | ) | ||||||
| Effect of foreign exchange on cash, cash equivalents and restricted cash | (157,725 | ) | 3,844 | 491 | ||||||||
| Cash and cash equivalent at the end of the period | 21,362,580 | 35,885,666 | 4,585,500 | |||||||||
Cash generated from operating activities
Our cash inflow from operating activities was principally from receipt of sales. Our cash outflow used in operating activities was principally for payment of purchases of manufactured goods, staff costs and other operating expenses.
For the year ended March 31, 2023, net cash generated from operating activities of HKD10,961,832 primarily resulted from our net income of HKD6,292,870, as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property, plant and equipment and amortization of right-of-use assets of HKD116,497 and unrealized FX loss of HKD178,454. Changes in operating assets and liabilities mainly included: (i) a net increase in total accounts payable of HKD 4,563,636 due to larger stock purchases; and (ii) an increase in accrued liabilities and other payables of HKD2,271,932 due to increase in deposits for trades; and partially offset by (i) an increase in accounts receivable of HKD907,711 due to increase in sales; (ii) an increase in deposits and prepayments of HKD10,200 related to office lease; (iii) a decrease in operating lease obligation of HKD100,849 due to principal repayment; and (iv) a decrease in taxes payable of HKD1,442,797.
For the year ended March 31, 2024, net cash generated from operating activities of HKD15,748,279 (US$2,012,329) primarily resulted from our net income of HKD9,936,794 (US$1,269,732), as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property, plant and equipment and amortization of right-of-use assets of HKD90,345 (US$11,544) and an unrealized foreign exchange gain of HKD61,043 (US$7,799). Changes in operating assets and liabilities mainly included: (i) a net increase in total accounts payable of HKD 15,548,943 (US$1,986,857) due to larger stock purchases; and (ii) an increase in accrued liabilities and other payables of HKD402,540 (US$51,437) due to increase in deposits for trades; and partially offset by (i) an increase in accounts receivable of HKD7,755,205 (US$990,967) due to increase in sales; (ii) an increase in merchandise inventories of HKD1,855,686 (US$237,121); (iii) a decrease in operating lease obligation of HKD87,972 (US$11,241) due to principal repayments; and (iv) a decrease in taxes payable of HKD119,002 (US$15,206).
Cash generated in investing activities
For the year ended March 31, 2023, net cash generated in investing activities was HKD1,444,872 which is driven by a repayment of director.
For the year ended March 31, 2024, net cash generated in investing activities was HKD846,860 (US$108,212), which is driven by a repayment of a director loan.
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Net cash used in financing activities
For the year ended March 31, 2023, net cash used in financing activities was HKD3,176,871, which was primarily related to the deferred IPO costs.
For the year ended March 31, 2024, net cash used in financing activities was HKD2,075,897 (US$265,260), which was primarily related to the deferred IPO costs.
Capital Expenditures
We did not incur any capital expenditures for the years ended March 31, 2023 and 2024.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, including arrangements that would affect its liquidity, capital resources, market risk support, and credit risk support or other benefits.
Quantitative and Qualitative Disclosure About Market Risk
Credit risk
Our assets that are potentially subject to a significant concentration of credit risk primarily consist of cash and accounts receivable.
We believe that there is no significant credit risk associated with cash in Hong Kong, which were held by reputable financial institutions. As of September 30, 2024, the cash balance of HKD81,047,102 (approximately US$10,431,712) was maintained at financial institutions in Hong Kong across 3 major reputable banks.
We have designed credit policies with an objective to minimize their exposure to credit risk. Our accounts receivable are short term in nature and the associated risk is minimal. We conduct credit evaluations on our customers and generally do not require collateral or other security from such customers. We periodically evaluate the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.
We are also exposed to risk from accounts receivables. These assets are subjected to credit evaluations. An allowance, where applicable, would make for estimated unrecoverable amounts which have been determined by reference to past default experience and the current economic environment.
Customers concentration risk
As of March 31, 2024, two customers, who are distributors representing and selling brands of well-known manufacturers from Japan, the U.S., UK, Europe and Australia accounted for 72.1 % and 27.9% of the Company’s total accounts receivable.
As of September 30, 2024, two customers, who are distributors representing and selling brands of well-known manufacturers from Japan, the U.S., UK, Europe and Australia accounted for 70.6% and 29.4% of the Company’s total accounts receivable respectively.
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For the six months ended September 30, 2023, one major customer, who is a distributor representing and selling brands of well-known manufacturers from Japan and abroad, accounted for 81.1% of the Company’s total revenues, while another customer, who is a global distributor of various consumer products, accounted for 17.1% of the Company’s total revenues.
For the six months ended September 30, 2024, two major customers, who are distributors representing and selling brands of well-known manufacturers from Japan, the U.S., UK, Europe and Australia accounted for 57.8% and 33.7% of the Company’s total revenues respectively.
Manufacturers concentration risk
As of March 31, 2024, one manufacturer accounted for 97.1% of the total balance of accounts payable. The manufacturer is a related party. As of September 30, 2024, one manufacturer accounted for 94.9% of the total balance of accounts payable. The manufacturer is a related party.
For the six months ended September 30, 2023, one manufacturer accounted for 92.7% of our total purchases. The manufacturer is a related party. For the six months ended September 30, 2024, one manufacturer accounted for 91.5% of our total purchases. The manufacturer is a related party.
Interest rate risk
Our exposure on cash flow interest rate risk mainly arises from our deposits with banks.
In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative financial instruments held by us, such as cash deposits and bank borrowings, at the end of the reporting period, we are not exposed to significant interest rate risk, as the interest rates are not expected to change significantly.
Foreign currency risk
We are exposed to foreign currency risk primarily through sales that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily US$. As HKD is currently pegged to US$, our exposure to foreign exchange fluctuations is minimal.
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BUSINESS
“The Company”, “we”, or “us” in this Business section refers to Raytech Holding Limited and its subsidiaries, unless the context otherwise indicates.
Business Overview
Leveraging our expertise in the personal care electrical appliance industry, we aim to promote consumer lifestyles and drive the awareness of personal grooming. Through Raytech Holding’s wholly-owned subsidiaries in Hong Kong, we principally engage in the sourcing and wholesaling of personal care electrical appliances for international brand owners. We also provide product design and development collaboration as a value-added service for our customers. Our current customers focus on marketing their personal care electrical appliances products mainly in Japan. Commencing our operation in 2013, we have accumulated over 10 years of experience in the industry.
Our Products
Over years of operation, we have sourced and wholesaled a wide range of personal care electrical appliances, which can be broadly classified into six major categories: (i) hair styling series, including hair dryer, hair straightener and curling iron; (ii) trimmer series, including facial shaver, nose trimmer and eyebrow trimmer; (iii) eyelash curler; (iv) nail care series; (v) tooling and (vi) other personal care appliances such as body and facial brush, reset brush, callus remover, sonic peeling, handy fan and others. In particular, along with product design and development collaboration, we are specialized in sourcing and wholesaling hair dryers within our hair styling series which primarily include salon-type hair protection and styling functions or compact design for travel.
Hair styling series:
Our sales of hair styling series constituted 62% and 48% of our total revenue for the years ended March 31, 2023 and 2024, respectively. Approximately 44% and 37% of our sale of hair styling series for the years ended March 31, 2023 and 2024, respectively, was derived from the sale of hair dryers.
Our sales of hair styling series constituted 61% and 44% of our total revenue for the six months ended September 30, 2023 and 2024, respectively. Approximately 39% and 28% of our sales of hair styling series for six months ended September 30, 2023 and 2024, respectively, was derived from the sale of hair dryers.
Major features of the salon-styled hair dryers that we have designed include:
| Negative ion technology | Help eliminate frizzy hair |
| Scirocco fan | Allows to thoroughly dry hair from the roots |
| Removable filter | Washable for easy daily cleaning and detachable for preventing dust and hair from blocking the blades |
| Compact size and lightweight | Handy for travel and home use |
Our sales of hair straighteners represented 36% and 43% of our sale of hair styling series for the years ended March 31, 2023 and 2024, respectively, and 61% and 44% of our sale of hair styling series for the six months ended September 30, 2023 and 2024, respectively. We have focused on designing hair straighteners in compact size with quick USB charging for travel and home use.
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Trimmer series:
Designed with compact size and equipped with 2-way head and face shaver and nose hair trimmer on each side, washable components, the 2-in-1 face shaver and nose trimmer sets are more popular than the face shaver and nose trimmer as two separate products.
For the years ended March 31, 2023 and 2024, 19% and 34% of our revenue related to the sale of the trimmer series. Approximately 32% and 15% of our trimmer series sold in the years ended March 31, 2023 and 2024, respectively, were 2-in-1 face shaver and nose trimmer sets.
For the six months ended September 30, 2023 and 2024, 14% and 48% of our revenue related to the sale of the trimmer series. Approximately 53% and 16% of our trimmer series sold in the six months ended September 30, 2023 and 2024, respectively, were 2-in-1 face shaver and nose trimmer sets.
Eyelash curler series:
Our eyelash curler is designed with 2-way comb either to increase the eyelash volume or to enhance panoramic appearance. The professionally-designed curved comb brush head fits the curve of upper and lower eyelashes to create natural curls. We generated approximately 3% and 1% of our revenue from this series for the years ended March 31, 2023 and 2024, respectively, and approximately 1% and 0.5% of our revenue from this series for the six months ended September 30, 2023 and 2024, respectively.
Nail care series:
Our nail care series consists of an electrical nail polisher. This series contributed 3% and 2%, respectively, to our total revenue for the years ended March 31, 2023 and 2024, and 2% and 2%, respectively, to our total revenue for the six months ended September 30, 2023 and 2024.
Other personal care appliance series:
Our other personal care appliance series comprises reset brush, callus removers, body and facial brush, sonic peeling, handy fan and others.
We generated approximately 7% and 5% of our total revenue from this series for the years ended March 31, 2023 and 2024, respectively, and approximately 2% and 2% of our total revenue from this series for the six months ended September 30, 2023 and 2024, respectively. The reset brush represented 55% and 65% of the sales of our other personal care appliance series for the years ended March 31, 2023 and 2024, respectively, and 41% and 53% of the sale of our other personal care appliance series for the six months ended September 30, 2023 and 2024, respectively.
Product Sourcing and Wholesaling
We are experienced in design and development in the personal care electrical appliance industry. Our research and development team consists of 2 full-time employees with at least 16 years of industry experience in electrical appliances engineering and supply chain management, in the aggregate. We serve our customers through sourcing or arranging the production process of personal care electrical appliance products to the manufacturers. Besides, leveraging our strong design and development capabilities and our experience in anticipating consumer preference, we are able to provide technical recommendations and solutions to or assist our customers in the design and development of the personal care electrical appliance products that meet the needs of our customers. Riding on our extensive experience and product development capability, we continue to expand and strengthen our market position.
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Our product sourcing service is summarized as follows: our sales and marketing team first receives an order from a customer who requests our expertise to examine and advise on the design and manufacturing feasibility of a product sample or design prototype of a product prepared by the customer. We forward the sample or design prototype to a manufacturer who performs a feasibility assessment of the design, specification, materials required, type of engineering and required technology and packaging of the product sample or design prototype provided by the customer. As an auxiliary service, we may suggest modifications to the design, specification, materials to be used, technology and packaging to the customer, or as requested by our customer, may jointly design and develop the products with our customer based on the requirement, standard and narrative of our customer. Upon the completion of the assessment and receipt of acceptance of the modifications from the customer, our marketing and operation team provides a price quotation to the customer. Once the quotation is accepted by the customer, we forward the finalized design, specification and customer’s requests to the manufacturer and arrange a manufacturing schedule for producing a sample at the manufacturer’s facility. The manufacturer performs an initial evaluation and quality testing on the sample of the finished product. We then provide the tested sample of the finished product to our customer. Upon the acceptance of the sample of the finished product by the customer’s quality control team, we will arrange a manufacturing schedule with the manufacturer for a mass production. After the mass production is completed, our shipping team confirms the shipping destination with our customer, arranges the shipping documents and forwards the instructions to the manufacturer who fulfills the shipment of the finished product to the customer’s destination as instructed.
We bear the costs and risks of forwarding the sample or design prototype to a manufacturer, providing suggestions for modifications of product design and specification, sending the tested sample of the finished product to our customer and shipping delay that is otherwise caused by other parties rather than the manufacturer. In the event of manufacturing defaults such as refining the product samples, manufacturing failure or delay, or delay of shipping caused by the manufacturing facility, our collaborating manufacturer bears the relative costs and risks.
We sell our personal care electrical appliances products at wholesale to our customers. As the design, prototype, specification of the personal care electrical appliances and the respective packaging, are developed under the narratives, requirements and standards of our customers, the patents of such design and product prototype are owned by our customers.
Our Customers
Our customers are brand owners of personal care electrical appliances including, (i) Koizumi Seiki Corp., one of the top 10 sellers in terms of retail volume in the personal care electrical appliance market in Japan as stated in “Personal Care Appliances in Japan” by Euromonitor International in December 2023; (ii) another customer, a U.S. home appliance manufacturer. For the years ended March 31, 2023 and 2024, we generated 91.3% and 74.1% of our total revenue, respectively, from Koizumi Seiki Corp. For the six months ended September 30, 2023, we generated 81% and 17% of our total revenue from Koizumi Seiki Corp. and another customer, who is a global distributor of various consumer products, respectively. For the six months ended September 30, 2024, we generated 57.8% and 33.7% of our total revenue from Koizumi Seiki Corp. and another customer, respectively. We maintain long term business relationships with our customers. Leveraging our experience and expertise in the personal care electrical appliances industry, we believe we are well positioned to maintain our relationships with our current customers, and explore our market share in the U.S., Europe and Asia in the near future. See “Expansion of Market” on page 7 of this prospectus.
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Collaborating Manufacturers
We have forged long-term relationships with manufacturers specialized in producing personal care electrical appliances for international brand owners who market their personal care electrical appliances globally. When selecting and evaluating manufacturers, we consider a number of business factors such as cost, quality and on-time delivery. Our collaborating manufacturers implemented applicable systems which meets the international or local standards requiring high levels of quality and safety requirements.
Our major collaborating manufacturers include: (i) Zhongshan Raytech Electrical Appliances Manufacturing Co. Ltd. (“Zhongshan Raytech”), a mainland China-based corporation controlled by our founder, Chairman and CEO, Mr. Ching Tim Hoi, and (ii) Zhongshan Leimi Electrical Appliances Company Limited (“Zhongshan Leimi”), a mainland China-based corporation. For the year ended March 31, 2024, payments to Zhongshan Raytech accounted for 88.5% of the total manufacturing costs of the Company. For the year ended March 31, 2023, payments to each of Zhongshan Raytech and Zhongshan Leimi accounted for 83.1% and 10.4%, respectively, of the total manufacturing costs of the Company. For the six months ended September 30, 2024, payments to Zhongshan Raytech accounted for 91.5% of the total manufacturing costs of the Company. For the six months ended September 30, 2023, payments to Zhongshan Raytech accounted for 92.7% of the total manufacturing costs of the Company. The factories operated by our major collaborating manufacturers are located in Zhongshan, Guangdong Province, PRC. The manufacturers have run a well-established supply chain process particularly the procurement of materials and components and manufacturer selection.
The factories operated by our major collaborating manufacturers are located in Zhongshan, Guangdong Province, PRC. The manufacturers have run a well-established supply chain process particularly the procurement of materials and components and manufacturer selection.
Zhongshan Raytech obtained certifications for its quality management system, environmental management system and occupational safety system under the standards of China Quality Certification Center (“CQC”), which is based in Beijing, PRC and is under control of the China Certification & Inspection Group, which is approved by the State General Administration for Quality Supervision and Inspection and Quarantine and the Certification and Accreditation Administration of the mainland China of the PRC. CQC is a member of IQNet Association, an international certification entity in Switzerland formed by more than 30 certification entities in major countries and those members implemented domestic standards which mirror equivalent standards established by International Organization for Standardization (“ISO”). Zhongshan Raytech obtained the following certifications issued by CQC as of September 30, 2024.
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| CQC Standard and equivalent ISO standard | Type of standard * | Date of issuance, renewal and expiration | Certificate number | ISO criteria that an organization is required to meet * | ||||
|
GB/T 19001-2016
(ISO9001:2015)
|
Quality management system |
Date of initial issuance: December 24, 2018
Date of renewal: December 20, 2024
Date of expiration: December 23, 2027 |
00122Q31058R1M/4400 |
An organization needs to demonstrate it had:
the ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements;
● facilitating opportunities to enhance customer satisfaction;
● addressing risks and opportunities associated with its context and objectives;
● the ability to demonstrate conformity to specified quality management system requirements. | ||||
|
GB/T 24001-2016
(ISO14001:2015) |
Environmental management system |
Date of initial issuance: March 1, 2019
Date of renewal: December 20, 2024
Date of expiration: February 28, 2028 |
00122E30452R1M/4400 |
An organization established, maintained and improved an environmental management system and assured itself of conformity with its stated environmental policy. It is required to demonstrate it had:
● enhancement of environmental performance;
● fulfilment of compliance obligations;
● achievement of environmental objectives. | ||||
|
GB/T 45001-2020
(ISO45001:2018)
|
Occupational health and safety (“OH&S”) management system |
Date of initial issuance: January 2, 2019
Date of renewal: December 20, 2024
Date of expiration: January 1, 2028 |
00122S30344R1M/4400 |
An organization established, implemented and maintained an OH&S management system to improve occupational, health and safety, eliminate hazards and minimize OH&S risks. An organization is required to demonstrate it had:
● continued to improve OH&S performance
● fulfilled legal and other requirements
● achieved OH&S objectives |
| * | Description of the applicable ISO standard type and requirement is presented according to the International Organization for Standardization. |
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Market and Industry Overview
As discussed in “Personal Care Electrical Appliances Market Size 2023-28 Market Research Report” by IMARC Group and “Personal Care Appliances Global Market Report 2023 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2023-2032” published by The Business Research Company, personal care electrical appliances are grooming products which primarily consist of hair care appliances (e.g. hair dryer, hair straightener, hair clippers, curling irons, hair setters, and others), hair removal appliances (e.g. trimmer, power shaver and epilator), oral care appliances such as powered tooth brush and oral irrigator, and other personal care appliances such as electrical facial brush, electrical facial cleanser, electrical eyebrow trimmer, battery-operated nail polisher. IMARC Group analyzed that the series of hair care appliances plays a major role in the total global market share of personal care electrical appliances currently.
Global Overview
The market size of the global personal care electrical appliances market expanded to US$22.75 billion in 2024 from US$21.27 billion in 2023 based on “Personal Care Appliances Global Market Report 2024 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2024-2033” published by The Business Research Company.
In its “Personal Care Electrical Appliances Market Size 2023-28 Market Research Report,” IMARC Group stated that the market size of the global personal care electrical appliances was about US$21.6 billion in 2022.
According to “Personal Care Appliances Global Market Report 2024 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2024-2033” issued by The Business Research Company, the major sellers in the global personal care appliances sector include: Conair Corporation, Dyson Ltd, Helen of Troy Limited, Colgate-Palmolive Company, Koninklijke Philips N.V., The Procter & Gamble Company, The Wahl Clipper Corporation, Vega Industries Pvt Ltd, Panasonic Corporation, Samsung Electronics Co., Ltd., LG Corporation, and Braun GmbH.
The majority of the Company’s customers are international brand owners who predominantly market their personal care electrical appliances in Japan.
A study of personal care appliances in Japan performed by Euromonitor International in December 2023 (“the study”, “the research”) found that while total retail sales volume flattened by 0.3% in 2023, from 30.7 million in 2022 to 30.8 million in 2023, the overall total sales value of personal care electrical appliances in Japan increased by 10.8% in 2023, from Japanese Yen 277.6 billion in 2022 to Japanese Yen 307.6 billion in 2023 primarily due to a growth in the average unit price and upgrades in product functions, particularly in hair care electrical appliance, in 2023. The study forecasted that retail volume sales are expected to rise to 32 million in 2024.
Statistics calculated by Euromonitor International identified that Panasonic Corp is the major personal care appliance company which represented 44.8% of the market share in the personal care electrical appliance industry in Japan in 2023. Koizumi Seiki Corp., Tescom Co. Ltd., Procter & Gamble Far East Inc., Philips Electronics Japan Ltd. and Hitachi Appliances Inc represented 7.6%, 7.6%, 5.9%, 3.6% and 3.3%, respectively, of the total market share in Japanese personal care electrical appliance industry.
Further, the research determined that the development of the personal care appliances includes three aspects:
| ● | brand premiumization and inflation |
| ● | dominance of hair care appliances |
| ● | innovation in body shavers |
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Euromonitor analyzed that although retail sales volume of personal care appliances in Japan remained steady in 2023, the sales dollar amount grew by 10.8% in 2023. Rise in unit price and product upgrades are the key factors. Personal care electrical appliance sellers continued to invest in offering high quality, authentic designs and additional value-added and unique product functions in order to justify higher unit prices.
Hair care appliances still represent a major category in personal care electrical appliances in Japan. Many new personal care appliance sellers such as Dyson, Yaman, Refa, I-ne entered the market of hair care appliances in 2016, 2021, 2019 and 2011, respectively. Traditional well-known brands such as Panasonic, Sharp and Tescom continued to elevate the quality and functions of their hair care appliances products with Panasonic retaining its strong presence in this category. The study mentioned that consumers are willing to pay for the higher price for the quality experience.
The study highlighted that the new design in body shavers by Panasonic and Yaman is expected to perform well. The new design integrated with skin care features and the slim size accommodated the needs for business travel and easier storage and portability.
Future Development
In its “Personal Care Electrical Appliances Market Size 2023-28 Market Research Report,” IMARC Group predicted that the global personal care electrical appliances market size could reach US$30.2 billion by 2028 which represents a growth rate (CAGR) of 5.5% during 2023-2028.
“Personal Care Appliances Global Market Report 2024 – By Product (Hair Care, Hair Removal, Oral Care, Other Products), By Distribution Channel (Online, Offline), By End-User (Female, Male) – Market Size, Trends, And Global Forecast 2024-2033” published by The Business Research Company anticipated that the global market value for personal care appliances is estimated to grow to US$29.68 billion by 2028, proliferating at a compound annual growth rate (CAGR) of 6.9%. It analyzed that Asia Pacific is anticipated to be the fastest growing market during the forecast period.
Allied Market Research evaluated that the expansion in the global personal care electrical appliances market from 2022 through 2031 is driven by an improvement in economic environment, an uprising in aging population and a surge in disposable income. Moreover, social media also play an instrumental role in the society and businesses utilized social media as a conduit to promote and market their brands and products. The research indicated that e-commerce channel segment is expected to record the highest CAGR of 7.4% among various distribution channels of this market during 2022 through 2031 owing to the increased association of internet and e-shopping habit of the consumers. In addition, through the advertisements and promotions of brands or products by celebrities or notable individuals, these brands and products tend to increase consumers’ awareness, trust and comfort. These sales channels help fuel the market and create bigger opportunities for personal care electrical appliances market. Allied Market Research also stated that the use of social media, a rise in disposable income, rapid urbanization and an increase in youth population in Asia-pacific regions trigger the demand for personal care appliances which would exhibit the highest CAGR of 8.4% during 2022 through 2031.
In addition, according to the analysis of Research and Markets on Personal Care Appliances Global Market Report 2024, global personal care appliances market exhibited a growth from US$21.27 billion in 2023 to US$22.75 billion in 2024 at CAGR of 7.0%. It added that the personal care appliances market size is expected to proliferate to US$29.68 billion in 2028 at CAGR of 6.9%. Major drivers include continued popularity of personal care appliances, an increase in consciousness of personal health, personal appearance and personal hygiene, growing aging population and surge in online purchase.
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Key Market Drivers and Opportunities:
| ● | rise in disposable incomes and expansion of organized retail sector; |
| ● | advertising and promotions through social media and celebrities; |
| ● | rapid technological advances and energy efficiency innovations that offering budget-friendly styling and personal care electrical appliance products, and advanced products with convenience and ease-of-use; and |
| ● | change of lifestyle pattern and fashion trends that drive customers to splurge on styling and aesthetically appealing self-grooming devices for personal care and hygiene. |
Key Market Restraints:
| ● | increasing amount of plastic waste due to disposal of electrical appliances acts as a restraint on the development of these products; and |
| ● | emerging markets are expected to continue to grow slightly slower than the developed markets in the forecast period due to lower priority in personal care and hygiene compared with the developed markets. |
COVID-19 Impact
Based on an analysis “Personal Care Electrical Appliances Market by Product Type and Distribution Channel: Global Opportunity Analysis and Industry Forecast, 2022-2031” concluded by Allied Market Research, the outbreak of coronavirus has led to shutdown of economic activities in the country for few months and has halted the operations of the personal care electrical appliances industry. There were supply disruptions across North America, Europe, and Asia-Pacific during the initial period of the pandemic outbreak. The pandemic also had negative impacts to the sales of personal care appliances market at the physical stores in recent years. In spite of this, the online sales channel has proliferated dramatically amidst the pandemic. Major market participants are now expanding their online channels to cater to increased demand from direct-to-consumer channel. Furthermore, globally, COVID-19 pandemic has increased consumer attention toward personal care and hygiene, which is expected to positively impact the personal care electrical appliances market in the upcoming years. While the most acute global disruptions have since subsided, we believe the pandemic has indelibly accelerated the migration to online purchasing and solidified a greater consumer emphasis on personal wellness and hygiene. Consequently, the industry continues to navigate an evolved marketplace, adapting to these persistent shifts in consumer behavior and supply chain dynamics.
Competitive Strengths
We possess certain attributes that differentiate us as a personal care electronic appliance provider from Hong Kong. Our key competitive strengths include:
We have a strong presence in the personal care electrical appliances industry with a 10-year operating history and emphasis on hair styling products
We believe that we have built up a strong reputation in the personal care electrical appliances industry as a result of our approximately 11-year operating history and our establishment in the industry. For example, in October 2017 and in April 2019, our founder, Mr. Ching, was featured twice by the HKEAIA Express Magazine, an official publication of the Hong Kong Electrical Appliance Industries Association, for his decades of experience in the electrical appliance industries. We believe our reputation has attracted various renowned brand owners which became our major customers.
Our research and development expertise has allowed us to further develop a new variety of personal care electronic products for our customers and establish strong relationships with our customers.
Led by a management team with an aggregate of 30 years of research, development and operation experience in the industry, our Company’s business growth has been driven by our research and development efforts in satisfying various needs of our customers.
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We work closely with our customers in product design and development. We believe that by engaging meetings with our customers and obtaining feedbacks from our customers, we are able to gain a deeper understanding of our customers’ requirements and develop desirable products that satisfy our customers’ needs. As such, we have established strong relationship with our customers. We believe that our Company is positioned to secure more orders from our existing customers and attract new customers to expand our customer base, due in part to our close working relationships with them.
We have a quality control system, which allows us to deliver high quality products and maintain market reputation
We place great emphasis on high quality products and hence, we have implemented stringent quality control system. Our quality control measures are to make sure our collaborated manufacturers in compliance with the quality standard required by our customers and ensure that our products are delivered with consistent, reliable, safe and high-quality standards such as those established by International Organization for Standardization (“ISO”). We also place great emphasis on the safety of our products. Our products meet the safety requirements from our customers and all applicable international safety standards of destinations where our products are shipped to, such as the JET Certification Scheme provided by the Japan Electrical Safety and Environment Technology Laboratories. Our customers are international renowned brand owners of hair styling products and personal care electronical appliance products which have stringent requirements on our products to meet various quality and safety standards. Given that we have long business relationship with these customers, we believe that our products are of high quality and capable of being sold in the high-end market and able to continue to strengthen our position as a design office for international brand owners in the long run.
We have a strong and experienced management team with strong commitment to deliver high quality products
Our success and growth are substantially attributable to the strong commitment of our executive Directors and senior management team to deliver high quality products to our customers. Our founder, Mr. Ching Tim Hoi, executive Director and Shareholder has over 30 years of experience in the personal care and lifestyle electrical appliances industry. Mr. Ching is primarily responsible for formulating the overall sales and marketing strategies, business development and making major decisions of our Company. Since the establishment of Pure Beauty, Mr. Ching has contributed to our Company consistently and continuously with his insight in product design, his dedication on quality control of our products and his skills in departmental management. For the senior management of our Company, most of them have worked in our Company for over 10 years and have extensive experience in the personal care and lifestyle electrical appliances industry. Leveraging the foresight and in-depth industry knowledge of our Directors and senior management team, our Company has been able to formulate sound business strategies, assess and manage risks, anticipate changes in consumer preferences, and capture market opportunities. For details of our executive Directors and senior management, please refer to the section entitled “Management” of this document.
We believe that the vision, experience, market-awareness, in-depth knowledge in the personal care and lifestyle electrical appliances industry of our Directors and senior management team have been pivotal to the success of our business and our ability to continue to explore new business opportunities and strengthen our position in the market.
Growth Strategy
Our goal is to become a leading product design and development office in personal care and lifestyle electrical appliances industry in Asia. To achieve this goal, we plan to adopt the following plans and strategies:
| ● | explore new product lines; |
| ● | continue to expand our men’s personal care and hair care and styling product lines. For instance, shavers and electric hair brush |
| ● | broaden sales through providing technical expertise to the potential and new customers in personal care electrical appliance market; and |
| ● | approach customers who sell and market their personal care electrical appliances in Europe, the US and other Asia markets. |
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Expansion of market
We seek to expand our customer base, geographic presence and improve our local connection with them. We intend to expand our business from Hong Kong to the U.S., Europe and Asia markets. We have currently only conducted limited market studies of these other markets, but have not started any marketing or sales initiatives for these markets.
We plan to increase our investments in sales and marketing function, in particular the U.S., Europe and Asia market to cope with our business expansion plan, our Company’s sales and marketing activities mainly included handling purchase orders received from our customers, coordinating with our manufacturers which have their production teams for execution of purchase orders, communicating with our customers on their requests and feedbacks exploring with them the potential business opportunities. We believe that one of our keys to success is to achieve customer satisfaction by, among others, demonstrating to our customers that their purchase orders are closely monitored and their requests and feedbacks are timely handled through our delegated sales and marketing team. This helps us to retain our customers and gain more orders from them. Our management identified a need to allocate resources to actively promote our aforesaid strengths with a view to attracting potential customers to approach us for our products and services. See “Use of Proceeds” on page 59 of this prospectus.
Recruit, Retain and Develop Employees
We will continue hiring highly qualified and experienced staff in the field. In order to expand and grow our business, we must continuously recruit and attract talented employees not only in the sales and marketing side for acquiring new customers, but also the operational staff to manage the interface with the production and manufacturing side. We believe that becoming a publicly-traded company will enhance our reputation and will attract more talented people to join us. With the continuous growth of our business and the market expansion plan, we intend to allocate 25% of the proceeds of the offering for recruiting additional experienced staff, including administrative, executive and accounting personnel, marketing and sales as well as designers with solid industry backgrounds that can support the expansion of our business, and necessary R&D personnel to support development of new product lines (including men’s personal care product lines). See “Use of Proceeds” on page 59 of this prospectus.
Competition
The personal care electrical appliance market is relatively fragmented subject to macro-economic cycles and the entry of new competitors. We are directly competing with other design and development offices in the industry and also with manufacturers who are located in South Asia.
The majority of our revenue was derived from sales to the Japanese consumer market. We anticipate that customer demand for our Company’s personal care electrical appliances going forward will be primarily affected by the demand and performance of Japan. However, our targeted customer markets are expected to maintain a stable growth.
