CCSC Technology International Holdings Ltd 20-F for FY2025
CCSC Technology International Holdings Ltd (CCTG)
About this 20-F
CCSC Technology International Holdings Ltd filed this 20-F on July 17, 2025, covering the fiscal year ended March 31, 2025 (FY2025).
Headline figures
Fiscal year ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $17.63M
- up 19.5% from $14.75M a year earlier
- Net loss
- $1.41M
- compared with a net loss of $1.3M a year earlier
- Diluted EPS
- -$0.12
- compared with -$0.13 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report
For the transition period from to
Commission file number:
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Telephone:
Email:
At the address of the Company set forth above
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
An aggregate of
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | 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 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
| * | If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐ |
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
TABLE OF CONTENTS
i
INTRODUCTION
In this annual report on Form 20-F, unless the context otherwise requires, references to:
| ● | “BVI” are to the “British Virgin Islands”; |
| ● | “CCSC Group” are to our direct wholly-owned subsidiary, CCSC Group Limited, an exempted company with limited liability incorporated under the laws of the BVI; |
| ● | “CCSC Interconnect DG” are to CCSC Technology Group’s wholly-owned subsidiary, Dongguan CCSC Interconnect Electronic Technology Limited, a company organized under the laws of the PRC; |
| ● | “CCSC Interconnect HK” are to CCSC Technology Group’s wholly-owned subsidiary, CCSC Interconnect Technology Limited, a limited liability company incorporated under the laws of Hong Kong; |
| ● | “CCSC Interconnect NL” are to CCSC Technology Group’s wholly-owned subsidiary, CCSC Interconnect Technology Europe B.V., a private limited liability company organized under the laws of the Netherlands; |
| ● | “CCSC Technology Group” are to CCSC Group’s direct wholly-owned subsidiary, CCSC Technology Group Limited, a limited liability company incorporated under the laws of Hong Kong; |
| ● | “CCSC Technology Serbia” are to CCSC Group’s direct wholly-owned subsidiary, CCSC Technology Doo Beograd, a limited liability company incorporated under the laws of Serbia; |
| ● | “China” or the “PRC” are to the People’s Republic of China, including Taiwan, the special administrative regions of Hong Kong and Macau for the purposes of this annual report; |
| ● | “Class A Ordinary Shares” are to the Class A ordinary shares, par value US$0.0005 per share, of the Company; |
| ● | “Class B Ordinary Shares” are to the Class B ordinary shares, par value US$0.0005 per share, of the Company; |
| ● | “HK” are to Hong Kong, which is a special administrative region of the PRC authorized to exercise a high degree of autonomy and enjoy executive, legislative and independent judicial power, under the principle of “one country, two systems”; |
| ● | “HK$” are to the legal currency of Hong Kong; |
| ● | “mainland China” are to the mainland China of the PRC, excluding Taiwan, the special administrative regions of Hong Kong and Macau for the purposes of this annual report only; |
| ● | “Operating Subsidiaries” are to Dongguan CCSC Interconnect Electronic Technology Limited, CCSC Technology Group Limited, CCSC Interconnect Technology Limited, CCSC Interconnect Technology Europe B.V., and CCSC Technology Doo Beogradas, collectively; |
| ● | “Ordinary Shares” are to our Class A Ordinary Shares and our Class B Ordinary Shares, collectively; |
| ● | “our PRC subsidiary” is to CCSC Interconnect DG; |
| ● | “PRC laws and regulations” or “PRC laws” are to the laws and regulations of mainland China; |
| ● | “RMB” are to Renminbi, the official currency of mainland China; |
| ● | “SEC” are to the U.S. Securities and Exchange Commission; |
| ● | “Serbia” are to the Republic of Serbia; |
| ● | “U.S. dollars,” “$,” and “US$” are to the legal currency of the United States; and |
| ● | “we,” “us,” “the Company”, “our”, “our company”, or “CCSC Cayman” are to CCSC Technology International Holdings Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands. |
We do not have any material operations of our own. We are a holding company with operations conducted in Hong Kong through the Operating Subsidiaries using Hong Kong dollars, the currency of Hong Kong. The Operating Subsidiaries reporting currency is in Hong Kong dollars. This annual report contains translations of certain foreign currency amounts into U.S. dollars. In this annual report, we refer to assets, obligations, commitments and liabilities in our consolidated financial statements in United States dollars or US$. These US$ references are based on the exchange rate of HK$ to US$, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of US$ which may result in an increase or decrease in the amount of our obligations and the value of our assets, including accounts receivable. No representation is made that the HK$ amounts could have been, or could be, converted, realized or settled into US$ at such rate or at any other rate.
ii
INDUSTRY AND MARKET DATA
This annual report contains estimates, projections and other information concerning our industry, our business and the markets for our products, including, but not limited to, our general expectations and market position, market opportunity and market size. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry and general publications, government data and similar sources. While we are responsible for the accuracy of such information and believe our internal company research as to such matters is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.
In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Item 3. Key Information-D. Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements.”
iii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to our operations, results of operations and other matters that are based on our current expectations, estimates, assumptions and projections. Statements regarding our future and projections relating to revenue, cost of sales, operating expenses, income (loss), and potential growth opportunities are typical of such statements. The forward-looking statements appear in a number of places, including, but not limited to, “Item 5. Operating and Financial Review and Prospects.” Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “is/are likely to,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target,” “continue” and “ongoing,” or the negative of these terms or other comparable terminology intended to identify statements about the future. The forward-looking statements and opinions are based upon current expectations and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.
The forward-looking statements included in this annual report relate to, among other things:
| ● | our goals and strategies; |
| ● | our business and operating strategies and plans for the development of existing and new businesses, ability to implement such strategies and plans and expected time; |
| ● | our future business development, financial condition and results of operations; |
| ● | expected changes in our revenues, costs or expenditures; |
| ● | our dividend policy; |
| ● | our expectations regarding demand for and market acceptance of our products and services; |
| ● | our expectations regarding our relationships with our clients, business partners and third-parties; |
| ● | the trends in, expected growth in and market size of the interconnect product industry in China and globally; |
| ● | our ability to maintain and enhance our market position; |
| ● | our ability to continue to develop new technologies and/or upgrade our existing technologies; |
| ● | developments in, or changes to, laws, regulations, governmental policies, incentives and taxation affecting our operations; |
| ● | relevant governmental policies and regulations relating to our businesses and industry; |
| ● | competitive environment, competitive landscape and potential competitor behavior in our industry; overall industry outlook in our industry; |
| ● | our ability to attract, train and retain executives and other employees; |
| ● | the development of the global financial and capital markets; |
| ● | fluctuations in inflation, interest rates and exchange rates; |
| ● | general business, political, social and economic conditions in China and the overseas markets in which we have business; |
| ● | the future development of the COVID-19 pandemic and its impact on our business and industry; and |
| ● | assumptions underlying or related to any of the foregoing. |
iv
Part I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
Item 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Risks Relating to Doing Business in China
Changes in China’s economic, political, or social conditions or government policies could have a material adverse effect on our business and operations.
A substantial amount of our assets is located in China and we conduct the manufacturing of interconnect products through our PRC subsidiary, CCSC Interconnect DG. Accordingly, our business, financial condition, results of operations, and prospects may be influenced to a significant degree by political, economic, and social conditions in China generally. The Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government, or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, reduce demand for our products, and weaken our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control regulation over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth. These measures may cause decreased economic activities in China, which may adversely affect our business and operating results.
Furthermore, we and our Chinese subsidiary, as well as our investors, face uncertainty about future actions by the Chinese government that could significantly affect our financial performance and operations. Failure to take timely and appropriate measures to adapt to any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure and business operations.
1
There are uncertainties regarding the enforcement of laws and rules and regulations in mainland China, which can change quickly with little advance notice, and there is a risk that the Chinese government may exert more oversight and control over offerings that are conducted overseas, which could materially and adversely affect our business and hinder our ability to offer our securities or continue our operations, and cause the value of our securities to significantly decline or become worthless.
The legal system of mainland China is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. There are uncertainties regarding the enforcement of PRC laws and regulations which can change quickly with little advance notice. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas could materially and adversely affect our business and hinder our ability to offer or continue our operations and cause the value of our securities to significantly decline or become worthless. For example, the Chinese cybersecurity regulator announced on July 2, 2021 that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that company’s app be removed from smartphone app stores. In December 2021, DIDI announced that it would delist from the New York Stock Exchange less than six months after its initial public offering.
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 an announcement 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 China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Measures and certain supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, a PRC domestic company that seeks to offer or list securities overseas, both directly and indirectly, shall submit the filing materials with the CSRC as required by the Trial Measures within three (3) business days following its submission of an application to overseas securities regulatory authorities for its initial public offering or listing, and once listed, report to the CSRC of any follow-on offerings upon the completion of such follow-on offering. See “Item 3. Key Information-D. Risk Factors—Risks relating to doing business in China—The CSRC’s Trial Measures and other relevant rules promulgated by the CSRC may subject us to additional compliance requirements in the future.” In connection with our initial public offering, the CSRC notified us in writing on November 6, 2023 that we do not fall within the scope of the filing requirements under the Trial Measures, therefore, as of the date of this annual report, we believe that we are not required to obtain permission or approvals from the competent Chinese authorities, including the CSRC, for the listing and trading of our Class A Ordinary Shares on U.S. exchanges. However, if the CSRC or other regulatory agencies later promulgate new rules and require that we obtain their approvals for our future offerings, we may be unable to obtain such approval in a timely manner, or at all. Failure to obtain such approvals may subject us to sanctions by the CSRC or other PRC regulatory agencies. See “-The approval of the China Securities Regulatory Commission and other compliance procedures may be required in the future in connection with any of our future offerings, and, if required, we cannot predict whether we will be able to obtain such approval” for details.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Since mainland China administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, however, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in mainland China legal system than in more developed legal systems. Furthermore, the legal system of mainland China is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations, and cause the value of our securities to significantly decline or become worthless.
2
Recent greater oversight by the Cyberspace Administration of China (the “CAC”) over cybersecurity and data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business.
On December 28, 2021, the CAC, together with 12 other governmental departments of the PRC, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures provides that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, network platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. The Cybersecurity Review Measures further requires that network platform operators that possess personal information of more than one million users must apply for a mandatory cybersecurity review before conducting listings in foreign countries.
On November 14, 2021, the CAC published the Network Data Security Administration Draft, or the “Security Administration Draft”, which provides that data processing operators engaging in data processing activities that affect or may affect national security or that processing personal information of more than one million users must be subject to network data security review by the relevant Cyberspace Administration of the PRC. The official version of the Regulation for the Administration of Network Data Security (the “Network Data Security Regulation”) was promulgated on September 24, 2024 and came into effect on January 1, 2025, which deletes the requirement for a mandatory application of cybersecurity review for data processing operators who possess personal data of at least one million users, as stated above. Instead, it requires that a network data handler who carries out network data processing activities that affect or may affect national security, shall undergo a national security review in accordance with relevant national regulations.
As of the date of this annual report, we have not received any notice from any PRC authorities identifying our PRC subsidiary as a CIIO or requiring us to go through cybersecurity review or network data security review by the CAC. We believe our PRC operations were not subject to cybersecurity review or network data security review by the CAC for our IPO, because we believe our PRC subsidiary is not a CIIO or a network platform operator possessing personal information of more than 1 million users, and our business does not involve data processing activities that affect or may affect national security. As of the date of this annual report, we believe that we are in compliance with the applicable PRC cybersecurity and data security laws and regulations that have been issued by the CAC in all material respects, and we have not received any complaints from any third party, nor have we been investigated or punished by any competent PRC authority in this regard. There remains uncertainty, however, as to how the relevant PRC cybersecurity and data security laws and regulations will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to cybersecurity. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we expect to take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review or network data security review in the future.
The approval of the China Securities Regulatory Commission and other compliance procedures may be required in the future in connection with any of our future offerings, and, if required, we cannot predict whether we will be able to obtain such approval.
The M&A Rules require overseas special purpose vehicles that are controlled by mainland China companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of mainland China domestic companies using shares of such special purpose vehicle or held by its shareholders as consideration to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicles’ securities on an overseas stock exchange. Our PRC legal counsel, JT&N, has advised us based on their understanding of the current PRC laws and regulations that the CSRC’s approval was not required for the listing and trading of our Class A Ordinary Shares on Nasdaq under the M&A Rules, given that: (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours in this annual report are subject to the M&A Rules, (ii) we established our wholly-foreign owned enterprise (“WFOE”), CCSC Interconnect DG, by means of direct investment rather than through merger and acquisition of a “mainland China domestic company” as defined under the M&A Rules. As of the date of this annual report, there was no material change to these regulations and policies since our IPO.
3
However, our PRC legal counsel, JT&N, has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, regulations and rules or detailed implementations and interpretations in any form relating to the M&A Rules. If the CSRC or other regulatory agencies later promulgate new rules or requiring that we obtain their approvals for our future offerings, we may be unable to obtain such approval in a timely manner, or at all. If it is determined that CSRC approval or any approval from the relevant PRC regulatory agencies is required for future offerings and we fail to obtain such approval, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to obtain the CSRC approval. These sanctions may include fines and penalties on our operations in China, limitations on our operating privileges in China, delays in or restrictions on the repatriation of the proceeds from our future offerings into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our subsidiary in China, or other actions that could have a material and adverse effect on our business, reputation, financial condition, results of operations, prospects, as well as the trading price of our Class A Ordinary Shares. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for our existing or future share offerings, we may be unable to obtain a waiver of such approval requirements or to obtain such approval in timely manner, or at all.
The CSRC’s Trial Measures and other relevant rules promulgated by the CSRC may subject us to additional compliance requirements in the future.
On February 17, 2023, the CSRC promulgated the Trial Measures and five (5) supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, a PRC domestic company that seeks to offer or list securities overseas, both directly and indirectly, shall submit the filing materials with the CSRC as required by the Trial Measures within three (3) business days following its submission of an application to overseas securities regulatory authorities for its initial public offering or listing. Once listed, such PRC domestic company is required to report to the CSRC within three (3) business days upon the completion of any follow-on offerings. If the PRC domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
Further, according to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies issued by the CSRC on February 17, 2023, or the CSRC Notice, beginning on March 31, 2023, PRC domestic companies that had submitted valid applications for overseas offering and listing but did not obtain the approval from overseas regulatory authorities or overseas stock exchanges shall complete the required filing procedures with the CSRC prior to the completion of their overseas offerings and listing. In compliance with the Trial Measures, we submitted our filing materials to the CSRC on August 31, 2023, and were informed by the CSRC in writing on November 6, 2023 that we did not fall within the scope of the filing requirements at such time. Based on such notice by the CSRC, we believe we are not required to undertake the relevant filing and reporting requirements as stipulated in the Trial Measures. However, we cannot assure you that we will not become subject to the filing requirements in the future, if the CSRC issues any further guidelines that otherwise subjects us to them.
On February 24, 2023, the CSRC, together with the Ministry of Finance, the National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023, together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a PRC domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to the PRC law and regulations, and file with the secrecy administrative department at the same level; and (b) a PRC domestic company that plans to, either directly or indirectly 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. Any failure or perceived failure by our Company and our PRC subsidiary to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
4
Any new laws and regulations issued by the PRC authorities may subject us to additional compliance requirements. We cannot assure you that we will be able to comply with all the new regulatory requirements, or any future implementing rules on a timely basis, or at all. Any failure by us to fully comply with the new regulatory requirements, including but not limited to the failure to complete the filing procedures with the CSRC if required, may significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our Class A Ordinary Shares to significantly decline in value or become worthless.
The Chinese government exerts substantial influence over the manner in which we must conduct our business and may intervene or influence our operations at any time, which actions may result in a material change in our operations and impact our operations materially and adversely, and significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless.
The Chinese government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to manufacturing, taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
Our business is subject to various government and regulatory interference. We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. Our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry, which could result in further material changes in our operations and could adversely impact the value of our Class A Ordinary Shares.
Furthermore, recent statements by the Chinese government indicate an intent to exert more oversight and control over offerings that are conducted overseas. Although we believe that we are currently not required to obtain permission from any of the PRC central or local government and we have not received any denial to list on any U.S. exchange, it is uncertain whether or when we might be required to obtain permission from the PRC government to list on U.S. exchanges in the future. Even if such permission is obtained, it remains uncertain whether it may be later denied or rescinded, which could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and may cause the value of our shares to significantly decline or be worthless. If (i) we do not receive or maintain such permissions or approvals, (ii) we inadvertently conclude that such permissions or approvals are not required, or (iii) applicable PRC laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, we may be subject to fines or other penalties, including suspension of business and revocation of prerequisite licenses, which could result in a material change in our operations, and may have a material adverse effect on our business, financial condition or results of operations, and the value of our Class A Ordinary Shares could depreciate significantly or become worthless.
5
You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in mainland China against us or our management based on foreign laws, compared to doing so in your home country against a domestic defendant. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within mainland China.
As a company incorporated under the laws of the Cayman Islands, we conduct a majority of our operations in China and a majority of our assets are located in China. As a result, it may be difficult for you to effect service of process upon those persons inside mainland China, compared to doing so in your home country against a domestic defendant. It may be difficult for you to enforce judgments obtained in U.S. courts based on civil liability provisions of the U.S. federal securities laws against us and our officers and directors, as none of them currently resides in the U.S. or has substantial assets in the U.S. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the mainland China would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state.
The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. The competent PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country or region where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the competent PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws and regulations or national sovereignty, security, or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.
It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within mainland China. For example, there are significant legal and other obstacles to obtaining information, documents, and materials needed for regulatory investigations or litigation outside mainland China. Although the authorities in China may establish a regulatory cooperation mechanism with its counterparts of another country or region to monitor and oversee cross border securities activities, such regulatory cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, 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 mainland China. Article 177 further provides that Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to foreign agencies without prior consent from the securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council. Furthermore, the Trial Measures provide that overseas securities regulatory authorities may conduct investigations or evidence collection relating to PRC domestic companies’ overseas offering and listing activities through the assistance of the CSRC under relevant cross-border securities regulatory cooperation mechanisms. Accordingly, without regulatory cooperation between the U.S. and China, no entity or individual in mainland China may provide documents and information relating to securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators, which could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted outside of mainland China. See “-There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of mainland China.”
The HFCAA and the Accelerating Holding Foreign Companies Accountable Act call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering and listing on the Nasdaq Capital Market, and Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or fully investigate our auditor.
On April 21, 2020, former SEC Chairman Jay Clayton and former PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.
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On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
On December 18, 2020, the “Holding Foreign Companies Accountable Act” was signed by President Donald Trump and became law. This legislation requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect the issuer’s public accounting firm for three (3) consecutive years beginning in 2021, the issuer’s securities are banned from trade on a national exchange or through other methods.
On June 22, 2021, the U.S. Senate passed the “Accelerating Holding Foreign Companies Accountable Act”, which, if passed by the U.S. House of Representatives and signed into law by the President, would decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three (3) to two (2) years, thus, reducing the period before their securities may be prohibited from trading or delisted if the PCAOB determines that it cannot inspect or investigate our auditor completely.
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 to determine whether it is unable to inspect or investigate 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 adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants 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.
On December 16, 2021, the PCAOB issued a report on its determinations that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the PRC, because of positions taken by PRC authorities in those jurisdictions. The PCAOB made the Determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the HFCAA.
On August 26, 2022, the PCAOB signed the SOP Agreements with the CSRC and the MOF governing inspections and investigations, to establish a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law.
On December 15, 2022, the PCAOB determined that it was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and vacated its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB may consider the need to issue a new determination.
On December 29, 2022, provisions of the Accelerating Holding Foreign Companies Accountable Act were signed into law as part of the Consolidated Appropriations Act, amending the HFCAA by requiring 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.
Any lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors to lose confidence in audit procedures and reported financial information and the quality of financial statements of China-based companies.
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Our former auditor, Friedman LLP, the independent registered public accounting firm that issued the audit report included in the annual report for our IPO, was headquartered in the City of New York and registered with the PCAOB during the time it served as our independent auditor. Effective on September 1, 2022, Friedman LLP combined with Marcum LLP. The services previously provided by Friedman LLP will now be provided by Marcum Asia CPAs LLP (“MarcumAsia”), which is a PCAOB registered public accounting firm headquartered in New York. On November 1, 2024, the Company appointed Enrome LLP as its independent registered public accounting firm in place of MarcumAsia, effective immediately. Enrome LLP, whose audit report is included in this annual report on Form 20-F, is headquartered in Singapore. Our current and former auditors are both subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess an auditor’s compliance with the applicable professional standards, and have been inspected by the PCAOB. As such, as of the date of this annual report, our offering is not affected by the HFCAA and related regulations. However, the recent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial statements. Furthermore, there is a risk that our auditor cannot be inspected by the PCAOB in the future. The lack of inspection could cause trading in our securities to be prohibited on a national exchange or in the over-the-counter trading market under the HFCAA and related regulations, and, as a result, Nasdaq may determine to delist our securities, which may cause the value of our securities to decline or become worthless.
We may face disruption to our technology systems, if our technology systems or the proprietary information and/or data collected and stored by our PRC subsidiary via such systems, particularly billing and client information, were to be accessed or tampered with by unauthorized persons, and, in any such case, our reputation and relationships with our customers could be harmed and our business could be materially and adversely affected.
The satisfactory performance, reliability and availability of our technology systems are critical to our business. We rely on our technology systems as well as the people who operate them to securely collect and store confidential and personal data regarding our customers, suppliers and employees during our day-to-day business operation and staff access to such confidential and personal data is only made available on a need-to-know basis, including access to names and billing data. However, these systems may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, and, for reasons beyond our control, we may also experience telecommunications failures, computer viruses, failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, user errors, unauthorized intrusions or inadvertent data breaches, or other attempts to harm our technology systems, which could result in exposure or destruction of the proprietary information and/or data stored in our technology systems.
We have established risk management and internal control systems, consisting of policies and procedures that we believe are appropriate for using and managing our technology systems and the proprietary information and/or data stored in such systems properly and securely, including (i) establishing procedures to evaluate our backup systems timely as well as to review the security level of our current systems and consider upgrading our security and software testing if needed, and (ii) the establishment of a fire wall to prevent external cyber risks, and providing cyber security training to our employees. Our board of directors are responsible for the overall management and implementation of such policies and procedures, which will be updated every year under the monitoring of our board of directors, and shall be approved by our board of directors and certified by a third party, to make sure such policies and procedures satisfy the requirements of IATF 16949 and ISO 9001. Although, as of the date of this annual report, we have not had any cyber-attacks, breaches of our network security systems on which we rely could involve attacks are intended to (i) obtain unauthorized access to and disclose sensitive and confidential client information and/or our proprietary information, or (ii) destroy data or disable, degrade, or sabotage our systems, often through the introduction of computer viruses and other means. Such breaches or attacks could originate from a wide variety of sources, including state actors or other unknown third parties. Since techniques used to obtain unauthorized access to systems or sabotage systems change frequently and may not be known until launched against us, we may not be able to anticipate these attacks or implement adequate preventative measures promptly and effectively. In addition, any party who is able to illegally obtain identification and password credentials could potentially gain unauthorized access to our technology systems, and we cannot assure you that we will be able to anticipate, detect, or implement effective preventative measures against frequently changing cyber-attacks. In addition to the implementation and maintenance of data security measures, we require our employees to maintain the confidentiality of the proprietary information that we hold. However, from time to time, employees make mistakes with respect to security policies that are not always immediately detected by compliance policies and procedures. Such mistakes can include errors in software implementation or a failure to follow protocols and patch systems. Employee errors, even if promptly discovered and remediated, may result in unauthorized disclosure of confidential information, and our systems may be otherwise compromised, malfunction or disabled; therefore, in such events, we could suffer a disruption of our business, financial losses, liability to clients, regulatory sanctions, and damage to our reputation.
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If a cybersecurity incident occurs, or is perceived to occur, we may have to spend significant capital and other resources to mitigate the impact of the event and to develop and implement protection to prevent future events of such nature from occurring. Furthermore, we may also be subject to negative publicity and the public perception of the ineffectiveness of our security measures, and our reputation may be harmed, in the event of any of the foregoing cybersecurity breaches or attacks, which could damage our relationships with, and result in the loss of existing or potential, customers, and our business and financial condition could be materially and adversely affected.
Increases in labor costs in the PRC may adversely affect our business and our profitability.
China’s economy has experienced increases in labor costs in recent years. China’s overall economy and the average wage in China are expected to continue to grow. The average wage level for our employees has also increased in recent years. We expect that our labor costs, including wages and employee benefits, will continue to increase. To counter the rising labor costs and improve our operational efficiency, we reduced the number of manufacturing employees from 166 in fiscal year ended March 31, 2023 to 136 in fiscal ended March 31, 2024, which number was increased to 139 as of March 31, 2025. The labor costs for the three most recent fiscal years amounted to US$2.87 million, US$2.49 million, and US$3.07 million for the fiscal years ended March 31, 2023, 2024, and 2025, respectively, representing 17.7%, 23.0%, and 24.3% of our total cost of revenue, respectively. Unless we are able to continue to improve our operational efficiency or pass on increased labor costs to our customers by increasing prices for our products or services, our profitability and results of operations may be materially and adversely affected.
In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the Labor Contract Law of the People’s Republic of China, or the “Labor Contract Law,” that became effective in January 2008 and its amendments that became effective in July 2013 and its implementing rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation, and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations.
As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practice does not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.
Our PRC subsidiary has not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations, which may subject us to penalties.
According to the PRC Social Insurance Law and the Administrative Regulations on the Housing Funds, companies operating in mainland China are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance (collectively known as “social insurance”), and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees. For more details, please see “Item 4. Information on the Company-B. Business Overview-Regulations-Regulations Relating to Labor Protection.” The requirement of social insurance and housing fund has not been implemented consistently by the local governments in China given the different levels of economic development in different locations.
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Pursuant to the relevant laws, an enterprise is required, within a prescribed time limit, to register with the relevant social security authority and housing fund management center, and to open the relevant accounts and make timely contributions for their employees; failure to do so may subject the enterprise to order for rectification, and certain fines if the enterprise fails to rectify in time. As of the date of this annual report, we have not been paying the social insurance and housing funds for our employees in full. Any failure to make sufficient provision of the outstanding amounts of contributions to such funds is a violation of applicable PRC laws and regulations and we could be required to make up the contributions and be subject to late fees, fines, and associated administrative penalties. As of March 31, 2023, 2024, and 2025, we had outstanding social insurance payments payable in the aggregate amount of approximately $165,772, $167,141, and $141,068, respectively, and outstanding housing funds in the aggregate amount of approximately $133,229, $116,942, and $115,668, respectively. In the event that the relevant authorities determine that we have underpaid, our PRC subsidiary may be required to pay outstanding contributions and penalties to the extent we did not make full contributions to the social security and housing provident funds. If we fail to pay the contributions in full and on time within the prescribed time limit as required, a late fee of 0.05% per day and a fine of one to three times the outstanding amount of social insurance may be imposed by the authority, and the relevant authorities could file applications to competent courts for compulsory enforcement of the underpaid payment of housing funds. As of March 31, 2023, 2024, and 2025, an estimated late fee may be imposed for the outstanding social insurance payments payable in the aggregate amount of approximately $53,859, $48,224, and $22,739, respectively. Moreover, our failure in making adequate contributions to social insurance and housing funds may also trigger private complaints filed by our employees against us.
As of the date of this annual report, we have not received any notices from the competent PRC authorities requiring us to make up the underpayment of social insurance and housing funds for our employees, however, we cannot guarantee that the competent PRC authorities will not order us to do so in the future. We intend to pay the outstanding social insurance and housing fund payments upon receipt of notice from the competent PRC authorities. We may also be subject to fines and penalties if we fail to comply, which could adversely affect our businesses, result of operations and financial conditions.
PRC regulations relating to offshore investment activities by mainland China residents may subject our mainland China resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us.
On July 4, 2014, State Administration of Foreign Exchange (“SAFE”) issued the Circular on Issues Concerning Foreign Exchange Control over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or “SAFE Circular 37.” According to SAFE Circular 37, prior registration with the local SAFE branch is required for mainland China residents, (including individuals and corporate entities, as well as foreign individuals that are deemed to be mainland China residents for foreign exchange administration purpose), in connection with their direct or indirect contribution of domestic assets or interests to offshore special purpose vehicles, or “SPVs.” SAFE Circular 37 further requires amendments to the SAFE registrations in the event of any changes with respect to the basic information of the offshore SPV, such as change of a mainland China individual shareholder, SPV name and operation term, or any significant changes with respect to the offshore SPV, such as an increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular 37 is applicable to our shareholders who are mainland China residents and may be applicable to any offshore acquisitions that we make in the future. In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or “SAFE Notice 13,” effective in June 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.
In addition to SAFE Circular 37 and SAFE Notice 13, our ability to conduct foreign exchange activities in mainland China may be subject to the interpretation and enforcement of the Administrative Measures for Individual Foreign Exchange and its implementing rule promulgated by the People’s Bank of China and SAFE in December 2006 and January 2007, respectively (as amended and supplemented, the “Individual Foreign Exchange Rules”). Under the Individual Foreign Exchange Rules, any mainland China individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions, the failure of which may subject such mainland China individual to warnings, fines, or other liabilities.
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We may not be informed of the identities of all the mainland China residents holding direct or indirect interest in our company, and we have no control over any of our future beneficial owners. Thus, we cannot provide any assurance that our current or future mainland China resident beneficial owners will comply with our request to make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations. Such failure or inability of our mainland China residents beneficial owners to comply with these SAFE regulations may subject us or our mainland China resident beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiary’s ability to distribute dividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.
We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material and adverse effect on our ability to conduct our business.
We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC subsidiary for our cash requirements, including for services of any debt we may incur. Our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings. Current PRC laws and regulations permit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiary is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Our PRC subsidiary, as a foreign-invested enterprise, or “FIE”, is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at its discretion. These reserves are not distributable as cash dividends. If our PRC subsidiary incur debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or other payments to its respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.
In addition, the PRC Enterprise Income Tax Law (“EIT Law”) and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to their enterprise shareholders who are not mainland China resident enterprises, unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. See “Item 8. Financial Information-A. Consolidated Statements and Other Financial Information-Dividend Policy.”
PRC laws and regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our public offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Under PRC laws and regulations, we are permitted to utilize the proceeds from our share offerings to fund our PRC subsidiary by making loans or providing additional capital contributions to our PRC subsidiary, subject to applicable government registration, statutory limitations on amount, and approval requirements.
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Any loans made to CCSC Interconnect DG, which is treated as a foreign-invested enterprise under PRC law, are subject to PRC laws and regulations and foreign exchange loan registrations. For example, loans made by us to CCSC Interconnect DG to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE, or filed with SAFE in its information system. Pursuant to relevant PRC laws and regulations, we may provide loans to CCSC Interconnect DG up to the larger amount of (i) the balance between the registered total investment amount and registered capital of CCSC Interconnect DG, or (ii) the amount equal to two (2) times the net assets of CCSC Interconnect DG, calculated in accordance with the Circular on Full-Coverage Macro-Prudent Management of Cross-Border Financing (the “PBOC Circular 9”), the Circular on Adjusting the Macro-Prudent Adjustment Parameter for Full-Covered Cross-Border Financing (the “PBOC Circular 64”), and the Circular on Adjusting the Macro-Prudent Adjustment Parameter for Cross-Border Financing (the “PBOC Circular 5”). Moreover, any medium or long-term loan to be provided by us to CCSC Interconnect DG must also be filed and registered with the National Development and Reform Commission (“NDRC”). We may also decide to finance CCSC Interconnect DG by means of capital contributions. These capital contributions must be recorded with the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) or its local counterpart, and the local market regulatory authority.
On March 30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Administrative Approach Regarding the Settlement of the Foreign Exchange Capital of Foreign-invested Enterprises, or “SAFE Circular 19,” which took effect on June 1, 2015. Pursuant to SAFE Circular 19, up to 100% of foreign currency capital of a foreign-invested enterprise may be converted into RMB capital according to the actual operation, and within the business scope, of the enterprise at its will. Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in mainland China, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond their business scope, for entrusted loans or for repayment of inter-company RMB loans. On June 9, 2016, SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or “SAFE Circular 16,” effective on June 9, 2016, which reiterates some rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans or repay inter-company loans to a prohibition against using such capital to issue loans to non-affiliated enterprises. On October 23, 2019, SAFE issued the Notice of the State Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment, which, among other things, expanded the use of foreign exchange capital to domestic equity investment area. Non-investment foreign-funded enterprises are allowed to lawfully make domestic equity investments without violation to prevailing special administrative measures for access of foreign investments (negative list) and the authenticity and compliance with the regulations of domestic investment projects. If our PRC subsidiary requires financial support from us in the future and we find it necessary to use foreign currency-denominated capital to provide such financial support, our ability to fund our PRC subsidiary’s operations will be subject to statutory limits and restrictions, including those described above.
In light of the various requirements imposed by PRC laws and regulations on loans to, and direct investment in, PRC entities by offshore holding companies, including SAFE Circular 19, SAFE Circular 16, and other relevant rules and regulations, we cannot assure you that we will be able to complete the necessary registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received or expect to receive from our offshore offerings and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our business, including our liquidity and our ability to fund and expand our business.
Fluctuations in exchange rates between the RMB and other currencies could have a material and adverse effect on our results of operations and the value of your investment.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the competent PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.
A significant amount of our business is conducted in mainland China by CCSC Interconnect DG, the books and records of which are maintained in RMB. The financial statements that we file with the SEC and provide to our shareholders are presented in U.S. dollars. Changes in the exchange rates between the RMB and U.S. dollar affect the value of our assets and the results of our operations, when presented in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue, and financial condition. Further, our Class A Ordinary Shares are offered in U.S. dollars, and we will need to convert the net proceeds we receive into RMB in order to use the funds for our business. Changes in the conversion rate among the U.S. dollar and the RMB will affect the amount of proceeds we will have available for our business.
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Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into more hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control laws and regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
Governmental control and restriction on currency exchange may limit our ability to utilize our revenues effectively.
All of our revenues generated by our PRC subsidiary are denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans that we may secure from our onshore subsidiaries. Currently, our PRC subsidiary may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of SAFE by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Since we expect a significant portion of our future revenue will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of mainland China and/or transfer cash out of mainland China to pay dividends in foreign currencies to our shareholders. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiary. In addition, there can be no assurance that the competent PRC government will not intervene or impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of mainland China and may adversely affect our business, financial condition and results of operations.
To the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in mainland China or Hong Kong, such cash or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets.
The transfer of funds and assets among CCSC Cayman, its Hong Kong and PRC subsidiaries is subject to governmental control and restriction. The competent PRC government imposes controls on the conversion of the RMB into foreign currencies and the remittance of currencies out of mainland China. In addition, the PRC EIT Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to enterprises that are not mainland China resident enterprises, unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the enterprises that are not mainland China resident enterprises are tax resident.
As of the date of this annual report, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to mainland China), except for the transfer of funds involving money laundering and criminal activities. However, there is no guarantee that the Hong Kong government will not promulgate new laws or regulations that may impose such restrictions in the future.
As a result of the above, to the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in mainland China or Hong Kong, such funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the competent government to the transfer of cash or assets.
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There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of mainland China.
On December 28, 2019, the amended Securities Law of the People’s Republic of China (the “PRC Securities Law”) was promulgated, which became effective on March 1, 2020. According to Article 177 of the PRC Securities Law (“Article 177”), the securities regulatory authority of the State Council may establish a regulatory cooperation mechanism with securities regulatory authorities of another country or region for the implementation of cross-border supervision and administration. Article 177 further provides that overseas securities regulatory authorities shall not engage in activities pertaining to investigations or evidence collection directly conducted within the territories of mainland China, and that no Chinese entities or individuals shall provide documents and information in connection with securities business activities to any organizations and/or persons aboard without the prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council. As of the date of this annual report, we are not aware of any implementing rules or regulations which have been published regarding application of Article 177.
On the other hand, the Trial Measures of the CSRC stipulates in Article 26 that “[w]here an overseas securities regulatory agency intends to carry out investigation and evidence collection regarding overseas offering and listing activities by a domestic company, and request assistance of the CSRC under relevant cross-border securities regulatory cooperation mechanisms, the CSRC may provide necessary assistance in accordance with law. Any domestic entity or individual providing documents and materials requested by an overseas securities regulatory agency out of investigative or evidence collection purposes, shall not provide such information without prior approval from the CSRC and competent authorities under the State Council.” Article 26 of the Trial Measures provides a clearer roadmap as to how overseas securities regulatory authorities may conduct investigation and/or evidence collection relating to PRC companies’ overseas offering and listing activities under Article 177.
As advised by our PRC counsel, JT&N, Article 177 is only applicable where the activities of overseas authorities constitute a direct investigation or evidence collection by such authorities within the territory of mainland China. Our principal business operation is conducted in the PRC. In the event that the U.S. securities regulatory agencies carry out an investigation on us, such as an enforcement action by the Department of Justice, the SEC or other authorities, such agencies’ activities will constitute an investigation or evidence collection directly within the territory of mainland China and, accordingly, will fall within the scope of Article 177. In that case, the U.S. securities regulatory agencies may have to consider establishing cross-border cooperation with the competent securities regulatory authorities of the PRC by way of judicial assistance, diplomatic channels or establishing a regulatory cooperation mechanism with the competent securities regulatory authority of the PRC. However, there is no assurance that the U.S. securities regulatory agencies will succeed in establishing such cross-border cooperation in this particular case and/or establish such cooperation in a timely manner.
Furthermore, as the date of this annual report, there have not been implementing rules or regulations regarding the application of Article 177, it remains unclear as to how it will be interpreted, implemented or applied by the CSRC or other relevant government authorities. As such, there are uncertainties as to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of mainland China. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from Nasdaq or other applicable trading market within the U.S.
Under the EIT Law, we may be classified as a mainland China “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.
Under the EIT Law that became effective in January 2008, an enterprise established outside mainland China with “de facto management bodies” within mainland China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances, and properties of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation, or the “SAT,” specifies that certain offshore incorporated enterprises controlled by enterprises or enterprise groups that are mainland China resident enterprises will be classified as mainland China resident enterprises if the following are located or resident in mainland China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by enterprises or enterprise groups that are mainland China resident enterprises, not those controlled by mainland China individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by enterprises or enterprise groups that are mainland China resident enterprises, or by mainland China or foreign individuals.
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If the competent PRC tax authorities determine that we meet all the criteria set forth in SAT Circular 82 and therefore the actual management organ of the Company is within the territory of mainland China, we may be deemed to be a mainland China resident enterprise for PRC enterprise income tax purposes and a number of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Finally, dividends payable by us to our investors and gains on the sale of our shares may become subject to PRC withholding tax, at a rate of 10% in the case of enterprises that are not mainland China resident enterprises or 20% in the case of individuals who are not mainland China residents (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be sourced from mainland China. It is unclear whether shareholders that are not mainland China residents of our company would be able to claim the benefits of any tax treaties between their country of tax residence and mainland China in the event that we are treated as a mainland China resident enterprise. Any such tax may reduce the returns on your investment in our shares. Although, as of the date of this annual report, we have not been notified or informed by the competent PRC tax authorities that we have been deemed to be a resident enterprise for the purpose of the EIT Law, we cannot assure you that we will not be deemed to be a resident enterprise in the future.
We face uncertainty with respect to indirect transfers of equity interests in mainland China resident enterprises by their holding companies that are not mainland China resident enterprises.
In February 2015, SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or “SAT Circular 7.” SAT Circular 7 provides comprehensive guidelines relating to indirect transfers of PRC taxable assets (including equity interests and real properties of a PRC resident enterprise) by a non-resident enterprise. In addition, in October 2017, SAT issued an Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or “SAT Circular 37,” effective in December 2017, which, among others, amended certain provisions in SAT Circular 7 and further clarify the tax payable declaration obligation by non-resident enterprise. Indirect transfer of equity interest and/or real properties in a PRC resident enterprise by their non-PRC holding companies are subject to SAT Circular 7 and SAT Circular 37.
SAT Circular 7 provides clear criteria for an assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. As stipulated in SAT Circular 7, indirect transfers of PRC taxable assets are considered as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following situations: i) the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor and the transferee are both 80% or above directly or indirectly owned by the same party; iii) the percentages in bullet points i) and ii) shall be 100% if over 50% of the share value of a foreign enterprise is directly or indirectly derived from real properties in mainland China. Furthermore, SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers PRC taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority and the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding, or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a mainland China resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
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According to SAT Circular 37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.
We face uncertainties as to the reporting and assessment of reasonable commercial purposes and future transactions where taxable assets in mainland China are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries, and investments. In the event of being assessed as having no reasonable commercial purposes in an indirect transfer transaction, we may be subject to filing obligations or taxed if we are a transferor in such transactions, and may be subject to withholding obligations (to be specific, a 10% withholding tax for the transfer of equity interests) if we are a transferee in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares by investors who are not mainland China resident enterprises, our PRC subsidiary may be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of CCSC Interconnect DG, and dividends payable by CCSC Interconnect DG to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.
Under the EIT Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside mainland China, will be subject to a withholding tax rate of 10%. Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the “Double Tax Avoidance Arrangement,” a withholding tax rate of 10% may be lowered to 5% if the mainland China enterprise is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws.
However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the “SAT Circular 81,” which became effective on February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According to Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which became effective as of April 1, 2018, when determining an applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further requires any applicant who intends to be proved of being the “beneficial owner” to file relevant documents with the relevant tax authorities. CCSC Interconnect DG is wholly owned by our Hong Kong subsidiary, CCSC Technology Group. However, we cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will be able to complete the necessary filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by CCSC Interconnect DG to CCSC Technology Group, in which case, we would be subject to the higher withdrawing tax rate of 10% on dividends received.
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The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in mainland China.
The M&A Rules concerning mergers and acquisitions established procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a mainland China domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. In addition, the security review rules issued by the Ministry of Commerce that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. It is unlikely that our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. The Ministry of Commerce or other government agencies, however, may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in mainland China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions could, in such case, be materially and adversely affected.
If we become directly subject to the 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.
U.S. public companies that have substantially all of their operations in China 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 on 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 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 us, our business, and the price of our Class A Ordinary Shares. If we become 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 would be costly and time consuming and could distract our management from developing our business. If such allegations are not proven to be groundless, we and our business operations could be severely affected and you could sustain a significant decline in the value of our Class A Ordinary Shares.
The disclosures in our reports and other filings with the SEC and our other public pronouncements may be subject to the scrutiny of any regulatory bodies in the PRC.
We are regulated by the SEC, and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are currently not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by the CSRC, a PRC regulator that is responsible for oversight of the capital markets in China. However, on February 17, 2023, with the approval of the State Council, the CSRC released the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. According to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and submit relevant documents, including the prospectus and other listing documents submitted to overseas regulatory authorities, to the CSRC. In compliance with the Trial Measures, we submitted our filing materials to the CSRC for our IPO. Upon examination of our filing materials, the CSRC notified us in writing that we are not subject to the filing requirement under the Trial Measures at this time. Based on such notice by the CSRC, we are not required to undertake the relevant filing and reporting requirements as stipulated in the Trial Measures. However, any new laws and regulations issued by the PRC authorities may subject us to additional compliance requirements, and we cannot assure you that the CSRC or other PRC authorities will not review or scrutinize our proposed offering and it is not clear how such scrutiny may affect our proposed offering.
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Risks Relating to Our Business
We operate in a highly competitive industry, and the scale and resources of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our net revenues and profitability.
We design and manufacture interconnect products, which is a highly competitive industry. We compete in various aspects, including value for money, user experience, breadth of product and service offerings, product functionality and quality, sales and distribution, supply chain management, customer loyalty, and engineering talent, among others. Intensified competition may result in pricing pressures and reduced profitability and may impede our ability to achieve sustainable growth in our revenues or cause us to lose market share. Our competitors may also engage in aggressive and negative marketing or public relations strategies which may harm our reputation and increase our marketing expenses. Any of these results could substantially harm our results of operations.
Some of our existing and potential competitors enjoy substantial competitive advantages, including: longer operating history, the capability to leverage their sales efforts and marketing expenditures across a broader portfolio of products, more established relationships with a larger number of suppliers, contract manufacturers and channel partners, access to larger and broader user bases, greater brand recognition, greater financial, research and development, marketing, distribution and other resources, more resources to make investments and acquisitions, larger intellectual property portfolios, and the ability to bundle competitive offerings with other products and services. We cannot assure you that we will compete with them successfully.
Escalating U.S.-China trade tensions and shifting international trade policies may increase our costs, disrupt supply chains, and adversely affect customer demand, thereby materially impacting our business, financial condition, and results of operations.
Recent developments in global trade policy, particularly the heightened tensions between the United States and China, have introduced significant uncertainty into the international trade environment. The U.S. government has imposed increased tariffs on a broad range of Chinese imports, raising cumulative tariffs to 145% as of February 2025, while China has responded with retaliatory tariffs of up to 125% on U.S. goods as of April 2025. These escalating trade barriers, along with the possibility of further tariffs, export restrictions, or renegotiation of trade agreements, could adversely affect the demand for our products, limit our access to certain markets, or impair the competitiveness of our pricing.
Our cost structure is sensitive to the prices of components and raw materials, which are subject to global commodity market conditions, supply chain disruptions, and transportation costs. With component costs representing over 65% of our total cost of sales, continued increases due to tariffs or supply chain inefficiencies may erode our gross margins. Furthermore, increased costs borne by our customers, particularly those with international exposure, could be passed on to us, potentially affecting our revenue and operating margins. Although we are taking measures to our operational flexibility and evaluating alternative sourcing and technological solutions, we cannot guarantee that these measures will fully shield us from the broader economic and regulatory effects of the ongoing trade conflict and policy shifts. As a result, our business, financial condition, and results of operations could be materially and adversely affected by continued trade tensions, rising costs, and regulatory uncertainty in the global trade environment.
A disruption, termination or alteration of the supply of materials or components due to natural disasters, political and economic turmoil, or widespread disease or pandemics (such as the COVID-19 pandemic) could materially and adversely affect the sales of our products.
Our business depends on the supply of manufacturing materials and components such as copper, plastic, solder bars, solder wires, and printed circuit boards. We are reliant on a consistent supply of materials and components in order to maintain our manufacturing capability. If these suppliers experience production delays, we may receive a lower allocation of materials and parts than anticipated, or if the quality or design of their materials and parts changes, or if these manufacturers implement recalls, we could incur substantive costs or disruptions to our business, which could have a material adverse effect on our net sales, financial condition, profitability and cash flows.
In addition, volatility in the financial markets, generally, could impact the financial viability of our suppliers, or could cause them to exit certain business lines, or change the terms on which they are willing to provide products. Further, any changes in quality or design, capacity limitations, shipping impediments, shortages of raw materials or other problems could result in shortages or delays in the supply of the raw material and components to us. Our business, operating results and financial condition could suffer if our suppliers reduce output or introduce new parts that are incompatible with our current designs or manufacturing process.
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Further, public health crises could impair our ability to procure necessary materials and may also increase the cost of these materials. For example, an outbreak of a new strain of coronavirus in Wuhan, China (“COVID-19”) resulted in widespread quarantines and travel bans issued by the government all over the world for certain periods of time from 2020 to 2022. Such quarantines and travel bans had a negative impact on the worldwide economy, including those where we operate our business, and as a result, our financial results were adversely impacted for fiscal year ended March 31, 2022. With the China’s nationwide loosening of COVID-19 policy since December 2022, a resurgence of pandemic could potentially increase the employee infection cases may disrupt the Company’s supply chain, and the continued uncertainties associated with the COVID-19 pandemic may further negatively impact the Company’s future revenue growth and cash flows. The COVID-19 pandemic did not materially adversely affect our business operations and condition and operating results for the fiscal years ended March 31, 2023, 2024, and 2025. For details about the impact of COVID-19 pandemic, see “Item 5. Operating and Financial Review and Prospects-A. Operating Results-Impact of the COVID-19 pandemic on Our Operations and Financial Performance.”
If we fail to acquire new customers or retain existing customers, especially our large customers, our business, financial condition and results of operations could be materially and adversely affected.
Retaining our existing customers, especially our large customer, has always been essential to our success. For the fiscal year ended March 31, 2025, there were three customers that contributed 14.5%, 11.9%, and 10.4% to our revenue. For the fiscal year ended March 31, 2024, there were two customers that contributed 17.4% and 12.7% to our revenue. For the fiscal year ended March 31, 2023, there were three customers that contributed 12.0%, 10.6% and 10.5% to our revenue. Apart from the major customers mentioned above, no other customers contributed more than 10% of our total revenue. Our supply agreements with our customers generally do not require them to purchase any products from us; rather we receive purchase orders from our customers on a monthly basis. If our products or services do not meet the requirements of our customers, or if our competitors offer more attractive products, prices, or better customer services, our existing customers may decrease or stop their purchase orders from us. The termination or any change of the purchase orders from our large customers could adversely affect our business and operating results. Furthermore, our ability to attract new customers is crucial to our growth. We have invested heavily in the branding, sales and marketing to acquire and retain customers since our inception. For example, we frequently attend domestic and international expos and exhibitions in an effort to marketing our products and attracting new customers. We also expect to continue to invest in our marketing and sales team to acquire new and retain existing customers. However, there can be no assurance that we will be able to acquire new customers despite our efforts. If we are unable to retain our existing customers or to acquire new customers in a cost-effective manner, our revenues may decrease and our results of operations could be adversely affected.
Increases in the price of raw materials could impact our ability to sustain and grow earnings.
Our manufacturing processes consume substantive amounts of raw materials, the costs of which may be subject to worldwide supply and demand factors, as well as other factors beyond our control such as financial market trends and supply chain disruptions. Raw material price fluctuations may adversely affect our results. In particular, copper is the principal raw material used in the components that we source from our suppliers, accounting for a majority of the cost of sales. Our prevailing practice is to purchase these components at prices based on the average prevailing international spot market prices on the London Metal Exchange (the “LME”) for copper for the one month prior to purchase. The price of copper is affected by numerous factors beyond our control, including global economic and political conditions, supply and demand, inventory levels maintained by suppliers, actions of participants in the commodities markets and currency exchange rates. As with other costs of production, changes in the price of copper may affect the Company’s cost of sales. Whether this has a material impact on our operating margins and financial results depends primarily on the Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are fully reflected in those selling prices and customers continue to place orders. Most of our sales of manufactured products reflect the cost of copper used to manufacture those products at the time the products are ordered. In the ordinary course of business, we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business. These inventories typically reflect the cost of copper prevailing in the market at the time of purchase. A long-term decrease in the price of copper would require the Company to revalue its inventory at periodic intervals to the then net realizable value, which could be below cost. Copper prices have been subject to considerable volatility, and it is not always possible to manage our copper purchases and inventory to neutralize the impact of copper price volatility. In addition, an excessive increase in the price of copper could result in fewer orders from customers. Accordingly, significant volatility in copper prices could have a material adverse effect on our business, financial condition and results of operations.
We do not engage in hedging transactions against raw material price fluctuations, but attempt to mitigate the short-term risks of price volatility by purchasing raw materials in advance based on forecasted production needs and/or reaching agreements with some of our suppliers to keep the cost of raw materials stable. We also attempt to lower the consumption of raw materials by reducing waste and using recycled materials whenever possible and without compromising product quality. In addition, we may pass the increases in the costs of raw materials to customers by adjusting the selling price of our products. For example, as a result of the global supply chain disruptions amid the COVID-19 pandemic, the average cost of the components and materials used in our products decreased by 14.7% per unit in fiscal year ended March 31, 2025 as compared to fiscal year ended March 31, 2024, increased by 8.5% per unit in fiscal year ended March 31, 2024 as compared to fiscal year ended March 31, 2023, and increased by 15.5% per unit in fiscal year ended March 31, 2023 as compared with fiscal year ended March 31, 2022. The average selling price of our products decreased by 12.8% per unit in fiscal year ended March 31, 2025, raised by 9.7% per unit in fiscal year ended March 31, 2024, and raised by 19.8% per unit in fiscal year ended March 31, 2023 to mitigate inflationary pressures. Although these strategies have helped mitigate the negative impact from the raw material fluctuations in the past, they may not be enough to provide sufficient protections for our business in the future, and, as a result, our financial results could be negatively and materially affected.
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We source our raw materials used for manufacturing from a limited number of suppliers. If we lose one or more of the suppliers, our operation may be disrupted, and our results of operations may be adversely and materially impacted.
For the fiscal year ended March 31, 2025, there was no supplier accounted for over 10% of the total purchases made by the Company. For the fiscal year ended March 31, 2024, there was one supplier who accounted for 12.1% of the total purchases made by the Company. For the fiscal years ended March 31, 2023, no supplier accounted for more than 10% of the total purchases made by the Company. As we have a variety of options for supplies, and the technical demands of preparing most of our main supplies are relatively low, we do not anticipate difficulties in obtaining supplies to produce our products. However, if we lose suppliers and are unable to swiftly engage new suppliers, our operations may be disrupted or suspended, and we may not be able to deliver products to our customers on time. We may also have to pay a higher price to source materials from a different supplier on short notice. There is no guarantee that we will be able to locate appropriate new suppliers or supplier merger targets in our desired timeline. As such, our results of operations may be adversely and materially impacted.
The impact of currency value fluctuations could impact our reported financial performance and our ability to sustain and grow earnings.
We are exposed to risks of doing business on a global scale, including fluctuations in foreign currencies. Our operating subsidiaries in Hong Kong, mainland China and the Netherlands use their respective currencies, which are Hong Kong dollar (“HK$”), Renminbi (“RMB”), Euro (“EUR”), and Serbian Dinar(“RSD”), as their functional currencies. The consolidated financial statements included elsewhere in this annual report are prepared in US$ for reporting purposes. In the past, fluctuations in currency exchange rates have affected our reported results of operations. For example, as a result of the fluctuations in currency exchange rates, we recorded a foreign currency translation adjustment in other comprehensive loss of $161,106, $523,250, and $728,399, due to the unfavorable exchange rate of our functional currencies towards the U.S. dollar for the fiscal years ended March 31, 2025, 2024, and 2023. As such, fluctuations in currency exchange rates from period-to-period may result in significant period-over-period changes in our reported financial performance.
Furthermore, due to our international operations, we may be required to purchase products or services with foreign currencies other than the currencies in which we normally conduct our operations. If the exchange rates for such currencies fluctuate in a manner that is unfavorable to us, our cost of sales may increase and we may be unable to shift the increase in the prices of the products or services we provide to our customers, which could have an adverse effect on our financial performance. For example, we recorded a foreign currency gain of $67,395, $425,308, and $562,527, due to favorable exchange rates for the fiscal years ended March 31, 2025, 2024, and 2023, respectively. Currency exchange rates may fluctuate significantly in the future, which could have a material effect on our results of operations, financial position and cash flows and impact the comparability of our results between financial periods.
We have limited sources of working capital and may need substantial additional financing.
The working capital required to implement our business strategy and research and development (“R&D”) efforts will most likely be provided by revenues generated by our business. No assurance can be given that we will have revenues sufficient to sustain our operations or that we would be able to obtain equity/debt financing in the current economic environment. If we do not have sufficient working capital and are unable to generate sufficient revenues or raise additional funds, we may delay the completion, or significantly reduce the scope, of our current business plan; delay some of our development and clinical or marketing efforts; postpone the hiring of new personnel; or, under certain dire financial circumstances, substantially curtail or cease our operations.
As of March 31, 2025, we had cash of approximately $3.69 million, total current assets of approximately $9.02 million, and total current liabilities of approximately $3.84 million. We may need to engage in capital-raising transactions in the near future. Such financing transactions may cause substantial dilution to our shareholders and could involve the issuance of securities with rights senior to the outstanding shares. Our ability to access additional financing is dependent on, among other things, the state of the capital markets at the time of any proposed offering, market reception of the Company and the likelihood of the success of its business model and offering terms. There is no assurance that we will be able to obtain any such additional capital through asset sales, equity or debt financing, or any combination thereof, on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs and to support our operations. If we do not obtain adequate capital on a timely basis and on satisfactory terms, our revenues and operations and the value of our Class A Ordinary Shares and Class A Ordinary Share equivalents would be materially negatively impacted and we may cease our operations.
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We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
Our success is, to a certain extent, attributable to the management, sales and marketing, and research and development expertise of key personnel. We do not carry key man life insurance for any of our key personnel, nor do we foresee purchasing such insurance to protect against the loss of key personnel. We are dependent upon the services of Dr. Chi Sing Chiu, Chairman of the board of directors of the Company, and Mr. Kung Lok Chiu, our Chief Executive Officer, for the continued growth and operation of our Company, due to their industry experience, technical expertise, as well as their personal and business contacts in the PRC. We may not be able to retain them for any given period of time. Although we have no reason to believe that Dr. Chi Sing Chiu or Mr. Kung Lok Chiu will discontinue their services with us, the interruption or loss of their services would adversely affect our ability to effectively run our business and pursue our business strategy as well as our results of operations.
The Company is dependent on the end markets, including industrial, automotive, robotics, medical equipment, computer, network and telecommunication, and consumer products, for the demand of its interconnect products, and is susceptible to negative trends relating to those industries that could adversely affect the Company’s operating results.
Demand for the Company’s products depends on the manufacturing needs for interconnect products of its customers in the various end markets, including industrial, automotive, robotics, medical equipment, computer, network and telecommunication, and consumer products. Therefore, the Company’s sales and profitability is susceptible to negative trends relating to those industries and will be affected by a variety of factors, including general economic conditions, consolidation within the industries, the financial condition of the Company’s customers and their access to financing, competition, technological developments, new legislation and regulation, among others. There can be no assurance that demand for the Company’s interconnect products will continue at the current level or not decrease in the future.
Our success depends on our ability to protect our intellectual property.
Our success relies on our ability to obtain and maintain patent protection for products developed using our technologies, both in the PRC and in other countries, and to enforce these patents. There is no guarantee that any of our existing or future patents will be considered valid and enforceable against third-party infringement, or that our products will not infringe any third-party patents or intellectual property. We currently have 71 valid patents registered with the China National Intellectual Property Administration.
Any patents relating to our technologies may not be sufficiently broad to protect our products. In addition, our patents may be challenged, potentially invalidated or potentially circumvented. Our patents may not afford us protection against competitors with similar technology or permit the commercialization of our products without infringing third-party patents or other intellectual property rights.
We also rely, or intend to rely, on our trademarks, trade names and brand names to distinguish our products from the products of our competitors, and have registered, or will apply to register, a number of these trademarks. However, third parties may oppose our trademark applications or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing these new brands. Further, our competitors may infringe our trademarks, or we may not have adequate resources to enforce our trademarks.
In addition, we also have trade secrets, non-patented proprietary expertise and continuing technological innovation that we shall seek to protect, in part, by entering into confidentiality agreements with licensees, suppliers, employees and consultants. These agreements may be breached and there may not be adequate remedies in the event of a breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Moreover, our trade secrets and proprietary technology may otherwise become known or be independently developed by our competitors. If patents are not issued with respect to products arising from research, we may not be able to maintain the confidentiality of information relating to these products.
21
The Company’s international operations subject the Company to additional business risks that may have a material adverse effect on the Company’s business, operating results and financial condition.
The Company’s headquarters is in Hong Kong, and conducts business through its subsidiaries established in mainland China, Hong Kong and the Netherlands. The Company’s products are currently sold to customers in more than 25 countries. Due to its international operations, the Company is subject to the risks of conducting business internationally, including unexpected changes in, or impositions of, legislative or regulatory requirements, which could materially adversely affect operating expenses, tariffs and other barriers and restrictions, potentially longer payment cycles, greater difficulty in accounts receivable collection, reduced or limited protection of intellectual property rights, potentially adverse taxes and the burdens of complying with a variety of international laws and communications standards. The Company is subject to foreign currency volatility, which could materially impact the Company’s operating results, including the impact of hyper-inflationary conditions in certain economies, particularly where exchange controls limit or eliminate the Company’s ability to convert from local currency. The Company is also subject to general geopolitical risks, such as political and economic instability, social unrest, terrorism and changes in diplomatic and trade relationships in connection with its international operations. Any such disruption could cause the loss of sales and customers. Moreover, these types of events could negatively impact consumer spending or the economy in the impacted regions or depending upon the severity, globally. These risks of conducting business internationally may have a material adverse effect on the Company’s business, operating results and financial condition. Other examples of risks arising from our international operations include the following, any of which could adversely affect our business, financial condition and cash flows:
| ● | increased transportation costs or delays and other logistical problems relating to the transportation of goods shipped by ocean or air freight, including border closures, trade conflicts and general trade route delays caused by events such as adverse weather and stoppages in the Suez Canal; |
| ● | restrictions on the transfer of funds from such countries to the United States; |
| ● | imposition of currency controls; |
| ● | increased labor costs and/or shortages; |
| ● | changes in governmental policies and regulations, including changes to import/export regulations, tariffs, freight rates or the adoption of protectionist legislation; |
| ● | differing and potentially adverse tax consequences, including consequences resulting from the complexities of foreign corporate income tax systems, value added tax (“VAT”) regimes, tax withholding rules, and other indirect taxes, tax collection or remittance obligations, and restrictions on the repatriation of earnings; |
| ● | the availability and extent of intellectual property law protections; |
| ● | longer payment cycles and difficulties in managing international accounts receivable; |
| ● | trade sanctions, political unrest, terrorism, war, including the Russia-Ukraine conflict, epidemics, pandemics, including COVID-19, or the threats of any of these or similar events; |
| ● | changing or unstable economic conditions or poor infrastructure; and/or |
| ● | different customer demand dynamics and difficulties and costs that arise in our efforts to adapt to local purchasing behaviors and consumer preferences. |
Our business is subject to complex and evolving foreign laws and regulations where we sell our products; these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or declines in sales.
We are subject to a variety of foreign laws and regulations in the countries where we sell our products, including intellectual property, competition, consumer protection, product safety, and social benefits. Furthermore, the introduction of new products in our existing markets and the expansion of our business to other countries may subject us to additional laws and regulations, among others resulting from the need to obtain additional licenses and approvals to conduct our businesses as envisioned. In addition, the application or interpretation of these laws and regulations is not clear in some jurisdictions, which could make compliance more costly. Moreover, if third parties we work with, such as our suppliers and other business partners, violate applicable laws or our policies, such violations may result in joint or secondary liability for us.
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The Company’s business will suffer if the Company fails to develop and successfully introduce new and enhanced products that meet the changing needs of the Company’s customers.