We mainly compete on product quality and research and development capabilities. We believe that we can compete effectively by virtue of our well-established relationship with our customers which are international brand owners, strong presence in the personal care electrical appliances industry, strong and established product design and development capabilities, quality assurance system and our experienced and dedicated management team.
Intellectual Property
We currently do not own any trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property. Regardless of the type of our services, as the design, prototype, specification of the personal care electrical appliances and the respective packaging, are developed under the narratives, requirements and standards of our customers, the patents of such design and product prototype are owned by our customers.
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As at the date of this prospectus, we have been using certain trademarks in Pure Beauty’s daily business operations which are currently registered in Japan and owned by Mr. Ching (the “Japan Pure Beauty Trademarks”). On August 1, 2021, a trademark license agreement was entered into between us and Mr. Ching (the “Japan Trademark License Agreement”), pursuant to which Mr. Ching agreed to irrevocably and unconditionally grant us, our subsidiaries and branches an exclusive license to use the Japan Pure Beauty Trademarks on a royalty-free basis, for 10 years commencing from the date of the Japan Trademark License Agreement. See “Risk Factors – Risks Related to Our Business – We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations” on page 31 of this prospectus for more information.
Patent
We do not retain the patent of the finished products we sourced to manufacturers and designed or developed with our customers. Such patents belong to our customers who hired us for the design and development of such products.
Domain
Pure Beauty Manufacturing Company Limited registered the domain name of “www.raytech.com.hk”.
Employees
As of September 30, 2024, we have 6 employees. No employees are represented by a labor union, and we believe that we have good relations with our employees.
Facilities
Our principal executive office is a 1,343 square feet leased property located at Unit 609, 6/F, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Hong Kong. Pursuant to the Lease Agreement, the lease term is one year, from April 1, 2025 to March 31, 2026 and the monthly rent is HKD25,000 (US$3,213). We believe our current offices are sufficient for the operation of our business.
The operating lease expenses amounted to HKD300,000 (US$38,560) for both the years ended March 31, 2023 and 2024, and HKD150,000 (US$19,155) for the six months ended September 30, 2024.
Legal Proceedings
We and our subsidiaries are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
Governmental Regulations
Our operations are subject to numerous laws of Hong Kong and regulations in a number of areas including, but not limited to, areas of labor and employment, immigration, advertising, e-commerce, tax, import and export requirements, data privacy requirements, anti-competition, and environmental, health, and safety. CLKW Lawyers LLP, Raytech Holding’s Hong Kong counsel, has advised Raytech Holding that, as of the date of this prospectus, we have obtained all necessary licenses, permissions or approvals including the business registration certificate from the governmental authorities of Hong Kong to operate our business and to the best of our knowledge, no license, permission or approval has been denied. See “Regulations” on page 91 of this prospectus.
The following table provides details on the licenses, permissions or approvals held by Raytech Holding’s Hong Kong subsidiaries.
| Entities | License/permit/approval | Issuing authority | Commencement date | Expiry date | |||
| Pure Beauty | Business Registration Certificate | Inland Revenue Department | April 15, 2025 | April 14, 2026 | |||
| Raytech Innovation | Business Registration Certificate | Inland Revenue Department | May 6, 2025 | May 5, 2026 |
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REGULATIONS
Regulations Related to our Business Operations in Hong Kong
Pure Beauty is Raytech Holding’s wholly-owned subsidiary established in Hong Kong through which Raytech Holding conducts its operations. As at the date of this prospectus, there was no statutory or mandatory licensing and qualification system in Hong Kong governing the design, development and sourcing of personal care electrical appliances.
Below sets out a summary of certain aspects of the Hong Kong laws and regulations which are relevant to our operation and business.
Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong)
The Business Registration Ordinance requires every person carrying on any business to make an application to the Commissioner of Inland Revenue in the prescribed manner for the registration of that business within one month after the commencement of business. The Commissioner of Inland Revenue must register each business for which a business registration application is made and as soon as practicable after the prescribed business registration fee and levy are paid and issue a business registration certificate or branch registration certificate for the relevant business or the relevant branch, as the case may be. Any person who fails to apply for business registration shall be guilty of an offence and shall be liable to a fine of HK$5,000 and to imprisonment for 1 year.
Personal Data (Privacy) Ordinance (Cap. 486) of Hong Kong), or the PDPO
The PDPO imposes a statutory duty on data users to comply with the requirements of the six data protection principles (the “Data Protection Principles”) contained in Schedule 1 to the PDPO. The PDPO provides that a data user shall not do an act, or engage in a practice, that contravenes a Data Protection Principle unless the act or practice, as the case may be, is required or permitted under the PDPO. The six Data Protection Principles are:
| ● | Principle 1—purpose and manner of collection of personal data; |
| ● | Principle 2—accuracy and duration of retention of personal data; |
| ● | Principle 3—use of personal data; |
| ● | Principle 4—security of personal data; |
| ● | Principle 5—information to be generally available; and |
| ● | Principle 6—access to personal data. |
Non-compliance with a Data Protection Principle may lead to a complaint to the Privacy Commissioner for Personal Data (the “Privacy Commissioner”). The Privacy Commissioner may serve an enforcement notice to direct the data user to remedy the contravention and/ or instigate prosecution actions. A data user who contravenes an enforcement notice commits an offense which may lead to a fine and imprisonment.
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The PDPO also gives data subjects certain rights, inter alia:
| ● | the right to be informed by a data user whether the data user holds personal data of which the individual is the data subject; |
| ● | if the data user holds such data, to be supplied with a copy of such data; and |
| ● | the right to request corrections of any data they consider to be inaccurate. |
The PDPO criminalizes certain violations, including but not limited to, the misuse or inappropriate use of personal data in direct marketing activities, non-compliance with a data access request and the unauthorized disclosure of personal data obtained without the relevant data user’s consent. An individual who suffers damage, including injured feelings, by reason of a contravention of the PDPO in relation to his or her personal data, may seek compensation from the data user concerned.
Employment Ordinance (Chapter 57 of the Laws of Hong Kong), or the EO
The Employment Ordinance (Chapter 57 of the Laws of Hong Kong), is an ordinance enacted for, amongst other things, the protection of the wages of employees and the regulation of the general conditions of employment and employment agencies. Under the EO, an employee is generally entitled to, amongst other things, notice of termination of his or her employment contract; payment in lieu of notice; maternity protection in the case of a pregnant employee; not less than one rest day in every period of seven days; severance payments or long service payments; sickness allowance; statutory holidays or alternative holidays; and paid annual leave of up to 14 days depending on the period of employment.
Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), or the ECO
The Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), is an ordinance enacted for the purpose of providing for the payment of compensation to employees injured in the course of employment.
The ECO establishes a no-fault and non-contributory employee compensation system for work injuries and lays down the rights and obligations of employers and employees in respect of injuries or death caused by accidents arising out of and in the course of employment, or by prescribed occupational diseases.
As stipulated by the ECO, no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an amount not less than the applicable amount specified in the Fourth Schedule of the ECO in respect of the liability of the employer. According to the Fourth Schedule of the ECO, the insured amount shall be not less than HKD100,000,000 (approximately $12,900,000) per event if a company has no more than 200 employees. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction to a fine and imprisonment. An employer who has taken out an insurance policy under the ECO is required to display a prescribed notice of insurance in a conspicuous place on each of its premises where any employee is employed.
Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong), or the MPFSO
The Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong), is an ordinance enacted for the purposes of providing for the establishment of non-governmental mandatory provident fund schemes, or the MPF Schemes. The MPFSO requires every employer of an employee of 18 years of age or above but under 65 years of age to take all practical steps to ensure the employee becomes a member of a registered MPF Scheme within the first 60 days of employment. Subject to the minimum and maximum relevant income levels, it is mandatory for both employers and their employees to contribute 5% of the employee’s relevant income to the MPF Scheme. Any employer who contravenes the requirement of enrolling eligible employees in a registered MPF Scheme or the requirement of paying mandatory contributions to the MPF Schemes commits a criminal offence and is liable on conviction to a fine and imprisonment.
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Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong), or the MWO
The Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) provides for a prescribed minimum hourly wage rate (currently at HK$42.1 per hour) during the wage period for every employee engaged under a contract of employment under the EO. Any provision of the employment contract which purports to extinguish or reduce the right, benefit or protection conferred on the employee by the MWO is void.
Failure to pay minimum wage amounts to a breach of the wage provisions under EO. An employer who wilfully and without reasonable excuse fails to pay wages to an employee when it becomes due commits a criminal offence and is liable on conviction to a fine and imprisonment.
Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)
Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong), where an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than three months after the date of commencement of such employment. Where an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than one month before such individual ceases to be employed in Hong Kong.
Consumer Goods Safety Ordinance (Chapter 456 of the Laws of Hong Kong), or the CGSO
The Consumer Goods Safety Ordinance (Chapter 456 of the Laws of Hong Kong) imposes a duty on manufacturers, importers and manufacturers of certain consumer goods to ensure that the consumer goods they supply are safe and for incidental purposes.
The Company’s products are regulated by the CGSO and the Consumer Goods Safety Regulation (Cap. 456A, Laws of Hong Kong) (the “Consumer Goods Safety Regulation”).
Section 4(1) of the CGSO requires consumer goods to be reasonably safe having regard to all of the circumstances including the manner in which, and the purpose for which the products are presented, promoted or marketed, the use of any mark in relation to the products, instructions and warnings given for the keeping or use of the products, reasonable safety standards published by a standards institute or other similar bodies and the existence of any reasonable means to make the products safer.
According to section 2(1) of the Consumer Goods Safety Regulation, where consumer goods on their packages are marked with, or where any labels affixed to or any documents enclosed in their packages contain, any warning or caution regarding the safe keeping, use, consumption or disposal, such warning or caution shall be in both the English and the Chinese languages. Such warnings and cautions, as required by section 2(2) of Consumer Goods Safety Regulation, shall be legible and be placed in a conspicuous position on (a) the consumer goods; (b) any package of the consumer goods; (c) a label security affixed to the package; or (d) a document enclosed in the package.
Electrical Products (Safety) Regulation (Chapter 405G of the Laws of Hong Kong)
It is a requirement under the Electrical Products (Safety) Regulation (Chapter. 405G of the Laws of Hong Kong) that electrical products which are designed for household use and supplied in Hong Kong shall comply with certain safety requirements and obtain recognized certificates of safety compliance.
Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong), or the OSHO
The Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong) aims to ensure the safety and health of employees when they are at work. Under the OSHO, an employer must ensure the safety and health of his workplace by (i) providing and maintaining plant and work systems that are safe and without risks to health, (ii) making arrangement for ensuring safety and health in connection with the use, handling, storage or transport of plant or substances, (iii) providing all necessary information, instruction, training and supervision for ensuring safety and health, (iv) providing and maintaining safe access to and egress from the workplace, and (v) providing and maintaining a safe and healthy work environment. An employer who fails to comply with the above may be liable on conviction to a fine and imprisonment, if he did so intentionally, knowingly or recklessly.
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Occupational Safety and Health Regulation (Chapter 509A of the Laws of Hong Kong)
The Occupational Safety and Health Regulation (Chapter 509A of the Laws of Hong Kong) further sets out basic requirements for accident prevention, fire precaution, workplace environment control, hygiene at workplaces, first aid, as well as what employers and employees are expected to do in manual handling operations.
Tortious Duty Under Common Law
Apart from contractual liability, under common law, manufacturers, distributors and retailers of products also owe a duty of care to consumers and may be liable for damage resulting from defects in goods caused by their negligent acts or for any fraudulent misrepresentation made in the distributing and selling of goods. Where a manufacturer, distributor or retailer knows or reasonably believes that the products may be defective, he may have to cease to supply such goods and to give warning and instructions to persons to whom the products are supplied. Any person who undertakes to design, import or supply a product, and who negligently performs his work and causes damage to another person or property, will also attract civil liability.
Trade Description Ordinance (Chapter 362 of the Laws of Hong Kong), or the TDO
The Trade Descriptions Ordinance (Chapter 362 of the Laws of Hong Kong) prohibits false trade descriptions, false, misleading or incomplete information, false statements, etc., in respect of goods offered in the course of trade. Therefore, all of the products sold by the Company are required to comply with the relevant provisions therein. Section 2 of the TDO provides, inter alia, that “trade description” in relation to goods means an indication, direct or indirect, and by whatever means given, of certain matters (including quantity, method of manufacture, composition, fitness for purpose, availability, compliance with a standard specified or recognized by any person, price, their being of the same kind as goods supplied to a person, price, place or date of manufacture, production, processing or reconditioning, person by whom manufactured, produced, processed or reconditioned, etc.), with respect to any goods or parts of the goods; and in relation to services means an indication, direct or indirect, and by whatever means given, of certain matters (including nature, scope, quantity, fitness for purpose, method and procedures, availability, the person by whom the service is supplied, after-sale service assistance, price etc.).
Section 7 of the TDO provides that no person shall in the course of trade or business apply a false trade description to any goods or sell or offer for sale any goods with false trade descriptions applied thereto. Section 7A of the TDO provides that a trader who applies a false trade description to a service supplied or offered to be supplied to a consumer, or supplies or offers to supply to a consumer a service to which a false trade description is applied, commits an offence.
Sections 13E, 13F, 13G, 13H and 13I of the TDO provide that a trader who engages in relation to a consumer in a commercial practice that (a) is a misleading omission; or (b) is aggressive; (c) constitutes bait advertising; (d) constitutes a bait and switch; or (e) constitutes wrongly accepting payment for a product, commits an offence.
A person who commits an offence under sections 7, 7A, 13E, 13F, 13G, 13H or 13I shall be subject, on conviction on indictment, to a fine of HK$500,000 and to imprisonment for 5 years, and on summary conviction, to a fine at HK$100,000 and to imprisonment for 2 years.
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Trade Marks Ordinance (Chapter 559 of the Laws of Hong Kong), or the TMO
The Trade Marks Ordinance (Chapter 559 of the Laws of Hong Kong) provides for the registration of trademarks, the use of registered trademarks and connected matters. Hong Kong provides territorial protection for trademarks. Therefore, trademarks registered in other countries or regions are not automatically entitled to protection in Hong Kong. In order to enjoy protection by the laws of Hong Kong, trademarks must be registered with the Trade Marks Registry of the Intellectual Property Department under the Trade Marks Ordinance and the Trade Marks Rules (Chapter 559A of the Laws of Hong Kong) (the “Trade Marks Rules”).
According to section 10 of the TMO, a registered trademark is a property right acquired through due registration under such ordinance. The owner of a registered trademark is entitled to the rights provided by the ordinance.
By virtue of section 14 of the TMO, the owner of a registered trademark is conferred exclusive rights in the trademark. The rights of the owner in respect of the registered trademark come into existence from the date of the registration of the trademark. According to section 48 of such ordinance, the registration date is the filing date of the application for registration.
Subject to the exceptions in section 19 to section 21 of the TMO, any use of the trademark by third parties without the consent of the owner is an infringement of the trademark. Conducts which amount to infringement of the registered trademark are further specified in section 18 of the same ordinance.
Sale of Goods Ordinance (Chapter 26 of the Laws of Hong Kong)
The Sale of Goods Ordinance (Chapter 26 of the Laws of Hong Kong) provides, inter alia, that where a seller sells goods in the course of a business, there is an implied condition that (a) where the goods are purchased by description, the goods must correspond with the description; (b) the goods supplied are of merchantable quality; and (c) the goods must be fit for the purpose for which they are purchased. Otherwise, a buyer has the right to reject defective goods unless he or she has a reasonable opportunity to examine the goods.
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MANAGEMENT
Set forth below is information concerning the Company’s directors, executive officers and other key employees.
The following individuals are members of the Board and management of the Company.
| Name | Age | Position(s) | ||
| CHING Tim Hoi | 68 | Chief Executive Officer and Chairman | ||
| LING Chun Yin | 47 | Director | ||
| WAN Yee Hing | 41 | Chief Financial officer | ||
| LI Wan Venus | 47 | Independent Director | ||
| FOK Pak Kin Charles | 49 | Independent Director | ||
| LI Shihua | 35 | Independent Director |
The following is a brief biography of each of the Company’s executive officers and directors:
CHING Tim Hoi, Chief Executive Officer and Chairman. Mr. Ching is the founder of the Company and he currently serves as the Chief Executive Officer, Director and Chairman of the Board of the Company since our inception. Mr. Ching has also served as Chief Executive Officer and Director of Pure Beauty Manufacturing Company Limited, a Hong Kong company and wholly-owned subsidiary of the Company, since April 2013. Mr. Ching has over 30 years of experience in the electrical appliances industry especially in hair and beauty products. Since September 2010, Mr. Ching has served in various positions at Raytech Holdings Company Limited (where he currently serves as Director), a Hong Kong electrical appliance manufacturing company and the parent of one of the Company’s collaborating manufacturers, Zhongshan Raytech Electrical Appliances Manufacturing Co. Ltd (where he currently serves as Executive Director). Mr. Ching has extensive experience in sales, marketing, business development and project management. He has been elected and conferred a fellowship by the Social Enterprise Research Academy in July 2019. He has also served as the Vice President of the Hong Kong Electrical Appliance Industries Association since 2022.
We believe Mr. Ching qualifies as the Company’s Chairman because of his deep knowledge of the Company’s business and extensive experience in the personal care electrical appliances industry.
LING Chun Yin, Director. Mr. Ling has served as a Director of the Company since May 2024. Mr. Ling has more than 15 years of experience in the lifestyle electrical appliances industry and extensive experience in project management and product development. Mr. Ling is currently serving as Assistant to the CEO, Mr. Ching, in Pure Beauty Manufacturing Company Limited, a Hong Kong company and wholly-owned subsidiary of the Company, since 2013. Since September 2010, Mr. Ling has also served as the Assistant to CEO in Raytech Holdings Company Limited. In that role, Mr. Ling is responsible for various business units and overall strategic planning. He also currently serves as Supervisor at Zhongshan Raytech Electrical Appliances Manufacturing Co. Ltd. Before joining Raytech Holdings Company Limited, Mr. Ling had worked in several multinational companies. From January 2008 to September 2009, Mr. Ling worked for Novo Nordisk A/S (NYSE: NVO), a world leading multinational diabetic pharmaceutical company, as an Assistant Sourcing Manager. Mr. Ling worked at Spectrum Brands Inc. (NYSE: SPB), as senior supply chain officer, from November 2004 through December 2007. Mr. Ling obtained his Bachelor of Business (Logistics & Supply Chain Management) degree from the Royal Melbourne Institute of Technology.
We believe Mr. Ling qualifies as the Company’s director because of his familiarity with the Company’s operations and past experience in the lifestyle electrical appliance industry.
WAN Yee Hing, Chief Financial Officer. Ms. Wan has over 15 years of experience in professional auditing, corporate accounting and financial management. She has served as our Chief Financial Officer since May 2024. She current serves as the financial controller of the operating entity, Pure Beauty Manufacturing Company Limited, a Hong Kong company and wholly-owned subsidiary of the Company, a role she assumed in June 2020, and supervises the accounting and finance function of the company. From 2014 through 2017, she worked at G4S (Holding) Limited, a global security company, with her last position as Finance Manager. Before that, Ms. Wan was the accounting manager of UGC Technology Limited, an information technology company, from 2010 through 2014. Ms. Wan worked at BDO Limited from 2005 through 2010, with her last position being senior associate assurance. Ms. Wan obtained her Bachelor of Arts degree with a major in accountancy from the Hong Kong Polytechnic University in 2005. She has been a member of the Hong Kong Institute of Certified Public Accountants (“HKICPA”) since January 2009.
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LI Wan Venus, Independent Director. Ms. Wan has served as our director since May 2024. Since 2010, Ms. Li has served as a Development Manager for Sun Lik Shoes & Metal Co., Ltd. (“Sun Lik”), a shoe manufacturer established in Hong Kong in 1980. At Sun Lik, Ms. Li specializes in managing the factory operation in China, monitoring sales team and promoting business development. Before she assumed her current role, she started at Sun Lik in 2002 as a sales coordinator. Ms. Li graduated from Simon Fraser University with Bachelor of Economics in 2002 and earned a Master degree of business at Hong Kong Polytechnic University in 2009.
We believe Ms. Li qualifies as the Company’s director because of her experience in the manufacturing industry.
FOK Pak Kin Charles, Independent Director. Mr. Fok has served as our director since May 2024. Mr. Fok has two decades of experience in sales and marketing. Mr. Fok joined Draco International Jewelry in 2015 and currently serves as Sales Manager, with principal responsibility in marketing development and jewelry product design for overseas markets. Before that, he was a Director at Ninobaby HK Company. Mr. Fok first joined Ninobaby in 2009, where he was responsible for overseeing manufacturing management and product design and development such as footwear, clothing and accessories. He also explored new markets for Ninobaby HK Company in the US and Taiwan. Mr. Fok started his career in Marketing at Boulevard Advertising in Canada in 2002. He then continued his sales and marketing career in Hong Kong. He joined King Sing Jewelry Ltd. from 2003 through 2006 and Max Ent Ltd from 2006 through 2009 where he promoted the jewelry and electronic products to overseas customers. Mr. Fok obtained his Bachelor of Art degree with major in economic from University of Saskatchewan in Canada in 2003.
We believe Mr. Fok qualifies as the Company’s director because of his experience in marketing and knowledge of markets important to the Company’s growth in the future.
LI Shihua, Independent Director. Mr. Li has served as our director since May 2025. Mr. Li has extensive experience in investment. Since May 2024, he has been acting as a director of the Strategic Development Department of WellCell Tech (HK) Co., Limited, a wholly owned subsidiary of the Company, and is mainly responsible for the strategic planning, investment, mergers and acquisitions and overseas business expansion of this company. From July 2023 to March 2024, Mr. Li served as the investment vice president of Silkroad Goldenbridge Capital Management Limited. From May 2017 to June 2023, Mr. Li served as the investment director of Shenzhen Qianhai Hongzhao Fund Management Co., Ltd. Mr. Li obtained a bachelor’s degree in environmental engineering from Sun Yat-sen University in June 2012 and a master’s degree in applied finance from the Australian National University in March 2017.
We believe Mr. Li qualifies as the Company’s director because of his track record in corporate finance and past experience serving in key roles for public companies.
Family Relationships
None of the directors or executive officers have a family relationship as defined in Item 401 of Regulation S-K.
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Involvement in Certain Legal Proceedings
To the best of the Company’s knowledge, none of the Company’s directors or executive officers has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.
Board of Directors
The Company’s board of directors consists of five directors. The Company’s board of directors has determined that the Company’s three independent directors, Li Wan Venus, Fok Pak Kin Charles, and Li Shihua satisfy the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and Rule 10A-3 under the Exchange Act.
Duties of Directors
Under British Virgin Islands law, the Company’s directors owe fiduciary duties both at common law and under statute, including a statutory duty to act honestly, in good faith and with a view to the Company’s best interests. When exercising powers or performing duties as a director, the Company’s directors also have a duty to exercise the care, diligence and skills that a reasonable director would exercise in comparable circumstances, taking into account without limitation the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken by him. In exercising the powers of a director, the directors must exercise their powers for a proper purpose and shall not act or agree to the company acting in a manner that contravenes the Company’s amended and restated memorandum and articles of association or the BVI Act. See “Description of Shares — Differences in Corporate Law”, beginning on page 109 of this prospectus, for additional information on the Company’s directors’ fiduciary duties under British Virgin Islands law. In fulfilling their duty of care to the Company, the Company’s directors must ensure compliance with the Company’s amended and restated memorandum and articles of association. The Company has the right to seek damages if a duty owed by the Company’s directors is breached.
The functions and powers of the Company’s board of directors include, among others:
| ● | appointing officers and determining the term of office of the officers; |
| ● | authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable; |
| ● | exercising the borrowing powers of the company and mortgaging the property of the company; |
| ● | executing checks, promissory notes and other negotiable instruments on behalf of the company; and |
| ● | maintaining or registering a register of relevant charges of the company. |
Terms of Directors and Executive Officers
Each of the Company’s directors holds office until a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for reelection. All of the Company’s executive officers are appointed by and serve at the discretion of the Company’s board of directors.
Qualification
There is currently no shareholding qualification for directors, although a shareholding qualification for directors may be fixed by the Company’s shareholders by ordinary resolution.
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Insider Participation Concerning Executive Compensation
The Company’s Board of Directors, which consists of five members, makes all determinations regarding executive officer compensation.
Committees of the Board of Directors
The Company has established three committees under the board of directors: An audit committee, a compensation committee and a nominating and corporate governance committee. Even though the Company is exempted from corporate governance standards because it is a foreign private issuer, the Company has voluntarily adopted a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee. The Company’s audit committee consists of Li Wan Venus, Fok Pak Kin Charles, and Li Shihua. Mr. Li is the chairman of the Company’s audit committee. The Company has determined that Ms. Li, Mr. Fok and Mr. Li satisfies the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Exchange Act. The Company’s board also has determined that Mr. Li qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees the Company’s accounting and financial reporting processes and the audits of the financial statements of the Company.
The audit committee is responsible for, among other things:
| ● | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
| ● | reviewing with the independent auditors any audit problems or difficulties and management’s response; |
| ● | discussing the annual audited financial statements with management and the independent auditors; |
| ● | reviewing the adequacy and effectiveness of the Company’s accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; |
| ● | reviewing and approving all proposed related party transactions; |
| ● | meeting separately and periodically with management and the independent auditors; and |
| ● | monitoring compliance with the Company’s code of business conduct and ethics, including reviewing the adequacy and effectiveness of the Company’s procedures to ensure proper compliance. |
Compensation Committee. The Company’s compensation committee consists of Li Wan Venus, Fok Pak Kin Charles, and Li Shihua. Mr. Fok is the chairman of the Company’s compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to the Company’s directors and executive officers. The Company’s chief executive officer may not be present at any committee meeting during which his compensation is deliberated.
The compensation committee is responsible for, among other things:
| ● | reviewing and approving to the board with respect to the total compensation package for the Company’s most senior executive officers; |
| ● | approving reviewing and recommending to the board with respect to the compensation of the Company’s directors; and overseeing the total compensation package for the Company’s executives other than the most senior executive officers; |
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| ● | reviewing periodically and approving any long-term incentive compensation or equity plans; |
| ● | selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and |
| ● | programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
Nominating and Corporate Governance Committee. The Company’s nominating and corporate governance committee consists of Li Wan Venus, Fok Pak Kin Charles, and LI Shihua. Ms. Li is the chairperson of the Company’s nominating and corporate governance committee. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become the Company’s directors and in determining the composition of the board and its committees.
The nominating and corporate governance committee is responsible for, among other things:
| ● | identifying and recommending nominees for election or re-election to the Company’s board of directors or for appointment to fill any vacancy; |
| ● | reviewing annually with the Company’s board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to the Company; |
| ● | identifying and recommending to the Company’s board the directors to serve as members of committees; |
| ● | advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as the Company’s compliance with applicable laws and regulations, and making recommendations to the Company’s board of directors on all matters of corporate governance and on any corrective action to be taken; and |
| ● | monitoring compliance with the Company’s code of business conduct and ethics, including reviewing the adequacy and effectiveness of the Company’s procedures to ensure proper compliance. |
Corporate Governance
The business and affairs of the company are managed under the direction of the Company’s Board. The Company has conducted Board meetings regularly since inception. Each of the Company’s directors has attended all meetings either in person, via telephone conference, or through written consent for special meetings. In addition to the contact information in this prospectus, the Board has adopted procedures for communication with the officers and directors as the date hereof. Each shareholder will be given specific information on how he/she can direct communications to the officers and directors of the Company at the Company’s annual shareholders’ meetings. All communications from shareholders are relayed to the members of the Board.
Code of Business Conduct and Ethics, Insider Trading Policy and Clawback Policy
We have adopted (i) a code of business conduct and ethics, (ii) an insider trading policy that applies to our directors, officers, and employees, and (iii) a clawback policy that applies to our directors, officers and employees (collectively, the “Policies”).
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COMPENSATION
For the years ended March 31, 2023, and 2024, the aggregate cash compensation paid by the Company to its directors and members of its administrative, supervisory or management bodies (collectively, the “Covered Persons”) was US$30,714 and US$36,502, respectively. For the six months ended September 30, 2023, and 2024, the aggregate cash compensation paid to the Covered Persons was US$12,941 and US$201,624, respectively. These payments were made by Pure Beauty, our wholly-owned subsidiary, pursuant to employment agreements (the “Operative Employment Agreements”) entered into with -such Covered Persons or certain of them. Each Operative Employment Agreement provides for salary, remuneration and benefits. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to the Company’s directors and executive officers.
Compensation of Executive Officers
The aggregate cash compensation paid to Covered Persons mentioned above includes compensation paid to members serving in our administrative or management roles (but not as directors, or for their services as executive officers rather than as directors) (“Executive Officers”).
On July 5, 2023, we entered into an executive employment agreement with Mr. Ching Tim Hoi as CEO which is filed as Exhibit 10.1 to this Registration Statement. Pursuant to the employment agreement, the term of the employment shall commence on July 5, 2023 and shall be an indefinite term, unless terminated pursuant to the terms of the employment agreement or as mutually agreed by the parties. The executive’s salary, remuneration and benefits shall be determined by the Company and shall be specified in the Operative Employment Agreement or any other agreement between the Company or any of its subsidiaries on one hand and the executive on the other hand. The executive’s salary, remuneration and benefits shall be reviewed by the board (or its designated compensation committee) and/or the management of the Company in accordance with the relevant policies adopted by the Company from time to time. We may terminate the employment for cause, at any time, by summary notice in writing with immediate effect without payment in lieu of notice, for certain acts of the executive, including but not limited to: (i) commission of any act of fraud or gross negligence by in the course of his employment; (ii) willful material misrepresentation at any time by the executive to the board; (iii) the willful failure or refusal to comply with any of the executive’s material obligations or to comply with a reasonable and lawful instruction of the board; or (iv) engagement by the executive in any misconduct or the commission by the executive of any act that is materially injurious or detrimental to the substantial interest of the Company and/or its subsidiaries and affiliated entities, as determined by the board. The executive has agreed, throughout the term of the employment and at all times thereafter, that the executive shall keep in strict confidence and not to use all non-public information relating to the technology, business, financial condition and other aspects of the Company. In addition, the executive has agreed to be bound by non-competition and non-solicitation restrictions during the term of his employment and for twelve (12) months following termination of the employment.
On May 13, 2024, we entered into an executive employment agreement with Ms. Wan Yee Hing as CFO which is filed as Exhibit 10.2 to this Registration Statement. Pursuant to the employment agreement, the term of the employment shall commence on May 13, 2024 and shall be an indefinite term, unless terminated pursuant to the terms of the employment agreement or as mutually agreed by the parties. The executive’s salary, remuneration and benefits shall be determined by the Company and shall be specified in the Operative Employment Agreement or any other agreement between the Company or any of its subsidiaries on one hand and the executive on the other hand. The executive’s salary, remuneration and benefits shall be reviewed by the board (or its designated compensation committee) and/or the management of the Company in accordance with the relevant policies adopted by the Company from time to time. We may terminate the employment for cause, at any time, by summary notice in writing with immediate effect without payment in lieu of notice, for certain acts of the executive, including but not limited to: (i) commission of any act of fraud or gross negligence by in the course of his employment; (ii) willful material misrepresentation at any time by the executive to the board; (iii) the willful failure or refusal to comply with any of the executive’s material obligations or to comply with a reasonable and lawful instruction of the board; or (iv) engagement by the executive in any misconduct or the commission by the executive of any act that is materially injurious or detrimental to the substantial interest of the Company and/or its subsidiaries and affiliated entities, as determined by the board. The executive has agreed, throughout the term of the employment and at all times thereafter, that the executive shall keep in strict confidence and not to use all non-public information relating to the technology, business, financial condition and other aspects of the Company. In addition, the executive has agreed to be bound by non-competition and non-solicitation restrictions during the term of his employment and for twelve (12) months following termination of the employment.