The interconnect product industry is developing rapidly, and related technology trends are constantly evolving. This results in the frequent introduction of new products and services, relatively short product design cycles and significant price competition. Consequently, our future success depends on our ability to anticipate technology development trends and identify, develop and commercialize in a timely and cost-effective manner. Our new and advanced products must also meet our customers’ evolving demand over time. Moreover, it may take an extended period of time for our new products to gain market acceptance, if at all. New product development often requires long-term forecasting of market trends, development and implementation of new designs and processes and a substantial capital commitment. Any failure by the Company to anticipate or respond in a cost-effective and timely manner to technological developments or changes in industry standards or customer requirements, or any significant delays in product development or introduction or any failure of new products to be widely accepted by the Company’s customers, could have a material adverse effect on the Company’s business, operating results and financial condition as a result of reduced net sales.
Our business may be adversely impacted by product defects.
Product defects can occur throughout the product development, design and manufacturing processes or as a result of our reliance on third parties for components, raw materials, and manufacturing. Any product defects or any other failure of our products or substandard product quality could harm our reputation and result in adverse publicity, lost revenues, delivery delays, product recalls, relationships with our customers and other business partners, product liability claims, administrative penalties, harm to our brand and reputation, and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects. Historically, our defect rate was close to 0%, and our warranty cost for each of fiscal years ended March 31, 2025, 2024, and 2023 was $0, due to the implementation of strict quality control procedures. However, there is no guarantee that our defect rate will remain low or that we will not incur any warranty costs in the future.
If we fail to maintain an effective quality control system, our business could be materially and adversely affected.
We place great emphasis on product quality and adhere to stringent quality control measures and have obtained quality control certifications for our products. To meet our customers’ requirements and expectations for the quality and safety of our products, we have adopted a stringent quality control system to ensure that every step of the production process is strictly monitored and managed. Failure to maintain an effective quality control system or to obtain or renew our quality standards certifications may result in a decrease in demand for our products or cancellation or loss of purchase orders from our customers, or our reputation could be impaired. As a result, our business and results of operations could be materially and adversely affected.
We rely on third-party logistics service providers to deliver our products. Disruption in logistics may prevent us from meeting customer demand and our business, results of operations and financial condition may suffer as a result.
We engage third-party logistics service providers to deliver our products from our warehouses to our customers. Disputes with or termination of our contractual relationships with one or more of our logistics service providers could result in delayed delivery of products or increased costs. There can be no assurance that we can continue or extend relationships with our current logistics service providers on terms acceptable to us, or that we will be able to establish relationships with new logistics service providers to ensure accurate, timely and cost-efficient delivery services. If we are unable to maintain or develop good relationships with our preferred logistics service providers, it may inhibit our ability to offer products in sufficient quantities, on a timely basis, or at prices acceptable to our consumers. If there is any breakdown in our relationships with our preferred logistics service providers, we cannot assure you that no interruptions in our product delivery will occur or that they would not materially and adversely affect our business, prospects and results of operations.
As we do not have any direct control over these logistics service providers, we cannot guarantee their quality of service. In addition, services provided by these logistics service providers could be interrupted by unforeseen events beyond our control, such as poor handling provided by these logistics service providers, natural disasters, pandemics, adverse weather conditions, riots and labor strikes. If there is any delay in delivery, damage to products or any other issue, we may lose customers and sales and our brand image may be tarnished.
Our production facility may be unable to maintain efficiency, encounter problems in ramping up production or otherwise have difficulty meeting our production requirements.
Our future growth will depend upon our ability to maintain efficient operations at our existing production facility and our ability to expand our production capacity as needed. The average utilization rate of our production lines was 60.8%, 51.3%, and 79.8% for fiscal years ended March 31, 2025, 2024, and 2023, respectively. The utilization rate of our production facility depends primarily on the demand for our products and the availability and maintenance of our machinery and equipment but may also be affected by other factors, such as the availability of employees, seasonal factors and changes in environmental laws and regulations. In order to meet our customers’ demands and advancements in technology, we maintain and upgrade our equipment periodically. If we are unable to maintain our production facilities’ efficiency, we may be unable to fulfill our purchase orders in a timely manner, or at all. This would negatively impact our reputation, business and results of operations.
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If CCSC Interconnect DG were to lose its accreditation as a National High and New-Technology Enterprise in China, we could face higher tax rates than we currently pay for much of our revenues.
CCSC Interconnect DG has been approved as a High and New-Technology Enterprise (“HNTE”) since 2016. The HNTE status is valid for three (3) years and entitles CCSC Interconnect DG to a favorable income tax rate of 15% rather than the unified rate of 25%. The HNTE accreditation may be renewed every three years, and, as of the date of this annual report, we are in the process of renewing the HNTE accreditation for years 2025 - 2027. For the fiscal years ended March 31, 2025, 2024, and 2023, the taxes payable by CCSC Interconnect DG would have increased by nil, nil, and $209,381, respectively, if CCSC Interconnect DG were not a certified HNTE. In the event we were to lose the benefit of the favorable tax rate in the future, we could see significant increases in the amount of taxes we pay, meaning that our operating results could be materially harmed, even in the absence of a decrease in our operations.
We may incorporate AI technologies into our manufacturing process in the future, which may present operational and reputational risks.
On May 22, 2024, we entered into a strategic cooperation framework agreement (the “Agreement”) with Innogetic International Limited (“Innogetic”), a Hong Kong-based company. Going forward, we aim to explore and apply digital technology such as artificial intelligence (“AI”) in manufacturing to further advancements in our business.
As of the date of this annual report, we have not incorporated AI technologies into any of our business operations, nor have we implemented detailed plans for such incorporation. However, we may determine to integrate AI technologies into our future operations.
There are significant risks associated with utilizing AI technology. Given the short time that has elapsed since AI became commercially viable and the rapid pace of change in the AI space, we may experience any number of difficulties in using AI technology. Additionally, there are significant risks involved in utilizing AI and there can be no assurance that the usage of AI will enhance our products or services, or be beneficial to our business, including our efficiency or profitability.
AI can also present ethical issues and may subject us to new or heightened legal, regulatory, ethical, or other challenges. Inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI, could impair the acceptance of AI solutions. If the AI tools that we use in the future happen to be deficient, inaccurate, or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results.
Utilizing AI may expose us to additional intellectual property, cybersecurity, operational, and technological risks, as the technologies underlying AI and its use are subject to a variety of laws, including intellectual property, privacy, and consumer protection. Further, AI is the subject of evolving review by various U.S. governmental and regulatory agencies, and other foreign jurisdictions we operate in. For example, in the United States, President Biden issued the Executive Order on Safe, Secure and Trustworthy Artificial Intelligence in October 2023 (the “Executive Order”), with the goal of promoting the “safe, secure, and trustworthy development and use of artificial intelligence in the United States.” The Executive Order has established certain new standards for the training, testing and cybersecurity of sophisticated AI models. It has also instructed other federal agencies to promulgate additional regulations within certain time frames from the date of the Executive Order. Federal artificial intelligence legislation has also been introduced in the U.S. Senate. Since regulation of AI is rapidly evolving worldwide and legislators and regulators are increasingly focused on these powerful emerging technologies, we may become subject to new laws and regulations, which may affect the legality, profitability, or sustainability of our businesses, and we may be unable to predict all the legal, operational, or technological risks that may arise relating to the use of AI. Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory action, or brand and reputational harm.
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We may incorporate open-source AI technology into our business operations, and if we do, our future use of open-source AI technology may negatively affect our business, results of operations, financial condition, and prospects.
As of the date of this annual report, we have not implemented any detailed plans to incorporate AI technology into our business operations. Therefore, we cannot assure you that we will not use open-source AI technology in the future.
If we decide to use open-source AI technology in our future operations, it may expose us to various risks. Relying on contributions from external developers to maintain and update these technologies introduces uncertainty about their availability and development timeline. Any discontinuation or delay in updates could force us to seek alternative solutions, increasing our costs and potentially disrupting our operations. Additionally, complying with the complex landscape of open-source licenses is challenging. Failure to comply could result in significant legal penalties or require us to release proprietary information, undermining our competitive advantage.
Additionally, open-source AI technologies may also pose security and reliability concerns, as they are more susceptible to exploitation due to their public nature, which could potentially lead to unauthorized disclosure of sensitive data, including proprietary customer information. Security vulnerabilities or bugs could result in reputational harm, loss of customer trust, and financial damage. Open-source software may not always align with regulatory requirements in different jurisdictions, potentially exposing us to legal and compliance risks. Ensuring that the use of open-source AI technology complies with applicable laws and regulations adds complexity and could incur additional costs. Furthermore, we may face the risk of intellectual property infringement claims, which could lead to costly legal battles and operational disruptions. The inherent lack of control over these external technologies and their development could limit our ability to customize solutions and promptly respond to market demands, impacting our innovation capabilities and market position.
Risks Relating to Our Class A Ordinary Shares
Since Dr. Chi Sing Chiu, the chairman of the board of directors of the Company, through his equity interest in the CCSC Investment Limited (as the largest shareholder of the Company), has the voting power of at least 50% of our Class A Ordinary Shares, he has the ability to elect directors and approve matters requiring shareholder approval by way of resolution of members.
Dr. Chi Sing Chiu, the chairman of the board of directors of the Company, is also a controlling shareholder of the Company, currently owns approximately 98.72% of our total voting power, through his 69.20% of equity interest in the CCSC Investment Limited, the largest shareholder of the Company. As such, he has sufficient voting power to pass ordinary resolutions of the shareholders without the votes of any other shareholders pursuant to our second amended and restated memorandum and articles of association (“New M&A”), including an ordinary resolution to elect all directors. This could permit Dr. Chi Sing Chiu to have significant influence over a decision to enter into any corporate transaction and have the ability to prevent any transaction that requires the approval of shareholders, regardless of whether or not our other shareholders believe that such transaction is in our best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our Class A Ordinary Shares or prevent our shareholders from realizing a premium over the then-prevailing market price for their Class A Ordinary Shares.
If we fail to implement and maintain an effective system of internal controls or fail to remediate the material weaknesses in our internal control over financial reporting that have been identified, we may fail to meet our reporting obligations or be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our Class A Ordinary Shares may be materially and adversely affected.
Prior to our IPO, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the fiscal year ended March 31, 2025, we and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting, as defined in the standards established by the PCAOB, and other control deficiencies. The material weaknesses identified included a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements. Following the identification of the material weaknesses and control deficiencies, we plan to continue to take remedial measures, including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel and (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control. However, the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting. Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our Class A Ordinary Shares, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.
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We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to file a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain as an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. The presence of material weaknesses in internal control over financial reporting could result in financial statement errors which, in turn, could lead to errors in our financial reports and/or delays in our financial reporting, which could require us to restate our operating results. We might not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.
If we are unable to conclude that we have effective internal controls over financial reporting, investors may lose confidence in our operating results, the price of the Class A Ordinary Shares could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, the Class A Ordinary Shares may not be able to remain listed on the Nasdaq Capital Market.
As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.
As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual general meetings will be governed by Cayman Islands’ requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our Class A Ordinary Shares.
As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, which may limit the information publicly available to our investors and afford them less protection than if we were an U.S. issuer.
As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq Stock Market listing rules that allow us to follow Cayman Islands law for certain governance matters. Certain corporate governance practices in the Cayman Islands may differ significantly from corporate governance listing standards as, except for general fiduciary duties and duties of care, Cayman Islands law has no corporate governance regime which prescribes specific corporate governance standards. The Cayman Islands law does not require a majority of our board to consist of independent directors. Since a majority of our board of directors may not consist of independent directors, fewer board members may be exercising independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, the Nasdaq Stock Market listing rules also require U.S. domestic issuers to have a compensation committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. The Nasdaq Stock Market listing rules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote on all equity compensation plans and material revisions to those plans, and certain ordinary share issuances. We intend to comply with the requirements of Nasdaq Listing Rules in determining whether shareholder approval is required on such matters and to appoint a nominating and corporate governance committee. However, we are permitted to, and we may choose to follow, home country practice in lieu of the requirements under the Nasdaq Stock Market listing rules with respect to certain corporate governance standards which may afford less protection to investors. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.
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As a foreign private issuer, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. We are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
| ● | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; |
| ● | 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 selective disclosure rules by issuers of material non-public information under Regulation FD. |
We are required to file an annual report on Form 20-F within four (4) months of the end of each fiscal year. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination with respect to our status will be made on September 30, 2025. We would lose our foreign private issuer status if, for example, more than 50% of our Class A Ordinary Shares are directly or indirectly held by residents of the U.S. and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on September 30, 2025, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq Stock Market listing rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.
We do not intend to pay dividends for the foreseeable future.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Class A Ordinary Shares if we are successfully listed and the market price of our Class A Ordinary Shares increases.
Shares eligible for future sale may adversely affect the market price of our Class A Ordinary Shares, as the future sale of a substantial amount of outstanding Class A Ordinary Shares in the public marketplace could reduce the price of our Class A Ordinary Shares.
The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our Class A Ordinary Shares.
In connection with the closing of our IPO, all of our officers and directors and shareholders who then owned five (5%) percent or more of our issued and outstanding shares agreed not to sell our ordinary shares for a period of six (6) months from January 22, 2024. The ordinary shares that were subject to these lock-up agreements became eligible for sale in the public market upon expiration of these lock-up agreements on July 22, 2024, subject to limitations imposed by Rule 144 under the Securities Act of 1933, as amended. As of the date of this annual report, an aggregate of 6,581,250 Class A Ordinary Shares and 5,000,000 Class B Ordinary Shares are outstanding. All of our Class A Ordinary Shares sold in our initial public offering that closed on January 22, 2024 (“IPO”) are freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act. Commencing on July 23, 2024, all remaining outstanding shares may also be sold in the public market, subject to the restrictions in Rule 144 and Rule 701 under the Securities Act.
If our shareholders sell substantial amounts of our Class A Ordinary Shares in the public market, the market price of our Class A Ordinary Shares could fall. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short our Class A Ordinary Shares. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
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We may experience extreme stock price volatility unrelated 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 Class A Ordinary Shares.
There have been recent instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with a number of recent initial public offerings, especially among companies with relatively smaller public floats. As a relatively small-capitalization company with a relatively small public float, we may experience greater share price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Class A 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 share run-up, may be unrelated 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 Class A Ordinary Shares. In addition, investors of our Class A Ordinary Shares may experience losses, which may be material, if the price of our Class A Ordinary Shares declines or if such investors purchase Class A Ordinary Shares prior to any price decline.
The laws of the Cayman Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.
Our corporate affairs are governed by our New M&A, by the Companies Act (As Revised) of the Cayman Islands and by the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Decisions of the Privy Council (which is the final Court of Appeal for British Overseas Territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
Because we are a Cayman Islands company and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain, and the U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.
We are incorporated in the Cayman Islands and conduct our operations primarily in China. Substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers reside outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe we have violated your rights, either under United States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may not permit you to enforce a judgment against our assets or the assets of our directors and officers.
The SEC, the U.S. Department of Justice and other U.S. authorities may also have difficulties in bringing and enforcing actions against us or our directors or executive officers in the PRC. The SEC has stated that there are significant legal and other obstacles to obtaining information needed for investigations or litigation in China. China has recently adopted a revised securities law, and Article 177 of which provides, among other things, that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without governmental approval in China, no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators, which could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted in China.
You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.
The Cayman Companies Act does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting. These rights, however, may be provided in a company’s articles of association. Our New M&A allow one or more of our shareholders which, at the date of the deposit of the requisition, carry in aggregate not less than one-third of all votes attaching to all issued and outstanding shares of our company that, as at the date of the deposit of the requisition, carry the right to vote at general meetings to requisition an extraordinary general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least seven calendar days is required for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third of the total issued shares carrying the right to vote at a general meeting of the Company.
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General Risk Factors
We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected.
We must attract, recruit and retain a sizeable workforce of technically competent employees. Competition for management and personnel in the PRC and Hong Kong is intense and the pool of qualified candidates in the PRC is limited. We may not be able to retain the services of our executives or personnel, or attract and retain high-quality senior executives or personnel in the future. This failure could materially and adversely affect our future growth and financial condition.
Our success depends on our ability to increase awareness of our brands and develop customer loyalty.
Our brands are integral to our sales and marketing efforts. We believe that maintaining and enhancing our brand name recognition in a cost-effective manner is critical to achieving widespread acceptance of our current and future products and is an important element in our effort to increase our customer base. Successful promotion of our brand names will depend largely on our marketing efforts and ability to provide reliable and quality products at competitive prices. Brand promotion activities may not necessarily yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur in marketing activities. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract new customers or retain our existing customers, in which case our business, operating results and financial condition, would be materially adversely affected.
We require various approvals, licenses, permits and certifications to operate our business. If we fail to obtain or renew any of these approvals, licenses, permits or certifications, it could materially and adversely affect our business and results of operations.
In accordance with the laws and regulations in the jurisdictions in which we operate, we are required to maintain various approvals, licenses, permits and certifications in order to operate our business or engage in the business we plan to enter into. Complying with such laws and regulations may require substantial expenses, any non-compliance may expose us to liability. In the event of that government authorities consider us to be in non-compliance, we may have to incur significant expenses and divert substantial management time to rectify the incidents. If we fail to obtain all the necessary approvals, licenses, permits and certifications, we may be subject to fines or the suspension of operations of the facilities that do not have the requisite approvals, licenses, permits or certifications, which would adversely affect our reputation, business and results of operations. See “Regulation” for further details on the requisite approvals license permits and certifications.
Our stock price may be volatile, which could result in substantial losses to investors.
From the closing of our IPO on January 22, 2024 to the date of this annual report, the trading price of our shares has ranged from $1.04 to $21.19 per ordinary share. The trading price of our Class A Ordinary Shares could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our Class A Ordinary Shares, you could lose a substantial part or all of your investment in our Class A Ordinary Shares. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations overseas that have listed their securities in the United States. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in their trading prices. The trading performances of other companies’ securities after their offerings may affect the attitudes of investors toward companies listed in the United States in general and consequently may impact the trading performance of our Class A Ordinary Shares, regardless of our actual operating performance.
In addition to market and industry factors, the price and trading volume for our Class A Ordinary Shares may be highly volatile for factors specific to our own operations, including the following:
| ● | our operating and financial performance; |
| ● | quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues; |
| ● | the public reaction to our press releases, our other public announcements and our filings with the SEC; |
| ● | strategic actions by our competitors; |
| ● | changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; |
| ● | speculation in the press or investment community; |
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| ● | the failure of research analysts to cover our Class A Ordinary Shares; |
| ● | sales of our Class A Ordinary Shares by us or other shareholders, or the perception that such sales may occur; |
| ● | changes in accounting principles, policies, guidance, interpretations or standards; |
| ● | additions or departures of key management personnel; |
| ● | actions by our shareholders; |
| ● | domestic and international economic, legal and regulatory factors unrelated to our performance; and |
| ● | the realization of any risks described under this “Item 3. Key Information-D. Risk Factors” section. |
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Class A Ordinary Shares. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results and financial condition.
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
In April 2012, President Obama signed into law the JOBS Act. We are classified as an “emerging growth company” under the JOBS Act. For as long as we are an emerging growth company, which may be up to five (5) full fiscal years, unlike other public companies, we will not be required to, among other things, (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act: (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer: (iii) provide certain disclosure regarding executive compensation required of larger public companies: or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company for up to five (5) years, although we will lose that status sooner if we have more than $1.235 billion of revenues in a fiscal year, have more than $700 million in market value of our Class A Ordinary Shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.
To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find our Class A Ordinary Shares to be less attractive as a result, there may be a less active trading market for our Class A Ordinary Shares and our stock price may be more volatile.
The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we will be subject to the reporting requirements of the Exchange Act, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal, accounting, and financial compliance costs and investor relations and public relations costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results as well as proxy statements.
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As a result of disclosure of information in this annual report and in future filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.
We are a public company in the United States. As a public company, we are required to file periodic reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our Company and shareholders. Although we may be able to attain confidential treatment of some of our developments, in some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our Company. Similarly, as a U.S. public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public company status could affect our results of operations.
Risks Related to Our Capital Structure
Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A Ordinary Shares may view as beneficial.
We have adopted a dual class share structure such that our Ordinary Shares consist of Class A Ordinary Shares and Class B Ordinary Shares. In respect of matters requiring the votes of shareholders, each Class A Ordinary Share is entitled to one (1) vote and each Class B Ordinary Share is entitled to fifty (50) votes. Each Class B Ordinary Share is convertible into one Class A Ordinary share at any time by the holder thereof. Our Class A Ordinary Shares are not convertible into our Class B Ordinary Shares under any circumstances.
Only our Class A Ordinary Shares are tradable on the market. This voting structure may discourage investors from pursuing any change of control transactions that holders of our Class A Ordinary Shares may view as beneficial.
Our dual class share structure with different voting rights may adversely affect the value and liquidity of the Class A Ordinary Shares.
We cannot predict whether our dual class share structure with different voting rights will result in a lower or more volatile market price of the Class A Ordinary Shares, in adverse publicity, or other adverse consequences. Certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indices. Because of our dual class structure, we will likely be excluded from these indices and other stock indices that take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make the Class A Ordinary Shares less attractive to investors. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structure and our dual class structure may cause shareholder advisory firms to publish negative commentary about our corporate governance, in which case the market price and liquidity of the Class A Ordinary Shares could be adversely affected.
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Item 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Our Corporate History
On October 19, 2021, CCSC Cayman, or the Company, was incorporated in the Cayman Islands under the Cayman Islands Companies Act.
On October 19, 2021, the Company’s wholly-owned subsidiary, CCSC Group, was established as an investment holding company with limited liability under the laws of the British Virgin Islands (“BVI”).
On December 31, 1992, CCSC Group incorporated its wholly-owned subsidiaries, CCSC Technology Group Limited (“CCSC Technology Group”), in Hong Kong, China. CCSC Technology Group was originally named “Leoco (H.K.) Limited”, and changed its name to the current one on December 5, 2019.
CCSC Group holds a wholly-owned subsidiaries in Serbia known as CCSC Technology Doo Beogradas (“CCSC Technology Serbia”), which was incorporated on February 27, 2024 in Serbia.
CCSC Technology Group has three wholly-owned subsidiaries in Hong Kong, mainland China, and the Netherlands as follows:
| ● | CCSC Interconnect DG, or Dongguan CCSC Interconnect Electronic Technology Limited, a company incorporated on June 28, 1993 in Dongguan, China; |
| ● | CCSC Interconnect HK, or CCSC Interconnect Technology Limited, a company incorporated on July 3, 2007 in Hong Kong, China; and |
| ● | CCSC Interconnect NL, or CCSC Interconnect Technology Europe B.V. a company incorporated on March 14, 2016 in the Netherlands. |
Prior to the reorganization described below, CCSC Technology Group was controlled by several individual shareholders. A reorganization of the Company’s structure was completed on March 17, 2022. The reorganization involved the incorporation of the Company and CCSC Group and the transfer of the 100% shareholding interest of CCSC Technology Group from its individual shareholders to CCSC Group. As the result of the reorganization, CCSC Cayman became the ultimate holding company of CCSC Group, CCSC Technology Group and its subsidiaries.
IPO in January 2024
The Class A Ordinary Shares of the Company commenced trading under the symbol “CCTG” on the Nasdaq Capital Market on January 18, 2024. On January 22, 2024, the Company closed its IPO of 1,375,000 ordinary shares pursuant to certain registration statements on Form F-1 (File Nos.333-270741 and 333-276545). Revere Securities, LLC and R.F. Lafferty & Co., Inc. were the underwriters of the Company’s IPO. On February 8, 2024, the underwriters exercised their over-allotment option in full to purchase an additional 206,250 ordinary shares at the public offering price of US$4.00 per share. The closing for the sale of the over-allotment shares took place on February 8, 2024.
Variation of Share Capital in September 2024
The 2024 annual general meeting of shareholders (the “AGM”) of the Company was held on September 10, 2024. At the AGM, the shareholders of the Company adopted resolutions with respect to the variation of share capital for the following:
| 1. | Increase of Authorized Share Capital. The authorized share capital of the Company was increased from US$50,000 divided into 100,000,000 ordinary shares of a par value of US$0.0005 each to US$250,000 divided into 500,000,000 ordinary shares of a par value of US$0.0005 each, by the creation of 400,000,000 additional ordinary shares of a par value of US$0.0005 each; and |
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| 2. | Implementation of Dual-Class Share Structure |
| a. | 5,000,000 ordinary shares of a par value of US$0.0005 held by CCSC Investment Limited were re-designated and reclassified as 5,000,000 Class B Ordinary Shares of a par value of US$0.0005 each, carrying the rights, preferences and privileges as set forth in the New M&A; and |
| b. | The remaining 495,000,000 issued and unissued ordinary shares of a par value of US$0.0005 each were re-designated and reclassified as Class A Ordinary Shares of a par value of US$0.0005 each, carrying the rights, preferences and privileges as set forth in the New M&A. |
As of the date of this annual report, an aggregate of 6,581,250 Class A Ordinary Shares and 5,000,000 Class B Ordinary Shares are issued and outstanding.
Corporate Information
Our principal executive offices are located at 1301-03, 13/f Shatin Galleria, 18-24 Shan Mei St, Fotan, Shatin, Hong Kong. Our telephone number at this address is 00852-26870272. Our registered office in the Cayman Islands is located at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, and the phone number of our registered office is +1 345 949 8066. Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our corporate website is http://www.ccsc-interconnect.com. The information contained on our websites is not a part of our annual report. Our agent for service of process in the United States, Cogency Global Inc., is located at 122 East 42nd Street, 18th Floor, New York, New York 10168.
The SEC maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.
For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Capital Expenditures.”
B. Business Overview
Overview
We are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of its own, we conduct our operations through operating direct wholly-owned subsidiaries established in Hong Kong, mainland China, the Netherlands, and Serbia primarily in the sale, design and manufacturing of interconnect products, including connectors, cables and wire harnesses. As of the date of this annual report, we have a diversified global customer base located in more than 25 countries throughout Asia, Europe and the Americas.
Interconnect products are essential components that form physical or logical connections between two electronic devices or networks. We specialize in customized interconnect products, including connectors, cables and harnesses that are used for a range of applications in a diversified set of industries, including industrial, automotive, robotics, medical equipment, computer, network and telecommunication, and consumer products.
We produce both OEM and ODM interconnect products for manufacturing companies that produce end products, as well as EMS companies, who procure and assemble products on behalf of such companies. OEM products refer to products we manufacture based on design and specifications provided by customers, while ODM products refer to those products that we design, develop and manufacture based on the specifications provided by customers. For the fiscal years ended March 31, 2025, 2024, and 2023, almost all, or more than 99% of our sales were attributed to manufacturing companies and EMSs, while the remaining sales were attributed to dealers who resell interconnect products. Many of our customers are global name-brand manufacturers, such as Linak, Danfoss, Bitzer, Maersk, Universal Robots, Philips, Osram, Flextronics, Harman and Vtech, with whom we have established long-term working relationships.
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We work closely with our customers in developing products and providing solutions that meet their specific requirements for the end applications, and believe that our focus on customers’ needs has contributed to our steady growth in the last two decades. We strive to achieve high customer satisfaction by (1) providing value-added services such as our “design for manufacturing” (“DFM”) analysis, through which we routinely analyze product design and specifications based on end application requirements to ensure final products achieve optimal results for customers, and (2) providing prompt and effective responses to customer inquiries and requests by utilizing our in-house management information system, which is designed to store, track and analyze data collected from various operational units, including sales, procurement, production, quality control, and engineering. Additionally, in order to better service our growing customer base in Europe, in 2016, we established our Netherlands subsidiary, CCSC Interconnect NL, which has since served as our Europe logistics and service hub.
We seek to deliver quality products at competitive prices through a vertically integrated production process. CCSC Interconnect DG, our PRC subsidiary, is our manufacturing and product development hub. CCSC Interconnect DG leases a facility in Dongguan, Guangdong Province, where more than 250 employees carry out design and development, engineering, manufacturing and assembly, and quality control of our products. While we strive to achieve efficiency and low costs by standardizing and optimizing certain processes across the production cycle, we understand the importance of maintaining the quality of our products. Our team of more than 20 quality assurance specialists strictly enforce our quality control protocols at every step of the production process.
Our product research and development capabilities have been a cornerstone of our success. Our engineering team that is responsible for product research and development currently has 20 employees, many of whom are experienced mechanical and electrical engineers. We hold the rights to 71 patents registered with the PRC intellectual property agency and CCSC Interconnect DG has been certified as a HNTE since 2016. CCSC Interconnect DG renewed its HNTE certificate in 2022, and can enjoy a preferred income tax rate of 15% by the year end of 2024. CCSC Interconnect DG is currently renewing its HNTE accreditation for years of 2025-2027. In July 2023, CCSC Interconnect DG was selected by the Ministry of Industry and Information Technology (MIIT) of China as a “Specialized Refinement Differential Innovation Little Giant Enterprise”, a recognition given to small and medium-sized enterprises that specialize in niche sectors and boast strong innovative capability. We intend to continually invest in our engineering team and further enhance our research and development capabilities.
We are led by a management team with extensive experience in research and development, manufacturing and commercialization of interconnect products. We believe our management team is well positioned to lead us through the development and commercialization of new products, while maintaining and improving the market position of our existing products. Our revenue was $17,631,489, $14,748,551, and $24,059,556, for the fiscal years ended March 31, 2025, 2024, and 2023, respectively. Our net loss was $1,410,465 and $1,295,163, and net income was $2,208,152, for the fiscal years ended March 31, 2025, 2024, and 2023, respectively.
Competitive Strength
We believe that the following strengths enable us to capture business opportunities and differentiate us from our competitors:
Established long-term relationships with customers and key suppliers
We have established long-term business relationships, which often date back more than ten years, with many of our key customers who are global brand name manufacturers and EMSs in a number of industries. For each of our key customers, we also typically supply a wide range of products. Such relationships help solidify our status as the preferred core supplier for these customers and have offered opportunities for us to identify general trends in these industries in order to understand the long-term business needs of our customers. We have also strived to maintain long term business relationships with our key suppliers to ensure reliable supply of key components and raw materials.
High standard and commitment to quality control
We believe strong quality control enhances product value, which results in satisfied and loyal customers. To that end, we set stringent production and quality control protocols designed to ensure that our products meet or often exceed relevant industry standards and customer requirements. We have a quality control team of more than 29 employees, who carry out day-to-day quality control functions at each stage of our production process, from raw material selection, product design and development, to manufacturing and testing. Additionally, we impose stringent standards on the selection of our suppliers and subcontractors to ensure the quality of our products. In a continuous effort to meet various international production and quality manufacturing standards, we have been certified by the International Organization for Standardization (the “ISO”), specifically as to the following: ISO 9001 (quality management), 14001 (environment management), 45001 (occupational health and safety), and 13485 (medical devices quality management). In addition, we have also been certified to the IATF 16949, which is a technical specification for quality management systems in the automotive sector established by the International Automotive Task Force. In June 2023, our HK subsidiary, CCSC Interconnect HK was certified to the Sustainable Development Goals (“SDG”) Certificate, which aligns with the “SDG 12: Responsible Consumption and Production” under United Nations Development Program.
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Strong focus on customers’ needs and value-added services
We design and manufacture products from the perspective of our customers in terms of raw material selection, functional and structural specifications, and technical requirements. Many of our products are customized and made-to-order in accordance with such specifications based on their end applications by end users. Our engineering team has built a solid reputation with our customers by providing value-added services such as our “DFM” analysis, partnering with customers every step of the way, from the initial concept and design to the prototype and final production. To provide prompt and effective responses to customer requests and inquiries, we use an in-house management information system to store, track and analyze each customer’s information collected from various operational units, including sales, production, quality control, engineering, and research and development. All of the above have empowered us to develop a deep understanding of the specific needs of each of our customers and deliver products and solutions that meet or exceed the expectations of our customers.
Vertically integrated production
We conduct in house all phases of our production process, including product design and development, engineering, manufacturing and assembly, creating a vertically integrated process that contributes to attractive financial characteristics. Based on our historical results of operations, we estimate that approximately 90% of our costs are comprised of direct materials and labor costs, which are flexible and variable by nature. Through our vertically integrated production, we can benefit by rapidly implementing design changes, control the quality of production, ensure timely delivery of products, purchase raw materials directly from suppliers to avoid charges by middlemen, and easily allow our key customers to audit our corporate practices and product quality, all of which have led to demonstrable customer satisfaction and loyalty.
Experienced management team and dedicated workforce
Our management team, led by our executive directors and senior management, possesses a demonstrated track record of managing and growing our business for the past twenty years. All members of our senior management have extensive experience, ranging from ten to thirty years, in the development, manufacturing, and commercialization of interconnect products. Our workforce is highly skilled in their specialized lines of business. We selectively recruit qualified employees, and provide continuous professional development training for our staff. We have some of the most dedicated employees. Approximately 63% of our employees have been with us for more than 5 years, and approximately 35% for more than ten years.
Growth Strategies
We plan to pursue the following strategies to further grow and expand our business:
Upgrade facility and management system to enhance operational efficiency and increase production capacity
While we continually grow and expand our business, we believe it is important to enhance operational efficiency to achieve further cost-savings, as well as expand production capacity to meet the additional demand for our products. To that end, we intend to (1) increase the level of automation of our production process, primarily through the upgrade and replacement of existing semi-automatic and manual machinery to fully-automated machinery, to reduce production costs and increase output, and (2) upgrade and optimize our management information system and other applications that integrate our system with those of our customers and suppliers, to improve operational efficiency and reduce administrative costs.
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Expand new customer base and increase product offering to existing customers
We are preferred vendors of many global brand-name manufactures and have established long-term working relationships with our key customers. Leveraging on such relationships and our in-depth industry knowledge, we intend to further expand our business with our existing customers through promotions and offering new and improved products. We also intend to expand our customer base by closely monitoring and studying industry trends, assessing the needs of potential customers, and aggressively seizing opportunities to promote and present our products and services to them. In addition, to attract, support and develop business with potential customers, we have and may set up additional regional sales offices or may cooperate with regional logistics/warehouse service providers in different regions where such potential customers are located. For example, in 2016, we established our regional office in the Netherlands to better serve our growing customer base in Europe. Furthermore, we launched a plan in May 2024 to establish a new supply chain management center in Serbia, Central Europe. This center will serve as the headquarters of our supply chain operations in Europe to support our operations across the region.
Accelerate our sales and marketing efforts
We intend to further strengthen our sales and marketing efforts through marketing campaigns and participation in trade shows and industrial exhibitions, as well as other promotional events, to improve our sales performance. We have and will continue to attend the Electronica trade fair for the electronics industry held once in every two years in Munich, Germany, which event is attended by many of our existing and potential customers. Additionally, we plan to participate in other industrial exhibitions, including those to be held in the PRC, such as the CMEF China Medical Equipment Fair and Shanghai International Medical Devices Exhibition for the medical and healthcare industry, China Robot Show and Shenzhen International Industrial Automation and Robot Exhibition for the robotics industry. Further, we plan to recruit more experienced sales and marketing executives and staff to accelerate our sales and marketing efforts and grow our business.
Continue to invest in research and development and cultivate engineering talents
Our product research and development capability has always been a cornerstone of our past success, and we plan to continually invest in our engineering team to strengthen our research and development capability. We highly value the skills and talents of our engineering team and have been actively recruiting talented engineers to join our team. To that end, we maintain collaborative relationships with relevant universities and colleges and recruit qualified graduates to meet the needs of our team. We also cultivate our engineer talents by providing vocational training and mentoring, as well as long-term career development plans.
Pursue expansion through strategic acquisitions and collaboration
We are a developing company and believe well executed strategic acquisitions and collaboration help accelerate growth of business and strengthen market position. Accordingly, we intend to seek opportunities for strategic acquisitions of high potential companies with strong management teams that complement our existing business, to further expand our product portfolio, technological capabilities and geographic presence. Where applicable, we may also pursue other growth strategies, such as licensing of third-party technology, joint ventures or other forms of collaboration.
Products
We manufacture a broad portfolio of interconnect products, including connectors, cables and wire harnesses for various end applications in a set of diversified industries, including industrial, medical equipment, computer, network and communication, automotive, robotic, and consumer appliance.
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Connectors
Connectors are electromechanical devices used to join electrical conductors and create electrical circuits. A connector bridges the communication between blocked or isolated electrical circuits so that the current flows and the electrical circuit may achieve its intended function. A typical connector is usually composed of three parts: a plastic body, a plastic shell, and metal terminals. We manufacture standard and customized connectors used in various industries.
The below table illustrates the some of our connector products and their applications.
| Type of connector | Industry | End Application/Products | Description | |||
|
Board to Board
|
Computer, network and communication, consumer appliances, medical | Personal computer and server, telecom switches, video conference equipment; networking equipment (modem, router, switch, network attached storage) | Connect signals between two printed circuit boards (“PCB”) without a cable | |||
|
Wire to Board
|
Industrial, medical equipment, consumer appliances | Power supply, electric actuator for hospital bed, computer mainboard, lighting equipment for architecture lighting and concert lighting, washing machine, coffee machine, television | Connect wires to a printed circuit board (“PCB”) | |||
|
Power
|
Robotic, industrial, automotive | Robot arm, industrial freezer for truck, lighting equipment for architecture lighting and concert lighting, industrial equipment power supply, automotive audio, car seat heating, car headlight | Connect devices to power sources | |||
|
Input Output
|
Industrial, consumer appliance | Computer equipment and peripheral set top box, robotic arms, smart devices and modules | Connect external devices, such as printers, keyboards, and displays to servers. |
Cables and Wire harness
Cables and wire harnesses are devices used to transmit electric or magnetic energy, exchange information, generate electromagnetic energy conversion, and form automated control route. Cables and wire harnesses have similar structures, except that wire harnesses have no outer sheaths and are mainly composed of conductors and insulators. Cables, on the other hand, are mainly composed of conductors, insulators, and additional outer sheathes, which provide extra protections against external elements.
We manufacture varieties of cables and wire harnesses for applications in products in various industries. A number of our cables and wire harnesses are custom designed based on technical requirements for specific applications in different industries. The below table illustrates some of our cable and wire harness products and their applications.
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| Type of cable and wire harness | Industry | End Application | Technical requirements/Specification | |||
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Waterproof cable
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Industrial
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Compressor in refrigerate container, industrial freezer, outdoor lighting cable | Waterproof capability meeting the requirement of the IPX7 industrial standard, which certifies that cables and wire harnesses can be submerged under up to one meter of water for 30 minutes and allows the end products to work safely and properly under harsh environmental conditions (i.e. typhoon with heavy raining). | |||
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Complex cable and wire harness with PCBA |
Industrial, consumer appliance | Lighting equipment (architecture lighting, concert lighting, etc.), industrial catering oven, coffee machine | Complex wire harness & assembly with more than 30 different kinds of electric wires bundled together up to 1,000 contact points. | |||
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Medical cable and wire harness
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Medical equipment | Dental x-ray scanner, disinfectant cabinet | Medical grade materials specifically designed and engineered for medical use that have passed our stringent in house testing procedures to ensure long life cycle. | |||
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Network cable |
Network and communication | Computer server, switch, router | To meet high transmission rate up to 10 Gigabit Ethernet standard with low latency time in order to let our customer product transfer and receive picture, voice, data signal in fast speed and high accuracy | |||
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Robotic cable and wire harness
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Robotic | Robotic arm | High AC voltage (600V, 1000V and 2000V), and high flexibility (our cables and wire harnesses can achieve the bending test at180 degree for 10,000 times or more. |
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Customers
We manufacture and sell a broad portfolio of interconnect products to customers in various industries in more than 25 countries throughout Asia, Europe and the Americas. Many of our customers are global name-brand manufacturers, such as Linak, Danfoss, Bitzer, Maersk, Universal Robots, Philips, Osram, Flextronics, Harman and Vtech, and our relationships with many of our customers date back many years. We believe that our diversified customer base helps reduce our exposure to particular industries or geographic regions, which may lower the risk of market concentration.
Below is a tabular illustration of our sales with respect to our geographic coverage for the fiscal years ended March 31, 2025, 2024, and 2023.
| Fiscal year ended March 31, 2025 | Fiscal year ended March 31, 2024 | Fiscal year ended March 31, 2023 | ||||||||||||||||||||||
| Total Revenue (US$) | % of Total Revenue | Total Revenue (US$) | % of Total Revenue | Total Revenue (US$) | % of Total Revenue | |||||||||||||||||||
| Northern Europe | 8,547,915 | 48.4 | % | 6,402,388 | 43.4 | % | 10,704,148 | 44.6 | % | |||||||||||||||
| Hong Kong | 1,670,446 | 9.5 | % | 1,895,230 | 12.9 | % | 3,073,838 | 12.8 | % | |||||||||||||||
| Mainland China | 1,636,832 | 9.3 | % | 1,372,966 | 9.3 | % | 1,779,668 | 7.4 | % | |||||||||||||||
| North America | 1,299,799 | 7.4 | % | 1,377,541 | 9.3 | % | 1,570,978 | 6.5 | % | |||||||||||||||
| Southern Europe | 1,203,407 | 6.8 | % | 900,786 | 6.1 | % | 913,221 | 3.8 | % | |||||||||||||||
| Eastern Europe | 893,500 | 5.1 | % | 825,249 | 5.6 | % | 2,984,706 | 12.4 | % | |||||||||||||||
| ASEAN | 2,025,688 | 11.5 | % | 1,570,519 | 10.6 | % | 2,557,550 | 10.6 | % | |||||||||||||||
| Western Europe | 347,082 | 2.0 | % | 395,364 | 2.8 | % | 442,363 | 1.8 | % | |||||||||||||||
| Other Asia countries | 3,282 | 0.0 | % | 4,368 | 0.0 | % | 27,235 | 0.1 | % | |||||||||||||||
| Southern America | 3,487 | 0.0 | % | 4,140 | 0.0 | % | 5,849 | 0.0 | % | |||||||||||||||
| Australia | 51 | 0.0 | % | - | - | % | - | - | % | |||||||||||||||
| Total | 17,631,489 | 100.0 | % | 14,748,551 | 100.0 | % | 24,059,556 | 100.0 | % | |||||||||||||||
For more than 20 years, we have strived to offer quality products at competitive prices. Our customer-oriented approach has helped us establish close working relationships with many of our customers. These relationships allow us to better anticipate and respond to customer needs when designing new products and new technical solutions. By working with customers in developing new products and technologies, we are able to identify and act on trends across our portfolio of products. In addition, we continuously invest on service, procurement and manufacturing improvements designed to increase product quality and performance and lower production lead-time and cost. For example, in 2016, in order to better service our growing customer base in Europe, we established CCSC Interconnect NL, our European logistic and service hub. Additionally, we launched a plan in May 2024 to establish a new supply chain management center in Serbia, Central Europe. This center is expected to serve as the headquarters of our supply chain operations in Europe to support our operations across the region.
Our customers include both manufacturing companies and electronic manufacturing services (“EMS”) companies, who procure and assemble products on behalf of manufacturing companies. Additionally, a tiny fraction, or less than 1% of our sales for the fiscal years ended March 31, 2025, 2024, and 2023, was attributed to dealers who resell our products to manufacturing companies. For fiscal year ended March 31, 2025, aggregate sales to three customers accounted for approximately 14.5%, 11.9%, and 10.4% of our total sales. For fiscal year ended March 31, 2024, aggregate sales to two customers accounted for approximately 17.4% and 12.7% each of our total sales. For fiscal year ended March 31, 2023, aggregate sales to three customers accounted for approximately 12.0%, 10.6% and 10.5% each of our total sales, respectively.
Manufacturing
We design, manufacture and assemble our products at our Dongguan factory located in Guangdong province, China. Currently, almost all of our products are manufactured in-house, while a minimal quantity, or less than 1% of our total output, is outsourced to third-party contract manufacturers located in Guangdong, China. We impose stringent standards on quality control, technical and managerial capabilities of our subcontractors to ensure the quality of the final products. The Company’s manufacturing process is vertically-integrated from the initial design stage through final production, and employs the following manufacturing processes: molding, wire cutting, stripping/crimping/termination, assembly (including surface mounting), and soldering.
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Each completed product is tested for functionality with the aid of a test board, such as programmable or universal cable/harness tester, which is pre-programmed with the required electrical characteristics for the specific product. The completed products can be plugged into the test board and tested individually or in multiple numbers. We also test each completed product for resistance and insulation use testing machines.
Our management believes that maintaining objectively verifiable quality standards fosters consumer confidence and loyalty. In a continuous effort to meet various international production and quality manufacturing standards, CCSC Interconnect DG has been certified under the requirements of the ISO, specifically to the ISO 9001, 14001, 45001, and 13485 standards, as well as the IATF 16949. These qualifications demonstrate that high quality manufacturing standards are consistently applied to our production and management processes, and help us gain accesses to international markets.
Engineering and R&D
Our engineering team, led directly by our Chief Executive Officer (“CEO”) and Chief Operation Officer (“COO”), has built a solid reputation with our customers by partnering with them every step of the way from initial concept and design to prototype and final production. As of the date of this annual report, our engineering department has a total of 20 employees with extensive experiences in mechanical and electronic engineering, as well as product design and development. Our engineering team is responsible for research and development of new and improved products and processes, and generally implements its product development strategy through collaborative initiatives with customers, which often result in our obtaining approved vendor status for the customers’ new products.
Prior to the launch of a new product that requires our customized interconnect products, our customer generally provides us with an initial concept or blueprint and we will provide the customer a product development proposal in 1 to 2 months. After the customers accept our proposal, we will start our design and development process including tooling, sampling and testing process. The entire process of our design and development typically takes approximately 9 to 12 months, during which time our engineering team is responsible for the followings:
| ● | performing feasibility studies with budgetary proposals for new projects; |
| ● | creating functional and structural design concepts based on specifications and technical requirements of customers; |
| ● | preparing proposals and related presentations to be reviewed and approved by customers; |
| ● | verifying design concepts and creating prototypes, and refining prototypes if required; |
| ● | defining project milestones and overseeing implementation of each project; and |
| ● | performing engineering validation tests, design validation tests, and production validation tests prior to final production. |
Components, Raw Materials and Suppliers
We procure the following components for the manufacturing of our products: 1) Cable and plastics, including single wire, cable, insulation tube, standard connector, plastic fabricated part; 2) Metal parts, including metal shell, metal terminal, metal fabricated part; and 3) Electronic parts, including printed circuit board, LED, resistor, capacitor, transistor, inductor, thermistor, potentiometer, ferrite core, switch and semiconductor. These components do not require any raw materials that are scarce, and, in general, are readily available from a wide range of local and national sources. Most of our components do not require advanced or proprietary technology that may make it difficult for us to source, although some customers have required us to purchase certain components from their authorized vendors. Although we do not directly procure raw materials, our business depends on a stable supply of such raw materials such as copper, zinc, and aluminum that are required for the manufacture of our components.
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Our components are mainly sourced from suppliers located in the PRC, Hong Kong, Taiwan and Europe. We select our suppliers based on many criteria, including, but not limited to: quality, production site, production process, delivery cycle, and price. As we have a variety of options for supplies, and the technical demand of preparing most of our main supplies are relatively low, we do not anticipate difficulties in obtaining supplies to produce our products. Accordingly, our agreements with our suppliers allow us to purchase our raw materials and components on a per purchase order basis. We have an enterprise resource planning (“ERP”) system that monitors and controls the stock level of components based on customer purchase orders and customer forecasts for the future orders. The prices for these components are nevertheless subject to market forces largely beyond our control, including energy costs, market demand, economy trends, and freight costs, and most importantly, the price of raw materials. The prices these components have fluctuated in the past, and may fluctuate significantly in the future, which could materially and adversely impact our business operations. For details, see “Item 3. Key Information-D. Risk Factors-Risks Related to Our Business-Increases in the price of raw materials could impact our ability to sustain and grow earnings.”
Our quality control system starts from procurement. Before entering into our production flow, the raw materials and components must be certified for quality. We also perform regular factory audits of our suppliers, quality reexaminations and unannounced inspections on raw materials to be used in the mass production flow. We review the performance of our suppliers based on the defective percentage of their supplies, and adjust amounts procured from them accordingly. Our supplier agreements usually contain a quality control clause, under which we may seek remedies against our suppliers, such as damages and rectification, in the event the supplies fall below the quality standards or exceed the minimum defective percentage.
The cost of the components constituted approximately 67.8%, 67.8%, and 74.8% of the total cost of production for the fiscal years ended March 31, 2025, 2024, and 2023, respectively.
For the fiscal year ended March 31, 2025, there was no supplier who accounted for more than 10% of the total purchases. For the fiscal year ended March 31, 2024, there was one supplier who accounted for 12.1% of the total purchases. For the fiscal years ended March 31, 2023, no supplier accounted for more than 10% of our total purchases.
Production Facility
We operate one manufacturing plant in Dongguan, Guangdong province, China, with 189,983 square feet in the aggregate. We have leased the plant since 1999 and renewed the term every 3 years; the current term is from September 2022 to August 2027. We own all of the equipment and machinery such as computerized vertical injection machine, low pressure injection machine, automatic cable cutting & stripping machine, automatic wire printing machine, automatic crimping machine, automatic soldering machine, automatic sealing machine, laser welding machine, laser engrave machine, automatic wire twisting machine, automatic cable winding machine, automatic shrink film packing machine, PCBA de-panel machine at our factory, which were valued at approximately $0.85 million as of March 31, 2025, net of depreciation costs. We focus on best practices in quality control and employee safety. For quality control and testing, we have fatigue testing machines, automatic wire sequence tester, automatic optical inspection machine, automatic cable flexing machine, hi-lo temperature chamber, salt spray tester, UV accelerated weathering tester, tensile tester, pull tester, connector insertion force & reliability tester, gold-plating thickness tester, spectrometer, cable functional & continuity tester, hi-pot tester, spectrophotometer, led color spectrum tester, ipx6 water jetting test chamber, high resolution electronic microscope. We routinely use our in-house information management system to record and track quality control data.
Warranty Policy
We offer general product warranty for durations ranging from 1 to 2 years based on the products and their end applications. For example, we provide 1 year warranty for cables and wire harnesses for robotic arms, and a 2-year warranty for cables and wire harnesses for air ventilators. Since we implement strict quality control procedures, we have not incurred significant warranty costs. Our warranty cost for each of the fiscal years ended March 31, 2025, 2024, and 2023 was $0.
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Sales and Marketing
We believe the best marketing is through: (1) making quality products that consistently meet and exceed customer expectations, and (2) providing excellent customer services to establish long-term relationships with satisfied customers. We have a dedicated sales team with 16 employees working from our Hong Kong and PRC office. We market our products through direct marketing efforts, including running advertising and promotions on our website, sending informational and promotional emails to potential customers, distributing advertisement materials through the mail, as well as benefitting from customer referrals. Additionally, since 2006, we have been attending and successfully recruiting new customers at the Electronica trade fair for the electronics industry held in Munich, Germany. We plan to recruit more qualified sales executives and staff, and attend more exhibitions and trade fairs to promote our products and grow our sales.
Competition
We complete in an industry that is highly competitive and fast-changing with new technologies and evolving market trends. We have competitors that manufacture products similar to ours, and some of these companies may have more assets, resources and a larger market share than ours. However, we believe that our industrial reputation, continuous marketing efforts and effective quality control enable us to compete effectively against our competitors.
Intellectual Property
Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patent, trademark and trade secret laws, as well as confidentiality agreements, to establish and protect our proprietary rights.
CCSC Interconnect DG owns a portfolio of intellectual property, including 71 patents registered with the Chinese intellectual property agency, confidential technical information and technological expertise in manufacturing interconnect products. Of the 71 patents, 9 are invention patents, which were granted to CCSC Interconnect DG in the years between 2013 and 2024, each for a duration of 20 years, commencing from the date of application and the other 62 are utility models, which were granted to CCSC Interconnect DG in the years between 2015 and 2025, each for a duration of 10 years. We do not foresee any material impact on our business when they expire in the future, the earliest of which will be on July 22, 2025.
CCSC Interconnect HK was granted an irrevocable exclusive license to use 13 trademarks by a company held by one of its shareholders for a term of ten years commencing from June 1, 2020. These trademarks are registered with the Trade Marks Registry, Intellectual Property Department of the Government of the Hong Kong Special Administrative Region of the PRC.
We believe that our intellectual property rights, confidentiality procedures and contractual provisions are adequate for our business operations. While we value our intellectual properties and related assets, we do not believe that our market position and competitiveness are heavily dependent on them, or that our operations are dependent upon any single patent or group of related patents to manufacture our products. We review third-party proprietary rights, including patents and patent applications, as available, in an effort to develop effective intellectual property strategies, avoid infringement of third-party proprietary rights, identify licensing opportunities and monitor the intellectual property claims of others. We nevertheless face intellectual property-related risks. For more information on these risks, see “Item 3. Key Information-D. Risk Factors-Risks Related to Our Business-Our success depends on our ability to protect our intellectual property.”
Seasonality
We have not experienced, and do not expect to experience, any seasonal fluctuations in our results of operations for business.
Insurance
We maintain certain insurance policies to safeguard against risks and unexpected events. CCSC Interconnect DG provides social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for its employees. CCSC Interconnect DG also maintains property insurance for fixed assets and inventories. CCSC Interconnect DG is not required to maintain key man insurance, business interruption insurance or product liability insurance under PRC laws and only provides product liability insurance to certain customers on a case by case basis. During the fiscal years ended March 31, 2023, 2024, and 2025 we did not file any material insurance claims in relation to our businesses.
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Employees
We and our subsidiaries had a total of 264, 273, and 304 employees as of March 31, 2025, 2024, and 2023, respectively. As of the date of this annual report, we have 263 employees. The following table sets forth the number of our employees by function as of the date of this annual report:
| Department | Number of Employees | |||
| Management | 4 | |||
| Manufacturing | 138 | |||
| Engineering | 20 | |||
| Quality | 29 | |||
| Sales and marketing | 16 | |||
| Warehouse, production and material control | 21 | |||
| Purchasing | 8 | |||
| Finance | 12 | |||
| Administration, MIS and Human resources | 15 | |||
| Total | 263 | |||
We enter into employment contracts with our full-time employees.
As required by regulations in China, CCSC Interconnect DG participates in various employee social security plans that are organized by municipal and provincial governments for our PRC-based full-time employees, including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. In Hong Kong, CCSC Technology Group and CCSC Interconnect HK participate in a contribution scheme, which is registered under the Mandatory Provident Fund Scheme (the “MPF Scheme”) established pursuant to the Mandatory Provident Fund Schemes Ordinance that took effect in December 2000. For each of Hong Kong’s full-time employees, CCSC Technology Group and CCSC Interconnect HK contributes the lower of HK$1,500 per month or 5% of relevant payroll costs each month to the MPF Scheme. In the Netherlands, the “Algemene Ouderdomswet”, or “AOW”, is a basic state pension insurance scheme, and everyone who lives or works in the Netherlands is insured automatically under the AOW, regardless of his or her nationality. CCSC Interconnect NL makes AOW contributions for its employees to the Dutch Tax and Customs Administration.
Our employees are not covered by any collective bargaining agreement. We believe that we maintain a good working relationship with our employees, and we have not experienced any significant labor disputes.
Properties and Facilities
We maintain the below facilities. We believe that our facilities are suitable and adequate for our operations and are adequately maintained.
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| Real Property Locations | Approximate Square Feet | Use | Owned or Leased (term of lease) | |||||
| No. 50, Puxing West Road, Yuliangwei Village, Shenzhen Shangsha Qingxi Industrial Park of Yuliangwei Management Area, Qingxi Town, Dongguan, Guangdong Province, PRC | 189,983 | Factory and staff quarter | Leased (from September 2022 to August 2027) | |||||
| 1301-1303, 13/f, Shatin Galleria, 18-24 Shan Mei Street, Fotan, Shatin, Hong Kong | 2,555 | Head office | Leased (from November 2023 to November 2025) | |||||
| Klompenmakerstraat 16a, 2984BB Ridderkerk, the Netherlands | 5,113 | Office and warehouse | Leased (from January 2019 to May 2028) | |||||
| Total | 197,651 | |||||||
Legal Proceedings
We 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.
Regulations
Our business is predominantly conducted by our subsidiaries in mainland China and Hong Kong. Hong Kong was established as a special administrative region of the PRC in accordance with Article 31 of the Constitution of the PRC. The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (the “Basic Law”) was adopted and promulgated on April 4, 1990 and became effective on July 1, 1997, when the PRC resumed the exercise of sovereignty over Hong Kong. Pursuant to the Basic Law, Hong Kong is authorized by the National People’s Congress of the PRC to exercise a high degree of autonomy and enjoy executive, legislative and independent judicial power, under the principle of “one country, two systems”; furthermore, the laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law, shall be maintained, except for any that contravene the Basic Law and are subject to any amendment by the legislature of Hong Kong, and the national laws of the PRC shall not be applied in Hong Kong except for those that relating to defense, foreign affairs and other matters that are not outside the limits of the autonomy of Hong Kong as specified by the Basic Law, which are listed under Annex III to the Basic Law.
PRC Regulations Relating to Foreign Investment
The Market Entry Rules for Foreign Investment
Market entry for investment activities in mainland China by foreign investors is mainly governed by the Guidance Catalogue of Encouraged Industries for Foreign Investment (2022 Version), or the Catalogue, which was promulgated by the Ministry of Commerce, or the MOFCOM, and the National Development and Reform Commission, or the NDRC, on October 26, 2022, and became effective on January 1, 2023, and the Special Administrative Measures (Negative List) for the Entrance of Foreign Investment (2024 Version), or the Negative List, which was promulgated by the MOFCOM and the NDRC on September 6, 2024 and became effective on November 1, 2024. The Catalogue lists the encouraged industries for foreign investment, and the Negative List identifies the prohibited and restricted industries for foreign investment. If the investment falls within an “encouraged” category in the Catalogue, such foreign investment can be conducted through the establishment of a wholly foreign-owned enterprise. If the investment falls within the “restricted” category on the Negative List, such foreign investment may be conducted through the establishment of a joint venture enterprise, with varying minimum shareholdings for the mainland China party, depending on the particular industry. If the investment falls within a “prohibited” category on the Negative List, no foreign investment of any kind is allowed. Any investment that occurs within an industry not falling into any of three categories mentioned above is classified as a permitted industry for foreign investment.
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CCSC Interconnect DG currently engages in the design, manufacture, and sale of interconnect product businesses, which activities do not fall within any restricted or prohibited category on the Negative List.
The Foreign Investment Law
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced the three governing laws on foreign investments in mainland China, namely, the PRC Sino-foreign Equity Joint Ventures Law, the PRC Sino-foreign Cooperative Enterprises Law and the PRC Wholly Foreign-owned Enterprises Law, together with their implementation rules and ancillary regulations. The Regulations for the Implementation of the Foreign Investment Law, which were promulgated by the State Council on December 26, 2019, and became effective on January 1, 2020, further clarified and elaborated the relevant provisions of the Foreign Investment Law. The Foreign Investment Law and its Implementation Rules embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in mainland China, and establish the basic framework for the access of, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.
Pursuant to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within mainland China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within mainland China; (ii) a foreign investor acquires stock shares, equity interest, shares in assets, or other equivalent rights and interests of an enterprise within mainland China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within mainland China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.
The Foreign Investment Law grants national treatment to foreign invested enterprises, or FIEs, except for those FIEs that operate in industries deemed to be either “restricted” or “prohibited” in the Negative List. The Foreign Investment Law provides that FIEs operating in foreign restricted industries will require market entry clearance and other approvals from relevant PRC authorities. If a foreign investor is found to invest in any prohibited industry as stipulated in the Negative List, such foreign investor may be required to, among other things, cease its investment activities, dispose of its equity interests or assets within a prescribed time limit or have its income confiscated. If the investment activity of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the Negative List, the relevant competent department shall order the foreign investor to make corrections within a prescribed time limit and take necessary measures to meet the requirements of the special administrative measure for restrictive access. Moreover, legal liability may be imposed if foreign investors were found to be in violation with the provisions for the access of foreign investment under the Negative List.
In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in mainland China, including, among others, that a foreign investor may freely transfer into or out of mainland China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within mainland China; local governments shall abide by their commitments to foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.
Furthermore, the Foreign Investment Law provides that FIEs established according to the previous PRC Sino-foreign Equity Joint Ventures Law, the PRC Sino-foreign Cooperative Enterprises Law and the PRC Wholly Foreign-owned Enterprises Law before the Foreign Investment Law was enacted may maintain their structure and corporate governance within five years commencing from January 1, 2020.
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On December 30, 2019, the MOFCOM and the State Administration for Market Regulation (formerly known as the State Administration for Industry and Commerce) jointly promulgated the Measures for Reporting of Foreign Investment Information, or the Foreign Investment Reporting Measures, which came into effect on January 1, 2020 and replaced the Interim Administrative Measures for the Record-filing of the Establishment and Modification of Foreign-invested Enterprises. The Foreign Investment Reporting Measures establish an online reporting system for foreign investment instead of the previous requirement of the MOFCOM filing and/or approval procedures. Pursuant to the Foreign Investment Reporting Measures, for foreign investment carried out directly or indirectly within mainland China, foreign investors or FIEs shall submit investment information for establishments, modifications and dissolution and annual reports of the FIEs through the online reporting system.
On December 19, 2020, the NDRC and the MOFCOM promulgated the Measures for Security Review of Foreign Investment, which became effective on January 18, 2021, pursuant to which, security review shall be conducted if foreign investments affecting or likely to affect national security. The Foreign Investment Security Review Mechanism in charge of organization, coordination and guidance of foreign investment security review is thereunder established. A working mechanism office shall be established under the NDRC and led by the NDRC and the MOFCOM to undertake routine work on the security review of foreign investment. According to the Measures for Security Review of Foreign Investment, foreign investment activities falling within the scope such as important cultural products and services, important information technologies and Internet products and services, important financial services, key technologies and other important fields that concern national security while obtaining the ultimate control over the enterprise invested in, a foreign investor or a party concerned in the PRC shall take the initiative to make a declaration to the working mechanism office prior to making the investment.
The PRC Company Law
Pursuant to the PRC Company Law (2023 Revision), which was promulgated by the Standing Committee of the National People’s Congress, or the SCNPC, on December 29, 2023 and became effective on July 1, 2024, the establishment, operation and management of corporate entities in mainland China are governed by the PRC Company Law. Unless otherwise stipulated in the relevant laws on foreign investment, FIEs are also required to comply with the provisions of the PRC Company Law. The PRC Company Law defines two types of companies: limited liability companies and companies limited by shares, our PRC subsidiary, CCSC Interconnect DG, is a limited liability company and is subject to the PRC Company Law.
PRC Regulations Relating to Environmental Protection
Pursuant to the Environmental Protection Law of the PRC issued on December 26, 1989, amended on April 24, 2014 and effective January 1, 2015, entities that cause environmental pollution and other public nuisances shall adopt effective measures to prevent the pollution of and hazards caused to the environment. Construction projects shall be equipped with constructional environmental protection facilities, which must be simultaneously designed, built and put into operation with the main part of the construction. Enterprises discharging pollutants must report to and register with the relevant authorities in accordance with the provisions of the competent environmental protection authority under the State Council. Enterprises and other producers and operators unlawfully discharging pollutants shall be fined and ordered to take corrective measures. For those refusing to make corrections, the competent authority may, starting from the day after the date of ordering correction, continuously impose daily fines based on the sum of the original fine. Enterprises and other producers and operators, which discharge pollutants exceeding the pollutant discharge standard or key pollutant gross discharge control thresholds, may be ordered by the competent environmental protection authority to take measures such as restricting production, suspending production and rectification. Serious cases may be reported to and approved by the competent government authority, resulting in orders of suspension or shutdown of operations.
Furthermore, according to the Catalog on Classifying and Managing Pollutant Discharge Permits for Stationary Pollution Sources (2019 Version), or the Pollutant Catalog, which was promulgated and became effective on December 20, 2019, management of pollutants shall be carried out depending on different industry sectors, the volumes of pollutants produced and discharged and the degree of environmental impact caused by such pollutants. If an enterprise produces and discharges major pollutants having major impacts on the environment, an intensive pollutant discharge permit is required; if an enterprise produces and discharges minor pollutants having minor impacts on the environment, a simplified pollutant discharge permit is required; if an enterprise produces and discharges a tiny amount pollutants having tiny impacts on the environment, no pollutant discharge permit is required, but it shall register at the relevant online platform with detailed information about its pollutant discharge, as well as the preventive measures taken on such pollutant discharge.
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CCSC Interconnect DG has completed the registration for its pollutant discharge online, which will remain valid until April 2, 2030.
PRC Regulations Relating to Product Quality
Pursuant to the Product Quality Law of the PRC, promulgated on February 22, 1993, last amended on and effective December 29, 2018, producers shall be responsible for the quality of their products. Product quality shall satisfy certain requirements, among other things, no unreasonable danger to personal safety and property safety shall exist, where there are national or industry standards for the protection of health, personal safety and property safety, such standards shall be complied with. If a defaulted product cause personal injuries or property losses, the injured party can claim compensation either from the producer or the seller, if the producer shall be responsible for the defaulted product and the seller compensated the injured party, the seller is entitled to claim such compensation from the producer, and vice versa. If a producer or seller produce or sell products that do not comply with the national or industry standards for the protection of health or personal safety or property safety, orders shall be issued to cease their production or sale and products that have been illegally produced or sold shall be confiscated. A fine shall be imposed equal to an amount greater than the value of the products that have been illegally produced or sold (including products already sold and products not yet sold) but less than three times the value of the products; where there is illegal income, the illegal income shall be confiscated; where the circumstances are serious, the business license shall be revoked; where the case constitutes a crime, criminal liability shall be pursued in accordance with relevant laws.
PRC Regulations Relating to Foreign Trade
Pursuant to the Foreign Trade Law of the PRC, promulgated on May 12, 1994 and most recently amended on December 30, 2022, and the Measures for the Record Filing and Registration of Foreign Trade Business Operators promulgated by the MOFCOM on June 25, 2004 and became effective on July 1, 2004, which was last amended on May 10, 2021. Foreign trade operators engaged in the import and export of goods or the import and export of technology must register with the MOFCOM or its authorized institution, and subsequent filings shall be completed within thirty (30) days if any changes occur on their registration forms. In addition, if an entity imports or exports goods as consignee or consignor, it shall register with the local customs authority according to the Administrative Provisions on the Declaration of Import and Export Goods, which was promulgated by the General Administration of Customs on September 18, 2013 and last amended on November 23, 2018.
We have registered with the appropriate authorities pursuant to the applicable provisions of the Foreign Trade Law.
PRC Regulations Relating to the Protection of Consumer Rights and Interests
Business operators in the business of supplying and selling manufactured goods or services to consumers, shall comply with the Law of the PRC on the Protection of Consumer Rights and Interests, or the Consumer Rights Protection Law, promulgated by the SCNPC on October 31, 1993 and last amended on October 25, 2013.
According to the Consumer Rights Protection Law, business operators must ensure that the goods or services provided by them meet the requirements for safeguarding personal and property safety. For goods and services that may endanger personal and property safety, consumers should be provided with a true description and an explicit warning, as well as a description and indication of the proper way to use the goods or accept the services and the methods of preventing the occurrence of a hazard. If the goods or services provided by the business operators cause personal injuries to consumers or third parties, the business operators shall compensate the injured parties for their losses.
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PRC Regulations Relating to Work Safety
The Work Safety Law of the PRC, issued on June 29, 2002, last amended on June 10, 2021 and became effective on September 1, 2021, provides that production and business operation entities shall abide by this law and other laws and regulations concerning work safety, strengthen work safety management; establish and improve work safety responsibility systems and rules; improve work safety conditions; promote work safety standardization and improve work safety levels, so as to ensure work safety. Production and business operation entities shall have the conditions for work safety as specified in this law and relevant laws, regulations, national standards or industrial specifications. Production and business operation entities that do not have such conditions are not allowed to engage in production or operation activities. Breach of the Work Safety Law of the PRC will incur various penalties, according to the specific circumstances.
PRC Regulations Relating to Intellectual Property
Trademark
Registered trademarks are mainly protected under the Trademark Law of the PRC (2019 Revision) and its Implementation Rules (2023 Revision), collectively the Trademark Laws. Pursuant to the Trademark Laws, the right to exclusive use of a registered trademark shall be limited to trademarks which have been approved for registration and to goods and/or services for which the use of such trademark has been approved. The period of validity of a registered trademark shall be ten years, counted from the day the registration is approved, and may be renewed for another ten years provided that relevant application procedures have been completed within twelve (12) months before the end of the validity period. If the registrant fails to apply for renewal in a timely manner, a grace period of six (6) additional months may be granted. However, if the registrant fails to apply for renewal before the grace period expires, the registered trademark shall be deregistered.
Under the Trademark Laws, the Trademark Office of the State Administration for Market Regulation, or the Trademark Office, is responsible for the registration and administration of trademarks nationwide. The Trademark Office adopted the “first-to-file” principle for trademark registration, if two or more applicants apply for registration of identical or similar trademarks for the same or similar commodities, the application that was filed first will receive preliminary approval and will be publicly announced.
In addition, according to the Trademark Laws, using a trademark that is identical to or similar to a registered trademark in connection with the same or similar goods and/or services without the authorization of the owner of the registered trademark constitutes an infringement of the exclusive right to use a registered trademark. As of the date of this annual report, CCSC Interconnect DG does not have any registered trademarks in mainland China.
Patent
Patents in the PRC are principally protected under the Patent Law of the PRC (2020 Revision) and its Implementation Rules (2010 Revision), collectively the Patent Laws. According to the Patent Laws, patents in the PRC are classified into three categories, namely, inventions, utility models and designs. The protection period of a patent right is ten (10) years for utility models, fifteen (15) years for designs, and twenty (20) years for inventions upon the date of application. The Patent Administration Office under the State Council is responsible for receiving, reviewing and approving patent applications. After a patent right is granted for an invention or utility model, except otherwise provided for in the Patent Laws, no entity or individual may, without the permission of the patent owner, exploit the patent, that is, manufacture, use, offer to sell, sell or import the patented product, or use the patented method, or use, offer to sell, sell or import any product which is a direct result of the use of the patented method, for production or business purposes. And after a patent right is granted for a design, no entity or individual shall, without the permission of the patent owner, exploit the patent, that is, manufacture, offer to sell, sell, or import any product containing the patented design for production or business purposes.
As of the date of this annual report, CCSC Interconnect DG currently holds 71 registered patents in mainland China, including 9 invention models and 62 utility models.
Domain Name
Domain names in China are regulated by the Administrative Measures on the Internet Domain Names promulgated by the Ministry of Industry and Information Technology, or the MIIT, on August 24, 2017 and became effective on November 1, 2017. Pursuant to which, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer on the internet and corresponds to the internet protocol (IP) address of that computer.
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Unless otherwise provided in relevant rules, the principle of “first-to-file” is applied to domain name registration service. Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration.
As of the date of this annual report, CCSC Interconnect DG currently holds one registered domain name in mainland China, ccsc-interconnect.com.
PRC Regulations Relating to Labor Protection
The Labor Laws
Pursuant to the Labor Law of the PRC (2018 Revision) promulgated and effective on December 29, 2018, companies must negotiate and execute employment contracts with their employees based on the principle of fairness. Companies must establish and strengthen an employment hygiene system, strictly implement the national labor safety and health rules and standards, deliver occupational health and safety education to employees, prevent work-related accidents, and reduce occupational hazards. In addition, employers and employees shall purchase social insurances and pay for social insurance fees in compliance with the applicable PRC laws.
The Labor Contract Law of the PRC (2012 Revision), which was promulgated on December 28, 2012 and became effective on July 1, 2013, and the Implementation Regulations on Labor Contract Law, which was promulgated and became effective on September 18, 2008, collectively the Labor Contract Laws, serve as the primary law regulating the labor contract relationship between companies and their employees in respects such as the concluding, performing, alternation, dissolution and termination of a labor contract, requirements on probation period, payment of remuneration and economic compensation, labor dispatches as well as social security premiums. Pursuant to the Labor Contract Laws, an employment relationship is established between the employer and the employee since the day of employment, a written employment contract shall be executed. Moreover, employers shall pay wages that are no lower than the local minimum wage standards to their employees, and are prohibited from forcing their employees to work above certain time limit and shall pay employees for overtime work in accordance to national regulations.
The Social Insurance Law
Under the Social Insurance Law of the PRC (2018 Revision), which was promulgated and became effective on December 29, 2018, employers are required to pay basic pension insurance, unemployment insurance, basic medical insurance, employment injury insurance and maternity insurance for their employees at specified percentages of the salaries of the employees, up to a maximum amount specified by the local government regulations from time to time, and employees are required to pay basic pension insurance, unemployment insurance and basic medical insurance at specified percentages of their salaries. When an employer fails to pay social insurance premiums in full on a timely manner, relevant social insurance collection agency shall order it to make up for any shortfall within a prescribed time limit, and may impose a late payment fee at the rate of 0.05% per day of the outstanding amount from the due date. If such employer still fails to make up for the shortfalls within the prescribed time limit, the relevant administrative authorities shall impose a fine of one to three times the outstanding amount upon such employer.
As of the date of this annual report, CCSC Interconnect DG has not made adequate social insurance contributions to their employees, which may subject it to make up such shortfalls or fines, see “Item 3. Key Information-D. Risk Factors-Risks relating to doing business in China-Our PRC subsidiary has not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations, which may subject us to penalties.”
The Housing Provident Fund Regulation
In accordance with the Administrative Regulation on Housing Provident Fund (2019 Revision) which was promulgated and became effective on March 24, 2019, employers must register at the designated administrative centers and open bank accounts for depositing their employees’ housing provident funds. Employer and employee are required to pay housing provident funds at an amount no less than 5% of the monthly average salary of the employee in the preceding year in full and on time. If an employer fails to conduct housing provident fund registration or open housing provident fund accounts for its employees, the relevant housing provident fund administrative center will order it to complete such registration and open accounts within a prescribed time limit, a fine up to RMB50,000 may be imposed if such employer fail to do so at the given time limit; if the employer fails to pay housing provident fund in part or in full, the relevant housing provident fund administrative center shall order it to pay the outstanding amount within a particular time frame, and if such employer fails to comply with such order, the relevant housing provident fund administrative center may apply for compulsory execution from certain people’s court.
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As of the date of this annual report, CCSC Interconnect DG has not made adequate housing provident fund contributions to their employees, which may subject it to fines, see “Item 3. Key Information-D. Risk Factors-Risks relating to doing business in China-Our PRC subsidiary has not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations, which may subject us to penalties.”
PRC Regulations Relating to Taxation
Enterprise Income Tax (“EIT”)
Pursuant to the PRC EIT Law, which was promulgated by the SCNPC on March 16, 2007 and last amended on December 29, 2018, and its implementation rules, including the Regulations on the Implementation of Enterprise Income Tax Law of the PRC which was promulgated by the State Council on December 6, 2007 and last amended on December 6, 2024 and effective on January 20, 2025, EIT shall be applicable at a uniform rate of 25% to both resident or non-resident enterprises. Resident enterprises are defined as enterprises that are established in mainland China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but have a de facto management body in mainland China. Non-resident enterprises are defined as enterprises that are established under the laws of foreign countries and have no de facto management body within mainland China, but have established institutions or premises in mainland China, or have no such institutions or premises but have income generated from mainland China. EIT shall be payable by a resident enterprise for income sourced within or outside mainland China. EIT shall be payable by a non-resident enterprise, for income sourced within mainland China by its institutions or premises established in mainland China, and for income sourced outside mainland China for which the institutions or premises established in mainland China have a de facto relationship. Where the non-resident enterprise has no institutions or premises established in mainland China or has income bearing no de facto relationship with the institution or premises established in mainland China, EIT shall be payable by the non-resident enterprise only for income sourced within mainland China at the rate of 20%.
Pursuant to the Administrative Measures on the Accreditation of High and New Technology Enterprise which was promulgated on January 29, 2016 and became effective as of January 1, 2016, enterprises that have been accredited as a HNTE, and can enjoy a preferential income tax rate of 15% in accordance with the PRC EIT Law and its implementation rules for a period of consecutive three (3) years, commencing from the year that such high-tech certificate has been obtained.
CCSC Interconnect DG has obtained the HNTE accreditation since 2016, which was last renewed on December 22, 2022, and has received a preferential income tax rate of 15% rather than the unified rate of 25% for years 2022-2024. As of the date of this annual report, CCSC Interconnect DG is in the process of renewing its HNTE accreditation for years 2025-2027.
Value-Added Tax (“VAT”)
Pursuant to the Interim Regulations on Value-added Tax of the PRC promulgated by the State Council on December 13, 1993 and were recently amended on November 19, 2017, and the Detailed Rules on the Implementation of Interim Regulation on Value-added Tax of the PRC promulgated by the Ministry of Finance, or the MOF, on December 25, 1993 and were recently amended on October 28, 2011, collectively the VAT Regulations, all entities and individuals in mainland China engaging in the sales of goods, provision of processing services, repairs and replacement services, sales services, intangible assets, real estate and the importation of goods are required to pay VAT at the rate of 17%, unless otherwise stated.
According to the Circular on Adjusting Value-added Tax Rates, which was promulgated by the MOF and the State Administration of Taxation, or the SAT, on April 4, 2018 and became effective on May 1, 2018, where a taxpayer engages in a taxable sales activity for the value-added tax purpose or importation of goods, the previous applicable 17% and 11% tax rates are lowered to 16% and 10%, respectively.
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According to the Circular on Policies to Deepen Value-added Tax Reform, which was promulgated by the MOF, the SAT and the General Administration of Customs on March 20, 2019 and became effective on April 1, 2019, where a taxpayer engages in a taxable sales activity for the value-added tax purpose or importation of goods, the previous applicable 16% and 10% tax rates are lowered to 13% and 9%, respectively.
On December 25, 2024, the SCNPC promulgated the Value-added Tax Law of the PRC (the “VAT Law”), which will become effective on January 1, 2026, and abolished the Interim Regulations on Value-added Tax of the PRC. Pursuant to the VAT Law, entities and individuals (including individual businesses) engaged in the sale of goods, services, intangible assets and immovables and the importation of goods within mainland China are VAT payers and shall pay VAT in accordance with the VAT Law.
As of the date of this annual report, the VAT rate applicable to our sales of goods by our PRC subsidiary is 13%.
Withholding Tax
Pursuant to the PRC EIT Law and its implementation rules, except as otherwise provided by relevant tax treaties with the PRC government, dividends paid by foreign-invested enterprises to foreign investors which are non-resident enterprises and which have not established or operated premises in mainland China, or which have established or operated premises but where their income has no de facto relationship with such establishment or operation of premises shall be subject to a withholding tax of 10%. Pursuant to an Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, where the beneficial owner holding at least 25% of the equity interest of the foreign invested enterprise, the tax rate may be reduced to 5% when distributing dividends.
Moreover, according to the Circular on Issues Relating to “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT and took effect on April 1, 2018, a “beneficial owner” shall mean a person who has ownership and control over the income, and the rights and property from which the income is derived. When determining the applicant’s status of being a “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, a comprehensive analysis shall be taken into account with the actual conditions of the specific case. In general, the following factors are unfavorable for the determination of “beneficial owner” status of an applicant: (i) the applicant is obligated to pay 50% or more of the income, within 12 months from its receipt, to a resident of a third country (region), where the term “obligated” includes agreed obligations and de facto payment for which there is no agreed obligation; (ii) the business activities undertaken by the applicant do not constitute substantive business activities; (iii) the treaty counterparty country (region) does not levy, or exempts tax on the relevant income, or levies tax but with a very low actual tax rate; (iv) in addition to the loan contract based on which interest is derived and paid, there exists other loans or deposit contracts between the creditor and the third party, of which factors such as the amount, interest rate and date of execution are similar; and (v) in addition to the transfer contract for rights to use such as copyright, patent, technology, from which the royalties are derived and paid, there exists other transfer contracts for rights to use or ownership in relation to copyright, patent, technology between the applicant and a third party.
Pursuant to the Notice on the Relevant Issues Concerning the Implementation of Dividend Clauses in Tax Treaties promulgated by the SAT and became effective on February 20, 2009, all of the following conditions shall be satisfied before the concession tax rate in a tax treaty can be enjoyed: (1) the tax resident obtaining dividends shall be restricted to the company as provided in the tax treaty; (2) among all the ownership equity interests and voting shares of the mainland China resident company, the proportion directly owned by the tax resident complies with the prescribed proportions under the tax treaty; and (3) the proportion of the equity interests of mainland China resident company directly owned by such tax resident complies with, at all times within the twelve months before obtaining the dividends, the proportions specified in the tax treaty.
Pursuant to the Announcement on Issuing the Administrative Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers promulgated by the SAT on October 14, 2019 and became effective on January 1, 2020, entitlement to treaty benefits for non-resident taxpayers shall be handled by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference”. Where non-resident taxpayers judge by themselves that they meet the conditions for entitlement to treaty benefits, they may obtain such entitlement themselves at the time of making tax declarations, or at the time of making withholding declarations via withholding agents. At the same time, they shall collect and retain relevant materials for future reference in accordance with the provisions of these Measures, and shall accept the follow-up administration by the relevant tax authorities. Relevant materials proving the status of “beneficial owner” shall be retained in the case of entitlement to treaty benefits relating to dividend, interest and royalty.
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PRC Regulations Relating to Foreign Exchange
The principal regulations governing foreign currency exchange in mainland China are the Foreign Exchange Administration Regulations, promulgated by the State Council in 1996 and most recently amended in 2008. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements. By contrast, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of foreign currency-denominated loans.
In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or the SAFE Circular 59, and was most recently amended in 2015, which substantially amends and simplifies the current foreign exchange procedures. Pursuant to the SAFE Circular 59, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts, and guarantee accounts, the reinvestment of Renminbi proceeds derived by foreign investors in mainland China, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously.
In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or the SAFE Circular 13, pursuant to which, instead of applying for approval regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration.
In March 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or the SAFE Circular 19, pursuant to which, a foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights and interests (or for which the bank has registered the injection of the monetary capital contribution into the account). In addition, for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capital on a discretionary basis. A foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business. Where an ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise must first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment with the foreign exchange administration or the bank at the place where it is registered.
In June 2016, SAFE promulgated Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or the SAFE Circular 16, pursuant to which, in addition to foreign currency capital, enterprises registered in mainland China may also convert their foreign debts, as well as repatriated fund raised through overseas listing, from foreign currency to Renminbi on a discretional basis. SAFE Circular 16 also reiterates that the use of capital so converted shall follow “the principle of authenticity and self-use” within the business scope of the enterprise. According to SAFE Circular 16, the Renminbi funds so converted shall not be used for the purposes of, whether directly or indirectly, (i) paying expenditures beyond the business scope of the enterprises or prohibited by laws and regulations; (ii) making securities investment or other investments (except for banks’ principal-secured products); (iii) granting loans to non-affiliated enterprises, except as expressly permitted in the business license; and (iv) purchasing non-self-used real estate (except for the foreign-invested real estate enterprises).
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In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or the SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records, and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Further, pursuant to the SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
On April 10, 2020, SAFE issued the Notice on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business, or the SAFE Circular 8, it provides that under the condition that the use of the funds is genuine and compliant with current administrative provisions on use of income relating to capital account, enterprises are allowed to use income under capital account such as capital funds, foreign debts and overseas listings for domestic payment, without submission to the bank prior to each transaction of materials evidencing the veracity of such payment.
PRC Regulations Relating to Dividend Distribution
The principal laws and regulations regulating dividend distributions by FIEs in mainland China include the Company Law of the PRC, the Foreign Investment Law and its Implementation Rules, pursuant to which, wholly foreign-owned enterprises in mainland China may pay dividends only out of their accumulated profits, if any, as determined in accordance with relevant PRC accounting standards and regulations, and shall not distribute any profits until any losses from prior fiscal years have been offset. Additionally, these FIEs may not pay dividends unless they set aside at least 10% of their respective accumulated profits after tax each year, if any, to fund certain reserve funds, until the accumulative amount of such fund reaches 50% of the enterprise’s registered capital, these reserves are not distributable as cash dividends. FIEs also may allocate a portion of their after-tax profits based on relevant PRC accounting standards to fund their employee welfare and bonus at their discretion.
PRC Regulations Related to Foreign Exchange Registration of Offshore Investment by Mainland China Residents
In July 2014, SAFE issued the Circular of the State Administration of Foreign Exchange on Issues concerning Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37. The SAFE Circular 37 regulates foreign exchange matters in relation to the use of offshore special purpose vehicles, or “SPVs”, by mainland China residents or entities to seek offshore investment and financing or conduct round trip investment in mainland China. Under the SAFE Circular 37, an SPV refers to an offshore entity established or controlled, directly or indirectly, by mainland China residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in mainland China by mainland China residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. The Circular 37 requires that, before making contribution into an SPV, mainland China residents or entities are required to complete foreign exchange registration with the SAFE or its local branch.
In February 2015, SAFE promulgated the SAFE Circular 13. SAFE Circular 13 has amended SAFE Circular 37 by requiring mainland China residents or entities to register with qualified banks instead of the SAFE or its local branch in connection with their establishment of an SPV.
In addition, pursuant to the SAFE Circular 37, an amendment to registration or subsequent filing with qualified banks by such mainland China resident is also required if there is a material change with respect to the capital of the offshore company, such as any change of basic information (including change of such mainland China residents, change of name and operation term of the SPV), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. Failure to comply with the registration requirements as set forth in both the SAFE Circular 37 and the SAFE Circular 13, misrepresent on or failure to disclose controllers of foreign-invested enterprises that are established by round-trip investment may result in bans on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent company or affiliates, and may also subject relevant mainland China residents to penalties under the Foreign Exchange Administration Regulations of the PRC.
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We may not be informed of the identities of all the mainland China residents holding direct or indirect interest in our company, and we have no control over any of our future beneficial owners. Thus, we cannot provide any assurance that our current or future mainland China resident beneficial owners will comply with our request to make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE rules. See “Item 3. Key Information-D. Risk Factors-Risks relating to doing business in China-PRC laws and regulations relating to offshore investment activities by mainland China residents may subject our mainland China resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us.”
PRC Regulations Relating to Foreign Debt
As an offshore holding company, we may make additional capital contributions to our WFOE subject to approval from the local department of market regulation and the SAFE, with no limitation on the amount of capital contributions. We may also make loans to our WFOE subject to the approval from SAFE or its local office within the limitation on the amount of loans.
By means of making loans, WFOE is subject to the relevant PRC laws and regulation relating to foreign debts. On January 8, 2003, the NDRC, the SAFE and the MOF, jointly promulgated the Circular on the Interim Provisions on the Management of Foreign Debts, or the Foreign Debts Provisions, which became effective on March 1, 2003. Pursuant to the Foreign Debts Provisions, the total amount of foreign loans received by a foreign-invested company shall not exceed the difference between the total investment in projects as approved by the MOFCOM or its local counterpart and the amount of registered capital of such foreign-invested company. In addition, on January 11, 2017, the People’s Bank of China, or the PBOC, issued the Circular on Full-Coverage Macro-Prudent Management of Cross-Border Financing, or the PBOC Circular9, which sets out the statutory upper limit on the foreign debts for PRC non-financial entities, including both foreign-invested companies and domestic-invested companies. Pursuant to the PBOC Circular 9, the foreign debt upper limit for both foreign-invested companies and domestic-invested companies is calculated as twice the net asset of such companies. As to net assets, the companies shall take the net assets value stated in their latest audited financial statement.
The PBOC Circular 9 does not supersede the Foreign Debts Provisions. It provides a one-year transitional period from January 11, 2017, for foreign-invested companies, during which foreign-invested companies, such as WFOE, could adopt their calculation method of foreign debt upper limit based on either the Foreign Debts Provisions or the PBOC Circular 9. The transitional period ended on January 11, 2018. Upon its expiry, pursuant to the PBOC Circular 9, the PBOC and the SAFE shall reevaluate the calculation method for foreign-invested companies and determine what the applicable calculation method would be.
On March 11, 2020, the PBOC and the SAFE promulgated the Circular on Adjusting the Macro-Prudent Adjustment Parameter for Full-Covered Cross-Border Financing, or the PBOC Circular 64, pursuant to which, the foreign debt upper limit is increased up to 2.5 times the net assets.
Further, on January 7, 2021, the PBOC and the SAFE collectively promulgated the Circular on Adjusting the Macro-Prudent Adjustment Parameter for Cross-Border Financing, or the PBOC Circular 5, pursuant to which, the macro-prudent adjustment parameter for cross-border financing was decreased from 1.25 to 1, therefore, the upper limit for foreign debt is down to 2 times the net assets.
PRC Regulations Relating to M&A and Overseas Listing
On August 8, 2006, six PRC governmental and regulatory agencies, including the MOFCOM and the China Securities Regulatory Commission, or the CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, governing the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006, and was amended on June 22, 2009. The M&A Rules, among other things, requires that offshore SPVs that are controlled by mainland China companies or individuals and that have been formed for overseas listing purposes through acquisitions of mainland China domestic interest held by such companies or individuals, shall obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.
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Our PRC counsel, JT&N, has advised us that, based on its understanding of current PRC laws, rules and regulations, and the M&A Rules, the CSRC approval was not required in the context of our IPO, or any follow-on offerings, given that: (i) CCSC Interconnect DG was established by means of direct investment rather than by a merger with or an acquisition of any mainland China domestic companies as defined under the M&A Rules, and (ii) no explicit provision in the M&A Rules classifies the respective share structure like ours falling within the M&A Rules. Notwithstanding the above opinion, our PRC counsel, JT&N, has further advised us that uncertainties exist as to how the M&A Rules will be interpreted and implemented and its opinions summarized above are subject to any new laws, rules, and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. If the CSRC or other PRC regulatory agencies subsequently determine that prior CSRC approvals are required regarding our IPO, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies.
On February 17, 2023, the CSRC promulgated the Trial Measures and five (5) supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, a PRC domestic company that seeks to offer or list securities overseas, both by direct and indirect means, shall submit the filing materials with the CSRC as required by the Trial Measures within three (3) business days following its submission of an application with oversea securities regulatory authorities for its IPO or listing. Further, such a PRC domestic company shall report to the CSRC within three business days upon the completion of any follow-on offerings. If the PRC domestic company fails to complete required filing procedures, conceals any material fact or falsifies any major content in its filing materials, such PRC domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
The Trial Measures outline the circumstances where PRC domestic companies are prohibited from offering and listing securities overseas, if such overseas offering and listing made by domestic companies (i) are explicitly prohibited by laws; (ii) may endanger national security as determined by relevant competent departments under the State Council; (iii) involve criminal offenses that disrupting PRC economy such as corruption, bribery, embezzlement, or misappropriation of property by such domestic company, the controlling shareholder, and/or actual controller in the recent three years; (iv) involve such domestic company in investigations for suspicion of criminal offenses or major violations of laws and regulations; or (v) involve material ownership disputes over the shares held by the controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. We believe that our application for our offering and listing on Nasdaq does not fall under the aforementioned circumstances that prohibit such overseas listing under the Trial Measures.
Further, according to the CSRC Notice that was issued by the CSRC on February 17, 2023, beginning on March 31, 2023, PRC domestic companies that had submitted valid applications for overseas offering and listing but did not obtain the approval from overseas regulatory authorities or overseas stock exchanges shall complete the required filing procedures with the CSRC prior to the completion of their overseas offerings and listing. In compliance with the Trial Measures, we submitted our filing materials relating to our IPO to the CSRC on August 31, 2023, and were informed by the CSRC in writing on November 6, 2023 that we did not fall within the scope of the filing requirements at such time. Based on such notice by the CSRC, we believe we are not required to undertake the relevant filing and reporting requirements as stipulated in the Trial Measures. However, we cannot assure you that we will not become subject to the filing requirements under the Trial Measures in the future, if the CSRC issues any further guidelines that otherwise subjects us to them.
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On February 24, 2023, the CSRC, together with the Ministry of Finance, the National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023, together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a PRC domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents 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; and (b) a PRC domestic company that plans to, either directly or indirectly 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. Any failure or perceived failure by our Company and our subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
Any new laws and regulations issued by the PRC authorities may subject us to additional compliance requirements. We cannot assure you that we will be able to comply with all the new regulatory requirements under the Trial Measures, the revised Provisions, or any future implementing rules on a timely basis, or at all. Any failure by us to fully comply with the new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our Class A Ordinary Shares to significantly decline in value or become worthless. See “Item 3. Key Information-D. Risk Factors-Risks relating to doing business in China-The CSRC’s Listing Rules and other relevant rules promulgated by the CSRC may subject us to additional compliance requirements in the future.”
Hong Kong Laws and Regulations
Our Hong Kong subsidiary, CCSC Interconnect HK, engages in the trading of electronic products and is subject to relevant Hong Kong laws and regulations. This section sets forth a summary of the principal laws and regulations that are applicable to our business operations in Hong Kong.
Business Registration
The Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong) requires every entity which carries on a business in Hong Kong to apply for business registration and to display the valid business registration certificate at the place of business. Any person who fails to apply for business registration or display a valid business registration certificate at the place of business shall be guilty of an offence and shall be liable to a fine of HK$5,000 and to imprisonment for one year.
Import and Export
Regulations 4 and 5 of the Import and Export (Registration) Regulations (Chapter 60E of the Laws of Hong Kong) (the “IAE Registration Regulations”) provide that every person who imports or exports any article other than an exempted article shall lodge an accurate and complete import or export declaration relating to such article using services provided by a specific body with the Commissioner of Customs and Excise within 14 days after the importation and exportation of the article.
Any person failing to declare within 14 days after the importation without reasonable excuse is liable to a fine of HK$2,000 upon summary conviction and HK$100 in respect of every day such declaration has not been lodged. Furthermore, the IAE Registration Regulations also provide that any person knowingly or recklessly lodges any declaration with the Commissioner of Customs and Excise that is inaccurate in any material particular shall be liable to a fine of HK$10,000 upon summary conviction.
Sale of Goods Ordinance
Sale of Goods Ordinance (Chapter 26 of the Laws of Hong Kong) (the “Sale of Goods Ordinance”) provides that where a seller sells goods in the course of a business, there is an implied condition that (i) where the goods are purchased by description, the goods shall correspond with the description; (ii) the goods supplied are of merchantable quality; and (iii) the goods shall be fit for the purpose for which they are purchased. Otherwise, a buyer has the right to reject the defective goods unless he or she has a reasonable opportunity to examine the goods. A breach of the implied term may give rise to a civil action for breach of contract by the customers. However, no criminal liability arises from such breach of implied term.
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Trade Descriptions
The Trade Descriptions Ordinance (Chapter 362 of the Laws of Hong Kong) prohibits false descriptions, false, misleading or incomplete information in respect of goods in the course of trade. Under the Trade Descriptions Ordinance, it is an offence for a person, in the course of trade or business, to apply a false or misleading trade description to any goods or supply any goods with false or misleading trade descriptions, forge any trade mark or falsely apply any trade mark to any goods, or engages in relation to a consumer in a commercial practice that is a misleading omission or aggressive, constitutes bait advertising, a bait and switch, or wrongly accepting payment for a product.
A person who commits any such offence is subject to, on conviction on indictment, a fine of up to HK$500,000 and imprisonment for five years, and, on summary conviction, to a fine of HK$100,000 and to imprisonment for two years.
Taxation
The Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (“IRO”) is an ordinance that regulates taxes on property, earnings and profits in Hong Kong. The IRO provides, among others, that persons, which include corporations, partnerships, trustees and bodies of persons, carrying on any trade, profession or business in Hong Kong are liable for tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business. As at the Latest Practicable Date, the standard profits tax rate for corporations is at 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part of assessable profits over HK$2,000,000. The IRO also contains provisions relating to, among others, permissible deductions for outgoings and expenses, set-offs for losses and allowances for depreciations.
Transfer pricing
According to the Inland Revenue (Amendment) (No. 6) Ordinance 2018 (the “IRAO”), the arm’s length principle is the fundamental transfer pricing rule in Hong Kong.
The IRAO empowers the Inland Revenue Department (the “IRD”) to impose transfer pricing adjustments on income or expenses arising from non-arm’s length transactions between associated persons which resulted in a potential Hong Kong tax disadvantages to the IRD. Where a transaction between two related persons does not comply with the arm’s length principle and creates tax advantages, the IRD is empowered to adjust the profits or losses of that person(s). The IRAO also implements a three-tiered transfer pricing documentation requirement including a master file, a local file and a country-by-country report. Such documentation requirement may be exempted based on the size of an entity and/or the value of the transactions.
Employment
The Employment Ordinance (Chapter 57 of the Laws of Hong Kong) (“EO”) provides basic employment protections to all employees, including but not limited to payment of wages, restrictions on wages deductions and the granting of statutory holidays.
The Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) (“MPFSO”) provides that every employer must take all practicable steps to ensure that each employee is covered under a Mandatory Provident Fund (MPF) scheme. An employer who fails to comply with such a requirement may face a fine and imprisonment. The MPFSO provides that an employer shall, for each contribution period, from the employer’s own funds, contribute to the relevant MPF scheme the amount determined in accordance with the MPFSO.
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The Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) (“ECO”) provides that all employers are required to take out insurance policies to cover their liabilities under the ECO and common law for injuries at workplace for all of their employees. An employer failing to do so may be liable to a fine and imprisonment.
The prescribed minimum hourly wage rate (currently set at HK$40 per hour) for every employee is govern by the Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) (the “MWO”). Section 15 of the MWO provides that any provision of employment contract which purports to extinguish or reduce the right, benefit or protection conferred on the employee under the MWO is void.
C. Organizational Structure
The following diagram illustrates our corporate structure as of the date of this annual report. For more detail on our corporate history please refer to “-A. History and Development of the Company.”
D. Property, Plants and Equipment
See “-B. Business Overview-Properties and Facilities.”
Item 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report.”
A. Operating Results
Overview
We are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of its own, we conduct our operations through direct wholly owned operating subsidiaries established in Hong Kong, mainland China, the Netherlands, and Serbia, primarily in the sale, design, and manufacturing of interconnect products, including connectors, cables, and wire harnesses. We specialize in customized interconnect products that are used for a range of applications in a diversified set of industries, including industrial, automotive, robotics, medical equipment, computer, network and telecommunication, and consumer products. We have a diversified global customer base located in more than 25 countries throughout Asia, Europe, the Americas, and Australia. Many of our customers are global name-brand manufacturers, such as Linak A/S, Danfoss, Bitzer, Universal Robots, Flextronics, Harman and Vtech, with whom we have established long-term working relationships.
In a continuous effort to meet various international production and quality manufacturing standards, we have been certified by the International Organization for Standardization (the “ISO”), specifically as to the following: ISO 9001 (quality management), 14001 (environment management), 45001 (occupational health and safety), and 13485 (medical devices quality management). In addition, we have also been certified to the IATF 16949, which is a technical specification for quality management systems in the automotive sector established by the International Automotive Task Force.
For the fiscal years ended March 31, 2025, 2024, and 2023, we had total revenue of US$17.63 million, US$14.75 million, and US$24.06 million, respectively, and net loss of US$1.41 million and US$1.30 million and net income of US$2.21 million, respectively. Revenue derived from cables and wire harnesses accounted for approximately 92.9%, 92.4%, and 92.3% of our total revenue for those fiscal years, respectively. Revenue derived from connectors accounted for approximately 7.1%, 7.6%, and 7.7% of our total revenue for those fiscal years, respectively.
For the fiscal years ended March 31, 2025, 2024, and 2023, approximately 60.6%, 61.6%, and 63.3% of our revenue was generated from our top ten customers, respectively.
Major Factors Affecting our Results of Operations
Our revenue is primarily derived from sales of both OEM (“original equipment manufacturer”) and ODM (“original design manufacture”) interconnect products — including connectors, cables and wire harnesses — which we sell to manufacturing companies and electronic manufacturing services (“EMS”) companies in Asia, Europe, the Americas and Australia. Our performance and business outlook are influenced by the following major factors:
Our ability to control the costs of raw materials and components
The costs of the components we source from suppliers are largely dependent on market forces, such as fluctuations of commodity prices, raw material prices, market supply and demand, and logistics and transport costs. Because the cost of components represents over 65% of our total cost of sales, higher or lower component costs affect our gross margins. Increases in the market price of components typically enable us to raise our selling prices. As our business further grows in scale, we expect to have higher bargaining power and, hence, more favorable terms, including pricing and payment terms, for the sourcing of components.
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Impact of foreign exchange fluctuation
Since we operate internationally, we sometimes purchase products and services with foreign currencies other than the currencies in which we normally conduct our operations. If the exchange rates for such currencies fluctuate in a manner that is unfavorable to us, our cost of sales may increase and we may be unable to shift the increase in the prices of the products or services we provide to our customers, which could have an adverse effect on our financial performance. Currency exchange rates may fluctuate significantly in the future, which could have a material effect on our results of operations, financial position and cash flows.
Our ability to retain existing customers and attract new customers
The interconnect product market is highly competitive. We compete in various aspects, including value for money, user experience, breadth of product and service offerings, product functionality and quality, sales and distribution, supply chain management, and customer loyalty, among others. Some factors that may affect our ability to meet customer demands and to attract customers include our ability to (i) design and manufacture products from the perspective of our customers in terms of raw material selection, functional and structural specifications, and technical requirements; (ii) invest in the branding, sales and marketing to acquire new customers and maintain long-term business relationships with many of our key customers; and (iii) attract new potential customers through attending the worldwide exhibitions such as the Electronica trade fair.
Impact of the COVID-19 pandemic on Our Operations and Financial Performance
Our results of operations and financial condition were negatively affected by the COVID-19 pandemic, and could continue to be further affected by the ongoing COVID-19 pandemic, the extent of which will depend on the future developments of the pandemic, which are highly uncertain and unpredictable.
Since 2020, some of our customers who were negatively impacted by the COVID-19 pandemic, which reduced their demand for our products, such as cables and wire harnesses for outdoor lighting solutions. During fiscal year ended March 31, 2022 and 2023, we took a series of measures, including tailoring our communication methods to replace physical meetings by setting up virtual meetings (e.g., Zoom meetings) with our customers on a regular basis or when required by our customers, and enhancing our presence on social media (e.g., LinkedIn) to strengthen our relationships with existing major customers, in an effort to mitigate risks brought by the COVID-19 pandemic.
In fiscal years ended March 31, 2022 and 2023, we experienced some disruptions to our supply chain that led the suppliers to increase lead times and prices for components and raw materials. In particular, the price of copper, which is the principal raw material used in the components that we source from our suppliers, increased tremendously due to rising global demand. Supply chain logistics also inflated the price of copper and the price of copper reached a record high in March 2022, as it was taking longer to move commodities around the world. As a result, the average cost of the components and materials used in our products increased by 15.5% per unit in fiscal year ended March 31, 2023 as compared with fiscal year ended March 31, 2022. To counter the higher costs, we had to raise the average selling price of our products by 19.8% per unit in fiscal year ended March 31, 2023. Our gross profit margin increased to 32.7% from 27.5%. However, in response to the expected increase of supply chain costs that caused the rising of our unit selling price, our customers had purchased products in advance from us in the fiscal year ended March 31, 2022 and the first half of the fiscal year ended March 31, 2023, resulting in a contraction in demand in the second half of the fiscal year ended March 31, 2023, and our revenue decreased by 11.4%, from US$27.17 million for the fiscal year ended March 31, 2022 to US$24.06 million for the fiscal year ended March 31, 2023.
In the fiscal year ended March 31, 2024, as the Chinese economy experienced slow and gradual recovery from COVID-19, our business was not materially impacted by COVID-19. However, the extent of the impact of COVID-19 on our future financial results will be dependent on future developments, such as any potential resurgence of COVID-19, future government actions in response thereto and the overall impact of COVID-19 on the global economy and capital markets, among many other factors, all of which remain uncertain and unpredictable. Given this uncertainty, we are currently unable to quantify the expected impact of COVID-19 on our future operations, financial condition, liquidity and results of operations.
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Impact of Wars and Geopolitical Tensions
In February 2022, the invasion of Ukraine by Russia (the “Invasion”) and the ensuing economic sanctions imposed by other countries against Russia have resulted in escalating geopolitical tensions and global supply chain disruptions. Because we do not have any customers or suppliers in Russia or Ukraine, generate any revenue from Russia or Ukraine, or use any products or commodities, including energy from Russia, in our business or products sold by us, our operations have not been materially impacted by the Invasion directly. However, as our products are sold globally, our business and operating results have been and will continue to be affected by worldwide economic conditions caused by the Invasion, which have contributed to supply chain disruptions and inflationary cost pressures. The deterioration of the global supply chain and related disruptions due to the Invasion, directly or indirectly, have contributed to fluctuations of the procurement costs of our components and raw materials. Although, historically we have been able to pass on the increases in costs to our customers, to some extent, by increasing the prices of our products, there is no guarantee that we will be able to continue to do so in the future. In the event that we are not able to pass on any increases in the procurement costs to our customers as a consequence of the Invasion, our profit margin and/or net profit could deteriorate.
Furthermore, Russia is a major player in global energy markets and the Invasion has led to significant destabilization of the global energy market. European electricity and natural gas prices are now close to ten times their historical average in the decade leading up to 2020. With no end to the Invasion in sight, the demand for our products, particularly from our European customers, have been reduced, and, as a result, our financial condition and results of operations have been negatively impacted.
In addition, an armed conflict between Israel and Hamas-led Palestinian militant groups has been taking place in the Gaza Strip since October 7, 2023. While we do not have any direct operations or significant sales in the Middle East, geopolitical tensions and ongoing conflicts in the region, particularly between Israel and Palestine, may lead to global economic instability and fluctuating energy prices that could materially affect our business. It is not possible to predict the broader consequences of the Israel-Hamas war, including related geopolitical tensions, and the measures and actions taken by other countries in respect thereof, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. While it is difficult to predict the impact of any of the foregoing, the Israel-Palestinian war may adversely affect our business, financial condition and results of operations.
Escalating Trade Tensions and Impacts of Tariff Policy Volatility
Recently there have been heightened tensions in international relations, particularly between the United States and China. Since February 2025, the U.S. administration has increased the total tariff level for imported Chinese goods to 145% and additional tariff increase could be imposed as the trade tension between the two countries continues to heighten. On April 11, 2025, China has responded by hiking its tariff on U.S. imports to 125%. While our products are sold globally, our business and operating results have been and will continue to be affected by the total tariff tensions, we remain alert to the potential indirect impacts of evolving trade policies. For instance, increased costs borne by our customers, particularly those with international exposure, could be passed on to us, potentially affecting our revenue and operating margins. The current trade environment is characterized by rapid and unpredictable changes in tariffs and regulations, making long-term planning more challenging. In response, we are strengthening collaboration with our customers and suppliers, evaluating alternative technology solutions, and enhancing the flexibility of our operational model to better respond to external disruptions. While these measures are designed to mitigate potential impacts, there can be no assurance that they will fully shield us from the broader effects of ongoing trade policy shifts. We will continue to monitor developments closely and adapt our business strategy as needed to maintain operational stability and financial performance.
Results of operations
Comparison of Results of Operations for the Fiscal Years Ended March 31, 2025 and 2024
The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
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| For the fiscal years ended March 31, | change | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||
| Net revenue | $ | 17,631,489 | $ | 14,748,551 | $ | 2,882,938 | 19.5 | % | ||||||||
| Cost of revenue | (12,647,287 | ) | (10,825,943 | ) | (1,821,344 | ) | 16.8 | % | ||||||||
| Gross profit | 4,984,202 | 3,922,608 | 1,061,594 | 27.1 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | (1,695,217 | ) | (1,039,882 | ) | (655,335 | ) | 63.0 | % | ||||||||
| General and administrative expenses | (4,601,637 | ) | (4,134,394 | ) | (467,243 | ) | 11.3 | % | ||||||||
| Research and development expenses | (654,039 | ) | (594,521 | ) | (59,518 | ) | 10.0 | % | ||||||||
| Total operating expenses | (6,950,893 | ) | (5,768,797 | ) | (1,182,096 | ) | 20.5 | % | ||||||||
| Loss from operations | (1,966,691 | ) | (1,846,189 | ) | (120,502 | ) | 6.5 | % | ||||||||
| Other income: | ||||||||||||||||
| Other non-operating income/(expenses), net | 534 | (35,509 | ) | 36,043 | (101.5 | )% | ||||||||||
| Government subsidy | 207,257 | 7,255 | 200,002 | 2,756.7 | % | |||||||||||
| Foreign currency exchange income | 67,395 | 425,308 | (357,913 | ) | (84.2 | )% | ||||||||||
| Financial and interest income, net | 10,538 | 67,636 | (57,098 | ) | (84.4 | )% | ||||||||||
| Total other income | 285,724 | 464,690 | (178,966 | ) | (38.5 | )% | ||||||||||
| Loss before income tax expense | (1,680,967 | ) | (1,381,499 | ) | (299,468 | ) | 21.7 | % | ||||||||
| Income tax benefit | 270,502 | 86,336 | 184,166 | 213.3 | % | |||||||||||
| Net loss | $ | (1,410,465 | ) | $ | (1,295,163 | ) | $ | (115,302 | ) | 8.9 | % | |||||
Revenue
We generated revenue primarily from the sales of both OEM and ODM interconnect products, including connectors, cables and wire harnesses, to manufacturing companies and EMS companies, who procure and assemble products on behalf of manufacturing companies. For the fiscal years ended March 31, 2025 and 2024, our total revenue was US$17.63 million and US$14.75 million, respectively. During these periods, we derived all of our revenue from sales in Europe, Asia, Americas, and Australia.
Our revenue increased by 19.5%, from US$14.75 million for the fiscal year ended March 31, 2024 to US$17.63 million for the fiscal year ended March 31, 2025. The increase was primarily attributable to a 37.1% increase in the total sales volume from approximately 22.86 million units for the fiscal year ended March 31, 2024 to approximately 31.34 million units for the fiscal year ended March 31, 2025, which was partially offset by a 12.8% decrease in the average selling price of our products from US$0.65 per unit for the fiscal year ended March 31, 2024 to US$0.56 per unit for the fiscal year ended March 31, 2025.
Our revenue generated from sales to our top ten customers increased from US$9.08 million in the fiscal year ended March 31, 2024 to US$10.68 million in the fiscal year ended March 31, 2025, which is consistent with the increase in our total revenue. Many of our major customers are global name-brand manufacturers, such as Linak, Danfoss, and Bitzer, and our relationships with many of our major customers date back many years. In fiscal years ended March 31, 2025 and 2024, sales to our top customers accounted for a significant portion of our total revenue and represents 60.6% and 61.6% of our total revenue, respectively. However, as the Company continues to develop new customers and expand into more markets, such customer concentration might diminish over time.
The following table sets forth our revenue by our interconnect products for the indicated periods.
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2025 | % | 2024 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Cable and wire harness | $ | 16,385,705 | 92.9 | $ | 13,626,836 | 92.4 | % | $ | 2,758,869 | 20.2 | ||||||||||||||
| Connectors | 1,245,784 | 7.1 | 1,121,715 | 7.6 | % | 124,069 | 11.1 | |||||||||||||||||
| Total | $ | 17,631,489 | 100.0 | $ | 14,748,551 | 100.0 | % | $ | 2,882,938 | 19.5 | ||||||||||||||
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For the fiscal year ended March 31, 2025, our revenue generated from cables and wire harnesses increased by 20.2%, from US$13.63 million for the fiscal year ended March 31, 2024 to US$16.39 million for the fiscal year ended March 31, 2025. The increase of sales of cables and wire harnesses was primarily attributable to the increase of sale volume, which was partially offset by the decrease of the overall average selling prices of our cables and wire harness products. Compared with the fiscal year ended March 31, 2024, our sales volume of cables and wire harnesses increased by 33.9% from approximately 9.54 million units in the fiscal year ended March 31, 2024 to approximately 12.77 million units in the fiscal year ended March 31, 2025, and our average selling prices decreased by 10.2% from US$1.43 per unit in the fiscal year ended March 31, 2024 to US$1.28 per unit in the fiscal year ended March 31, 2025. The increase in demand was mainly due to that our customers had utilized their inventories previously purchased, leading to a subsequent increase in their purchasing orders.
Our revenue generated from connectors accounted for 7.1% of our total revenue and increased by 11.1% from US$1.12 million for the fiscal year ended March 31, 2024 to US$1.25 million for the fiscal year ended March 31, 2025. The increase was primarily attributable to the increase in sale volume, which was partially offset by the decrease of the overall average selling prices of our connectors. Compared with the fiscal year ended March 31, 2024, our sales volume of connectors increased by 39.4% from approximately 13.33 million units in the fiscal year ended March 31, 2024 to approximately 18.57 million units in the fiscal year ended March 31, 2025, and our average selling prices decreased by 20.3% from US$0.08 per unit in the fiscal year ended March 31, 2024 to US$0.07 per unit in the fiscal year ended March 31, 2025. The increase in demand was primarily due to our customers that had drawn down on their previously purchased inventories, prompting a rebound in purchase orders.
All of our revenue for the fiscal years ended March 31, 2025 and 2024 was generated from sales of our products to customers located in Europe, Asia, the Americas, and Australia. The following table sets forth the disaggregation of revenue by regions:
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2025 | % | 2024 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Europe | $ | 10,991,905 | 62.3 | % | $ | 8,523,788 | 57.8 | % | $ | 2,468,117 | 29.0 | |||||||||||||
| Asia | 5,336,247 | 30.3 | % | 4,843,082 | 32.8 | % | 493,165 | 10.2 | ||||||||||||||||
| The Americas | 1,303,286 | 7.4 | % | 1,381,681 | 9.4 | % | (78,395 | ) | (5.7 | ) | ||||||||||||||
| Others | 51 | 0 | % | - | - | % | 51 | 100.0 | ||||||||||||||||
| Total | $ | 17,631,489 | 100.0 | % | $ | 14,748,551 | 100 | % | $ | 2,882,938 | 19.5 | |||||||||||||
Our revenue generated from Europe increased by 29.0%, from US$8.52 million for the fiscal year ended March 31, 2024 to US$10.99 million for the fiscal year ended March 31, 2025. The increase was primarily attributable to (i) an increase of sales in Denmark of US$2.02 million, from US$6.04 million for the fiscal year ended March 31, 2024, to US$8.06 million for the fiscal year ended March 31, 2025, (ii) an increase of sales in Bulgaria of US$0.32 million, from US$0.57 million for the fiscal year ended March 31, 2024, to US$0.89 million for the fiscal year ended March 31, 2025, and (iii) an increase of sales in Poland of US$0.11 million, from US$0.16 million for the fiscal year ended March 31, 2024, to US$0.27 million for the fiscal year ended March 31, 2025.
Our revenue generated from Asia increased by 10.2%, from US$4.84 million for the fiscal year ended March 31, 2024, to US$5.34 million for the fiscal year ended March 31, 2025. This increase was primarily driven by a sales increase in Association of Southeast Asian Nations, or ASEAN, of US$0.46 million, a sales increase in Mainland China of US$0.26 million, and partially offset by a sales decrease in Hong Kong, China of US$0.22 million. The growth in ASEAN was mainly attributable to rising demand driven by regional economic development, which resulted in higher sales of products such as connectors and cables. The increase in Mainland China was primarily driven by a recovery in customer purchasing activity, as customers had utilized previously procured inventories and subsequently resumed order placements.
Our revenue generated from the Americas decreased by 5.7%, from US$1.38 million for the fiscal year ended March 31, 2024 to US$1.30 million for the fiscal year ended March 31, 2025, which was primarily due to a sales decrease in North America of US$0.08 million.
Our revenue from other regions was mainly derived from Australia, reflecting efforts to expand our customer base in other geographic areas.
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Cost of revenue
Our cost of revenue primarily consists of the following: (i) inventory costs, which primarily include procurement costs for components for the manufacturing of our products, including 1) cables and plastics, including single wires, insulation tubes, standard connectors, plastic fabricated parts, 2) metal parts, including metal shells, metal terminals, metal fabricated parts, and 3) electronic parts, including printed circuit boards, LEDs, resistors, capacitors, transistors, inductors, thermistors, potentiometers, ferrite cores, switches, and semiconductors; (ii) labor costs, which consist of salaries and benefits of employees; (iii) rental expenses for the factory and dormitory of employees; (iv) depreciation expenses on our plant, property and equipment used for production; and (v) other expenses that are directly attributable to our principal operations, which primarily include freight charges for materials and components, and electricity and water used for manufacturing.
Our cost of revenue increased by US$1.82 million, or 16.8%, from US$10.83 million for the fiscal year ended March 31, 2024 to US$12.65 million for the fiscal year ended March 31, 2025, which was generally in line with the increase in total revenue. The increase was primarily due to the following: (i) an increase in our inventory costs from US$7.34 million for the fiscal year ended March 31, 2024 to US$8.58 million for the fiscal year ended March 31, 2025, and (ii) an increase in our labor costs from US$2.49 million for the fiscal year ended March 31, 2024 to US$3.07 million for the fiscal year ended March 31, 2025.
Our inventory costs represented a significant portion of our cost of revenue. For the fiscal years ended March 31, 2025 and 2024, our inventory costs amounted to US$8.58 million and US$7.34 million, respectively, representing 67.8% and 67.8% of our total cost of revenue for such respective periods. The increase in our inventory costs was primarily due to a 37.1% increase in the total sales volume from approximately 22.86 million units in the fiscal year ended March 31, 2024 to approximately 31.34 million units in the fiscal year ended March 31, 2025. This increase was partially offset by a 14.7% decrease in inventory cost per unit from US$0.32 in the fiscal year ended March 31, 2024 to US$0.27 in the fiscal year ended March 31, 2025.
For the fiscal years ended March 31, 2025 and 2024, our labor costs amounted to US$3.07 million and US$2.49 million, respectively, representing 24.3% and 23.0% of our total cost of revenue. The increase in labor costs was mainly attributable to higher production volumes driven by increased sales.
Gross Profit and Gross Profit Margin
Gross profit represents our revenue less cost of revenue. Our gross profit margin represents our gross profit as a percentage of our revenue. For the fiscal years ended March 31, 2025 and 2024, our gross profit was US$4.98 million and US$3.92 million, respectively, and our gross profit margin was 28.3% and 26.6%, respectively.
The following table sets forth the overall gross profit margin of the Company:
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2025 | % | 2024 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Revenue | $ | 17,631,489 | 100.0 | $ | 14,748,551 | 100 | % | $ | 2,882,938 | 19.5 | ||||||||||||||
| Cost | (12,647,287 | ) | (71.7 | ) | (10,825,943 | ) | (73.4 | )% | (1,821,344 | ) | 16.8 | |||||||||||||
| Gross Profit | $ | 4,984,202 | 28.3 | $ | 3,922,608 | 26.6 | % | $ | 1,061,594 | 27.1 | ||||||||||||||
The gross profit margin increased slightly compared to the prior fiscal year, primarily due to a reduction in fixed cost per unit. This was driven by a 37.1% increase in total sales volume, which rose from 22.86 million units in the fiscal year ended March 31, 2024 to 31.34 million units in the fiscal year ended March 31, 2025. The increase in sales volume was primarily driven by increased customer orders as previously purchased inventories were depleted.
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Operating Expenses
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2025 | % | 2024 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Selling expenses | $ | (1,695,217 | ) | (9.6 | ) | $ | (1,039,882 | ) | (7.1 | )% | $ | (655,335 | ) | 63.0 | ||||||||||
| General and administrative expenses | (4,601,637 | ) | (26.1 | ) | (4,134,394 | ) | (28.0 | )% | (467,243 | ) | 11.3 | |||||||||||||
| Research and development expenses | (654,039 | ) | (3.7 | ) | (594,521 | ) | (4.0 | )% | (59,518 | ) | 10.0 | |||||||||||||
| Total | $ | (6,950,893 | ) | (39.4 | ) | $ | (5,768,797 | ) | (39.1 | )% | $ | (1,182,096 | ) | 20.5 | ||||||||||
Selling expenses
Selling expenses primarily consist of: (i) marketing and entertainment expenses for promotion; (ii) staff costs, travelling expenses, rental and depreciation related to selling and marketing functions; (iii) freight fees and transportation fees; and (iv) office, utility and other expenses.
Our selling expenses increased by 63.0%, or US$0.66 million, from US$1.04 million for the fiscal year ended March 31, 2024 to US$1.70 million for the fiscal year ended March 31, 2025. The increase was a result of combined factors that included: (i) an increase of US$0.57 million in market development costs for entering the ASEAN, American, and European markets; (ii) an increase of US$0.09 million in freight charges due to the increase in our sales volumes; and (iii) an increase of US$0.07 million in exhibition expenses.
General and administrative expenses
General and administrative expenses primarily consist of: (i) salaries and benefits for our administrative personnel; (ii) agent and professional fees related to our IPO, including both one-time IPO-related costs and recurring public company compliance expenses; (iii) office expenses, expenses for office supplies and consumables; (iv) depreciation and amortization expenses relating to our property, plant and equipment and leased properties used for administrative purposes; and (v) other expenses, which primarily include utilities, traveling, entertainment, repair and maintenance, rental and other miscellaneous expenses for administrative purposes.
Our general and administrative expenses increased by 11.3%, or US$0.47 million, from US$4.13 million for the fiscal year ended March 31, 2024 to US$4.60 million for the fiscal year ended March 31, 2025, which was primarily attributable to the following: (i) an increase of US$0.43 million in agent and professional fees, primarily related to compliance and reporting obligations as a public company following our IPO in the U.S; (ii) an increase of US$0.34 million in salaries and benefits, primarily attributable to higher compensation for our general and administrative personnel, as well as bonuses and celebration expenses incurred in connection with the successful completion of our IPO. This increase was partially offset by a reduction in travel expenses during the fiscal year ended March 31, 2025, due to the absence of non-recurring overseas trips in the prior year for IPO-related activities and business development; and (iii) a decrease of US$0.30 million in entertainment and related expenses, mainly due to the absence of non-recurring IPO celebration events and overseas business trips that contributed to entertainment costs in the prior year.
Research and development (“R&D”) expenses
Research and development expenses primarily include (i) salaries, welfare and insurance expenses paid to R&D employees; (ii) costs of materials and components for the research and development activities; and (iii) manufacturing expenses for producing samples related to our research and development activities.
Our research and development expenses increased by 10.0%, or US$0.06 million from US$0.59 million for the fiscal year ended March 31, 2024 to US$0.65 million for the fiscal year ended March 31, 2025, primarily due to an increase of US$0.07 million in employee salaries, and partially offset by a decrease of US$0.01 million in the materials and components consumption.
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Other income
Other income, primarily consists of: (i) government subsidy; (ii) non-recurring engineering charge paid by customers; (iii) other non-operating income/(expenses), net, inclusive of overtime expense compensation and material enhancement compensation paid by customers for early delivery orders; (iv) financial and interest income (expenses), inclusive of interest income and interest expenses; and (v) gains or losses on exchange rate fluctuations.
Other income decreased by US$0.17 million from US$0.46 million in the fiscal year ended March 31, 2024 to US$0.29 million in the fiscal year ended March 31, 2025, which was primarily attributable to (i) a decrease in foreign currency exchange gain of US$0.36 million, and (ii) an increase of US$0.20 million in government subsidy, mainly from a “Little Giant” award granted by the Dongguan Municipal Treasury.
Income tax benefit
Cayman Islands
Our Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act of the Cayman Islands and accordingly is not subject to income tax from business carried out in the Cayman Islands.
British Virgin Islands
Our subsidiary, CCSC Group Limited, was incorporated under the laws of the British Virgin Islands (“BVI”) as a business company with limited liability under the BVI Business Companies Act and, accordingly, is not subject to income tax from business carried out in the BVI.
Hong Kong
According to Tax (Amendment) (No. 3) Ordinance 2019 published by Hong Kong government, effective April 1, 2019, under the two-tiered profits tax rates regime, the profits tax rate for the first HK$2 million of assessable profits was reduced to 8.25% (half of the rate specified in Schedule 8 to the Inland Revenue Ordinance (IRO)) for corporations, while the remaining profits will continue to be taxed at the existing 16.5% tax rate. CCSC Technology Group and CCSC Interconnect HK were subject to Hong Kong profit tax during the periods presented.
Serbia
Our subsidiary, CCSC Technology Serbia, which was incorporated and operated in Serbia, is subject to enterprise income tax on its worldwide taxable income, as determined under the tax laws and accounting standards, at a rate of 15%. CCSC Technology Serbia was not subject to any income tax, as it was only established in February 2024 and did not have taxable income during these periods.
Netherlands
Our subsidiary, CCSC Interconnect NL, which was incorporated and is operated in the Netherlands, is subject to enterprise income tax on their worldwide taxable income, as determined under the tax laws and accounting standards, at a rate of 19% (15% in 2022) for the first EUR200,000 (EUR395,000 in 2022) of profits earned by CCSC Interconnect NL, and the remaining profits will continue to be taxed at the existing 25.8% tax rate in 2025, 2024 and 2023. For the fiscal years ended March 31, 2025 and 2024, CCSC Interconnect NL was not subject to any income tax as it had no taxable income during these periods.
Mainland China
Generally, our PRC subsidiary, CCSC Interconnect DG, is subject to enterprise income tax on its taxable income in China at a statutory rate of 25%; however, since CCSC Interconnect DG is certified as a National High Tech Enterprise, or NHTE, it is eligible for a preferential enterprise income tax rate of 15%. The enterprise income tax is calculated based on the entity’s global income, as determined under the PRC laws and accounting standards. The HNTE accreditation may be renewed every three year. As of the date of this annual report, we are in the process of renewing the HNTE accreditation for CCSC Interconnect DG for years 2025-2027.