Except as disclosed above, we have not entered into other employment agreements with the Company’s officers.
Compensation of Directors
The aggregate cash compensation paid to Covered Persons mentioned above also includes compensation paid to our directors (for their services as directors). Specifically, For the fiscal year ended March 31, 2024, the Company did not compensate its independent non-executive directors, and the aggregate compensation paid to executive directors was US$25,580. For the six months ended September 30, 2024, the aggregate cash compensation paid by the Company to its independent non-executive directors was US$16,347, and the aggregate compensation paid to executive directors was US$125,142.
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2024 Equity Incentive Plan
In September 2024, our Board of Directors adopted the Raytech Holding Limited 2024 Equity Incentive Plan (the “2024 Plan”), which was subsequently approved by our shareholders on October 23, 2024. The purpose of the 2024 Plan is to promote the long-term success of the Company and the creation of shareholder value by (a) encouraging Employees, Directors and Consultants to focus on the Company’s performance, (b) encouraging the attraction and retention of Employees, Directors and Consultants with exceptional qualifications, and (c) providing incentives that align the interests of Employees, Directors and Consultants with those of the shareholders of the Company. The 2024 Plan provides for the grant of Incentive Share Options, Non-statutory Share Options, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units, and Performance Shares (collectively, “Equity Awards”). The holder of such Equity Awards is referred to as a “Participant”. We believe that the 2024 Plan will provide the eligible Participants an opportunity to benefit from the success of the Company and our affiliates.
The initial maximum aggregate number of Ordinary Shares which may be granted and issuable pursuant to the 2024 Plan is 2,500,000 Ordinary Shares. This number is subject to proportionate adjustments by the Administrator (as defined below) in the event of any dividend (other than normal cash dividends), share split, combination or exchange of Shares, amalgamation, arrangement or consolidation, spin-off, recapitalization or other distribution of Company assets to its shareholders, or any other change affecting the Shares or the share price of a Share. The Administrator shall make such proportionate adjustments as it, in its discretion, may deem appropriate to reflect such change with respect to (i) the aggregate number and type of shares that may be issued under the 2024 Plan (including adjustments of the limitations in Section 3 of the 2024 Plan); (ii) the terms and conditions of any outstanding Equity Awards (including any applicable performance targets or criteria); and (iii) the grant or exercise price per share for any outstanding Equity Awards under the 2024 Plan.
The following paragraphs describe the principal terms of the 2024 Plan.
Administration. The 2024 Plan is administered by the Board or a committee appointed by the Board (the “Administrator”). If a committee is appointed, it shall consist of no less than two (2) non-employee directors and be comprised solely of non-employee directors who are (a) “outside directors” under Section 162(m) of the Code, (b) “non-employee directors” under Rule 16b-3 of the Exchange Act, and (c) who meet any listing standards prescribed by the principal securities market on which the Company’s equity securities are traded. The Administrator’s decisions, determinations, and interpretations will be final and binding on all Participants and any other holders of Equity Awards. Any decision or action taken by the Administrator in connection with the construction, administration, interpretation, and effect of the 2024 Plan shall, to the maximum extent permitted by Applicable Laws, be within its absolute discretion and shall be final, binding, and conclusive upon the Company and all Participants.
Eligibility. As determined by the Administrator, Nonstatutory Share Options, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units, or Performance Shares may be granted to Employees, Directors, and Consultants (“Service Providers”) of the Company or any Subsidiary, either alone or in combination with other Equity Awards. Incentive Share Options may be granted to Employees of the Company or any Subsidiary.
Award Agreement. Equity Awards under the 2024 Plan shall be evidenced by written or electronic Award Agreements that set forth the terms, conditions, and limitations for each Equity Award, which may include the term of an Equity Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel, or rescind an Equity Award, subject to the terms of the 2024 Plan.
Vesting Conditions. Equity Awards may be subject to vesting conditions, including time-based and/or performance-based criteria, as determined by the Administrator in its sole discretion and set forth in the applicable Award Agreement. For example, during the applicable Period of Restriction, Restricted Shares or Restricted Share Units shall be subject to forfeiture based on such conditions as the Administrator may determine. Any such risk of forfeiture may be waived or terminated, or the Period of Restriction shortened, at any time by the Administrator on such basis as it deems appropriate.
Restriction on Transfer and Sale. Generally, Equity Awards are non-transferable other than by will or the laws of descent and distribution, unless otherwise permitted by the Administrator in limited circumstances (such as transfers to certain family members or trusts for estate planning purposes). Any Shares issued pursuant to Equity Awards granted under the 2024 Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Company’s memorandum and articles of association. In addition, either at the time an Equity Award is granted or by subsequent action, the Administrator may impose such restrictions, conditions, or limitations as it determines appropriate as to the timing and manner of any resales or other subsequent transfers by a Participant, or a holder of Shares acquired pursuant to the 2024 Plan, including (a) restrictions under an insider trading policy, (b) lock-up arrangements with an placement agent of the Company, and (c) restrictions as to the use of a specified brokerage firm.
Term. The 2024 Plan will expire on, and no Equity Award may be granted pursuant to the 2024 Plan after, the tenth anniversary of its Effective Date. Any Equity Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to their terms and the terms of the 2024 Plan.
Amendment and Termination. The Board in its sole discretion may at any time amend, alter, suspend, or terminate the 2024 Plan, provided that no such action may adversely affect in any material way any Equity Award previously granted without the prior written consent of the Participant, except for amendments necessary to comply with Applicable Laws. Shareholder approval for amendments will be obtained to the extent necessary and desirable to comply with Applicable Laws.
As of the date of this prospectus, none of our Covered Persons held any outstanding share options, restricted shares, restricted share units, or other equity-based awards granted by the Company under our 2024 Equity Incentive Plan or any other equity compensation plan of the Company.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of the Company’s Ordinary Shares as of the date of this prospectus, and as adjusted to reflect the sale of the Ordinary Shares offered in this offering for:
| ● | each of the Company’s directors, director nominees and executive officers who beneficially own the Company’s Ordinary Shares; and |
| ● | each person known to the Company to own beneficially more than 5.0% of the Company’s Ordinary Shares. |
Beneficial ownership includes voting or dispositive power with respect to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and dispositive power with respect to all Ordinary Shares shown as beneficially owned by them. Percentage of beneficial ownership of each listed person prior to this offering is based on 17,613,083 Ordinary Shares outstanding as of the date of this prospectus.
Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of 5% or more of the Company’s Ordinary Shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this prospectus are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person.
| Ordinary Shares Beneficially Owned Prior to this Offering | Ordinary Shares | |||||||||||||||
| Number | Percent | Number | Percent | |||||||||||||
| Directors and Executive Officers(1): | ||||||||||||||||
| Ching Tim Hoi | 12,800,000 | 72.7 | % | 12,800,000 | 26.9 | % | ||||||||||
| Ling Chun Yin | 800,000 | 4.5 | % | 800,000 | 1.7 | % | ||||||||||
| Wan Yee Hing | - | - | - | - | ||||||||||||
| Li Wan Venus | - | - | - | - | ||||||||||||
| Fok Pak Kin Charles | - | - | - | - | ||||||||||||
| Li Shihua | - | - | - | - | ||||||||||||
| All directors and executive officers as a group | 13,600,000 | 77.2 | % | 13,600,000 | 28.6 | % | ||||||||||
| 5% Principal Shareholders: | ||||||||||||||||
| Ching Tim Hoi | 12,800,000 | 72.7 | % | 12,800,000 | 26.9 | % | ||||||||||
| (1) | Unless otherwise indicated, the business address of each of the individuals is Unit 609, 6/F, Nan Fung Commercial Centre, No.19 Lam Lok Street, Kowloon Bay, Hong Kong. |
The Company is not aware of any arrangement that may, at a subsequent date, result in a change of control of the Company.
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RELATED PARTY TRANSACTIONS
In addition to the executive officer and director compensation arrangements discussed in “Compensation of Executive Officers,” below we describe transactions since incorporation, to which the Company has been a participant, in which the amount involved in the transaction is material to the Company and in which any of the following is a party: (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual’s family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of companies and close members of such individuals’ families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.
Set forth below are the related party transactions that we have entered into during the last three fiscal years and up to the date of this prospectus.
a. Nature of Related Party Relationships
| Name | Relationship with the Company | |
| Zhongshan Raytech Electric Appliances Manufacturing Company Limited (“Zhongshan Raytech”) | An entity controlled by Mr. Ching Tim Hoi (“Mr. Ching”) | |
| Raytech Holdings Company Limited | An Entity controlled by Mr. Ching and the holding company of the Zhongshan Raytech | |
| Mr. Ching Tim Hoi (“Mr. Ching”) | Controlling shareholder, CEO and Chairman of the Company and Director of Pure Beauty, Director of Raytech Holdings Company Limited, and Executive Director of Zhongshan Raytech | |
Mr. Ling Chun Yin |
Director of the Company and, Assistant to the CEO of Pure Beauty and Raytech Holdings Company Limited, and Supervisor of Zhongshan Raytech |
b. Due from a director
| Name | Related party relationship | As of March 31, 2023 | As of March 31, 2024(1) | As of September 30, 2024 | As of September 30, 2024 | |||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||||
| Mr. Ching | Mr. Ching is a director of Pure Beauty | 992,026 | 145,166 | - | - | |||||||||||||
| Total due from related parties | 992,026 | 145,166 | - | - | ||||||||||||||
| (1) | The amount was wholly settled in cash subsequently in July 2024. |
The receivable represented payments made on behalf of the director and shareholder by Pure Beauty. The loan agreement provides that borrowings are interest free and are payable on demand.
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c. Accounts payable – related party
These accounts payable to Zhongshan Raytech was related to products we purchased from Zhongshan Raytech.
| Name | As of March 31 2023 | As of March 31, 2024 | As of September 30, 2024 | As of September 30, 2024 | ||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| Zhongshan Raytech (1) | 8,768,420 | 24,278,340 | 20,418,181 | 2,628,059 | ||||||||||||
| Total purchase from related party | 8,768,420 | 24,278,340 | 20,418,181 | 2,628,059 | ||||||||||||
| (1) | As of the date of this prospectus, the balance of such accounts payable is US$1,366,629. |
d. Related party transactions
Purchases of products from a related party
| Name | For year ended March 31, 2023 | For year ended March 31, 2024 | For the Six Months ended September 30, 2024 | For the Six Months ended September 30, 2024 | ||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| Zhongshan Raytech (1) | 28,301,082 | 47,704,656 | 30,490,751 | 3,924,517 | ||||||||||||
| Total purchase from related party | 28,301,082 | 47,704,656 | 30,490,751 | 3,924,517 | ||||||||||||
| (1) | As of the date of this prospectus, the purchase from Zhongshan Raytech is US$7,300,575. |
Other Transactions
Pure Beauty Manufacturing Company Limited leased an aggregate of 1,343 square feet of property, located at Unit 609, 6/F, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Hong Kong, from Raytech Holdings Company Limited, a company controlled by our CEO and Chairman, Mr. Ching. Pursuant to the lease agreement between Raytech Holdings Company Limited and Pure Beauty, the lease term is one year, from April 1, 2025 to March 31, 2026 and the monthly rent is HKD25,000 (US$3,213).
From April 1, 2023 to March 31, 2024, Pure Beauty Manufacturing Company Limited leased an aggregate of 1,343 square feet of property, located at Unit 609, 6/F, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Hong Kong, from Wong Yuk Lin, the Assistant to Executive Director of Pure Beauty, who leased the property from Raytech Holdings Company Limited, a company controlled by our CEO and Chairman, Mr. Ching. Pursuant to each of the lease agreement between Wong Yuk Lin and Pure Beauty and the lease agreement between Raytech Holdings Company Limited and Wong Yuk Lin, the lease term is one year, from April 1, 2023 to March 31, 2024 and the monthly rent is HKD25,000 (US$3,194).
Policies and Procedures for Related Party Transactions
The Company’s board of directors has established an audit committee, which is tasked with review and approval of all related party transactions. In addition, the Company has adopted a related party transactions policy. The related party transactions policy requires the review and approval of related party transactions by the Company’s audit committee before the entry into such related party transactions.
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DESCRIPTION OF SHARES
The Company was incorporated as a BVI business company under the laws of the British Virgin Islands on June 24, 2022. As of the date of this prospectus, the Company’s authorized shares consist of 8,000,000,000 Ordinary Shares with a par value of $0.00000625 per share.
As of the date of this prospectus, prior to the completion of the offering, there were 17,613,083 Ordinary Shares issued and outstanding.
On May 10, 2023, we filed our amended and restated memorandum and articles of association with the Registrar of Corporate Affairs in the British Virgin Islands to increase our authorized shares from 50,000 ordinary shares, par value of $1.00 per share, to 8,000,000,000 Ordinary Shares, par value of $0.00000625 per share and effectuated a forward split of all issued and outstanding shares at a ratio of 160,000-for-1.
In August 2023, Market Tycoon Investments Limited transferred 480,000 Ordinary Shares to Mr. Wong Tai Chi at $0.00000625 per share, and APTC Holdings Limited transferred 800,000 Ordinary Shares to Ms. Look Wai Yi at $0.00000625 per share. In October 2023, Value Classic Global Limited transferred 640,000 Ordinary Shares to Crystal Charm Investments Limited, a British Virgin Islands company, at $0.00000625 per share, Mr. Wong Tai Chi transferred 480,000 Ordinary Shares to Value Crystal Investment Limited, a British Virgin Islands company, at $0.00000625 per share, and Ms. Look Wai Yi transferred 800,000 Ordinary Shares to Ace Challenger Limited, a British Virgin Islands company, at $0.00000625 per share.
On May 17, 2024, we consummated the sale of 1,500,000 Ordinary Shares (the “IPO Shares”) in our initial public offering. The Company completed the IPO on a firm commitment basis pursuant to the Company’s registration statement on Form F-1, as amended (File No. 333-275197), filed with the Securities and Exchange Commission, which was declared effective by the Securities and Exchange Commission on May 13, 2024. The IPO Shares were priced at $4.00 per share. The Company also granted the underwriter a 45-day option to purchase up to an additional 225,000 Ordinary Shares to cover over-allotments, if any (the “Over-Allotment Option”). The Ordinary Shares were approved for listing on The Nasdaq Capital Market on May 13, 2024 and commenced trading under the symbol “RAY” on May 15, 2024.
On July 5, 2024, upon the underwriter’s partial exercise of the Over-Allotment Option, the Company sold an additional 113,083 Ordinary Shares at $4.00 per share. As a result, the Company has raised gross proceeds of $6,452,332 in the IPO, including the partial exercise of the Over-Allotment Option, before deducting underwriting discounts and offering expenses.
Ordinary Shares
General
All of the Company’s issued shares are validly issued, fully paid and non-assessable. Certificates evidencing the shares are issued in registered form. There are no limitations imposed by the Company’s amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on the Company’s shares. In addition, there are no provisions in the Company’s memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
Under the BVI Act, the Ordinary Shares are deemed to be issued when the name of the shareholder is entered in the Company’s register of members. If (a) information that is required to be entered in the register of members is omitted from the register or is inaccurately entered in the register, or (b) there is unreasonable delay in entering information in the register, a shareholder of the company, or any person who is aggrieved by the omission, inaccuracy or delay, may apply to the British Virgin Islands Courts for an order that the register be rectified, and the court may either refuse the application or order the rectification of the register, and may direct the company to pay all costs of the application and any damages the applicant may have sustained.
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Dividends
The holders of the Company’s Ordinary Shares are entitled to such dividends as may be declared by the Company’s board of directors subject to the BVI Act and the Company’s amended and restated memorandum and articles of association.
Voting Rights
Any action required or permitted to be taken by the shareholders must be effected at a duly called meeting of the shareholders entitled to vote on such action or may be effected by a resolution of members in writing, each in accordance with the amended and restated memorandum and articles of association. At each meeting of shareholders, each shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) will have one vote for each share that such shareholder holds.
Transfer of Ordinary Shares
Subject to the restrictions contained in the Company’s amended and restated articles of association, any of the Company’s shareholders may transfer all or any of his or her Ordinary Shares by an instrument of transfer in the usual or common form or any other form approved by the Company’s board of directors.
Liquidation
As permitted by the BVI Act and the Company’s amended and restated memorandum and articles of association, the Company may be voluntarily liquidated under Part XII of the BVI Act by resolution of directors and resolution of shareholders if the Company’s assets exceed the Company’s liabilities and the Company is able to pay the Company’s debts as they fall due. The Company may also be wound up in circumstances where the Company is insolvent in accordance with the terms of the BVI Insolvency Act, Revised Edition 2020.
If the Company is wound up and the assets available for distribution among the Company’s shareholders are more than sufficient to repay all amounts paid to the Company on account of the issue of shares immediately prior to the winding up, the excess shall be distributable pari passu among those shareholders in proportion to the amount paid up immediately prior to the winding up on the shares held by them, respectively. If the Company is wound up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the amounts paid to the Company on account of the issue of shares, those assets shall be distributed so that, to the greatest extent possible, the losses shall be borne by the shareholders in proportion to the amounts paid up immediately prior to the winding up on the shares held by them, respectively. If the Company is wound up, the liquidator appointed by the Company may, in accordance with the BVI Act, divide among the Company’s shareholders in specie or kind the whole or any part of the Company’s assets (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
The Company’s board of directors may from time to time make calls upon shareholders for any Ordinary Shares held but not fully paid, amounts unpaid on their Ordinary Shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The Ordinary Shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares
Subject to the provisions of the BVI Act, the Company may issue shares on terms that are subject to redemption, at the Company’s option or at the option of the holders, on such terms and in such manner as may be determined by the Company’s amended and restated memorandum and articles of association and subject to any applicable requirements imposed from time to time by the BVI Act, the SEC, the Nasdaq Capital Market, or by any recognized stock exchange on which the Company’s securities are listed.
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Variations of Rights of Shares
If at any time the Company is authorized to issue more than one class of shares, all or any of the rights attached to any class of shares may be amended only with the consent in writing of or by a resolution passed at a meeting of not less than 50 percent of the shares of the class to be affected.
General Meetings of Shareholders
Under the Company’s amended and restated memorandum and articles of association, a copy of the notice of any meeting of shareholders shall be given not less than seven days before the date of the proposed meeting to those persons whose names appear as shareholders in the register of members on the date of the notice and are entitled to vote at the meeting. The Company’s board of directors shall call a meeting of shareholders upon the written request of shareholders holding at least 30% of the Company’s outstanding voting shares. In addition, the Company’s board of directors may call a meeting of shareholders on its own motion. A meeting of shareholders may be called on short notice if at least 90% of the shares entitled to vote on the matters to be considered at the meeting have agreed to short notice of the meeting, or if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice and presence at the meeting shall be deemed to constitute waiver for this purpose.
At any meeting of shareholders, a quorum will be present if there are shareholders present in person or by proxy representing not less than 50 percent of the shares entitled to vote on the resolutions to be considered at the meeting. Such quorum may be represented by only a single shareholder or proxy. If no quorum is present within two hours of the start time of the meeting, the meeting shall be dissolved if it was requested by shareholders. In any other case, the meeting shall be adjourned to the next business day, and if shareholders representing not less than one-third of the votes of the Ordinary Shares or each class of shares entitled to vote on the matters to be considered at the meeting are present within one hour of the start time of the adjourned meeting, a quorum will be present. If not, the meeting will be dissolved. No business may be transacted at any meeting of shareholders unless a quorum is present at the commencement of business. If present, the chair of our board of directors shall be the chair presiding at any meeting of the shareholders. If the chair of our board is not present then the members present shall choose a shareholder to act to chair the meeting of the shareholders. If the shareholders are unable to choose a chairman for any reason, then the person representing the greatest number of voting shares present in person or by proxy shall preside as chairman, failing which the oldest individual member or member representative shall take the chair.
A corporation that is a shareholder shall be deemed for the purpose of the Company’s amended and restated memorandum and articles of association to be present in person if represented by its duly authorized representative. This duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were the Company’s individual shareholder.
Inspection of Books and Records
Under the BVI Act, members of the general public, on payment of a nominal fee, can obtain copies of the public records of a company available at the office of the Registrar of Corporate Affairs in the British Virgin Islands, which will include the company’s certificate of incorporation, its memorandum and articles of association (with any amendments) and records of license fees paid to date and will also disclose any articles of dissolution, articles of merger and a register of charges if the company has elected to file such a register.
A member of the Company is also entitled, upon giving written notice to the Company, to inspect (i) the Company’s amended and restated memorandum and articles of association, (ii) the register of members, (iii) the register of directors and (iv) minutes of meetings and resolutions of members and of those classes of members of which that member is a member, and to make copies and take extracts from the documents and records referred to in (i) to (iv) above. However, the Company’s directors may, if they are satisfied that it would be contrary to the company’s interests to allow a member to inspect any document, or part of a document specified in (ii) to (iv) above, refuse to permit the member to inspect the document or limit the inspection of the document, including limiting the making of copies or the taking of extracts or records. See “Where You Can Find Additional Information.” on page 127 of this prospectus. Where a company fails or refuses to permit a member to inspect a document or permits a member to inspect a document subject to limitations, that member may apply to the BVI court for an order that he should be permitted to inspect the document or to inspect the document without limitation.
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Changes in Maximum Number of Shares our Company is Authorized to Issue
The Company’s directors or shareholders may from time to time by resolution of directors or resolution of shareholders increase or decrease the maximum number of shares our Company is authorized to issue, by amendment to the memorandum of association.
Differences in Corporate Law
The BVI Act and the laws of the British Virgin Islands affecting BVI business companies like the Company and the Company’s shareholders differ from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the laws of the British Virgin Islands applicable to the Company and the laws applicable to companies incorporated in the United States and their shareholders.
Mergers and Similar Arrangements
Under the laws of the British Virgin Islands, two or more companies may merge or consolidate in accordance with Section 170 of the BVI Act. A merger means the merging of two or more constituent companies into one of the constituent companies (the “surviving company”) and a consolidation means the uniting of two or more constituent companies into a new company (the “consolidated company”). The procedure for a merger or consolidation between the company and another company (which need not be a BVI company, and which may be the company’s parent or subsidiary, but need not be) is set out in the BVI Act. In order to merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation, which with the exception of a merger between a parent company and its subsidiaries, must also be approved by a resolution of a majority of the shareholders voting at a quorate meeting of shareholders or by written resolution of the shareholders of the BVI company or BVI companies which are to merge. While a director may vote on the plan of merger or consolidation, or any other matter, even if he has a financial interest in the plan, the interested director must disclose the interest to all other directors of the company promptly upon becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the company. A transaction entered into by the Company in respect of which a director is interested (including a merger or consolidation) is voidable by the Company unless the director’s interest was (a) disclosed to the board prior to the transaction or (b) the transaction is (i) between the director and the company and (ii) the transaction is in the ordinary course of the company’s business and on usual terms and conditions. Notwithstanding the above, a transaction entered into by the company is not voidable if the material facts of the interest are known to the shareholders and they approve or ratify it or the company received fair value for the transaction. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting to approve the plan of merger or consolidation. A foreign company which is able under the laws of its foreign jurisdiction to participate in the merger or consolidation is required by the BVI Act to comply with the laws of that foreign jurisdiction in relation to the merger or consolidation. The shareholders of the constituent companies are not required to receive shares of the surviving or consolidated company but may receive debt obligations or other securities of the surviving or consolidated company, other assets, or a combination thereof. Further, some or all of the shares of a class or series may be converted into a kind of asset while the other shares of the same class or series may receive a different kind of asset. As such, not all the shares of a class or series must receive the same kind of consideration. After the plan of merger or consolidation has been approved by the directors and authorized, if required, by a resolution of the shareholders, articles of merger or consolidation are executed by each company and filed with the Registrar of Corporate Affairs in the British Virgin Islands. The merger is effective on the date that the articles of merger are registered with the Registrar or on such subsequent date, not exceeding thirty days, as is stated in the articles of merger or consolidation.
As soon as a merger becomes effective: (a) the surviving company or consolidated company (so far as is consistent with its memorandum and articles of association, as amended or established by the articles of merger or consolidation) has all rights, privileges, immunities, powers, objects and purposes of each of the constituent companies; (b) in the case of a merger, the memorandum and articles of association of any surviving company are automatically amended to the extent, if any, that changes to its memorandum and articles of association are contained in the articles of merger or, in the case of a consolidation, the memorandum and articles of association filed with the articles of consolidation are the memorandum and articles of the consolidated company; (c) assets of every description, including choses-in-action and the business of each of the constituent companies, immediately vest in the surviving company or consolidated company; (d) the surviving company or consolidated company is liable for all claims, debts, liabilities and obligations of each of the constituent companies; (e) no conviction, judgment, ruling, order, claim, debt, liability or obligation due or to become due, and no cause existing, against a constituent company or against any member, director, officer or agent thereof, is released or impaired by the merger or consolidation; and (f) no proceedings, whether civil or criminal, pending at the time of a merger by or against a constituent company, or against any member, director, officer or agent thereof, are abated or discontinued by the merger or consolidation; but: (i) the proceedings may be enforced, prosecuted, settled or compromised by or against the surviving company or consolidated company or against the member, director, officer or agent thereof, as the case may be; or (ii) the surviving company or consolidated company may be substituted in the proceedings for a constituent company. The Registrar of Corporate Affairs in the British Virgin Islands shall strike off the register of companies each constituent company that is not the surviving company in the case of a merger and all constituent companies in the case of a consolidation. If the directors determine it to be in the best interests of the company, it is also possible for a merger to be approved as a Court approved plan of arrangement or scheme of arrangement in accordance with the BVI Act.
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A shareholder may dissent from (a) a merger if the company is a constituent company, unless the company is the surviving company and the member continues to hold the same or similar shares; (b) a consolidation if the company is a constituent company; (c) any sale, transfer, lease, exchange or other disposition of more than 50 per cent in value of the assets or business of the company if not made in the usual or regular course of the business carried on by the company but not including: (i) a disposition pursuant to an order of the court having jurisdiction in the matter, (ii) a disposition for money on terms requiring all or substantially all net proceeds to be distributed to the members in accordance with their respective interest within one year after the date of disposition, or (iii) a transfer pursuant to the power of the directors to transfer assets for the protection thereof; (d) a compulsory redemption of 10 per cent or fewer of the issued shares of the company required by the holders of 90 percent or more of the shares of the company pursuant to the terms of the BVI Act; and (e) a plan of arrangement, if permitted by the British Virgin Islands Court (each, an Action). A shareholder properly exercising his dissent rights is entitled to a cash payment equal to the fair value of his shares.
A shareholder dissenting from an Action must object in writing to the Action before the vote by the shareholders on the merger or consolidation, unless notice of the meeting was not given to the shareholder. If the merger or consolidation is approved by the shareholders, the company must give notice of this fact to each shareholder within 20 days who gave written objection. Such objection shall include a statement that the member proposes to demand payment for his or her shares if the Action is taken. These shareholders then have 20 days to give to the company their written election in the form specified by the BVI Act to dissent from the Action, provided that in the case of a merger, the 20 days starts when the plan of merger is delivered to the shareholder. Upon giving notice of his election to dissent, a shareholder ceases to have any shareholder rights except the right to be paid the fair value of his shares. As such, the merger or consolidation may proceed in the ordinary course notwithstanding his dissent. Within seven days of the later of the delivery of the notice of election to dissent and the effective date of the merger or consolidation, the company shall make a written offer to each dissenting shareholder to purchase his shares at a specified price per share that the company determines to be the fair value of the shares. The company and the shareholder then have 30 days to agree upon the price. If the company and a shareholder fail to agree on the price within the 30 days, then the company and the shareholder shall, within 20 days immediately following the expiration of the 30-day period, each designate an appraiser and these two appraisers shall designate a third appraiser. These three appraisers shall fix the fair value of the shares as of the close of business on the day prior to the shareholders’ approval of the transaction without taking into account any change in value as a result of the transaction.
Shareholders’ Suits
There are both statutory and common law remedies available to the Company’s shareholders as a matter of British Virgin Islands law. These are summarized below.
Prejudiced members
A shareholder who considers that the affairs of the company have been, are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory or unfairly prejudicial to him in that capacity, can apply to the court under Section 184I of the BVI Act, inter alia, for an order that his shares be acquired, that he be provided compensation, that the Court regulate the future conduct of the company, or that any decision of the company which contravenes the BVI Act or the Company’s amended and restated memorandum and articles of association be set aside.
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Derivative actions
Section 184C of the BVI Act provides that a shareholder of a company may, with the leave of the Court, bring an action in the name of the company in certain circumstances to redress any wrong done to it. Such actions are known as derivative actions. The BVI Court may only grant permission to bring a derivative action where the following circumstances apply:
| ● | the company does not intend to bring, diligently continue or defend or discontinue proceedings; and |
| ● | it is in the interests of the company that the conduct of the proceedings not be left to the directors or to the determination of the shareholders as a whole. |
When considering whether to grant leave, the British Virgin Islands Court is also required to have regard to the following matters:
| ● | whether the shareholder is acting in good faith; |
| ● | whether a derivative action is in the company’s best interests, taking into account the directors’ views on commercial matters; |
| ● | whether the action is likely to proceed; |
| ● | the costs of the proceedings in relation to the relief likely to be obtained; and |
| ● | whether an alternative remedy is available. |
Just and equitable winding up
In addition to the statutory remedies outlined above, shareholders can also petition the BVI Court for the winding up of a company under the BVI Insolvency Act, Revised Edition 2020 for the appointment of a liquidator to liquidate the company and the court may appoint a liquidator for the company if it is of the opinion that it is just and equitable for the court to so order. Save in exceptional circumstances, this remedy is generally only available where the company has been operated as a quasi-partnership and trust and confidence between the partners has broken down.
Indemnification of directors and executive officers and limitation of liability
The Company’s amended and restated memorandum and articles of association provides that, subject to certain limitations, the Company indemnifies against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings for any person who:
| ● | is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was the Company’s director; or |
| ● | is or was, at the Company’s request, serving as a director or officer of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise. |
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These indemnities only apply if the person acted honestly and in good faith with a view to the Company’s best interests and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the company and as to whether the person had no reasonable cause to believe that his conduct was unlawful and is, in the absence of fraud, sufficient for the purposes of the memorandum and articles of association, unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the company or that the person had reasonable cause to believe that his conduct was unlawful.
This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Company’s directors, officers or persons controlling the Company under the foregoing provisions, the Company has been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Anti-takeover provisions in the Company’s amended and restated memorandum and articles of association
Some provisions of the Company’s amended and restated articles of association may discourage, delay or prevent a change in control of the Company or management that shareholders may consider favorable. Under the BVI Act there are no provisions which specifically prevent the issuance of preferred shares or any such other ‘poison pill’ measures. The amended and restated memorandum and articles of association of the Company also does not contain any express prohibitions on the issuance of any preferred shares. Therefore, the directors without the approval of the holders of Ordinary Shares may issue preferred shares that have characteristics that may be deemed to be anti-takeover. Additionally, such a designation of shares may be used in connection with plans that are poison pill plans. However, under British Virgin Islands law, the Company’s directors in the exercise of their powers granted to them under the Company’s amended and restated memorandum and articles of association and performance of their duties, are required to act honestly and in good faith in what the director believes to be in the best interests of the Company’s company.
Directors’ fiduciary duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction.