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Our products are primarily subject to value-added tax at a rate of 13% on sales, in each case less any deductible value-added tax we have already paid or borne. We are also subject to surcharges on value-added tax payments in accordance with PRC laws.
Dividends paid by our PRC subsidiary in China to our Hong Kong subsidiary, CCSC Technology Group, will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Double Taxation Avoidance Arrangement and receives approval from the relevant tax authority. If CCSC Technology Group satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. Effective from November 1, 2015, the above-mentioned approval requirement was abolished, but a Hong Kong entity is still required to file an application package with the relevant tax authority, and settle the overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority.
If we or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, the affected entity would be subject to enterprise income tax on its worldwide income at a rate of 25%.
Under the PRC Enterprise Income Tax Law and the Notice on Improvements to Policies of Weighted Pre-tax Deduction of Research and Development Expenses, research and development expenses incurred by an enterprise in the course of carrying out research and development activities that have not formed intangible assets are included in the profit and loss account for the current year. Starting from January 1, 2021, besides deducting the actual amount of research and development expenses incurred, an enterprise is allowed an additional 100% deduction of the amount in calculating its taxable income for the relevant year, the rate of which was 75% before 2021. For R&D expenses that have formed intangible assets, the tax amortization is based on 200% of the costs of the intangible assets.
Our income tax benefit increased from US$0.09 million for the fiscal year ended March 31, 2024 to US$0.27 million for the fiscal year ended March 31, 2025, which was due losses incurred by CCSC Interconnect DG and CCSC Interconnect HK in the fiscal year ended March 31, 2025.
Net loss
As a result of the foregoing, our net loss increased by 8.9%, or US$0.11 million from US$1.30 million for the fiscal year ended March 31, 2024 to US$1.41 million for the fiscal year ended March 31, 2025.
Comparison of Results of Operations for the Fiscal Years Ended March 31, 2024 and 2023
The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
| For the fiscal years ended March 31, | change | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||
| Net revenue | $ | 14,748,551 | $ | 24,059,556 | $ | (9,311,005 | ) | (38.7 | )% | |||||||
| Cost of revenue | (10,825,943 | ) | (16,190,985 | ) | 5,365,042 | (33.1 | )% | |||||||||
| Gross profit | 3,922,608 | 7,868,571 | (3,945,963 | ) | (50.1 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | (1,039,882 | ) | (1,097,150 | ) | 57,268 | (5.2 | )% | |||||||||
| General and administrative expenses | (4,134,394 | ) | (3,898,894 | ) | (235,500 | ) | 6.0 | % | ||||||||
| Research and development expenses | (594,521 | ) | (1,084,119 | ) | 489,598 | (45.2 | )% | |||||||||
| Total operating expenses | (5,768,797 | ) | (6,080,163 | ) | 311,366 | (5.1 | )% | |||||||||
| (Loss)/income from operations | (1,846,189 | ) | 1,788,408 | (3,634,597 | ) | (203.2 | )% | |||||||||
| Other (expenses)/income: | ||||||||||||||||
| Other non-operating (expenses)/income, net | (35,509 | ) | 49,873 | (85,382 | ) | (171.2 | )% | |||||||||
| Government subsidy | 7,255 | 62,627 | (55,372 | ) | (88.4 | )% | ||||||||||
| Foreign currency exchange income | 425,308 | 562,527 | (137,219 | ) | (24.4 | )% | ||||||||||
| Financial and interest income, net | 67,636 | 22,455 | 45,181 | 201.2 | % | |||||||||||
| Total other income | 464,690 | 697,482 | (232,792 | ) | (33.4 | )% | ||||||||||
| (Loss)/income before income tax expense | (1,381,499 | ) | 2,485,890 | (3,867,389 | ) | (155.6 | )% | |||||||||
| Income tax benefit/(expense) | 86,336 | (277,738 | ) | 364,074 | (131.1 | )% | ||||||||||
| Net (loss)/income | $ | (1,295,163 | ) | $ | 2,208,152 | $ | (3,503,315 | ) | (158.7 | )% | ||||||
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Revenue
We generated revenue primarily from the sales of both OEM and ODM interconnect products, including connectors, cables, and wire harnesses, to manufacturing companies and EMS companies, who procure and assemble products on behalf of manufacturing companies. For the fiscal years ended March 31, 2024 and 2023, our total revenue was US$14.75 million and US$24.06 million, respectively. During these periods, we derived all of our revenue from sales in Europe, Asia and the Americas.
Our revenue decreased by 38.7%, from US$24.06 million for the fiscal year ended March 31, 2023 to US$14.75 million for the fiscal year ended March 31, 2024. The decrease was primarily attributable to (i) a 44.1% decrease in the total sales volume from approximately 40.93 million units for the fiscal year ended March 31, 2023 to approximately 22.86 million units for the fiscal year ended March 31, 2024, and (ii) a 15.3% decrease of the average selling price of our cable and wire harnesses products from US$1.69 per unit for the fiscal year ended March 31, 2023 to US$1.43 per unit for the fiscal year ended March 31, 2024.
Our revenue generated from the sales to our top ten customers dropped from US$15.23 million in the fiscal year ended March 31, 2023 to US$9.08 million in the fiscal year ended March 31, 2024, which is consistent with the decrease in our total revenue. Many of our major customers are global name-brand manufacturers, such as Linak, Danfoss, and Bitzer, and our relationships with many of our major customers date back many years. In the fiscal years ended March 31, 2024 and 2023, sales to our top customers accounted for a significant portion of our total revenue. In the fiscal years ended March 31, 2024 and 2023, revenue generated from the sales to our top ten customers represents 61.6% and 63.3% of our total revenue, respectively. However, as the Company continues to develop new customers and expand into more markets, we expect such customer concentration will diminish over time.
The following table sets forth our revenue by our interconnect products for the indicated periods.
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Cable and wire harness | $ | 13,626,836 | 92.4 | % | $ | 22,212,627 | 92.3 | % | $ | (8,585,791 | ) | (38.7 | )% | |||||||||||
| Connectors | 1,121,715 | 7.6 | % | 1,846,929 | 7.7 | % | (725,214 | ) | (39.3 | )% | ||||||||||||||
| Total | $ | 14,748,551 | 100.0 | % | $ | 24,059,556 | 100.0 | % | $ | (9,311,005 | ) | (38.7 | )% | |||||||||||
For the fiscal year ended March 31, 2024, our revenue generated from cables and wire harnesses decreased by 38.7%, from US$22.21 million for the fiscal year ended March 31, 2023 to US$13.63 million for the fiscal year ended March 31, 2024. The decrease of sales from cables and wire harnesses was primarily attributable to the decrease in sale volume and the overall average selling prices of our cables and wire harness products. Compared with the fiscal year ended March 31, 2023, our sales volume of cables and wire harnesses decreased by 27.6% from approximately 13.17 million units in the fiscal year ended March 31, 2023 to approximately 9.54 million units in the fiscal year ended March 31, 2024, and our average selling prices decreased by 15.3% from US$1.69 per unit in the fiscal year ended March 31, 2023 to US$1.43 per unit in the fiscal year ended March 31, 2024, as we adjusted the selling prices in response to the decreased demand for our products. The decrease was because our customers had purchased products in advance from us in the fiscal year ended March 31, 2022 and the first half of the fiscal year ended March 31, 2023 in response to the expected increase of supply chain costs. However, given the stagnant global economy, customers shifted towards maintaining zero inventory instead of advanced procurement, leading to a contraction in customer demand for the fiscal year ended March 31, 2024.
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Our revenue generated from connectors accounted for 7.6% of our total revenue and decreased by 39.3% from US$1.85 million for the fiscal year ended March 31, 2023 to US$1.12 million for the fiscal year ended March 31, 2024. The decrease was primarily attributable to the 52.0% decrease in our total sales volume from approximately 27.76 million units in the fiscal year ended March 31, 2023 to approximately 13.33 million units in the fiscal year ended March 31, 2024. This decrease can be attributed to advance purchases made by our customers in response to the expected increase of supply chain costs in the fiscal year ended March 31, 2022 and the first half of the fiscal year ended March 31, 2023. However, due to the stagnant global economy, customers preferred just-in-time procurement over stockpiling inventory since the second half of the fiscal year ended March 31, 2023, resulting in a contraction in customer demands. This decrease in demand was partially offset by a 26.5% increase of the overall selling prices of connectors due to high-priced connectors we sold during the fiscal year ended March 31, 2024.
All of our revenue for the fiscal years ended March 31, 2024 and 2023 was generated from sales of our products to customers located in Europe, Asia, and the Americas. The following table sets forth the disaggregation of revenue by regions:
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Europe | $ | 8,523,788 | 57.8 | % | $ | 15,044,438 | 62.5 | % | $ | (6,520,650 | ) | (43.3 | )% | |||||||||||
| Asia | 4,843,082 | 32.8 | % | 7,438,292 | 30.9 | % | (2,595,210 | ) | (34.9 | )% | ||||||||||||||
| Americas | 1,381,681 | 9.4 | % | 1,576,826 | 6.6 | % | (195,145 | ) | (12.4 | )% | ||||||||||||||
| Total | $ | 14,748,551 | 100 | % | $ | 24,059,556 | 100 | % | $ | (9,311,005 | ) | (38.7 | )% | |||||||||||
Our revenue generated from Europe decreased by 43.3%, from US$15.04 million for the fiscal year ended March 31, 2023 to US$8.52 million for the fiscal year ended March 31, 2024. The decrease was primarily attributable to (i) a decrease of sales in Denmark of US$4.06 million, from US$10.10 million for the fiscal year ended March 31, 2023, to US$6.04 million for the fiscal year ended March 31, 2024; (ii) a decrease of sales in Hungary of US$1.83 million, from US$2.14 million for the fiscal year ended March 31, 2023, to US$0.32 million for the fiscal year ended March 31, 2024; and (iii) a decrease of sales in Bulgaria of US$0.30 million, from US$0.87 million for the fiscal year ended March 31, 2023, to US$0.57 million for the fiscal year ended March 31, 2024. This decrease was partially offset by the increase of sales of US$0.29 million in Italy.
Our revenue generated from Asia decreased by 34.9%, from US$7.44 million for the fiscal year ended March 31, 2023, to US$4.84 million for the fiscal year ended March 31, 2024, which was primarily due to the sales decreases in China of US$1.59 million, and the decrease in sales in ASEAN, of US$0.99 million. Sales orders in China decreased because our customers had purchased products in advance from us in the fiscal year ended March 31, 2022 and the first half of the fiscal year ended March 31, 2023 in response to the expected increase of supply chain costs, resulting in a contraction in demand in the fiscal year ended March 31, 2024. Our customers in Malaysia had decreased demand for our cables and harness products for robotic applications due to a decrease in robotic market demand.
Our revenue generated from the Americas decreased by 12.4%, from US$1.58 million for the fiscal year ended March 31, 2023 to US$1.38 million for the year ended March 31, 2024, which was primarily due to the sales decrease in North America of US$0.19 million.
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Cost of revenue
Our cost of revenue primarily consists of the following: (i) inventory costs, which primarily include procurement costs for components for the manufacturing of our products, including 1) cables and plastics, including single wires, insulation tubes, standard connectors, plastic fabricated parts, 2) metal parts, including metal shells, metal terminals, metal fabricated parts, and 3) electronic parts, including printed circuit boards, LEDs, resistors, capacitors, transistors, inductors, thermistors, potentiometers, ferrite cores, switches and semiconductors; (ii) labor costs, which consist of salaries and benefits of employees; (iii) rental expenses for the factory and dormitory of employees; (iv) depreciation expenses on our plant, property and equipment used for production; and (v) other expenses that are directly attributable to our principle operations, which primarily include freight charges for materials and components, and electricity and water used for manufacturing.
Our cost of revenue decreased by US$5.37 million, or 33.1%, from US$16.19 million for the fiscal year ended March 31, 2023 to US$10.83 million for the fiscal year ended March 31, 2024. The reason was primarily due to (i) a decrease of our inventory costs from US$12.10 million for the fiscal year ended March 31, 2023 to US$7.34 million for the fiscal year ended March 31, 2024, and (ii) a decrease of our labor costs from US$2.87 million for the fiscal year ended March 31, 2023 to US$2.49 million for the fiscal year ended March 31, 2024.
Our inventory costs represented a significant portion of our cost of revenue. For the fiscal years ended March 31, 2024 and 2023, our inventory costs amounted to US$7.34 million and US$12.10 million, respectively, representing 67.8% and 74.8% of our total cost of revenue for such respective periods. The decrease of our inventory costs was primarily due to a 44.1% decrease of the total sales volume from approximately 40.93 million units in the fiscal year ended March 31, 2023 to approximately 22.86 million units in the fiscal year ended March 31, 2024. This reduction was partially offset by an 8.5% increase of inventory cost per unit from US$0.30 in the fiscal year ended March 31, 2023 to US$0.32 in the fiscal year ended March 31, 2024.
For the fiscal years ended March 31, 2024 and 2023, our labor costs amounted to US$2.49 million and US$2.87 million, respectively, representing 23.0% and 17.7% of our total cost of revenue. The decrease of labor costs was primarily because we reduced the number of manufacturing employees from 166 in the fiscal year ended March 31, 2023 to 136 in the fiscal year ended March 31, 2024 to improve our operational efficiency.
Gross Profit and Gross Profit Margin
Gross profit represents our revenue less cost of revenue. Our gross profit margin represents our gross profit as a percentage of our revenue. For the fiscal years ended March 31, 2024 and 2023, our gross profit was US$3.92 million and US$7.87 million, respectively, and our gross profit margin was 26.6% and 32.7%, respectively.
The following table sets forth the overall gross profit margin of the Company:
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Revenue | $ | 14,748,551 | 100 | % | $ | 24,059,556 | 100 | % | $ | (9,311,005 | ) | (38.7 | )% | |||||||||||
| Cost | (10,825,943 | ) | (73.4 | )% | (16,190,985 | ) | (67.3 | )% | 5,365,042 | (33.1 | )% | |||||||||||||
| Gross Profit | $ | 3,922,608 | 26.6 | % | $ | 7,868,571 | 32.7 | % | $ | (3,945,963 | ) | (50.1 | )% | |||||||||||
The gross profit margin slightly decreased in the fiscal year ended March 31, 2024 compared to the fiscal year ended March 31 2023, primarily due to the increase in fixed cost per unit as a result of a decrease by 44.1% of total sales volume from 40.93 million units for the fiscal year ended March 31, 2023 to 22.86 million units for the fiscal year ended March 31, 2024, affected by the diminishing global export demands.
Operating Expenses
| For the fiscal years ended March 31, | Change | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||||||||||
| Selling expenses | $ | (1,039,882 | ) | (7.1 | )% | $ | (1,097,150 | ) | (4.6 | )% | $ | 57,268 | (5.2 | )% | ||||||||||
| General and administrative expenses | (4,134,394 | ) | (28.0 | )% | (3,898,894 | ) | (16.2 | )% | (235,500 | ) | 6.0 | % | ||||||||||||
| Research and development expenses | (594,521 | ) | (4.0 | )% | (1,084,119 | ) | (4.5 | )% | 489,598 | (45.2 | )% | |||||||||||||
| Total | $ | (5,768,797 | ) | (39.1 | )% | $ | (6,080,163 | ) | (25.3 | )% | $ | 311,366 | (5.1 | )% | ||||||||||
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Selling expenses
Selling expenses primarily consist of: (i) freight fees and transportation fees; (ii) staff costs, travelling expenses, rental and depreciation related to selling and marketing functions; and (iii) marketing and entertainment expenses for promotion; and (iv) free sample expenses incurred for obtaining new customers and sales orders.
Our selling expenses decreased by 5.2%, or US$0.06 million, from US$1.10 million for the fiscal year ended March 31, 2023 to US$1.04 million for the fiscal year ended March 31, 2024. The decrease was a result of combined factors that included: (i) a decrease of US$0.04 million in exhibition expenses; (ii) a decrease of US$0.03 million in office expenses; and (iii) a decrease of US$0.05 million in freight charges, due to the decrease in our sales volumes. The decrease was partially offset by (i) an increase of US$0.04 million in travelling expenses for site visit to our existing and potential customers in Europe and (ii) an increase of US$0.04 million in consulting service fees for market development and expansion to the ASEAN market.
General and administrative expenses
General and administrative expenses primarily consist of: (i) salaries and benefits for our administrative personnel; (ii) depreciation and amortization expenses relating to our property, plant and equipment and leased properties used for administrative purposes; (iii) office expenses, expenses for office supplies and consumables; (iv) agent and professional fees related to our IPO, including both one-time IPO-related costs and recurring public company compliance expenses; and (v) other expenses, which primarily include utilities, traveling, entertainment, repair and maintenance, rental and other miscellaneous expenses for administrative purposes.
Our general and administrative expenses increased by 6.0%, or US$0.24 million, from US$3.90 million for the fiscal year ended March 31, 2023 to US$4.13 million for the fiscal year ended March 31, 2024, which was primarily attributable to an increase of US$0.41 million in travel allowance and entertainment and partially offset by a decrease of US$0.21 million in salaries and benefits as a result of a reduction in the number of our general and administrative personnel.
Research and development (“R&D”) expenses
Research and development expenses primarily include (i) costs of materials and components for the research and development activities; (ii) salaries, welfare and insurance expenses paid to R&D employees; and (iii) manufacturing expenses for producing samples related to our research and development activities.
Our research and development expenses decreased by 45.2%, or US$0.49 million from US$1.08 million for the fiscal year ended March 31, 2023 to US$0.59 million for the fiscal year ended March 31, 2024, primarily due to a decrease in the materials and components consumption and employee salaries. These adjustments were made in response to a decrease in revenue, leading us to scale back our investment in R&D activities for the fiscal year ended March 31, 2024.
Other income
Other income, primarily consists of: (i) government subsidy; (ii) non-recurring engineering charge paid by customers; (iii) other non-operating income, inclusive of overtime expense compensation and material enhancement compensation paid by customers for early delivery orders; (iv) financial and interest income (loss), inclusive of interest income and interest expenses; and (v) gains or losses on exchange rate fluctuations.
Other income decreased by US$0.23 million from US$0.70 million in the fiscal year ended March 31, 2023 to US$0.46 million in the fiscal year ended March 31, 2024, which was primarily attributable to (i) a decrease in foreign exchange gain of US$0.14 million, (ii) a decrease of US$0.06 million in government subsidy, and (iii) a decrease of US$0.03 million in overtime expense compensation and material enhancement compensation paid by customers for early delivery orders.
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Income tax benefit/(expense)
Cayman Islands
Our Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act of the Cayman Islands and accordingly is not subject to income tax from business carried out in the Cayman Islands.
British Virgin Islands
Our subsidiary, CCSC Group Limited, was incorporated under the laws of the BVI as a business company with limited liability under the BVI Business Companies Act and, accordingly, is not subject to income tax from business carried out in the BVI.
Hong Kong
According to Tax (Amendment) (No. 3) Ordinance 2019 published by Hong Kong government, effective April 1, 2019, under the two-tiered profits tax rates regime, the profits tax rate for the first HK$2 million of assessable profits was reduced to 8.25% (half of the rate specified in Schedule 8 to the IRO) for corporations and 16.5% on any part of assessable profits over HK$2,000,000. Our subsidiaries, CCSC Technology Group and CCSC Interconnect HK that are considered HK resident enterprises under HK tax law, were subject to Hong Kong profit tax for any period presented as have assessable profit during the periods presented.
Netherlands
Our subsidiary, CCSC Interconnect NL, which was incorporated and operated in the Netherlands, is subject to enterprise income tax on their worldwide taxable income, as determined under the tax laws and accounting standards, at a rate of 19% (15% in 2022) for the first EUR 200,000 (EUR 395,000 in 2022) of profits earned by CCSC Interconnect NL, and the remaining profits will be taxed at the existing 25.8% tax rate in 2024, 2023 and 2022. For the fiscal years ended March 31, 2024 and 2023, CCSC Interconnect NL was not subject to any income tax as it had no taxable income during these periods.
Serbia
Our subsidiary, CCSC Technology Serbia, which was incorporated and operates in Serbia, is subject to enterprise income tax on its worldwide taxable income, as determined under the tax laws and accounting standards, at a rate of 15%. CCSC Technology Serbia was not subject to any income tax, as it was only established in February 2024 and had no taxable income during these periods.
Mainland China
Generally, our PRC subsidiary, CCSC Interconnect DG, is subject to enterprise income tax on its taxable income in China at a statutory rate of 25%; however, since CCSC Interconnect DG is certified as a National High Tech Enterprise, it is eligible for a preferential enterprise income tax rate of 15%. The enterprise income tax is calculated based on the entity’s global income, as determined under the PRC laws and accounting standards. CCSC Interconnect DG has obtained the HNTE accreditation since 2016, which was last renewed on December 22, 2022, and has received a preferential income tax rate of 15% rather than the unified rate of 25% for years 2022-2024. As of the date of this annual report, CCSC Interconnect DG is in the process of renewing its HNTE accreditation for years 2025-2027.
Our products are primarily subject to value-added tax at a rate of 13% on sales, in each case less any deductible value-added tax we have already paid or borne. We are also subject to surcharges on value-added tax payments in accordance with PRC laws.
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Dividends paid by our PRC subsidiary in China to our Hong Kong subsidiary, CCSC Technology Group, will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Double Taxation Avoidance Arrangement and receives approval from the relevant tax authority. If CCSC Technology Group satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. Effective from November 1, 2015, the above-mentioned approval requirement was abolished, but a Hong Kong entity is still required to file an application package with the relevant tax authority, and settle the overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority.
If we or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, the affected entity would be subject to enterprise income tax on its worldwide income at a rate of 25%.
Under the PRC Enterprise Income Tax Law and the Notice on Improvements to Policies of Weighted Pre-tax Deduction of Research and Development Expenses, research and development expenses incurred by an enterprise in the course of carrying out research and development activities that have not formed intangible assets are included in the profit and loss account for the current year. Starting from January 1, 2021, besides deducting the actual amount of research and development expenses incurred, an enterprise is allowed an additional 100% deduction of the amount in calculating its taxable income for the relevant year, the rate of which was 75% before 2021. For R&D expenses that have formed intangible assets, the tax amortization is based on 200% of the costs of the intangible assets.
Our income tax benefit/(expense) decreased from tax expense of US$0.28 million for the fiscal year ended March 31, 2023 to tax benefit of US$0.09 million for the fiscal year ended March 31, 2024, which was due to the loss of CCSC Interconnect DG in the fiscal year ended March 31, 2024.
Net (loss)/income
As a result of the foregoing, our net income decreased by 158.7%, or US$3.50 million from net income of US$2.21 million for the fiscal year ended March 31, 2023 to net loss of US$1.30 million for the fiscal year ended March 31, 2024.
B. Liquidity and Capital Resources
As of March 31, 2025, we had US$3.69 million in cash and restricted cash, which consisted of (i) cash in mainland China of US$0.69 million; (ii) cash in Hong Kong of US$2.85 million; (iii) cash and restricted cash in the Netherlands of US$0.07 million; and (iv) cash in Serbia of US$0.08 million. Under PRC laws, RMB can be converted into U.S. dollars under the Company’s “current account” (including dividends, trade and service-related foreign exchange transactions), rather than the “capital account” (including foreign direct investments and loans, without the prior approval of the SAFE). Payments of current account items, including profit distributions, interest payments, and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements.
As of the date of this annual report, we have financed our operations primarily through cash generated from our operations and with a portion of the net proceeds raised from our IPO. We intend to continue relying on cash generated from our operations to support our future operations, and may consider seeking additional financing such as bank loans as needed.
Accounts receivable amounted to US$2.50 million and US$2.75 million as of March 31, 2025 and 2024, respectively. All the accounts receivable balances on March 31, 2024 have been fully collected as of the date of this annual report. Approximately 99.1%, or US$2.47 million, of the accounts receivable balances on March 31, 2025 have been collected as of the date of this annual report.
As of March 31, 2025, we had a total inventory balance of US$1.76 million, which primarily included raw material of US$0.81 million, to ensure sufficient raw materials were available to meet our production needs, inventory in transit of US$0.57 million. The inventory in transit has since been fully settled when the customers received the products in the subsequent period.
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As of March 31, 2024, we had a total inventory balance of US$2.02 million, which primarily included raw material of US$1.78 million, to ensure sufficient raw materials were available to meet our production needs, and inventory in transit of US$0.34 million. The inventory in transit has since been fully settled when the customers received the products in the subsequent period.
As of March 31, 2025, we had working capital of US$5.18 million, as compared to working capital of US$7.54 million as of March 31, 2024. We believe that our current cash and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements, capital expenditures and debt repayment obligations for at least the next 12 months following the date of our consolidated financial statements for the fiscal year ended March 31, 2025 were released.
Cash Flows
Cash Flows Analysis for the Fiscal Years Ended March 31, 2025, 2024, and 2023
The following table sets forth a summary of our cash flows for the periods indicated:
| For the fiscal years ended March 31, | change | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||
| Net cash used in operating activities | $ | (1,018,153 | ) | $ | (2,528,503 | ) | $ | 1,510,350 | (59.7 | ) | ||||||
| Net cash used in investing activities | (890,490 | ) | (3,825,787 | ) | 2,935,297 | (76.7 | ) | |||||||||
| Net cash provided by financing activities | - | 4,626,269 | (4,626,269 | ) | (100.0 | ) | ||||||||||
| Effect of exchange rate changes on cash and restricted cash | (131,648 | ) | (254,847 | ) | 123,199 | (48.3 | ) | |||||||||
| Net change in cash and restricted cash | (2,040,291 | ) | (1,982,868 | ) | (57,423 | ) | 2.9 | |||||||||
| Cash and restricted cash, beginning of the year | 5,734,747 | 7,717,615 | (1,982,868 | ) | (25.7 | ) | ||||||||||
| Cash and restricted cash, end of the year | $ | 3,694,456 | $ | 5,734,747 | $ | (2,040,291 | ) | (35.6 | ) | |||||||
| For the fiscal years ended March 31, | change | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| (Amounts expressed in U.S. dollars) | ||||||||||||||||
| Net cash (used in)/provided by operating activities | $ | (2,528,503 | ) | $ | 3,463,635 | $ | (5,992,138 | ) | (173.0 | )% | ||||||
| Net cash used in investing activities | (3,825,787 | ) | (206,882 | ) | (3,618,905 | ) | 1,749.3 | % | ||||||||
| Net cash provided by/(used in) financing activities | 4,626,269 | (752,620 | ) | 5,378,889 | (714.7 | )% | ||||||||||
| Effect of exchange rate changes on cash and restricted cash | (254,847 | ) | (72,458 | ) | (182,389 | ) | 251.7 | % | ||||||||
| Net change in cash and restricted cash | (1,982,868 | ) | 2,431,675 | (4,414,543 | ) | (181.5 | )% | |||||||||
| Cash and restricted cash, beginning of the year | 7,717,615 | 5,285,940 | 2,431,675 | 46.0 | % | |||||||||||
| Cash and restricted cash, end of the year | $ | 5,734,747 | $ | 7,717,615 | $ | (1,982,868 | ) | (25.7 | )% | |||||||
Operating Activities
For the fiscal year ended March 31, 2025, our net cash used in operating activities was US$1.02 million, which was primarily attributable to (i) net loss of US$1.41 million, adjusted by an inventory write-down of US$0.13 million, depreciation and amortization of fixed assets and right-of-use assets of US$0.76 million, and deferred tax benefit of US$0.27 million; (ii) a decrease of US$0.53 million in operating lease liabilities; (iii) a decrease of US$0.36 million in accounts payable due to the settlement of prior purchase obligations; (iv) a decrease of US$0.23 million in accrued expenses and other current liabilities due to the decrease in accrued payroll and employee benefits; partially offset by (iv) a decrease of US$0.41 million in prepaid expenses and other current assets due to the decrease in deductible value-added tax (“VAT”) input and income tax recoverable; (v) a decrease of US$0.27 million in accounts receivable as a result of the increase in collections; and (vi) a decrease of US$0.26 million in other non-current assets.
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For the fiscal year ended March 31, 2024, our net cash used in operating activities was US$2.53 million, which was primarily attributable to (i) net loss of US$1.30 million, adjusted by an inventory write-down of US$0.19 million, depreciation and amortization of fixed assets and right-of-use assets of US$0.75 million, and foreign currency exchange gains of US$0.23 million; (ii) an increase of US$0.7 million in prepaid expenses and other current assets due to the income tax prepayments to the Hong Kong tax authority; and (iii) an increase of US$0.5 million in accounts receivable due to the slow economic recovery.
For the fiscal year ended March 31, 2023, our net cash provided by operating activities was US$3.46 million, which was primarily attributable to (i) net income of US$2.21 million, adjusted by inventory reserve of US$0.37 million and depreciation and amortization of US$0.22 million; (ii) a decrease in inventories of US$2.03 million due to the decrease of inventory purchase as the sales orders decrease; and (iii) a decrease in accounts receivable of US$0.59 million, due to collection of account receivables, partially offset by a decrease in accounts payable of US$2.05 million, due to a decrease in material and component purchases and stockpiles.
Investing activities
Our net cash used in investing activities was US$0.89 million, US$3.83 million, and US$0.21 million for the fiscal years ended March 31, 2025, 2024, and 2023, respectively. The cash flow in the fiscal year ended March 31, 2025 primarily reflected the purchase of land of US$0.52 million and the purchase of new equipment and software of US$0.37 million. The cash flow in the fiscal year ended March 31, 2024 primarily reflected the purchase of new equipment and software of US$0.19 million and prepayment of long-term equipment and mold model of US$3.64 million. The cash flow in the fiscal year ended March 31, 2023 primarily reflected the purchase of new equipment of US$0.06 million for producing new products based on customer requirements, new motor vehicle of US$0.09 million, and new software of US$0.06 million for daily office operation.
Financing activities
There were no cash outflows from financing activities for the fiscal year ended March 31, 2025.
For the fiscal year ended March 31, 2024, our net cash provided by financing activities was US$4.63 million, which consisted of proceeds from issuance of ordinary shares, net of issuance cost of US$4.67 million and partially offset by the repayments of long-term bank loans of US$0.04 million.
For the fiscal year ended March 31, 2023, our net cash used in financing activities was US$0.75 million, which consisted of proceeds from short-term bank loans of US$0.14 million, repaid within the fiscal year and partially offset by the repayment of a long-term bank loan of US$0.16 million, and an increase in the deferred offering costs of US$0.60 million for the IPO in the U.S.
Capital Expenditure
Our capital expenditures were US$0.89 million, US$3.80 million, and US$0.15 million for the fiscal years ended March 31, 2025, 2024, and 2023, respectively. Generally, our capital expenditures are used primarily for the purchase of machinery and equipment relating to manufacture of interconnect products.
Tabular Disclosure of Contractual Obligations
The following table sets forth our contractual obligations as of March 31, 2025:
| Payment Due by Period | ||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | |||||||||||||
| (Amounts expressed in U.S.$) | ||||||||||||||||
| Lease obligations | $ | 1,352,842 | $ | 558,632 | $ | 743,707 | $ | 50,503 | ||||||||
| Capital commitment | 2,942,938 | 2,942,938 | - | - | ||||||||||||
| Total | $ | 4,295,780 | $ | 3,501,570 | $ | 743,707 | $ | 50,503 | ||||||||
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Operating lease obligations consist of leases in relation to certain offices and buildings, plants and other property for our sales.
On September 1, 2022, the Company renewed leased plants with an original lease term expired on August 31, 2022 and extended the lease term for another five years to August, 2027.
On November 7, 2023, the Company renewed leased equipment with original lease terms that expired on August 20, 2023 and extended the lease term for another five years to February 19, 2028. The Company will acquire ownership of such equipment upon maturity of the leases.
On November 23, 2023, the Company combined and renewed leased offices with two original leases once the terms expired on November 31, 2023 and extended the lease term for the combined space another two years to November 30, 2025. The Company intends to renew the lease once it expires.
On December 24, 2024, the Company entered into a finance lease agreement for a vehicle with monthly payments through June 20, 2029. Ownership of the vehicle will transfer to the Company at lease expiration.
All renewed leases discussed above caused the increased operating and finance right-of-use assets and liabilities, which are disclosed in Note 11 in our consolidated financial statements for the fiscal year ended March 31, 2025.
The Company had certain equipment purchase agreements with three independent third party vendors, with a future payment of US$2.09 million, US$0.82 million, and US$0.03 million, respectively. The payment of US$2.09 million and US$0.82 million had been extended until the completion of the Serbia manufacturing plant by December 2025. The remaining payment of US$0.03 million relates to equipment currently undergoing technical testing and will be paid upon successful completion of testing and final acceptance.
Other than those shown above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of March 31, 2025.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interests in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Risks and Uncertainties
Our headquarters and sales office are located in HK, while we conduct the manufacturing of interconnect products through our PRC subsidiary located in mainland China. For the fiscal years ended March 31, 2025, 2024, and 2023, all of our revenue was generated by our HK and PRC subsidiaries collectively. As such, our business, financial condition, and results of operations are subject to risks and uncertainties relating to political, economic, and legal environments in HK and mainland China, as well as the general state of the economy of HK and mainland China. Our financial results may be adversely affected by changes in the political, regulatory, and social conditions in HK and mainland China.
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The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates, and assumptions that affect (i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these judgments, estimates, and assumptions based on our own historical experience, knowledge, and assessment of current business and other conditions and our expectations regarding the future based on available information, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following: (i) revenue recognition and (ii) income taxes. See “Summary of Significant Accounting Policies” under Note 2 to our consolidated financial statements for the disclosure of these accounting policies. We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.
Estimates for inventory write-down
Inventories, primarily consisting of raw materials, work in progress and finished goods, are stated at the lower of cost or net realizable value, with net realized value represented by estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation. Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving, which is dependent upon factors such as historical and forecasted consumer demand. Inventories are written down to estimated net realizable value, which could be impacted by certain factors including historical usage, expected demand, anticipated sales price, new product development schedules, product obsolescence, and other factors. We review our inventories periodically if any reserves are necessary for potential shrinkage and obsolete or unusable inventory. For the years ended March 31, 2025, 2024, and 2023, we recorded $128,241, $188,268, and $369,512 of inventories write-down from the carrying amount to their net realizable values.
Estimate for the valuation allowance of deferred tax assets
We are required to make estimates and apply our judgements in determining the provision for income tax expenses for financial reporting purpose based on tax laws in various jurisdictions in which we operate. In calculating the effective income tax rate, we make estimates and judgements, including the calculation of tax credits and the timing differences of recognition of revenues and expenses between financial reporting and tax reporting. These estimates and judgements may result in adjustments of pre-tax income amount filed with local tax authorities in accordance with the local tax rules and regulations in various tax jurisdictions. Although we believe that our estimates and judgments are reasonable, actual results may be materially different from the estimated amounts. Changes in these estimates and judgements may result in material increase or decrease in our provision for income tax expenses, which could be material to our financial position and results of operations.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry forwards. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. When we determine and quantify the valuation allowances, we consider such factors as projected future taxable income, the availability of tax planning strategies, the historical taxable income/losses in prior years, and future reversals of existing taxable temporary differences. The assumptions used in determining projected future taxable income require significant judgment. Actual operating results in future years could differ from our current assumptions, judgments, and estimates. Changes in these estimates and assumptions may materially affect the tax position measurement and financial statement recognition. If, in the future, we determine that we would not be able to realize our recorded deferred tax assets, an increase in the valuation allowance would decrease our earnings in the period in which such determination is made. As of March 31, 2025 and 2024, the Company recorded $91,847 and $121,016 valuation allowance for the deferred tax assets, respectively.
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Recent accounting pronouncements
A list of recently issued accounting pronouncements that are relevant to us is included in Note 2 to our consolidated financial statements included elsewhere in this annual report.
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
| Name | Age | Position(s) | ||
| Chi Sing Chiu | 65 | Chairman of the board, director | ||
| Kung Lok Chiu | 36 | Chief Executive Officer (“CEO”), director | ||
| Kwok Kwan Chan | 57 | Chief Operation Officer (“COO”) | ||
| Chee Hui Law | 46 | Chief Finance Officer (“CFO”) | ||
| Chi Man Chan, William | 61 | Chief Sale Officer (“CSO”) | ||
| Jung Yi Chiu | 62 | Chief Strategy Officer | ||
| Sin Ting Chiu | 38 | Director | ||
| Wai Chun Tsang | 70 | Independent director | ||
| Tsz Fai Shiu | 61 | Independent director | ||
| Kenneth Wang | 71 | Independent director | ||
| Pak Keung Chan | 87 | Independent director |
Dr. Chi Sing Chiu is the founder of the Company, and has served as the chairman of the board and a director of the Company since October 2021, and chairman of CCSC Interconnect HK from January 2021 to September 2021. He is in charge of the leadership of the board, strategic planning and major decision-making of our Company. From March 1993 to December 2020, he was the CEO of CCSC Interconnect HK. Dr. Chiu holds an Honorary Doctorate degree in business administration from Sabi University, and received a post-doctoral fellowship from California State University. He is currently pursuing a doctoral degree of regional and industrial economic management from Nanchang University.
Dr. Chiu is a successful entrepreneur with over 30 years’ experience in the interconnect products industry. He has been awarded a Medal of Honor from the Austrian Albert Schweitzer Association in June 2020, and Elite of Commerce from the Economic of French Collection Metropolis Prosperity in each of 2011 and 2012. Dr. Chiu is keen on public welfare undertakings and has been awarded as Outstanding Social Responsibility Entrepreneur Award from the Hong Kong Commercial Daily in August 2021.
Mr. Kung Lok Chiu has served as the CEO and a director of the Company since October 2021. He has also served as the CEO of CCSC Interconnect HK since January 2021, and in such capacity is responsible for our Company’s overall management, corporate development and strategic planning. From January 2018 to December 2020, he served as the sales director of CCSC Interconnect HK, managing the sales department. From April 2014 to December 2017, he served as the sales manager of CCSC Interconnect HK. Mr. Chiu holds a Bachelor’s degree in Mechanical Engineering from Loughborough University and an MBA degree from Concordia University Wisconsin. He is currently pursuing a doctoral degree in Regional and Industrial Economic Management from Nanchang University. Mr. Chiu was awarded a New Generation Enterprise Elite Award from Hong Kong Federation of Innovative Technologies and Manufacturing Industries in July 2022. Mr. Chiu supports public welfare undertakings and was awarded the Best Social Responsibility Award from the Guangdong-HK-Macao Bay Area Entrepreneurs Union in September 2022.
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Mr. Kwok Kwan Chan has served as our COO since October 2021. He has also served as the COO of CCSC Interconnect HK since July 2020, responsible for the management and daily operation of various departments. From February 2016 to March 2021, he served as the executive assistant to the general manager of CCSC HK. Mr. Chan holds a Bachelor’s degree in Electrical and Electronics Engineering from Portsmouth University and a Postgraduate diploma in Industrial Automation from Hong Kong Polytechnic University.
Mr. Chee Hui Law has served as our CFO since October 2021. He has also served as the CFO of CCSC Interconnect HK since January 2021. From October 2019 to December 2020, he served as a director of Excellence Capital Management Limited and was responsible for the project management for the Company. From April 2019 to September 2019, he served as the CFO of State Energy International Group Ltd. and was responsible for the overall management of its accounting and corporate finance department, including overseeing the financial management, regulatory compliance and reporting obligation. From September 2012 to March 2019, he served as the CFO and company secretary of AAB International Holding Limited. Mr. Law holds a Bachelor’s degree in accounting from the Royal Melbourne Institute of Technology University in Australia. Mr. Law is a Certified Practicing Accountant of CPA Australia and Member of Hong Kong Institute of Certified Public Accountants.
Mr. Chi Man Chan (William) has served as our CSO since October 2021. He has also served as the CSO of CCSC Interconnect HK since October 2020. From January 1997 to September 2020, he served as the vice president of CCSC Interconnect HK, managing the daily operation of the sales department. Mr. Chan holds a High Diploma in computer science from Chu Hai College of Higher Education in Hong Kong. With over twenty-five years of experience in sales of interconnect products, we believe Mr. Chan is well qualified to serve as our CSO.
Mr. Jung Yi Chiu has served as or Chief Strategy Officer since May 2024. Mr. Chiu has over 30 years of experience in various leadership roles in the electronics industry, specializing in sales, marketing, and business development. Mr. Chiu joined the Company in August 2020 as the Development Strategy Officer, and has since led strategic initiatives to drive Industry 4.0-related projects and new business development at the Company. Prior to joining the Company, Mr. Chiu held senior positions at multiple electronics companies, including Kenmec Group and AVC Thermal Cooling Corporation (both are listed companies on the Taipei Exchange). Mr. Chiu holds a Master’s degree in Industrial Management and a Bachelor’s degree in Electrical Engineering from the National Taiwan University of Science and Technology.
Ms. Sin Ting Chiu has served as a director of the Company since October 2021. From May 2016 to September 2021, she was responsible for overseeing the overall administration and human resources affairs and served as the manager of the finance department of CCSC Interconnect HK. Ms. Chiu holds a Bachelor’s degree in Bioscience (nutrition) from the University of Nottingham.
Dr. Wai Chun Tsang has been an independent director since December 2023. In April 2000, she founded TWC Corporate Services Ltd., a company that provides accounting, corporate and private equity fund administration services, and has since served as a managing director, responsible for overall supervision of the company. Currently, she serves as a director of ten companies, including a Hong Kong listed company, Timeless Software Ltd. Ms. Tsang holds a diploma in secretarial management from Hong Kong Baptist College, an MBA from Heriot-Watt University, an Honorary Doctorate degree in business administration from Sabi University in France, and a Doctorate degree from International American University.
Dr. Tsz Fai Shiu has been an independent director since December 2023. Since 2005, he has been working for Knowing Management Consultancy, where he serves as the principal consultant and training director. His responsibilities include: overall office administration and management, formulating marketing strategies and performing marketing functions, providing consulting and training services to individual and corporate clients. Mr. Shiu holds a Bachelor’s degree in social service and social work from Hong Kong Polytechnic University, a Master’s degree in business administration from Sheffield Hallam University in United Kingdom, and a Doctorate degree in business administration from Bulacan State University in Philippines.
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Mr. Kenneth Wang has been an independent director since December 2023. Since September 2009, he has served as the President of Synergy Turfs Co., Ltd., a Taiwanese company that produces artificial turf for leisure and sports industry, where he oversees new market expansion and product development, manages key accounts to promote profitability and customer satisfaction. From March 1993 to September 2009, he served as the managing director of Best Interlink Group, where he managed primary account relationships. From June 1981 to March 1993, he served as the head of the Sr. technical staff of Hughes Aircraft Company in Fullerton, where he provided technical evaluations of engineering design documents sourced from third parties, advised design team on potential implementation plans, and monitored design processes from conceptual through implementation. Mr. Wang holds a Bachelor’s degree in electrical engineering from California State University and an MBA from the National University (La Jolla, CA).
Dr. Pak Keung Chan has been an independent director since December 2023. Since April 2016, he has been working as an independent advisor, specializing on the design, testing and global marketing of computer memory products and systems for aerospace and military industries. He served as an Emeritus Consultant to the chairman and CEO of the Integrated Manufacturing Solutions, Greater China, from April 2015 to March 2016, and served as the President, of Sanmina Corporation, a Nasdaq listed company, from March 1999 to March 2015. Dr. Chan holds a Bachelor’s degree in Mechanical Engineering and Automation from Tianjin University; and Postgraduate degree in Applied Electronic Engineering from Hong Kong University; and Honorary Doctorate degree of Philosophy in Business Administration from Tarlac State University. He also received post-doctoral fellowship in Art Management and Technology from University of Quebec, and post-doctoral fellowship in Business and Technology Management from China National School of Administration.
Family Relationships
Dr. Chi Sing Chiu is father of Mr. Kung Lok Chiu and Ms. Sin Ting Chiu. None of the other directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our 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.
Controlled Company
Our biggest shareholder, our director and chairman of the Board, Dr. Chi Sing Chiu, owns approximately 98.72% of the aggregate voting power of our outstanding Ordinary Shares as of the date of this annual report. As a result, we may be deemed to be a “controlled company” within the meaning of the NASDAQ listing standards. Dr. Chi Sing Chiu, has the ability to control the outcome of matters submitted to the shareholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. If we are deemed to be a “controlled company”, we are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements, including:
| ● | the requirement that a majority of the board of directors consist of independent directors; | |
| ● | the requirement that our director nominees be selected or recommended solely by independent directors; and | |
| ● | the requirement that we have a nominating and corporate governance committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purposes and responsibilities of the committees. |
Although we do not intend to rely on the controlled company exemptions under the NASDAQ listing standards even if we are deemed a controlled company, we could elect to rely on these exemptions in the future, and if so, our shareholders would not have the same protection afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NASDAQ Capital Market.
B. Compensation
For the year ended March 31, 2025, we paid an aggregate of approximately US$1,075,676 in cash to our executive officers and directors, and we paid an aggregate of US$86,400 in cash to our non-executive directors. This amount consisted only of cash and did not include any share-based compensation or benefits in kind. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
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The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors and the executive officers.
2024 Share Incentive Plan
Our shareholders adopted the 2024 performance incentive plan (the “2024 Plan”) on September 10, 2024, effective as of the same date, to attract and retain the best available personnel, provide additional incentives to employees, directors, and consultants, and promote the success of our business. Under the 2024 Plan, the maximum aggregate number of shares that may be issued pursuant to all awards is 2,200,000 Class A Ordinary Shares.
As of the date of this annual report, we have not issued any awards under the 2024 Plan.
The following describes the principal terms of the 2024 Plan.
Types of awards
The 2024 Plan permits the awards of cash, restricted stock units, share options, or any similar securities with a value derived from the value of or related to the Class A Ordinary Shares and/or returns thereon.
Plan Administration
Our board of directors or a committee of one or more board members administers the 2024 Plan. The committee or the full board, as applicable, determines the participants, the type and number of awards to be granted to each participant, and the terms and conditions of each award.
Award Agreement
Each awards granted under the 2024 Plan will be evidenced by an award agreement that will set forth terms, conditions, and limitations, which may include the provisions applicable in the event the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility
We may grant awards to our employees, directors, and consultants of our Company, and other individuals, as determined by the plan administrator.
Vesting Schedule
In general, the plan administrator determines the vesting schedule, which will be specified in the award agreement.
Exercise of Options
The plan administrator will determine the exercise price for each award, which will be stated in the award agreement.
C. Board Practices
Board of Directors
Our board of directors consists of seven directors.
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Duties of Directors
Under Cayman Islands law, all of our directors owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties. The Companies Act (As Revised) of the Cayman Islands imposes a number of statutory duties on a director. A Cayman Islands director’s fiduciary duties are not codified; however, the courts of the Cayman Islands have held that a director owes the following fiduciary duties: (a) a duty to act in what the director bona fide considers to be in the best interests of the company, (b) a duty to exercise their powers for the purposes they were conferred, (c) a duty to avoid fettering his or her discretion in the future and (d) a duty to avoid conflicts of interest and of duty. The common law duties owed by a director are those to act with skill, care and diligence that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and, also, to act with the skill, care and diligence in keeping with a standard of care commensurate with any particular skill they have which enables them to meet a higher standard than a director without those skills. In fulfilling their duty of care to us, our directors must ensure compliance with our New M&A, as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our directors is breached.
Terms of Directors and Executive Officers
Each of our 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 annual meeting of shareholders at which time such director is eligible for re-election. All of our executive officers are appointed by and serve at the discretion of our board of directors.
Qualification
There is currently no shareholding qualification for directors.
Insider Participation Concerning Executive Compensation
Our current board of directors, which comprises of 7 directors, has been making decisions regarding executive officer compensation. Our compensation committee is responsible for making decisions regarding executive officer compensation, and our audit committee will be making decisions regarding related-party transactions.
Committees of the Board of Directors
We have established three committees under the board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. We have adopted a charter for each of the three committees. We have determined that each of Wai Chun Tsang, Tsz Fai Shiu, Pak Keung Chan, and Kenneth Wang satisfies the “independence” requirements of the Nasdaq listing rules under and Rule 10A-3under the Securities Exchange Act. Each committee’s members and functions are described below.
Audit Committee. Our audit committee consists of Wai Chun Tsang, Tsz Fai Shiu, and Pak Keung Chan. Wai Chun Tsang is the chairperson of our audit committee. Our board of directors also has determined that Wai Chun Tsang 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 our accounting and financial reporting processes and the audits of the financial statements of our 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 our 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 our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
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Compensation Committee. Our compensation committee consists of Tsz Fai Shiu, Wai Chun Tsang, and Kenneth Wang. Tsz Fai Shiu is the chairperson of our compensation committee. The compensation committee assists the board of directors in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:
| ● | reviewing and approving the total compensation package for our most senior executive officers; |
| ● | approving and overseeing the total compensation package for our executives other than the most senior executive officers; |
| ● | reviewing and recommending to the board with respect to the compensation of our directors; |
| ● | 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 |
| ● | reviewing programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Kenneth Wang, Wai Chun Tsang, and Pak Keung Chan. Pak Keung Chan is the chairperson of our nominating and corporate governance committee. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board of directors and its committees. The nominating and corporate governance committee is responsible for, among other things:
Compensation Recovery Policy
We have adopted a compensation recovery policy to provide for the recovery of erroneously-awarded incentive compensation, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, final SEC rules, and applicable listing standards.
Agreements with Named Executive Officers
We have entered into employment agreement with each of our executive officers. Pursuant to employment agreements, the form of which was filed as Exhibit 4.1 to the annual report on Form 20-F filed by the Company with the SEC on July 22, 2024 and is hereby incorporated by reference into this annual report. Upon expiration of the 3-year term, the employment shall be automatically extended for successive three-year terms unless either party gives the other party provides a 1-month prior written notice to terminate the employment before the expiration of such 3-year term or otherwise terminated earlier pursuant to the terms of the agreement. We may terminate the employment for “cause”, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited to the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice. Each executive officer agrees to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information.
We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify our 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 our company.
D. Employees
See “Item 4. Information on the Company-B. Business Overview-Employees.”
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E. Share Ownership
The following table sets forth information regarding the beneficial ownership of our Ordinary Shares as of the date of this annual report by our officers, directors, and 5% or greater beneficial owners of Ordinary Shares. There is no other person or group of affiliated persons known by us to beneficially own more than 5% of our Ordinary Shares.
Beneficial ownership includes voting or investment 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 investment power with respect to all Ordinary Shares shown as beneficially owned by them. Percentage of beneficial ownership is calculated based on 6,581,250 Class A Ordinary Shares and 5,000,000 Class B Ordinary Shares issued and outstanding as of the date of this annual report.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days of the date of this annual report, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
| Class A Ordinary Shares | Class B Ordinary Shares | % of Beneficial Ownership | % of Aggregate Voting Power | |||||||||||||
| Directors and Executive Officers*: | ||||||||||||||||
| Chi Sing Chiu(1) | 3,292,770 | 5,000,000 | 71.61 | % | 98.72 | % | ||||||||||
| Kung Lok Chiu | - | - | - | - | ||||||||||||
| Kwok Kwan Chan, Chee Hui Law, and Chi Man Chan (William)(2) | 186,770 | - | 1.61 | % | 0.07 | % | ||||||||||
| Sin Ting Chiu | - | - | - | |||||||||||||
| Wai Chun Tsang | - | - | - | - | ||||||||||||
| Tsz Fai Shiu | - | - | - | - | ||||||||||||
| Kenneth Wang | - | - | - | - | ||||||||||||
| Pak Keung Chan | - | - | - | - | ||||||||||||
| Jung Yi Chiu | - | - | - | - | ||||||||||||
| 5% Shareholders**: | ||||||||||||||||
| CCSC Investment Limited(1) | 3,292,770 | 5,000,000 | 71.61 | % | 98.72 | % | ||||||||||
| * | Unless otherwise indicated, the business address of each of the individuals is 1301-03, 13/f Shatin Galleria, 18-24Shan Mei St, Fotan, Shatin, Hong Kong. |
| ** | The principal office of the 5% beneficial owner is located at 1301-03, 13/f Shatin Galleria, 18-24 Shan Mei St, Fotan, Shatin, Hong Kong. |
| (1) | Dr. Chi Sing Chiu, chairman of the board of directors, beneficially owns 3,292,770 Class A Ordinary Shares and 5,000,000 Class B Ordinary Shares through his 69.20% ownership of CCSC Investment Limited. |
| (2) | Kwok Kwan Chan, Chee Hui Law, and Chi Man Chan (William) jointly beneficially own 186,770 Class A Ordinary Shares through their 23.89%, 21.66% and 23.89% ownership of Cyber Generations Investment Limited. |
As of the date of this annual report, none of our Ordinary Shares are held by record holders in the United States. None of our shareholders has informed us that it is affiliated with a registered broker-dealer or is in the business of underwriting securities.
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We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
F. Disclosure of a registrant’s action to recover erroneously awarded compensation
Not applicable.
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
See “Item 6. Directors, Senior Management and Employees-E. Share Ownership.”
B. Related Party Transactions
Transactions with Related Parties
Sales to Related Parties
For the fiscal years ended March 31, 2025, 2024, and 2023, the Company did not sell goods to its related parties. As of the date of this annual report, the Company has not sold goods to its related parties in the fiscal year ended March 31, 2026.
Purchases from Related Parties
For the fiscal years ended March 31, 2025, 2024, and 2023, the Company did not purchase goods from its related parties. As of the date of this annual report, the Company has not purchased goods from its related parties in the fiscal year ended March 31, 2026.
Loans to Related Parties
The Company provided a loan in the amount of $433,689 to Dr. Chi Sing Chiu, the controlling shareholder and chairman of the board of director of the Company. The loan was unsecured, interest free and due upon demand. The loan was fully repaid in May 2022.
Loans from Related Parties
Woon Bing Yeung, a shareholder of CCSC Investment Limited that owns 71.61% shares of the Company and the wife of Dr. Chi Sing Chiu, made unsecured, interest-free and due upon demand loans to the Company for working capital. The balance was fully repaid in May 2022.
Loan Guaranteed by Related Parties
Dr. Chi Sing Chiu and Woon Bing Yeung, who jointly own 71.61% of the Company’s shares through CCSC Investment Limited, provided personal guarantees for a bank loan in the amount of $464,354 (HK$3,600,000) with a 3-year term, from June 30, 2020 to June 29, 2023, from Bank of China (HK) Limited (“BOCHK”). The personal guarantees for the bank loan were released as the balance was fully repaid in June 2023.
During the fiscal year ended March 31, 2022, Dr. Chi Sing Chiu and Woon Bing Yeung also provided their personal guarantees for a revolving export invoice discounting facility with a maximum amount of $1,929,409 (HK$15,000,000), a revolving loan facility with a maximum amount of $385,882 (HK$3,000,000) and a forex hedging facility in an amount up to $257,255 (HK$2,000,000) from BOCHK (the “Facilities”). The personal guarantees for the foregoing facilities were released because the Company ceased to use such facilities in May 2024.
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Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees-C. Board of Directors-Agreements with Named Executive Officers.”
Policies and Procedures for Related Party Transactions
Our board of directors has established an audit committee that is tasked with reviewing and approving all related party transactions.
C. Interests of Experts and Counsel
Not applicable.
Item 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report. See “Item 18. Financial Statements.”
Legal Proceedings
From time to time, we may become a party to various legal or administrative proceedings arising in the ordinary course of our business, including actions with respect to intellectual property infringement, violation of third-party licenses or other rights, breach of contract, and labor and employment claims. We are currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, are likely to have any material and adverse effect on our business, financial condition, cash flow, or results of operations.
Dividend Policy
We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries for our cash requirements, including any payment of dividends to our shareholders. We have not declared or paid any dividends. We do not have any present plan to pay any cash dividends on our Class A Ordinary Shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profits, if any, or share premium amounts, provided that under no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business immediately following the date on which the dividend is paid. Current PRC laws and regulations permit our PRC subsidiary to pay dividends to CCSC Technology Group only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our PRC subsidiary is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Our PRC subsidiary is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings. These reserve funds, however, may not be distributed as cash dividends.
If we determine to pay dividends on any of our Class A Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our direct wholly-owned subsidiaries. Pursuant to the PRC EIT Law and its implementation rules, any dividends paid by our PRC subsidiary to CCSC Technology Group will be subject to a withholding tax rate of 10% unless otherwise reduced to 5% by relevant tax authorities according to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, or other applicable laws. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by our PRC subsidiary to our Hong Kong subsidiary, CCSC Technology Group. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. CCSC Technology Group, intends to apply for the tax resident certificate when CCSC Interconnect DG plans to declare and pay dividends to it.
If we pay any dividends, cash dividends on our Class A Ordinary Shares, if any, will be paid in U.S. dollars.
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B. Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
Item 9. THE OFFER AND LISTING
A. Offer and Listing Details.
Our Class A Ordinary Shares have been listed on the Nasdaq Capital Market since January 18, 2024 under the symbol “CCTG.”
B. Plan of Distribution
Not applicable.
C. Markets
Our Class A Ordinary Shares have been listed on the Nasdaq Capital Market since January 18, 2024 under the symbol “CCTG.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. ADDITIONAL INFORMATION
A. Share Capital
Variation of Share Capital in September 2024
The AGM of the Company was held on September 10, 2024. At the AGM, the shareholders of the Company adopted the resolutions with respect to the variation of share capital for the following:
| 1. | Increase of Authorized Share Capital. The authorized share capital of the Company was increased from US$50,000 divided into 100,000,000 ordinary shares of a par value of US$0.0005 each to US$250,000 divided into 500,000,000 ordinary shares of a par value of US$0.0005 each, by the creation of 400,000,000 additional ordinary shares of a par value of US$0.0005 each; and |
| 2. | Implementation of Dual-Class Share Structure |
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| a. | 5,000,000 ordinary shares of a par value of US$0.0005 held by CCSC Investment Limited were re-designated and reclassified as 5,000,000 Class B Ordinary Shares of a par value of US$0.0005 each, carrying the rights, preferences and privileges as set forth in the New M&A; and |
| b. | The remaining 495,000,000 issued and unissued ordinary shares of a par value of US$0.0005 each were re-designated and reclassified as Class A Ordinary Shares of a par value of US$0.0005 each, carrying the rights, preferences and privileges as set forth in the New M&A. |
B. Memorandum and Articles of Association
Our New M&A is filed as Exhibit 3.1 to this annual report and is incorporated by reference herein.
As of the date of this annual report, the authorized share capital of the Company is US$250,000 divided into 495,000,000 Class A Ordinary Shares of a par value of US$0.0005 each, and 5,000,000 Class B Ordinary Shares of a par value of US$0.0005 each. As of the date of this annual report, 6,581,250 Class A Ordinary Shares and 5,000,000 Class B Ordinary Shares are issued and outstanding. All of our issued and outstanding Ordinary Shares are fully paid.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or elsewhere in this annual report.
D. Exchange Controls
See “Item 4. Information on the Company-B. Business Overview-Regulations-Regulations Relating to Foreign Exchange” and “-PRC Regulations Related to Foreign Exchange Registration of Offshore Investment by Mainland China Residents.”
E. Taxation
The following discussion of material PRC, Cayman Islands, Hong Kong and United States federal income tax consequences of an investment in our Class A Ordinary Shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our Class A Ordinary Shares, such as the tax consequences under state, local, and other tax laws or under tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China, Hong Kong, and the United States.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our Class A Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Class A Ordinary Shares, nor will gains derived from the disposal of our Class A Ordinary Shares be subject to Cayman Islands income or corporation tax.
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Hong Kong Taxation
The IRO is an ordinance that regulates taxes on property, earnings and profits in Hong Kong. It provides, among others, that persons, which include corporations, partnerships, trustees and bodies of persons, carrying on any trade, profession or business in Hong Kong are liable for tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong for the year of assessment from such trade, profession or business. As at the Latest Practicable Date, the standard profits tax rate for corporations is at 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part of assessable profits over HK$2,000,000. It also contains provisions relating to, among others, permissible deductions for outgoings and expenses, set-offs for losses and allowances for depreciations.
PRC Laws and Regulations on Taxation
Enterprise Income Tax and Withholding Tax
In March 2007, the National People’s Congress of China enacted the EIT Law, which became effective on January 1, 2008 (as amended in December 2018). The EIT Law provides that enterprises organized under the laws of jurisdictions outside mainland China with their “de facto management bodies” located within mainland China may be considered as mainland China resident enterprises and therefore subject to EIT at the rate of 25% on their worldwide income. The Implementing Rules of the EIT Law further defines the term “de facto management body” as the management body that exercises substantial and overall management and control over the business, personnel, accounts and properties of an enterprise.
In April 2009, the SAT issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is deemed to be located in mainland China. Although Circular 82 only applies to offshore enterprises controlled by mainland China enterprises or mainland China enterprise groups, not offshore enterprises controlled by mainland China individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.
According to SAT Notice 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a mainland China tax resident by virtue of having a “de facto management body” in mainland China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the places where senior management and senior management departments that are responsible for daily production, operation and management of the enterprise perform their duties are mainly located within the territory of mainland China; (ii) financial decisions (such as money borrowing, lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are decided or need to be decided by organizations or persons located within the territory of mainland China; (iii) main property, accounting books, corporate seal, the board of directors and files of the minutes of shareholders’ meetings of the enterprise are located or preserved within the territory of mainland China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside within the territory of mainland China.
The Administrative Measures for Enterprise Income Tax of Chinese-Controlled Overseas Incorporated Resident Enterprises (Trial Version), or Bulletin 45, further clarifies certain issues related to the determination of tax resident status. Bulletin 45 also specifies that when provided with a resident Chinese-controlled, offshore-incorporated enterprise’s copy of its recognition of residential status, a payer does not need to withhold a 10% income tax when paying certain income sourced from mainland China, such as dividends, to such Chinese-controlled offshore-incorporated enterprise as provided under the EIT Law and Circular 82.
We believe that our Cayman Islands holding company, CCSC Technology International Holdings Limited, is not a mainland China resident enterprise for PRC tax purposes. CCSC Technology International Holdings Limited is a company incorporated outside mainland China. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside mainland China. As such, we do not believe that our company meets all of the conditions above or is a mainland China resident enterprise for PRC tax purposes. For the same reasons, we believe our other entities outside mainland China are not mainland China resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the competent PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the competent PRC government will ultimately take a view that is consistent with our position and there is a risk that the competent PRC tax authorities may deem our company as a mainland China resident enterprise, in which case we would be subject to the EIT at the rate of 25% on our worldwide income. If the competent PRC tax authorities determine that our Cayman Islands holding company is a mainland China “resident enterprise” for EIT purposes, a number of unfavorable tax consequences could follow.