The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
Under British Virgin Islands law, the Company’s directors owe fiduciary duties both at common law and under statute including, among others, a statutory duty to act honestly, in good faith, for a proper purpose and with a view to what the directors believe to be in the best interests of the company. The Company’s directors are also required, when exercising powers or performing duties as a director, to exercise the care, diligence and skill that a reasonable director would exercise in comparable circumstances, taking into account without limitation, the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken. In the exercise of their powers, the Company’s directors must ensure neither they nor the company acts in a manner which contravenes the BVI Act or the Company’s amended and restated memorandum and articles of association. A shareholder has the right to seek damages for breaches of duties owed to the Company by the Company’s directors.
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Pursuant to the BVI Act and the Company’s amended and restated memorandum and articles of association, a director of a company who has an interest in a transaction and who has declared such interest to the other directors, may:
| (a) | vote on a matter relating to the transaction; |
| (b) | attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and |
| (c) | sign a document on behalf of the Company, or do any other thing in his capacity as a director, that relates to the transaction. |
In certain limited circumstances, a shareholder has the right to seek various remedies against the company in the event the directors are in breach of their duties under the BVI Act. Pursuant to Section 184B of the BVI Act, if a company or director of a company engages in, or proposes to engage in or has engaged in, conduct that contravenes the provisions of the BVI Act or the memorandum or articles of association of the company, the British Virgin Islands Court may, on application of a shareholder or director of the company, make an order directing the company or director to comply with, or restraining the company or director from engaging in conduct that contravenes the BVI Act or the memorandum or articles. Furthermore, pursuant to section 184I(1) of the BVI Act, a shareholder of a company who considers that the affairs of the company have been, are being or are likely to be, conducted in a manner that is, or any acts of the company have been, or are likely to be oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the British Virgin Islands Court for an order which, inter alia, can require the company or any other person to pay compensation to the shareholders.
Shareholder action by written consent
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. British Virgin Islands law provides that, subject to the memorandum and articles of association of a company, an action that may be taken by members of the company at a meeting may also be taken by a resolution of members consented to in writing.
Shareholder proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. British Virgin Islands law and the Company’s amended and restated memorandum and articles of association allow the Company’s shareholders holding 30% or more of the votes of the outstanding voting shares to requisition a shareholders’ meeting. There is no requirement under BVI law to hold shareholders’ annual general meetings, but the Company’s amended and restated memorandum and articles of association do permit the directors to call such a meeting. The location of any shareholders’ meeting can be determined by the board of directors and can be held anywhere in the world.
Cumulative voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. As permitted under British Virgin Islands law, the Company’s amended and restated memorandum and articles of association do not provide for cumulative voting. As a result, the Company’s shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under the Company’s amended and restated memorandum and articles of association, directors can be removed from office, with or without cause, by a resolution of shareholders passed at a meeting of the shareholders called for the purposes of removing the director or for purposes including the removal of the director or by a written resolution passed by at least 75 percent of the votes of the shareholders entitled to vote. Directors can also be removed by a resolution of directors passed at a meeting of directors called for the purpose of removing the director or for purposes including the removal of the director.
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Transactions with interested shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15% or more of the target’s outstanding voting shares within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s board of directors. British Virgin Islands law has no comparable statute and the Company’s amended and restated memorandum and articles of association does not provide for the same protection afforded by the Delaware business combination statute.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the BVI Act and the Company’s amended and restated memorandum and articles of association, the Company may appoint a voluntary liquidator by a resolution of the shareholders, provided that the directors have made a declaration of solvency that the company is able to discharge its debts as they fall due and that the value of the company’s assets exceed its liabilities.
Variation of rights of shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under the Company’s amended and restated memorandum and articles of association, if at any time the Company’s shares are divided into different classes of shares, the rights attached to any class may only be varied, whether or not the Company is in liquidation, with the consent in writing of or by a resolution passed at a meeting by a majority of the votes cast by those entitled to vote at a meeting of the holders of the issued shares in that class. For these purposes the creation, designation or issue of shares with rights and privileges ranking pari passu to an existing class of shares is deemed not to be a variation of the rights of such existing class and may in accordance with the Company’s memorandum and articles of association be effected by resolution of directors without shareholder approval.
Amendment of governing documents
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by British Virgin Islands law, the Company’s amended and restated memorandum and articles of association may be amended by a resolution of shareholders and, subject to certain exceptions, by a resolution of directors. An amendment is effective from the date it is registered at the Registry of Corporate Affairs in the British Virgin Islands.
Anti-Money Laundering Laws
In order to comply with legislation or regulations aimed at the prevention of money laundering the Company is required to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to verify their identity. Where permitted, and subject to certain conditions, the Company also may delegate the maintenance of the Company’s anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.
The Company reserves the right to request such information as is necessary to verify the identity of a subscriber. In the event of delay or failure on the part of the subscriber in producing any information required for verification purposes, the Company may refuse to accept the application, in which case any funds received will be returned without interest to the account from which they were originally debited.
If any person resident in the British Virgin Islands knows or suspects that another person is engaged in money laundering or terrorist financing and the information for that knowledge or suspicion came to their attention in the course of their business the person will be required to report his belief or suspicion to the Financial Investigation Agency of the British Virgin Islands, pursuant to the Proceeds of Criminal Conduct Act, Revision Edition 2020. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 47,613,083 Ordinary Shares issued and outstanding. All of the Ordinary Shares sold in this offering will be freely transferable by persons other than Raytech Holding’s “affiliates” without restriction or further registration under the Securities Act. Future sales of substantial amounts of Raytech Holding’s Ordinary Shares in the public market, or the possibility of these sales occurring, could cause the prevailing market price for Raytech Holding’s Ordinary Shares to fall or impair Raytech Holding’s ability to raise equity capital in the future.
Lock-Up Agreements
See “Plan of Distribution—Lock-Up Agreements.”
Rule 144
All of Raytech Holding’s Ordinary Shares outstanding prior to this offering are “restricted securities” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as those provided by Rule 144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who is not deemed to have been Raytech Holding’s affiliate at any time during the three months preceding a sale and who has beneficially owned restricted securities within the meaning of Rule 144 for more than six months would be entitled to sell an unlimited number of those shares, subject only to the availability of current public information about the Company. A non-affiliate who has beneficially owned restricted securities for at least one year from the later of the date these shares were acquired from the Company or from Raytech Holding’s affiliate would be entitled to freely sell those shares.
A person who is deemed to be an affiliate of Raytech Holding and who has beneficially owned “restricted securities” for at least six months would be entitled to sell, within any three-month period, a number of shares that is not more than the greater of:
| ● | 1% of the number of Ordinary Shares then outstanding, in the form of Ordinary Shares or otherwise; or |
| ● | the average weekly trading volume of the Ordinary Shares on the Nasdaq Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales under Rule 144 by Raytech Holding’s affiliates or persons selling shares on behalf of Raytech Holding’s affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of Raytech Holding’s employees, consultants, or advisors who purchases Raytech Holding’s Ordinary Shares from the Company in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell those Ordinary Shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
Regulation S
Regulation S provides generally that sales made in offshore transactions are not subject to the registration or prospectus-delivery requirements of the Securities Act.
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TAXATION
Material U.S. Federal Income Tax Consequences Applicable to U.S. Holders of Raytech Holding’s Ordinary Shares
The following sets forth the material U.S. federal income tax consequences related to an investment in Raytech Holding’s Ordinary Shares. It is directed to U.S. Holders (as defined below) of Raytech Holding’s Ordinary Shares and is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This description does not deal with all possible tax consequences relating to an investment in Raytech Holding’s Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences under non U.S. tax laws, state, local and other tax laws.
The following brief description applies only to U.S. Holders (defined below) that hold Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the federal income tax laws of the United States in effect as of the date of this prospectus and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this prospectus, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.
The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of Ordinary Shares and you are, for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia; |
| ● | an estate whose income is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of Raytech Holding’s Ordinary Shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding Raytech Holding’s Ordinary Shares are urged to consult their tax advisors regarding an investment in Raytech Holding’s Ordinary Shares.
RAYTECH HOLDING URGES POTENTIAL PURCHASERS OF RAYTECH HOLDING’S ORDINARY SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF RAYTECH HOLDING’S ORDINARY SHARES.
The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:
| ● | banks; |
| ● | financial institutions; |
| ● | insurance companies; |
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| ● | pension plans; |
| ● | cooperatives; |
| ● | regulated investment companies; |
| ● | real estate investment trusts; |
| ● | broker-dealers; |
| ● | traders that elect to use a mark-to-market method of accounting; |
| ● | U.S. expatriates; |
| ● | certain former U.S. citizens or long-term residents; |
| ● | tax-exempt entities (including private foundations); |
| ● | persons liable for alternative minimum tax; |
| ● | persons holding Raytech Holding’s Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction; |
| ● | persons that actually or constructively own 10% (by vote or value) or more of Raytech Holding’s voting shares (including by reason of owning Raytech Holding’s Ordinary Shares); |
| ● | persons who acquired Raytech Holding’s Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation; |
| ● | persons holding Raytech Holding’s Ordinary Shares through partnerships or other pass-through entities; |
| ● | events, hip-hop, and marketing industries investment trusts; |
| ● | governments or agencies or instrumentalities thereof; |
| ● | beneficiaries of a Trust holding Raytech Holding’s Ordinary Shares; or |
| ● | persons holding Raytech Holding’s Ordinary Shares through a trust. |
All of whom may be subject to tax rules that differ significantly from those discussed below.
The discussion set forth below is addressed only to U.S. Holders that purchase Ordinary Shares in this offering. Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of Raytech Holding’s Ordinary Shares.
Taxation of Dividends and Other Distributions on Raytech Holding’s Ordinary Shares
Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by the Company to you with respect to the Ordinary Shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of Raytech Holding’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
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With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the Ordinary Shares are readily tradable on an established securities market in the United States, or Raytech Holding is eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) Raytech Holding is not a PFIC for either Raytech Holding’s taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax treaty between the United States and the BVI, clause (1) above can be satisfied only if the Ordinary Shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States, provided they are listed on the Nasdaq Capital Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to Raytech Holding’s Ordinary Shares, including the effects of any change in law after the date of this prospectus.
Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by the Company with respect to Raytech Holding’s Ordinary Shares will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”
To the extent that the amount of the distribution exceeds Raytech Holding’s current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. Raytech Holding does not intend to calculate Raytech Holding’s earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
Taxation of Dispositions of Ordinary Shares
Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the Ordinary Shares for more than one year, you will be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes.
Information Reporting and Backup Withholding
Dividend payments with respect to Raytech Holding’s Ordinary Shares and proceeds from the sale, exchange or redemption of Raytech Holding’s Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. Raytech Holding does not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.
Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to Raytech Holding’s Ordinary Shares, subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares. Failure to report the information could result in substantial penalties. You should consult your own tax advisor regarding your obligation to file Form 8938.
Passive Foreign Investment Company (“PFIC”)
Based on Raytech Holding’s operations and the composition of Raytech Holding’s assets, Raytech Holding was not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the taxable year ended March 31, 2024 and the taxable year ended March 31, 2023. Depending on the amount of cash Raytech Holding raises in this offering, together with any other assets held for the production of passive income, it is possible that, for Raytech Holding’s taxable year ending March 31, 2025 (Raytech Holding’s current taxable year) or for any subsequent year, more than 50% of Raytech Holding’s assets may be assets which produce passive income, in which case Raytech Holding would be deemed a PFIC, which could have adverse US federal income tax consequences for US taxpayers who are shareholders. Raytech Holding will make this determination following the end of any particular tax year. PFIC status is a factual determination for each taxable year which cannot be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC, as defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:
| ● | at least 75% of its gross income is passive income; or |
| ● | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). |
Raytech Holding will be treated as owning Raytech Holding’s proportionate share of the assets and earning Raytech Holding’s proportionate share of income of any other corporation in which Raytech Holding owns, directly or indirectly, at least 25% (by value) of the stock.
Raytech Holding must make a separate determination each year as to whether Raytech Holding is a PFIC, however, and there can be no assurance with respect to Raytech Holding’s status as a PFIC for Raytech Holding’s current taxable year or any future taxable year. Depending on the amount of cash Raytech Holding raises in this offering, together with any other assets held for the production of passive income, it is possible that, for Raytech Holding’s current taxable year or for any subsequent taxable year, more than 50% of Raytech Holding’s assets may be assets held for the production of passive income. Raytech Holding will make this determination following the end of any particular tax year. In addition, because the value of Raytech Holding’s assets for purposes of the asset test will generally be determined based on the market price of Raytech Holding’s Ordinary Shares and because cash is generally considered to be an asset held for the production of passive income, Raytech Holding’s PFIC status will depend in large part on the market price of Raytech Holding’s Ordinary Shares and the amount of cash Raytech Holding raises in this offering. Accordingly, fluctuations in the market price of the Ordinary Shares may cause Raytech Holding to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of Raytech Holding’s income and assets will be affected by how, and how quickly, Raytech Holding spends the cash Raytech Holding raises in this offering. Raytech Holding is under no obligation to take steps to reduce the risk of Raytech Holding’s being classified as a PFIC, and as stated above, the determination of the value of Raytech Holding’s assets will depend upon material facts (including the market price of Raytech Holding’s Ordinary Shares from time to time and the amount of cash Raytech Holding raises in this offering) that may not be within Raytech Holding’s control. If Raytech Holding is a PFIC for any year during which you hold Ordinary Shares, Raytech Holding will continue to be treated as a PFIC for all succeeding years during which you hold Ordinary Shares. If Raytech Holding ceases to be a PFIC and you did not previously make a timely “mark-to-market” election as described below, however, you may avoid some of the adverse effects of the PFIC regime by making a “purging election” (as described below) with respect to the Ordinary Shares.
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If Raytech Holding is a PFIC for any taxable year during which you hold Ordinary Shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as an excess distribution. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares; |
| ● | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which was were a PFIC, will be treated as ordinary income, |
| ● | the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year, and |
| ● | An additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year. |
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even if you hold the Ordinary Shares as capital assets.
A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for the Ordinary Shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the Ordinary Shares as of the close of your taxable year over your adjusted basis in such Ordinary Shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary Shares. Your basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by Raytech Holding, except that the lower applicable capital gains rate for qualified dividend income discussed above under “— Taxation of Dividends and Other Distributions on Raytech Holding’s Ordinary Shares” generally would not apply.
The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including the Nasdaq Capital Market. If the Ordinary Shares are regularly traded on the Nasdaq Capital Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were Raytech Holding to be or become a PFIC.
Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. Raytech Holding does not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. Therefore, you should not expect to be eligible to make this election.
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If you do not make a timely “mark-to-market” election (as described above), and if Raytech Holding was a PFIC at any time during the period you hold Raytech Holding’s Ordinary Shares, then such Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if Raytech Holding ceases to be a PFIC in a future year, unless you make a “purging election” for the year Raytech Holding ceases to be a PFIC. A “purging election” creates a deemed sale of such Ordinary Shares at their fair market value on the last day of the last year in which Raytech Holding is treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the fair market value of the Ordinary Shares on the last day of the last year in which Raytech Holding is treated as a PFIC) and holding period (which new holding period will begin the day after such last day) in your Ordinary Shares for tax purposes. IRC Section 1014(a) provides for a step-up in basis to the fair market value for Raytech Holding’s Ordinary Shares when inherited from a decedent that was previously a holder of Raytech Holding’s Ordinary Shares. However, if Raytech Holding is determined to be a PFIC and a decedent that was a U.S. Holder did not make either a timely qualified electing fund election for Raytech Holding’s first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) Raytech Holding’s Ordinary Shares, or a mark-to-market election and ownership of those Ordinary Shares are inherited, a special provision in IRC Section 1291(e) provides that the new U.S. Holder’s basis should be reduced by an amount equal to the Section 1014 basis minus the decedent’s adjusted basis just before death. As such if Raytech Holding is determined to be a PFIC at any time prior to a decedent’s passing, the PFIC rules will cause any new U.S. Holder that inherits Raytech Holding’s Ordinary Shares from a U.S. Holder to not get a step-up in basis under Section 1014 and instead will receive a carryover basis in those Ordinary Shares.
If you hold Ordinary Shares in any year in which Raytech Holding is classified as a PFIC, you will be required to file IRS Form 8621 and to provide certain annual information regarding such Ordinary Shares, including regarding distributions received on the Ordinary Shares and any gain realized on the disposition of the Ordinary Shares. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.
You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in Raytech Holding’s Ordinary Shares and the elections discussed above.
Hong Kong Profits Taxation
Raytech Holding’s subsidiaries, Pure Beauty and Raytech Innovation, are Hong Kong entities subject to the two-tier profit tax rates system according to Hong Kong tax rules and regulations.
The two-tier profits tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (the “Ordinance”) of Hong Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first HKD 2 million (US$254,780) of assessable profits of a corporation will be subject to the lowered tax rate, 8.25% while the remaining assessable profits will be subject to the legacy tax rate, 16.5%. The Ordinance only allows one entity within a group of “connected entities” is eligible for the two-tier tax rate benefit. An entity is a connected entity of another entity if (1) one of them has control over the other; (2) both of them are under the control (more than 50% of the issued share capital) of the same entity; (3) in the case of the first entity being a natural person carrying on a sole proprietorship business-the other entity is the same person carrying on another sole proprietorship business. Under the Ordinance, it is an entity’s election to nominate an entity that will be subject to the two-tier profits tax rate on its Profits Tax Return. The election is irrevocable.
Pure Beauty elected the two-tier profits tax rate for its tax years of 2021/2022, 2022/2023 and 2023/24, and opted out the two-tier profits tax rate for its tax years of 2024/25.
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British Virgin Islands Taxation
The disclosure relating to tax consequences under British Virgin Islands law is the opinion of Harney Westwood & Riegels, Raytech Holding’s counsel as to BVI law.
The Government of the British Virgin Islands does not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Company or its shareholders who are not tax resident in the British Virgin Islands.
The Company and all distributions, interest and other amounts paid by the Company to persons who are not tax resident in the British Virgin Islands will not be subject to any income, withholding or capital gains taxes in the British Virgin Islands, with respect to the Ordinary Shares in the Company owned by them and dividends received on such shares, nor will they be subject to any estate or inheritance taxes in the British Virgin Islands.
No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not tax resident in the British Virgin Islands with respect to any shares, debt obligations or other securities of the Company.
Except to the extent that Raytech Holding has any interest in real property in the British Virgin Islands, all instruments relating to transactions in respect of the shares, debt obligations or other securities of the Company and all instruments relating to other transactions relating to the business of the Company are exempt from the payment of stamp duty in the British Virgin Islands.
There are currently no withholding taxes or exchange control regulations in the British Virgin Islands applicable to the Company or its shareholders.
There is no income tax treaty or convention currently in effect between the United States and the British Virgin Islands or between Hong Kong and the British Virgin Islands.
British Virgin Islands Economic Substance Legislation
The British Virgin Islands, together with several other non-European Union jurisdictions, has introduced legislation aimed at addressing concerns raised by the Council of the European Union (the “EU”) as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “ES Act”) came into force in the British Virgin Islands introducing certain economic substance requirements for in-scope British Virgin Islands entities which are engaged in certain “relevant activities”.
Although it is presently anticipated that the ES Act will have little material impact on the Company or its operations, as the legislation is relatively new and remains subject to further clarification and interpretation, it is not currently possible to ascertain the precise impact of these legislative changes on the Company.
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British Virgin Islands Data Protection Act
The Data Protection Act, 2021 (the “BVI DPA”) came into force in the British Virgin Islands on 9 July 2021. The BVI DPA establishes a framework of rights and duties designed to safeguard individuals’ personal data, balanced against the need of public authorities, businesses and organizations to collect and use personal data for lawful purposes. The BVI DPA is centered around seven data protection principles (the General Principle, the Notice and Choice Principle, the Disclosure Principle, the Security Principle, the Retention Principle, the Data Protection Principle and the Access Principle) which require that:
| ● | personal data must not be processed without consent unless specific conditions are met and must not be transferred outside the British Virgin Islands, unless there is proof of adequate data protection safeguards or consent from the data subject; |
| ● | Where consent has been given to processing of personal data, the data subject may at any time withdraw his or her consent; |
| ● | a data controller must inform a data subject of specific matters, for instance the purposes for which it is being collected and further processed; |
| ● | personal data must not be disclosed for any purpose other than the purpose for which it was to be disclosed at the time of collection or a purpose directly related thereto or to any party other than a third party of a class previously notified to the data subject; |
| ● | a data controller shall, when processing personal data, take practical steps to protect personal data from loss, misuse, modification, unauthorized or accidental access or disclosure, alteration or destruction; |
| ● | personal data must not be kept for longer than is necessary for the purpose; |
| ● | personal data must be accurate, complete, not misleading and kept up to date; and |
| ● | a data subject must be given access to his or her own personal data and be able to correct that data where it is inaccurate, incomplete, misleading or not up to date, except where a request for such access or correction is refused under the BVI DPA. |
The BVI DPA imposes specific obligations on data controllers, including the duty to (i) apply the data protection principles; and (ii) respond in a timely fashion to requests from data subjects in relation to their personal data.
The Information Commissioner is the regulator responsible for the proper functioning and enforcement of the BVI DPA. Offences under the BVI DPA include
| ● | processing sensitive personal data in contravention of the BVI DPA; |
| ● | willfully obstructing the Information Commissioner or an authorized officer in the conduct of his or her duties and functions; |
| ● | willfully disclosing personal information in contravention of the BVI DPA; and |
| ● | collecting, storing or disposing of personal information in a manner that contravenes the BVI DPA. |
Offences committed under the BVI DPA may result in fines (up to US$500,000 in certain cases) or imprisonment. Further, a data subject who suffers damage or distress as a result of their data being processed in contravention of the DPA may institute civil proceedings in the British Virgin Islands courts.
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PLAN OF DISTRIBUTION
Fees, Commissions and Expense Reimbursement
Upon the closing of this offering, we will pay the placement agent a commission of 7.0% of the aggregate gross proceeds raised in this offering, or 6.0% for company-directed or company-introduced investors. We have also agreed to (i) reimburse the placement agent for accountable expenses, up to a maximum of $150,000, in accordance with FINRA Rule 5110(g)(5)(A); and (ii) provide a non-accountable expense allowance equal to 1% of the gross proceeds of this offering. In the event this offering does not close, we have agreed to reimburse the placement agent accountable expenses up to an aggregate of $50,000.
The following table shows the public offering price, placement agent fees, other fees, and proceeds, before expenses, to us, assuming all investors are introduced to us by the placement agent.
If all of the Ordinary Shares offered by us are not sold at the public offering price, the placement agent may change the offering price and other selling terms by means of a supplement to this prospectus.
| Per Ordinary Share | Total | |||||||
| Public offering price | $ | [●] | $ | [●] | ||||
| Placement agent fees and commissions (7.0%) | $ | [●] | $ | [●] | ||||
| Non-accountable expense allowance | $ | [●] | $ | [●] | ||||
| Other Fees | $ | [●] | $ | [●] | ||||
| Proceeds, before expenses, to us | $ | [●] | $ | [●] | ||||
The foregoing does not purport to be a complete statement of the terms and conditions of the Placement agency agreement. A form of the Placement agency agreement is included as an exhibit to the registration statement of which this prospectus forms a part.
Lock-Up Agreements
We will agree in the Placement agency agreement that, without the prior written consent of the placement agent, we and any of our successors will not, for a period of ninety (90) days from the closing of this offering, (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, or file with the SEC any registration statement relating to, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) complete any offering of debt securities of the Company, other than entering into a line of credit with a traditional bank, or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
In addition, our directors and officers shall enter into customary “lock-up” agreements in favor of the placement agent pursuant to which such persons and/or entities agree, for a period of twenty (20) days from the date of the consummation of the Offering, that they shall neither offer, issue, sell, contract to sell, encumber, or otherwise dispose of any securities of the Company without the placement agent’s prior written consent.
Regulation M
The placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of our securities by the placement agent acting as principal. Under these rules and regulations, the placement agent (i) may not engage in any stabilization activity in connection with our securities and (ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.
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Determination of Offering Price
The actual offering price of the Ordinary Shares will be negotiated between us, the placement agent, and the prospective investors in the offering based on the trading of our ordinary shares prior to the offering, among other things. Other factors considered in determining the public offering price of the Ordinary Shares we are offering, include our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, the general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.
Electronic Offer, Sale and Distribution of Securities
A prospectus in electronic format may be delivered to potential investors by the placement agent. The prospectus in electronic format will be identical to the paper version of such prospectus. Other than the prospectus in electronic format, the information on the placement agent’s websites and any information contained in any other website maintained by the placement agent is not part of the prospectus or the registration statement of which this prospectus forms a part.
Relationships
The placement agent and its respective affiliates are full service financial institutions engaged in various activities, which may include the sales and trading of securities, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, financing, brokerage and other financial and non-financial activities and services. The placement agent and their respective affiliates may have, from time to time, performed, and may in the future perform, a variety of such activities and services for us and for persons or entities with relationships with us for which they received or will receive customary fees, commissions and expenses.
In the ordinary course of their various business activities, the placement agent and its respective affiliates, directors, officers and employees may at any time purchase, sell or hold a broad array of investments, and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own accounts and for the accounts of their customers. Such investment and trading activities may involve or relate to our assets, securities and/or instruments (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The placement agent and its respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments. In addition, the placement agent and its respective affiliates may at any time hold, or recommend to clients that they should acquire, long and short positions in such assets, securities and instruments.
Selling Restrictions
No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the Ordinary Shares, or the possession, circulation or distribution of this prospectus or any other material relating to us or the Ordinary Shares, where action for that purpose is required. Accordingly, the Ordinary Shares may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the Ordinary Shares may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.
Indemnification
We have agreed to indemnify the placement agent against liabilities relating to the offering arising under the Securities Act and the Exchange Act and to contribute to payments that the placement agent may be required to make for these liabilities. In the opinion of the Securities and Exchange Commission, we have been advised that indemnification of liabilities under the Securities Act is against public policy as expressed in the Securities Act, and is therefore unenforceable.
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EXPENSES RELATING TO THIS OFFERING
Set forth below is an itemization of the total expenses, excluding placement agent fees and accountable and non-accountable expenses reimbursable to the placement agent, that Raytech Holding expects to incur in connection with this offering. Except for the SEC registration fee and the Financial Industry Regulatory Authority Inc. filing fee, all amounts are estimates.
| USD | ||||
| Securities and Exchange Commission Registration Fee | $ | 7532.52 | ||
| Financial Industry Regulatory Authority Inc. Filing Fee | $ | 2,000 | ||
| Legal Fees and Expenses | $ | 137,087 | ||
| Printing and Engraving Expenses | $ | 7500 | ||
| Accounting fees and expenses | $ | 20,000 | ||
| Total Expenses | $ | 178,471.4 | ||
These expenses will be borne by Raytech Holding.
LEGAL MATTERS
The validity of the Ordinary Shares offered in this offering and certain other legal matters as to BVI law are passed upon for Raytech Holding by Harney Westwood & Riegels, Raytech Holding’s counsel as to BVI law. The legal matters as to United States Federal and New York State law are passed upon for Raytech Holding by Loeb & Loeb LLP. The placement agent is being represented by Zarif Law Group P.C. with respect to legal matters of United States federal and New York State law. Legal matters as to Hong Kong laws are passed upon for Raytech Holding by CLKW Lawyers LLP. Legal matters as to the laws of mainland China are passed upon for Raytech Holding by AllBright Law Offices (Fuzhou).
EXPERTS
The consolidated financial statements for the years ended March 31, 2023 and 2024 included in this prospectus have been so included in reliance on the report of WWC, P.C., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The office of WWC, P.C. is located at 2010 Pioneer Court, San Mateo, CA 94403.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the Ordinary Shares was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant. Nor was any such person connected with the registrant as a promoter, managing or principal placement agent/placement agent, voting trustee, director, officer, or employee.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to Raytech Holding’s directors, officers or persons controlling Raytech Holding, Raytech Holding has been advised that it is the SEC’s opinion that such indemnification is against public policy as expressed in such act and is, therefore, unenforceable.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
Raytech Holding has filed with the SEC a registration statement on Form F-1, including relevant exhibits and schedules under the Securities Act, covering the Ordinary Shares offered by this prospectus. You should refer to Raytech Holding’s registration statements and their exhibits and schedules if you would like to find out more about Raytech Holding and about the Ordinary Shares. This prospectus summarizes material provisions of contracts and other documents that Raytech Holding refers you to. Since the prospectus may not contain all the information that you may find important, you should review the full text of these documents.
Raytech Holding is subject to periodic reporting and other informational requirements of the Exchange Act, as applicable to foreign private issuers. Accordingly, Raytech Holding is required to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, Raytech Holding is exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders under the federal proxy rules contained in Sections 14(a), (b) and (c) of the Exchange Act, and Raytech Holding’s executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
The SEC maintains a website that contains reports, proxy statements and other information about issuers, such as Raytech Holding, who file electronically with the SEC. The address of that website is http://www.sec.gov. The information on that website is not a part of this prospectus.
No dealers, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
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RAYTECH HOLDING LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
F-1
RAYTECH HOLDING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
| As of March 31, | (Unaudited) | |||||||||||
| 2024 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable, net | ||||||||||||
| Amount due from a director | ||||||||||||
| Merchandise inventories, net | ||||||||||||
| Taxes receivables | ||||||||||||
| Prepayments | ||||||||||||
| TOTAL CURRENT ASSETS | ||||||||||||
| NON-CURRENT ASSETS | ||||||||||||
| Property and equipment, net | ||||||||||||
| Deferred initial public offering costs | ||||||||||||
| Long-term deposits | ||||||||||||
| TOTAL NON-CURRENT ASSETS | ||||||||||||
| TOTAL ASSETS | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Accounts payable | ||||||||||||
| Accounts payable - related party | ||||||||||||
| Accruals | ||||||||||||
| Contract liabilities | ||||||||||||
| TOTAL CURRENT LIABILITIES | ||||||||||||
| TOTAL LIABILITIES | ||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Ordinary Shares, US$ | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Retained earnings | ||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-2
RAYTECH HOLDING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| REVENUE | ||||||||||||
| Sales of products | ||||||||||||
| Sales of tooling | ||||||||||||
| OPERATING EXPENSES | ||||||||||||
| Merchandise costs | ( | ) | ( | ) | ( | ) | ||||||
| Selling, general and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ||||||
| INCOME FROM OPERATIONS | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ||||||||||
| Loss from foreign currency exchange | ( | ) | ( | ) | ( | ) | ||||||
| Total other income, net | ||||||||||||
| INCOME BEFORE INCOME TAX PROVISION | ||||||||||||
| PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ||||||
| NET INCOME | ||||||||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||||||
| Basic and diluted(1) | ||||||||||||
| EARNINGS PER SHARE | ||||||||||||
| Basic and diluted | ||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-3
RAYTECH HOLDING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Ordinary shares | Additional | Total | ||||||||||||||||||
| No. of Shares(1) | Par Value | Paid-in Capital | Retained Earnings | Shareholders’ Equity | ||||||||||||||||
| HKD | HKD | HKD | HKD | |||||||||||||||||
| For the six months ended September 30, 2023: | ||||||||||||||||||||
| BALANCE, March 31, 2023 | ||||||||||||||||||||
| Net income | – | |||||||||||||||||||
| BALANCE, September 30, 2023 | ||||||||||||||||||||
| For the six months ended September 30, 2024: | ||||||||||||||||||||
| BALANCE, March 31, 2024 | ||||||||||||||||||||
| Initial Public Offering of shares | ||||||||||||||||||||
| Net income | – | |||||||||||||||||||
| BALANCE, September 30, 2024 | ||||||||||||||||||||
| BALANCE, September 30, 2024 (US$) | ||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-4
RAYTECH HOLDING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| (Unaudited) For the Six Months ended September 30, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net income | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
| Depreciation of property and equipment | ||||||||||||
| Amortization of right-of-use asset | ||||||||||||
| Loss from unrealized foreign currency translation | ||||||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Accounts receivable, net | ( | ) | ||||||||||
| Merchandise inventories, net | ( | ) | ||||||||||
| Prepayments | ||||||||||||
| Accounts payable | ( | ) | ||||||||||
| Accounts payable - related party | ( | ) | ( | ) | ||||||||
| Accruals | ( | ) | ( | ) | ( | ) | ||||||
| Contract liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Operating lease obligation | ( | ) | ||||||||||
| Taxes receivables | – | |||||||||||
| Taxes payables | ||||||||||||
| Net cash provided by operating activities | ||||||||||||
| Cash flows from investing activities | ||||||||||||
| Repayment of amount due from a director | ||||||||||||
| Net cash provided by investing activities | ||||||||||||
| Cash flows from financing activities | ||||||||||||
| Proceed from Initial Public Offering of shares | ||||||||||||
| Deferred initial public offering cost | ( | ) | ||||||||||
| Net cash (used in)/from financing activities | ( | ) | ||||||||||
| Change in cash | ||||||||||||
| Effect of foreign exchange on cash | ( | ) | ( | ) | ||||||||
| Cash at the beginning of the period | ||||||||||||
| Cash at the end of the period | ||||||||||||
| Supplementary cash flow information | ||||||||||||
| Cash paid for income tax | ||||||||||||
| Cash paid for interest expense | ||||||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-5
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| To: | The Board of Directors and Shareholders of Raytech Holding Limited |
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Raytech Holding Limited and its subsidiary (collectively the “Company”) as of March 31, 2023 and 2024, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of our internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ WWC, P.C. |
WWC, P.C.
Certified Public Accountants
PCAOB ID No. 1171
We have served as the Company’s auditor since 2022.
San Mateo, California
July 30, 2024
F-6
RAYTECH HOLDING LIMITED
CONSOLIDATED BALANCE SHEETS
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable, net | ||||||||||||
| Amount due from a director | ||||||||||||
| Merchandise inventories, net | ||||||||||||
| Taxes receivables | ||||||||||||
| Prepayments | ||||||||||||
| TOTAL CURRENT ASSETS | ||||||||||||
| NON-CURRENT ASSETS | ||||||||||||
| Property and equipment, net | ||||||||||||
| Right-of-use assets – operating lease | ||||||||||||
| Deferred initial public offering costs | ||||||||||||
| Long-term deposits | ||||||||||||
| TOTAL NON-CURRENT ASSETS | ||||||||||||
| TOTAL ASSETS | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Accounts payable | ||||||||||||
| Accounts payable - related party | ||||||||||||
| Accruals | ||||||||||||
| Contract liabilities | ||||||||||||
| Operating lease obligation, current portion | ||||||||||||
| TOTAL CURRENT LIABILITIES | ||||||||||||
| OTHER LIABILITIES | ||||||||||||
| Operating lease obligation, net of current portion | ||||||||||||
| TOTAL LIABILITIES | ||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Ordinary Shares, US$ | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Retained earnings | ||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| (1) | Giving retroactive effect to the 160,000-for-1 share split effected on May 10, 2023. |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
RAYTECH HOLDING LIMITED
CONSOLIDATED STATEMENTS OF INCOME
| For the Years ended March 31, | ||||||||||||||||
| 2022 | 2023 | 2024 | 2024 | |||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| REVENUE | ||||||||||||||||
| Sales of products | ||||||||||||||||
| Sales of tooling | ||||||||||||||||
| Total revenue | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Merchandise costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Selling, general and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME FROM OPERATIONS | ||||||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain (loss) from foreign currency exchange | ( | ) | ( | ) | ||||||||||||
| Government grants | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Total other income, net | ||||||||||||||||
| INCOME BEFORE INCOME TAX PROVISION | ||||||||||||||||
| PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET INCOME | ||||||||||||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||||||||||
| Basic and diluted (1) | ||||||||||||||||
| EARNINGS PER SHARE | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| (1) | Giving retroactive effect to the 160,000-for-1 share split effected on May 10, 2023. |
The accompanying notes are an integral part of these consolidated financial statements.
F-8
RAYTECH HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Ordinary shares | Additional | Total | ||||||||||||||||||
| No. of Shares (1) | Par Value | Paid-in Capital | Retained Earnings | Shareholders’ Equity | ||||||||||||||||
| HKD | HKD | HKD | HKD | |||||||||||||||||
| BALANCE, April 1, 2021 | ||||||||||||||||||||
| Net income | – | |||||||||||||||||||
| Dividends distribution | – | ( | ) | ( | ) | |||||||||||||||
| BALANCE, March 31, 2022 | ||||||||||||||||||||
| Net income | – | |||||||||||||||||||
| BALANCE, March 31, 2023 | ||||||||||||||||||||
| Net income | – | |||||||||||||||||||
| BALANCE, March 31, 2024 | ||||||||||||||||||||
| BALANCE, March 31, 2024 (US$) | ||||||||||||||||||||
| (1) | Giving retroactive effect to the 160,000-for-1 share split effected on May 10, 2023. |
The accompanying notes are an integral part of these consolidated financial statements.
F-9
RAYTECH HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years ended March 31, | ||||||||||||||||
| 2022 | 2023 | 2024 | 2024 | |||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net income | ||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||||||
| Depreciation of plant and equipment | ||||||||||||||||
| Amortization of right-of-use asset | ||||||||||||||||
| Gain from unrealized foreign currency translation | ( | ) | ( | ) | ( | ) | ||||||||||
| Changes in operating assets and liabilities | ||||||||||||||||
| Accounts receivable, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Merchandise inventories, net | ( | ) | ( | ) | ||||||||||||
| Prepayments | ( | ) | ( | ) | ||||||||||||
| Long-term deposits | ( | ) | ( | ) | ||||||||||||
| Accounts payable | ( | ) | ( | ) | ( | ) | ||||||||||
| Accounts payable - related party | ||||||||||||||||
| Accruals | ||||||||||||||||
| Contract liabilities | ( | ) | ( | ) | ||||||||||||
| Operating lease obligation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Taxes payables | ( | ) | ( | ) | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||||
| Cash flows from investing activities | ||||||||||||||||
| Purchase of property and equipment | ( | ) | ||||||||||||||
| Repayment by the director | ||||||||||||||||
| Net cash provided by investing activities | ||||||||||||||||
| Cash flows from financing activities | ||||||||||||||||
| Deferred initial public offering cost | ( | ) | ( | ) | ( | ) | ||||||||||
| Dividend payments | ( | ) | ||||||||||||||
| Net cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in cash | ||||||||||||||||
| Effect of foreign exchange on cash | ( | ) | ||||||||||||||
| Cash at the beginning of the year | ||||||||||||||||
| Cash at the end of the year | ||||||||||||||||
| Supplementary cash flow information | ||||||||||||||||
| Cash paid for income tax | ||||||||||||||||
| Cash paid for interest expense | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-10
RAYTECH HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — NATURE OF BUSINESS AND ORGANIZATION
Raytech Holding Limited (the “Company” or “Raytech”) is a holding company incorporated on June 24, 2022 under the British Virgin Islands (“BVI”) law. The Company has no substantial operations other than holding all of the outstanding share capital of Pure Beauty Manufacturing Company Limited (“Pure Beauty”), a Hong Kong Company incorporated on April 15, 2013. The Company, through Pure Beauty, is engaged in the sourcing and wholesaling of personal care and lifestyle electrical appliances for international brand owners as our customers. The Company’s headquarter is located in Hong Kong, China. All of the Company’s business activities are carried out by Pure Beauty.
In August 2022 completed a reorganization of Pure Beauty under common control of its then existing shareholders, who collectively owned all of the equity interests of Raytech prior to the reorganization. Raytech and Pure Beauty are under common control which results in the consolidation of Pure Beauty at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of Raytech.
The consolidated financial statements reflect the activities of each of the following entities:
| Name | Background | Ownership | Principal activities | |||
| Raytech Holding Limited (“Raytech”) | ● A BVI company | |||||
| Pure Beauty Manufacturing Company Limited (“Pure Beauty”) | ● A Hong Kong company ● Incorporated on April 15, 2013 |
Note 2 — Summary of Significant Accounting Policies and Practices
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”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiary. All inter-company transactions have been eliminated upon consolidation.
Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable, useful lives of property and equipment, the recoverability of long-lived assets and implicit interest rate of operating leases. Actual results could differ from those estimates.
F-11
Risks and uncertainties
Economic and political risks
The Company’s operations are mainly conducted in Hong Kong. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in Hong Kong.
The Company’s operations in Hong Kong are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in Hong Kong, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.
Inflation Risk
Management monitors changes in price levels. Historically inflation has not materially impacted the Company’s audited consolidated financial statements; however, significant increases in the price of raw materials and labor that cannot be passed to the Company’s customers could adversely impact Company’s results of operations.
World unrest due to wars and terrorist attacks have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy. Since mid-2022, the U.S. Federal Reserve has addressed elevated inflation by increasing interest rates, as inflation remains elevated. Given current market conditions, the Company may be unable to access the capital markets, and additional capital may only be available to the Company on terms that could be significantly detrimental to the Company’s existing stockholders and to the Company’s business.
Foreign currency translation
The Company uses Hong Kong dollars (“HKD”) as its reporting currency. The functional currency of the Company and its subsidiary which is incorporated in Hong Kong is HKD, which is its respective local currency based on the criteria of ASC 830, “Foreign Currency Matters”.
Convenience translation
No representation is made that the HKD amounts could have been, or could be, converted, realized or settled into US$ at such rate or at any other rate.
In the consolidated financial statements of the Company, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in the consolidated statements of income during the year in which they occur.
Cash and cash equivalents
Cash and cash equivalents mainly represents cash
at bank and demand deposits which have original maturities less than three months and are unrestricted as to withdrawal or use. As of
March 31, 2023 and 2024, the Company had HKD21, and HKD35, (US$
Accounts receivable, net
Accounts receivables are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts.
F-12
The Company make estimates of expected credit and collectability trends for the allowance for credit losses and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
Provision for doubtful accounts was and as of March 31, 2023 and 2024, respectively.
Merchandise inventories, net
Merchandise inventories are stated at the lower of cost or net realizable value, on a weighted average basis. Costs include mainly the cost of merchandise inventories. Any excess of the cost over the net realizable value of each item of merchandise inventories is recognized as a provision for diminution in the value of merchandise inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to sell products. The Company periodically evaluates merchandise inventories for their net realizable value adjustments and reduces the carrying value of those merchandise inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and expiration dates, as applicable, taking into consideration historical and expected future product sales. For the years ended March 31, 2023 and 2024, no merchandise inventory reserve was recorded because no slow-moving, obsolete, or damaged merchandise inventory was identified.
Prepayments
Prepayments primarily consists of prepaid expenses. These amounts are refundable and bear no interest. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. As of March 31, 2023 and 2024, no allowance was deemed necessary.
Deferred initial public offering (“IPO”) costs
Pursuant to ASC 340-10-S99-1, IPO costs directly
attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction
of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related
to the registration preparation, the SEC filing and print related costs. During the year ended March 31, 2024, the Company recorded a
charge of related to the IPO. As of March 31, 2023 and 2024, the accumulated deferred IPO costs were and HKD5,
(US$
Long-term deposits
Long-term deposits are mainly for rent, utilities and money deposited with certain manufacturers. These amounts are refundable and bear no interest. The long-term deposits are refunded from manufacturers when the terms and conditions set forth in the agreements have been satisfied.
F-13
Property and equipment, net
Property and equipment are stated at cost less
accumulated depreciation and impairment if applicable. Depreciation is computed using the straight-line method after consideration of
the estimated useful lives.
| Useful Life | ||
| Office equipment | ||
| Office furniture and fixtures | ||
| Leasehold improvements |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statements of operations. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterment, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment for long-lived assets
Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company will reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of March 31, 2023 and 2024, impairment of long-lived assets was recognized.
Fair value measurement
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liability, and operating lease liability, non-current in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option, if any. As the Company’s leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company has elected to adopt the following lease policies in conjunction with the adoption of ASU 2016-02: (i) for leases that have lease terms of 12 months or less and does not include a purchase option that is reasonably certain to exercise, the Company elected not to apply ASC 842 recognition requirements; and (ii) the Company elected to apply the package of practical expedients for existing arrangements entered into prior to April 1, 2020 to not reassess (a) whether an arrangement is or contains a lease, (b) the lease classification applied to existing leases, and(c) initial direct costs.
F-14
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers. For certain services, customers are required to pay before the services are delivered. The Company recognizes a contract asset or a contract liability in the consolidated balance sheets, depending on the relationship between the Company’s performance and the customer’s payment.
The Company classifies its right to consideration in exchange for services transferred to a customer as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factors other than the passage of time. The Company recognizes accounts receivable in its consolidated balance sheets when it performs a service in advance of receiving consideration and if it has the unconditional right to receive consideration. The Company did not have any capitalized contract costs as of March 31, 2023 and 2024.
Contract liabilities are recognized if the Company
receives consideration in advance of performance, which is mainly in relation to emerging and other services. The Company expects to recognize
a significant majority of this balance as revenue over the next 12 months, and the remainder thereafter. As of March 31, 2023 and 2024,
the contract liabilities of the Company amounted to and HKD1, (US$
Revenue Recognition
Revenue from contracts with customers is recognized using the five-step model defined by ASC Topic 606 requires the Company to (1) identify its contracts with customers, (2) identify its performance obligations under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to its performance obligations in those contracts and (5) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services.
Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from the specified goods and services.
The Company currently generates its revenue through
sourcing and wholesaling of Japanese beauty products, as well as personal care products and other products, through distribution network
to Japan market. Currently, the Company sells its products through sourcing and wholesale customers. The Company sells goods under Free
On Board (“FOB”) shipping point term, and revenue is recognized when product is loaded on the ships and control is deemed
as transferred. Typical payment terms set forth in the invoice are within
Tooling revenue is earned from manufacturing multiple tools, molds and assembly equipment as part of a tooling program for a customer. Given that the Company is providing a significant service of producing highly interdependent component parts of the tooling program, each component does not generate standalone values. It must be a completed mold so the customer can benefit from the purchase. Based on the arrangement with the customer, the Company recognizes revenue at a point in time. In such cases, the Company recognizes revenue at the evidence transfer of control.
The Company is the principal for the majority of its transactions and recognizes revenue on a gross basis. The Company is the principal when it has control of the merchandise before it is transferred to customers, which generally is established when the Company is primarily responsible for merchandising decisions, maintains the relationship with customer, and has pricing discretion.
F-15
Merchandise costs
Cost of sales of beauty products, personal care products and other products, which are directly related to revenue-generating transactions, primarily consist of cost of purchasing of products.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of motor vehicle running expenses, travelling and entertainment and general administrative expenses such as of staff costs, rental expenses, depreciation, legal and professional fees and other miscellaneous administrative expenses.
Employee Benefit
Hong Kong Employment Ordinance (“The Ordinance”) requires an employee employed under a continuous employment contract is entitled to sickness allowance if (1) the sick leave taken is not less than four consecutive days; (2) the sick leave take is supported by an appropriate medical certificate; and (3) the employee has accumulated sufficient number of paid sickness days. The daily rate of sickness allowance is a sum equivalent to four-fifths of the average daily wages earned by an employee in the 12-month period preceding the first sickness day.
The Ordinance also requires an employee is entitled to 12 statutory holidays regardless of his or her length of services. Holiday pay should be paid to the employee whose continuous employment contract is not less than three months immediately preceding a statutory holiday is entitled to the holiday pay.
An employee is entitled to a paid annual leave after having been employed under a continuous employment contract for every 12 months. An employee’s paid annual leave increases progressively from 7 days to a maximum of 14 days in accordance with his or her length of employment.
Under Hong Kong Mandatory Provident Fund Schemes
Ordinance, an employer shall enroll their regular employees in Mandatory Provident Fund Schemes. Regular employees are those who are at
between 18 and 65 years of age and have been employed for consecutive 60 days or more. An employer is required to make regular mandatory
contributions of at least
Income taxes
Raytech is not subject to tax on income or capital gains under the current laws of the British Virgin Islands. In addition, upon payments of dividends by Raytech and the Company’s subsidiary in Hong Kong, Pure Beauty to the Company’s shareholders, no British Virgin Islands withholding tax will be imposed.
Pure Beauty is incorporated in and carry trade and business in Hong Kong and is subject to Hong Kong profits tax under Inland Revenue Department Ordinance.
The charge for taxation is based on actual results for the year as adjusted for items that are non-assessable or disallowed; and it is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The Group is not currently subject to tax in the British Virgin Islands.
Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized
is the largest amount of tax benefit that is greater than
F-16
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such a contingency if it determines it is probable that a loss has occurred, and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the years ended March 31, 2022, 2023 and 2024, there were no dilutive shares.
Concentration of Risks
Concentration of credit risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with financial institutions with high credit ratings and quality.
Accounts receivable primarily comprise of amounts receivable from the service customers. To reduce credit risk, the Company performs ongoing credit evaluations of the financial condition of these service customers. The Company establishes a provision for doubtful accounts based upon estimates, factors surrounding the credit risk of specific service customers and other information.
Concentration of customers
As of March 31, 2022 and 2023, one major customer,
who is a distributor represent and sell brands of well-known manufactures from Japan and abroad, accounted for
For the years ended March 31, 2022 and 2023, one
major customer, who is a distributor represent and sell brands of well-known manufactures from Japan and abroad, accounted for
F-17
Concentration of manufacturers
As of March 31, 2022, two manufacturers accounted
for
Segment reporting
ASC 280, “Segment Reporting”, establishes
standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure
as well as information about geographical areas, business segments and major customers in consolidated financial statements for detailing
the Company’s business segments. Based on the criteria established by ASC 280, the Company’s chief operating decision maker
(“CODM”) has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about
allocating resources and assessing performance of the Company. As a whole and hence, the Company has only
Recently issued accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
On December 18, 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income Taxes. This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when there is not a business combination, 2) policy election to not allocate consolidated taxes on a separate entity basis to entities not subject to income tax, 3) accounting for tax law changes or rates during interim periods, 4) ownership changes from equity method investment to subsidiary or vice versa, 5) elimination of exception to intrapetrous allocation when there is gain in discontinued operations and a loss from continuing operations, and 6) treatment of franchise taxes that are partially based on income. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The Company is currently evaluating the impact of this new standard on the Company’s consolidated financial statements and related disclosures.
F-18
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for the Company for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.The amendments in this Update should be applied retrospectively. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. This standard is effective for the Company on January 1, 2023 and the Company does not expect a significant impact to the consolidated financial statements upon adoption. However, the ultimate impact is dependent upon the size and frequency of future acquisitions.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, consolidated statements of income and consolidated statements of cash flows.
Note 3 — Revenue
Effective April 1, 2020, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, which replaced ASC Topic 605, using the modified retrospective method of adoption. Results for reporting periods beginning after April 1, 2020 are presented under ASC Topic 606 while prior period amounts are not adjusted and continue to be presented under the Company’s historic accounting under ASC Topic 605. The Company’s accounting for revenues remains substantially unchanged. There were no cumulative effect adjustments made to the contracts in place prior to July 1, 2019. The effect from the adoption of ASC Topic 606 was not material to the Company’s consolidated financial statements.
Revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from the specified goods and services.
The following table present the Company’s revenue disaggregated by product categories for the years ended March 31, 2022, 2023 and 2024, respectively:
| For the years ended March 31, | ||||||||||||||||
| 2022 | 2023 | 2024 | 2024 | |||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| Sales of products | ||||||||||||||||
| Hair styling series | ||||||||||||||||
| Trimmer series | ||||||||||||||||
| Eyelash curler | ||||||||||||||||
| Neck care series | ||||||||||||||||
| Nail care series | ||||||||||||||||
| Other personal care appliances | ||||||||||||||||
| Sales of tooling | ||||||||||||||||
| Total | ||||||||||||||||
F-19
Note 4 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Accounts receivable | ||||||||||||
| Less: allowance for doubtful accounts | ||||||||||||
| Accounts receivable, net | ||||||||||||
As of the end of each of the financial year, the aging analysis of accounts receivable, net of allowance for doubtful accounts, based on the invoice date is as follows:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Within 30 days | ||||||||||||
| Within 31 to 60 days | ||||||||||||
| Total accounts receivable, net | ||||||||||||
There was provision of doubtful debts for the years ended March 31, 2023 and 2024, respectively.
Note 5 — MERCHANDISE INVENTORIES, NET
Merchandise inventories, net, consisted of the following:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Hair styling series | ||||||||||||
| Trimmer series | ||||||||||||
| Nail care series | ||||||||||||
| Other personal care appliances | ||||||||||||
| Less: inventory allowances | ||||||||||||
| Merchandise inventories, net | ||||||||||||
There was no inventory impairment for the years ended March 31, 2023 and 2024, respectively.
F-20
Note 6 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Office equipment | ||||||||||||
| Office furniture and fixtures | ||||||||||||
| Subtotal | ||||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ( | ) | ||||||
| Property and equipment, net | ||||||||||||
Depreciation expenses recognized for the years
ended March 31, 2023 and 2024 amounted to and (US$
No impairment loss had been recognized during the years ended March 31, 2023 and 2024, respectively.
Note 7 — ACCRUALS
Accruals consisted of the following:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Professional fee | ||||||||||||
| Employee payroll and other benefits | ||||||||||||
| Commission | ||||||||||||
| Total accruals | ||||||||||||
F-21
Note 8 — CONTRACT LIABILITIES
Movement in contract liabilities, consistent of the following:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| At the beginning | ||||||||||||
| Receipt from the clients | ||||||||||||
| Revenue recognized during the year | ( | ) | ( | ) | ( | ) | ||||||
| At the end | ||||||||||||
Note 9 — TAXES
Income tax
British Virgin Islands
The Company is incorporated in the BVI and is not subject to tax on income or capital gains under current BVI law. In addition, upon payments of dividends by these entities to their shareholders, no BVI withholding tax will be imposed.
Hong Kong
Pure Beauty is incorporated in Hong Kong
and is subject to Hong Kong profits tax at a rate of
Taxation in the statement of income represents:
| For the years ended March 31, | ||||||||||||||||
| 2022 | 2023 | 2024 | 2024 | |||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| Hong Kong profits tax provision for the year: | ||||||||||||||||
| Current | ||||||||||||||||
| Deferred | ||||||||||||||||
F-22
The following table reconciles Hong Kong statutory rates to the Company’s effective tax rate:
| For the years ended March 31, | ||||||||||||||||
| 2022 | 2023 | 2024 | 2024 | |||||||||||||
| HKD | HKD | HKD | HKD | |||||||||||||
| Income before tax | ||||||||||||||||
| Hong Kong statutory income tax rate | % | % | % | % | ||||||||||||
| Income tax expense computed at statutory rate | ||||||||||||||||
| Reconciling items: | ||||||||||||||||
| Non-deductible items in Hong Kong | ||||||||||||||||
| Non-taxable items in Hong Kong | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Under provision for prior year | ||||||||||||||||
| Tax credit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Effective income tax expenses | ||||||||||||||||
Uncertain tax positions
The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of March 31, 2022, 2023 and 2024, the Company did not have any unrecognized tax benefits. For the years ended March 31, 2022, 2023 and 2024, the Company had unrecognized tax benefits.
Note 10 — Related party balances and transactions
The Company’s relationships with related parties who had transactions with the Company are summarized as follows:
| Related Party Name | Relationship to the Company | |
| Mr. Ching Tim Hoi (“Mr. Ching”) | ||
| Zhongshan Raytech Electric Appliances Manufacturing Company Limited (“Zhongshan Raytech”) |
| a. |
| As of March 31, | ||||||||||||||||
| Name of related party | Relationship | Nature of transactions | 2023 | 2024 | 2024 | |||||||||||
| HKD | HKD | US$ | ||||||||||||||
| Mr. Ching | The amount was wholly settled in cash subsequently on June 28, 2024. | |||||||||||||||
F-23
| b. | Accounts payable - related party |
Due to a related party consisted of the following:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Name of related party | ||||||||||||
| Zhongshan Raytech | ||||||||||||
| Total | ||||||||||||
These accounts payable to a related party was related to products we purchased from this related party. See “—Purchase from a Related Party” for more information.
Related party transactions
| c. |
| For the years ended March 31, | ||||||||||||||||
| 2022 | 2023 | 2024 | 2024 | |||||||||||||
| HKD | HKD | HKD | US$ | |||||||||||||
| Name of a related party | ||||||||||||||||
| Zhongshan Raytech | ||||||||||||||||
| Total | ||||||||||||||||
Note 11 — EQUITY
Ordinary shares
On August 2, 2022,
On May 10, 2023, the Company effected a share
split of all issued and outstanding shares of
Dividend
During the years ended March 31, 2023 and 2024, the Company has not declared any dividend.
Note 12 — COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which results in an economic penalty.
The Company has one property lease agreement with
lease terms for
F-24
The following table shows amounts recognized in the consolidated balance sheet:
| As of March 31, | ||||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HKD | HKD | US$ | ||||||||||
| Right-of-use assets | ||||||||||||
| Operating lease liabilities | ||||||||||||
| Current | ||||||||||||
| Non-current | ||||||||||||
Note 13 — SUBSEQUENT EVENTS
The Company evaluated all events and transactions that from March 31, 2024 up through July 29, 2024, which is the date that these consolidated financial statements are available to be issued, there were no other any material subsequent events that require disclosure in these consolidated financial statements, other than disclosed below.
On May 15, 2024, the Company completed its initial
public offering. In this offering, the Company issued
F-25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Raytech Holding’s amended and restated memorandum and articles of association, which became effective on May 10, 2023, empowers Raytech Holding to indemnify Raytech Holding’s directors and officers against certain liabilities they incur by reason of their being a director or officer of Raytech Holding.
Raytech Holding has also entered into indemnification agreements with each of Raytech Holding’s directors and executive officers in connection with this offering, the form of which is filed as Exhibit 10.5 to this registration statement. Under these agreements, Raytech Holding has agreed to indemnify Raytech Holding’s directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of Raytech Holding.
The placement agency agreement entered into, or to be entered into, in connection with this offering also provides for indemnification of Raytech Holding and Raytech Holding’s officers, directors or persons controlling Raytech Holding for certain liabilities.
Raytech Holding intends to obtain directors’ and officer’s liability insurance coverage that will cover certain liabilities of directors and officers of Raytech Holding arising out of claims based on acts or omissions in their capacities as directors or officers.
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.
In the past three years, we have issued the following securities (including options to acquire our ordinary shares) that were not registered under the Securities Act. We believe that each of the following issuances was exempt from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No placement agents were involved in these issuances of securities.
II-1
| Purchaser | Date of Issuance | Number of Ordinary Shares | Consideration Paid | |||||
| Ching Tim Hoi (1) | July 24, 2022 | 90 | US$90.00 | |||||
| Top Virtue International Limited | July 24, 2022 | 3 | US$3.00 | |||||
| Market Tycoon Investments Limited | July 24, 2022 | 3 | US$3.00 | |||||
| Value Classic Global Limited | July 24, 2022 | 4 | US$4.00 | |||||
| Ching Tim Hoi | May 10, 2023 | 12,800,000 | N/A (shares split on May 10, 2023: shares subdivided from 1 share to 160,000 shares(s), by amending the par value from US$1.00 to US$0.00000625) | |||||
| Top Virtue International Limited | May 10, 2023 | 480,000 | N/A (shares split on May 10, 2023: shares subdivided from 1 share to 160,000 shares(s), by amending the par value from US$1.00 to US$0.00000625) | |||||
| Market Tycoon Investments Limited (2) | May 10, 2023 | 480,000 | N/A (shares split on May 10, 2023: shares subdivided from 1 share to 160,000 shares(s), by amending the par value from US$1.00 to US$0.00000625) | |||||
| Value Classic Global Limited (3) | May 10, 2023 | 640,000 | N/A (shares split on May 10, 2023: shares subdivided from 1 share to 160,000 shares(s), by amending the par value from US$1.00 to US$0.00000625) | |||||
| APTC Holdings Limited (1)(4) | May 10, 2023 | 800,000 | N/A (shares split on May 10, 2023: shares subdivided from 1 share to 160,000 shares(s), by amending the par value from US$1.00 to US$0.00000625) | |||||
| Ling Chun Yin (1) | May 10, 2023 | 800,000 | N/A (shares split on May 10, 2023: shares subdivided from 1 share to 160,000 shares(s), by amending the par value from US$1.00 to US$0.00000625) | |||||
| (1) | On September 8, 2022, Mr. Ching Tim Hoi transferred to each of APTC Holdings Limited and Ling Chun Yin 5 ordinary shares. |
| (2) | On August 30, 2023, Market Tycoon Investments Limited transferred 480,000 Ordinary Shares to Mr. WONG TAI CHI. On October 11, 2023, Mr. WONG TAI CHI transferred 480,000 Ordinary Shares to Value Crystal Investment Limited. |
| (3) | On October 11, 2023, Value Classic Global Limited transferred 640,000 Ordinary Shares to Crystal Charm Investments Limited. |
| (4) | On August 30, 2023, APTC Holdings Limited transferred 800,000 Ordinary Shares to Ms. LOOK Wai Yi. On October 11, 2023, Ms. LOOK Wai Yi transferred 800,000 Ordinary Shares to Ace Challenger Limited. |
ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
See the Exhibit Index attached to this registration statement, which is incorporated by reference herein.
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.
II-2
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated best efforts offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| (i) | If the Registrant is relying on Rule 430B (§230.430B of this chapter): |
| (A) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| (B) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an placement agent, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
| (ii) | If the Registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
II-3
| (5) | That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the placement agent method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant; |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser |
| (6) | To file a post-effective amendment to the registration statement to include any financial statements required by item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided, that the Registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. |
| (7) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| (8) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue. |
II-4
EXHIBIT INDEX
II-5
| + | Previously filed |
| ++ | Filed herewith |
| * | To be filed in subsequent amendments. |
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on the Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Hong Kong, on the 6th of June 2025.
| Raytech Holding Limited | ||
| By: | /s/ Ching Tim Hoi | |
| Ching Tim Hoi | ||
| Chief Executive Officer | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ching Tim Hoi as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him or her and in his name or her name, place and stead, in any and all capacities, in connection with this registration statement, including to sign and file in the name and on behalf of the undersigned as director or officer of the registrant, any and all amendments or supplements (including any and all prospectus supplements, stickers and post-effective amendments) to this registration statement with all exhibits thereto, and sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and any applicable securities exchange, securities self-regulatory body or other regulatory authority, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith and in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| /s/ Ching Tim Hoi | Chief Executive Officer, Chairman and Director | June 6, 2025 | ||
| Ching Tim Hoi | (Principal Executive Officer) | |||
| /s/ Wan Yee Hing | Chief Financial Officer | June 6, 2025 | ||
| Wan Yee Hing | (Principal Financial and Accounting Officer) | |||
| /s/ Ling Chun Yin | Director | June 6, 2025 | ||
| Ling Chun Yin | ||||
| /s/ Li Wan Venus | Director | June 6, 2025 | ||
| Li Wan Venus | ||||
| /s/ Fok Pak Kin Charles | Director | June 6, 2025 | ||
| Fok Pak Kin Charles | ||||
| /s/ Li Shihua | Director | June 6, 2025 | ||
| Li Shihua |
II-7
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933 as amended, the undersigned, the duly authorized representative in the United States of America, has signed this registration statement thereto in Newark, Delaware, on June 6, 2025.
| U.S. Authorized Representative | |||
| Puglisi & Associates | |||
| By: | /s/ Donald J. Puglisi |
||
| Name: | Donald J. Puglisi | ||
| Title: | Authorized Representative | ||
II-8
Exhibit 1.1
PLACEMENT AGENCY AGREEMENT
__, 2025
R.F. Lafferty & Co. Inc.