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One example is a 10% withholding tax would be imposed on dividends we pay to our enterprise shareholders that are not mainland China resident enterprises and with respect to gains derived by our enterprise shareholders that are not mainland China resident enterprises from transferring our Class A Ordinary Shares. It is unclear whether, if we are considered a mainland China resident enterprise, holders of our Class A Ordinary Shares would be able to claim the benefit of income tax treaties or agreements entered into between mainland China and other countries or areas. See “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in China-Under the EIT Law, we may be classified as a mainland China “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our shareholders who are not mainland China residents and have a material adverse effect on our results of operations and the value of your investment.”
According to the Announcement of SAT on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or Circular 7, which was promulgated by the SAT and became effective on February 3, 2015, if a non-resident enterprise transfers the equity interests of a mainland China resident enterprise indirectly by transfer of the equity interests of an offshore holding company (other than a purchase and sale of shares issued by a mainland China resident enterprise in the public securities market) without a reasonable commercial purpose, the competent PRC tax authorities have the power to reassess the nature of the transaction and the indirect equity transfer may be treated as a direct transfer. As a result, the gain derived from such transfer, which means the equity transfer price less the cost of equity, will be subject to withholding tax at a rate of up to 10%.
Under the terms of Circular 7, a transfer which meets all of the following circumstances shall be directly deemed as having no reasonable commercial purposes if:
| ● | over 75% of the value of the equity interests of the offshore holding company are directly or indirectly derived from taxable properties in mainland China; |
| ● | at any time during the year before the indirect transfer, over 90% of the total properties of the offshore holding company are investments within the territories of mainland China, or in the year before the indirect transfer, over 90% of the offshore holding company’s revenue is directly or indirectly derived from the territories of mainland China; |
| ● | the function performed and risks assumed by the offshore holding company are insufficient to substantiate its corporate existence; or |
| ● | the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on the direct transfer of the taxable properties in mainland China. |
On October 17, 2017, the SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or SAT Circular 37, which took effect on December 1, 2017. SAT Circular 37 purports to provide further clarifications by setting forth the definitions of equity transfer income and tax basis, the foreign exchange rate to be used in the calculation of the withholding amount and the date on which the withholding obligation arises.
Specifically, SAT Circular 37 provides that where the transfer income subject to withholding at source is derived by an enterprise that is not mainland China resident enterprise in instalments, the instalments may first be treated as recovery of costs of previous investments. Upon recovery of all costs, the tax amount to be withheld must then be computed and withheld.
There is uncertainty as to the application of SAT Circular 7 and SAT Circular 37. SAT Circular 7 and SAT Circular 37 may be determined by the competent PRC tax authorities to be applicable to transfers of our shares that involve non-resident investors, if any of such transactions were determined by the tax authorities to lack a reasonable commercial purpose.
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As a result, we and our non-resident investors in such transactions may become at risk of being taxed under SAT Circular 7 and SAT Circular 37, and we may be required to comply with SAT Circular 7 and SAT Circular 37 or to establish that we should not be taxed under the general anti-avoidance rule of the EIT Law. This process may be costly and have a material adverse effect on our financial condition and results of operations. See “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in China-We face uncertainty with respect to indirect transfers of equity interests in mainland China resident enterprises by their holding companies that are not mainland China resident enterprises.”
Value-added Tax
Pursuant to the Interim Regulations on Value-added Tax of the PRC promulgated by the State Council on December 13, 1993 and were recently amended on November 19, 2017, and the Detailed Rules on the Implementation of Interim Regulation on Value-added Tax of the PRC promulgated by the Ministry of Finance, or the MOF, on December 25, 1993 and were recently amended on October 28, 2011, collectively the VAT Regulations, all entities and individuals in mainland China engaging in the sales of goods, provision of processing services, repairs and replacement services, sales services, intangible assets, real estate and the importation of goods are required to pay VAT at the rate of 17%, unless otherwise stated.
According to the Circular on Adjusting Value-added Tax Rates, which was promulgated by the MOF and the State Administration of Taxation, or the SAT, on April 4, 2018 and became effective on May 1, 2018, where a taxpayer engages in a taxable sales activity for the value-added tax purpose or importation of goods, the previous applicable 17% and 11% tax rates are lowered to 16% and 10%, respectively.
According to the Circular on Policies to Deepen Value-added Tax Reform, which was promulgated by the MOF, the SAT and the General Administration of Customs on March 20, 2019 and became effective on April 1, 2019, where a taxpayer engages in a taxable sales activity for the value-added tax purpose or importation of goods, the previous applicable 16% and 10% tax rates are lowered to 13% and 9%, respectively.
On December 25, 2024, the SCNPC promulgated the VAT Law, which will become effective on January 1, 2026 and abolish the Interim Regulations on Value-added Tax of the PRC. Pursuant to the VAT Law, entities and individuals (including individual businesses) engaged in sale of goods, services, intangible assets and immovables and importation of goods within mainland China are VAT payers and shall pay VAT in accordance with the VAT Law.
As of the date of this annual report, the VAT rate applicable to our sales of goods is 13%.
Material U.S. Federal Income Tax Consequences
The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our Class A Ordinary Shares by a U.S. Holder (as defined below) that acquires our Class A Ordinary Shares in our share offering and holds our Class A Ordinary Shares as “capital assets” (generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended, or the Code. This discussion is based upon existing U.S. federal tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service, or the IRS, with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion, moreover, does not address the U.S. federal estate, gift, Medicare, and alternative minimum tax considerations, any withholding or information reporting requirements, or any state, local and non-U.S. tax considerations relating to the ownership or disposition of our Class A Ordinary Shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:
| ● | banks and other 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 market-to-market method of accounting; |
| ● | certain former U.S. citizens or long-term residents; |
| ● | governments or agencies or instrumentalities thereof; |
| ● | tax-exempt entities (including private foundations); |
| ● | holders who acquired our Class A Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation; |
| ● | investors that will hold our Class A Ordinary Shares as part of a straddle, hedging, conversion or other integrated transaction for U.S. federal income tax purposes; |
| ● | persons holding their Class A Ordinary Shares in connection with a trade or business outside the United States; |
| ● | persons that actually or constructively own 10% or more of our voting power or value (including by reason of owning our Ordinary Shares); |
| ● | investors required to accelerate the recognition of any item of gross income with respect to their Class A Ordinary Shares as a result of such income being recognized on an applicable financial statement; |
| ● | investors that have a functional currency other than the U.S. dollar; |
| ● | partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding Class A Ordinary Shares through such entities, 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 Class A Ordinary Shares in our IPO. 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 our Ordinary Shares.
General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our Class A Ordinary Shares that is, 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 |
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| ● | 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 U.S. federal income tax purposes) is a beneficial owner of our Ordinary Shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our Class A Ordinary Shares and their partners are urged to consult their tax advisors regarding an investment in our Ordinary Shares.
Passive Foreign Investment Company (“PFIC”)
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 for such taxable year 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”). |
Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we raise in our IPO will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based on the market value of our Class A Ordinary Shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets (including the cash raised in our IPO) on any particular quarterly testing date for purposes of the asset test.
Based on our operations, current and projected income and assets, and the composition of our income and assets (taking into account the current and expected income generated from our investment products purchased from banks), we do not expect to be treated as a PFIC for the current taxable year or the foreseeable future under the current PFIC rules. We must make a separate determination each year as to whether we are a PFIC, however, and there can be no assurance with respect to our status as a PFIC for our current taxable year or any future taxable year. Depending on the amount of cash we raise in our IPO, together with any other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent taxable year, more than 50% of our assets may be assets held for the production of passive income. We will make this determination following the end of any particular tax year. Because the value of our assets for purposes of the asset test will generally be determined based on the market price of our Class A Ordinary Shares and because cash is generally considered to be an asset held for the production of passive income, our PFIC status will depend in large part on the market price of our Class A Ordinary Shares and the amount of cash we raise in our IPO. Accordingly, fluctuations in the market price of the Class A Ordinary Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in our IPO. We are under no obligation to take steps to reduce the risk of our being classified as a PFIC, and as stated above, the determination of the value of our assets will depend upon material facts (including the market price of our Class A Ordinary Shares from time to time and the amount of cash we raise in our IPO) that may not be within our control. If we are a PFIC for any year during which you hold Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Class A Ordinary Shares. If we cease 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 Class A Ordinary Shares.
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If we are a PFIC for your taxable year(s) during which you hold Class A 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 Class A 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 Class A 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 Class A Ordinary Shares; |
| ● | the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and |
| ● | the amount allocated to each of your other taxable year(s) 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. |
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 Class A Ordinary Shares cannot be treated as capital, even if you hold the Class A 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 under Section 1296 of the US Internal Revenue Code for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to hold) Class A Ordinary Shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the excess, if any, of the fair market value of the Class A Ordinary Shares as of the close of such taxable year over your adjusted basis in such Class A Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess, if any, of the adjusted basis of the Class A Ordinary Shares over their fair market value as of the close of the taxable year. Such ordinary loss, however, is allowable only to the extent of any net mark-to-market gains on the Class A 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 Class A Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale or disposition of the Class A Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Class A Ordinary Shares. Your basis in the Class A 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 us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “-Taxation of Dividends and Other Distributions on our Class A 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 Nasdaq. If the Class A Ordinary Shares are regularly traded on Nasdaq and if you are a holder of Class A Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC.
Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election under Section 1295(b) of the US Internal Revenue Code 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. The qualified electing fund election, however, 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. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold Class A Ordinary Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year and provide certain annual information regarding such Ordinary Shares, including regarding distributions received on the Class A Ordinary Shares and any gain realized on the disposition of the Class A Ordinary Shares.
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If you do not make a timely “mark-to-market” election (as described above), and if we were a PFIC at any time during the period you hold our Ordinary Shares, then such Class A Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless you make a “purging election” for the year we cease to be a PFIC. A “purging election” creates a deemed sale of such Class A Ordinary Shares at their fair market value on the last day of the last year in which we are 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 Class A Ordinary Shares on the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after such last day) in your Class A Ordinary Shares for tax purposes.
IRC Section 1014(a) provides for a step-up in basis to the fair market value for our Class A Ordinary Shares when inherited from a decedent that was previously a holder of our Class A Ordinary Shares. However, if we are 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 our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) our Class A Ordinary Shares, or a mark-to-market election and ownership of those Class A 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 we are 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 our Class A 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 Class A Ordinary Shares.
You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our Class A Ordinary Shares and the elections discussed above.
Taxation of Dividends and Other Distributions on our Class A Ordinary Shares
Subject to the PFIC rules discussed above, the gross amount of distributions made by us to you with respect to the Class A 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 our 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.
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 Class A Ordinary Shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a PFIC for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is not income tax treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the Class A Ordinary Shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, Class A Ordinary Shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on certain exchanges, which presently include the NYSE and the Nasdaq Stock Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Class A Ordinary Shares, including the effects of any change in law after the date of this annual report.
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 us with respect to our Class A 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 our 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 Class A Ordinary Shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our 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.
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Taxation of Dispositions of Class A Ordinary Shares
Subject to the passive foreign investment company rules discussed above, 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 Class A 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 Class A Ordinary Shares for more than one year, you will generally 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 which will generally limit the availability of foreign tax credits.
Information Reporting and Backup Withholding
Dividend payments with respect to our Class A Ordinary Shares and proceeds from the sale, exchange or redemption of our Class A Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a current flat 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-9or 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.
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. We do not intend to withhold taxes for individual shareholders. Transactions effected through certain brokers or other intermediaries, however, 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 our Ordinary Shares, subject to certain exceptions (including an exception for Class A 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.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing, among other things, the furnishing and content of proxy statements to shareholders, and our 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.
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I. Subsidiary Information
See “Item 4. Information on the Company-A. History and Development of the Company” and “-C. Organizational Structure.”
J. Annual Report to Security Holders
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Concentration and Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, restricted cash and accounts receivable. As of March 31, 2025, 2024, and 2023, the aggregate amounts of cash and restricted cash of $691,695, $2,672,506, and $4,584,530, respectively, were held at major financial institutions located in mainland China; and $3,002,761, $3,062,241, and $3,133,085, respectively, were deposited with major financial institutions located outside mainland China. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions.
The Company’s exposure to credit risk associated with its trading and other activities is measured on an individual counterparty basis, as well as by group of counterparties that share similar attributes. Substantially all of the Company’s sales are made to customers that are located primarily in the Europe, Asia and the Americas. The Company’s operating results could be adversely affected by government policies on exporting businesses, foreign exchange rate fluctuations, and local market condition changes.
There were three customers who accounted for approximately 14.5%, 11.9%, and 10.4% of our total revenue for the year ended March 31, 2025, respectively. There were two customers who accounted for approximately 17.4% and 12.7% each of our total revenue for the year ended March 31, 2024, respectively. There were three customers who accounted for approximately 12.0%, 10.6% and 10.5% of total revenue for the year ended March 31, 2023, respectively.
There were two customers who accounted for approximately 12.3% and 10.6% of the accounts receivable balance as of March 31, 2025, respectively. There were two customers who accounted for approximately 21.6% and 10.4% each of the accounts receivable balance as of March 31, 2024.
There was no single supplier that accounted for over 10% of the Company’s total purchases for the year ended March 31, 2025. There was one supplier who accounted for 12.1% of the Company’s total purchases for the year ended March 31, 2024. There was no single supplier that accounted for over 10% of the Company’s total purchases for the years ended March 31, 2023.
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Liquidity Risk
Our policy is to regularly monitor our liquidity requirements and our compliance with lending covenants, to ensure that we maintain sufficient reserves of cash and readily realizable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. See “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources” for details.
Currency Risk
The functional currency and reporting currency of the Company is the United States Dollar (“US$”). The Company’s direct wholly-owned operating subsidiaries in Hong Kong, mainland China, and the Netherlands, use their respective currencies, Hong Kong dollar (“HK$”), Renminbi (“RMB”) and Euro (“EUR”), as their functional currencies. Therefore, we are exposed to currency risk primarily through sales and purchases which give rise to receivables, payables and cash balances that are denominated in a currency other than the functional currency of the operations to which the transactions relate. Thus, our revenues and results of operations may be impacted by exchange rate fluctuations between currencies.
In the past, fluctuations in currency exchange rates have affected our reported results of operations. For example, as a result of the fluctuations in currency exchange rates, we incurred and recognized foreign currency translation income of US$0.07 million, US$0.43 million, and US$0.56 million for the years ended March 31, 2025, 2024, and 2023, respectively, as a result of changes in the exchange rate.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
Not applicable.
98
Part II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-270741) for our IPO, which was declared effective by the SEC on December 28, 2023. In January 2024, we completed our IPO in which we issued and sold an aggregate of 1,375,000 ordinary shares at a price of $4.00 per share for $5.50 million. Revere Securities, LLC and R.F. Lafferty & Co., Inc. were the underwriters of our IPO. On February 8, 2024, the underwriters exercised their over-allotment option in full to purchase an additional 206,250 ordinary shares at the price of US$4.00 per share. Gross proceeds of our IPO, including the proceeds from the sale of the over-allotment shares, totaled US$6.325 million, before deducting underwriting discounts and other related expenses.
We incurred approximately $2.71 million in expenses in connection with our IPO, which included approximately $0.47 million in underwriting discounts and commissions, approximately $0.19 million in expenses paid to or for the underwriter’s non-accountable expenses, approximately $1.87 million in other expenses, and approximately $0.18 million paid for underwriter’s legal counsel service fee. None of the transaction expenses included payments to directors or officers of our Company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds we received from the IPO were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.
The net proceeds raised from the IPO were approximately $3.62 million, after deducting underwriting discounts and the offering expenses payable by us. As of the date of this annual report, we have fully utilized the net proceeds as well as the released escrow deposit of $200,000 (which escrow deposit was retained to cover possible indemnification claims against the underwriters for a period of 12 months from the closing of the IPO), for upgrading the facility and management system, marketing efforts and expanding the sales team, research and development, and working capital and other general corporate purposes.
99
Item 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the Exchange Act, as of March 31, 2025.
Based on that evaluation, our management has concluded that, due to the material weaknesses described below, as of March 31, 2025, our disclosure controls and procedures were not effective. Notwithstanding management’s assessment that our internal control over financial reporting was ineffective as of March 31, 2025, due to the material weakness described below, we believe that the consolidated financial statements included in this annual report on Form 20-F correctly present our financial position, results of operations and cash flows for the fiscal years covered thereby in all material respects.
Management’s Annual Report on Internal Control over Financial Reporting
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. However, in connection with the audits of our consolidated financial statements as of March 31, 2024 and 2025, we and our independent registered public accounting firms identified certain material weaknesses in our internal control over financial reporting PCAOB of the United States. 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 our annual or interim financial statements will not be prevented or detected on a timely basis.
As of March 31, 2025, we identified the material weaknesses related to a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements. Following the identification of the material weaknesses and control deficiencies, we plan to continue to take remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel and (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control.
Our management has implemented and is currently taking the steps necessary to remediate the ineffectiveness, such as (i) conducting regular and continuous U.S. GAAP training programs and webinars for our financial reporting and accounting personnel; ii) actively recruiting more qualified staff to fill up the key roles in the operations; and iii) setting up a financial and system control framework with formal documentation of polices and controls in place. However, we cannot assure you that these measures may fully address the material weakness in our internal control over financial reporting or that we may not identify additional material weaknesses or significant deficiencies in the future.
Attestation Report of the Registered Public Accounting Firm
This annual report on Form 20-F does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC where domestic and foreign registrants that are non-accelerated filers, which we are, and “emerging growth companies,” which we also are, are not required to provide the auditor attestation report.
100
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. RESERVED
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors also has determined that Wai Chun Tsang qualifies as an “audit committee financial expert” as defined in Item 16A of Form 20-F. Wai Chun Tsang also satisfies the “independence” requirements of Section 5605(a)(2) of the NASDAQ Listing Rules as well as the independence requirements of Rule 10A-3 under the Exchange Act.
Item 16B. CODE OF ETHICS
Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors, officers, and employees. We have made our code of business conduct and ethics publicly available on our website, which can be accessed at https://ir.ccsc-interconnect.com/corporate.html.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered and billed by Enrome LLP, our independent registered public accounting firm since November 1, 2024, and MarcumAsia, our independent registered public accounting firm from September 1, 2022 through September 30, 2024, for the periods indicated.
| For the Years Ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Audit fees (1) | $ | 220,000 | $ | 348,000 | $ | 318,000 | ||||||
| Audit-related fees (2) | 40,000 | - | - | |||||||||
| Total | $ | 260,000 | $ | 348,000 | $ | 318,000 | ||||||
| (1) | Audit fees include the aggregate fees billed for each of the fiscal years for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements or for the audits of our financial statements and review of the interim financial statements in connection with our IPO. |
| (2) | Audit-related fees include the fees billed for professional services rendered by our independent registered public accounting firm for the review of the interim financial statements prepared after our IPO. |
The policy of our audit committee is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services, and other services as described above.
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On November 1, 2024, the Company appointed Enrome LLP as its independent registered public accounting firm, effective on the same day. Enrome LLP replaced MarcumAsia, the former independent registered public accounting firm, which the Company dismissed on November 1, 2024. The appointment of Enrome LLP was made after a careful consideration and evaluation process undertaken by the Company and was approved by the audit committee of the board of directors of the Company.
101
The details of the Company’s change of auditor are described on a report on Form 6-K filed with the SEC on November 8, 2024, which is incorporated by reference herein.
Item 16G. CORPORATE GOVERNANCE
As a Cayman Islands company listed on the Nasdaq Capital Market, we are subject to the Nasdaq corporate governance listing standards. Nasdaq rules, however, permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. To the extent that we choose to follow home country practice with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
Nasdaq Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company’s common stock or voting power for less than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended.
Nasdaq Listing Rule 5640 sets forth that voting rights of existing shareholders of publicly traded common stock registered under Section 12 of the Exchange Act cannot be disparately reduced or restricted through any corporate action or issuance. Examples of such corporate action or issuance include, but are not limited to, the adoption of time-phased voting plans, the adoption of capped voting rights plans, the issuance of super-voting stock, or the issuance of stock with voting rights less than the per share voting rights of the existing common stock through an exchange offer.
Notwithstanding these general requirements, Nasdaq Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these requirements. Under Cayman Islands laws, shareholder approval is not required for the types of securities issuances described in Nasdaq Listing Rules 5635, nor is there a prohibition against actions that may disparately reduce or restrict the voting rights of existing holders of publicly traded common stock. The board of directors of the Company elected to follow the Company’s home country rules in lieu of Nasdaq Listing Rules 5635 and 5640. We, therefore, are not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described above, and we may take corporate actions or make issuances that disparately reduce or restrict the voting rights of existing shareholders of our publicly traded common stock registered under Section 12 of the Exchange Act. Other than the above, there are no significant differences between our corporate governance practices and those followed by U.S. domestic companies under Nasdaq Capital Market corporate governance listing standards.
See “Item 3. Key Information-D. Risk Factors-Risks Relating to Our Class A Ordinary Shares-As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, which may limit the information publicly available to our investors and afford them less protection than if we were an U.S. issuer.”
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
102
Item 16J. INSIDER TRADING POLICIES
Our board of directors has
Our board of directors has also adopted a compensation recovery policy required by the Nasdaq Listing Rule 5608, the form of which is filed as Exhibit 97.1 to the annual report on Form 20-F filed by the Company with the SEC on July 22, 2024 and is incorporated by reference herein.
Item 16K. CYBERSECURITY
Risk management and strategy
Cybersecurity is a vital aspect of maintaining the trust of our customers and employees. We have instituted a comprehensive cybersecurity risk management program that employs various methods to monitor and assess our threat environment and risk profile. These methods include the use of manual and automated tools, conducting scans of the threat environment, evaluating our and our industry’s risk profile, evaluating threats reported to us and conducting vulnerabilities assessments. We also (i) established procedures to evaluate our backup systems timely as well as to review the security level of our current systems and consider upgrading our security and software testing if needed, (ii) established a fire wall to prevent external cyber risks, and (iii) provided cybersecurity training to our employees.
We have implemented protocols to safeguard against
cybersecurity threats and prevent unauthorized access to sensitive data. We regularly assess the Company’s cybersecurity risks and
vulnerabilities by identifying potential threats, evaluating the likelihood and potential impact of cyberattacks. We also conduct ongoing
evaluation of the industry trends and regulatory environments to ensure full compliance with cybersecurity laws and regulations in all
jurisdictions where we operate. We have set in place an efficient risk mitigation, control, and incident response protocols to identify
potential risks, detect, effectively respond to, and recover from cybersecurity breaches. We also provide regular training programs to
enhance employees’ awareness of cybersecurity risks and to help them better understand their roles and responsibilities in protecting
the assets and data of the Company and its subsidiaries. As of the date of this annual report, we do not engage
We believe these are useful tools for maintaining
a robust cybersecurity program to protect our investors, customers, employees, vendors, and intellectual property.
Governance
Our board of directors are primarily responsible for the overall risk management and implementation of such policies and procedures, which will be updated every year under the monitoring of our board of directors, and shall be approved by our board of directors to make sure such policies and procedures satisfy the requirements of IATF 16949 and ISO 9001. The executive management team is responsible for overseeing risk monitoring carried out by our IT department.
103
Part III
Item 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
Item 18. FINANCIAL STATEMENTS
The consolidated financial statements of the Company and the Operating Subsidiaries are included at the end of this annual report.
Item 19. EXHIBITS
EXHIBIT INDEX
| * | Filed with this annual report on Form 20-F |
| ** | Furnished with this annual report on Form 20-F |
| # | Portions of this exhibit have been omitted in accordance with Item 601 of Regulation S-K. |
104
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| CCSC Technology International Holdings Limited | ||
| By: | /s/ Kung Lok Chiu | |
| Kung Lok Chiu | ||
| Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| Date: July 17, 2025 | ||
105
CCSC TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
CCSC Technology International Holdings Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CCSC Technology International Holdings Limited and its subsidiaries (collectively, the “Company”) as of March 31, 2025 and the related consolidated statements of operations and comprehensive (loss)/income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the year ended March 31, 2025 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, consolidated financial position of the Company as of March 31, 2025, and the results of its operations and its cash flows for the year ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
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 audit. 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 PCAOB.
We conducted our audit in accordance with the standards of 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 audit, 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 the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatements 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 audit 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 presentation. We believe that our audit provide a reasonable basis for our opinion.
The consolidated financial statements of the Company for the years ended March 31, 2024 and 2023 were audited by another auditor. As described in Note 14, the Company had divided its authorized and issued shares into 2 classes of shares and have reflected this in the consolidated financial statement for the year ended March 31, 2024 retrospectively. We audited the adjustments applied. In our opinion, such adjustment is appropriate and has been properly applied. However, we are not engaged to audit, review, or apply any procedures to the consolidated financial statements for the year ended March 31, 2024 other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the consolidated financial statements for the year ended March 31, 2024 taken as a whole.
/s/
We have served as the Company’s auditor since 2024.
July 17, 2025
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
CCSC Technology International Holdings Limited
Opinion on the Financial Statements
We have audited, before the effects of the adjustments to retrospectively apply the change in share structure described in Note 14, the accompanying consolidated balance sheets of CCSC Technology International Holdings Limited. and its subsidiaries (collectively, the “Company”) as of March 31, 2024, and the related consolidated statements of operations and comprehensive (loss)/income, change in shareholders’ equity, and cash flows for each of the two years in the period ended March 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the change in share structure described in Note 14, present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in share structure described in Note 14 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by Enrome LLP.
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 audits 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 the Company’s 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/ Marcum Asia CPAs LLP
Marcum Asia CPAs LLP
We have served as the Company’s auditor from 2022 to 2024. (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022)
New York, New York
July 22, 2024
F-3
CCSC TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(Amount in U.S. dollars, except for number of shares)
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Operating right-of-use assets, net | ||||||||
| Finance lease right-of-use assets, net | ||||||||
| Deferred tax assets, net | ||||||||
| Other non-current assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Advance from customers | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Taxes payable | ||||||||
| Operating lease liabilities, current | ||||||||
| Finance lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Finance lease liabilities, non-current | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Class A ordinary shares, par value of US$ | $ | $ | ||||||
| Class B ordinary shares, par value of US$ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
| * |
The accompanying notes are an integral part of the consolidated financial statements.
F-4
CCSC TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME
(Amount in U.S. dollars, except for number of shares)
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Net revenue | $ | $ | $ | |||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling expenses | ( | ) | ( | ) | ( | ) | ||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ||||||
| (Loss)/income from operations | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||
| Other non-operating income/(expenses), net | ( | ) | ||||||||||
| Government subsidy | ||||||||||||
| Foreign currency exchange income | ||||||||||||
| Financial and interest income, net | ||||||||||||
| Total other income | ||||||||||||
| (Loss)/income before income tax expense | ( | ) | ( | ) | ||||||||
| Income tax benefit/(expenses) | ( | ) | ||||||||||
| Net (loss)/income | ( | ) | ( | ) | ||||||||
| Other comprehensive loss | ||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Total comprehensive (loss)/income | $ | ( | ) | $ | ( | ) | $ | |||||
| (Loss)/earnings per share | ||||||||||||
| Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | |||||
| Weighted average number of ordinary shares | ||||||||||||
| Basic and Diluted | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-5
CCSC TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amount in thousands of U.S. dollars, except for number of shares)
| Class A Ordinary | Class B Ordinary | Additional | Accumulated other | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Shares | Subscription | paid-in | Statutory | Retained | comprehensive | shareholders’ | |||||||||||||||||||||||||||||||||
| Share* | Amount | Share* | Amount | receivable | capital | reserves | earnings | loss | equity | |||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Capital injection by shareholder | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares upon Initial Public Offering (“IPO”) and over-allotment, net of issuance cost | - | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of the consolidated financial statements.
F-6
CCSC TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amount in U.S. dollars, except for number of shares)
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net (loss)/income | $ | ( | ) | $ | ( | ) | $ | |||||
| Adjustments to reconcile net (loss)/income to net cash (used in)/ provided by operating activities: | ||||||||||||
| Inventory write-downs | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Amortization of right-of-use asset | ||||||||||||
| Loss from disposal of property, plant and equipment | ||||||||||||
| Deferred tax (benefit)/expense | ( | ) | ( | ) | ||||||||
| Foreign currency exchange gains | ( | ) | ( | ) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( | ) | ||||||||||
| Inventories | ( | ) | ||||||||||
| Amount due from related parties | ||||||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||||||
| Other non-current assets | ( | ) | ||||||||||
| Accounts payable | ( | ) | ( | ) | ||||||||
| Advance from customers | ( | ) | ||||||||||
| Taxes payable | ( | ) | ( | ) | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Financing lease liabilities | ( | ) | ||||||||||
| Amount due to related parties | ( | ) | ||||||||||
| Net cash (used in)/provided by operating activities | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Prepayment of long-term equipment and mold model | ( | ) | ||||||||||
| Proceed from disposal of property, plant and equipment | ||||||||||||
| Purchase of land | ( | ) | ||||||||||
| Purchase of intangible asset | ( | ) | ( | ) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| CASH FLOWS FORM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from short-term bank loans | ||||||||||||
| Repayments of short-term bank loans | ( | ) | ||||||||||
| Repayments of long-term bank loans | ( | ) | ( | ) | ||||||||
| Proceeds from issuance of ordinary shares, net of issuance cost of US$ | ||||||||||||
| Payment for deferred IPO costs | ( | ) | ||||||||||
| Capital contribution by shareholder | ||||||||||||
| Payment made for principal portion of financing lease liabilities | ( | ) | ||||||||||
| Net cash provided by/(used in) financing activities | ( | ) | ||||||||||
| Effect of exchange rate changes on cash and restricted cash | ( | ) | ( | ) | ( | ) | ||||||
| Net change in cash and restricted cash | ( | ) | ( | ) | ||||||||
| Cash and restricted cash, beginning of the year | ||||||||||||
| Cash and restricted cash, end of the year | $ | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||
| Cash paid for income tax | $ | $ | ( | ) | $ | ( | ) | |||||
| Cash received from income tax refund | $ | $ | $ | |||||||||
| Cash paid for interest | $ | $ | ( | ) | $ | ( | ) | |||||
| Cash paid for operating lease | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Cash paid for finance lease | $ | ( | ) | $ | ( | ) | $ | |||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | $ | $ | $ | |||||||||
| Purchase of intangible assets included in accrued expenses and other liabilities | $ | ( | ) | $ | $ | |||||||
| Purchase of property and equipment included in accrued expenses and other liabilities | $ | ( | ) | $ | $ | |||||||
The following tables provide a reconciliation of cash and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the consolidated statement of cash flows:
| March 31, | March 31, | March 31, | ||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Cash, beginning of the year | $ | $ | $ | |||||||||
| Restricted cash, beginning of the year | ||||||||||||
| Total cash and restricted cash, beginning of the year | $ | $ | $ | |||||||||
| March 31, | March 31, | March 31, | ||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Cash, end of the year | $ | $ | $ | |||||||||
| Restricted cash, end of the year | ||||||||||||
| Total cash and restricted cash, end of the year | $ | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-7
| 1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
| (a) | Principal activities |
CCSC Technology International Holdings Limited (“CCSC Cayman” or the “Company”), through its direct wholly-owned subsidiaries, is principally engaged in the manufacturing and sale of interconnect products, including connectors, cables and wire harnesses. The majority of the Company’s products are sold in Europe and Asia. The Company produces both OEM (“original equipment manufacturer”) and ODM (“original design manufacture”) interconnect products for manufacturing companies that produce end products, as well as for electronic manufacturing services (“EMS”) companies, who procure and assemble products on behalf of such companies.
| (b) | Organization |
A reorganization of the Company’s legal
structure (“Reorganization”) was completed on March 17, 2022.
| Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Major business activities | ||||||||
| CCSC Cayman | ||||||||||||
| CCSC Group | ||||||||||||
| CCSC Technology Group | ||||||||||||
| CCSC Interconnect HK | ||||||||||||
| CCSC Interconnect DG | ||||||||||||
| CCSC Interconnect NL | ||||||||||||
| CCSC Technology Serbia | ||||||||||||
| 2. | LIQUIDITY |
The Company incurred net losses of
US$
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Basis of presentation |
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
| (b) | Principles of consolidation |
The accompanying consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All inter-company balances and transactions are eliminated upon consolidation.
| (c) | Use of estimates |
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. These estimates are based on information as of the date of the consolidated financial statements. Significant accounting estimates include, but are not limited to allowance for credit losses, inventory write-down, useful lives of property, plant and equipment and intangible assets, recoverability of long-lived assets, and realization of deferred income taxes. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates.
F-8
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (d) | Foreign currencies and foreign currency translation |
The functional currency and reporting currency of the Company is the United States Dollar (“US$” or “$”). The Company’s direct wholly-owned operating subsidiaries in Hong Kong, mainland China, the Netherlands and the Serbia, use their respective currencies, Hong Kong dollar (“HK$”), Renminbi (“RMB”), Euro (“EUR”) and Serbian Dinar (“RSD”), as their functional currencies.
The financial statements of the Company’s direct wholly-owned operating subsidiaries were translated into the U.S. dollar using the exchange rate as of the balance sheet date for assets and liabilities and average exchange rate for the year for income and expense items. Assets and liabilities denominated in functional currencies at the balance sheet date were translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency was translated at the historical rate of exchange at the time of the capital contribution. Because cash flows were translated based on the average exchange rate, amounts related to assets and liabilities reported on the consolidated statements of cash flows may not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive loss included in consolidated statements of changes in shareholders’ equity. Gains and losses from foreign currency transactions are included in the Company’s consolidated statements of operations and comprehensive (loss)/income.
The following table outlines the currency exchange rates that were used in preparing the consolidated financial statements:
| March 31, 2025 | March 31, 2024 | ||||||||||||
| Year-end spot rate | Average rate | Year-end spot rate | Average rate | ||||||||||
| US$ against RMB | US$1=RMB |
US$1=RMB |
US$1=RMB |
US$1=RMB |
|||||||||
| US$ against EUR | US$1=EUR |
US$1=EUR |
US$1=EUR |
US$1=EUR |
|||||||||
| US$ against HK$ | US$1=HK$ |
US$1=HK$ |
US$1=HK$ |
US$1=HK$ |
|||||||||
| US$ against RSD | US$1=RSD |
US$1=RSD |
|||||||||||
| * |
| (e) | Cash |
Cash consists of cash on hand and cash in bank. The Company maintains cash with various financial institutions primarily in HK, mainland China, the Netherlands and the Serbia. The Company has not experienced any losses in bank accounts.
| (f) | Restricted Cash |
Restricted cash consists of rental
guarantee deposits and escrow deposits. The rental guarantee deposit for the Company’s office located in the Netherlands cannot
be withdrawn without certain approval or notice. Escrow deposits in the designated escrow account were to cover possible indemnification
claims against the underwriters for a period of 12 months from the closing of the IPO. The amount of designated escrow account was
and $
F-9
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (g) | Accounts receivable |
Accounts receivable represents the amounts that the Company has an unconditional right to consideration, which are stated at the original amount less the expected credit losses of accounts receivable. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company considers many factors in assessing the expected credit losses model, such as size, the age of the accounts, the customer’s payment history, credit-worthiness and other specific circumstances related to the accounts, along with reasonable and supportable forecasts as a basis to develop the Company’s expected loss estimates. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive (loss)/income. Delinquent account balances are written off against the credit losses of accounts receivable after management has determined that the likelihood of collection is remote. The Company adopted ASU 2016-13 from April 1, 2023 using modified-retrospective transition approach with a cumulative-effect adjustment to shareholders’ equity amounting to nil recognized as of April 1, 2023. As of March 31, 2025 and 2024, there were no credit losses recorded as the Company considers all of the outstanding accounts receivable fully collectible.
| (h) | Inventories |
Inventories, primarily consisting of
raw materials, work-in-process, finished goods and inventory in transit, are stated at the lower cost or net realizable value. Net realizable
value is the estimated selling price in the normal course of business less any costs to complete and sell products. Cost of inventory
is determined using the weighted average cost method. The Company reviews its inventories periodically to determine if any reserves are
necessary for potential shrinkage and obsolete or unusable inventory. The amounts of the inventory write-down to net realizable value,
recognized in cost of sales, were $
The Company combines the disclosure of gross inventory balances and inventory write-down in Note 5 during the fiscal year 2025 as for any write-down of inventory establishes a new cost basis that is not subject to subsequent reversal, even if the inventory value recovers in future periods due to changes in market conditions.
As a result of this clarification and to enhance consistency with U.S. GAAP, the Company revised the presentation of its inventory disclosures to improve comparability across periods. Accordingly, prior period amounts have been reclassified to conform to the current period’s presentation. This change pertains solely to the presentation of information in the financial statements and has no effect on the recognition, measurement, or write-down of inventory of previous periods. It also does not impact any previously reported results of operations or financial position.
| (i) | Property, plant and equipment, net |
Property, plant and equipment, net are stated at cost less accumulated depreciation and impairment, if any, and are depreciated on a straight-line basis over the estimated useful lives of the assets as follows. Land is not depreciated since it has an indefinite useful life.
| Category | Estimated useful lives | |
| Machinery and equipment | ||
| Office equipment, furniture and fixtures | ||
| Leasehold improvements | ||
| Motor vehicle | ||
| Land |
Repair and maintenance costs are charged to expenses as incurred, whereas the cost of renewals and betterments that extend the useful lives of property, plant and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation and impairment with any resulting gain or loss recognized in the consolidated statements of operations and comprehensive (loss)/income in other income or expenses.
F-10
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (j) | Intangible assets, net |
Intangible assets, net are stated at
cost less accumulated amortization and amortized in a method which reflects the pattern in which the economic benefits of the intangible
assets are expected to be consumed or otherwise used up.
| Category | Estimated useful lives | |
| Software |
| (k) | Impairment of long-lived assets |
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss, which is the excess of the carrying amount over the fair value of the assets, using the expected future discounted cash flows. There were no impairments of these long-lived assets for the years ended March 31, 2025 and 2024.
| (l) | Fair value measurement |
The Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820’’). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 — Include other inputs that are directly or indirectly observable in the marketplace. | |
| ● | Level 3 — Unobservable inputs which are supported by little or no market activity. |
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
Financial assets and liabilities of the Company primarily consisted of cash, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, income tax payable, and accrued expenses and other current liabilities. As of March 31, 2025 and 2024, the carrying amounts of the Company’s financial instruments approximated to their fair value of the respective assets and liabilities based upon the short-term nature of these assets and liabilities.
The Company believes that the carrying amount of long-term loans, current portion approximate fair value at March 31, 2025 and 2024 based on the terms of the borrowings and current market rates, as the rates of the borrowings are reflective of the current market rates.
F-11
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (m) | Commitments and contingencies |
From time to time, the Company may be a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. For the years ended March 31, 2025, 2024 and 2023, the Company did not have any material legal claims or litigation that, individually or in aggregate, could have a material adverse impact on the Company’s consolidated financial position, results of operations, and cash flows.
The Company had contractual payment obligations under its operating lease agreements with the landlords.
The Company had certain equipment purchase
agreements with three independent third party vendors, with a future payment of US$
| (n) | Revenue recognition |
ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
To determine revenue recognition for contracts with customers, the Company performs the following five steps:
| Step 1: | Identify the contract with the customer |
| Step 2: | Identify the performance obligations in the contract |
| Step 3: | Determine the transaction price |
| Step 4: | Allocate the transaction price to the performance obligations in the contract |
| Step 5: | Recognize revenue when the company satisfies a performance obligation |
The Company manufactures and sells interconnect products, including connectors, cables and wire harnesses.
The Company recognizes revenue when it transfers its goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products to its customers on a gross basis, because the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods. All of the Company’s contracts have single performance obligation as the promise is to transfer the individual goods at a fixed price to customers, and there are no other separately identifiable promises or financial component in the contracts.
F-12
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (n) | Revenue recognition (cont.) |
The Company’s revenue is recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at delivery. The Company’s products are sold with no right of return and the Company does not provide other credits or sales incentives to customers. Revenue is reported net of value added tax (“VAT”).
Disaggregation of Revenue
The Company disaggregates its revenue from contracts by product category and geographic regions, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the years ended March 31, 2025, 2024 and 2023 are disclosed in Note 15 to these consolidated financial statements.
Contract assets and liabilities
Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit. Accounts receivable represent revenue recognized for the amounts invoiced and/or prior to invoicing when the Company has satisfied its performance obligation and has unconditional right to the payment. Contract assets represent the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer. Other than accounts receivable, the Company had no other material contract assets recorded on its consolidated balance sheets as of March 31, 2025 and 2024, respectively.
The Company’s contract liabilities
primarily relate to unsatisfied performance obligations when payment has been received from customers before the Company’s products
are delivered, and are recorded as “advance from customers” on the consolidated balance sheets. Costs of fulfilling customers’
purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general
and administrative expenses when incurred. Advance from customers amounted to $
| (o) | Cost of revenue |
Cost of revenue consists primarily of (i) cost of materials; (ii) labor costs; (iii) inventory write-down; (iv) depreciation and amortization; and (v) rental expenses for the factory and employee dormitory. Depreciation and amortization of manufacturing facilities and warehouses attributable to manufacturing activities are capitalized as part of the cost of inventory, and expensed in costs of revenues when the inventory is sold.
| (p) | Selling expenses |
Selling expenses mainly consist of (i) marketing and entertainment expenses for promotion; (ii) staff costs, travelling expenses, rental and depreciation related to selling and marketing functions; (iii) freight fees and transportation fees; and (iv) office, utility and other expenses.
| (q) | General and administrative expenses |
General and administrative expenses mainly consist of (i) salaries and benefits for our administrative personnel; (ii) agent and professional fees related to our IPO, including both one-time IPO-related costs and recurring public company compliance expenses; (iii) office expenses, expenses for office supplies and consumables; (iv) depreciation and amortization expenses relating to our property, plant and equipment and leased properties used for administrative purposes; and (v) other expenses, which primarily include utilities, traveling, entertainment, repair and maintenance, rental and other miscellaneous expenses for administrative purposes.
F-13
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (r) | Research and development (“R&D”) expenses |
R&D expenses mainly consist of (i) salaries, welfare and insurance expenses paid to R&D employees; (ii) costs of materials and components for the research and development activities; and (iii) manufacturing expenses for producing samples related to research and development activities.
| (s) | Government subsidy |
Government subsidy is recognized when
there is a reasonable assurance that the Company will comply with the conditions attached to it and the grant will be received. Government
grant for the purpose of giving immediate financial support to the Company with no future related costs or obligation is recognized in
the Company’s consolidated statements of operations and comprehensive (loss)/income when the grant becomes receivable. Government
subsidies received and recognized as other income totaled $
| (t) | Employee Defined Contribution Plan |
The Company’s subsidiaries in
the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which pension, work-related injury benefits,
maternity insurance, medical insurance, unemployment benefits and housing funds are provided to eligible full-time employees. The relevant
labor regulations require the Company’s subsidiaries in the PRC to pay the local labor and social welfare authorities monthly contributions
based on the applicable benchmarks and rates stipulated by the local government. The contributions to the plan are expensed as incurred.
Employee social security and welfare benefits included as expenses in the accompanying consolidated statements of operations and comprehensive
(loss)/income amounted to $
| (u) | Leases |
The Company leases premises for factory and offices under non-cancellable operating leases.
On April 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). ASC 842 requires that lessees recognize right-of-use (“ROU”) assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. ASC 842 distinguishes leases as either a finance lease or an operating lease on the consolidated balance sheets that affects how the leases are measured and presented in the statement of operations and statement of cash flows (see Note 11).
Right-of-use (“ROU”) assets represent the Company’s right to use underlying assets including factory, vehicles and production equipment for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset, and whether it has the right to control the use of the asset.
The right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease expenses and finance lease amortization expenses on a straight-line basis over the lease term.
F-14
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (u) | Leases (cont.) |
Operating lease right-of-use of assets and finance lease right-of-use of assets
The right-of-use of asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received. The Company has both operating lease and finance lease.
For operating lease, lease expense is recorded on a straight-line basis over the lease term. The amortization of the right-of-use asset is calculated as the difference between the straight-line lease expense and the interest calculated on the lease liability. For finance lease, the amortization of the right-of-use asset is calculated on a straight-line basis over the lease term.
Operating lease liabilities and finance lease liabilities
Lease liability is initially measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee and any exercise price under a purchase option that the Company is reasonably certain to exercise.
Lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments, if there is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if there is any change in the Company assessment of option purchases, contract extensions or termination options.
| (v) | Income taxes benefit/(expenses) |
The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
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.
The Company records uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company records interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included on the related tax liabilities line in the consolidated balance sheets. The Company does not believe that there were any uncertain tax positions as of March 31, 2025 and 2024, respectively.
F-15
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (v) | Income taxes benefit/(expenses) (cont.) |
The Company’s operating subsidiary
in mainland China is subject to examination by the relevant PRC tax authorities. According to the PRC Tax Administration and Collection
Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or
the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of
taxes is more than RMB
The Company’s operating subsidiary in Hong Kong are subject to examination by the Hong Kong Inland Revenue Department (the “HKIRD”) if the HKIRD has doubts regarding the source of income, the completeness and accuracy of the tax returns filed by the taxpayers. According to the Inland Revenue Ordinance, the taxpayers are required to keep sufficient records of income and expenditure for a period of not less than seven years to enable the assessable profits to be readily ascertained.
| (w) | Value added tax (“VAT”) |
Sales revenue represents the invoiced value of goods, net of VAT. The Company is subject to VAT and related surcharges on revenue generated from sales of products. The Company records revenue net of VAT. Entities that are VAT general taxpayers are allowed to offset qualified input VAT, paid to suppliers against their output VAT liabilities.
The VAT is based on gross sales price.
The mainland China VAT rate is
| (x) | Segment Reporting |
An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker (the “CODM”) in order to allocate resources and assess the performance of the segment.
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the CODM or decision-making group, in deciding how to allocate resources and in assessing performance. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s CODM for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the CODM, reviews operating results by the revenue of different services. Based on management’s assessment, the Company has determined that it has one operating segment as defined by ASC 280 (see Note 15).
The Company has concluded that consolidated net (loss)/income is the measure of segment profitability. The CODM assesses performance for the Company, monitors budget versus actual results and determines how to allocate resources based on consolidated net income as reported in the consolidated statements of operations and comprehensive income. There is no other expense categories regularly provided to the CODM that are not already included in the primary financial statements herein.
The Company expanded its segment disclosures by providing additional information on long-lived assets by geographic region during the fiscal year 2025 in Note 15. When the measurement of a segment significantly changes or additional disclosure dimensions are introduced, prior period amounts and balances are reclassified to conform to the current period’s presentation to ensure comparability. It does not impact any previously reported results of operations or financial position.
| (y) | (Loss)/earnings per share |
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing income available to shareholders of the Company by the weighted average Ordinary Shares outstanding during the period. Diluted EPS take into account the potential dilution that could occur if securities or other contracts to issue Ordinary Shares were exercised and converted into Ordinary Shares. As of March 31, 2025 and 2024, there were no dilutive shares.
F-16
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (z) | Comprehensive (loss)/income |
Comprehensive (loss)/income consists of two components, net (loss)/income and other comprehensive loss. The foreign currency translation adjustment resulting from translation of the consolidated financial statements expressed in RMB and other foreign currencies to US$ is reported in other comprehensive loss in the consolidated statements of operations and comprehensive (loss)/income.
| (aa) | Concentration and credit risk |
Financial instruments that potentially
subject the Company to significant concentration of credit risk consist primarily of cash, restricted cash and accounts receivable. As
of March 31, 2025, and 2024, the aggregate amounts of cash and restricted cash of $
The Company’s exposure to credit risk associated with its trading and other activities is measured on an individual counterparty basis, as well as by a group of counterparties that share similar attributes. Substantially all of the Company’s sales are made to customers that are located primarily in Europe, Asia and the Americas. The Company’s operating results could be adversely affected by government policies on exporting businesses, foreign exchange rate fluctuations, and local market condition changes.
There were three customers who accounted
for approximately
There were two customers who accounted
for approximately
There was no single supplier that
accounted for over 10% of the Company’s total purchases for the year ended March 31, 2025. There was one supplier who
accounted for
There was one supplier who accounted
for approximately
F-17
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (bb) | Related parties and transactions |
The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.
Related 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 operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it nonetheless requires their disclosure.
| (cc) | Risks and uncertainties |
The Company has substantial operations in China through its PRC subsidiaries. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to regional wars, geopolitical tensions, natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could potentially and significantly disrupt the Company’s operations.
The uncertainties associated with the ongoing Russia-Ukraine war may cause the Company’s future revenue and cash flows to underperform due to significant increases in raw material purchase prices and disruptions of the global supply chain. Any potential impact on the Company’s operating results will depend, to a large extent, on future developments and new information that may emerge regarding the duration and the new development of the Russia-Ukraine war, of which are beyond the Company’s control and cannot be reasonably predicted as of the date of this report.
F-18
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| (dd) | Recent accounting pronouncements |
Recently issued accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU 2023-09, Improvement to Income Tax Disclosure. This standard requires more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This standard also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for public business entities, for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.
In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and will not become effective for any entity. The Company does not expect the adoption of ASU 2023-06 to have a material impact on its consolidated financial statements.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for the Company’s annual reporting for the fiscal year ended March 31, 2028 and for interim period reporting beginning in the fiscal year ended March 31, 2029 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.
Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on, or are unrelated to, its consolidated financial condition, results of operations, cash flows or disclosures.
F-19
| 4. | ACCOUNTS RECEIVABLE |
Accounts receivable amounted to $
Approximately
| Accounts receivable by aging bucket | Balance as of March 31, 2025 | Subsequent collection (1) | % of subsequent collection(1) | |||||||||
| Overdue but within 1 year | $ | $ | % | |||||||||
| Not yet due | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for credit losses | ||||||||||||
| Accounts receivable | $ | $ | % | |||||||||
| Accounts receivable by aging bucket | Balance as of March 31, 2024 | Subsequent collection | % of subsequent collection(2) | |||||||||
| Overdue but within 1 year | $ | $ | % | |||||||||
| Not yet due | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for credit losses | ||||||||||||
| Accounts receivable | $ | $ | % | |||||||||
| (1) | |
| (2) |
| 5. | INVENTORIES |
Inventories consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Work in process | ||||||||
| Inventory in transit (Note A) | ||||||||
| Inventories | $ | $ | ||||||
Note A:
F-20
| 6. | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
Prepaid expenses and other current assets consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Deductible VAT-Input (1) | $ | $ | ||||||
| Income tax recoverable (2) | ||||||||
| Prepaid expenses (3) | ||||||||
| Advances to vendors (4) | ||||||||
| Others | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
| 7. | PROPERTY, PLANT AND EQUIPMENT, NET |
Property, plant and equipment, net, consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Machinery equipment | $ | $ | ||||||
| Land (1) | ||||||||
| Office equipment | ||||||||
| Leasehold improvements | ||||||||
| Motor vehicle | ||||||||
| Furniture | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | ||||||||
| Construction in progress | ||||||||
| Total property, plant and equipment, net | $ | $ | ||||||
| (1) |
Depreciation expenses were $
F-21
| 8. | INTANGIBLE ASSETS, NET |
Intangible assets, net, consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Software | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization expenses were $
| 9. | Other non-current assets, net |
Other non-current assets, net consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Prepayment of long-term equipment and mold model (1) | $ | $ | ||||||
| Deposits and others (2) | ||||||||
| Subtotal | ||||||||
| Less: impairment loss | ( | ) | ||||||
| Other non-current assets, net | $ | $ | ||||||
| (1) |
| (2) |
| 10. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Accrued payroll and employee benefits (1) | $ | $ | ||||||
| Others (2) | ||||||||
| Total | $ | $ | ||||||
| (1) |
| (2) |
| 11. | LEASES |
At the inception of a contract, the Company determines if the arrangement is, or contains, a lease. ROU assets represent the Company’s right to use an underlying asset over the lease term and lease liabilities represent the Company’s obligation to make lease payments derived from the lease.
Operating lease and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease terms. Rent expense is recognized on a straight-line basis over the lease terms.
F-22
| 11. | LEASES (cont.) |
On September 1, 2022, the Company renewed leased plants with an original lease term expired on August 31, 2022 and extended the lease term for another years to August, 2027.
On November 7, 2023, the Company renewed leased equipment with original leases term expired on August 20, 2023 and extended the lease term for another years to February 19, 2028. The Company will have ownership of the equipment upon maturity of the leases.
On November 23, 2023, the Company combined and renewed leased office with two original leases term expired on November 31, 2023 and extended the lease term for another years to November 30, 2025.
On December 24, 2024, the Company entered into a finance lease agreement for a vehicle with monthly payments through June 20, 2029. Ownership of the vehicle will transfer to the Company at lease expiration.
Balance sheet information related to ROU assets and lease liabilities are as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Accumulated amortization of operating lease right-of-use assets | ( | ) | ( | ) | ||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Operating lease liabilities, current | $ | $ | ||||||
| Operating lease liabilities, non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Finance lease right-of-use assets | $ | $ | ||||||
| Accumulated amortization of finance lease right-of-use-assets | ( | ) | ( | ) | ||||
| Finance lease right-of-use assets, net | $ | $ | ||||||
| Finance lease liabilities, current | $ | $ | ||||||
| Finance lease liabilities, non-current | ||||||||
| Total Finance lease liabilities | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for the operating lease and finance lease as of March 31, 2025 and 2024 are as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Operating lease | ||||||||
| Finance lease | ||||||||
| Weighted average discount rate (1) | ||||||||
| Operating lease | % | % | ||||||
| Finance lease | % | % | ||||||
F-23
| 11. | LEASES (cont.) |
| (1) |
The components of lease expenses for the years ended March 31, 2025, 2024 and 2023 are as follows:
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Operating lease: | ||||||||||||
| Operating lease expense | $ | $ | $ | |||||||||
| Short-term lease expense | ||||||||||||
| Total operating lease expenses | ||||||||||||
| Finance leases: | ||||||||||||
| Amortization expense | ||||||||||||
| Interest expense | ||||||||||||
| Total finance lease expenses | ||||||||||||
| Total lease expenses | $ | $ | $ | |||||||||
For the years ended March 31,
2025, 2024 and 2023, cash paid for operating leases were $
The following table summarizes the maturity of lease liabilities and future minimum payments of leases as of March 31, 2025:
| Operating lease | Finance lease | |||||||
| Year ending March 31, | ||||||||
| 2026 | $ | $ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Total lease payments | ||||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Total lease liabilities | $ | $ | ||||||
| 12. | TAXATION |
Cayman Islands and British Virgin Islands (“BVI”)
Under the current laws of the Cayman Islands and the BVI, the Company is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands or the BVI.
Hong Kong
According to Tax (Amendment) (No.
3) Ordinance 2019 published by Hong Kong government, effective April 1, 2019, under the two-tiered profits tax rates
regime, the profits tax rate for the first HK$
F-24
| 12. | TAXATION (cont.) |
Serbia
Our subsidiary, CCSC Technology Serbia,
which was incorporated and operated in the Serbia, is subject to enterprise income tax on its worldwide taxable income, as determined
under the tax laws and accounting standards, at a rate of
Netherlands
CCSC Interconnect NL, which was incorporated
in the Netherlands, is subject to enterprise income tax on their worldwide taxable income, as determined under the tax laws and accounting
standards, at a rate of
Mainland China
Generally, CCSC Interconnect DG is
considered mainland China resident enterprises under the PRC tax law, are subject to enterprise income tax on their worldwide taxable
income, as determined under the PRC tax laws and accounting standards at a statutory income tax rate of
In accordance with the implementation
rules of Enterprise Income Tax Laws of the PRC (the “EIT Laws”), a qualified “High and New Technology Enterprise”
(“HNTE”) is eligible for a preferential tax rate of
Tax saving as a result of HNTE were
, and $
The EIT Laws also impose a withholding
income tax of
F-25
| 12. | TAXATION (cont.) |
The income tax provision consisted of the following components:
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Current income tax expense: | ||||||||||||
| PRC | $ | $ | $ | |||||||||
| Hong Kong | ||||||||||||
| Serbia | ||||||||||||
| True up adjustments for income tax expense for prior years | ||||||||||||
| Total current income tax expense | ||||||||||||
| Deferred income tax (benefit)/expense: | ||||||||||||
| PRC | ( | ) | ( | ) | ||||||||
| Hong Kong | ( | ) | ( | ) | ||||||||
| Other | ( | ) | ||||||||||
| Total deferred income tax (benefit)/expense | ( | ) | ( | ) | ||||||||
| Total income tax (benefit)/expense | $ | ( | ) | $ | ( | ) | $ | |||||
The pretax income by major tax jurisdictions is as follows:
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (Loss)/income before tax | ||||||||||||
| PRC | $ | ( | ) | $ | ( | ) | $ | |||||
| Hong Kong | ( | ) | ( | ) | ||||||||
| Serbia | ( | ) | ||||||||||
| Other | ( | ) | ||||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | |||||
F-26
| 12. | TAXATION (cont.) |
A reconciliation between the Company’s actual provision for income taxes and the provision under the PRC statutory rate is as follows:
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (Loss)/income before income tax | $ | ( | ) | $ | ( | ) | $ | |||||
| PRC statutory tax rate | % | % | % | |||||||||
| Computed income tax (benefit)/expense with statutory Enterprise Income Tax rate | ( | ) | ( | ) | ||||||||
| Additional deduction for R&D expenses | ( | ) | ( | ) | ( | ) | ||||||
| Effect of preferential tax rates for PRC subsidiary | ( | ) | ||||||||||
| Effect of preferential tax rates for Hong Kong subsidiary | ( | ) | ||||||||||
| Changes in valuation allowance | ( | ) | ||||||||||
| Effect of different tax rates in jurisdictions other than PRC* | ( | ) | ||||||||||
| True up adjustments for income tax expense for prior years** | ||||||||||||
| Tax effect of non-taxable income and non-deductible items | ( | ) | ( | ) | ||||||||
| Income tax (benefit)/expense | $ | ( | ) | $ | ( | ) | $ | |||||
| * |
| ** |
As of March 31, 2025 and 2024, the
cash paid for income tax were and $
As of March 31, 2025 and 2024, the significant components of the deferred tax assets were summarized below:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carried forward | ||||||||
| Inventory provision allowance | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
The Company periodically evaluates
the likelihood of the realization of deferred tax assets and reduces the carrying amount of the deferred tax assets by a valuation allowance
to the extent it believes a portion will not be realized. Management considers new evidence, both positive and negative, that could affect
the Company’s future realization of deferred tax assets, including its recent cumulative earnings experience, expectation of future
income, the carry forward periods available for tax reporting purposes and other relevant factors. As of March 31, 2025 and 2024,
the Company’s subsidiary, CCSC Technology Group, reported a net operating loss of $
F-27
| 12. | TAXATION (cont.) |
As of March 31, 2025 and 2024, net
operating loss carryforwards of our PRC subsidiary amounted to $
The movements of valuation allowance of deferred tax assets are as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at beginning of the year | $ | $ | ||||||
| Additions | ||||||||
| Reversal | ( | ) | ||||||
| Foreign currency translation adjustments | ||||||||
| Balance at end of the year | $ | $ | ||||||
As of March 31, 2025 and 2024,
the Company had income taxes payable of $
The Company also had income tax recoverable
of $
The Company evaluates 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, 2025 and 2024, the Company did not have any significant unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next twelve months. For the years ended March 31, 2025, 2024 and 2023, the Company did not have any significant interest or penalties related to potential underpaid income tax expenses.
According to PRC Tax Administration
and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the
taxpayer or withholding agent. The statute of limitations will be extended five years under special circumstances, which are not clearly
defined (but an underpayment of tax liability exceeding RMB
F-28
| 13. | RELATED PARTY TRANSACTIONS |
Related parties
The Company’s related parties
with which the Company had transactions include its subsidiaries, any director or executive officers of the Company and his or her immediate
family members, as well as any shareholders owning more than
| Name of Related Party | Relationship to the Company | |
| Dr. Chi Sing Chiu | ||
| Ms. Woon Bing Yeung | ||
| Dongguan Concord Internet of Things Seienct Technology.Ltd (“Dongguan Concord Internet”)* |
| * |
Collection of loan to a related party
Collection of loan to a related party consisted of the following:
| For the years ended March 31, | ||||||||||||||
| Name | Related party relationship | 2025 | 2024 | 2023 | ||||||||||
| Dr. Chi Sing Chiu | $ | $ | $ | |||||||||||
Refund from a Related Party
Refund from a related party consisted of the following:
| For the years ended March 31, | ||||||||||||||
| Name | Related party relationship | 2025 | 2024 | 2023 | ||||||||||
| Dongguan Concord Internet | $ | $ | $ | |||||||||||
Repayment of loan from a related party
Repayment of loan from a related party consisted of the following:
| For the years ended March 31, | ||||||||||||||
| Name | Related party relationship | 2025 | 2024 | 2023 | ||||||||||
| Ms. Woon Bing Yeung | $ | $ | $ | |||||||||||
The balance of related parties as of March 31, 2025 and 2024 was . There were no related party transactions for the years ended March 31, 2025 and 2024, respectively.
F-29
| 14. | Equity |
Ordinary Shares
On October 19, 2021, the Company
was incorporated in the Cayman Islands and had an initial authorized share capital of US$
On May 5, 2022, the Company’s
authorized and issued shares of par value US$
Immediately following the Subdivision,
pursuant to the director’s written resolutions on May 5, 2022, a total of
On January 17, 2024, the Company completed
its IPO and was listed on the Nasdaq Capital Market under the symbol “CCTG”.
On September 10, 2024, the authorized
share capital of the Company was increased from
As of March 31, 2025 and 2024, the
Company’s issued Class A Ordinary Shares were
| Restricted Net Assets |
A significant portion of the Company’s
operations are conducted through its PRC subsidiary. The Company’s ability to pay dividends is primarily dependent on receiving
distributions of funds from its subsidiary. Relevant PRC and regulations permit payments of dividends by PRC subsidiary only out of its
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations, and after an entity has met the
requirements for appropriation to statutory reserves. The Company is required to make appropriations to certain reserve funds, comprising
the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income determined in accordance with generally
accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be
at least
As a result of these PRC laws and regulations,
the Company’s PRC subsidiary is restricted in its ability to transfer a portion of their net assets to the Company. As of March 31,
2025 and 2024, net assets restricted in the aggregate, which included paid-in capital and statutory reserve funds of the Company’s
PRC subsidiary, that were included in the Company’s consolidated net assets, were approximately $
F-30
| 15. | SEGMENT INFORMATION |
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
In accordance with ASC 280, Segment
Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that
is evaluated regularly by the CODM, or decision-making group, in deciding how to allocate resources and in assessing performance. The
Company uses the “management approach” in determining reportable operating segments. The management approach considers the
internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for determining the Company’s reportable segments. The Company’s CODM has been identified as the
CEO, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The Company
has determined that it only has
The Company has concluded that consolidated net (loss)/income is the measure of segment profitability. The CODM assesses performance for the Company, monitors budget versus actual results and determines how to allocate resources based on consolidated net income as reported in the consolidated statements of operations and comprehensive income. There is no other expense categories regularly provided to the CODM that are not already included in the primary financial statements herein.
Revenue by products
The Company’s revenue derived from different products are as below:
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Cable and wire harness | $ | $ | $ | |||||||||
| Connectors | ||||||||||||
| Total | $ | $ | $ | |||||||||
Geographic information
The majority of the Company’s
revenue for the years ended March 31, 2025, 2024 and 2023 was generated from product sales to different geographic areas including
Europe, Asia and Americas.
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Europe | $ | $ | $ | |||||||||
| Asia | ||||||||||||
| Americas | ||||||||||||
| Others | ||||||||||||
| Total | $ | $ | $ | |||||||||
Long-lived assets by Geography
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Europe | $ | $ | ||||||
| Asia | ||||||||
| Total | $ | $ | ||||||
| 16. | SUBSEQUENT EVENTS |
The Company has performed an evaluation of subsequent events through the date of the consolidated financial statements which were issued, and determined that no events that would have required adjustment or disclosure in the consolidated financial statements.
F-32
Exhibit 1.1
THE COMPANIES ACT (AS REVISED)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
SECOND AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
CCSC Technology International Holdings Limited
(adopted by a special resolution passed on 10 September 2024)
| 1 | The name of the Company is CCSC Technology International Holdings Limited. |
| 2 | The Registered Office of the Company shall be at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, or at such other place within the Cayman Islands as the Directors may decide. |
| 3 | The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the laws of the Cayman Islands. |
| 4 | The liability of each Member is limited to the amount unpaid on such Member’s shares. |
| 5 | The share capital of the Company is US$250,000 divided into 500,000,000 shares of a par value of US$0.0005 each, comprising 495,000,000 Class A Ordinary Shares of a par value of US$0.0005 each and 5,000,000 Class B Ordinary Shares of a par value of US$0.0005. |
| 6 | The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands. |
| 7 | Capitalised terms that are not defined in this Memorandum of Association bear the respective meanings given to them in the Articles of Association of the Company. |
THE COMPANIES ACT (AS REVISED)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
SECOND AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
CCSC Technology International Holdings Limited
(adopted by a special resolution passed on 10 September 2024)
| 1 | Interpretation |
| 1.1 | In these Articles Table A in the First Schedule to the Companies Act does not apply and, unless there is something in the subject or context inconsistent therewith: |
|
“Affiliate” |
means in respect of a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, and (i) in the case of a natural person, shall include, without limitation, such person’s spouse, parents, children, siblings, mother-in-law, father-in-law, brothers-in-law and sisters-in-law, a trust for the benefit of any of the foregoing, and a corporation, partnership or any other entity wholly or jointly owned by any of the foregoing, and (ii) in the case of an entity, shall include a partnership, a corporation or any other entity or any natural person which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity. The term “control” shall mean the ownership, directly or indirectly, of shares possessing more than fifty per cent (50%) of the voting power of the corporation, partnership or other entity (other than, in the case of a corporation, securities having such power only by reason of the happening of a contingency), or having the power to control the management or elect a majority of members to the board of directors or equivalent decision-making body of such corporation, partnership or other entity; | ||
| “Articles” | means these articles of association of the Company, as amended or substituted from time to time; | ||
| “Board” and “Board of Directors” and “Directors” | means the directors of the Company for the time being, or as the case may be, the directors assembled as a board or as a committee thereof; | ||
| “Chairperson” | means the chairperson of the Board of Directors; | ||
| “Class” or “Classes” | means any class or classes of Shares as may from time to time be issued by the Company; |
| “Class A Ordinary Share” | means an Ordinary Share of a par value of US$0.0005 in the capital of the Company, designated as a Class A Ordinary Share and having the rights provided for in these Articles; | ||
| “Class B Ordinary Shares” | means an Ordinary Share of a par value of US$0.0005 in the capital of the Company, designated as a Class B Ordinary Share and having the rights provided for in these Articles; | ||
| “Commission” | means the Securities and Exchange Commission of the United States or any other federal agency for the time being administering the Securities Act; | ||
| “Company” | means CCSC Technology International Holdings Limited, a Cayman Islands exempted company; | ||
| “Companies Act” | means the Companies Act (As Revised) of the Cayman Islands and any statutory amendment or re-enactment thereof; | ||
| “Company’s Website” | means the main corporate/investor relations website of the Company, the address or domain name of which has been disclosed in any registration statement filed by the Company with the Commission in connection with its initial public offering of Shares, or which has otherwise been notified to Shareholders; | ||
| “Designated Stock Exchange” | means the stock exchange in the United States on which any Shares are listed for trading; | ||
| “Designated Stock Exchange Rules” | means the relevant code, rules and regulations, as amended, from time to time, applicable as a result of the original and continued listing of any Shares on the Designated Stock Exchange; | ||
| “electronic” | has the meaning given to it in the Electronic Transactions Act and any amendment thereto or re-enactments thereof for the time being in force and includes every other law incorporated therewith or substituted therefor; | ||
| “electronic communication” | means electronic posting to the Company’s Website, transmission to any number, address or internet website or other electronic delivery methods as otherwise decided and approved by not less than two-thirds of the vote of the Board; | ||
| “Electronic Transactions Act” | means the Electronic Transactions Act (As Revised) of the Cayman Islands and any statutory amendment or re-enactment thereof; | ||
| “electronic record” | has the meaning given to it in the Electronic Transactions Act and any amendment thereto or re-enactments thereof for the time being in force and includes every other law incorporated therewith or substituted therefor; | ||
| “Memorandum of Association” | means the memorandum of association of the Company, as amended or substituted from time to time; |
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| “Ordinary Resolution” |
means a resolution: |
| (a) | passed by a simple majority of the votes cast by such Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations, by their duly authorised representatives, at a general meeting of the Company held in accordance with these Articles; or |
| (b) | approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Shareholders and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed; |
| “Ordinary Share” | means a Class A Ordinary Share or a Class B Ordinary Share; | ||
| “paid up” | means paid up as to the par value in respect of the issue of any Shares and includes credited as paid up; | ||
| “Person” | means any natural person, firm, company, joint venture, partnership, corporation, association or other entity (whether or not having a separate legal personality) or any of them as the context so requires; | ||
| “Register” | means the register of Members of the Company maintained in accordance with the Companies Act; | ||
| “Registered Office” | means the registered office of the Company as required by the Companies Act; | ||
| “Seal” | means the common seal of the Company (if adopted) including any facsimile thereof; | ||
| “Secretary” | means any Person appointed by the Directors to perform any of the duties of the secretary of the Company; | ||
| “Securities Act” | means the Securities Act of 1933 of the United States, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time; | ||
| “Share” | means a share of a par value of US$0.0005 in the share capital of the Company. All references to “Shares” herein shall be deemed to be Shares of any or all Classes as the context may require. For the avoidance of doubt in these Articles the expression “Share” shall include a fraction of a Share; | ||
| “Shareholder” or “Member” | means a Person who is registered as the holder of one or more Shares in the Register; | ||
| “Share Premium Account” | means the share premium account established in accordance with these Articles and the Companies Act; | ||
| “signed” | means bearing a signature or representation of a signature affixed by mechanical means or an electronic symbol or process attached to or logically associated with an electronic communication and executed or adopted by a Person with the intent to sign the electronic communication; |
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| “Special Resolution” |
means a special resolution of the Company passed in accordance with the Companies Act, being a resolution: |
| (a) | passed by not less than two-thirds of the votes cast by such Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations, by their duly authorised representatives, at a general meeting of the Company of which notice specifying the intention to propose the resolution as a special resolution has been duly given; or | |||
| (b) | approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Shareholders and the effective date of the special resolution so adopted shall be the date on which the instrument or the last of such instruments, if more than one, is executed; |
| “Treasury Share” | means a Share held in the name of the Company as a treasury share in accordance with the Companies Act; and | ||
| “United States” | means the United States of America, its territories, its possessions and all areas subject to its jurisdiction. |
| 1.2 | In these Articles, save where the context requires otherwise: |
| (a) | words importing the singular number shall include the plural number and vice versa; |
| (b) | words importing the masculine gender only shall include the feminine gender and any Person as the context may require; |
| (c) | the word “may” shall be construed as permissive and the word “shall” shall be construed as imperative; |
| (d) | reference to a dollar or dollars (or US$) and to a cent or cents is reference to dollars and cents of the United States; |
| (e) | reference to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force; |
| (f) | reference to any determination by the Directors shall be construed as a determination by the Directors in their sole and absolute discretion and shall be applicable either generally or in any particular case; |
| (g) | reference to “in writing” shall be construed as written or represented by any means reproducible in writing, including any form of print, lithograph, email, facsimile, photograph or telex or represented by any other substitute or format for storage or transmission for writing including in the form of an electronic record or partly one and partly another; |
| (h) | any requirements as to delivery under the Articles include delivery in the form of an electronic record or an electronic communication; |
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| (i) | any requirements as to execution or signature under the Articles, including the execution of the Articles themselves, can be satisfied in the form of an electronic signature as defined in the Electronic Transaction Act; and |
| (j) | Sections 8 and 19(3) of the Electronic Transactions Act shall not apply. |
| 1.3 | Subject to the last two preceding Articles, any words defined in the Companies Act shall, if not inconsistent with the subject or context, bear the same meaning in these Articles. |
| 2 | Preliminary |
| 2.1 | The business of the Company may be conducted as the Directors see fit. |
| 2.2 | The Registered Office shall be at such address in the Cayman Islands as the Directors may from time to time determine. The Company may in addition establish and maintain such other offices and places of business and agencies in such places as the Directors may from time to time determine. |
| 2.3 | The expenses incurred in the formation of the Company and in connection with the offer for subscription and issue of Shares shall be paid by the Company. Such expenses may be amortised over such period as the Directors may determine and the amount so paid shall be charged against income and/or capital in the accounts of the Company as the Directors shall determine. |
| 2.4 | The Directors shall keep, or cause to be kept, the Register at such place as the Directors may from time to time determine and, in the absence of any such determination, the Register shall be kept at the Registered Office. |
| 3 | Shares |
| 3.1 | Subject to these Articles, all Shares for the time being unissued shall be under the control of the Directors who may, in their absolute discretion and without the approval of the Members, cause the Company to: |
| (a) | issue, allot and dispose of Shares (including, without limitation, preferred shares) (whether in certificated form or non-certificated form) to such Persons, in such manner, on such terms and having such rights and being subject to such restrictions as they may from time to time determine; |
| (b) | grant rights over Shares or other securities to be issued in one or more classes or series as they deem necessary or appropriate and determine the designations, powers, preferences, privileges and other rights attaching to such Shares or securities, including dividend rights, voting rights, conversion rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers, preferences, privileges and rights associated with the then issued and outstanding Shares, at such times and on such other terms as they think proper; and |
| (c) | grant options with respect to Shares and issue warrants or similar instruments with respect thereto. |
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| 3.2 | The Directors may authorise the division of Shares into any number of Classes and the different Classes shall be authorised, established and designated (or re-designated as the case may be) and the variations in the relative rights (including, without limitation, voting, dividend and redemption rights), restrictions, preferences, privileges and payment obligations as between the different Classes (if any) may be fixed and determined by the Directors or by a Special Resolution. The Directors may issue Shares with such preferred or other rights, all or any of which may be greater than the rights of the Shares, at such time and on such terms as they may think appropriate. Notwithstanding Article 5.1, the Directors may issue from time to time, out of the authorised share capital of the Company (other than the authorised but unissued Shares), series of preferred shares in their absolute discretion and without approval of the Members; provided, however, before any preferred shares of any such series are issued, the Directors shall by resolution of Directors determine, with respect to any series of preferred shares, the terms and rights of that series, including: |
| (a) | the designation of such series, the number of preferred shares to constitute such series and the subscription price thereof if different from the par value thereof; |
| (b) | whether the preferred shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights, which may be general or limited; |
| (c) | the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends payable on any shares of any other class or any other series of shares; |
| (d) | whether the preferred shares of such series shall be subject to redemption by the Company, and, if so, the times, prices and other conditions of such redemption; |
| (e) | whether the preferred shares of such series shall have any rights to receive any part of the assets available for distribution amongst the Members upon the liquidation of the Company, and, if so, the terms of such liquidation preference, and the relation which such liquidation preference shall bear to the entitlements of the holders of shares of any other class or any other series of shares; |
| (f) | whether the preferred shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the preferred shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof; |
| (g) | whether the preferred shares of such series shall be convertible into, or exchangeable for, shares of any other class or any other series of preferred shares or any other securities and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange; |
| (h) | the limitations and restrictions, if any, to be effective while any preferred shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Company of, the existing shares or shares of any other class of shares or any other series of preferred shares; |
| (i) | the conditions or restrictions, if any, upon the creation of indebtedness of the Company or upon the issue of any additional shares, including additional shares of such series or of any other class of shares or any other series of preferred shares; and |
| (j) | any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof; |
and, for such purposes, the Directors may reserve an appropriate number of Shares for the time being unissued.
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| 3.3 | The Company shall not issue Shares to bearer. |
| 3.4 | The Company may insofar as may be permitted by law, pay a commission to any Person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares. Such commissions may be satisfied by the payment of cash or the lodgment of fully or partly paid-up Shares or partly in one way and partly in the other. The Company may also pay such brokerage as may be lawful on any issue of Shares. |
| 3.5 | The Directors may refuse to accept any application for Shares, and may accept any application in whole or in part, for any reason or for no reason. |
| 4 | Share Rights |
| 4.1 | Holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all resolutions submitted to a vote by the Members. Each Class A Ordinary Share shall entitle the holder thereof to one (1) vote on all matters subject to vote at general meetings of the Company, and each Class B Ordinary Share shall entitle the holder thereof to fifty (50) votes on all matters subject to vote at general meetings of the Company. |
| 4.2 | Each Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time at the option of the holder thereof. The right to convert shall be exercisable by the holder of the Class B Ordinary Share delivering a written notice to the Company that such holder elects to convert a specified number of Class B Ordinary Shares into Class A Ordinary Shares. |
| 4.3 | The Class B Ordinary Shares held by a holder thereof shall be automatically and immediately converted into an equal number of Class A Ordinary Shares upon any direct or indirect sale, transfer, assignment or disposition of such number of Class B Ordinary Shares by the holder thereof or the direct or indirect transfer or assignment of the voting power attached to such number of Class B Ordinary Shares through voting proxy or otherwise to any person that is not (i) an Affiliate of such holder; (ii) another holder of Class B Ordinary Shares; or (iii) an Affiliate of such other holder; and for the avoidance of doubt, the creation of any mortgage, charge, encumbrance or other third party right of whatever description on any of the Class B Ordinary Shares to secure contractual or legal obligations shall not be deemed as a sale, transfer, assignment or disposition under this Article 4.3 unless and until any such mortgage, charge, encumbrance or other third party right is enforced and results in a third party, which is not an Affiliate of the holder, another holder of Class B Ordinary Shares or an Affiliate of such other holder, holding directly or indirectly beneficial ownership or voting power through voting proxy or otherwise to the related Class B Ordinary Shares, in which case all the related Class B Ordinary Shares shall be automatically converted into the same number of Class A Ordinary Shares. |
| 4.4 | Any conversion of Class B Ordinary Shares into Class A Ordinary Shares pursuant to these Articles shall be effected by means of the re-designation of each relevant Class B Ordinary Share as a Class A Ordinary Share. Such conversion shall become effective (a) in the case of any conversion effected pursuant to Article 4.2, forthwith upon the receipt by the Company of the written notice delivered to the Company as described in Article 4.2 (or such later date as may be specified in such notice), or (b) in the case of any automatic conversion effected pursuant to Article 4.3, forthwith upon occurrence of the event specified in Article 4.3 which triggers such automatic conversion, and the Company shall make entries in the Register to record the re-designation of the relevant Class B Ordinary Shares as Class A Ordinary Shares at the relevant time. |
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| 4.5 | Class A Ordinary Shares are not convertible into Class B Ordinary Shares under any circumstances. |
| 4.6 | Save and except for the voting rights and conversion rights as set out in this Article 4, the Class A Ordinary Shares and the Class B Ordinary Shares shall rank pari passu with one another and shall have the same rights, preferences, privileges and restrictions. |
| 5 | Modification of Rights |
| 5.1 | Whenever the capital of the Company is divided into different Classes the rights attached to any such Class may, subject to any rights or restrictions for the time being attached to any Class, only be materially and adversely varied with the consent in writing of the holders of at least two-thirds (2/3) of the issued Shares of that Class or with the sanction of a Special Resolution passed at a separate meeting of the holders of the Shares of that Class. To every such separate meeting all the provisions of these Articles relating to general meetings of the Company or to the proceedings thereat shall, mutatis mutandis, apply, except that the necessary quorum shall be one or more Persons holding or representing by proxy at least one-third in nominal or par value amount of the issued Shares of the relevant Class (but so that if at any adjourned meeting of such holders a quorum as above defined is not present, those Shareholders who are present shall form a quorum) and that, subject to any rights or restrictions for the time being attached to the Shares of that Class, every Shareholder of the Class shall on a poll have one vote for each Share of the Class held by him. For the purposes of this Article the Directors may treat all the Classes or any two or more Classes as forming one Class if they consider that all such Classes would be affected in the same way by the proposals under consideration, but in any other case shall treat them as separate Classes. |
| 5.2 | The rights conferred upon the holders of the Shares of any Class issued with preferred or other rights shall not, subject to any rights or restrictions for the time being attached to the Shares of that Class, be deemed to be materially and adversely varied by, inter alia, the creation, allotment or issue of further Shares ranking pari passu with or subsequent to them or the redemption or purchase of any Shares of any Class by the Company. The rights of the holders of Shares shall not be deemed to be materially and adversely varied by the creation or issue of Shares with preferred or other rights including, without limitation, the creation of Shares with enhanced or weighted voting rights. |
| 6 | Certificates |
| 6.1 | Every Person whose name is entered as a Member in the Register may, without payment and upon its written request, request a certificate within two calendar months after allotment or lodgment of transfer (or within such other period as the conditions of issue shall provide) in the form determined by the Directors. All certificates shall specify the Share or Shares held by that Person, provided that in respect of a Share or Shares held jointly by several Persons the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a Share to one of several joint holders shall be sufficient delivery to all. All certificates for Shares shall be delivered personally or sent through the post addressed to the Member entitled thereto at the Member’s registered address as appearing in the Register. |
| 6.2 | Every share certificate of the Company shall bear legends required under the applicable laws, including the Securities Act. |
| 6.3 | Any two or more certificates representing Shares of any one Class held by any Member may at the Member’s request be cancelled and a single new certificate for such Shares issued in lieu on payment (if the Directors shall so require) of one dollar (US$1.00) or such smaller sum as the Directors shall determine. |
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| 6.4 | If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same Shares may be issued to the relevant Member upon request, subject to delivery up of the old certificate or (if alleged to have been lost, stolen or destroyed) compliance with such conditions as to evidence and indemnity and the payment of out-of-pocket expenses of the Company in connection with the request as the Directors may think fit. |
| 6.5 | In the event that Shares are held jointly by several Persons, any request may be made by any one of the joint holders and if so made shall be binding on all of the joint holders. |
| 7 | Fractional Shares |
The Directors may issue fractions of a Share and, if so issued, a fraction of a Share shall be subject to and carry the corresponding fraction of liabilities (whether with respect to nominal or par value, premium, contributions, calls or otherwise), limitations, preferences, privileges, qualifications, restrictions, rights (including, without prejudice to the generality of the foregoing, voting and participation rights) and other attributes of a whole Share. If more than one fraction of a Share of the same Class is issued to or acquired by the same Shareholder such fractions shall be accumulated.
| 8 | Lien |
| 8.1 | The Company has a first and paramount lien on every Share (whether or not fully paid) for all amounts (whether presently payable or not) payable at a fixed time or called in respect of that Share. The Company also has a first and paramount lien on every Share registered in the name of a Person indebted or under liability to the Company (whether he is the sole registered holder of a Share or one of two or more joint holders) for all amounts owing by him or his estate to the Company (whether or not presently payable). The Directors may at any time declare a Share to be wholly or in part exempt from the provisions of this Article. The Company’s lien on a Share extends to any amount payable in respect of it, including but not limited to dividends. |
| 8.2 | The Company may sell, in such manner as the Directors in their absolute discretion think fit, any Share on which the Company has a lien, but no sale shall be made unless an amount in respect of which the lien exists is presently payable nor until the expiration of fourteen (14) calendar days after a notice in writing, demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the Share, or the Persons entitled thereto by reason of his death or bankruptcy. |
| 8.3 | For giving effect to any such sale the Directors may authorise a Person to transfer the Shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the Shares comprised in any such transfer and he shall not be bound to see to the application of the purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. |
| 8.4 | The proceeds of the sale after deduction of expenses, fees and commissions incurred by the Company shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the Shares prior to the sale) be paid to the Person entitled to the Shares immediately prior to the sale. |
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| 9 | Call on Shares |
| 9.1 | Subject to the terms of the allotment, the Directors may from time to time make calls upon the Shareholders in respect of any moneys unpaid on their Shares, and each Shareholder shall (subject to receiving at least fourteen (14) calendar days’ notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on such Shares. A call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. |
| 9.2 | The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof. |
| 9.3 | If a sum called in respect of a Share is not paid before or on the day appointed for payment thereof, the Person from whom the sum is due shall pay interest upon the sum at the rate of eight percent per annum from the day appointed for the payment thereof to the time of the actual payment, but the Directors shall be at liberty to waive payment of that interest wholly or in part. |
| 9.4 | The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the amount of the Share, or by way of premium, as if the same had become payable by virtue of a call duly made and notified. |
| 9.5 | The Directors may make arrangements with respect to the issue of partly paid Shares for a difference between the Shareholders, or the particular Shares, in the amount of calls to be paid and in the times of payment. |
| 9.6 | The Directors may, if they think fit, receive from any Shareholder willing to advance the same all or any part of the moneys uncalled and unpaid upon any partly paid Shares held by him, and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate (not exceeding without the sanction of an Ordinary Resolution, eight percent per annum) as may be agreed upon between the Shareholder paying the sum in advance and the Directors. No such sum paid in advance of calls shall entitle the Member paying such sum to any portion of a dividend declared in respect of any period prior to the date upon which such sum would, but for such payment, become presently payable. |
| 10 | Forfeiture of Shares |
| 10.1 | If a Shareholder fails to pay any call or instalment of a call in respect of partly paid Shares on the day appointed for payment, the Directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. |
| 10.2 | The notice shall name a further day (not earlier than the expiration of fourteen (14) calendar days from the date of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed, the Shares in respect of which the call was made will be liable to be forfeited. |
| 10.3 | If the requirements of any such notice as aforesaid are not complied with, any Share in respect of which the notice has been given may at any time thereafter, before the payment required by notice has been made, be forfeited by a resolution of the Directors to that effect. |
| 10.4 | A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the Directors think fit. |
| 10.5 | A Person whose Shares have been forfeited shall cease to be a Shareholder in respect of the forfeited Shares, but shall, notwithstanding, remain liable to pay to the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the Shares forfeited, but his liability shall cease if and when the Company receives payment in full of the amount unpaid on the Shares forfeited. |
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| 10.6 | A certificate in writing under the hand of a Director that a Share has been duly forfeited on a date stated in the certificate shall be conclusive evidence of the facts in the declaration as against all Persons claiming to be entitled to the Share. |
| 10.7 | The Company may receive the consideration, if any, given for a Share on any sale or disposition thereof pursuant to the provisions of these Articles as to forfeiture and may execute a transfer of the Share in favour of the Person to whom the Share is sold or disposed of and that Person shall be registered as the holder of the Share and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the disposition or sale. |
| 10.8 | The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which by the terms of issue of a Share becomes due and payable, whether on account of the amount of the Share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified. |
| 11 | Transfer of Shares |
| 11.1 | The instrument of transfer of any Share shall be in writing and in any usual or common form or such other form as the Directors may, in their absolute discretion, approve and be executed by or on behalf of the transferor and if in respect of a nil or partly paid up Share, or if so required by the Directors, shall also be executed on behalf of the transferee and shall be accompanied by the certificate (if any) of the Shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. The transferor shall be deemed to remain a Shareholder until the name of the transferee is entered in the Register in respect of the relevant Shares. |
| 11.2 | The Directors may in their absolute discretion decline to register any transfer of Shares which is not fully paid up or on which the Company has a lien. |
| 11.3 | The Directors may also decline to register any transfer of any Share unless: |
| (a) | the instrument of transfer is lodged with the Company, accompanied by the certificate for the Shares to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer; |
| (b) | the instrument of transfer is in respect of only one Class of Shares; |
| (c) | the instrument of transfer is properly stamped, if required; |
| (d) | in the case of a transfer to joint holders, the number of joint holders to whom the Share is to be transferred does not exceed four; and |
| (e) | a fee of such maximum sum as the Designated Stock Exchange may determine to be payable, or such lesser sum as the Board of Directors may from time to time require, is paid to the Company in respect thereof. |
| 11.4 | The registration of transfers may, on ten (10) calendar days’ notice being given by advertisement in such one or more newspapers, by electronic means or by any other means in accordance with the Designated Stock Exchange Rules, be suspended and the Register closed at such times and for such periods as the Directors may, in their absolute discretion, from time to time determine, provided always that such registration of transfer shall not be suspended nor the Register closed for more than thirty (30) calendar days in any calendar year. |
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| 11.5 | All instruments of transfer that are registered shall be retained by the Company. If the Directors refuse to register a transfer of any Shares, they shall within three calendar months after the date on which the transfer was lodged with the Company send notice of the refusal to each of the transferor and the transferee. |
| 12 | Transmission of Shares |
| 12.1 | The legal personal representative of a deceased sole holder of a Share shall be the only Person recognised by the Company as having any title to the Share. In the case of a Share registered in the name of two or more holders, the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the only Person recognised by the Company as having any title to the Share. |
| 12.2 | Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall, upon such evidence being produced as may from time to time be required by the Directors, have the right either to be registered as a Shareholder in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt Person could have made; but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by the deceased or bankrupt Person before the death or bankruptcy. |
| 12.3 | A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered Shareholder, except that he shall not, before being registered as a Shareholder in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company, provided however, that the Directors may at any time give notice requiring any such Person to elect either to be registered himself or to transfer the Share, and if the notice is not complied with within ninety (90) calendar days, the Directors may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the Share until the requirements of the notice have been complied with. |
| 13 | Registration of Empowering Instruments |
The Company shall be entitled to charge a fee not exceeding one dollar (US$1.00) on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, notice in lieu of distringas, or other instrument.
| 14 | Alteration of Share Capital |
| 14.1 | The Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe. |
| 14.2 | The Company may by Ordinary Resolution: |
| (a) | increase its share capital by new Shares of such amount as it thinks expedient; |
| (b) | consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares; |
| (c) | subdivide its Shares, or any of them, into Shares of an amount smaller than that fixed by the Memorandum, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced Share is derived; and |
| (d) | cancel any Shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person and diminish the amount of its share capital by the amount of the Shares so cancelled. |
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| 14.3 | The Company may by Special Resolution reduce its share capital and any capital redemption reserve in any manner authorised by the Companies Act. |
| 15 | Redemption, Purchase and Surrender of Shares |
| 15.1 | Subject to the provisions of the Companies Act and these Articles, the Company may: |
| (a) | issue Shares that are to be redeemed or are liable to be redeemed at the option of the Shareholder or the Company. The redemption of Shares shall be effected in such manner and upon such terms as may be determined, before the issue of such Shares, by either the Board or by the Shareholders by Ordinary Resolution; |
| (b) | purchase its own Shares (including any redeemable Shares) on such terms and in such manner and terms as have been approved by the Board or by the Shareholders by Ordinary Resolution, or are otherwise authorised by these Articles; and |
| (c) | make a payment in respect of the redemption or purchase of its own Shares in any manner permitted by the Companies Act, including out of capital. |
| 15.2 | The purchase of any Share shall not oblige the Company to purchase any other Share other than as may be required pursuant to applicable law and any other contractual obligations of the Company. |
| 15.3 | The holder of the Shares being purchased shall be bound to deliver up to the Company the certificate(s) (if any) thereof for cancellation and thereupon the Company shall pay to him the purchase or redemption monies or consideration in respect thereof. |
| 15.4 | The Directors may accept the surrender for no consideration of any fully paid Share. |
| 16 | Treasury Shares |
| 16.1 | The Directors may, prior to the purchase, redemption or surrender of any Share, determine that such Share shall be held as a Treasury Share. |
| 16.2 | The Directors may determine to cancel a Treasury Share or transfer a Treasury Share on such terms as they think proper (including, without limitation, for nil consideration). |
| 17 | General Meetings |
| 17.1 | All general meetings other than annual general meetings shall be called extraordinary general meetings. |
| 17.2 | The Company may (but shall not be obliged to) in each calendar year hold a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as may be determined by the Directors. At these meetings the report of the Directors (if any) shall be presented. |
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| 17.3 | The Chairperson or the Directors (acting by a resolution of the Board) may call general meetings, and they shall on a Shareholders’ requisition forthwith proceed to convene an extraordinary general meeting of the Company. |
| 17.4 | A Shareholders’ requisition is a requisition of Members holding at the date of deposit of the requisition Shares which carry in aggregate not less than one-third (1/3) of all votes attaching to all issued and outstanding Shares that as at the date of the deposit carry the right to vote at general meetings of the Company. |
| 17.5 | The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the Registered Office, and may consist of several documents in like form each signed by one or more requisitionists. |
| 17.6 | If there are no Directors as at the date of the deposit of the Shareholders’ requisition, or if the Directors do not within twenty-one (21) calendar days from the date of the deposit of the requisition duly proceed to convene a general meeting to be held within a further twenty-one (21) calendar days, the requisitionists, or any of them representing more than one-half (1/2) of the total voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not be held after the expiration of three (3) calendar months after the expiration of the said twenty-one (21) calendar days. |
| 17.7 | A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by Directors. |
| 18 | Notice of General Meetings |
| 18.1 | At least seven (7) calendar days’ notice shall be given for any general meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the business and shall be given in the manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company, provided that a general meeting of the Company shall, whether or not the notice specified in this Article has been given and whether or not the provisions of these Articles regarding general meetings have been complied with, be deemed to have been duly convened if it is so agreed: |
| (a) | in the case of an annual general meeting, by all the Shareholders (or their proxies) entitled to attend and vote thereat; and |
| (b) | in the case of an extraordinary general meeting, by holders of two-thirds (2/3) of the Shareholders having a right to attend and vote at the meeting, present at the meeting or, in the case of a corporation or other non-natural person, represented by its duly authorised representative or proxy. |
| 18.2 | The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any Shareholder shall not invalidate the proceedings at any meeting. |
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| 19 | Proceedings at General Meetings |
| 19.1 | No business except for the appointment of a chairperson for the meeting shall be transacted at any general meeting unless a quorum of Shareholders is present at the time when the meeting proceeds to business. One or more Shareholders holding Shares which carry in aggregate (or representing by proxy) not less than one-third (1/3) of all votes attaching to all Shares in issue and entitled to vote at such general meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorised representative, shall be a quorum for all purposes. |
| 19.2 | If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall be dissolved. |
| 19.3 | If the Directors wish to make this facility available for a specific general meeting or all general meetings of the Company, participation in any general meeting of the Company may be by means of a telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participants shall be deemed to constitute presence in person at the meeting. |
| 19.4 | The Chairperson, if any, shall preside as chairperson at every general meeting of the Company. |
| 19.5 | If there is no such Chairperson, or if at any general meeting he or she is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairperson of the meeting, any Director or Person nominated by the Directors shall preside as chairperson of that meeting, failing which the Shareholders present in person or by proxy shall choose any Person present to be chairperson of that meeting. |
| 19.6 | The chairperson may with the consent of any general meeting at which a quorum is present (and shall if so directed by the meeting) adjourn a meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting, or adjourned meeting, is adjourned for fourteen (14) calendar days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. |
| 19.7 | The Directors may cancel or postpone any duly convened general meeting at any time prior to such meeting, except for general meetings requisitioned by the Shareholders in accordance with these Articles, for any reason or for no reason, upon notice in writing to Shareholders. A postponement may be for a stated period of any length or indefinitely as the Directors may determine. |
| 19.8 | At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairperson of the meeting or any Shareholder present in person or by proxy, and unless a poll is so demanded, a declaration by the chairperson of the meeting that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book of the proceedings of the Company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. |
| 19.9 | If a poll is duly demanded it shall be taken in such manner as the chairperson of the meeting directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. |
| 19.10 | All questions submitted to a meeting shall be decided by an Ordinary Resolution except where a greater majority is required by these Articles or by the Companies Act. In the case of an equality of votes, whether on a show of hands or on a poll, the chairperson of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote. |
| 19.11 | A poll demanded on the election of a chairperson of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairperson of the meeting directs. |
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| 20 | Votes of Members |
| 20.1 | Subject to any rights and restrictions for the time being attached to any Share, on a show of hands every Shareholder present in person and every Person representing a Shareholder by proxy shall, at a general meeting of the Company, each have one (1) vote and on a poll every Shareholder and every Person representing a Shareholder by proxy shall have one (1) vote for each Class A Ordinary Share and fifty (50) votes for each Class B Ordinary Share of which he or the Person represented by proxy is the holder. |
| 20.2 | In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy (or, if a corporation or other non-natural person, by its duly authorised representative or proxy) shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register. |
| 20.3 | Shares carrying the right to vote that are held by a Shareholder of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may be voted, whether on a show of hands or on a poll, by his committee, or other Person in the nature of a committee appointed by that court, and any such committee or other Person may vote in respect of such Shares by proxy. |
| 20.4 | No Shareholder shall be entitled to vote at any general meeting of the Company unless all calls, if any, or other sums presently payable by him in respect of Shares carrying the right to vote held by him have been paid. |
| 20.5 | On a poll votes may be given either personally or by proxy. |
| 20.6 | Each Shareholder, other than a recognised clearing house (or its nominee(s)), may only appoint one proxy on a show of hand. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under Seal or under the hand of an officer or attorney duly authorised. A proxy need not be a Shareholder. |
| 20.7 | An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve. |
| 20.8 | The instrument appointing a proxy shall be deposited at the Registered Office or at such other place as is specified for that purpose in the notice convening the meeting, or in any instrument of proxy sent out by the Company: |
| (a) | not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or |
| (b) | in the case of a poll taken more than 48 hours after it is demanded, be deposited as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or |
| (c) | where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded be delivered at the meeting at which the poll was demanded to the chairperson of the meeting or to the secretary or to any Director; |
provided that the Directors may in the notice convening the meeting, or in an instrument of proxy sent out by the Company, direct that the instrument appointing a proxy may be deposited at such other time (no later than the time for holding the meeting or adjourned meeting) at the Registered Office or at such other place as is specified for that purpose in the notice convening the meeting, or in any instrument of proxy sent out by the Company. The chairperson of the meeting may in any event at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited. An instrument of proxy that is not deposited in the manner permitted shall be invalid.
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| 20.9 | The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. |
| 20.10 | A resolution in writing signed by all the Shareholders for the time being entitled to receive notice of and to attend and vote at general meetings of the Company (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. |
| 21 | Corporations Acting by Representatives at Meetings |
Any corporation which is a Shareholder or a Director may by resolution of its directors or other governing body authorise such Person as it thinks fit to act as its representative at any meeting of the Company or of any meeting of holders of a Class or of the Directors or of a committee of Directors, and the Person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual Shareholder or Director.
| 22 | Clearing Houses |
If a recognised clearing house (or its nominee(s)) is a Member of the Company it may, by resolution of its directors or other governing body or by power of attorney, authorise such Person(s) as it thinks fit to act as its representative(s) at any general meeting of the Company or of any Class of Shareholders provided that, if more than one Person is so authorised, the authorisation shall specify the number and Class of Shares in respect of which each such Person is so authorised. A Person so authorised pursuant to this Article shall be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) which he represents as that recognised clearing house (or its nominee(s)) could exercise if it were an individual Member holding the number and Class of Shares specified in such authorisation, including the right to vote individually on a show of hands.
| 23 | Directors |
| 23.1 | Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than three (3) Directors, the exact number of Directors to be determined from time to time by the Board of Directors. |
| (a) | The Board of Directors shall elect and appoint the Chairperson by a majority of the Directors then in office. The period for which the Chairperson so elected and appointed will hold office will also be determined by a majority of all of the Directors then in office. The Chairperson shall preside as chairperson at every meeting of the Board of Directors. To the extent the Chairperson is not present at a meeting of the Board of Directors within fifteen minutes after the time appointed for holding the same, the attending Directors may choose one of their number to be the chairperson of the meeting. |
| (b) | The Company may by Ordinary Resolution appoint any person to be a Director. |
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| (c) | The Board may appoint any person as a Director, to fill a casual vacancy on the Board or as an addition to the existing Board. |
| (d) | An appointment of a Director may be on terms that the Director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any specified event or after any specified period in a written agreement between the Company and the Director, if any; but no such term shall be implied in the absence of express provision. Each Director whose term of office expires shall be eligible for re-election at a meeting of the Shareholders or re-appointment by the Board. |
| (f) | A Director may be removed from office by Ordinary Resolution, notwithstanding anything in these Articles or in any agreement between the Company and such Director (but without prejudice to any claim for damages under such agreement). |
| (e) | The notice of any meeting at which a resolution to remove a Director shall be proposed or voted upon must contain a statement of the intention to remove that Director and such notice must be served on that Director not less than ten (10) calendar days before the meeting. Such Director is entitled to attend the meeting and be heard on the motion for his removal. |
| 23.2 | The Board may, from time to time, and except as required by applicable law or Designated Stock Exchange Rules, adopt, institute, amend, modify or revoke the corporate governance policies or initiatives of the Company and determine on various corporate governance related matters of the Company as the Board shall determine by resolution of Directors from time to time. |
| 23.3 | A Director shall not be required to hold any Shares in the Company by way of qualification. A Director who is not a Member of the Company shall nevertheless be entitled to attend and speak at general meetings. |
| 23.4 | The remuneration of the Directors may be determined by the Directors or by Ordinary Resolution. |
| 23.5 | The Directors shall be entitled to be paid for their travelling, hotel and other expenses properly incurred by them in going to, attending and returning from meetings of the Directors, or any committee of the Directors, or general meetings of the Company, or otherwise in connection with the business of the Company, or to receive such fixed allowance in respect thereof as may be determined by the Directors from time to time, or a combination partly of one such method and partly the other. |
| 24 | Alternate Director or Proxy |
| 24.1 | Any Director may in writing appoint another Person to be his alternate and, save to the extent provided otherwise in the form of appointment, such alternate shall have authority to sign written resolutions on behalf of the appointing Director, but shall not be required to sign such written resolutions where they have been signed by the appointing director, and to act in such Director’s place at any meeting of the Directors at which the appointing Director is unable to be present. Every such alternate shall be entitled to attend and vote at meetings of the Directors as a Director when the Director appointing him is not personally present and where he is a Director to have a separate vote on behalf of the Director he is representing in addition to his own vote. A Director may at any time in writing revoke the appointment of an alternate appointed by him. Such alternate shall be deemed for all purposes to be a Director of the Company and shall not be deemed to be the agent of the Director appointing him. The remuneration of such alternate shall be payable out of the remuneration of the Director appointing him and the proportion thereof shall be agreed between them. |
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| 24.2 | Any Director may appoint any Person, whether or not a Director, to be the proxy of that Director to attend and vote on his behalf, in accordance with instructions given by that Director, or in the absence of such instructions at the discretion of the proxy, at a meeting or meetings of the Directors which that Director is unable to attend personally. The instrument appointing the proxy shall be in writing under the hand of the appointing Director and shall be in any usual or common form or such other form as the Directors may approve, and must be lodged with the chairperson of the meeting of the Directors at which such proxy is to be used, or first used, prior to the commencement of the meeting. |
| 25 | Powers and Duties of Directors |
| 25.1 | Subject to the Companies Act, these Articles and any resolutions passed in a general meeting, the business of the Company shall be managed by the Directors, who may pay all expenses incurred in setting up and registering the Company and may exercise all powers of the Company. No resolution passed by the Company in general meeting shall invalidate any prior act of the Directors that would have been valid if that resolution had not been passed. |
| 25.2 | Subject to these Articles, the Directors may from time to time appoint any natural person or corporation, whether or not a Director to hold such office in the Company as the Directors may think necessary for the administration of the Company, including but not limited to, chief executive officer, one or more other executive officers, president, one or more vice presidents, treasurer, assistant treasurer, manager or controller, and for such term and at such remuneration (whether by way of salary or commission or participation in profits or partly in one way and partly in another), and with such powers and duties as the Directors may think fit. Any natural person or corporation so appointed by the Directors may be removed by the Directors. The Directors may also appoint one or more of their number to the office of managing director upon like terms, but any such appointment shall ipso facto terminate if any managing director ceases for any cause to be a Director, or if the Company by Ordinary Resolution resolves that his tenure of office be terminated. |
| 25.3 | The Directors may appoint any natural person or corporation to be a Secretary (and if need be an assistant Secretary or assistant Secretaries) who shall hold office for such term, at such remuneration and upon such conditions and with such powers as they think fit. Any Secretary or assistant Secretary so appointed by the Directors may be removed by the Directors. |
| 25.4 | The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors. |
| 25.5 | The Directors may from time to time and at any time by power of attorney (whether under Seal or under hand) or otherwise appoint any company, firm or Person or body of Persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys or authorised signatory (any such person being an “Attorney” or “Authorised Signatory”, respectively) of the Company for such purposes and with such powers, authorities and discretion (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of Persons dealing with any such Attorney or Authorised Signatory as the Directors may think fit, and may also authorise any such Attorney or Authorised Signatory to delegate all or any of the powers, authorities and discretion vested in him. |
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| 25.6 | The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the provisions contained in the three next following Articles shall not limit the general powers conferred by this Article. |
| 25.7 | The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the Company and may appoint any natural person or corporation to be a member of such committees or local boards and may appoint any managers or agents of the Company and may fix the remuneration of any such natural person or corporation. |
| 25.8 | The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities and discretions for the time being vested in the Directors and may authorise the members for the time being of any such local board, or any of them to fill any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject to such conditions as the Directors may think fit and the Directors may at any time remove any natural person or corporation so appointed and may annul or vary any such delegation, but no Person dealing in good faith and without notice of any such annulment or variation shall be affected thereby. |
| 25.9 | Any such delegates as aforesaid may be authorised by the Directors to sub-delegate all or any of the powers, authorities, and discretion for the time being vested in them. |
| 26 | Borrower Powers of Directors |
The Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow money and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, to issue debentures, debenture stock, bonds and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.
| 27 | The Seal |
| 27.1 | The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixing of the Seal. The Seal shall be affixed in the presence of a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may appoint for the purpose and every Person as aforesaid shall sign every instrument to which the Seal is so affixed in their presence. |
| 27.2 | The Company may maintain a facsimile of the Seal in such countries or places as the Directors may appoint and such facsimile Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be given prior to or after the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixing of such facsimile Seal. The facsimile Seal shall be affixed in the presence of such Person or Persons as the Directors shall for this purpose appoint and such Person or Persons as aforesaid shall sign every instrument to which the facsimile Seal is so affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid shall have the same meaning and effect as if the Seal had been affixed in the presence of and the instrument signed by a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may appoint for the purpose. |
| 27.3 | Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the Seal, or the facsimile Seal, to any instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the Company. |
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| 28 | Disqualification of Directors |
The office of Director shall be vacated, if the Director:
| (a) | becomes bankrupt or makes any arrangement or composition with his creditors; |
| (b) | dies or is found to be or becomes of unsound mind; |
| (c) | resigns his office by notice in writing to the Company; or |
| (d) | is removed from office pursuant to any other provision of these Articles. |
| 29 | Proceedings of Directors |
| 29.1 | The Directors may meet together (either within or outside of the Cayman Islands) for the despatch of business, adjourn, and otherwise regulate their meetings and proceedings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. At any meeting of the Directors, each Director present in person or represented by his proxy or alternate shall be entitled to one vote. In case of an equality of votes the chairperson of the meeting shall have a second or casting vote. A Director may, and a Secretary or assistant Secretary on the requisition of a Director shall, at any time summon a meeting of the Directors. |
| 29.2 | A Director may participate in any meeting of the Directors, or of any committee appointed by the Directors of which such Director is a member, by means of telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting. |
| 29.3 | The quorum necessary for the transaction of the business of the Board shall be a majority of the Directors then in office. A Director represented by proxy or by an alternate Director at any meeting shall be deemed to be present for the purposes of determining whether or not a quorum is present. |
| 29.4 | A Director who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or transaction with the Company shall declare the nature of his interest at a meeting of the Directors. A general notice given to the Directors by any Director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract or transaction which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made or transaction so consummated. Subject to the Designated Stock Exchange Rules and disqualification by the chairperson of the relevant Board meeting, a Director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the Directors at which any such contract or transaction or proposed contract or transaction shall come before the meeting for consideration. |
| 29.5 | A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established. A Director, notwithstanding his interest, may be counted in the quorum present at any meeting of the Directors whereat he or any other Director is appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote on any such appointment or arrangement. |
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| 29.6 | Any Director may act by himself or through his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for professional services as if he were not a Director; provided that nothing herein contained shall authorise a Director or his firm to act as auditor to the Company. |
| 29.7 | The Directors shall cause minutes to be made for the purpose of recording: |
| (a) | all appointments of officers made by the Directors; |
| (b) | the names of the Directors present at each meeting of the Directors and of any committee of the Directors; and |
| (c) | all resolutions and proceedings at all meetings of the Company, and of the Directors and of committees of Directors. |
| 29.8 | When the chairperson of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held notwithstanding that all the Directors have not actually come together or that there may have been a technical defect in the proceedings. |
| 29.9 | A resolution in writing signed by all the Directors or all the members of a committee of Directors entitled to receive notice of a meeting of Directors or committee of Directors, as the case may be (an alternate Director, subject as provided otherwise in the terms of appointment of the alternate Director, being entitled to sign such a resolution on behalf of his appointer), shall be as valid and effectual as if it had been passed at a duly called and constituted meeting of Directors or committee of Directors, as the case may be. When signed a resolution may consist of several documents each signed by one or more of the Directors or his duly appointed alternate. |
| 29.10 | The continuing Directors may act notwithstanding any vacancy in their body but if and for so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number, or of summoning a general meeting of the Company, but for no other purpose. |
| 29.11 | Subject to any regulations imposed on it by the Directors, a committee appointed by the Directors may elect a chairperson of its meetings. If no such chairperson is elected, or if at any meeting the chairperson is not present within fifteen minutes after the time appointed for holding the meeting, the committee members present may choose one of their number to be chairperson of the meeting. |
| 29.12 | A committee appointed by the Directors may meet and adjourn as it thinks proper. Subject to any regulations imposed on it by the Directors, questions arising at any meeting shall be determined by a majority of votes of the committee members present and in case of an equality of votes the chairperson shall have a second or casting vote. |
| 29.13 | All acts done by any meeting of the Directors or of a committee of Directors, or by any Person acting as a Director, shall notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director or Person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such Person had been duly appointed and was qualified to be a Director. |
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| 30 | Presumption of Assent |
A Director who is present at a meeting of the Board of Directors at which an action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the chairperson or secretary of the meeting before the adjournment thereof or shall forward such dissent by registered post to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action.
| 31 | Dividends |
| 31.1 | Subject to any rights and restrictions for the time being attached to any Shares, the Directors may from time to time declare dividends (including interim dividends) and other distributions on Shares in issue and authorise payment of the same out of the funds of the Company lawfully available therefor. |
| 31.2 | Subject to any rights and restrictions for the time being attached to any Shares, the Company by Ordinary Resolution may declare dividends, but no dividend shall exceed the amount recommended by the Directors. |
| 31.3 | The Directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they think proper as a reserve or reserves which shall, in the absolute discretion of the Directors, be applicable for meeting contingencies or for equalising dividends or for any other purpose to which those funds may be properly applied, and pending such application may in the absolute discretion of the Directors, either be employed in the business of the Company or be invested in such investments (other than Shares of the Company) as the Directors may from time to time think fit. |
| 31.4 | Any dividend payable in cash to the holder of Shares may be paid in any manner determined by the Directors. If paid by cheque it will be sent by mail addressed to the holder at his address in the Register, or addressed to such person and at such addresses as the holder may direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the Register in respect of such Shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. |
| 31.5 | The Directors may determine that a dividend shall be paid wholly or partly by the distribution of specific assets (which may consist of the shares or securities of any other company) and may settle all questions concerning such distribution. Without limiting the generality of the foregoing, the Directors may fix the value of such specific assets, may determine that cash payment shall be made to some Shareholders in lieu of specific assets and may vest any such specific assets in trustees on such terms as the Directors think fit. |
| 31.6 | Subject to any rights and restrictions for the time being attached to any Shares, all dividends shall be declared and paid according to the amounts paid up on the Shares, but if and for so long as nothing is paid up on any of the Shares dividends may be declared and paid according to the par value of the Shares. No amount paid on a Share in advance of calls shall, while carrying interest, be treated for the purposes of this Article as paid on the Share. |
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| 31.7 | If several Persons are registered as joint holders of any Share, any of them may give effective receipts for any dividend or other moneys payable on or in respect of the Share. |
| 31.8 | No dividend shall bear interest against the Company. |
| 31.9 | Any dividend unclaimed after a period of six calendar years from the date of declaration of such dividend may be forfeited by the Board of Directors and, if so forfeited, shall revert to the Company. |
| 32 | Accounts, Audit and Annual Return and Declaration |
| 32.1 | The books of account relating to the Company’s affairs shall be kept in such manner as may be determined from time to time by the Directors. |
| 32.2 | The books of account shall be kept at the Registered Office or at such other place or places as the Directors think fit, and shall always be open to the inspection of the Directors. |
| 32.3 | The Directors may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Shareholders not being Directors, and no Shareholder (not being a Director) shall have any right to inspect any account or book or document of the Company except as conferred by law or authorised by the Directors or by Ordinary Resolution. |
| 32.4 | The accounts relating to the Company’s affairs shall be audited in such manner and with such financial year end as may be determined from time to time by the Directors or failing any determination as aforesaid shall not be audited. |
| 32.5 | The Directors may appoint an auditor of the Company who shall hold office until removed from office by a resolution of the Directors and may fix his or their remuneration. |
| 32.6 | Every auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled to require from the Directors and officers of the Company such information and explanation as may be necessary for the performance of the duties of the auditors. |
| 32.7 | The auditors shall, if so required by the Directors, make a report on the accounts of the Company during their tenure of office at the next annual general meeting following their appointment, and at any time during their term of office, upon request of the Directors or any general meeting of the Members. |
| 32.8 | The Directors in each calendar year shall prepare, or cause to be prepared, an annual return and declaration setting forth the particulars required by the Companies Act and deliver a copy thereof to the Registrar of Companies in the Cayman Islands. |
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| 33 | Capitalisation of Reserves |
| 33.1 | Subject to the Companies Act, the Directors may: |
| (a) | resolve to capitalise an amount standing to the credit of reserves (including a Share Premium Account, capital redemption reserve and profit and loss account), which is available for distribution; |
| (b) | appropriate the sum resolved to be capitalised to the Shareholders in proportion to the nominal amount of Shares (whether or not fully paid) held by them respectively and apply that sum on their behalf in or towards: |
| (i) | paying up the amounts (if any) for the time being unpaid on Shares held by them respectively, or |
| (ii) | paying up in full unissued Shares or debentures of a nominal amount equal to that sum, |
and allot the Shares or debentures, credited as fully paid, to the Shareholders (or as they may direct) in those proportions, or partly in one way and partly in the other, but the Share Premium Account, the capital redemption reserve and profits which are not available for distribution may, for the purposes of this Article, only be applied in paying up unissued Shares to be allotted to Shareholders credited as fully paid;
| (c) | make any arrangements they think fit to resolve a difficulty arising in the distribution of a capitalised reserve and in particular, without limitation, where Shares or debentures become distributable in fractions the Directors may deal with the fractions as they think fit; |
| (d) | authorise a Person to enter (on behalf of all the Shareholders concerned) into an agreement with the Company providing for either: |
| (i) | the allotment to the Shareholders respectively, credited as fully paid, of Shares or debentures to which they may be entitled on the capitalisation, or |
| (ii) | the payment by the Company on behalf of the Shareholders (by the application of their respective proportions of the reserves resolved to be capitalised) of the amounts or part of the amounts remaining unpaid on their existing Shares, |
and any such agreement made under this authority being effective and binding on all those Shareholders; and
| (e) | generally do all acts and things required to give effect to the resolution. |
| 33.2 | Notwithstanding any provisions in these Articles and subject to the Companies Act, the Directors may resolve to capitalise an amount standing to the credit of reserves (including the share premium account, capital redemption reserve and profit and loss account) or otherwise available for distribution by applying such sum in paying up in full unissued Shares to be allotted and issued to: |
| (a) | employees (including Directors) or service providers of the Company or its Affiliates upon exercise or vesting of any options or awards granted under any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the Directors or the Members; or |
| (b) | any trustee of any trust or administrator of any share incentive scheme or employee benefit scheme to whom shares are to be allotted and issued by the Company in connection with the operation of any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the Directors or Members. |
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| 34 | Share Premium Account |
| 34.1 | The Directors shall in accordance with the Companies Act establish a Share Premium Account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any Share. |
| 34.2 | There shall be debited to any Share Premium Account on the redemption or purchase of a Share the difference between the nominal value of such Share and the redemption or purchase price provided always that at the discretion of the Directors such sum may be paid out of the profits of the Company or, if permitted by the Companies Act, out of capital. |
| 35 | Notices |
| 35.1 | Except as otherwise provided in these Articles, any notice or document may be served by the Company or by the Person entitled to give notice to any Shareholder either personally, or by posting it by airmail or a recognised courier service in a prepaid letter addressed to such Shareholder at his address as appearing in the Register, or by electronic mail to any electronic mail address such Shareholder may have specified in writing for the purpose of such service of notices, or by facsimile to any facsimile number such Shareholder may have specified in writing for the purpose of such service of notices, or by placing it on the Company’s Website should the Directors deem it appropriate. In the case of joint holders of a Share, all notices shall be given to that one of the joint holders whose name stands first in the Register in respect of the joint holding, and notice so given shall be sufficient notice to all the joint holders. |
| 35.2 | Notices sent from one country to another shall be sent or forwarded by prepaid airmail or a recognised courier service. |
| 35.3 | Any Shareholder present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was convened. |
| 35.4 | Any notice or other document, if served by: |
| (a) | post, shall be deemed to have been served five (5) calendar days after the time when the letter containing the same is posted; |
| (b) | facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission of the facsimile in full to the facsimile number of the recipient; |
| (c) | recognised courier service, shall be deemed to have been served 48 hours after the time when the letter containing the same is delivered to the courier service; or |
| (d) | electronic means, shall be deemed to have been served immediately (i) upon the time of the transmission to the electronic mail address supplied by the Shareholder to the Company or (ii) upon the time of its placement on the Company’s Website. |
| 35.5 | In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed and duly posted or delivered to the courier service. |
| 35.6 | Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in accordance with the terms of these Articles shall notwithstanding that such Shareholder be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be deemed to have been duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless his name shall at the time of the service of the notice or document have been removed from the Register as the holder of the Share, and such service shall for all purposes be deemed a sufficient service of such notice or document on all Persons interested (whether jointly with or as claiming through or under him) in the Share. |
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| 35.7 | Notice of every general meeting of the Company shall be given to: |
| (a) | all Shareholders holding Shares with the right to receive notice and who have supplied to the Company an address for the giving of notices to them; and |
| (b) | every Person entitled to a Share in consequence of the death or bankruptcy of a Shareholder, who but for his death or bankruptcy would be entitled to receive notice of the meeting. |
No other Person shall be entitled to receive notices of general meetings.
| 36 | Information |
| 36.1 | Subject to the relevant laws, rules and regulations applicable to the Company, no Member shall be entitled to require discovery of any information in respect of any detail of the Company’s trading or any information which is or may be in the nature of a trade secret or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Board would not be in the interests of the Members of the Company to communicate to the public. |
| 36.2 | Subject to due compliance with the relevant laws, rules and regulations applicable to the Company, the Board shall be entitled to release or disclose any information in its possession, custody or control regarding the Company or its affairs to any of its Members including, without limitation, information contained in the Register and transfer books of the Company. |
| 37 | Indemnity |
| 37.1 | Every Director (including for the purposes of this Article any alternate Director appointed pursuant to the provisions of these Articles), Secretary, assistant Secretary, or other officer for the time being and from time to time of the Company (but not including the Company’s auditors) and the personal representatives of the same (each an “Indemnified Person”) shall be indemnified and secured harmless against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such Indemnified Person, other than by reason of such Indemnified Person’s own dishonesty, wilful default or fraud, in or about the conduct of the Company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such Indemnified Person in defending (whether successfully or otherwise) any civil proceedings concerning the Company or its affairs in any court whether in the Cayman Islands or elsewhere. |
| 37.2 | No Indemnified Person shall be liable: |
| (a) | for the acts, receipts, neglects, defaults or omissions of any other Director or officer or agent of the Company; or |
| (b) | for any loss on account of defect of title to any property of the Company; or |
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| (c) | on account of the insufficiency of any security in or upon which any money of the Company shall be invested; or |
| (d) | for any loss incurred through any bank, broker or other similar Person; or |
| (e) | for any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgement or oversight on such Indemnified Person’s part; or |
| (f) | for any loss, damage or misfortune whatsoever which may happen in or arise from the execution or discharge of the duties, powers, authorities, or discretions of such Indemnified Person’s office or in relation thereto; |
unless the same shall happen through such Indemnified Person’s own dishonesty, willful default or fraud.
| 38 | Financial Year |
Unless the Directors otherwise prescribe, the financial year of the Company shall end on March 31st in each calendar year and shall begin on April 1st in each calendar year.
| 39 | Non-Recognition of Trusts |
No Person shall be recognised by the Company as holding any Share upon any trust and the Company shall not, unless required by law, be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any Share or (except only as otherwise provided by these Articles or as the Companies Act requires) any other right in respect of any Share except an absolute right to the entirety thereof in each Shareholder registered in the Register.
| 40 | Winding Up |
| 40.1 | If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Companies Act, divide amongst the Members in species or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any asset upon which there is a liability. |
| 40.2 | If the Company shall be wound up, and the assets available for distribution amongst the Members shall be insufficient to repay the whole of the share capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the par value of the Shares held by them. If in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst the Members in proportion to the par value of the Shares held by them at the commencement of the winding up subject to a deduction from those Shares in respect of which there are monies due, of all monies payable to the Company for unpaid calls or otherwise. This Article is without prejudice to the rights of the holders of Shares issued upon special terms and conditions. |
| 41 | Amendment of Articles of Association |
Subject to the Companies Act, the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or in part.
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| 42 | Closing of Register or Fixing of Record Date |
| 42.1 | For the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at any meeting of Shareholders or any adjournment thereof, or those Shareholders that are entitled to receive payment of any dividend, or in order to make a determination as to who is a Shareholder for any other purpose, the Directors may provide that the Register shall be closed for transfers for a stated period which shall not exceed in any case thirty (30) calendar days in any calendar year. |
| 42.2 | In lieu of or apart from closing the Register, the Directors may fix in advance a date as the record date for any such determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of the Shareholders and for the purpose of determining those Shareholders that are entitled to receive payment of any dividend the Directors may, at or within ninety (90) calendar days prior to the date of declaration of such dividend, fix a subsequent date as the record date for such determination. |
| 42.3 | If the Register is not so closed and no record date is fixed for the determination of those Shareholders entitled to receive notice of, attend or vote at a meeting of Shareholders or those Shareholders that are entitled to receive payment of a dividend, the date on which notice of the meeting is posted or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Shareholders. When a determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of Shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof. |
| 43 | Registration by way of Continuation |
The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing. In furtherance of a resolution adopted pursuant to this Article, the Directors may cause an application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the Company.
| 44 | Disclosure |
The Directors, or any service providers (including the officers, the Secretary and the Registered Office provider of the Company) specifically authorised by the Directors, shall be entitled to disclose to any regulatory or judicial authority any information regarding the affairs of the Company including without limitation information contained in the Register and books of the Company.
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Exhibit 2.2
Description of Rights of Each Class of Securities
Registered under Section 12 of the Securities Exchange Act of 1934, as Amended (the “Exchange Act”)
Class A ordinary shares, par value US$0.0005 per share (“Class A Ordinary Shares”), of CCSC Technology International Holdings Limited, (“we,” “our,” “our company,” or “us”) are listed and traded on the Nasdaq Capital Market and, in connection with this listing (but not for trading), its Class A Ordinary Shares are registered under Section 12(b) of the Exchange Act. This exhibit contains a description of the rights of the holders of Class A Ordinary Shares.
Description of Class A Ordinary Shares
The following is a summary of material provisions of our currently effective second amended and restated memorandum and articles of association (the “Memorandum and Articles of Association”), as well as the Companies Act (Revised) of the Cayman Islands (the “Cayman Companies Act”) insofar as they relate to the material terms of our Class A Ordinary Shares. Notwithstanding this, because it is a summary, it may not contain all the information that you may otherwise deem important. For more complete information, you should read the entire Memorandum and Articles of Association, which have been filed with the U.S. Securities and Exchange Commission as exhibits to our Registration Statement on Form 20-F (File No. 001-[*]), initially filed with the U.S. Securities and Exchange Commission on July [*], 2025.
Type and Class of Securities (Item 9.A.5 of Form 20-F)
Each Class A Ordinary Share has a par value of US$0.0005 per share. The number of Class A Ordinary Shares that have been issued as of the last day of the financial year ended March 31, 2025 is provided on the cover of the annual report on Form 20-F filed on July [*], 2025. Our Class A Ordinary Shares may be held in either certificated or uncertificated form.
Preemptive Rights (Item 9.A.3 of Form 20-F)
The Class A Ordinary Shares are not subject to any pre-emptive or similar rights under the Cayman Companies Act or pursuant to the Memorandum and Articles of Association.