40 Wall Street, 27th Floor
New York, New York 10005
Ladies and Gentlemen:
Introduction. Subject to the terms and conditions herein (this “Agreement”), Raytech Holding Limited, a British Virgin Islands Business Company (collectively with its subsidiaries and affiliates, including, without limitation, all entities disclosed or described in the Registration Statement as being subsidiaries or affiliates of Raytech Holding Limited, the “Company”), hereby agrees to sell up to an aggregate of Ten Million U.S. Dollars ($10,000,000) of registered securities of the Company, including ordinary shares (the “Shares”) of the Company, US$0.00000625 par value per share (the “Ordinary Shares”) directly to various investors (each, an “Investor” and, collectively, the “Investors”) through R.F. Lafferty & Co. Inc. as Placement Agent (the “Placement Agent”). The documents executed and delivered by the Company and the Investors in connection with the Offering (as defined below), including, without limitation, a securities purchase agreement (the “Purchase Agreement”), shall be collectively referred to herein as the “Transaction Documents.” The purchase price to the Investors for each Share is $____. The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the Offering.
The Company hereby confirms its agreement with the Placement Agent as follows:
Section 1. Agreement to Act as Placement Agent
(a) On the basis of the representations, warranties and agreements of the Company herein contained, and subject to all the terms and conditions of this Agreement, the Placement Agent shall be the exclusive Placement Agent in connection with the offering and sale by the Company of the Shares pursuant to the Company’s registration statement on Form F-1 (File No. 333-[ ]) (and including any registration statement prepared and filed by the Company in accordance with Rule 462(b) pursuant to the Securities Act) (the “Registration Statement”), with the terms of such offering (the “Offering”) to be subject to market conditions and negotiations among the Company, the Placement Agent and the prospective Investors. The Placement Agent will act on a reasonable best-efforts basis and the Company agrees and acknowledges that there is no guarantee of the successful placement of the Shares, or any portion thereof, in the prospective Offering. Under no circumstances will the Placement Agent or any of its “Affiliates” (as defined below) be obligated to underwrite or purchase any of the Shares for its own account or otherwise provide any financing. The Placement Agent shall act solely as the Company’s agent and not as principal. The Placement Agent shall have no authority to bind the Company with respect to any prospective offer to purchase Shares and the Company shall have the sole right to accept offers to purchase Shares and may reject any such offer, in whole or in part. Subject to the terms and conditions hereof, payment of the purchase price for, and delivery of, the Securities shall be made at one or more closings (each a “Closing” and the date on which each Closing occurs, a “Closing Date”). The Closing shall occur via “Delivery Versus Payment”, i.e., on the Closing Date, the Company shall issue the Securities directly to the account designated by the Placement Agent and, upon receipt of such Shares, the Placement Agent shall electronically deliver such Shares to the applicable Investor and payment shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company. As compensation for services rendered, on each Closing Date, the Company shall pay to the Placement Agent the fees and expenses set forth below:
(i) A cash fee equal to 7.0% of the gross proceeds received by the Company from the sale of the Shares at the closing of the Offering (the “Closing”) and 6.0% for any company-directed Investors.
(ii) In addition to the cash fee, the Company hereby agrees to pay on the Closing Date all expenses related to the Offering or otherwise incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and expenses relating to the registration of the Shares with the Securities and Exchange Commission (the “SEC” or the “Commission”); (b) all fees and expenses relating to the listing of the Shares on the Nasdaq Stock Market LLC and such other stock exchanges as the Company and the Placement Agent together determine, including any fees charged by DTC; (c) all fees, expenses and disbursements relating to the registration or qualification of the Shares under “blue sky” or securities laws of such states of the United States of America and other jurisdictions designated by the Placement Agent, including the reasonable fees and expenses of blue sky counsel to the Placement Agent; (d) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Shares under the securities laws of such foreign jurisdictions as reasonably designated by the Placement Agent; (e) the costs of all mailing and printing of documents relating to the Offering (including, without limitation, this Agreement, any Blue Sky Surveys, Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Placement Agent may reasonably deem necessary); (f) transfer and/or stamp taxes, if any, payable upon our transfer of the Shares to the Investors; (g) the fees and expenses of the Company’s accountants; (h) the fees and expenses of the Company’s legal counsel and other agents and Placement Agent; (i) all filing fees and communication expenses associated with the review of the Offering by FINRA; (cost associated with the Placement Agent’s clearing system data services and communications expenses; (j) cost associated with the Placement Agent’s Capital IQ system for comparable company analysis and valuation; (k) all fees, expenses and disbursements relating to background checks of directors and officers of the Company as reasonably requested by the Placement Agent; (l) the costs associated with bound volumes of the offering materials as well as commemorative mementos and Lucite tombstones; (m) the fees of counsel to the Placement Agent in an amount not to exceed $125,000; provided, however, that (x) the aggregate accountable expenses reimbursable by the Company to the Placement Agent pursuant to this Section 3.9.1 shall in no event exceed one hundred fifty thousand Dollars ($150,000) in the aggregate upon Closing of the Offering, and (y) if the Offering is terminated or otherwise fails to close, such aggregate reimbursable accountable expenses shall be up to fifty thousand dollars ($50,000), including the Placement Agent’s legal fees. Any expense advances will be returned to the Company to the extent the Placement Agent’s accountable expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A). The Company shall also pay to the Placement Agent a non-accountable expense allowance equal to 1% of the gross proceeds of the Offering (excluding any proceeds from the exercise of the over-allotment option) at the Closing.
(iii) The Placement Agent shall be entitled to a cash fee equal to seven percent (7.0%) of the gross proceeds received or to be received by the Company from the sale of any equity, debt and/or equity derivative instruments to any investor with whom the Placement Agent has had a conference call or a meeting arranged by the Placement Agent during the Engagement Period (as defined in the Engagement letter) in connection with any public or private financing or capital raise (each, a “Tail Financing”), provided such Tail Financing is consummated during the period that is six (6) months from the Closing Date (the “Tail Period”) or within twelve (12) months after the termination or expiration of the Engagement Letter if such investor was contacted by the Placement Agent in connection with the Offering during the Engagement Period. For the avoidance of doubt, such Tail Financing fee shall not be applicable to any Company-introduced or company-directed investors.
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(b) Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality, indemnification and contribution contained herein and the Company’s obligations contained in the indemnification provisions will survive any expiration or termination of this Agreement, and the Company’s obligation to pay fees actually earned and payable and to reimburse expenses actually incurred and reimbursable pursuant to Section 1 hereof and which are permitted to be reimbursed under FINRA Rule 5110(g)(4)(A), will survive any expiration or termination of this Agreement. Nothing in this Agreement shall be construed to limit the ability of the Placement Agent or its Affiliates to pursue, investigate, analyze, invest in, or engage in investment banking, financial advisory or any other business relationship with Persons (as defined below) other than the Company. As used herein (i) “Persons” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind and (ii) “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”).
Section 2. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the Placement Agent as of the date hereof, and as of each Closing Date, as follows:
(a) Securities Law Filings. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) the Registration Statement under the Securities Act, which was initially filed on [ ], 2025 as amended, and declared effective on [ ], 2025 for the registration of the Shares under the Securities Act. Following the effectiveness of the Registration Statement and the determination of pricing among the Company and the prospective Investors, the Company will file with the Commission pursuant to Rules 430A and 424(b) under the Securities Act, and the rules and regulations (the “Rules and Regulations”) of the Commission promulgated thereunder, a final prospectus relating to the placement of the Securities, their respective pricings and the plan of distribution thereof and will advise the Placement Agent of all further information (financial and other) with respect to the Company required to be set forth therein. Such Registration Statement, at any given time, including the exhibits thereto filed at such time, as amended at such time, is hereinafter called the “Registration Statement”; such prospectus in the form in which it appears in the Registration Statement is hereinafter called the “Preliminary Prospectus”; and the form of prospectus, in the form in which it will be filed with the Commission pursuant to Rules 430A and/or 424(b) (including the Preliminary Prospectus as so amended or supplemented) is hereinafter called the “Prospectus.” The Registration Statement at the time it originally became effective is hereinafter called the “Original Registration Statement.” Any reference in this Agreement to the Registration Statement, the Original Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein (the “Incorporated Documents”), if any, which were or are filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), at any given time, as the case may be; and any reference in this Agreement to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Original Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the date of this Agreement, or the issue date of the Preliminary Prospectus or the Prospectus, as the case may be, deemed to be incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information which is “contained,” “included,” “described,” “referenced,” “set forth” or “stated” in the Registration Statement, the Preliminary Prospectus or the Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement, the Preliminary Prospectus or the Prospectus, as the case may be. The Company has not received any notice that the Commission has issued or intends to issue a stop order suspending the effectiveness of the Registration Statement or the use of the Preliminary Prospectus or the Prospectus or intends to commence a proceeding for any such purpose.
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(b) Assurances. The Registration Statement, as amended, (and any further documents to be filed with the Commission) contains all exhibits and schedules as required by the Securities Act. Each of the Original Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the Securities Act and the applicable Rules and Regulations and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Preliminary Prospectus, and the Prospectus, each as of its respective date, comply or will comply in all material respects with the Securities Act and the applicable Rules and Regulations. Each of the Preliminary Prospectus and the Prospectus, as amended or supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations promulgated thereunder, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated Documents incorporated by reference in the Final Prospectus), in light of the circumstances under which they were made not misleading. No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. Except for this Agreement and the Transaction Documents, there are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. Except for this Agreement and the Transaction Documents, there are no contracts or other documents required to be described in the Preliminary Prospectus or Prospectus, or to be filed as exhibits or schedules to the Registration Statement, which have not been described or filed as required.
(c) Offering Materials. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to each Closing Date, any offering material in connection with the offering and sale of the Shares other than the Preliminary Prospectus, the Prospectus, the Registration Statement, copies of the documents incorporated by reference therein and any other materials permitted by the Securities Act.
(d) Subsidiaries. All of the direct and indirect subsidiaries of the Company (the “Subsidiaries”) are set forth in the Registration Statement. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any liens, charges, security interests, encumbrances, rights of first refusal, preemptive rights or other restrictions (collectively, “Liens”), and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.
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(e) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Documents, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened (“Proceeding”) has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(f) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and any Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Company’s Board of Directors (the “Board of Directors”) or the Company’s shareholders in connection therewith. This Agreement has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(g) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the Transaction Documents to which it is a party, the issuance and sale of the Shares and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
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(h) Foreign Private Issuer. The Company is a “foreign private issuer” as defined in Rule 405 promulgated under the Securities Act.
(i) Consent to Jurisdiction. The Company has the power to submit, and pursuant to this Agreement has legally, validly, effectively and irrevocably submitted, to the jurisdiction of any federal or state court in the State of New York, County of New York, and has the power to designate, appoint and empower, and pursuant to this Agreement has legally, validly and effectively designated, appointed and empowered, an agent for service of process in any suit or proceeding based on or arising under this Agreement in any federal or state court in the State of New York.
(j) Anti-Manipulation. Neither the Company nor, to its knowledge, any of its employees, directors or shareholders has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.
(k) Representations and Warranties Incorporated by Reference. Each of the representations and warranties (together with any related disclosure schedules thereto) made to the Investors in the Purchase Agreement is hereby incorporated herein by reference (as though fully restated herein) and is hereby made to, and in favor of, the Placement Agent.
Section 3. Delivery and Payment. Each Closing shall occur remotely by facsimile or other electronic transmission (or at such other place as shall be agreed upon by the Placement Agent and the Company). Subject to the terms and conditions hereof, at each Closing, payment of the purchase price for the Securities sold on such Closing Date shall be made by Federal Funds wire transfer, against delivery of such Shares, and such Shares shall be registered in such name or names and shall be in such denominations, as the Placement Agent may request at least one (1) business day before the time of purchase (as defined below).
Deliveries of the documents with respect to the purchase of the Shares, if any, shall be made remotely by facsimile or other electronic transmission. All actions taken at a Closing shall be deemed to have occurred simultaneously.
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Section 4. Covenants and Agreements of the Company. The Company further covenants and agrees with the Placement Agent as follows:
(a) Registration Statement Matters. The Company will advise the Placement Agent promptly after it receives notice thereof of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to any Prospectus or any amended Prospectus has been filed and will furnish the Placement Agent with copies thereof. The Company will file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 14 or 15(d) of the Exchange Act subsequent to the date of any Prospectus and for so long as the delivery of a prospectus is required in connection with the Offering. The Company will advise the Placement Agent, promptly after it receives notice thereof (i) of any request by the Commission to amend the Original Registration Statement or to amend or supplement any Prospectus or for additional information, and (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Original Registration Statement or any post-effective amendment thereto or any order directed at any Incorporated Document, if any, or any amendment or supplement thereto or any order preventing or suspending the use of the Preliminary Prospectus or any Prospectus or any amendment or supplement thereto or any post-effective amendment to the Registration Statement, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, of the institution or threatened institution of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or a Prospectus or for additional information. The Company shall use its best efforts to prevent the issuance of any such stop order or prevention or suspension of such use. If the Commission shall enter any such stop order or order or notice of prevention or suspension at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment, or will file a new registration statement and use its best efforts to have such new registration statement declared effective as soon as practicable. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b), 430A, 430B and 430C, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder, and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) are received in a timely manner by the Commission.
(b) Blue Sky Compliance. The Company will cooperate with the Placement Agent and the Investors in endeavoring to qualify the Securities for sale under the securities laws of such jurisdictions (United States and foreign) as the Placement Agent and the Investors may reasonably request and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent, and provided further that the Company shall not be required to produce any new disclosure document other than a Prospectus. The Company will, from time to time, prepare and file such statements, reports and other documents as are or may be required to continue such qualifications in effect for so long a period as the Placement Agent may reasonably request for distribution of the Securities. The Company will advise the Placement Agent promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment.
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(c) Amendments and Supplements to a Prospectus and Other Matters. The Company will comply with the Securities Act and the Exchange Act, and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the Incorporated Documents (if any) and any Prospectus. If during the period in which a prospectus is required by law to be delivered in connection with the distribution of Shares contemplated by the Registration Statement or any Prospectus (the “Prospectus Delivery Period”), any event shall occur as a result of which, in the judgment of the Company or in the opinion of the Placement Agent or counsel for the Placement Agent, it becomes necessary to amend or supplement the Registration Statement or any Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, as the case may be, not misleading, or if it is necessary at any time to amend or supplement the Registration Statement or any Prospectus or to comply with any law, the Company will promptly prepare and file with the Commission, and furnish at its own expense to the Placement Agent and to dealers, an appropriate amendment to the Registration Statement or supplement to the Registration Statement, the Incorporated Documents (if any) or any Prospectus that is necessary in order to make the statements in the Registration Statement and any Prospectus as so amended or supplemented, in the light of the circumstances under which they were made, as the case may be, not misleading, or so that the Registration Statement, the Incorporated Documents (if any) or any Prospectus, as so amended or supplemented, will comply with law. Before amending the Registration Statement or supplementing the Incorporated Documents or any Prospectus in connection with the Offering, the Company will furnish the Placement Agent with a copy of such proposed amendment or supplement and will not file any such amendment or supplement to which the Placement Agent reasonably objects.
(d) Copies of any Amendments and Supplements to a Prospectus. The Company will furnish the Placement Agent, without charge, during the period beginning on the date hereof and ending on the later of the last Closing Date of the Offering, as many copies of the Registration Statement and any Prospectus and any amendments and supplements thereto (including any Incorporated Documents, if any) as the Placement Agent may reasonably request.
(e) Free Writing Prospectus. The Company covenants that it will not, unless it obtains the prior written consent of the Placement Agent, make any offer relating to the Securities that would constitute a Company Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405 of the Securities Act) required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act. In the event that the Placement Agent expressly consents in writing to any such free writing prospectus (a “Permitted Free Writing Prospectus”), the Company covenants that it shall (i) treat each Permitted Free Writing Prospectus as a Company Free Writing Prospectus, and (ii) comply with the requirements of Rule 164 and 433 of the Securities Act applicable to such Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping.
(f) Transfer Agent. The Company will maintain, at its expense, a registrar and transfer agent for the Ordinary Shares.
(g) Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
(h) Periodic Reporting Obligations. During the Prospectus Delivery Period, the Company will duly file, on a timely basis, with the Commission and the Trading Market (as defined in the Securities Purchase Agreement) all reports and documents required to be filed under the Exchange Act within the time periods and in the manner required by the Exchange Act.
(i) Additional Documents. The Company will enter into any subscription, purchase or other customary agreements as the Placement Agent or the Investors deem necessary or appropriate to consummate the Offering, all of which will be in form and substance reasonably acceptable to the Placement Agent and the Investors. The Company agrees that the Placement Agent may rely upon, and each is a third party beneficiary of, the representations and warranties, and applicable covenants, set forth in any such purchase, subscription or other agreement with Investors in the Offering.
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(j) No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company.
(k) Acknowledgment. The Company acknowledges that any advice given by the Placement Agent to the Company is solely for the benefit and use of the Board of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred to, without the Placement Agent’s prior written consent.
(l) Announcement of Offering. The Company acknowledges and agrees that the Placement Agent may make public its involvement with the Offering.
(m) Reliance on Others. The Company confirms that it will and has relied on its own counsel and accountants for legal and accounting advice.
(n) Research Matters. By entering into this Agreement, the Placement Agent does not provide any promise, either explicitly or implicitly, of favorable or continued research coverage of the Company and the Company hereby acknowledges and agrees that the Placement Agent’s selection as a Placement Agent for the Offering was in no way conditioned, explicitly or implicitly, on the Placement Agent providing favorable or any research coverage of the Company. In accordance with FINRA Rule 2241(b)(2)(k), the parties acknowledge and agree that the Placement Agent have not directly or indirectly offered favorable research, a specific rating or a specific price target, or threatened to change research, a rating or a price target, to the Company or inducement for the receipt of business or compensation.
(o) Subsequent Equity Sales.
(i) The Company, on behalf of itself and any successor entity, agrees that without the prior written consent of the Placement Agent, such consent not to be unreasonably withheld, conditioned, or delayed, it will not, for a period of ninety (90) days after the date of this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract act to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of the Company or any securities convertible into or exercisable or exchangeable for shares of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of the Company or any securities convertible into or exercisable or exchangeable for shares of the Company other than a registration statement on Form F-4 (or at the Company’s option, Form S-4) or S-8 or a resale shelf registration statement for existing shareholders not filed in connection with a primary offering by the Company; (iii) complete any offering of debt securities of the Company, other than entering into or drawing down upon an existing line of credit or senior credit facility with a traditional bank or other lending institution in the ordinary course of business; or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of shares of the Company, whether any such transaction described in clause (i), (ii), (iii), or (iv) above is to be settled by delivery of shares of the Company or such other securities, in cash or otherwise.
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The restrictions contained in this Section 4(o) shall not apply to (i) the Shares to be sold hereunder; (ii) the issuance by the Company of the Ordinary Shares upon the exercise of a share option or warrant, the conversion of a security, or pursuant to a contractual obligation, in each case issued and outstanding on the date hereof, provided that such options, warrants, securities or contracts are disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus and have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities, (iii) the issuance of the Ordinary Shares issued as part of the purchase price in connection with the acquisitions or strategic transactions, provided certain conditions are met, (iv) the issuance by the Company of any Ordinary Shares or standard options to purchase such shares to directors, officers, employees or consultants of the Company in their capacity as such pursuant to an Approved Share Plan (as defined below), (v) the issuance of Ordinary Shares, options or convertible securities to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by a majority of the disinterested directors of the Company or entered into in the ordinary course of business but shall not include a transaction in which the company is primarily issuing Ordinary Shares or Ordinary Shares equivalents primarily for the purpose of raising capital, circumventing the restrictions set forth in this Section 3.18, or to a person or an entity whose primary business is investing in securities, (vi) the issuance of Ordinary Shares, options or convertible securities in connection with the provision of goods or services pursuant to transactions approved by a majority of the disinterested directors of the Company or entered into in the ordinary course of business but shall not include a transaction in which the company is issuing Ordinary Shares or Ordinary Share equivalents primarily for the purpose of raising capital, circumventing the restrictions set forth in this Section 3.18, or to a person or an entity whose primary business is investing in securities; and (vii) the issuance of Ordinary Shares, options or convertible securities issued in connection with sponsored research, collaboration, technology license, development, investor or public relations, marketing or other similar agreements or strategic partnerships approved by a majority of the disinterested directors of the Company or entered into in the ordinary course of business but shall not include a transaction in which the Company is primarily issuing Ordinary Shares or Ordinary Share equivalents primarily for the purpose of raising capital, circumventing the restrictions set forth in this Section 3.18, or to a person or an entity whose primary business is investing in securities. For purposes of this section, “Approved Share Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which the Ordinary Shares and standard options to purchase such shares may be issued to any employee, officer, director or consultant for services provided to the Company in their capacity as such.
(p) Lock-Up Agreements. The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements except to extend the term of the lock-up period and shall enforce the provisions of each Lock-Up Agreement in accordance with its terms. If any party to a Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company shall promptly use its best efforts to seek specific performance of the terms of such Lock-Up Agreement.
(q) FINRA. The Company shall advise the Placement Agent (who shall make an appropriate filing with FINRA) if it is aware that any officer, director, 10% or greater shareholder of the Company or Person that received the Company’s unregistered equity securities in the past 180 days is or becomes an affiliate or associated person of a FINRA member firm prior to the earlier of the termination of this Agreement or the 60-day period after the Effective Date.
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Section 5. Conditions of the Obligations of the Placement Agent. The obligations of the Placement Agent hereunder shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 2 hereof, in each case as of the date hereof and as of each Closing Date as though then made, to the timely performance by each of the Company of its covenants and other obligations hereunder on and as of such dates, and to each of the following additional conditions:
(a) Accountants’ Comfort Letter. On the date hereof, the Placement Agent shall have received, and the Company shall have caused to be delivered to the Placement Agent, a letter from Assentsure PAC (the independent registered public accounting firm of the Company), addressed to the Placement Agent, dated as of the date hereof, in form and substance satisfactory to the Placement Agent. The letter shall not disclose any change in the condition (financial or other), earnings, operations, business or prospects of the Company from that set forth in the Registration Statement or the applicable Prospectus, which, in the Placement Agent’s sole judgment, is material and adverse and that makes it, in the Placement Agent’s sole judgment, impracticable or inadvisable to proceed with the Offering of the Securities as contemplated by such Prospectus.
(b) Compliance with Registration Requirements; No Stop Order; No Objection from the FINRA. Each Prospectus (in accordance with Rule 424(b)) and “free writing prospectus” (as defined in Rule 405 of the Securities Act), if any, shall have been duly filed with the Commission, as appropriate; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no order preventing or suspending the use of any Prospectus shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no order having the effect of ceasing or suspending the distribution of the Securities or any other securities of the Company shall have been issued by any securities commission, securities regulatory authority or stock exchange and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange; all requests for additional information on the part of the Commission shall have been complied with; and the Placement Agent shall have received a letter of no objections from FINRA as to the terms and arrangements and amount of compensation allowable or payable to the Placement Agent as described in the Registration Statement.
(c) Corporate Proceedings. All corporate proceedings and other legal matters in connection with this Agreement, the Registration Statement and each Prospectus, and the registration, sale and delivery the Securities, shall have been completed or resolved in a manner reasonably satisfactory to the Placement Agent’s Counsel, and such counsel shall have been furnished with such papers and information as it may reasonably have requested to enable such counsel to pass upon the matters referred to in this Section 5.
(d) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement and prior to each Closing Date, in the Placement Agent’s sole judgment after consultation with the Company, there shall not have occurred any Material Adverse Effect or any material adverse change or development involving a prospective material adverse change in the condition or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement and Prospectus (“Material Adverse Change”).
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(e) Opinions of Counsels for the Company. The Placement Agent shall have received on each Closing Date:
(i) the favorable opinion and negative assurance letter from Loeb & Loeb LLP (“Company Counsel”), counsel to the Company as to federal law of the United States of America, and the law of the State of New York, dated the Closing Date, and addressed to the Placement Agent, substantially in the form previously agreed or otherwise in form and substance reasonably satisfactory to the Placement Agent and counsel to the Placement Agent;
(ii) the favorable opinion of AllBright Law Offices (Fuzhou), China counsel to the Company, dated the Closing Date, respectively, and addressed to the Placement Agent, substantially in the form previously agreed or otherwise in form and substance reasonably satisfactory to the Placement Agent.
(iii) the favorable opinion of Harney Westwood & Riegels, British Virgin Islands counsel to the Company, dated the Closing Date, respectively, and addressed to the Placement Agent, substantially in the form previously agreed or otherwise in form and substance reasonably satisfactory to the Placement Agent.
(f) Officers’ Certificate. The Placement Agent shall have received on each Closing Date a certificate of the Company, dated as of such Closing Date, signed by the Chief Executive Officer and Chief Financial Officer of the Company, solely in their respective capacities as officers of the Company and not individually, to the effect that, and the Placement Agent shall be satisfied that, the signers of such certificate have reviewed the Registration Statement, the Incorporated Documents (if any), any Prospectus, and this Agreement and to the further effect that:
(i) The representations and warranties of the Company in this Agreement are true and correct, as if made on and as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date;
(ii) No stop order suspending the effectiveness of the Original Registration Statement or the use of the Preliminary Prospectus or any Prospectus has been issued and no proceedings for that purpose have been instituted or are pending or, to the Company’s knowledge threatened under the Securities Act; no order having the effect of ceasing or suspending the distribution of the Securities or any other securities of the Company has been issued by any securities commission, securities regulatory authority or stock exchange in the United States and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company contemplated by any securities commission, securities regulatory authority or stock exchange in the United States;
(iii) When the Registration Statement became effective, at the time of sale, and at all times subsequent thereto up to the delivery of such certificate, the Registration Statement and the Incorporated Documents, if any, did not and do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Incorporated Documents, if any, when such documents were filed with the Commission, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading(provided, however, that the preceding representations and warranties contained in this paragraph (iii) shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Placement Agent expressly for use therein) and since the effective date of the Registration Statement, there has occurred no event required by the Securities Act and the rules and regulations of the Commission thereunder to be set forth in the Registration Statement which has not been so set forth; and
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(iv) Subsequent to the respective dates as of which information is given in the Registration Statement, the Incorporated Documents (if any) and any Prospectus, there has not been: (a) any Material Adverse Change; (b) any transaction that is material to the Company and the Subsidiaries taken as a whole, except transactions entered into in the ordinary course of business consistent with past practice; (c) any obligation, direct or contingent, that is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or any Subsidiary, except obligations incurred in the ordinary course of business consistent with past practice; (d) any material change in the shares (except changes thereto resulting from the exercise of outstanding share options or warrants disclosed in the Registration Statement, the Incorporated Documents (if any) and any Prospectus) or material change in the outstanding indebtedness of the Company or any Subsidiary; (other than borrowings under existing credit facilities disclosed in the Registration Statement, the Incorporated Documents (if any) and any Prospectus, but including any outstanding indebtedness related to any related party transaction); (e) any dividend or distribution of any kind declared, paid or made on the shares of the Company; or (f) any loss or damage (whether or not insured) to the property of the Company or any Subsidiary which has been sustained or will have been sustained which has had or would reasonably be expected to have a Material Adverse Effect.
(g) Bring-down Comfort Letter. On each Closing Date, the Placement Agent shall have received from Assentsure PAC, or such other independent registered public accounting firm of the Company, a letter dated as of such Closing Date, in form and substance satisfactory to the Placement Agent, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three (3) business days prior to such Closing Date.
(h) Stock Exchange Listing. The Ordinary Shares shall be registered under the Exchange Act and shall be listed on the Trading Market, and the Company shall not have taken any action designed to terminate, or likely to have the effect of terminating, the registration of the Ordinary Shares under the Exchange Act or delisting or suspending from trading the Ordinary Shares from the Trading Market, nor shall the Company have received any information suggesting that the Commission or the Trading Market is contemplating terminating such registration or listing.
(i) Lock-Up Agreements. On the Closing Date, the Placement Agent shall have received the executed lock-up agreement, in the form attached as Exhibit A in the Purchase Agreement, from each of the directors and officers of the Company.
(j) Additional Documents. On or before each Closing Date, the Placement Agent and counsel for the Placement Agent shall have received such information and documents as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained, provided however that such request shall be made at least three (3) business days in advance.
If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent by notice to the Company at any time on or prior to a Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification and Contribution) and Section 8 (Representations and Indemnities to Survive Delivery) shall at all times be effective and shall survive such termination.
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Section 6. Intentionally Omitted.
Section 7. Indemnification and Contribution.
(a) Indemnification of the Placement Agent. The Company shall, to the fullest extent permitted by applicable law, indemnify and hold harmless the Placement Agent its Affiliates and each of its and their respective directors, officers, members, employees, representatives, partners, shareholders, counsel and agents and each person, if any, who controls the Placement Agent within the meaning of Section 15 of the Securities Act of 1933, as amended , or Section 20 of the Exchange Act (collectively, the “Placement Agent Indemnified Parties,” and each, a “Placement Agent Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Placement Agent Indemnified Parties and the Company or between any of the Placement Agent Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus (as each may be amended or supplemented from time to time); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations (whether in person or electronically); or (iii) any application or other document or written communication (collectively in this Section 7, an “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Shares under the securities laws thereof or filed with the Commission, any state securities commission or agency, Trading Market; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Placement Agent’s Information (as defined below). With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Disclosure Package, the indemnity agreement contained in this Section 7 shall not inure to the benefit of any Placement Agent Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Placement Agent Indemnified Party (a) is based on the Placement Agent’s Information, (b) results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Shares to such person as required by the Securities Act and the rules and regulations promulgated thereunder, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 4(c) hereof, or (c) is found in a final, non-appealable judgment of a court of competent jurisdiction to have resulted primarily from the fraud, willful misconduct or gross negligence of such Placement Agent Indemnified Party.
(b) Placement Agent’s Information. For purposes of this Agreement, the term “Placement Agent’s Information” means written information furnished to the Company by the Placement Agent specifically for inclusion in any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or the Prospectus, or in any amendment or supplement thereto. The Company hereby acknowledges that, as of the date hereof, the Placement Agent’s Information is limited solely to the statements concerning the Placement Agent contained in the “Plan of Distribution” and “Placement Agent” sections of the Prospectus.
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(c) Defense of Claims. If any action is brought against a Placement Agent Indemnified Party in respect of which indemnity may be sought against the Company pursuant to this Section 7, such Placement Agent Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense of such action, including the employment of counsel (subject to the reasonable approval of such Placement Agent Indemnified Party) and payment of actual expenses. Such Placement Agent Indemnified Party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Placement Agent Indemnified Party unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company, (ii) the Company shall not have employed counsel reasonably satisfactory to the Placement Agent Indemnified Party to have charge of the defense of such action within a reasonable time after notice of the commencement of the action, or (iii) the action includes both the Company and the indemnified party as defendants and such indemnified party shall have been advised by its counsel in writing that is an actual or potential conflict of interest that makes it inadvisable for the Company and such indemnified party to be represented in the action by the same counsel, in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Placement Agent Indemnified Parties who are party to such action (in addition to local counsel) shall be borne by the Company. The Company shall not be liable for any settlement of any Action effected without its written consent, which consent shall not be unreasonably withheld, conditioned or delayed. In addition, the Company shall not, without the prior written consent of the Placement Agent (which consent shall not be unreasonably withheld, conditioned or delayed), settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened Action in respect of which indemnification or contribution may be sought hereunder (whether or not any Placement Agent Indemnified Party is a party thereto) unless such settlement, compromise, consent or termination includes an unconditional release of each Placement Agent Indemnified Party from all liabilities arising out of such Action for which indemnification or contribution may be sought hereunder. Notwithstanding anything to the contrary contained herein, if any Placement Agent Indemnified Party shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld, conditioned or delayed.
(d) Indemnification of the Company. The Placement Agent shall, to the fullest extent permitted by applicable laws, indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the Placement Agent, as incurred, but only with respect to such losses, liabilities, claims, damages and expenses (or actions in respect thereof) which arise out of or are based upon untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or the Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Placement Agent’s Information. In case any action shall be brought against the Company or any other person so indemnified based on any of the foregoing documents or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against the Placement Agent, the Placement Agent shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the Placement Agent by the provisions of Section 7. Notwithstanding any provision of this Agreement to the contrary, in no event shall the Placement Agent be liable to the Company under this Agreement or otherwise in connection with the Offering for any losses, claims, damages, liabilities or expenses that are not finally judicially determined to have resulted from the Placement Agent’s gross negligence, willful misconduct or bad-faith breach of this Agreement.
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(e) Contribution.
(i) Contribution Rights. If the indemnification provided for in this Section 7 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Placement Agent, on the other hand, from the Offering, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Placement Agent, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Placement Agent, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering received by the Company bear to the total placement-agent cash fee and non-accountable expense allowance received by the Placement Agent in connection with the Offering, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, on the one hand, and the Placement Agent, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Placement Agent, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the Placement Agent’s Information constitutes the only written information furnished to the Company by or on behalf of the Placement Agent for use in the documents referred to in Section 7(a). The Company and the Placement Agent agree that it would not be just and equitable if contributions pursuant to this Section 7(e)(i) were to be determined by pro rata allocation (even if the Placement Agent were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense, liability, action, investigation or proceeding referred to above in this Section 7(e)(i) shall be deemed to include, for purposes of this Section 7(e)(i), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third-party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 7(e)(i), the Placement Agent shall not be required to contribute any amount in excess of the total placement-agent cash fee and non-accountable expense allowance actually received by the Placement Agent in connection with the Offering, less the amount of any damages which the Placement Agent has otherwise paid or becomes liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
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(ii) Contribution Procedure. Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (a “contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding effected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 7(e)(ii) are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available.
Section 8. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company or any person controlling the Company, of its officers, and of the Placement Agent set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent, the Company, or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement. A successor to a Placement Agent, or to the Company, its directors or officers or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Agreement.
Section 9. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered, telecopied or e-mailed and confirmed to the parties hereto as follows:
If to the Placement Agent to the address set forth above, attention: Robert Hackel, Chief Operating Officer; Email: info@rflafferty.com
with a copy (which shall not constitute notice) to:
Zarif Law Group P.C.
603 Laurel Avenue
Allenhurst, New Jersey 07711
Attention: Morris C. Zarif, Esq.
Email: mzarif@zariflg.com
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If to the Company:
RAYTECH HOLDING LIMITED
Unit 609, 6/F, Nan Fung Commercial Centre
No. 19 Lam Lok Street, Kowloon Bay, Hong Kong
Attention: Ching Tim Hoi, Chief Executive Officer & Chairman
E-mail: ray@raytech.com.hk
with a copy (which shall not constitute notice) to:
Loeb & Loeb LLP
2206-19 Jardine House
1 Connaught Place, Central, Hong Kong
Attention: Henry Yin
E-mail: henry.yin@loeb.com
Any party hereto may change the address for receipt of communications by giving written notice to the others.
Section 10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 7 hereof, and to their respective successors, and personal representative, and no other person will have any right or obligation hereunder.
Section 11. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
Section 12. Effective Date of this Agreement and Termination Thereof.
(a) Effective Date. This Agreement shall become effective when both the Company and the Placement Agent have executed the same and delivered counterparts of such signatures to the other party.
(b) Termination. (i) This Agreement may be terminated by the Placement Agent by notice to the Company at any time on or prior to a Closing Date if any condition specified in Section 5 is not satisfied or waived by the Placement Agent when and as required to be satisfied. (ii) The Placement Agent shall have the right to terminate this Agreement by giving notice to the Company as hereinafter specified at any time on or prior to any Closing Date, if in the Placement Agent’s reasonable judgment: (1) if any domestic or international event or act or occurrence has materially and adversely disrupted, or in the opinion of the Placement Agent will in the immediate future materially and adversely disrupt, general securities markets in the United States; (2) if trading on The Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government or other authority having jurisdiction; (iii) if the United States shall have become involved in a new war or an increase in major hostilities; (iv) if a banking moratorium has been declared by an authority in the State of New York State or of the United States of America; (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Placement Agent’s opinion, make it inadvisable to proceed with the delivery of the Shares ; (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Placement Agent shall have become aware after the date hereof of a Material Adverse Change, or an adverse material change in general market conditions as in the judgment of the Placement Agent would make it impracticable to proceed with the offering, sale and/or delivery of the Shares or to enforce contracts made by the Placement Agent for the sale of the Shares. (iii) The Company shall have the right to terminate this Agreement by giving notice to the Placement Agent at any time prior to any Closing Date if (1) the Placement Agent is in material breach of any of its material covenants or agreements hereunder, and such breach is not cured within ten (10) business days after written notice thereof from the Company.
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(c) Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 7 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
(d) Expenses. Notwithstanding anything to the contrary in this Agreement, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Placement Agent its actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of counsel to the Placement Agent) up to $50,000, payable upon the ending of the Engagement Period (as defined in the Engagement Agreement) or earlier termination of this Agreement, and upon demand the Company shall pay the full amount thereof to the Placement Agent ; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement.
(e) Representations, Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Placement Agent or its affiliates or selling agents, any person controlling any Placement Agent, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Shares.
Section 13. Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury. This Agreement shall be governed by and construed in accordance with the law of the State of New York. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the Supreme Court of the State of New York sitting in the County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction and to the jurisdiction of the appellate courts therefrom, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its shareholders and affiliates) and the Placement Agent hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
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Section 14. General Provisions.
(a) This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. Notwithstanding anything herein to the contrary, the Engagement Agreement, dated April 24, 2025, as amended on [--], 2025, (collectively, the “Engagement Agreement”), between the Company and the Placement Agent, shall continue to be effective and the terms therein shall continue to survive and be enforceable by the Placement Agent in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement and this Agreement, the terms of this Agreement shall prevail. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.
(b) The Company acknowledges that in connection with the offering of the Securities: (i) the Placement Agent has acted at arm’s length, are not agents of, and owe no fiduciary duties to the Company or any other person, (ii) the Placement Agent owes the Company only those duties and obligations set forth in this Agreement and (iii) the Placement Agent may have interests that differ from those of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Placement Agent arising from an alleged breach of fiduciary duty in connection with the offering of the Securities.
(c) The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non compliance or non-fulfillment.
[The remainder of this page has been intentionally left blank.]
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If the foregoing is in accordance with your understanding of our agreement, please sign below whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.
| Very truly yours, | ||
| RAYTECH HOLDING LIMITED | ||
| By: | ||
| Name: | Ching Tim Hoi | |
| Title: | Chief Executive Officer | |
Confirmed as of the date first written above mentioned, on behalf of itself:
| R.F. LAFFERTY & CO., INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
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Exhibit A
Form of Lock-Up Agreement
_________, 2025
R.F. Lafferty & Co. Inc.
40 Wall Street, 27th Floor
New York, New York 10005
| Re: | Placement Agency Agreement (the “Placement Agency Agreement”) between RAYTECH HOLDING LIMITED, a British Virgin Islands business company (the “Company”) and R.F. Lafferty & Co., Inc. (“R.F. Lafferty” or the “Placement Agent”). |
Ladies and Gentlemen:
The undersigned, an officer and/or director understands that R.F. Lafferty, as Placement Agent, propose to enter into a placement agency agreement with the Company, providing for a public offering (the “Offering”) by the Placement Agent of the ordinary shares, par value $0.00000625 per share (the “Ordinary Shares”) pursuant to a registration statement on Form F-1 filed by the Company with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”). Defined terms used herein and not otherwise defined in this letter agreement (this “Letter Agreement”) shall have the meanings set forth in the Placement Agency Agreement.
In consideration of the Placement Agent’s agreement to enter into the Placement Agency Agreement and to proceed with the Offering, and for other good and valuable consideration receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of the Placement Agent, which consent shall not be unreasonably withheld, conditioned, or delayed, the undersigned will not, and will not cause any direct or indirect affiliate to, during the period beginning on the date of this Letter Agreement and ending at the close of business twenty (20) days after the date on which the Offering is completed (the “Restricted Period”), directly or indirectly offer, sell, contract to sell, hypothecate, pledge, grant any option, right, or warrant to purchase, lend or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any affiliate of the undersigned or any person in privity directly or indirectly with the undersigned or with any affiliate of the undersigned), or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to, any Ordinary Share, any warrant or option to purchase the Ordinary Shares or any other security of the Company or any other entity that is convertible into or exchangeable or exercisable for the Ordinary Shares or any other equity security of the Company (“Relevant Securities”) beneficially owned, held or hereafter acquired by the undersigned (the Relevant Securities so beneficially owned, held or acquired being, the “Restricted Securities”) or publicly disclose an intention to do any of the foregoing. Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.
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In furtherance of the obligations of the undersigned under this Letter Agreement, the undersigned hereby authorizes the Company during the Restricted Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the share register and other records relating to, Relevant Securities for which the undersigned is the record owner and the transfer of which would be a violation of this Letter Agreement and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record owner, agrees that during the Restricted Period it will use its reasonable best efforts to cause the record owner to authorize the Company to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the share register and other records relating to, such Restricted Securities to the extent such transfer would be a violation of this Agreement.
The Placement Agent may consent to an early release from the Restricted Period if, in its sole and absolute discretion, the market for the Ordinary Shares would not be adversely impacted by sales of Relevant Securities and in cases of financial emergency. The restrictions contained in this Letter Agreement shall not apply to securities to be sold pursuant to the Placement Agency Agreement on behalf of the undersigned, if any.
Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Restricted Securities provided that, in the case of clauses (i) to (vii) below (l) the Company receives a signed lock-up letter agreement (in the form of this Letter Agreement) for the balance of the Restricted Period from each donee, trustee, distributee, or transferee, as the case may be, prior to such transfer, (2) any such transfer shall not involve a disposition for value, (3) such transfer is not required to be reported with the Commission in accordance with the Exchange Act and no report of such transfer shall be made voluntarily by the undersigned or the transferee, and (4) neither the undersigned nor any donee, trustee, distributee or transferee, as the case may be, otherwise voluntarily effects any public filing or report regarding such transfers, with respect to transfer:
| i) | as a bona fide gift or gifts; |
| ii) | to any immediate family member or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this Letter Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin); by will, other testamentary document, or intestacy; |
| iii) | to any corporation, partnership, limited liability company, or other business entity of which the undersigned and/or one or more members of the immediate family of the undersigned are, directly or indirectly, the legal and beneficial owner of all of the outstanding equity securities or similar interests; |
| iv) | if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (a) to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 under the Securities Act) of the undersigned, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), (b) in the form of a distribution to limited partners, limited liability company members, shareholders of the undersigned or holders of similar equity interests in the undersigned or (c) in connection with a sale, merger or transfer of all or substantially all of the assets of the undersigned or any other change of control of the undersigned, not undertaken for the purpose of avoiding the restrictions imposed by this Letter Agreement; |
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| v) | if the undersigned is a trust, to the beneficiary of such trust; |
| vi) | by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the undersigned; |
| vii) | by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement or decree, separation agreement, or court order; |
| viii) | pursuant to the Placement Agency Agreement; |
| ix) | to the Company solely in an amount necessary to satisfy tax obligations (withholding or otherwise) in connection with any grant of restricted Ordinary Share, exercise or vesting of options or warrants to purchase Ordinary Share, and |
| x) | of securities purchased in open market transactions after the Closing Date, provided that no filing under Section l6(a) of the Exchange Act is required or triggered by such transaction and no such filing is voluntarily made by the undersigned or the transferee in connection with such transaction. |
In addition, notwithstanding the foregoing, this Letter Agreement shall not restrict the delivery of the Ordinary Shares to the undersigned upon (i) exercise of any options, settle any restricted share units or other equity awards granted under any employee benefit plan or other equity compensation arrangements of the Company existing as of the date hereof and disclosed in the Prospectus; (ii) the exercise of warrants, existing as of the date hereof and disclosed in the Prospectus, or (iii) conversion of issued and outstanding preferred shares, warrants to acquire preferred shares or convertible securities or warrants to acquire the Ordinary Shares into the Ordinary Share, existing as of the date hereof and disclosed in the Prospectus, provided, in each case, that any Ordinary Shares or Restricted Securities acquired in connection with any such exercise, settlement or conversion will be subject to the restrictions set forth in this Letter Agreement.
Furthermore, the undersigned may enter into any new plan established in compliance with Rule 10b5-1 of the Exchange Act; provided that (i) such plan may only be established if no public announcement or filing with the Commission, or other applicable regulatory authority, is made in connection with the establishment of such plan during the Restricted Period and (ii) no sale of the Ordinary Shares are made pursuant to such plan during the Restricted Period.
In addition, the undersigned further agrees that, except for the registration statement filed or to be filed in connection with the Offering, during the Restricted Period, the undersigned will not, without the prior written consent of the Placement Agent: (a) file or participate in the filing with the Commission of any registration statement or circulate, or participate in the circulation of, any preliminary or final prospectus or other disclosure document, in each case with respect to any proposed offering or sale of a Relevant Security beneficially owned by the undersigned, or (b) exercise any rights the undersigned may have to require registration with the Commission of any proposed offering or sale of a Relevant Security beneficially owned by the undersigned.
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The undersigned acknowledges and understands that the execution, delivery and performance of this Letter Agreement is a material inducement to the Placement Agent to enter into and to perform the transactions contemplated by the Placement Agency Agreement, that the Placement Agent is proceeding with the Offering in reliance upon this Letter Agreement and that the Company shall be entitled to specific performance of the obligations of the undersigned in this Letter Agreement.
The undersigned hereby represents and warrants that (a) the undersigned has full power and authority to execute, deliver and perform this Letter Agreement, (b) this Letter Agreement has been duly authorized (if the undersigned is not a natural person) or, in the case of a natural person, such person has the legal capacity to enter into this Letter Agreement; (c) this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable against the undersigned in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity) and (d) the undersigned has received adequate consideration therefor and that the undersigned will indirectly benefit from the closing of the transactions contemplated by the Placement Agency Agreement.
The undersigned understands that, if the Placement Agency Agreement does not become effective, or if the Placement Agency Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the securities to be sold thereunder, the undersigned shall be released from all obligations under this Agreement.
This Letter Agreement may not be amended or otherwise modified in any respect without the written consent of the Placement Agent, the Company and the undersigned.
This Letter Agreement shall be binding on successors and assigns of the undersigned with respect to the Restricted Securities. This Letter Agreement shall be governed by and construed in accordance with the law of the State of New York.
The undersigned hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York and the courts of the State of New York located in the City and County of New York and to the appellate courts therefrom, for the purposes of any suit, action or proceeding arising out of or relating to this Letter Agreement, and hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that (i) it is not personally subject to the jurisdiction of such court, (ii) the suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of the suit, action or proceeding is improper. The undersigned hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under the Placement Agency Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The undersigned hereby waives any right to a trial by jury. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
[Signature Page Follows]
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| Very truly yours, | |
| Signature | |
| Print Name | |
| Position in Company, if any |
26
Exhibit 5.1
 |
Harney Westwood & Riegels 3501 The Center 99 Queen’s Road Central Hong Kong Tel: +852 5806 7800 Fax: +852 5806 7810 |
June 6, 2025
raymond.ng@harneys.com
+852 5806 7883
066171-0001-RLN
Raytech Holding Limited
Aegis Chambers, 1st Floor
Ellen Skelton Building
3076 Sir Francis Drake’s Highway
Road Town, Tortola, VG1110
British Virgin Islands
Dear Sir or Madam
Raytech Holding Limited (the Company)
We are lawyers qualified to practise in the British Virgin Islands and have acted as British Virgin Islands advisers to the Company in connection with the Company’s registration statement on Form F-1 (the Registration Statement), including all amendments or supplements thereto, and accompanying prospectus filed with the Securities and Exchange Commission (the Commission) under the United States Securities Act of 1933, as amended (the Securities Act), relating to the offering by the Company of up to 30,000,000 ordinary shares of par value US$0.00000625 per share (the Shares).
We are furnishing this opinion as Exhibit 5.1 to the Registration Statement.
For the purposes of giving this opinion, we have examined the Documents (as defined in Schedule 1) which we regard as necessary in order to issue this opinion. We have not examined any other documents, official or corporate records or external or internal registers and have not undertaken or been instructed to undertake any further enquiry or due diligence in relation to the transaction which is the subject of this opinion.
In giving this opinion we have relied upon the assumptions set out in Schedule 2 which we have not verified.
Based solely upon the foregoing examinations and assumptions and having regard to legal considerations which we deem relevant, and subject to the qualifications set out in Schedule 3, we are of the opinion that under the laws of the British Virgin Islands:
| 1 | Existence and Good Standing. The Company is a BVI business company duly incorporated with limited liability, and is validly existing and in good standing under the laws of the British Virgin Islands. The Company is a separate legal entity and is subject to suit in its own name. |
The British Virgin Islands is Harneys Hong Kong office's main jurisdiction of practice. Jersey legal services are provided through a referral arrangement with Harneys (Jersey) which is an independently owned and controlled Jersey law firm. Resident Partners: M Chu | JP Engwirda | Y Fan | S Gray | P Kay | MW Kwok | IN Mann R Ng | ATC Ridgers | PJ Sephton |
Anguilla | Bermuda | British Virgin Islands Cayman Islands | Cyprus | Hong Kong | Jersey London | Luxembourg | Shanghai | Singapore harneys.com |
| 2 | Maximum Number of Authorized Shares. Based on our review of the M&A (as defined in Schedule 1), the Company is authorized to issue up to a maximum of 8,000,000,000 ordinary shares of a single class each with a par value of US$0.00000625. |
| 3 | Valid Issuance of Shares. The allotment and issuance of the Shares as contemplated by the Registration Statement have been duly authorised and, when allotted, issued and fully paid for in accordance with the Registration Statement, and when the names of the shareholders are entered in the register of members of the Company, the Shares will be validly allotted, issued, fully paid and non-assessable. |
| 4 | British Virgin Islands Law. The statements under the headings “Taxation”, “Enforceability of Civil Liabilities” and “Description of Shares” in the prospectus forming part of the Registration Statement, to the extent that they constitute statements of British Virgin Islands law, are accurate in all material respects as at the date of this opinion and such statements constitute our opinion. |
This opinion is confined to the matters expressly opined on herein and given on the basis of the laws of the British Virgin Islands as they are in force and applied by the British Virgin Islands courts at the date of this opinion. We have made no investigation of, and express no opinion on, the laws of any other jurisdiction. Except as specifically stated herein, we express no opinion as to matters of fact. Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company in the Registration Statement. We express no opinion with respect to the commercial terms of the transactions the subject of this opinion.
In connection with the above opinion, we hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference made to this firm in the Registration Statement under the headings “Enforceability of Civil Liabilities” and “Legal Matters” and elsewhere in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder.
This opinion is limited to the matters referred to herein and shall not be construed as extending to any other matter or document not referred to herein.
This opinion shall be construed in accordance with the laws of the British Virgin Islands.
|
Yours faithfully |
|
|
| Harney Westwood & Riegels |
2
Schedule 1
List of Documents and Records Examined
| 1 | the certificate of incorporation of the Company dated 24 June 2022; |
| 2 | the amended and restated memorandum and articles of association of the Company dated 10 May 2023 (the M&A); |
| 3 | the register of directors of the Company provided to us on 28 May 2025; |
| 4 | a copy of the unanimous written resolutions of the directors of the Company dated [-] 2025 (the Resolutions); |
| 5 | a certificate of good standing in respect of the Company issued by the Registrar of Corporate Affairs dated 26 May 2025; |
| 6 | a certificate of incumbency in respect of the company issued by the registered agent of the Company, Aegis International Group Limited, on 28 May 2025; |
| 7 | a certificate from a director of the Company dated 6 May 2025, a copy of which is attached hereto (the Director’s Certificate); and |
| 8 | the Registration Statement filed with the Commission on [date] 2025. |
(1 to 7 above are the Corporate Documents, and 1 to 8 above are the Documents).
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Schedule 2
Assumptions
| 1 | Authenticity of Documents. All original Documents are authentic, all signatures, initials and seals are genuine, all copies of Documents are true and correct copies. |
| 2 | Corporate Documents. All matters required by law to be recorded in the Corporate Documents are so recorded, all corporate minutes, resolutions, certificates, documents and records which we have reviewed are accurate and complete, and all facts expressed in or implied thereby are accurate and complete. |
| 3 | Director’s Certificate. The contents of the Director’s Certificate are true and accurate as at the date of this opinion and there is no information not contained in the Director’s Certificate that will in any way affect this opinion. |
| 4 | No Steps to Wind-up. The directors and shareholders of the Company have not taken any steps to appoint a liquidator of the Company and no receiver has been appointed over any of the property or assets of the Company. |
| 5 | Resolutions. The written Resolutions have been duly executed (and where executed by a corporate entity, such execution has been duly authorised if so required) by or on behalf of each director or shareholder (as the case may be), and the signatures and initials thereon are those of a person or persons in whose name the Resolutions have been expressed to be signed. The Resolutions remain in full force and effect. |
| 6 | Unseen Documents. Save for the Documents provided to us there are no resolutions, agreements, documents or arrangements which materially affect, amend or vary the transactions envisaged in the Registration Statement. |
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Schedule 3
Qualifications
| 1 | Foreign Statutes. We express no opinion in relation to provisions making reference to foreign statutes in the Registration Statement. |
| 2 | Commercial Terms. Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company in any of the documents or instruments cited in this opinion or otherwise with respect to the commercial terms of the transactions the subject of this opinion. |
| 3 | Meaning of Non-Assessable. In this opinion the phrase non-assessable means, with respect to the issuance of the Shares, that a shareholder shall not, in respect of the relevant Shares, have any obligation to make further contributions to the Company’s assets (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil). |
| 4 | Good Standing. To maintain the Company in good standing under the laws of the British Virgin Islands, it must pay its annual licence fees to the Registrar of Corporate Affairs, and comply with its mandated statutory obligations. |
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Annex
Director’s Certificate
6
Exhibit 5.3
| Date | June 6, 2025 |
| Your Ref | |
| Our Ref | AC/BH/2500459 |
RAYTECH HOLDING LIMITED
Unit 609, 6/F, Nan Fung Commercial Centre
No.19 Lam Lok Street
Kowloon Bay, Hong Kong
Dear Sirs or Madams,
| Re | : | Legal Opinion on Certain Hong Kong Legal Matters |
We are qualified lawyers of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) and as such are qualified to issue this opinion on the laws and regulations of Hong Kong effective as at the date hereof.
We were engaged (the “Engagement”) as Hong Kong counsel to RAYTECH HOLDING LIMITED (the “Company”), a company incorporated under the laws of the British Virgin Islands, and its subsidiaries established in Hong Kong in connection with the offering (the “Offering”) on a best efforts basis of up to 30,000,000 ordinary shares (the “Ordinary Shares”), par value US$0.00000625 per share, of the Company, by the Company as set forth in the Company’s registration statement on Form F-1, including all amendments or supplements thereto (the “Registration Statement”), filed by the Company with the United States Securities and Exchange Commission under the U.S. Securities Act of 1933 (as amended) in relation to the Offering.
A. Assumptions
In rendering this opinion, we have carried out, reviewed and examined copies of the Registration Statement, and other documents as we have considered necessary or advisable for the purpose of rendering this opinion (collectively, the “Documents”). Where certain facts were not independently established and verified by us, we have relied upon certificates or statements issued or made by, among others, appropriate representatives of the Company. In rendering this opinion, we have assumed without independent investigation that (the “Assumptions”):
| (i) | all signatures, seals and chops are genuine, each signature on behalf of a party thereto is that of a person duly authorized by such party to execute the same, all Documents submitted to us in relation to the Engagement as originals are authentic, and all documents submitted to us as certified or photostatic copies conform to the originals; |
| Partners |
Michael C. C. Li 李智聰 |
Henry W. H. Wong 黃頴恒 |
Leung Ka Wai 梁嘉偉 |
Daniel H. Chan 陳 恒 |
Cassidy K. M. Wan 溫嘉敏 |
Alvin M. L. Chang 張文亮 |
|
Karen K. L. Lau 劉嘉琳 |
William P. H. Chan 陳沛恒 |
Victor L. K. Kwong 鄺麟基 |
||||
| Solicitors |
Kung Hei To 龔曦濤 |
Vivyanne J. Soo 蘇尉恩 |
Beth K. Y. Lui 呂潔盈 |
Angela V. Leung 梁詠恩 |
Chloe H. Y. Ng 伍愷盈 |
Joanne C. Y. Fung 馮靖宜 |
|
Brittany H. Q. Huang 黃皓晴 |
Ethan Y. C. Ng 吳以證 |
Tracy H. L. Cheung 張珩琳 |
Chris S. Y. Lau 劉思睿 |
Angela S. T. Chung 鍾倩婷 |
Yan T. Y. Yip 葉芷茵 |
| (ii) | each of the parties to the Documents, (a) if a legal person or other entity, is duly organized and is validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation; or (b) if an individual, has full capacity for civil conduct; each of them, has full power and authority to execute, deliver and perform its/her/his obligations under such documents to which it is a party in accordance with the laws of its jurisdiction of organization or incorporation or the laws that it/she/he is subject to; |
| (iii) | the Documents remain in full force and effect on the date of this opinion and have not been revoked, amended or supplemented, and no amendments, revisions, supplements, modifications or other changes have been made, and no revocation or termination has occurred, with respect to any of such Documents after they were submitted to us for the purposes of this opinion; |
| (iv) | the laws of jurisdictions other than Hong Kong which may be applicable to the execution, delivery, performance or enforcement of the Documents are complied with; and |
| (v) | all requested Documents have been provided to us and all factual statements made to us by the Company in connection with this opinion are true, accurate, correct and complete. |
B. Opinions
Subject to the Assumptions, Qualifications (as defined below) and limitations set forth herein and subject to any matters not disclosed to us, and having regard to such considerations of the laws of Hong Kong in force as at the date of this opinion as we consider relevant, we are of the opinion that:
| (i) | the description of Hong Kong laws and the legal matters relating to the Company and its subsidiaries’ business activities in Hong Kong with respect to the regulations set forth in the Registration Statement on the cover page and under the captions “Prospectus Summary”, “Risk Factors”, “Corporate History and Structure”, “Enforceability of Civil Liabilities”, “Business – Governmental Regulations”, “Regulations”, “Taxation – Hong Kong Profits Taxation” and “Legal Matters” in each case insofar as such statements purport to describe or summarize the Hong Kong laws and legal matters relating the Company and its subsidiaries’ business activities in Hong Kong with respect to the regulations, correctly and fairly summarizes and describes the matters referred to therein as at the date hereof, are true and accurate in all material respects, and fairly present and summarize in all material respects the Hong Kong legal matters stated therein as at the date hereof; and |
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| (ii) | nothing has been omitted from such description which would make the same misleading in any material aspect. |
C. Qualifications
Our opinion expressed above is subject to the following qualifications (“Qualifications”):
| (i) | our opinion is limited to the laws of Hong Kong of general application on the date hereof. We have made no investigation of, and do not express or imply any views on, the laws of any jurisdiction other than Hong Kong. Without prejudice to the generality of the preceding sentences, our opinion is not intended to constitute, nor should it be construed as, advice regarding the securities laws or any other laws of the United States or any State thereof and we express no opinion as to the jurisdiction of any court of the United States or any State thereof; |
| (ii) | the laws of Hong Kong referred to herein are laws and regulations publicly available and currently in force on the date hereof and there is no guarantee that any of such laws and regulations, or the interpretation or enforcement thereof, will not be changed, amended or revoked in the future with or without retrospective effect. Our opinion is given on the basis that we have no obligation to notify any addressee of this opinion of any change in Hong Kong laws or its application after the date of this opinion; |
| (iii) | our opinion is subject to (a) applicable bankruptcy, insolvency, liquidation, fraudulent transfer, reorganization, moratorium or similar laws in the Hong Kong affecting creditors’ rights generally, and (b) possible judicial or administrative actions or any Hong Kong laws affecting creditors’ rights; |
| (iv) | our opinion is subject to the effects of (a) certain legal or statutory principles affecting the enforceability of contractual rights generally under the concepts of public interest, social ethics, national security, good faith, fair dealing, and applicable statutes of limitation; (b) any circumstance in connection with formulation, execution or performance of any legal documents that would be deemed materially mistaken, clearly unconscionable, fraudulent, coercionary or concealing illegal intentions with a lawful form; (c) judicial discretion with respect to the availability of specific performance, injunctive relief, remedies or defences, or calculation of damages; and (d) the discretion of any competent Hong Kong legislative, administrative or judicial bodies in exercising their authority in Hong Kong; |
| (v) | this opinion is issued based on our understanding of the laws of Hong Kong. For matters not explicitly provided under the laws of Hong Kong, the interpretation, implementation and application of the specific requirements under the laws of Hong Kong are subject to the final discretion of competent Hong Kong legislative, administrative and judicial authorities, and there can be no assurance that the government agencies will ultimately take a view that is not contrary to our opinion stated above; |
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| (vi) | we may rely, as to matters of fact (but not as to legal conclusions), to the extent we deem proper, on certificates and confirmations of responsible officers of the Company and public searches carried in Hong Kong; |
| (vii) | as used in this opinion, the expression “to our best knowledge” or similar language with reference to matters of fact refers to the current actual knowledge of the solicitors of this firm who have worked on matters for the Company in connection with the Offering and the transactions contemplated thereunder. We have not undertaken any independent investigation to determine the existence or absence of any fact, and no inference as to our knowledge of the existence or absence of any fact should be drawn from our representation of the Company or the rendering of this opinion; |
| (viii) | nothing in this opinion shall be construed as an opinion that the Registration Statement complies with any legal or regulatory requirement as to its contents; |
| (ix) | this opinion is intended to be used in the context which is specifically referred to herein; each paragraph shall be construed as a whole and no part shall be extracted and referred to independently; and |
| (x) | this opinion is strictly limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. The opinion expressed herein is rendered only as of the date hereof, and we assume no responsibility to advise you of facts, circumstances, events or developments that hereafter may be brought to our attention and that may alter, affect or modify the opinion expressed herein. |
This opinion is delivered solely for the purpose of and in connection with the Registration Statement publicly filed with the U.S. Securities and Exchange Commission on the date of this opinion and may not be used for any other purpose without our prior written consent.
We hereby consent to the use of this opinion in, and the filing hereof as an exhibit to, the Registration Statement, and to the reference to our name in such Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the regulations promulgated thereunder.