Limitations or Qualifications (Item 9.A.6 of Form 20-F)
We have a dual-class voting structure such that our ordinary shares consist of Class A Ordinary Shares and Class B ordinary shares of a par value of US$0.0005 each (“Class B Ordinary Shares”). In respect of matters requiring a shareholder vote, (i) on a show of hands, each shareholder present at the general meeting shall have one vote, and (ii) on a poll, every shareholder present at the general meeting shall have one (1) vote for each Class A Ordinary Share and fifty (50) votes for each Class B Ordinary Share. Each Class B Ordinary Share is convertible into one Class A Ordinary share at any time by the holder thereof. Our Class A Ordinary Shares are not convertible into our Class B Ordinary Shares under any circumstances.
Rights of Other Types of Securities (Item 9.A.7 of Form 20-F)
Not applicable.
Rights of Class A Ordinary Shares (Item 10.B.3 of Form 20-F)
Class A Ordinary Shares
Our authorized share capital is US$250,000 divided into 500,000,000 shares of a par value of US$0.0005 each, comprising 495,000,000 Class A Ordinary Shares of a par value of US$0.0005 each and 5,000,000 Class B Ordinary Shares of a par value of US$0.0005 each. All of our issued and outstanding ordinary shares are fully paid and non-assessable. Holders of Class A Ordinary Shares and Class B Ordinary Shares have the same rights except for voting and conversion rights.
Dividends
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors or declared by our shareholders by ordinary resolution (provided that no dividend may be declared by our shareholders which exceeds the amount recommended by our directors). Our Memorandum and Articles of Association provide that dividends may be declared and paid out of funds of our Company lawfully available therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profits or share premium account, provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business immediately following the date on which the dividend is paid.
Voting Rights
Holders of our Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all matters submitted to a vote by the shareholders at any general meeting of our company. Subject to any rights or restrictions as to voting attached to any shares, on a show of hands every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote per ordinary share. On a poll, every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote for each Class A Ordinary Share and 50 votes for each Class B Ordinary Share of which he or the person represented by proxy is the holder. In addition, all shareholders holding shares of a particular class are entitled to vote at a meeting of the holders of that class of shares. Votes may be given either personally or by proxy.
Conversion Rights
Each Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time at the option of the holder thereof. The right to convert shall be exercisable by the holder of the Class B Ordinary Share by delivering a written notice to the Company that such holder elects to convert a specified number of Class B Ordinary Shares into Class A Ordinary Shares.
Upon any direct or indirect sale, transfer, assignment or disposition of any Class B Ordinary Share by a holder thereof or the direct or indirect transfer or assignment of the voting power attached to any Class B Ordinary Share through voting proxy or otherwise to any person or entity which is not (a) an affiliate of such holder; (b) another holder of Class B Ordinary Shares; or (c) an affiliate of such other holder, each such Class B Ordinary Share shall be automatically and immediately converted into one Class A Ordinary Share upon the effectiveness of such transfer such that the recipient receives one Class A Ordinary Share for every one Class B Ordinary Share attempted to be transferred.
All conversions of Class B Ordinary Shares to Class A Ordinary Shares shall be effected by means of the re-designation of each relevant Class B Ordinary Share as a Class A Ordinary Share. Class A Ordinary Shares are not convertible into Class B Ordinary Shares under any circumstances.
Transfer of Shares
Subject to the restrictions set out below, any of our 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 our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
| ● | the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; |
| ● | the instrument of transfer is in respect of only one class of ordinary shares; |
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| ● | the instrument of transfer is properly stamped, if required; |
| ● | in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and |
| ● | a fee of such maximum sum as the relevant stock exchange may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer they shall, within three calendar months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, on ten calendar days’ notice being given by advertisement in such one or more newspapers, by electronic means or by any other means in accordance with the rules of the Nasdaq Capital Market, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 calendar days in any calendar year.
Liquidation
On the winding up of our company, if the assets available for distribution among our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed among our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay the whole of the share capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by our shareholders in proportion to the par value of the shares held by them.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 calendar days prior to the specified time of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.
Requirements to Change the Rights of Holders of Ordinary Shares (Item 10.B.4 of Form 20-F)
Variation of Rights of Shares
Whenever our capital is divided into different classes of shares, the rights attached to any class of shares may, subject to any rights or restrictions for the time being attached to any class of shares, only be materially and adversely varied with the consent in writing of the holders of at least two-thirds of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. To every such separate meeting, the necessary quorum shall be one or more persons holding or representing by proxy at least one-third in nominal or par value amount of the issued shares of the relevant class (but so that if at any adjourned meeting of such holders a quorum as above defined is not present, those shareholders who are present shall form a quorum).
The rights conferred on the holders of the shares of any class issued with preferred or other rights shall not, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be materially and adversely varied by, inter alia, the creation, allotment or issue of further shares ranking pari passu with or subsequent to the existing shares of that class or the redemption or purchase of any shares of any class by our company. The rights of the holders of the shares shall not be deemed to be materially and adversely varied by the creation or issue of shares with preferred or other rights including, without limitation, the creation of shares with enhanced or weighted voting rights.
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Limitations on the Rights to Own Ordinary Shares (Item 10.B.6 of Form 20-F)
There are no limitations under the laws of the Cayman Islands or under the Memorandum and Articles of Association that limit the right of non-resident or foreign owners to hold or exercise voting rights on our ordinary shares.
Provisions Affecting Any Change of Control (Item 10.B.7 of Form 20-F)
Anti-Takeover Provisions. Some provisions of our Memorandum and Articles of Association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that (i) authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders, and (ii) limit the ability of shareholders to requisition and convene general meetings of shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and Articles of Association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Ownership Threshold (Item 10.B.8 of Form 20-F)
There are no provisions under the Cayman Companies Act or under the Memorandum and Articles of Association that require our company to disclose shareholder ownership above any particular ownership threshold.
Differences Between the Law of Different Jurisdictions (Item 10.B.9 of Form 20-F)
The Cayman Companies Act is modeled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the Cayman Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Cayman Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware in the United States.
Mergers and Similar Arrangements
The Cayman Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The plan must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that shareholder agrees otherwise. For this purpose, a company is a “parent” of a subsidiary if it holds issued shares that together represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary.
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
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Save in certain limited circumstances, a shareholder of a Cayman Islands constituent company who dissents from the merger or consolidation is entitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upon dissenting to the merger or consolidation, provided the dissenting shareholder complies strictly with the procedures set out in the Cayman Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.
Separate from the statutory provisions relating to mergers and consolidations, the Cayman Companies Act also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by (a) 75% in value of the shareholders or class of shareholders, as the case may be, or (b) a majority in number representing 75% in value of the creditors or each class of creditors, as the case may be, with whom the arrangement is to be made, that are, in each case, present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
| ● | the statutory provisions as to the required majority vote have been met; |
| ● | the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class; |
| ● | the arrangement is such that may be reasonably approved by an intelligent and honest man of that acting in respect of his interest; and |
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Cayman Companies Act. |
The Cayman Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction by way of scheme of arrangement is thus approved, or if a tender offer is made and accepted, in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights, save that objectors to a takeover offer may apply to the Grand Court of the Cayman Islands for various orders that the Grand Court of the Cayman Islands has a broad discretion to make, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits
In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English law authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands courts can be expected (and have had occasion) to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action against, or derivative actions in the name of, our company to challenge:
| ● | an act which is ultra vires or illegal and is therefore incapable of ratification by the shareholders; |
| ● | an act which constitutes a fraud against the minority where the wrongdoer are themselves in control of the company; and |
| ● | an act which requires a resolution with a qualified (or special) majority (i.e. more than a simple majority) which has not been obtained. |
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Indemnification of Directors and Executive Officers and Limitation of Liability
The Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles of Association provide that that we shall indemnify each director (including alternate director), secretary, assistant secretary, or other officer for the time being and from time to time of the Company (but not including the Company’s auditors), and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such person, other than by reason of such person’s dishonesty, wilful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we have entered into indemnification agreements with our directors and senior executive officers that will provide such persons with additional indemnification beyond that provided in our Memorandum and Articles of Association.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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 or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her 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.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company — a duty to act bona fide in the best interests of the company, a duty not to make a personal profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
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. Cayman Islands law and our Memorandum and Articles of Association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.
6
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.
The Cayman Companies Act does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our Memorandum and Articles of Association allow our shareholders holding shares which at the date of the deposit of the requisition carry in aggregate not less than one-third of all votes attaching to all issued and outstanding shares of our company that as at the date of the deposit carry the right to vote at general meetings to requisition an extraordinary general meeting of our shareholders, in which case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. Other than this right to requisition a shareholders’ meeting, our Memorandum and Articles of Association do not provide our shareholders with any other right to put proposals before annual general meetings or extraordinary general meetings. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.
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. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our Memorandum and Articles of Association do not provide for cumulative voting. As a result, our 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 our Memorandum and Articles of Association, subject to certain restrictions as contained therein, directors may be removed with or without cause, by an ordinary resolution of our shareholders. An appointment of a director may be on terms that the director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any specified event or after any specified period in a written agreement between the company and the director, if any; but no such term shall be implied in the absence of express provision. In addition, a director’s office shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) is found to be or becomes of unsound mind or dies; (iii) resigns his office by notice in writing to the company; or; (iv) is removed from office pursuant to any other provisions of our Memorandum and Articles of Association.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware 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 a group who or which owns or owned 15% or more of the target’s outstanding voting share 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 corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
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Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.
Restructuring
A company may present a petition to the Grand Court of the Cayman Islands for the appointment of a restructuring officer on the grounds that the company:
| (a) | is or is likely to become unable to pay its debts; and |
| (b) | intends to present a compromise or arrangement to its creditors (or classes thereof) either pursuant to the Companies Act, the law of a foreign country or by way of a consensual restructuring. |
The Grand Court may, among other things, make an order appointing a restructuring officer upon hearing of such petition, with such powers and to carry out such functions as the court may order. At any time (i) after the presentation of a petition for the appointment of a restructuring officer but before an order for the appointment of a restructuring officer has been made, and (ii) when an order for the appointment of a restructuring officer is made, until such order has been discharged, no suit, action or other proceedings (other than criminal proceedings) shall be proceeded with or commenced against the company, no resolution to wind up the company shall be passed, and no winding up petition may be presented against the company, except with the leave of the court. However, notwithstanding the presentation of a petition for the appointment of a restructuring officer or the appointment of a restructuring officer, a creditor who has security over the whole or part of the assets of the company is entitled to enforce the security without the leave of the court and without reference to the restructuring officer appointed.
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 Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
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 our Memorandum and Articles of Association, if our share capital is divided into more than one class of shares, the rights attached to any such class may, subject to any rights or restrictions for the time being attached to any class, only be materially and adversely varied with the consent in writing of the holders of at least two-thirds of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be materially and adversely varied by, inter alia, the creation, allotment or issue of further shares ranking pari passu with or subsequent to them or the redemption or purchase of any shares of any class by our company. The rights of the holders of shares shall not be deemed to be materially and adversely varied by the creation or issue of shares with preferred or other rights including, without limitation, the creation of shares with enhanced or weighted voting rights..
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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. Under Cayman Islands law, our Memorandum and Articles of Association may only be amended with a special resolution of our shareholders.
Changes in Capital (Item 10.B.10 of Form 20-F)
Subject to the Cayman Companies Act, we may from time to time by ordinary resolution:
| ● | increase our share capital by new shares of such amount as we think expedient; |
| ● | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; |
| ● | subdivide our shares, or any of them, into shares of an amount smaller than that fixed by the Memorandum and Articles of Association, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived; and | |
| ● | cancel any shares that, at the date of the passing of that ordinary resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled. |
We may by special resolution, subject to any confirmation or consent required by the Cayman Companies Act, reduce our share capital or any capital redemption reserve in any manner permitted by law.
Debt Securities (Item 12.A of Form 20-F)
Not applicable.
Warrants and Rights (Item 12.B of Form 20-F)
Not applicable.
Other Securities (Item 12.C of Form 20-F)
Not applicable.
Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)
Not applicable.
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Exhibit 4.4
| vanvliet | commercial real estate agents & consultants |
IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K, CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THE EXHIBIT BECAUSE IT IS BOTH (1) NOT MATERIAL AND (2) THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. [*] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Lease Agreement
Klompenmakerstraat 16a
Ridderkerk
| vanvliet | commercial real estate agents & consultants |
LEASE AGREEMENT FOR OFFICE SPACE
and other commercial space as defined in Article 7:230a of the Dutch Civil Code
Model established by the Dutch Council for Real Estate (ROZ) on 30-1-2015 and deposited on 17-2-2015 with the Registry of the District Court in The Hague, registered under number 15220 and also published on the website www.roz.nl. Reference to and use of this model is only permitted if the completed, added, and/or deviating text is clearly identifiable as such. Additions and deviations should preferably be included under the chapter ‘Special Provisions’. The ROZ disclaims all liability for any adverse consequences resulting from the use of the model text.
THE UNDERSIGNED
Japhet De Jong Holding B.V.,
legally represented by J. Th. De Jong Holding B.V.,
in this case legally represented by its director Mr. J. Th. de Jong,
having its registered office in Rotterdam, Apoloniastraat 1 (3084 CC),
registered in the trade register under file number 24388481,
VAT number NL815190529B01,
hereinafter referred to as the ‘lessor’,
AND
Leoco Europe B.V.,
represented by Mr. B. Tian,
having its registered office in Ridderkerk, Klompenmakerstraat 16a (2984 BB),
registered in the trade register under file number 65567455,
VAT number PM,
hereinafter referred to as the ‘lessee’,
HAVE AGREED AS FOLLOWS
The leased property, purpose
1.1. The lessor leases to the lessee, and the lessee leases from the lessor, a commercial/office space including 4 parking spaces (hereinafter referred to as the ‘leased property’), located at:
Klompenmakerstraat 16a in Ridderkerk (2984 BB)
Cadastral details:
Municipality: Ridderkerk Section: B Number: 2402 |  |
The leased property is further specified on the floor plan/drawing attached as an appendix to this lease agreement and initialed by both parties. The condition of the leased property on the delivery date is described in the delivery report, also to be attached and initialed by both parties.
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1.2. The leased property shall be used by or on behalf of the Lessee exclusively as commercial/office space for the purpose of an electrical wholesale business.
1.3. The Lessee is not permitted to assign any other use to the leased property than described in Article 1.2 without the prior written consent of the Lessor.
1.4. The maximum permissible floor load of the leased property is 1,500 kg/m² for the commercial space and 250 kg/m² for the office space.
1.5. Upon entering into this lease agreement, the Lessee has received a copy of the energy label regarding the leased property, as referred to in the Decree on Energy Performance of Buildings.
1.6. If it appears that the surface area mentioned in Article 1.1 is incorrect, the parties agree that any discrepancy with the actual size (whether smaller or larger) will have no effect on the rent.
Conditions
2.1. This lease agreement includes the “GENERAL PROVISIONS FOR LEASE OF OFFICE SPACE and other commercial space within the meaning of Article 7:230a of the Dutch Civil Code”, deposited with the Registry of the District Court of The Hague on 17-2-2015 and registered under number 15/21 (hereinafter referred to as “general provisions”). The parties acknowledge familiarity with the contents of these general provisions. Both the Lessee and the Lessor have received a copy of the general provisions.
2.2. The general provisions referred to in Article 2.1 shall apply except insofar as they are expressly deviated from in this lease agreement or cannot be applied to the leased property.
Duration, Renewal and Termination
3.1. This lease agreement shall commence on 1 May 2016 (hereinafter referred to as the “commencement date”) and shall be entered into for a period of 3 years, ending on 30 April 2019.
3.2. After the period mentioned in Article 3.1 expires, this lease agreement shall, unless terminated by the Lessee or the Lessor in accordance with Articles 3.3 and 3.4, be extended for a subsequent period of 3 years, thus until 30 April 2022. The lease shall then continue for additional subsequent periods of 3 years each.
3.3. Termination of this lease agreement shall occur by notice given by the Lessee to the Lessor or by the Lessor to the Lessee at the end of the current lease period or, in the case of a lease for an indefinite period, at any time, subject to a notice period of 6 months.
3.4. Notice of termination must be given either by bailiff’s writ or by registered letter.
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Rent, VAT, Service Charges, Rent Adjustment, Payment Obligation, Payment Period
4.1. The initial rent for the leased property amounts to, on an annual basis:
- for the first lease year (1 May 2016 – 30 April 2017):
€27,600 excluding service charges and excluding VAT,
- for the second lease year (1 May 2017 – 30 April 2018):
€28,800 excluding service charges and excluding VAT,
- for the third lease year (1 May 2018 – 30 April 2019):
€30,000 excluding service charges and excluding VAT.
- As of 1 May 2019, this latest rent amount will be indexed annually on 1 May in accordance with Article 4.5.
4.2. The parties agree that the Lessor will charge VAT on the rent. If rental subject to VAT is not agreed upon, the Lessee shall owe the Lessor a separate compensation, in addition to the rent, to offset the loss that the Lessor or their successor(s) suffers or will suffer due to the VAT on the Lessor’s investments and operating costs no longer being deductible. Article 19 of the general provisions does not apply in that case.
4.3. The parties declare, with reference to Article 11 paragraph 1, introductory part (b), subpart 5 of the Dutch VAT Act 1968, that they have agreed on VAT-taxed rental. VAT will also be charged on the compensation owed by the Lessee for the goods and services to be provided by or on behalf of the Lessor, as stipulated in Article 5 of the lease agreement and Article 18 of the general provisions.
By signing this lease agreement, the Lessee declares—also for the benefit of the Lessor’s successor(s)—that the leased premises will be used or remain in use for purposes that entitle the Lessee to a full or nearly full right to deduct VAT in accordance with Article 15 of the Dutch VAT Act 1968.
4.4. The Lessee’s financial year runs from 1 January to 31 December.
4.5. The rent will be adjusted annually as of 1 May, starting on 1 May 2019, in accordance with Articles 17.1 through 17.3 of the general provisions.
4.6. The compensation owed by the Lessee for the supply of goods and services to be provided by or on behalf of the Lessor will be determined in accordance with Article 18 of the general provisions. An advance payment system with later settlement, as indicated therein, will be applied to this compensation.
4.7. The Lessee is no longer required to pay VAT on the rent if the leased property may no longer be rented with VAT, even though the parties had agreed otherwise. In such case, the compensations referred to in Article 19.1 of the general provisions shall apply instead, and this compensation shall be determined at a percentage of the current rent to be further specified by the Lessor.
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4.8. The Lessee’s payment obligation consists of the following components:
For each payment period of 1 calendar month, the amounts due at the commencement of the lease are:
- Rent: €2,300.00
- VAT on the rent: €483.00
- Advance payment for service charges: €50.00
- VAT on the service charges advance: €10.50
Total: €2,843.50
In words: two thousand eight hundred forty-three euros and fifty cents, including service charges and including VAT.
4.9. In view of the commencement date, the Lessee’s first payment covers the period from 1 May 2016 to 31 May 2016, and the amount due for this first period is €2,843.50. The Lessee shall pay this amount on or before 1 May 2016.
4.10. The periodic payments to be made by the Lessee to the Lessor under this lease agreement, as specified in Article 4.8, shall be paid in full and in advance in euros, and must be received by the Lessor no later than the first day of the relevant period.
4.11. Unless otherwise stated, all amounts mentioned in this lease agreement and the accompanying general provisions are exclusive of VAT.
Costs for the Supply of Goods and Services
5.1. An advance payment of €50 per month excluding VAT shall be charged by or on behalf of the Lessor for the following goods and services:
- Periodic maintenance of central heating installation;
- Periodic maintenance of the overhead door;
- Periodic maintenance of fire extinguishing equipment;
- Periodic maintenance of green areas;
- Window cleaning of the exterior.
5.2. The Lessor is entitled, after consultation with the Lessee, to modify or discontinue the type and scope of the goods and services listed in Article 5.1.
Security
6.1. Before the commencement date, the Lessee shall:
provide a bank guarantee for / pay a security deposit in the amount of €8,532
(in words: eight thousand five hundred thirty-two euros).
6.2. No interest shall be paid on the security deposit.
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Manager
7.1. Until the Lessor notifies otherwise, the manager shall be:
Van Vliet Bedrijfsmakelaars B.V.
Property Management Department
Contact person: Mr. R. Tetteroo
P.O. Box 111, 2980 AC Ridderkerk
Phone: [*]
Email: beheer@vanvliet.net
In case of emergencies: [*]
7.2. Unless otherwise agreed in writing, the Lessee shall contact the manager regarding the content and all other matters concerning this lease agreement.
7.3. Notice of termination of the lease must also be sent to the Lessor.
Incentives
The parties declare that no incentives have been agreed between the parties other than those stated in this lease agreement.
Asbestos / Environment
9.1. The Lessor is not aware that asbestos has been used in the leased property. The Lessor’s lack of knowledge about the presence of asbestos in the leased property explicitly does not constitute a guarantee that asbestos is absent.
9.2. The Lessor is not aware of any contamination in, on, or around the leased property that, according to applicable legislation at the time of signing this lease agreement, would require remedial measures. The Lessor’s lack of knowledge about contamination in, on, or around the leased property at the time of the lease agreement explicitly does not constitute a guarantee that no contamination is present.
Sustainability / Green Lease
10. The parties recognize the importance of sustainability and agree to support each other in achieving the jointly formulated or to be formulated objectives and to regularly discuss the progress.
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Special Provisions
11. The handover/delivery of the leased property can take place once the owner/lessor has received the bank guarantee or security deposit. The period from delivery up to and including April 30, 2016, can be considered rent-free.
12. Rent payments must be made monthly in advance via automatic transfer or direct debit.
13. The lessor may deduct any rent arrears, including interest and costs, from the bank guarantee or security deposit. In that case, the tenant is obliged to replenish the bank guarantee or security deposit to the original amount within seven calendar days.
14. If the tenant wishes to make modifications to the leased property, the tenant must always obtain prior written consent from the lessor and provide the lessor with access to these (construction) plans.
15. The tenant is solely responsible for obtaining any necessary approvals and/or permits and/or exemptions from governmental authorities or otherwise. The lessor is indemnified against all damages, costs, and liabilities that may arise from this.
16. Advertising may only be conducted in consultation with and after approval by the owner/lessor. The tenant must arrange for obtaining permission from the municipal authorities. The tenant is responsible for any associated costs (such as public space taxes), even if the assessment is in the name of the lessor.
17. The tenant is not permitted to trade or produce narcotics (hard/soft drugs) or provide any opportunity for trading/production or use of these substances within the leased property. It is also strictly forbidden to conduct or allow any indecent activities or prostitution in the leased property. The lessor and/or any persons designated by him/her have the right to enter the leased property to check compliance with the permitted use as described in Article 1.2. The exact date and inspection will be agreed upon with the tenant. If the tenant does not cooperate with these inspections, after a formal notice of default, the tenant will owe a fine of €1,000 per day.
If activities other than those agreed upon take place in the leased property, or if the above-mentioned prohibited activities occur, or if illegal substances, including drugs or raw materials for drug production, are found, this agreement shall be automatically terminated and the rental period ended. In this case, the tenant is obliged to immediately vacate and surrender the leased property. The tenant will have 48 hours to vacate and surrender the leased property. If the tenant fails to do so, they will owe a penalty of €1,000 per day for each day of delay. The provided bank guarantee or security deposit will then also be forfeited to the lessor. Furthermore, the tenant is liable for all damages that the lessor may suffer due to the illegal/incorrect use by the tenant or for fines imposed on the lessor due to the tenant’s illegal/incorrect use of the leased property.
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18. The tenant acknowledges that smoking is not allowed in the leased premises.
Thus drawn up and signed in duplicate
| On behalf of the lessor: | On behalf of the tenant: | |
| Mr. J. Th. de Jong | Mr. B. Tian | |
 |
 | |
| Location: Rotterdam | Ridderkerk | |
| Date: 22 March 2016 | 15 March 2016 |
Attachments:
- Floor plan/drawing of the leased premises;
- Energy label;
- General terms and conditions;
- Sample bank guarantee;
- Extract from the trade register Chamber of Commerce of the lessor;
- Extract from the trade register Chamber of Commerce of the tenant;
- Copy of valid ID of the authorized representative of the lessor;
- Copy of valid ID of the authorized representative of the tenant.
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Exhibit 4.5
LD-AG-020
COMMERCIAL TENANCY
THIS AGREEMENT is dated 23rd November 2023
BETWEEN the parties described as the Landlord and the Tenant respectively in Part I of the First Schedule
WHEREBY IT IS AGREED as follows:
SECTION I
INTERPRETATION AND AGREEMENT
| 1.1 | Interpretation |
In this Agreement, the expressions set out below and in the Schedules hereto shall where the context so admits have the meanings respectively ascribed to them below or and, as the case may be, in the Schedules:
| (a) | “Authority” means any Government department and/or competent authority; |
| (b) | “Business Day” means Monday to Friday on which banks are ordinarily open for business in HKSAR; |
| (c) | “Government” means the Government of HKSAR; | |
| (d) | “HKSAR” means Hong Kong Special Administrative Region of The People’s Republic of China; | |
| (e) | “Laws” means all applicable laws, ordinances, by-laws, rules, regulations and any guidelines, codes of practice, requirements, notices and orders of any Authority now or hereafter in force; | |
| (f) | “Permits” means all licences, approvals, permits, authorities, permissions, consents, orders, franchises, and other necessary authorizations for operation and maintenance of the Tenant’s business, or the use and occupation of the Premises by the Tenant or otherwise, including without limitation those relating to any work for fitting out, construction, repair, maintenance or reinstatement; | |
| (g) | “Tenant’s Agents” means the employees, servants, agents, contractors, licensees, workmen, invitees, customers or visitors of the Tenant. |
| 1.2 | Joint and several liability |
In this Agreement, where the context so permits or requires words importing a gender include all other genders. If there are two (2) or more persons included in the expression “Tenant”, covenants expressed to be made by the Tenant shall be deemed to be made by such persons jointly and severally.
| 1.3 | Headings and index |
The headings and covering pages are intended for guidance only and do not form part of this Agreement nor shall any of the provisions of this Agreement be construed or interpreted by reference thereto.
| 1.4 | Third Party Rights |
The Landlord and the Tenant do not intend any term of this Agreement to be enforceable by any person, firm, company or corporation who is not a party to this Agreement pursuant to the Contracts (Rights of Third Parties) Ordinance (Cap. 623) (“CRTPO”) and agree that this Agreement shall be excluded from the application of the CRTPO.
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| 2 | Premises Term and Rent |
The Landlord shall let and the Tenant shall take, in the state and condition as it is, ALL THAT the premises more particularly set out in Part II of the First Schedule (“Premises”) for the term set out in Part III of the First Schedule (“Term”) and at such rent (“rent”), Management Fee and Air-Conditioning Charge, rates, Government rent (which are, unless the context otherwise requires, collectively included in the term “Rent”) and other charges as are from time to time payable in advance and in accordance with the provisions set out in this Agreement, including provisions in the Second Schedule. The Tenant shall have the right to use (in common with the Landlord and all others having the like right) the entrances, staircases, landings, lavatories, corridors and passages in the Building as defined in Part II of the First Schedule AND the passenger lifts and freight lifts, escalators and central air-conditioning service serving the Premises whenever the same shall be operating and insofar as the same are necessary for the proper use and enjoyment of the Premises and for conveying goods merchandise and raw materials to and from the Premises from and to the loading and unloading areas of the Building respectively, to pass and repass with vehicles over and along the loading and unloading areas of the Building for loading and discharging goods merchandise and raw materials SUBJECT to the Tenant’s compliance with the rules and regulations from time to time prescribed by the manager or management committee or similar management body for the time being of the Building (if any) (“Building Manager”) and the payment of such charges and fees as may be charged therefor.
SECTION II
DEPOSIT
| 1 | Deposit |
| 1.1 | The Tenant shall on or before the signing hereof deposit with the Landlord the sum(s) specified in Part V of the First Schedule and, where applicable, a bank guarantee in the sum specified in Part V of the First Schedule (“Deposit”) to secure the due observance and performance by the Tenant of the terms and conditions herein contained and on the part of the Tenant to be observed and performed. The bank guarantee shall be in a form and from a licensed bank in HKSAR approved by the Landlord and shall be subsisting and valid for the whole Term and until at least forty five (45) days after the expiration or sooner determination of this Agreement. |
| 1.2 | The Deposit shall, subject to clause 1 of Section IX hereof, be retained by the Landlord throughout the Term without interest. The Tenant hereby specifically and irrevocably authorises the Landlord (but the Landlord is not obliged to and without prejudice to any other Landlord’s right or remedy) to deduct and apply the Deposit in payment of (i) the amount of any arrears of Rent and other charges payable hereunder by the Tenant; and (ii) any costs, expenses, loss or damage sustained by. the Landlord as the result of any non-observance or non-performance by the Tenant of any of the terms or conditions herein contained. In addition thereto or alternatively, the Landlord may call in the bank guarantee to settle the amounts referred to in (i) and/or (ii) above, or the shortfall thereof, where applicable. |
| 1.3 | If any deduction is made by the Landlord from the Deposit or if there shall be any increase in the Rent, the Tenant shall forthwith on demand by the Landlord make a further deposit and/or provide an additional bank guarantee equal to the amount so deducted or the amount proportionate to the increase in Rent to restore the ratio of Deposit to the Rent to that previously subsisting. Failure by the Tenant to comply with the aforesaid obligation shall entitle the Landlord to determine this Agreement and forthwith to re-enter upon the Premises. |
| 1.4 | If, at the expiration or sooner determination of this Agreement, there is any money due and owing by the Tenant to the Landlord under any other contract(s) or agreement(s) made between the Landlord and the Tenant (whether or not any other party is also party to such contract or agreement), the Landlord shall be entitled, at its absolute discretion, to deduct and apply the Deposit or any part thereof or hold it on account for or in settlement of the money, loss and damage (whether liquidated or pending assessment) or any part thereof then due or to be due and owing to the Landlord as aforesaid. |
| 2 | Refund of Deposit |
Subject as aforesaid, the Deposit shall be refunded to the Tenant by the Landlord without interest within forty five (45) days after (i) the expiration or sooner determination of this Agreement and delivery of vacant possession of the Premises to the Landlord; and (ii) settlement of the last outstanding claim by the Landlord against the Tenant for any arrears of Rent and other charges and for any breach of any of the terms and conditions contained in the Agreement and on the part of the Tenant to be observed or performed.
| 3 | Transfer of Deposit |
In the event the Premises and/or Landlord’s interest in this Agreement shall be assigned by the Landlord to any party, the Landlord shall be entitled to transfer directly the Deposit or the balance thereof to the assignee, after making any deduction(s) as permitted under this Agreement (whether with or without consent of the Tenant) PROVIDED that the assignee shall undertake to refund the Deposit or balance thereof to the Tenant in accordance with the provisions hereof. Upon such transfer, the Landlord shall be released from any and all further obligations to the Tenant in respect of the Deposit, and the Tenant shall thereafter have no claim whatsoever against the Landlord in respect thereof. In the event of there being a bank guarantee, the Tenant will upon request provide a substitute guarantee in favour of the assignee in exchange for that provided to the Landlord.
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SECTION III
TENANT’S OBLIGATIONS
The Tenant hereby agrees with the Landlord as follows:
| 1 | Rent and Management Fee, etc. |
| 1.1 | To pay the rent in advance as set out in Part I of the Second Schedule clear of all deductions, counterclaim, legal or equitable setoff on the first day of each calendar month, the first and last of such payments to be apportioned according to the number of days in the month included in the Term. |
| 1.2 | To pay and discharge, at the same time and in the same manner as the rent is payable, |
| (a) | the Management Fee and Air-Conditioning Charge; and | |
| (b) | any other service and maintenance charges payable by the owner or occupier of the Premises or (as the case may be) the Landlord including (without limitation) such charges as may be demanded from time to time by the Building Manager; and/or | |
| (c) | those charges payable in respect of the Premises pursuant to the deed of mutual covenant and management agreement, if any, (“Deed of Mutual Covenant”) relating to the Building and/or the Premises. |
Subject to revisions as provided in this Agreement, the Management Fee and Air-Conditioning Charge payable at the commencement of the Term are set out in Part II of the Second Schedule.
| 1.3 | If the day on which the Rent or any part(s) thereof or other payments fall due under this Agreement is not a Business Day, the relevant payment of Rent or any part(s) thereof or otherwise shall become due and payable on the preceding Business Day. |
| 1.4 | In paying any Rent or any part(s) thereof or other payments required under this Agreement, the Tenant shall make or tender the payments by autopay services of the bank if so required by the Landlord or by cashier orders, cheques/ e-cheques or if the facilities are available to the Landlord, by direct debit payments, electronic fund transfer payments or internet payment services through banks, financial institutions and/or electronic payment platforms into the account designated by the Landlord. The Tenant shall provide the Landlord with relevant receipts, pay-in-slips, or other documentary evidences to support the payments upon written request by the Landlord at any time during the Term, failing which, the Landlord is entitled to treat the Tenant as not having made the payment and to exercise any and all its right to recover such payment as it deems appropriate. The Tenant shall not tender any cash to the Landlord for such payments. |
| 1.5 | (a) | If payment is made by the Tenant by cheque, such cheque must be crossed and honoured for payment by the bank upon presentation for payment by Landlord before payment shall be regarded as having been made by the Tenant. Further, if the cheque so received by the Landlord shall be lost, stolen or destroyed by fire or any other cause before the Landlord presents the cheque to the bank for payment, such payment shall be regarded as not having been made by the Tenant to the Landlord and the Tenant’s obligation to pay and make good payment of the Rent concerned shall remain without any deduction, set-off or counterclaim whatsoever. In this case, the Tenant shall not be required to pay any interest payable under clause 3 of section IX hereof between the date of receipt of the cheque by Landlord and fourteen (14) days after request by Landlord to the Tenant for replacement cheque. |
| (b) | The cheque must reach the office of the Landlord before 3:30 p.m. in the afternoon of the due date, failing which the payment shall be deemed to have been paid by the Tenant on the following Business Day. |
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| 1.6 | If, at any time and from time to time during the Term, the operating cost relative to the supply of the air-conditioning and/or the costs and expenses for the provision of management services to the Building and/or the Premises shall have risen over the costs prevailing at the commencement of the Term, the Landlord shall be entitled to serve one (1) month’s written notice upon the Tenant to increase the relevant charges by appropriate amount(s). The Landlord’s or the Building Manager’s assessments of the appropriate increase shall be conclusive and binding on the Tenant and thereafter such increased charges shall prevail. |
| 1.7 | If the Tenant requires air-conditioning outside the normal air-conditioning supply hours set out in the Fourth Schedule, the Tenant shall give to the Landlord not less than twenty four (24) hours’ prior notice in writing. Additional air-conditioning will normally be provided on condition that the additional air-conditioning shall be applied in units of one hour and at least two (2) hours on each occasion at such rate as may be charged by the Landlord and/or the Building Manager from time to time. |
| 1.8 | If the Management Fee and Air-conditioning Charge shall be in arrears for more than fifteen (15) days, the Landlord shall, without prejudice to any other rights or remedies of the Landlord, be thereafter at its discretion entitled to suspend or discontinue the provision of all or some of management and/or air-conditioning services to the Premises including any cleaning service, if any, until such default or breach has been rectified and the Landlord shall not incur any liability to the Tenant for any interruption, inconvenience, disturbance, nuisance, loss or damage suffered by the Tenant as a result thereof. |
| 1.9 | Where the Tenant tenders payment of the Rent or such other charges as reserved hereunder to the Landlord by whatever means (including any payment made by the Tenant to the Landlord in satisfaction of such claims arising from the warrant of distress and other writs of execution levied by the Landlord), it is hereby irrevocably agreed and acknowledged by the Tenant that |
| (a) | notwithstanding that in tendering or making the payment as aforesaid (i) the Tenant has stipulated or has made appropriation (whether verbally or in writing) as to which part or period of the Rent or such charges (whether the same has become overdue or not) the payment is purportedly to be applied towards settlement or (ii) the Tenant has made payment to settle the amount as demanded in the warrant of distress or other writs of execution for the arrears of specific period(s), the same stipulation or appropriation of payment of the Tenant shall not be binding on the Landlord; | |
| (b) | the Landlord is hereby irrevocably authorised by the Tenant to have overriding right to apply the payment tendered by the Tenant to settle or pay off such of the Rent or charges due under this Agreement in whatever manner, period and amount as the Landlord deems appropriate without any compliance with the Tenant’s stipulation or appropriation; | |
| (c) | the Landlord’s overriding right of appropriation provided above shall apply and subsist notwithstanding any rule of law or equity which is contrary or inconsistent with such overriding right; and | |
| (d) | for the avoidance of doubt, the Landlord shall not be required to give any notice to the Tenant before its exercise of the overriding right. The manner, period and amount of the application of Tenant’s payment as stated or shown in the payment advice, official receipt, demand note or notice of the Rent or such other charges furnished to the Tenant by the Landlord shall be conclusive evidence of the Landlord’s exercise of the right and such application shall be final and binding on the Tenant. |
| 2 | Rates and Government Rent |
| 2.1 | To pay and discharge punctually during the Term all rates, Government rent, taxes, assessments, duties, charges, impositions and outgoings of an annual or recurring nature whatsoever now or hereafter to be assessed imposed or charged on the Premises or upon the owner or occupier of the Premises or any part thereof by the Authority (Property Tax alone excepted). Rates and Government rent shall be payable quarterly in advance on the 1st day of the months of January, April, July and October to the Landlord who shall settle the same with the Authority. |
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| 2.2 | In the event of the Premises not yet having been assessed to rates and/or the Government rent, the Tenant shall pay to the Landlord a sum (which shall be computed on the basis of the prevailing percentages of the rateable value of the Premises for rates and/or the Government rent for the corresponding quarter) as shall be required by the Landlord on account of and as payment of rates and/or Government rent subject to adjustment on actual rates and/or the Government rent assessment being received by the Landlord from the Authority. |
| 3 | Water & electricity charges |
To pay and discharge punctually during the Term all charges (including all deposits) in respect of water, electric, light, power, telephones, telecommunications and other utilities as may be shown by the separate meter or meters installed upon the Premises or by accounts rendered to the Tenant.
| 4 | User |
To use the Premises only for the purposes set out in Part IV of the First Schedule hereto and for no other purpose whatsoever.
| 5 | Entry by Landlord |
To permit the Landlord, its employees, agents, contractors and architects at all reasonable times upon prior notice to enter upon the Premises and if necessary, to remain at the Premises:
| (a) | to inspect, take inventories of fixtures and fittings therein and to carry out any works of maintenance, renewal, cleaning, alteration or repair or, for the purpose of compliance with any Laws, such other works as the Landlord may deem necessary for the Premises or any adjacent premises or any part of the Building or any facilities or services of the Premises or the Building; | |
| (b) | to rectify or demolish any works carried out not in accordance with the approved fitting-out plans (where applicable) and the terms of this Agreement by the Landlord at the costs of the Tenant; and/or | |
| (c) | to show the Premises to prospective tenants during the last six (6) months of the Term or to prospective purchasers at any time during the Term without any claim for damages or indemnity against the Landlord; but in the event of emergency the Landlord or its employees agents or authorised persons may without notice enter upon the Premises forcibly, and the Tenant shall not make any claim for damages or indemnity against the Landlord. |
| 6 | Repairs |
Upon receipt of notice from the Landlord to forthwith make good all defects and wants of repair for which the Tenant is responsible hereunder. If the Tenant has not within fourteen (14) days or such shorter period as the circumstances require after the service of such notice proceeded diligently with the work required, then the Tenant shall permit the Landlord, its employees, contractors or agents to enter upon the Premises and make good the said defects and carry out such repair. The costs thereof shall be paid by the Tenant and be a debt due from the Tenant to the Landlord and be forthwith recoverable by action.
| 7 | Close windows |
To keep all windows and doors of the Premises closed and to permit the Landlord or its employees and agents and others from time to time during the Term to enter upon the Premises for the purpose of closing any doors or windows.
| 8 | Notify Landlord of damage |
To notify the Landlord or its agent of any accidents to or defects in the water pipes, electrical wires or fittings, installations, fixtures or other facilities provided by the Landlord within the Premises (whether or not the Tenant is liable hereunder for the repair of the same) forthwith upon the Tenant’s becoming aware of the same arising.
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| 9 | Interior fitting out |
| 9.1 | To fit out the interior of the Premises at the Tenant’s expense in accordance with the requirements and provisions set out in the Third Schedule and Fit-Out Guide of the Landlord and to take out adequate insurance to cover all risks for the fit out work naming the Landlord and the Building Manager as co-insured parties for their respective rights and interests. Copies of the insurance policies (together with premium receipts) shall be produced and lodged with the Landlord by the Tenant without demand, prior to commencement of any fit out work. |
| 9.2 | Fitting out works in the Premises to be carried out by the Tenant shall be carried out in accordance with plans, drawings and specifications which have been first submitted to and approved in writing by the Landlord. Such works shall be carried out within the boundary lines of the Premises by contractor approved by the Landlord and in a good and proper workmanlike fashion with good quality materials and with all necessary Permits required by the Authority. |
| 9.3 | The Tenant shall design, fit out, lay out, decorate or furnish the Premises in a way not to diminish the function, increase the operative costs or in any way affect or tamper with the operation of any services, decorations or facilities of the Building. |
| 9.4 | (a) | Should the Tenant require to install and/or replace any door(s), partition wall(s), fire shutter(s) or construction element(s) (individually and collectively “Fire Rated Elements”) of the Premises that require fire resistance rating under any Laws, the Fire Rated Elements must be of fire-rated type and comply with all Laws and Landlord’s requirements. The Tenant shall within fourteen (14) days after completion of the installation and/or replacement work provide to the Landlord original certificate and test report from the contractor confirming that quality of the Fire Rated Elements meets with the statutory requirements at time of the installation and replacement. |
| (b) | If the Tenant fails to comply with sub-clause 9.4(a) above, the Fit-out Deposit payable under sub-clause 9.7 hereunder shall not be returned to the Tenant until the failure has been rectified and the Landlord shall have right to terminate this Agreement forthwith by written notice to the Tenant but without prejudice to other rights and remedies that the Landlord may have against the Tenant in respect of breach of sub-clause 9.4(a) and to recover from the Tenant all loss and damages it sustains as a result of such early determination of this Agreement. The Tenant shall indemnify the Landlord against any claim, liability, cost, expense, loss or damage arising from or in connection with the installation of Fire Rated Elements or any part of them or any breach of the Tenant of clause 9.4(a). |
| 9.5 | The Tenant shall not cause or permit to be made any alteration, addition to the approved interior design fit-out or layout of the Premises without the prior written consent of the Landlord. In carrying out any works, the Tenant shall obey and cause his employees agents contractors and workmen to obey and comply with all instructions and directions prescribed by the Landlord, the Building Manager or their respective agents. |
| 9.6 | To employ at the Tenant’s expense only such contractors approved by the Landlord for the purpose of designing, carrying out and installing all mechanical and electrical engineering work and arrangements relating to the Premises including but not confined to electrical, plumbing, building automation, fire fighting installations, fuel gas system, ventilation system and hazardous gas/materials detectors (“building services”) in manner as prescribed by the Landlord and to ensure that the building services are in order. |
| 9.7 | Prior to carrying out any fitting out or other works to the Premises, the Tenant shall pay to the Landlord and/or the Building Manager a vetting charge for his checking of the fitting out plans and specifications and inspection the fitting-out works, a refundable deposit (“Fit-out Deposit”) as security for any damage to the Building caused as a result of the Tenant’s works and for payment of any costs and charges required from the Tenant under the Fit-Out Guide, charges for removal of any debris (if any) and such other charges for compliance of all fitting out requirements whether under this Agreement or the Fit-Out Guide. The Fit-out Deposit shall be refunded to the Tenant without interest, subject to deduction, upon completion of the fitting out works and after submission of the approved as-built drawings by the Tenant to the Landlord including all Permits. |
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| 10 | Submission of information |
| 10.1 | Prior to the commencement of any works to the Premises, the Tenant shall submit to the Landlord all plans, specifications, drawings and full details thereof, other information or materials as and when required by the Landlord (“Materials”) for its written approval. |
| 10.2 | The Tenant shall demolish any construction work carried out by the Tenant which in the opinion of the Landlord adversely affects the appearance of the Building. Without prejudice to the Landlord’s right to seek injunction or specific performance or other reliefs from court against the Tenant, if the Tenant fails to do so, the Landlord shall have the absolute right to demolish the same and the Tenant shall pay all costs therefor. |
| 10.3 | The Tenant warrants and agrees that the Landlord may use and may provide to any subsequent user(s) or occupier(s) of the Premises or any other person(s) for use any and all Materials or any of them for any acts, matters or things relating to or in connection with the reinstatement, alteration, addition, decoration, repair or maintenance of the Premises or any part thereof or any fixtures, fittings or installations therein free from any claim for copyright or any other intellectual property rights. The Tenant shall indemnify the Landlord in respect of any claim for infringement of copyright or any other intellectual property rights or any other rights whatsoever for such use by the Landlord or subsequent user(s) or occupier(s) or such other person(s). |
| 11 | Preventive Measures |
To take and maintain in good repair and condition throughout the Term at the Tenant’s own expenses adequate and proper measures to avoid, prevent or minimize the risk of any loss or damage to property or injury to person in connection with. operation of its business in the Premises (“Preventive Measures”). The Tenant shall permit and accompany the Landlord, its agents or the Building Manager at all reasonable times to enter the Premises and view the state and condition of the building services and the Preventive Measures.
| 12 | Reimbursement to Landlord |
The Landlord shall have the right to perform and is hereby irrevocably authorized by the Tenant to perform on behalf of and for the account of the Tenant, subject to reimbursement of all costs therefor by the Tenant, any work for which the Tenant is responsible under this Agreement and which the Landlord determines shall be so performed. Such work shall be limited to work which the Landlord deems necessary to be done on an emergency basis, work caused by the Tenant’s default, and work which pertains to structural components or which affects fire safety of the Building or the general utility systems for the Building and the erection of temporary safety barricades and temporary signs during the period when construction works are carried out by the Tenant.
| 13 | Good repair of interior |
| 13.1 | To keep and maintain throughout the Term at the expense of the Tenant all the interior of the Premises, including the flooring and interior plaster or other finishing material to walls, floors and ceilings, and the Landlord’s fixtures, and additions within the Premises and/or exclusively serving the Premises including the building services, doors, window, air-conditioning units, air ductings, electrical installation, wiring, piping, water and sanitary apparatus and facilities and fittings for light, power and water, all fire alarms, fire-fighting equipment, roller shutters and other equipment for security purpose, in good clean, tenantable and proper repair and condition and properly preserved (fair wear and tear excepted) to the satisfaction of the Landlord and to make good all damage thereto at the expenses of the Tenant. |
| 13.2 | The Tenant shall be responsible for and shall pay to the Landlord the costs incurred in cleaning and clearing the pipes, drains, ducts, sanitary or plumbing apparatus of the Building becoming choked or stopped up and the replacement of damaged or broken glass panels or windows caused by any act, omission, negligence or default of the Tenant or Tenant’s Agents. |
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| 14 | Common parts services and facility |
To pay or reimburse to the Landlord the cost for making good any damage caused to any part of the common areas, services and facilities of the Building occasioned by the Tenant, the Tenant’s Agents or any other person claiming through or under the Tenant.
| 15 | Installation of sub-main cable, etc. |
To provide at its own costs all electrical wiring specifically required by the Tenant from the switch room to the Premises including its own sub-main cable and to carry out at its own costs all the mechanical and electrical alterations works within the Premises. The Tenant shall ensure that such sub-main cable, wiring and alteration works shall be of good quality and are completed in accordance with the requirements of the relevant electricity company and competent authorities and to the satisfaction of the Landlord’s electrical consultant or engineer.
| 16 | Fire fighting and security system |
To ensure at all times that all fire alarms, fire fighting equipment, roller shutters and other equipment for security purposes provided by the Landlord are in good working condition and are not disrupted, interrupted, damaged or caused to be defective. The Tenant may not under any circumstances cover up any hose-reel, break-glass unit or alarm bell.
| 17 | Passage of wires pipes cables etc. |
To permit permanent utility lines passing through the Premises to service other premises and areas in the Building whether they are at present existing or will be constructed or installed by the Landlord or Building Manager during the Term.
| 18 | Directions, orders of Fire Services Department |
To observe and comply with all directions and orders of the Fire Services Department applicable to the Premises from time to time. If such directions and orders shall require the taking of any fire precautions or installation of any fire fighting equipment or fittings at, in, on or upon the Premises (whether additional to or in replacement of that installed by the Landlord), the Tenant shall forthwith at its own expense procure and implement, install and/or replace the same. For the avoidance of doubt, such additional or replacement equipment or fittings so installed by the Tenant shall become part of the Landlord’s fixtures upon installation without any payment or compensation required to be made or paid by the Landlord to the Tenant in respect of the same.
| 19 | Laws, Deed of Mutual Covenant |
| 19.1 | To comply with all Laws for all works performed by or on behalf of the Tenant whether or not within the Premises. The Landlord’s or the Landlord’s agent’s approval of plans, specifications, calculations or otherwise of the Tenant’s works shall not constitute any implication, representation or certification by the Landlord that the works are in compliance with the Laws. |
| 19.2 | To comply with all Laws in relation to the use or occupation of the Premises and the provisions of the Deed of Mutual Covenant and the building rules and regulations of the Building from time to time prescribed by the Building Manager. |
| 20 | Goodwill and Reputation |
To fit out, use, manage and maintain the Premises in such manner so as not to prejudice the goodwill and reputation of the Building and the Landlord.
| 21 | Protection of the Premises and chattels inside |
To take all reasonable precautions to protect the interior of the Premises against damage by rainfall, storm, typhoon fire and similar hazards or the like threats as well as to prevent the Premises from becoming infested with insects or vermin. The Tenant shall be wholly responsible for any loss or damage to property within the Premises including without limitation all fixtures and fittings provided by the Landlord, and all goods, chattels, samples, personal effects, contents and stock therein and shall effect with a reputable insurance company adequate insurance cover for the same in their full replacement value against all insurable risks.
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| 22 | Insurances |
To effect and maintain throughout the Term sufficient insurance cover for third party liability either under an insurance scheme arranged or nominated by the Landlord (“Nominated Insurance Scheme”), particulars of the insurance cover to be effected or extract of information relevant to which are set out in the Fifth Schedule, if any, or with a reputable insurance company at the Tenant’s choice with terms not be less favourable for protection of the Tenant than offered under the Nominated Insurance Scheme. The Tenant shall also effect and maintain throughout the Term sufficient insurance cover for other kinds of insurance that is generally available for the type of the Building and the Tenant’s business carrying on at the Premises. The Landlord and the Building Manager shall be named as co-insured parties under such insurance policies. If the Tenant fails to do so, the Landlord shall be entitled (but shall not be obliged) at the Tenant’s expense to effect such insurance covers (including the third party insurance under the Nominated Insurance Scheme) and to recover all premia therefor from the Tenant by action and/or by deduction from the Deposit paid by the Tenant under this Agreement. The Tenant shall produce to the Landlord, without demand, within one (1) month from commencement of the Term and (as the case may be) within one (1) month of renewal of such policies, the policy of such insurance and the receipt for the last payment of premium and shall apply all moneys received in respect of such insurance towards payment of any compensation and making good the loss or damage in respect of which such moneys were paid.
| 23 | Clean and Sanitary State |
To keep the Premises including all windows and lightings and all spaces and areas within or included in the Premises or designated for the use of the Tenant and the fittings and installations therein at all times in a clean and sanitary state and condition to the satisfaction of the Landlord. If, in the opinion of the Landlord, the Tenant fails to keep the Premises in the aforesaid condition, the Landlord shall have the right (but shall not be obliged) to enter the Premises and arrange cleaning or other work to be carried out to the Premises which the Landlord in its absolute discretion considers necessary to maintain the Premises in such condition at the costs of the Tenant.
SECTION IV
RESTRICTIONS AND PROHIBITIONS
| 1 | Breach of Government Lease |
Not to do or cause to be done or suffer or permit any act, deed, matter or thing whatsoever or carry any trade
| (a) | which (i) constitutes a breach of any of the terms and conditions in the Government Lease or Conditions under which the Premises are held or the Deed of Mutual Covenant or the Building rules and regulations or (ii) is in contravention of any Laws or restrictions or prohibitions imposed by any Authority in connection with the Premises or (iii) that is now or may hereafter be declared an offensive trade by the Authority. | |
| (b) | whereby the insurance on the Building against loss or damage by fire and/or other insurable perils and/or claims by third parties for the time being in force may be rendered void or voidable or whereby the premium thereon may be increased. |
| 2 | Subletting and assigning |
Not to assign, underlet, transfer, license, share or otherwise part with the possession of the Premises or any part thereof either by way of subletting, lending, sharing or other means whereby any organization, company, firm or person not a party to this Agreement obtains the use or possession of the Premises or any part thereof, irrespective of whether any rental or other consideration is given therefor. This Agreement is personal to the Tenant named in this Agreement and, without in any way limiting the generality of the foregoing the following acts and events shall, unless previously approved in writing by the Landlord, be deemed to be breaches of this clause:
| 2.1 | In the case of a tenant which is a partnership, the taking in of one or more new partners whether on the death or retirement of an existing partner or otherwise. |
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| 2.2 | In the case of a tenant who is an individual (including a sole surviving partner of a partnership tenant), the death, insanity or disability of that individual to the intent that no right to use, possess, occupy or enjoy the Premises or any part thereof shall vest in the executors, administrators, personal representatives, next of kin, trustee or committee of any such individual. |
| 2.3 | In the case of a tenant which is a corporation, any take-over, reconstruction, amalgamation, merger, voluntary liquidation or change in the person or persons who owns or own a majority of its voting shares or who otherwise has or have effective control thereof. |
| 2.4 | The giving by the Tenant of a Power of Attorney or similar authority whereby the donee of the Power obtains the right to use, possess, occupy or enjoy the Premises or any part thereof or does in fact use, possess, occupy or enjoy the same. |
| 2.5 | The change of the Tenant’s business name. |
| 3 | Alterations, additions, etc. |
| 3.1 | Not to make or permit any (structural or non-structural) alterations or additions to or in the Premises or any part thereof (either internally or externally) or to any fixtures or fittings (including but not limited to any electrical/mechanical installations or equipment without obtaining the necessary approvals from Buildings Department (if necessary) and the prior written consent of the Landlord. In carrying out such works, the Tenant shall comply with all Laws and shall use the Landlord’s approved contractor for carrying out the approved alteration or additional works and installing mechanical and electrical engineering work at the Tenant’s sole costs and expenses. |
| 3.2 | Not to cut, maim or injure or permit or suffer to be cut, maimed or injured any doors, windows, walls, beams or any structural members or other part of the fabric of the Premises or of the Building or any common facilities therein. |
| 4 | Disfigure structures, fixtures, etc. |
Not to damage or disfigure any structures, fixtures, canopies, decorations, installations outside the Premises including central air-conditioning unit, mail chutes, refuse chutes, halls, passages, drainage wells, walls, partitions, ceilings, and to pay on demand to the Landlord the costs and expenses incurred by the Landlord in repairing or making good such damage or cleaning the same.
| 5 | Signs |
| 5.1 | Not to alter the exterior or external appearance of the Premises, nor to affix, erect, attach, exhibit, display or permit or suffer so to be done upon any part within or on the exterior or at the show windows (if any) of the Premises or to or through any windows thereof any writing, sign, decoration, signboard, notice, advertisement, placard, neon light, TV broadcast, films or other device (whether illuminated or not) (collectively “Signs”) which may be visible from outside the Premises except the following, the costs of which shall be borne by the Tenant solely: |
| (a) | the display of the name-plate or signboard of the Tenant at the entrance to the Premises. The size and position of such name-plate or signboard shall be subject to the approval of the Landlord and/or the Building Manager; and | |
| (b) | the name of the Tenant and the nature of the trade or business carried out on the Premises may be displayed on the Directory Board(s) provided by the Landlord but only in such form and place and character as shall be first approved by the Landlord and/or the Building Manager. |
The above displays must be in an appearance, design, quality and type appropriate to first class commercial premises to the satisfaction of the Landlord. The Tenant shall remove any such displays notwithstanding that prior approval has been obtained from the Landlord and/or the Building Manager if, at any time during the Term, it is in the opinion of the Landlord that any such displays does not appear in a manner (whether of design, quality, type or otherwise) keeping with first class commercial premises, then the Tenant shall, at his sole cost, replace the same with such appropriate displays approved by and to the satisfaction of the Landlord and/or the Building Manager.
| 5.2 | The Landlord shall have the right and at the cost and expense of the Tenant to remove, relocate and/or discontinue the display of any Signs affixed or displayed without the approval of the Landlord and/or the Building Manager. |
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| 6 | Floor loading capacity |
Not to place or allow anyone to place any load upon any floor of the Premises in excess of the loading capacity for which the floor is designed. The Landlord reserves the right to prescribe the weight and position of all safes and any heavy articles which must be placed so as to distribute the weight. Machines and/or mechanical equipment allowed by the Landlord to be placed on the Premises shall be placed and maintained by the Tenant at the Tenant’s expense in settings sufficient in the Landlord’s judgement to absorb and prevent vibration, noise and annoyance to occupiers of the other portions of the Building.
| 7 | Animals |
Not to keep any birds or livestock of any description or any noxious goods or articles on the Premises.
| 8 | Noise, vibration, nuisance, illegal or immoral purposes |
Not to use or allow anyone to use the Premises or any part thereof for any activities or business which are offensive, harmful, dangerous, noisy, odorous, noxious, noisome, illegal or immoral or which may cause excessive vibration or likely to cause fire risk or other hazard or which are, or may become, a nuisance or annoyance or disturbance to the Landlord or to the owner or occupier of any neighbouring property; or which will or may infringe any intellectual property rights of other party.
| 9 | Sleeping or domestic use |
Not, without the Landlord’s prior permission in writing, to permit any person to remain in the Premises overnight nor use the Premises as sleeping quarters or as domestic premises.
| 10 | Obstructions in common areas |
Not to encumber, obstruct or permit to be encumbered or obstructed with any boxes, packaging, merchandise, rubbish or other articles or obstructions of any kind or whatever nature at any part(s) of the Building not included in the Premises. The Tenant shall not obstruct or otherwise use or permit or suffer the loading and/or unloading space(s) of the Building to be used for any purpose other than loading and unloading of goods or articles and in accordance with the regulations of the Building and/or the instructions of the Building Manager. In addition to any other remedies which the Landlord may have, the Landlord, its employees or agents may (without any prior notice to the Tenant) remove any such obstruction and dispose of the same as it or they may think fit without incurring any liability therefor and the Tenant shall on demand pay to the Landlord all costs and expenses incurred in such removal and disposal.
| 11 | Use of Landlord’s name/logo |
Not, without the previous written consent of the Landlord, to use or permit to be used the name and/or logo of the Landlord or of the Building or any picture representation or likeness of such name and/or logo for any purpose whatsoever other than to indicate the address and place of business of the Tenant at the Premises.
| 12 | Cleaning and security service |
Not to employ any person or firm to provide internal cleaning of the Premises or for provision of security service to the Premises except person or firm approved by the Landlord or the Building Manager. Such cleaning and/or security service shall be obtained at the sole expense of the Tenant.
| 13 | Visitors, etc. |
Not to allow any visitors, licensees or invitees of the Tenant or any person(s) to stand or queue up outside the Premises thereby causing an obstruction to any part(s) of the Building not included in the Premises, whether or not such part(s) are common part(s).
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| 14 | Displays |
| 14.1 | Not to and not to permit or suffer anyone to install, affix, put up or display at, on or upon the Premises and/or any part of the Building, any artwork, sculpture, figure, exhibits, display, articles or materials (“Displays”) and any content of which have not been first approved by the Landlord (such approval shall be given or withheld by the Landlord in its sole and absolute discretion and whose decision shall be final and conclusive), or is, or is considered in its absolute discretion by the Landlord (whose decision is final and conclusive) to be: |
| (a) | illegal, immoral or prohibited by the Government; |
| (b) | in breach of any applicable Laws from time to time in force in HKSAR; |
| (c) | obscene, indecent, objectionable, defamatory, discriminatory or offensive to the general public or any person(s); |
| (d) | promoting or advertising the business of any direct competitors of the Landlord or Sino Group; |
| (e) | adversely affecting the image or reputation or prestige of the Landlord or Sino Group or the Building; |
| (f) | not being connected with the usage or business of the Tenant conducted at the Premises as permitted under this Agreement; or |
| (g) | otherwise inappropriate or considered by the Landlord to be inappropriate to be displayed at the Premises and /or the Building. |
| 14.2 | The Tenant shall be wholly responsible for the contents of the Displays and shall indemnify the Landlord against any claim, liability, cost, expense, loss or damage arising from or in connection with the contents of the Displays or any part of them or any breach of the Tenant of this clause 14. |
| 14.3 | If the Landlord is of the opinion that the contents of the Displays or any part thereof is of any kind referred to in clause 14.1 above, the Tenant must remove or demolish the same within 24 hours upon demand by the Landlord at its sole cost. For the avoidance of doubt, the Landlord is entitled (but not obliged) to forcibly enter the Premises, remove or demolish the Displays or such part thereof at any time without incurring any liability to the Tenant. All expenses for the removal and demolition shall be borne and paid by the Tenant and the Landlord shall not be liable to the Tenant or any other party whomsoever for any claim, liability, loss or damage whatsoever arising from or in connection with such removal and demolition. |
| 14.4 | Breach of any sub-clause of this clause above shall be a fundamental breach of this Agreement entitling the Landlord to determine this Agreement and re-enter the Premises without prejudice to any other rights and remedies available to the Landlord. |
| 15 | No smoking |
Not to smoke and not to allow any of the Tenant’s Agents to smoke inside the Premises or in any parts of the Building, including but not limited to common corridors, washrooms, lobbies, staircases, etc., except any location, if any, designated for such purpose by the Landlord or the Building Manager or their authorised agents.
| 16 | Fire risk |
Not to burn or do or permit any act or thing to be burnt or to be done which is likely to cause any fire risk or other hazard in the Premises or any part of the Building, including but not limited to igniting candles, using burner, burning of incense or essence oil or any substance causing high heat that may create fire or potential fire hazard.