Yours faithfully,
/s/ CLKW Lawyers LLP
CLKW Lawyers LLP
in association with Michael Li & Co.
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Exhibit 5.4
福建省福州市台江区望龙二路1号国际金融中心（IFC）37层（350005）
电话：+86-591-87850803 传真：+86-591-87816904
37/F, IFC, No.1, Wanglong 2nd Avenue, Taijiang District, Fuzhou, Fujian 350005 P. R. China
Tel: +86-591-87850803 Fax: +86-591-87816904
www.allbrightlaw.com
TO: RAYTECH HOLDING LIMITED
June 6, 2025
Dear Sir/Madam,
We are qualified lawyers of the People’s Republic of China (the “PRC”, for the purpose of issuing this opinion, excluding Hong Kong Special Administration Region, Macau Special Administration Region and Taiwan) and as such are qualified to issue this opinion with respect to all laws, regulations, rules, judicial interpretations and other legislations of the PRC effective and publicly available as of the date hereof. We have acted as your PRC legal counsel in connection with the offering (the “Offering”) of up to 30,000,000 ordinary shares (the “Ordinary Shares”), par value US$0.00000625 per share, of the Company (the “Offered Shares”) pursuant to the Company’s registration statement on Form F-1, including all amendments and supplements thereto (the “Registration Statement”), filed by the Company with the U.S. Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended (the “Offering”); and the Registration Statement.
We are licensed lawyers in the PRC and are authorized by the Ministry of Justice of the PRC to issue legal opinions in relation to the above matters in accordance with the published and publicly available PRC laws, regulations, rules and judicial interpretations announced by the PRC Supreme People’s Court (collectively the “PRC Laws”), such licenses and authorization of which have not been revoked, suspended, restricted, or limited in any manner whatsoever.
| A. | Documents Examined, Definition and Information Provided |
In rendering this opinion, we have reviewed the Company’s Registration Statement, the Prospectus (as defined below) and the Underwriting Agreement (as defined below). In addition, we have examined the originals or copies, certified or otherwise identified to our satisfaction of the documents as we have considered necessary or advisable for the purpose of rendering this opinion. Where certain facts were not independently established by us, we have relied upon certificates or statements issued or made by competent national, provincial or local governmental regulatory or administrative authority, agency or commission in the PRC having jurisdiction over the relevant PRC Entities, the Company and appropriate representatives of the Company. All of these documents are hereinafter collectively referred to as the “Documents.”
Unless the context of this opinion otherwise provides, the following terms in this opinion shall have the meanings set forth below:
| “The Company” | means Raytech Holding Limited. | ||
| “Pure Beauty” | means Pure Beauty Manufacturing Company Limited, a company incorporated under the laws of Hong Kong on with limited liability on April 15, 2013. | ||
| “CSRC” | means the China Securities Regulatory Commission. | ||
| “CAC” | means the Cyberspace Administration of China. | ||
| “Group” | means the Company and its subsidiaries or any of them, or where the context so requires, in respect of the period before our Company becoming the holding company of its present subsidiaries, such subsidiaries as if they were subsidiaries of our Company at the relevant time or the businesses which have since been acquired or carried on by them or as the case may be their predecessors. | ||
| “Mainland China” | means the mainland of the People’s Republic of China excluding Taiwan and the special administrative regions of Hong Kong and Macau for the purposes of this legal opinion only; | ||
| “PRC Laws” | means any and all laws, regulations, statues, rules, decrees, notices, and supreme court’s judicial interpretations currently in force and publicly available in the PRC as of the date hereof. | ||
| “PRC authorities,” “PRC government” or “PRC regulatory | means the authorities, government or regulatory agencies of Mainland China for the purpose of this prospectus only. | ||
| “Prospectus” | means the prospectus, including all amendments or supplements thereto, that forms part of the Registration Statement. | ||
| “Registration Statement” | the Company’s registration statement on Form F-1, including all amendments or supplements thereto, filed by the Company with the Securities and Exchange Commission under the U.S. Securities Act of 1933 (as amended) in relation to the Offering. |
Capitalized terms used but not defined herein shall have the meanings set forth in the Registration Statement.
| B. | Assumptions |
In our examination of the aforesaid Documents, we have assumed, without independent investigation and inquiry that:
| 1. | all signatures, seals and chops are genuine and were made or affixed by representatives duly authorized by the respective parties, all natural persons have the necessary legal capacity, all Documents submitted to us as originals are authentic, and all Documents submitted to us as certified or photostatic copies conform to the originals; |
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| 2. | no amendments, revisions, modifications or other changes have been made with respect to any of the Documents after they were submitted to us for the purposes of this opinion; and |
| 3. | each of the parties to the Documents (except that we do not make such assumptions about the PR Entities) is duly organized and validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation, and has been duly approved and authorized where applicable by the competent governmental authorities of the relevant jurisdiction to carry on its business and to perform its obligations under the Documents to which it is a party. |
In expressing the opinions set forth herein, we have relied upon the factual matters contained in the representations and warranties set forth in the Documents.
| C. | Opinion |
Based upon the foregoing, we are of the opinion that:
| 1. | As of the date of this legal opinion, on the basis that (i) the Company and its subsidiaries currently do not have or intend to set up any subsidiary or VIE structure in mainland China, (ii) the Company and its subsidiaries do not have any business operations in mainland China, except that the Company and its subsidiaries collaborate with manufacturers located in mainland China to manufacture products, (iii) none of clients of the Company and its subsidiaries are located in mainland China, and (iv) the Company and its subsidiaries possesses personal information of less than 1 million individuals in the PRC (for the purpose of this subsection (iv) only, including the special administrative regions of Hong Kong and Macau and Taiwan), and do not possess any core data or important data of the PRC or any information which affects or may affect national security of the PRC, we are of the opinion that, the Company and its subsidiaries are currently not required to obtain any permission or approval from the CAC or any other governmental authorities of mainland China in connection with their current business operation, this Offering, or the listing of the Company’s Ordinary Shares on Nasdaq, neither the Company nor its subsidiaries have been denied any permissions or approvals from the authorities of mainland China in connection with their current business operations, this Offering, or the listing of the Company’s Ordinary Shares on Nasdaq. |
| 2. | According to the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, promulgated by the CSRC on February 17, 2023 and became effective on March 31, 2023, a domestic company in the PRC that seeks to offer and list securities on overseas markets shall fulfill the filing procedures with the CSRC. This includes subsequent securities offerings of the company in the same overseas market where it has previously offered and listed securities, which requires a company to file with the CSRC within three working days after the subsequent securities offering is completed. Article 15 of the Overseas Listing Trial Measures provides that if the issuer both meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by a mainland China company: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by mainland China companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Based on the facts that (i) the Company or its subsidiaries do not operate any entities in mainland China and the operating revenue, total profit, total assets or net assets as documented in the Company’s audited consolidated financial statements for the most recent fiscal year is accounted for by Pure Beauty located outside mainland China; (ii) the Company or its subsidiaries does not have any equity interest in any manufacturer located in mainland China and vice versa; and (iii) the Company and its subsidiaries conduct a majority of business and are headquartered in Hong Kong rather than in mainland China, and senior management team are not PRC citizens or have their residence located outside mainland China, we are of the opinion that this Offering will not be regarded as an indirect overseas offering by a domestic company under Article 15 of the Overseas Listing Trial Measures, and therefore, the Company is not required to fulfill the filing procedures with the CSRC for this Offering to issue securities to foreign investors. |
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| D. | Consent |
We hereby consent to the use of this opinion as an exhibit to the Registration Statement, to the use of our name as your PRC counsel and to all references made to us in the Registration Statement and in the prospectus forming a part thereof. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.
This opinion letter relates only to PRC Laws and we express no opinion as to any laws other than PRC Laws. PRC Laws referred to herein are laws currently in force as of the date of this opinion letter and there is no guarantee that any of such PRC Laws, or the interpretation thereof or enforcement therefor, will not be changed, amended or revoked in the immediate future or in the longer term with or without retroactive effect.
Although we do not assume any responsibility or liability for the accuracy, completeness or fairness of the statements contained in the Registration Statement, or the Prospectus, to the best of our knowledge after due and reasonable inquiries, nothing has come to our attention that would reasonably cause us to believe that, (A) the Registration Statement (other than the financial statements and related schedules, statistical data and other expertized statements therein, as to which we express no opinion), as of its effective date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (B) the Prospectus (other than the financial statements and related schedules, statistical data and other expertized statements therein, as to which we express no opinion), as of its date and the date hereof, contained or contains any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
Very truly yours,
| /s/ ALLBRIGHT LAW OFFICES (FUZHOU) | |
| ALLBRIGHT LAW OFFICES (FUZHOU) |
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Exhibit 10.15
Lease Agreement
The landlord, Raytech Holdings Company Limited is hereinafter referred to as Party A, and the tenant, Pure Beauty Manufacturing Company Limited is hereinafter referred to as Party B; both parties agree to enter into all the conditions listed below, each willing to abide by:
(1) Party A rents Room 609, 6th Floor, Nan Fung Commercial Center, No. 19 Lin Lok Street, Kowloon Bay to Party B. The two parties agreed on a rent of HK$25,000 per month (a separate rent receipt will be issued when collecting the rent). Prescribed lease for 1 year: from 1 April 2025 to 31 March 2026
(2) It stipulates that Party B shall not sublease or sublease with others. When the lease expires, if the tenant continues to lease or withdraws from the lease, he must notify in writing one month in advance (renewing the lease requires a new contract to take effect).
(3) When Party B moves out, he must remove all the furniture within the lease term to clear the formalities. If Party B refuses to hand over the door key for an excuse, or leaves old boxes and cabinets and refuses to move them out, deliberately delays the time, and still fails to pick them up within three days after Party B moves out, it will be regarded as a waiver of rights. Party A has the right to cooperate with one or two witnesses to sell the property and sublease it separately without going through the procedures of the police or the renting court; Responsible, no objection.
(4) All rates, property taxes, ground rent and building management fees of the building shall be paid by Party A.
(5) When Party B enters the house, he shall decorate the wall compartments, window grilles, electrical appliances, air conditioners, etc., and shall not dismantle them when Party B moves out, so as to maintain the original order of the building. If Party A agrees, Party B can dismantle it, but must complete the decoration of the building.
(6) The building of this building is only allowed to be used as an office. Party B is not allowed to store contraband in this building, or do anything that violates the laws and regulations of the Hong Kong government. Party B shall not transfer the building to others when Party B moves out or moves out midway.
| Stamped by the Landlord: | Stamped by the Tenant: |
| Raytech Holdings Company Limited | Pure Beauty Manufacturing Company Limited |
| Date: April 1, 2025 | Date: April 1, 2025 |
Exhibit 10.16
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of June__, 2025, between Raytech Holding Limited, a British Virgin Islands Business Company (collectively with its subsidiaries and affiliates, including, without limitation, all entities disclosed or described in the Registration Statement as being subsidiaries or affiliates of Raytech Holding Limited, the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act (as defined below), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.4.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally open for use by customers on such day.
“Closing” means the closing of the purchase and sale of the Shares pursuant to Section 2.1.
“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Shares, in each case, have been satisfied or waived, but in no event later than the second (2nd) Trading Day following the date hereof.
“Commission” means the United States Securities and Exchange Commission.
“Company Counsel” means, (i) Loeb & Loeb LLP, the Company’s U.S. counsel, (ii) Allbright Law Offices (Fuzhou), China counsel to the Company, and (iii) Harney Westwood & Riegels, British Virgin Islands counsel to the Company.
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.
“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, unless otherwise instructed as to an earlier time by the Placement Agent, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof, unless otherwise instructed as to an earlier time by the Placement Agent.
“Placement Agent’s Counsel” means Zarif Law Group P.C., 603 Laurel Avenue, Allenhurst, N.J. 07711.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).
“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Lock-Up Agreement” means the Lock-Up Agreement, dated as of the date hereof, by and among the Company and the directors and officers, in the form attached as Exhibit A to the Placement Agency Agreement.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).
“Ordinary Shares” means the ordinary shares of the Company, par value $0.00000625 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Ordinary Share Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Ordinary Shares, including, without limitation, any debt, preferred share, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Ordinary Shares.
“Per Share Purchase Price” equals $[_______], subject to adjustment for reverse and forward share splits, share dividends, share combinations and other similar transactions of the Ordinary Shares that occur after the date of this Agreement.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Placement Agent” means R.F. Lafferty & Co. Inc.
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“Placement Agency Agreement” means the placement agency agreement dated on or about the date hereof, between the Company and the Placement Agent.
“Preliminary Prospectus” means any preliminary prospectus included in the Registration Statement, as originally filed or as part of any amendment thereto, or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act.
“Pricing Prospectus” means (i) the Preliminary Prospectus relating to the Shares that was included in the Registration Statement immediately prior to [___] (New York City time) on the date hereof and (ii) any free writing prospectus (as defined in the Securities Act) identified in Schedule A hereto, taken together.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Prospectus” means the final prospectus filed for the Registration Statement.
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.7.
“Registration Statement” means the effective registration statement with Commission file No. 333-[ ] which registers the sale of the Shares to the Purchasers, and includes any Rule 462(b) Registration Statement.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 462(b) Registration Statement” means any registration statement prepared by the Company registering additional Public Securities, which was filed with the Commission on or prior to the date hereof and became automatically effective pursuant to Rule 462(b) promulgated by the Commission pursuant to the Securities Act.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Securities” means the Shares.
“Shares” means the Ordinary Shares issued or issuable to each Purchaser pursuant to this Agreement.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing Ordinary Shares).
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
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“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Ordinary Shares are listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the Pink Open Market, OTCQB or the OTCQX (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Placement Agency Agreement, the Lock-up Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Transhare Corporation.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $[_______] of Shares. Each Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for “Delivery Versus Payment” settlement with the Company or its designee. The Company shall deliver to each Purchaser its respective Shares, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall take place remotely by electronic transfer of the Closing documentation. Each Purchaser acknowledges that, concurrently with the Closing and pursuant to the Prospectus, the Company may sell up to $[___] of additional Shares to purchasers not party to this Agreement, less the aggregate Subscription Amounts purchased pursuant to this Agreement, and will issue to such purchasers such Shares at the same Per Share Purchase Price. Unless otherwise directed by the Placement Agent, settlement of the Shares shall occur via “Delivery Versus Payment” (“DVP”) (i.e., on the Closing Date, the Company shall issue the Shares registered in the Purchasers’ names and addresses and released by the Transfer Agent directly to the account(s) at the Placement Agent identified by each Purchaser; upon receipt of such Shares, the Placement Agent shall promptly electronically deliver such Shares to the applicable Purchaser, and payment therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company). Notwithstanding anything herein to the contrary, if at any time on or after the time of execution of this Agreement by the Company and an applicable Purchaser, through, and including the time immediately prior to the Closing (the “Pre-Settlement Period”), such Purchaser sells to any Person all, or any portion, of the Shares to be issued hereunder to such Purchaser at the Closing (collectively, the “Pre-Settlement Shares”), such Purchaser shall, automatically hereunder (without any additional required actions by such Purchaser or the Company), be deemed to be unconditionally bound to purchase, such Pre-Settlement Shares at the Closing; provided, that the Company shall not be required to deliver any Pre-Settlement Shares to such Purchaser prior to the Company’s receipt of the purchase price of such Pre-Settlement Shares hereunder; and provided further that the Company hereby acknowledges and agrees that the forgoing shall not constitute a representation or covenant by such Purchaser as to whether or not during the Pre-Settlement Period such Purchaser shall sell any Ordinary Shares to any Person and that any such decision to sell any Ordinary Shares by such Purchaser shall solely be made at the time such Purchaser elects to effect any such sale, if any. Notwithstanding anything to the contrary herein and a Purchaser’s Subscription Amount set forth on the signature pages attached hereto, the number of Shares purchased by a Purchaser (and its Affiliates) hereunder shall not, when aggregated with all other Ordinary Shares owned by such Purchaser (and its Affiliates) at such time, result in such Purchaser beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act) in excess of 9.9% of the then issued and outstanding Ordinary Shares outstanding at the Closing (the “Beneficial Ownership Maximum”), and such Purchaser’s Subscription Amount, to the extent it would otherwise exceed the Beneficial Ownership Maximum immediately prior to the Closing, shall be conditioned upon the issuance of Shares at the Closing to the other Purchasers signatory hereto. To the extent that a Purchaser’s beneficial ownership of the Shares would otherwise be deemed to exceed the Beneficial Ownership Maximum, such Purchaser’s Subscription Amount shall automatically be reduced as necessary in order to comply with this paragraph.
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2.2 Deliveries.
(a) On or prior to the Closing Date (except as indicated below), the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of each Company Counsel, substantially in the form and substance reasonably acceptable to the Placement Agent;
(iii) subject to the sixth sentence of Section 2.1, the Company shall have provided each Purchaser with the Company’s wire instructions, on Company letterhead and executed by the Company’s Chief Executive Officer or Chief Financial Officer;
(iv) subject to the sixth sentence of Section 2.1, a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;
(v) the duly executed Lock-Up Agreements;
(vi) the Preliminary Prospectus and Prospectus (which may be delivered in accordance with Rule 172 under the Securities Act); and
(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) such Purchaser’s Subscription Amount, which shall be made available for “Delivery Versus Payment” settlement with the Company or its designee.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless such representation or warranty is as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) as of such date);
(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
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(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless such representation or warranty is as of a specific date therein in which case they shall be accurate in all material respects, or to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects as of such date);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;
(v) from the date hereof to the Closing Date, trading in the Ordinary Shares shall not have been suspended by the Commission or the Company’s principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Shares at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth in Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.
(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
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(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s shareholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.3 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Shares for trading thereon in the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).
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(f) Issuance of the Shares; Registration. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized shares the maximum number of Ordinary Shares issuable pursuant to this Agreement. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on [__], 2025 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Pricing Prospectus, Prospectus and any amendments or supplements thereto, at the time the Pricing Prospectus, Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has filed with the Commission a Form 8-A (File Number 001-[ ]) providing for the registration under the Exchange Act of Shares to be issued in the offering contemplated herein. The registration of the Shares under the Exchange Act has been declared effective by the Commission on the date hereof.
(g) Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of Ordinary Shares owned beneficially, and of record, by Affiliates of the Company as of the date hereof. Except as set forth on Schedule 3.1(g), the Company has not issued any shares since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee share options under the Company’s share option plans or the settlement of restricted shares under the Company’s equity incentive plans, the issuance of Ordinary Shares to employees pursuant to the Company’s employee share purchase plans and pursuant to the conversion and/or exercise of Ordinary Shares Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Ordinary Shares or shares of the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional Ordinary Shares or Ordinary Shares Equivalents or capital stock of any Subsidiary. The issuance and sale of the Shares will not obligate the Company or any Subsidiary to issue Ordinary Shares or other securities to any Person (other than the Purchasers). Except as set forth in the SEC Reports with respect to customary adjustments, such as reverse share splits, there are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary. Except as set forth on Schedule 3.1(g), there are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any share appreciation rights or “phantom share” plans or agreements or any similar plan or agreement. All of the outstanding shares of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any shareholder, the Board of Directors or others is required for the issuance and sale of the Shares. Except as set forth on Schedule 3.1(g), there are no shareholders agreements, voting agreements or other similar agreements with respect to the Company’s shares to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s shareholders.
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(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one calendar year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Pricing Prospectus and the Prospectus, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, or to the extent corrected or modified by a subsequent amendment, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing (or to the extent corrected or modified by a subsequent amendment). Such financial statements have been prepared in all material respects in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as set forth in Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not materially altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any of its shares and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company share option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Shares contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.
(j) Litigation. Except as set forth in Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) that could have or reasonably be expected to result in a Material Adverse Effect. None of the Actions set forth in Schedule 3.1(j), (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company, except for such matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
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(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all applicable foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(m) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all applicable federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
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(o) [RESERVED].
(p) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement, except as would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Insurance. The Company and the Subsidiaries maintain property insurance for leased equipment and social insurance for their employees in China, including pension insurance, unemployment insurance, work-related injury insurance, and medical insurance, as required by Chinese regulations. Neither the Company nor any Subsidiary maintains business interruption insurance or key person insurance. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as set forth on Schedule 3.1(r), none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including share option agreements under any share option plan of the Company.
(s) Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed annual report on Form 20-F the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.
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(t) Certain Fees. Except for fees payable by the Company to the Placement Agent or as set forth in the Pricing Prospectus or Prospectus, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
(u) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(v) Registration Rights. Except as set forth on Schedule 3.1(v) , no Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(w) Listing and Maintenance Requirements. The Ordinary Shares are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to terminate, or which to its knowledge is likely to have the effect of, terminating the registration of the Ordinary Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Ordinary Shares are or have been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Ordinary Shares are currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.
(x) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Amended and Restated Memorandum and Articles of Association, as amended from time to time (or similar charter documents) or the laws of its jurisdiction of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Shares and the Purchasers’ ownership of the Shares.
(y) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects as of the date made and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
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(z) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(aa) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Shares hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(bb) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
(cc) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA, except to the extent that such law has been repealed, suspended, or rendered unenforceable by a final and non-appealable order.
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(dd) Accountants. The Company’s accounting firm is set forth on Schedule 3.1(dd) of the Disclosure Schedules. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2023.
(ee) Acknowledgment Regarding Purchasers’ Purchase of Shares. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Shares. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ff) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.12 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Shares for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Ordinary Shares, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Shares are outstanding, and (z) such hedging activities (if any) could reduce the value of the existing shareholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
(gg) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Shares, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement of the Shares.
(hh) Reserved
(ii) Share Option Plans. Each share option granted by the Company under the Company’s share option plan was granted (i) in accordance with the terms of the Company’s share option plan and (ii) with an exercise price at least equal to the fair market value of the Ordinary Shares on the date such share option would be considered granted under GAAP and applicable law. No share option granted under the Company’s share option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, share options prior to, or otherwise knowingly coordinate the grant of share options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.
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(jj) Cybersecurity. To the best of the Company’s knowledge, (i)(x) there has been no security breach or other compromise of or relating to any of the Company’s or any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”), except for those as would not cause a Material Adverse Effect, and (y) the Company and the Subsidiaries have not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data that would cause a Material Adverse Effect; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.
(kk) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(ll) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.
(mm) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(nn) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
(oo) Compliance with Data Privacy Laws. To the best of the Company’s knowledge, (i) the Company and the Subsidiaries are, and at all times during the last three (3) years were, in compliance with all applicable state, federal and foreign data privacy and security laws and regulations, including, without limitation, the European Union General Data Protection Regulation (“GDPR”) (EU 2016/679) (collectively, “Privacy Laws”); (ii) the Company and the Subsidiaries have in place, comply with, and take appropriate steps reasonably designed to ensure compliance with their policies and procedures relating to data privacy and security and the collection, storage, use, disclosure, handling and analysis of Personal Data (as defined below) (the “Policies”); (iii) the Company provides accurate notice of its applicable Policies to its customers, employees, third party vendors and representatives as required by the Privacy Laws; and (iv) applicable Policies provide accurate and sufficient notice of the Company’s then-current privacy practices relating to its subject matter, and do not contain any material omissions of the Company’s then-current privacy practices, as required by Privacy Laws. “Personal Data” means (i) a natural person’s name, street address, telephone number, email address, photograph, social security number, bank information, or customer or account number; (ii) any information which would qualify as “personally identifying information” under the Federal Trade Commission Act, as amended; (iii) “personal data” as defined by GDPR; and (iv) any other piece of information that allows the identification of such natural person, or his or her family, or permits the collection or analysis of any identifiable data related to an identified person’s health or sexual orientation. (i) None of such disclosures made or contained in any of the Policies have been inaccurate, misleading, or deceptive in violation of any Privacy Laws and (ii) the execution, delivery and performance of the Transaction Documents will not result in a breach of any Privacy Laws or Policies. Neither the Company nor the Subsidiaries (i) to the knowledge of the Company, has received written notice of any actual or potential liability of the Company or the Subsidiaries under, or actual or potential violation by the Company or the Subsidiaries of, any of the Privacy Laws; (ii) is currently conducting or paying for, in whole or in part, any investigation, remediation or other corrective action pursuant to any regulatory request or demand pursuant to any Privacy Law; or (iii) is a party to any order, decree, or agreement by or with any court or arbitrator or governmental or regulatory authority that imposed any obligation or liability under any Privacy Law.
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(pp) Foreign Private Issuer. The Company is a “foreign private issuer” as defined in Rule 405 promulgated under the Securities Act.
(qq) Consent to Jurisdiction: The Company has the power to submit, and pursuant to this Agreement, has legally, validly, effectively, and irrevocably submitted, to the jurisdiction of any federal or state court in the State of New York, County of New York, and has the power to designate, appoint, and empower, and pursuant to this Agreement has legally, validly, and effectively designated, appointed, and empowered, an agent for service of process in any suit or proceeding based on or arising under this Agreement in any federal or state court in the State of New York.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Understandings or Arrangements. Such Purchaser is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Shares in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Shares pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Shares hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the Shares, it was, and as of the date hereof it is an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12) or (a)(13) under the Securities Act.
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(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent have provided such Purchaser with any information or advice with respect to the Shares nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Shares and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Shares to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.
(f) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material pricing terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Shares covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Furnishing of Information. Until the time that no Purchaser owns Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
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4.2 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
4.3 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) promptly following the Closing Date, and in any event within the time required by the Exchange Act for reporting the consummation of the Closing, the Company shall file a Current Report of Foreign Private Issuer on Form 6-K, including the Transaction Documents as exhibits thereto, with the Commission (the “Closing 6-K”). From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agents, including, without limitation, the Placement Agent, in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees, Affiliates or agents, including without limitation, the Placement Agent, on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate and be of no further force or effect. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b) and reasonably cooperate with such Purchaser regarding such disclosure.
4.4 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Shares under the Transaction Documents or under any other agreement between the Company and the Purchasers.
4.5 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.3, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented in writing to the receipt of such information and agreed in writing with the Company to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, directors, employees or Affiliates delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agents, including, without limitation, the Placement Agent, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, Affiliates or agents including, without limitation, the Placement Agent, not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously with the delivery of such notice file such notice with the Commission pursuant to a Current Report of Foreign Private Issuer on Form 6-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
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4.6 Use of Proceeds. Except as set forth in the Pricing Prospectus and Prospectus, the Company shall use the net proceeds from the sale of the Shares hereunder for working capital purposes and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Ordinary Shares or Ordinary Shares Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.
4.7 Indemnification of Purchasers. Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such shareholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and, the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement. The indemnification required by this Section 4.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.8 Listing of Ordinary Shares. The Company hereby agrees to use best efforts to maintain the listing or quotation of the Ordinary Shares on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Shares on such Trading Market and promptly secure the listing of all of the Shares on such Trading Market. The Company further agrees, if the Company applies to have the Ordinary Shares traded on any other Trading Market, it will then include in such application all of the Shares, and will take such other action as is necessary to cause all of the Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of its Ordinary Shares on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of the Ordinary Shares for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
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4.9 Reserved
4.10 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to such Transaction Document. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Shares or otherwise.
4.11 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.3. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.3, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules (other than as disclosed to its legal and other representatives). Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.3, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.3 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agent, including without limitation, the Placement Agent, after the issuance of the initial press release as described in Section 4.3. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Shares covered by this Agreement.
4.12 Reserved
4.13 Lock-Up Agreements. The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements except to extend the term of the lock-up period and shall enforce the provisions of each Lock-Up Agreement in accordance with its terms. If any party to a Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company shall promptly use its best efforts to seek specific performance of the terms of such Lock-Up Agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).
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5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other taxes and duties levied in connection with the delivery of any Shares to the Purchasers.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Preliminary Prospectus and the Prospectus, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchasers which purchased at least 50.1% in interest of the Shares and Pre-Funded Warrants Shares based on the initial Subscription Amounts hereunder (or, prior to the Closing, the Company and each Purchaser) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Shares and the Company.
5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Shares, provided that such transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No Third-Party Beneficiaries. The Placement Agent shall be the third party beneficiary of the representations and warranties of the Company in Section 3.1 and the representations and warranties of the Purchasers in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 and this Section 5.8.
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5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.7, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding. In addition to and without limiting the foregoing, the Company has confirms that it has appointed Cogency Global Inc, as its authorized agent (the “Authorized Agent”) upon whom process may be served in any suit, action or proceeding arising out of or based upon the this Agreement or the Transaction Documents or the transactions contemplated herein which may be instituted in any New York federal or state court, by the Representatives, the directors, officers, partners, employees and agents of the Representatives and each affiliate of the Representatives, and expressly accept the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. The Company hereby authorizes and directs the Authorized Agent to accept such service. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company. If the Authorized Agent shall cease to act as agent for service of process, the Company shall appoint, without unreasonable delay, another such agent in the United States, and notify you of such appointment. This paragraph shall survive any termination of this Agreement, in whole or in part.
5.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares.
5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a “.pdf” format data file (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com), such signature shall shall be deemed to have been duly and validly delivered and create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature page were an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
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5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
5.14 Replacement of Shares. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Shares.
5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
5.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through Placement Agent’s Counsel. Placement Agent’s Counsel does not represent any of the Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.18 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
5.19 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and Ordinary Shares in any Transaction Document shall be subject to adjustment for reverse and forward share splits, share dividends, share combinations and other similar transactions of the Ordinary Shares that occur after the date of this Agreement.
5.20 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY RELATED TO THE TRANSACTION DOCUMENTS, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| RAYTECH HOLDING LIMITED | |||
| By: | |||
| Name: | Ching Tim Hoi | ||
| Title: | Chief Executive Officer | ||
With a copy to (which shall not constitute notice):
Loeb & Loeb LLP
2206-19 Jardine House
1 Connaught Place, Central, Hong Kong
Attention: Henry Yin
E-mail: henry.yin@loeb.com
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO RAYTECH SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: ________________________________________________________
Signature of Authorized Signatory of Purchaser: _________________________________
Name of Authorized Signatory: _______________________________________________
Title of Authorized Signatory: ________________________________________________
Email Address of Authorized Signatory:_________________________________________
Address for Notice to Purchaser:
Address for Delivery of Shares to Purchaser (if not same as address for notice):
Subscription Amount: $_________________
Shares: _________________
EIN Number: ____________________
☐ Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur on the second (2nd) Trading Day following the date of this Agreement and (iii) any condition to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.
[SIGNATURE PAGES CONTINUE]
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Exhibit 15.1
To the Board of Directors and Shareholders of
Raytech Holding Limited
LETTER IN LIEU OF CONSENT FOR REVIEW REPORT
We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim condensed consolidated financial statements of Raytech Holding Limited and its subsidiaries for the six-month periods ended September 30, 2023 and 2024, as included in the Company’s initial filing on January 10, 2025; because we did not perform an audit, we do not express an opinion on this interim financial information.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
 | |
| San Mateo, California | WWC, P.C. |
| June 6, 2025 | Certified Public Accountants |
| PCAOB ID: 1171 |
Exhibit 21.1
Subsidiaries of the Registrant
| Subsidiaries | Jurisdiction of Incorporation | |
| Pure Beauty Manufacturing Company Limited | Hong Kong | |
| Raytech Innovation Limited | Hong Kong |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the inclusion of our report dated July 30, 2024 in the Registration Statement on Form F-1, under the Securities Act of 1933 (File No. 333-275197) with respect to the consolidated balance sheets of Raytech Holding Limited and its subsidiaries as of March 31, 2023 and 2024, and related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the years in the two-year period ended March 31, 2024, and the related notes included herein.
 | |
| San Mateo, California | WWC, P.C. |
| June 6, 2025 | Certified Public Accountants |
| PCAOB ID: 1171 |