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SECTION V
INDEMNITIES
| 1 | Indemnify Landlord |
The Tenant shall indemnify the Landlord against all liabilities, claims, demands, actions, proceedings, damages, losses, costs and expenses (arising directly or indirectly) from or incidental to
| (a) | the fitting out, use or occupation of the Premises, the execution, existence or removal of alterations, additions or repairs to the Premises, the want of repair of the interior of the Premises, the defective or damaged condition of any part of interior of the Premises or of any of the fixtures and fittings therein, any non-compliance by the Tenant with its obligations under this Agreement, or any other act, default, neglect or omission by the Tenant or any of the Tenant’s Agents; or |
| (b) | in any way owing to the spread of fire, smoke, fumes or any other emission or escape or overflow of water (in whatever nature) from the Premises or any part thereof. |
SECTION VI
LANDLORD’S OBLIGATIONS
The Landlord hereby agrees with the Tenant as follows:
| 1 | Quiet enjoyment |
To permit the Tenant (duly paying the Rent and observing and performing the terms and conditions contained in this Agreement) to have quiet possession and enjoyment of the Premises during the Term without any interruption by the Landlord.
| 2 | Lifts, air-conditioning services, etc. |
To take reasonable steps or arrange for the Building Manager to take reasonable steps to keep the lifts, escalators, air-conditioning system and services of the Building in a proper state of repair and condition. The Landlord shall not incur any liability under this clause 2 unless and until written notice of any defect or want of repair has been given to the Landlord by the Tenant and the Landlord has failed to execute repairs within a reasonable period of time thereafter.
| 3 | Property tax |
To pay the Property Tax in respect of the Premises.
SECTION VII
EXCLUSIONS OF LIABILITY
| 1 | To the maximum extent as permissible under Laws, the Landlord shall not be liable to the Tenant and any of the Tenant’s Agents in respect of any claim, loss (including but not limited to loss of profits), damage or injury to person or property sustained by the Tenant or any such other person caused by or through or in any way owing to: |
| 1.1 | Lifts escalators and other services |
The adequacy or inadequacy or any defect in or breakdown, failure, malfunction or suspension or otherwise of the lifts, escalators, fire services, security or water sprinkler equipment, central air-conditioning system, or other facilities of the Building or the management or security services, electricity, gas or water or other building services provided to the Building or the Premises or the development on which the Building is erected (“Development”); or
| 1.2 | Fire overflow of water and vermin |
Typhoon or other adverse weather condition or fire or the overflow or leakage or influx of water including rain, storm or sea water or water of any other nature or other substances from or into anywhere within the Building or the Premises or leakage of electric current from electric wiring or cable situated upon or in any way connected with the Premises or the escape of fumes, smoke, fire or to activity of termites, cockroaches, pests, rats, mice or other pests or vermin in the Building; or
| 1.3 | Services |
The adequacy or inadequacy or otherwise of or any defect in any of the management services (including security) rendered by the Landlord and/or the Building Manager or the failure to render the same or the suspension or interruption thereof for whatever reason; or
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| 1.4 | Closure of the Building |
The closure of the Building or any part thereof by reason of any war, hostilities (whether war be declared or not), invasion, act of foreign enemies, revolution, insurrection, or military or usurped power, order or direction of any Authority, riot, commotion, social unrest, strikes, industrial action, lock outs or disorder, or threats of terrorism, pandemic or any other contingencies which, in the opinion of the Landlord, may cause or threaten to cause damage or injury to the Premises or the Building or any part thereof or injury or death of person; or
| 1.5 | Other letting |
The letting or leasing of any part of the Building and the Development (except the Premises) to any other party for any purpose whatsoever or any acts, omissions, neglect or default of any other tenants, licensees or occupiers of or any accident in the Building and the Development;
nor shall the Rent or service charge or any part thereof cease to be payable other than in the circumstances set out in Section VIII.
SECTION VIII
ABATEMENT OF RENT
| 1 | Abatement |
| 1.1 | If the Premises or the Building or any part thereof shall at any time during the Term be destroyed or damaged or become unfit for occupation (not due to any default of the Tenant but owing to fire, flooding, storm, typhoon, earthquake, subsidence of the ground or any calamity beyond the control of the Landlord or owing to operation of demolition order or closing order or the Premises being condemned as a dangerous structure), and the policy or policies of insurance effected by the Landlord shall not have been vitiated or payment of policy moneys refused in whole or in part in consequence of any act, omission or default of the Tenant, the rent hereby reserved or a proportionate part thereof (such proportion to be determined by the Landlord whose determination shall be final and binding) according to the extent and duration of the damage sustained shall be suspended until the Premises shall again be rendered fit for occupation and use. The Landlord shall in this connection be under no obligation to repair or reinstate the Premises. |
| 1.2 | If the whole or substantially the whole of the Premises are not repaired or reinstated within three (3) months from the occurrence of such event or order, either the Landlord or the Tenant shall have the right thereafter to determine this Agreement by giving one (1) month’s written notice to the other whereupon everything herein contained shall be determined as from the date of the expiry of such notice but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of the terms and conditions contained in this Agreement. |
SECTION IX
DEFAULT
| 1 | Default |
| (a) | If the Rent or other charges or outgoings or interest thereon (if any) hereby reserved or any part thereof shall be in arrears at any time after the due date (whether formally demanded or not); |
| (b) | if there shall be any other breach or non-performance of any of the terms or conditions contained in this Agreement and on the part of the Tenant to be observed or performed; | |
| (c) | if the Tenant shall become bankrupt or being a corporation go into liquidation whether compulsory or voluntary (save for the purposes of amalgamation or reconstruction) or if any petition shall be filed for the bankruptcy or winding up of the Tenant; |
| (d) | if, in the opinion of the Landlord, the Tenant shall otherwise become insolvent (whether or not a receiver or a receiver and manager is being appointed against all or any of the asset or business of the Tenant) or shall suffer any distress or execution to be levied upon the Premises or otherwise on the Tenant’s goods or effects; or |
| (e) | if the Tenant persistently fails to pay the Rent or any part(s) thereof or any payments stipulated by this Agreement and when due. |
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Then and in any such case it shall be lawful for the Landlord at any time thereafter to re-enter into and upon the Premises or any part thereof in the name of the whole. This Agreement shall then be absolutely determined and the Deposit shall be absolutely forfeited to the Landlord as and for liquidated damages and not as penalty. The aforesaid right of the Landlord shall be without prejudice to any right of action by the Landlord in respect of any outstanding breach or non-performance by the Tenant of any of the terms or conditions of this Agreement and the Landlord shall be entitled to recover from the Tenant all loss and damage it sustains as a direct or indirect result of such early determination. A written notice served by the Landlord on the Tenant or left at the Premises, to the effect that the Landlord exercises the power of re-entry, shall be a full and sufficient exercise of such power without actual entry by the Landlord.
| 2 | Acceptance of Rent |
The acceptance of any Rent or any part(s) thereof by the Landlord under this Agreement shall not be deemed to operate or be regarded by the Tenant as a waiver by the Landlord of any right to proceed against the Tenant in respect of any breach or non-performance by the Tenant of any of the terms and conditions herein contained and on the part of the Tenant to be observed and performed.
| 3 | Interest |
Without prejudice to the right of the Landlord to exercise any other right or remedy (including the right of re-entry) under this Agreement or at law, in the event of default in payment of Rent and/or any charges payable hereunder or any part thereof on its due date, the Tenant shall further pay to the Landlord on demand interest on the amount in arrears at the rate of one and a half (1.5) percent per month (that is, eighteen (18) percent per annum) calculated from the date on which the same became due for payment until the date of payment (both days inclusive) as liquidated damages and not as penalty.
| 4 | Distraint |
For the purposes of Part III of the Landlord and Tenant (Consolidation) Ordinance (Cap.7) and of this Agreement, the Rent payable in respect of the Premises and other amounts recoverable by distress as rent in arrears shall be and be deemed to be in arrears if not paid in advance at the times and in the manner herein provided for payment thereof. All costs and expenses of and incidental to distraint shall be paid by the Tenant on a full indemnity basis and shall be recoverable from Tenant as a debt.
| 5 | Recovery of Landlord’s expenses |
The Tenant shall pay to the Landlord on an indemnity basis all costs, fees, disbursements and expenses (including, without prejudice to the generality of the foregoing, those payable to counsel, solicitors, surveyors, architects and bailiffs) incurred by the Landlord in relation or incidental to the Tenant’s breach or non-performance of any of the terms of this Agreement and/or the Landlord’s exercise of its rights and powers under this Agreement, including but not limited to recovery of Rent and the Landlord’s exercise of its right of re-entry.
SECTION X
GENERAL
| 1 | Yield Up Premises And Handover |
| 1.1 | (a) | Subject to Sub-clause 1.1(b) and (c) and Clause 1.2 of Section X below, the Tenant shall yield up the Premises with all keys giving access to all parts of the Premises with all fixtures, fittings, additions and alterations therein and thereto at the expiration or sooner determination of this Agreement in good clean and tenantable repair and condition and in accordance with the stipulations contained in this Agreement. For the avoidance of doubt, the Tenant shall deliver possession of the Premises to the Landlord even if the expiration or termination falls on a Sunday or public holiday. | |
| (b) | The Landlord may at its discretion require the Tenant and the Tenant shall, upon such request and at its own cost, replace, refurbish, remove, do away and/or alter any fixtures, fittings, alterations or additions of and in the Premises or any part(s) thereof (whether made, installed and/or erected by the Landlord, the Tenant and/or any previous tenant(s) and occupier(s) of the Premises with or without approval of the Landlord) in compliance with the then updated applicable requirements of relevant Laws and/or in conformity with and alignment of the Landlord’s standard, colour, arrangements and conditions of other parts of the Building as at the time of delivering up possession of the Premises to the Landlord or as the Landlord in its absolute discretion considers necessary upon expiration or sooner determination of this Agreement as the Landlord may direct. The Tenant shall make good and repair in a proper and workmanlike manner any damage to the Premises as a result thereof before delivering up the Premises to the Landlord in accordance with the conditions and requirements as set out in the Landlord’s Reinstatement Guide/Guidelines (which may be amended from time to time) to the satisfaction of the Landlord. The Landlord has the right to waive or vary any of the conditions or requirements in the said Reinstatement Guide/Guidelines in writing. |
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| (c) | Should the Tenant fail to comply with Sub-clauses (b) above, the Landlord shall be entitled to remove the said alterations, fixtures or additions and reinstate the Premises at the sole expense of the Tenant and to recover from the Tenant such cost together with any mesne profits equivalent to the then applicable Rent for such period during which the reinstatement work shall have been carried out by the Landlord by action and/or by deduction from the deposits paid by the Tenant under this Agreement. In this connection, a certificate of the Landlord as to the amount of cost and expense incurred for the reinstatement shall be final, conclusive and binding on the Tenant. |
| 1.2 | Immediately prior to delivery or redelivery to the Landlord of the fan coil units or similar indoor parts of the air-conditioning units within the Premises and all air-conditioning units serving the Premises exclusively (whether they are of split-type or window type, whether they are situated inside or outside the Premises and whether they belong to the Tenant or the Landlord or any other party), the Tenant shall employ at its own expenses a cleaning contractor approved by the Landlord to carry out a final cleaning (with the application of chemical) to such units and shall produce to the Landlord upon its request the receipt of the contractor’s charges for such cleaning. Should the Tenant fail to carry out the cleaning work, the Landlord shall be entitled to carry out the same at the expense of the Tenant and to recover such cost from the Tenant by action and/or by deduction from any deposit paid by Tenant under this Agreement. |
| 1.3 | In addition to any other deposits required under this Agreement, the Tenant shall, if so required by the Landlord at its sole discretion, pay to the Landlord and/or the Building Manager upon request a reinstatement deposit to secure performance and observance of the above sub-clauses 1.1 and 1.2 of this Clause by the Tenant such amount as the Landlord may absolutely determine. The reinstatement deposit shall be returned to the Tenant without any interest within forty five (45) days after compliance of the above sub-clauses 1.1 and 1.2 by the Tenant. |
| 1.4 | Without prejudice to the Landlord’s rights and remedies under this Agreement or at law, the Tenant hereby irrevocably appoints the Landlord as its agent with authority to enter upon the Premises and to deal with or dispose of at the Tenant’s risk and expense any of the Tenant’s effects left on or about the Premises after the expiry or sooner determination of the Term (howsoever arising or occasioned) without incurring any liability to the Tenant or any other parties. |
| 2 | No excuse for non-payment of Rent |
The obligation of the Tenant to pay the Rent and other sums due and to perform the Tenant’s obligations under this Agreement shall in no way be affected, impaired or excused due to the Landlord’s inability or failure or delay in fulfilling its obligations under this Agreement and the Tenant’s remedy is to claim damages against the Landlord only.
| 3 | Approval, waiver etc. |
| 3.1 | No condoning, excusing or overlooking by the Landlord of any default, breach or non-observance by the Tenant at any time or times of any of the terms and/or conditions contained in this Agreement shall operate or be regarded by the Tenant as a waiver of the Landlord’s rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance. All waiver by the Landlord must be expressed in writing and signed by the Landlord. |
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| 3.2 | The Landlord and its authorised agents shall have absolute discretion in granting or refusing any approval and/or consent sought by the Tenant under this Agreement and in granting the same, the Landlord may impose any conditions as the Landlord or its agent thinks fit. No approval by the Landlord is valid unless it is in writing and signed by the Landlord. |
| 3.3 | Any approval/consent given by the Landlord shall operate as an approval/consent only for the particular matter to which it relates and shall in no way be considered as a waiver or release of any of the provisions of this Agreement nor shall it be construed as dispensing with the necessity of obtaining the specific written approval/consent of the Landlord in the future, unless expressly so provided. |
| 4 | Re-letting notice |
During the six (6) months immediately preceding the determination of the Term, the Landlord shall be at liberty to affix and retain without interference upon any external part of the Premises a notice for re-letting.
| 5 | Service of notices |
| 5.1 | Any notice required to be served hereunder shall be sufficiently served on the Tenant if delivered to it by post or facsimile or email or left addressed to it at the Premises or at its last known address in HKSAR and shall be sufficiently served on the Landlord if sent to it by post or delivered to it at the address given herein or any other address which the Landlord may notify to the Tenant from time to time. A notice sent by post shall be deemed to have been given one (1) Business Day after the date of posting. |
| 5.2 | The Tenant agrees and confirms that the email address set out in Part III of the Second Schedule is provided for the purpose of receiving notices served under this Agreement by email. The Tenant understands and acknowledges that (i) the Landlord may, but is not obliged to and without limiting the kind of notices sent by the Landlord to the Tenant through email, send notices or advice for payment of the Rent, other charges and/or payments with interest thereon (if any) payable under this Agreement or for other related purposes to the Tenant through the email address provided in this Agreement or to the Landlord in writing from time to time; and (ii) irrespective of whether any such notice or advice for payment has been sent to the Tenant by the Landlord or not, payments shall be in arrears if not made on the date and in manner as provided in this Agreement and the Landlord is not in any way liable to the Tenant or any other persons for any delay or failure in giving the aforesaid notice or advice. |
| 6 | Tenancy preparation and administration costs |
The Tenant shall on or before signing this Agreement hereof pay to the Landlord the Tenancy Preparation and Administration Costs set out in Part IV of the Second Schedule being the costs incidental to the preparation and completion of this Agreement and its counterpart. Should the Tenant engage its own solicitors, it shall in addition bear its own legal costs and disbursements of the approval and completion of this Agreement and its counterpart absolutely.
| 7 | Stamp duty |
The stamp duty upon this Agreement and its counterpart, the Land Registry registration fees (if any) and all other disbursements in connection with this Agreement and its counterpart shall be borne by the Landlord and the Tenant in equal shares.
| 8 | No premium or fine |
The Tenant hereby expressly admits and declares that no premium or fine or other consideration or key money has been paid to the Landlord by the-Tenant for the creation of this tenancy.
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| 9 | Exclusion of Warranty as to use |
Nothing in this Agreement nor in any consent granted by the Landlord under this Agreement shall imply or warrant that the Premises may be used for the purpose permitted in this Agreement or Landlord’s consent. The Tenant shall be solely responsible and at its sole expense to appoint such Authorized Person(s) as defined in the Buildings Ordinance and/or consultant(s) with prior written approval of the Landlord for obtaining the necessary Permits and/or waivers from the Authority for the intending operation and user of the Premises prior to such operation and use and thereafter to maintain the same in force during the Term. The Landlord shall not be liable for any loss or damage or inconvenience suffered or incurred by the Tenant by reason of or in consequence of the refusal of the Authority to grant the Permits and/or waivers with or without conditions. In the event that any Authority serves any notice prohibiting the use of the Premises in the manner permitted hereunder or under any consent of the Landlord or use(s) and/or operation(s) conducted by the Tenant at the Premises, the Tenant shall forthwith comply with the notice, failing which, the Landlord shall be entitled to terminate this Agreement but without prejudice to the Landlord’s claim against the Tenant in respect of any antecedent breach of this Agreement and without prejudice to right of the Landlord to recover from the Tenant all loss and damages it sustains as a result of such early determination of this Agreement.
| 10 | Entire Agreement |
This Agreement together with all guarantee(s), if any, provided for securing performance of Tenant’s obligations hereunder supersedes any and all previous agreements between the parties hereto, and constitutes the entire agreement. Any representations, warranties, statements or agreements, whether orally or in writing, made before the date of this Agreement relating to any of the matters referred to in this Agreement are hereby expressly negated and excluded unless hereafter otherwise agreed or confirmed by the parties in writing.
| 11 | Sales and Redevelopment |
| 11.1 | Notwithstanding any provision to the contrary contained in this Agreement, if, at any time during the Term, the Landlord shall decide to redevelop, renovate, refurbish or redesign the Building or any part thereof (which decision shall be sufficiently evidenced by a certified true copy of the relevant Board Resolution of the Landlord) or shall sell, assign or enter into any agreement for the sale or assignment of the whole or any part of the Building which includes the Premises, the Landlord shall be entitled to give not less than six (6) calendar months’ notice in writing to the Tenant to determine this Agreement and at the expiry of such notice, everything herein contained shall cease and be void and the Tenant shall immediately deliver up vacant possession of the Premises to the Landlord. |
| 11.2 | The Tenant shall not be entitled to claim against the Landlord for any damages, relief or compensation whatsoever but any such termination shall be without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of any terms or stipulations contained in this Agreement. |
| 11.3 | The expression “Landlord” in this clause shall include the Landlord’s successors in title and this clause shall enure for the benefit of the Landlord’s successors in title. |
| 11.4 | It is also agreed and declared that notwithstanding any other provision(s) in this Agreement and notwithstanding any law to the contrary, the Tenant’s option right(s) (if any) shall be extinguished and determined upon the service of the said notice of termination, irrespective of whether such rights shall have been exercised by the Tenant or not. |
| 11.5 | The Tenant shall not be entitled to any claim against the Landlord for any damages or compensation or any relief against the extinguishment and determination of its option right(s). |
| 12 | Confidentiality |
Each party shall not and shall take every reasonable precaution to ensure that its agents, officers or employees and in addition, in case of the Tenant, its contractors, solicitors and other professional advisers do not disclose any term of this Agreement; or disclose or use any information acquired in connection with this Agreement or acquired in connection with the negotiations leading up to it save
| (a) | to banks and/or financial institutions for the purposes of the Landlord’s raising and/or arranging finance and/or refinancing whether in connection with the Premises, the Building or the Development; |
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| (b) | to any purchaser(s) or potential purchaser(s) or any other party in connection with any sale, assignment, transfer or other disposal of the Premises, the Building and/or the Development or any part thereof or any interest therein and/or of the shares and/or business of the Landlord, or the discussion or negotiation thereof; and |
| (c) | to any other party not named herein as approved and deemed fit and necessary by the Landlord. |
| 13 | Withholding of Service or Facility |
If the Tenant has failed to observe or perform any terms or conditions of this Agreement, the Landlord and/or the Building Manager has the right to withhold any service or facility provided by the Landlord and/or the Building Manager under this Agreement without incurring any liability to the Tenant for any interruption, inconvenience, nuisance, disturbance, loss or damage suffered by the Tenant as a result thereof. The aforesaid right shall be exercisable by the Landlord and Building Manager notwithstanding anything to the contrary contained in this Agreement and without prejudice to any other rights and remedies of the Landlord and/or the Building Manager.
| 14 | Reservation of rights |
The Landlord reserves the right, exercisable at any time or times:
| 14.1 | to install or erect at the entrances, passages, passageways, doorways, corridors, landings, staircases, lobbies or other parts of the Building (“Passage Areas”) any counters, vending or capsule machines, kiddie rides, sale booths, promotional counters, showcases or light boxes and to change the access, arrangement and/or location of any of the Passage Area(s) or of the lifts, escalators, toilets or other parts of the Building or any service or apparatus serving the Building; |
| 14.2 | to change the name or description of the Building or any part thereof; |
| 14.3 | to change the user of the Building or any part thereof, for any other purposes and to alter the layout of the shopping arcade (if any) or office area (if any) or any part or any area of the Building including but not limited to the external walls, advertising space(s), toilets, and Passage Areas and to carry out works and inspection in connection therewith; |
| 14.4 | to make or cause to be made any structural or non-structural alteration or improvement in or addition to the Passage Areas or any part of the Building in common use, without incurring any liability to the Tenant on any account whatsoever; |
| 14.5 | to make, introduce, amend, adopt or abolish rules and/or regulations as it may consider necessary for the management and maintenance of the Building; or |
| 14.6 | to affix, install, remove, maintain, renew or paint on or to such parts of the exterior of the Building and/or the Premises (including but not limited to. the walls and windows) flags, poles, banners, posters, decorations, chimneys, sunshades, sculptures, signs, stickers, signboards, advertisements, broadcasting device or structures, marketing or promotional materials (whether or not they are illuminated, with sound system or otherwise), |
and the Tenant shall not make any objection thereto and shall have no right of action or claim for compensation whatsoever or for any disturbance or interference of its use or enjoyment of the Premises by reason thereof.
| 15 | Meaning of “Tenant” |
The expression “Tenant” shall (where the context permits) mean and include the party or parties specifically named herein and shall not include the executors and administrators of any such party or where such party is a corporation any liquidator or receiver thereof.
| 16 | Responsible for acts of servant, etc. |
Any act, default, neglect or omissions of any of the Tenant’s Agents shall be deemed to be the act, default, neglect or omission of the Tenant.
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LD-AG-020
| 17 | Special condition(s) |
The parties hereto hereby agree that the terms or conditions or matters set out in the Sixth Schedule hereto shall be incorporated as an integral part of this Agreement. In case of inconsistency, the terms and conditions set out in the Sixth Schedule shall prevail.
| 18 | Independent and Severable |
Each and every part of the clause, sub-clause, term, condition or provision in this Agreement (save and except otherwise specified) shall be construed as an independent and severable part of this Agreement. In the event that any part of the clause, sub-clause, term, condition or provision is found to be illegal invalid or unenforceable, such part thereof shall be deemed to have been severed from this Agreement and shall not affect the validity and enforceability of the other part of the clause, sub-clause, term, condition or provision and any other parts of this Agreement whatsoever.
| 19 | Governing law |
This Agreement and the rights and obligations of the parties hereto shall be governed by and construed and interpreted in all respects in accordance with the laws of HKSAR and the Tenant hereby irrevocably submit(s) himself themselves to the jurisdiction of the courts of HKSAR.
20
LD-AG-020
THE FIRST SCHEDULE ABOVE REFERRED TO
PART I
| LANDLORD | : | HANDSOME LIFT INVESTMENT (CI) LIMITED whose registered office is situate at 12th Floor, Tsim Sha Tsui Centre, Salisbury Road, Tsim Sha Tsui, Kowloon, Hong Kong (“Landlord” which expression shall include its successors and assigns). |
| TENANT | : | CCSC TECHNOLOGY GROUP LIMITED 
(Company Registration No. 397069) whose registered office is situate at Room 1301, 13/F., Shatin Galleria, 18-24 Shan Mei Street, Fotan,
New Territories, Hong Kong Special Administrative Region (“Tenant”). |
PART II
| Premises | : | OFFICE NOS. 1, 2 and 3 on the 13TH FLOOR of SHATIN GALLERIA (“Building”) at 18-24 Shan Mei Street, Fotan, New Territories, Hong Kong Special Administrative Region standing on ALL That piece or parcel of ground registered in the Land Registry as SHA TIN TOWN LOT NO.191 (the said Offices for the purpose of identification only are shown and coloured Pink on the Floor Plan annexed hereto). |
PART III
| Term | : | For a term commencing on the 1st day of December 2023 and expiring on the 30th day of November 2025 (both days inclusive). For the avoidance of doubt, the Term shall commence and rent, Management Fee and Air-Conditioning Charge, rates and Government rent (if any) become payable from the date as aforementioned even if it falls on a Sunday or public holiday or the Tenant does not take delivery of possession of the Premises on such date. |
PART IV
| User | : | Restricted to use by the Tenant as office premises only and for no other purpose whatsoever. |
PART V
| Deposit | : | The sum of Hong Kong Dollars ONE HUNDRED NINETY SIX THOUSAND SIX HUNDRED AND EIGHTY NINE ONLY (HK$196,689.00) (equivalent to three months’ rent, three months’ Management Fee and Air-Conditioning Charge and three months’ rates and Government rent). |
21
LD-AG-020
The deposits in the total sum of HK$196,137.00 held by the Landlord on account of the Tenant’s obligations under the following two Tenancy Agreements (“previous Tenancy Agreements”) both made between the Landlord and the Tenant which expired/shall be expired on the day immediately before the commencement of the Term hereunder, less any proper deductions therefrom, may be retained by the Landlord and applied towards the Deposit due under this Agreement on the commencement date of the Term hereunder:-
| (i) | a Tenancy Agreement dated 21st December 2021 in respect of Office No. 1 on the 13th Floor of the Building, the deposit of which is HK$108,375.00; and |
| (ii) | a Tenancy Agreement dated 22nd November 2021 in respect of Office Nos. 2 and 3 on the 13th Floor of the Building, the deposit of which is HK$87,762.00. |
The balance of the Deposit in the sum of HK$552.00 shall be payable by the Tenant to the Landlord on or before the signing of this Agreement.
If for whatever reasons, the deposit paid under the previous Tenancy Agreement or any part thereof is not applied as aforesaid, the Tenant shall pay the amount of the Deposit of this Agreement or the shortfall thereof to the Landlord immediately upon demand by the Landlord.
| Bank guarantee | : | Nil |
22
LD-AG-020
THE SECOND SCHEDULE ABOVE REFERRED TO
PART I
PARTICULARS OF RENT
| (1) | The rent during the Term shall be Hong Kong Dollars FORTY SEVEN THOUSAND TWO HUNDRED AND SIXTY EIGHT Only (HK$47,268.00) each calendar month payable in advance on the first day of each calendar month. |
| (2) | The rent is exclusive of rates, Government rent, Management Fee and Air-Conditioning Charge and other outgoings. |
PART II
PARTICULARS OF CHARGES
| Management Fee and Air-Conditioning Charge | : | HK$15,075.00 per calendar month (subject to revision pursuant to Clause 1.6 of Section III). |
| Rates | : | HK$6,037.50 per quarter (subject to revision by the Authority) |
| Government rent | : | HK$3,622.50 per quarter (subject to revision by the Authority) |
PART III
| Tenant’s email address | : | fiona@ccsc-interconnect.com |
| regina@ccsc-interconnect.com |
PART IV
| Tenancy Preparation and Administration Costs | : | HK$2,875.00 |
23
LD-AG-020
THE THIRD SCHEDULE ABOVE REFERRED TO
FITTING OUT REQUIREMENTS
The Tenant shall:
| (a) | provide electrical light fittings and a ceiling of non-combustible material approved by the Landlord save that no combustible material will be permitted above the ceiling. If the Tenant requires any extension or relocation of the sprinkler heads and/or the smoke detectors and other fire services equipment installed by the Landlord, the cost of such work will be paid by the Tenant; |
| (b) | provide vertical window blinds, tracks and fittings at the Tenant’s expenses; |
| (c) | paint and decorate the interior of the Premises to the satisfaction of the Landlord; |
| (d) | furnish and install floor fill and floor finishes. PVC tiles shall not be used unless approved by the Landlord; |
| (e) | with the relevant plan showing all the details including but not limited to the gauge of wire, etc. duly approved in writing in advance by the Landlord, apply for the electricity and water meters from the relevant Authority, complete all electrical and mechanical installations (heating, lighting system, ventilation, air-conditioning, sub-main cable, wiring, plumbing, drainage and fire services) for the purpose of providing electrical mechanical and drainage services to and within the Premises. The Tenant shall make good all affected areas including but not limited to reinstatement of the ceiling or any part of the common area damaged or removed, which said reinstatement works shall be carried out by the Landlord’s approved contractor at the Tenant’s expense; |
| (f) | furnish and install or arrange for the installation of telephones and internet as well as other Tenant’s requirements within the Premises together with such meters as are necessary to measure the Tenant’s consumption thereof. The Tenant shall employ only the contractors approved by the Landlord for such purposes; |
| (g) | furnish, install, support and connect all lighting fixtures, including lamps, switches and wiring, save that in the case of support involving cutting into structure, prior written approval of the Landlord will be required and in all instances only the contractor approved by the Landlord shall be used; and |
| (h) | install such fire extinguishers or other means of fire-fighting equipment inside the Premises as may be required from time to time in accordance with all relevant Laws. |
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LD-AG-020
THE FOURTH SCHEDULE ABOVE REFERRED TO
NORMAL AIR-CONDITIONING SUPPLY HOURS
| Monday to Friday (both days inclusive) | 08:30 - 18:30 |
| Saturday | 08:30 - 13:00 |
For the avoidance of doubt, no normal air-conditioning will be supplied to the Premises on Sundays and public holidays.
The above normal air-conditioning supply hours are subject to revision from time to time by the Landlord or the Building Manager at its sole discretion by giving to the Tenant not less than one (1) month’s prior written notice.
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LD-AG-020
THE FIFTH SCHEDULE ABOVE REFERRED TO
PARTICULARS OR EXTRACT OF INFORMATION OF THE
NOMINATED INSURANCE SCHEME
| Names of lnsured for Endorsement of Interests | : | Tenant, Landlord, Sino Real Estate Agency Limited, Sino Estates Management Limited and Building Manager of the Building, as per their respective rights and interests may appear |
| Minimum Limit of Liability | : | HK$20,000,000.00 per accident and unlimited for the period of insurance |
The policy shall include but not be limited to the following clauses:
| i. | Cross liability clause |
| ii. | Fire and explosion clause |
| iii. | Indemnity to Landlord clause |
| iv. | Waiver of subrogation |
The Tenant is obliged to obtain the consent of the Landlord for any cancellation, modification of or restriction to the terms and conditions of the Nominated Insurance Scheme.
26
LD-AG-020
THE SIXTH SCHEDULE ABOVE REFERRED TO
SPECIAL CONDITION(S)
| 1. | The Tenant shall pay to the Landlord such handling charge as the Landlord shall determine in its absolute discretion for considering the Tenant’s fitting out plans and specifications and inspecting the fitting out works carried out or to be carried out in the Premises. |
| 2. | The Tenant shall pay and discharge any temporary electricity charges incurred during the fitting out period as demanded by the Building Manager. |
| 3. | The Tenant shall pay a sum, as demanded by the Landlord or the Building Manager of the Building as a fitting out and decoration deposit before commencing to fit out the Premises. Such sum shall be refunded to the Tenant without interest, subject to any necessary deductions, upon completion of the decoration works. |
| 4. | From time to time as necessary and upon completion of the fitting out works in the Premises, the Tenant shall at its own expense remove all debris and rubbish in an orderly and proper manner to the location designated by the Landlord or the Building Manager or their authorised agents. |
| 5. | It is hereby expressly agreed and acknowledged by the parties hereto that if the rent and other charges payable under the previous Tenancy Agreements shall at any time be in arrears or the Tenant shall have breached any of the terms and conditions contained in the previous Tenancy Agreements which on the part of the Tenant is to be observed and performed up to and inclusive of the date of expiration of the term of the previous Tenancy Agreements, the Landlord shall be entitled at its absolute discretion upon written notice by the Landlord to the Tenant to determine this Agreement in which event this Agreement shall become null and void and of no legal effect whatsoever but without prejudice to the exercise of any other right or remedy which the Landlord may have as against the Tenant. For the avoidance of doubt, the entering into this Agreement shall not be deemed to operate or be regarded as a waiver of any of the Landlord’s rights under the previous Tenancy Agreements to proceed against the Tenant in respect of any breach or non-observance or non-performance by the Tenant under the previous Tenancy Agreements. |
| 6. | The Tenant has been advised and given sufficient time to seek independent legal advice to advise him the content of this Agreement and its legal effect on him before signing it. The Tenant acknowledges and fully understands that notwithstanding that the staff of the Landlord or its agent may have explained the content of this Agreement to him and/or attested his signature of this Agreement, they are acting for the Landlord only. |
| 7. | The Tenant shall maintain all heat pump units of the Premises and all and any parts or installations in relation thereto at its own expense in proper repair and functional condition during the Term of this Agreement. |
| 8. | Green Clauses |
| 8.1 | Objective |
The Tenant acknowledges the Landlord’s commitment to creating a sustainable business environment for the Building and in support, the Tenant shall, at its own cost, use its reasonable endeavours to achieve energy efficiency, water efficiency and purifying efficiency, to use green construction materials and to reduce waste and waste collection in the fitting out of and the use of the Premises, particulars of which are set out in clauses 8.2, 8.3, 8.4 and 8.5 below and in accordance with the Green Fit-Out Guide for Food & Beverage Tenants or any other guidelines as may from time to time specified by the Landlord (collectively the “Guidelines”).
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LD-AG-020
| 8.2 | Energy and Water Management |
The Tenant pledges to:-
| (a) | reduce and avoid wastage on energy and water consumption, use energy-efficient equipment, energy-efficient air-conditioning vent hoods along with programmable thermostats, energy-efficient lighting, maintain equipment, repair leakage and adopt any other measures such as but not limited to those as specified in the Guidelines.
| |
| (b) | develop a strategy for environmentally friendly management of energy and water consumption, where its implementation shall be monitored, examined and adjusted. For better management, the Tenant also pledges to implement a start-up/shutdown schedule and provide energy assessment to the Landlord if so requested by the Landlord. |
| 8.3 | Indoor Air Quality Control |
The Tenant pledges to achieve purifying efficiency in respect of:-
| (a) | installation, use and maintenance of any relevant equipment(s); |
| (b) | procurement, purchase, use and disposal of any relevant goods or materials; and |
| (c) | operation of business; |
with measures such as but not limited to those as specified in the Guidelines.
| 8.4 | Green Construction Materials of the Premises |
The Tenant pledges to minimize the emission of greenhouse gases through selecting low carbon construction materials and products by referring to the CIC Green Product Certification in fitting out or renovation of the Premises.
| 8.5 | Recycling |
The Tenant pledges to conduct waste assessment, implement a recycling program and use recycled content products.
| 8.6 | Upon the Landlord’s request, the Tenant shall provide to the Landlord any information, statistics and documents (the “Data”) which are associated with the sustainability of the use of the Premises including but not limited to the Data relating to energy and water consumption, indoor air quality control, construction decoration and renovation, and implementation of any initiatives by the Tenant or any measures as specified in the Guidelines. |
| 8.7 | The Tenant shall train its employees to conserve and make them acquainted with the Guidelines and/or any measures regarding sustainability initiated by the Tenant and shall encourage its employees to observe the applicable guidelines where practicable. |
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LD-AG-020
Exhibit 4.6
Equipment Purchase Agreement
Contract No.: 20231017001
Party A: Dongguan Chengchuang Huliang Electronic Technology Co., Ltd.
Party B: Dongguan Taide Automation Technology Co., Ltd.
Party A and Party B, in accordance with the Contract Law of the People’s Republic of China and based on the principles of equality and mutual benefit, have, through amicable negotiation, entered into this contract regarding Party A’s purchase of the “2-4 Core Wire Terminal Crimping and Insertion Machine” from Party B.
I. Equipment Cost
The total cost of the equipment is RMB 548,672.57 (exclusive of tax), or RMB 620,000.00 (inclusive of tax), with a value-added tax rate of 13%. This amount includes packaging and transportation costs. The specific configuration details are set forth in the attached Quotation Sheet, reference number QucC20230920001.
II. Payment Terms
Upon execution of this contract, Party A shall make a 60% advance payment, i.e., RMB 372,000.00 (inclusive of tax, calculated as RMB 620,000.00 × 60%).
Upon completion of the equipment manufacturing, Party B shall provide the inspection report and complete photos of the equipment; after Party A’s personnel complete on-site inspection and acceptance at Party B’s premises, Party A shall pay an additional 30%, i.e., RMB 186,000.00 (inclusive of tax, calculated as RMB 620,000.00 × 30%).
The remaining 10%, i.e., RMB 62,000.00 (inclusive of tax, calculated as RMB 620,000.00 × 10%), shall be paid within 60 days after Party A receives and accepts the equipment.
III. Delivery Schedule
The equipment shall be delivered to Party A’s Dongguan factory within 60 working days from the date of contract signing (manufacturing period).
IV. Intellectual Property
The intellectual property rights of the equipment, which is customized according to Party A’s requirements, shall belong to Party A. Party B shall not disclose or sell the solution to any third party without Party A’s written consent for a period of three (3) years.
V. Liability for Breach of Contract
1. Both parties must strictly perform all terms of this contract. Neither party may unilaterally alter or terminate this contract without the other party’s written consent.
2. If, upon inspection, the delivered equipment does not conform to the mutually agreed equipment solution and specification requirements (including 3D simulation, as detailed in the attachment “2-4 Core Wire Terminal Crimping and Insertion Machine Solution”), Party B shall refund to Party A the full 60% advance payment (RMB 372,000.00).
3. If Party A cancels or unilaterally terminates the project, Party B shall refund 50% (RMB 186,000.00)of the 60% advance payment (RMB372,000.00) to Party A as compensation.
4. If Party B fails to deliver on time due to reasons attributable to Party B, 1% of the total equipment cost shall be deducted for each day of delay, up to a maximum of 10% of the total contract amount. If delivery is delayed by more than 30 days, Party A has the right to terminate this contract, and any resulting losses shall be borne by Party B.
VI. Dispute Resolution
Any disputes arising out of or in connection with this contract shall be resolved through friendly negotiation in accordance with the relevant provisions of the Contract Law of the People’s Republic of China and other applicable laws. If negotiation fails, either party may bring a lawsuit to the People’s Court of Dongguan. The breaching party or the party primarily responsible for the contract dispute shall bear the other party’s reasonable legal fees, appraisal (inspection) fees, and other related costs incurred in the course of litigation or arbitration.
VII. Any matters not covered herein shall be separately agreed upon by both parties. This contract is made in duplicate, with each party holding one copy. This contract shall become effective upon signature and affixing of company seals by both parties, and upon receipt of payment.
This contract shall become effective upon receipt of payment (hand written).
| Party A: Dongguan Chengchuang Huliang Electronic Technology Co., Ltd. |
Party B: Dongguan Taide Automation Technology Co., Ltd. | |||
| Authorized Signature: | Authorized Signature: | |||
| Company Seal: |  |
Company Seal: |  | |
| Date of Signing: November 6, 2023 | Date of Signing: November 6, 2023 | |||
Exhibit 4.7
IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K, CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THE EXHIBIT BECAUSE IT IS BOTH (1) NOT MATERIAL AND (2) THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. [*] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Lease (Rent-to-Own) Agreement
Contract No.: QY20230301
Date of Execution: November 7, 2023 (Amended)
Lessee (Party A): Dongguan Chengchuang Huliang Electronic Technology Co., Ltd. (hereinafter referred to as “Party A”)
Lessor (Party B): Shenzhen Qiuyi Technology Co., Ltd. (hereinafter referred to as “Party B”)
This Agreement is entered into by and between Party A and Party B, in accordance with the Contract Law of the People’s Republic of China and other relevant regulations, for the purpose of clarifying the rights and obligations of both parties. Based on the principles of fairness, justice, mutual benefit and amicable negotiation, the parties have reached the following agreement:
I. Leased Equipment
| Equipment Name | Model | Configuration | Quantity | Monthly Rental per Unit (RMB) | Total Monthly Rental (RMB) | Remarks |
| Network Analyzer | E5071C | 4 Ports, 8.5 GHz | 1 unit | ¥3,500 | ¥3,500 | |
| Including 13% VAT, the total monthly rental is ¥3,500 (in words: Three Thousand Five Hundred Yuan Only). | ||||||
|
Remarks:
Rent-to-Own:
1. The monthly rental is ¥3,500. If the instrument is rented for a full five years (lease commencement date: March 20, 2023), the ownership of the leased equipment shall be transferred to the Lessee upon expiration of the lease term. | ||||||
Notes:
1). This quotation is made in duplicate (copies sent by fax or email are equally valid). Upon signature and affixing of official seals by both parties, this Lease Agreement shall become effective.
II. Lease Term
1. The lease term shall commence on March 20, 2023 and expire on February 19, 2028, calculated from the date the equipment is delivered and successfully commissioned.
2. During the lease term, Party A may terminate the lease early without incurring liability for breach of contract. In special circumstances, early termination may be resolved through mutual agreement between both parties.
3. The lease is calculated on a monthly basis, starting from the day following delivery and ending on the corresponding day of the following month.
4. Upon the expiration of the five-year lease term, ownership of the leased equipment shall be transferred to Party A.
III. Rental Payment Terms
1. The rental shall be settled on a monthly basis, with payment due via bank transfer within 60 days after the end of each month.
2. Party B shall deliver the equipment to the location designated by Party A. Upon successful acceptance and verification of all accessories by Party A, the rental shall be remitted to the following account:
Account Name: [*]
Bank: [*]
Account Number: [*]
IV. Equipment Use and Precautions
1. The ownership of the leased equipment shall remain with Party B. During the lease period, Party A shall not remove or damage Party B’s security seals or logos. If the equipment malfunctions due to tampering with seals, Party A shall compensate Party B for any resulting losses.
2. Upon expiration of the lease term, Party A shall return the leased equipment in good condition (consistent with normal use and the intended purpose of the equipment).
V. Equipment Maintenance
During the lease term, Party B shall be responsible for repairing any non-man-made equipment failures upon notification from Party A. No rental fees shall be charged during the repair period, and Party B shall make every effort to provide replacement equipment. If equipment malfunction or failure is caused by improper use by Party A, Party A shall not dismantle or repair the equipment on its own, but shall return it to Party B for repair, with the cost borne by Party A. If, for reasons not attributable to Party A, the leased equipment suffers major failure three times or more during the lease term, Party A shall have the right to request replacement equipment of equivalent or superior performance from Party B.
VI. Rights and Obligations of Both Parties
1. During the lease term, Party A is entitled to use the equipment, but may not transfer or pledge the equipment as collateral. Without Party B’s consent, Party A may not add or remove any components. The equipment must be used appropriately in accordance with its intended purpose. In the event the equipment is lost, cannot be returned, or is damaged and cannot be used normally, Party A shall compensate Party B for the full replacement value.
2. If Party A fails to use the equipment as agreed or in accordance with its intended purpose, causing damage to the equipment, Party B may terminate the contract and seek compensation for losses from Party A.
3. Party B shall provide Party A’s staff with necessary technical and operational training to ensure proper operation of the leased equipment.
2
VII. Dispute Resolution
1. Any dispute arising from the interpretation or performance of this Agreement shall be resolved through friendly negotiation based on the principles of equality and mutual benefit. If negotiation fails, the dispute shall be submitted to the Shenzhen Arbitration Commission for arbitration.
2. The resolution of disputes under this Agreement shall be governed by the laws of the People’s Republic of China, as well as the relevant leasing regulations of Shenzhen, China.
3. Party A shall properly safeguard the leased equipment and shall not sublease it. Otherwise, Party A shall bear liability for damages.
4. In the event of a dispute, the defaulting party shall bear all reasonable costs incurred by the other party, including attorneys’ fees, arbitration fees, travel expenses, appraisal and evaluation fees, business inquiry fees, property search fees, document search fees, and expert testimony fees.
VIII. Liability for Breach and Compensation
8.1 If Party A delays payment, Party A shall pay Party B a penalty equal to 0.1% of the overdue amount per day.
8.2 If Party B delays delivery, Party B shall pay Party A a penalty equal to 0.1% of the overdue amount per day.
8.3 The total amount of liquidated damages payable under this Agreement shall not exceed 0.5% of the total contract amount. After liability has been determined, payment shall be made within 15 days; otherwise, it shall be treated as a late payment.
Appendix:
When executing this contract, please provide the following supporting documents:
1. A copy of the business license;
2. A letter of authorization for legal representative (affixed with company seal).
| Party A: Dongguan Chengchuang Huliang Electronic Technology Co., Ltd. |
Party B: Shenzhen Qiuyi Electronic Co., Ltd. | |||
| Address: | Address: | |||
| Tel: | Tel: 13480882215 | |||
| Authorized Signature & Company Seal: |  |
Authorized Signature: Luo Qiuhong |  | |
| Date of Signing: | Date of Signing: November 7, 2023 | |||
3
Exhibit 4.8
EQUIPMENT PURCHASE AND SALE AGREEMENT
This Equipment Purchase and Sale Agreement (the “Agreement”) is made this 15 day of November, 2023 (the “Effective Date”), by and between Jingna Trading Co., Limited, a Hong Kong corporation whose address is Room 1D, 2/F, Fu Tao Building, 98 Argyle Street, Mongkok, Kowloon, Hong Kong (“Seller”) and CCSC Interconnect Technology Limited, a Hong Kong corporation, whose address is 1301-03, 13/f, Shatin Galleria, 18-24 Shan Mei Street, Fotan, N.T., Hong Kong (“Buyer”).
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth in this Agreement, the parties agree as follows:
1. Purchase and Sale of Equipment. At the Closing (as defined in Section 2) Seller shall sell, transfer, convey, assign, and deliver to Buyer, and Buyer shall purchase, accept, and pay for all right, title, and interest in and to the machinery and equipment set forth or Exhibit A hereto (the “Equipment”), and Buyer shall pay Seller, by wire transfer or attorney trust account check, Four million Five Hundred Eighty Nine Thousand Nine Hundred Twenty Three US dollars ($4,589,923.00) (the “Purchase Price”).
2. Closing. The closing (the “Closing”) and consummation of the transactions contemplated by this Agreement, shall take place by facsimile exchange or email of the documents on November 15, 2023, and delivery of the original documents the next business day, or such other date as the parties may mutually determine. “Closing Date” means the date of the exchange of documents via facsimile or email.
3. Representations and Warranties of Seller. Seller represents and warrants to Buyer that the statements contained in this Section 3 are true, correct and complete as of the Effective Date and will be true, correct and complete as of the Closing Date.
3.1 Organization of the Buyer and Authorization of Transaction. Seller has full power and authority, including full corporate power and authority, to execute and deliver this Agreement and to perform and consummate, its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Seller, enforceable in accordance with its terms and conditions. The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any person(s), or government or governmental agency in order to consummate the transactions contemplated by this Agreement.
3.2 Non-contravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will, immediately or with the passage of time: (A) violate any statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any of the Seller or the Equipment is subject; or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Seller is a party or by which it is bound or to which any of the Equipment is subject.
3.3 Consents. No approval, consent, waiver, or authorization of or filing or registration with any governmental authority or third party is required for the execution, delivery, or performance by Seller of the transactions contemplated by this Agreement.
3.4 Title to Equipment. Seller has good and marketable title to the Equipment, free and clear of all security interests, liens and encumbrances. Other than as expressly set forth herein, the Equipment is being sold “as-is” “where-is” with no representations or warranties of any kind.
3.5 Litigation. Neither Seller or the Equipment, in whole or in part: (A) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge that would limit, restrict or prevent consummation of the transactions contemplated hereby; or (B) is a party or the subject of, or is, to the knowledge of Seller’s president, threatened to be made a party to, or the subject of, any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator that would, if determined adversely to Seller: (1) limit, restrict or prevent consummation of the transactions contemplated hereby; or (2) cause any representation or warranty of Seller herein to be not true.
3.6 Brokers’ Fees. Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated or for which a lien or encumbrance could be placed on the Equipment.
3.7 Disclosure. The representations and warranties contained in this Section 3 do not contain any untrue statement of a fact or omit to state any fact necessary in order to make the statements contained in this Section 3 not misleading.
4. Representations and Warranties of Buyer. Buyer represents and warrants to Seller that the statements contained in this Section 4 are true, correct and complete as of the Effective Date and will be true, correct and complete as of the Closing Date.
4.1 Organization of the Seller/Authorization of Transaction. Buyer has full power and authority, including full corporate power and authority, to execute and deliver this Agreement and to perform and consummate, its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Buyer, enforceable in accordance with its terms and conditions. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any person(s), or government or governmental agency in order to consummate the transactions contemplated by this Agreement.
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4.2 Non-contravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will, immediately or with the passage of time: (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Buyer is subject; or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound.
4.3 Consents. No approval, consent, waiver, or authorization of or filing or registration with any governmental authority or third party is required for the execution, delivery, or performance by Buyer of the transactions contemplated by this Agreement.
4.4 Litigation. Buyer is not: (A) subject to any outstanding injunction, judgment, order, decree, ruling, or charge that would limit, restrict or prevent consummation of the transactions contemplated hereby; or (B) a party, or, to the knowledge of Buyer’s officers, threatened to be made a party, to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator that would, if determined adversely to Buyer: (1) limit, restrict or prevent consummation of the transactions contemplated hereby; or (2) cause any representation or warranty of Seller herein to be not true.
4.5 Brokers’ Fees. Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated.
4.6 Disclosure. The representations and warranties contained in this Section 4 do not contain any untrue statement of a fact or omit to state any fact necessary in order to make the statements and information contained in this Section 4 not misleading.
5. Pre-Closing. Each of the parties will use its reasonable best efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement.
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6. Post Purchase Covenants. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of such further instruments and documents) as any other party may request, at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefore under Section 10 below). Without limiting the foregoing, Seller shall from time to time at the request of Buyer and without further consideration, execute and deliver such instruments of transfer, conveyance, and assignment in addition to those delivered hereunder, and will take such other actions as Buyer may request from time to time, to more effectively transfer, convey, and assign to and vest in Buyer, and to put Buyer in possession of, all or any portion of the Equipment.
7. Conditions to Obligation to Close.
7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (A) the representations and warranties of Seller set forth in Section 3 shall be true and correct in all material respects at and as of the Closing Date; (B) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (1) prevent consummation of any of the transactions contemplated by this Agreement, (2) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (3) make any of the representations or warranties set forth in Section 3, not true or not correct; and (C) all actions to be taken by Seller in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Buyer. Buyer may waive any condition specified in this Section 7.1 if it executes a writing so stating at or prior to the Closing.
7.2 Conditions to Obligation of Seller. The obligation of Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (A) the representations and warranties of Buyer set forth in Section 3 shall be true and correct in all material respects at and as of the Closing Date; (B) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (1) prevent consummation of any of the transactions contemplated by this Agreement, (2) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (3) make any of the representations or warranties set forth in Section 3, not true or not correct; and (C) all actions to be taken by Buyer in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Seller. Seller may waive any condition specified in this Section 7.2 if it executes a writing so stating at or prior to the Closing.
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8. Items to be Delivered. At the Closing: (A) Seller shall make the Equipment available to the Buyer at Seller’s location up to the 30 of November 2024; and (B) Buyer shall deliver to Seller the 20% of the Purchase Price which is US$918,000, by wire transfer in accordance with Seller’s written instructions before 15 of December 2023; Buyer shall deliver to Seller the 25% of the Purchase Price which is US$1,147,000, by wire transfer in accordance with Seller’s written instructions before 30 of January 2024; then the remaining 55% of the Purchase Price, which is US$2,524,923, by the 15 of December 2024. Buyer shall arrange promptly take possession of the Equipment.
9. Termination. The parties may terminate this Agreement as set forth in this Section.
9.1 Buyer Termination Generally. Buyer may terminate this Agreement by giving written notice to Seller at any time prior to the Closing: (A) in the event Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, Buyer has provided Seller with three (3) business days written notice of the such breach and Seller has not cured such stated breach within the notice period; or (B) if the Closing shall not have occurred on or before November 14, 2024, by reason of the failure of any condition precedent under Section 7.1 (unless the failure results primarily from the Buyer itself or Buyer’s Shareholder himself breaching any representation, warranty, or covenant contained in this Agreement).
9.2 Seller Termination Generally. Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing: (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, Seller has provided Buyer with three (3) business written notice of the such breach and Buyer has not cured such stated breach within the notice period; or (B) if the Closing shall not have occurred on or before. November 14, 2024, by reason of the failure of any condition precedent under Section 7.2 (unless the failure results primarily from Seller itself breaching any representation, warranty, or covenant contained in this Agreement).
9.3 Effect of Termination. If a party terminates this Agreement pursuant to Sections 9.1(B) or 9.2(B) above, all rights and obligations of the parties hereunder shall terminate without any liability of any party to the other party, except for any liability of a party then in breach.
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10. Indemnification.
10.1 Seller shall indemnify and hold Buyer harmless from any and all losses, claims, liabilities, damages, obligations, liens, encumbrances, costs and expenses, including reasonable attorney fees, pretrial, trial and appellate, and court costs (collectively being “Damages”), that are suffered or incurred by Buyer or the Equipment, in whole or in part, from time to time, and arise as a result of any breach of the covenants, warranties or representations of this Agreement or the Bill of Sale by Seller.
10.2 Buyer shall indemnify and hold Seller harmless from any and all Damages that are suffered or incurred by Seller, in whole or in part, from time to time, and arise as a result of: (A) any breach of the covenants, warranties or representations of this Agreement or the Bill of Sale by Buyer; or (B) Buyer’s ownership and utilization of the Equipment on and after the Closing Date.
11. No Third-party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the parties and their respective successors and permitted assigns.
12. Entire Agreement, Waiver and Modification. This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof and incorporates all prior negotiations and understandings. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between them relating to the subject matter of this Agreement other than those set forth herein. No purported waiver by any party of any default by another party of any term or provision contained herein shall be deemed to be a waiver of such term or provision unless the waiver is in writing and signed by the waiving party. No such waiver shall in any event be deemed a waiver of any subsequent default under the same or any other term or provision contained herein. No alteration, amendment, change or addition to this Agreement shall be binding upon any party unless in writing and signed by the party to be charged.
13. Notices. Any consent, waiver, notice, demand, request or other instrument required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given at the earlier of: (A) actual delivery, when delivered in person; (B) the next business day following a complete successful facsimile transmission to the appropriate number first set forth above; (C) the next business day if sent via overnight express courier (e.g., FedEx) to the party’s address first set forth above; or (D) three (3) business days after being sent by certified United States mail, return receipt requested, postage prepaid, to the party’s address first set forth above. Either party may change its address for notices or facsimile phone number in the manner set forth herein.
14. Captions. The captions and paragraph numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement.
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15. Applicable Law, Venue and Jurisdiction. This Agreement shall be construed and governed under and by the laws of the Hong Kong Special Administration regions of China.
16. WAIVER OF JURY TRIAL. THE PARTIES KNOWINGLY AND VOLUNTARILY WAIVE ALL OF THEIR RIGHTS TO A TRIAL BY JURY ON ANY AND ALL ISSUES PERTAINING TO OR ARISING OUT OF THIS AGREEMENT AND EQUIPMENT.
17. Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation. The parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty, or covenant.
18. Attorney’s Fees. In the event any litigation, mediation, arbitration, or controversy between the parties hereto arises out of or relates to this Agreement, the prevailing party in such litigation, mediation, arbitration or controversy shall be entitled to recover from the other party all reasonable attorneys’ fees, expenses and suit costs, including those associated with any appellate proceedings or any post-judgment collection proceedings.
19. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same Agreement.
20. Survival. Sections 3, 4, 6 and 10 through 18 shall survive the Closing and shall continue in full force and effect thereafter.
[Signatures on the following page(s). Balance of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written
Exhibit 4.9
EQUIPMENT PURCHASE AGREEMENT
between
CCSC INTERCONNECT TECHNOLOGY LIMITED
and
WSYQR LIMITED
November 26, 2023
EQUIPMENT PURCHASE AGREEMENT
This EQUIPMENT PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of November 26, 2023, by and between CCSC Interconnect Technology Limited., a company incorporated under the laws of the HKSAR (“CCSC” or the “Purchaser”), and WSYQR Limited, a company incorporated under the laws of the HKSAR (“WSYOR” or the “Seller”). Capitalized terms used herein shall have the meaning ascribed to them in Article 1 hereto.
W i t n e s s e t h:
Whereas, WSYQR will sell the Equipment to CCSC, for the purchase price and upon the terms and conditions set forth in this Agreement;
Now, Therefore, in consideration of the foregoing recitals and the mutual promises, representations, warranties, and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Definitions. The following terms shall have the following meanings for all purposes of this Agreement, except where the context otherwise requires:
“Business Day” shall mean a day other than a Saturday, Sunday on other day or which commercial banks in Taiwan are authorized or required by the law to close.
“Contract” shall mean any contract, license, consent, agreement, instrument or other enforceable, commitment, written or unwritten, including any deed, loan or credit agreement, note, bond, mortgage, indenture or lease to which a Person is a party or by which any of its material assets or properties is bound.
“Effective Date” means the date when the parties hereto execute this Agreement;
“Governmental Authority” means any federal, state, foreign, supranational, national, municipal or local government, any court, any instrumentality, subdivision, administrative agency or commission or securities regulatory authority or other governmental authority or instrumentality or industry self-regulatory body.
“Equipment” means the equipment provided by WSYQR as specified in Schedule A.
“Installation Site” means factory of the Purchaser located at Dongguan, People’s Republic of China.
“Liens” shall mean any liens, charges, pledges, mortgages, options, encumbrances, adverse claims, security interests or other third party rights (including rights of preemption, purchase rights and voting trusts), restrictions or limitations, in each case of any nature whatsoever.
“Маnufacturer” means a person, an enterprise or an entity that produced the Equipment.
“US Dollars” and “US$” mean the transaction currency of this Agreement;
“Sale Price” means the price for the Equipment as provided in Section 2.2, which shall have included the Value-Added Business Tax;
SECTION 1.2 Certain Rules of Construction. The headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. Unless the context otherwise requires, words (including words defined herein) denoting the singular number only shall include the plural and vice versa. The words “written” and “in writing” include any means of visible reproduction. References to “Sections” and “Schedules” are to be construed as references to the Sections of, and schedules to, this Agreement.
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ARTICLE II
SALE OF EQUIPMENT, SALE PRICE AND PAYMENT TERMS
SECTION 2.1 Sale of Equipment. The Seller hereby agrees to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Seller, the Equipment on the terms and conditions hereof.
SECTION 2.2 Sale Price. The Sale Price for the Equipment shall be One Million Six Hundred Forty Five Thousand Four Hundred and Eight US Dollar. (US$1,645,408).
SECTION 2.3 Payment Schedule. Payment of the Sale Price shall be made by instalments by Purchaser to Seller in accordance with the following schedule:
(a) First payment at US$494,000 (“First Payment” equivalent to 30% of the sale price shall be paid within 30 Business Days after the Effective Date;
(b) Second payment at US$329,000 (“Second Payment” equivalent to 20% of the sale price) shall be paid on 27 January, 2024;
(b) Second payment at US$822,408 (“Second Payment” equivalent to 50% of the sale price) shall be paid on 27 November, 2024.
ARTICLE III
DELIVERY OF EQUIPMENT
The Seller shall deliver the Equipment to the Purchaser at the installation Site on the respective delivery dates (“Delivery Date(s)”) in accordance with the following delivery schedule:
SECTION 3.1 Equipment. Delivery of the Equipment shall be commenced on April 2024, completed by November 26, 2023. The delivery details and schedules shall be further negotiated and agreed by the parties hereto in good faith.
SECTION 3.2 Title and Risk of Loss. The title to and risk of loss or destruction or damages to any or all of the Equipment shall pass to the Purchaser upon receipt of such Equipment by the Purchaser.
SECTION 3.3 Cost and Expense. The Seller shall bear any and all cost, expense and fees arising out of disassembly packing, moving, transportation of the Equipment from the Seller’s premises to the Installation Site and the Purchaser shall bear any and all cost, expense and fees arising out of unpacking and installation of the Equipment at the Installation Site.
ARTICLE IV
PURCHASER’S COVENANT
SECTION 4.1 Purchaser’s Reasonable Efforts. If any of the Equipment is the bonded goods, the Purchaser agrees to exert its commercially reasonable efforts in keeping the Equipment as the bonded goods, including take all required and necessary application for such status.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Seller’s Representation and Warranty. The Seller represents and warrants to the Purchaser that:
(a) the Seller is a company duly organized and validly existing under the laws of the HKSAR and is duly authorized to conduct business and in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on its ability to consummate the transactions contemplated herein;
(b) the Seller has the requisite corporate power and authority to execute and deliver this Agreement and to carry out the provisions of this Agreement including without limitation to transfer the title to the Equipment to the Purchaser. This Agreement and the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action of the Seller. This Agreement has been duly executed and delivered by the Seller and this Agreement constitutes a valid and legally binding obligation of the Seller, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting creditors’ rights generally or by general principles of equity.
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(c) no consent, approval, permit or authorization of, license or order of, or registration, declaration, filing with, or notice to, any Governmental Authority (such consents, approvals, authorizations, licenses, orders, registrations, filings and notices, together with any consents, approvals, actions or notices required to be obtained from any Governmental Authority, collectively, the “Consents”) is required to be obtained, made or given by the Seller in connection with (i) the execution and delivery by the Seller of this Agreement, (ii) the performance by the Seller of its obligations under this Agreement or (iii) the consummation by the Seller of the transactions contemplated by this Agreement; in each case, other than where the lack thereof would not be reasonably expected to have, individually or in the aggregate, a material adverse effect;
(d) the execution, delivery and performance by the Seller of this Agreement, the compliance by the Seller with all the provisions hereof and thereof on part of the Seller and the consummation of the transactions contemplated hereby and thereby on pert of the Seller will not conflict with or result in (i) any violation of the provisions of the Articles of Incorporation or its internal rules or any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over the Seller or any of its properties or assets, other than any such conflicts, breaches, violations or defaults, or (ii) any breach or violation of any of the terms or provisions of, or constitute a default under, any material Contract to which the Seller is a party or by which the Seller is bound or to which the Equipment is subject;
(e) the Seller owns and holds good and valid title to the Equipment, free of all Liens and the Equipment is the property of the Seller and the Seller may transfer the Equipment to any person or entity without any restrictions whatsoever;
(f) the Seller owns or has valid ownership or license related to the use of the Equipment, without knowing infringement of the rights of others;
(g) the Equipment will operate in conformance with the Specifications or in the event of no Specifications, will have the ordinary functionality of the like products.
(h) Except for the representations and warranties contained in this Section 5.1, neither Seller nor any other Person makes any other express or implied representation or warranty on behalf of or with respect to Seller, and Seller hereby disclaims any such representation or warranty, whether by Seller or any other Person, with respect to the execution and delivery of this Agreement, the consummation of the transactions contemplated in this Agreement or Seller, notwithstanding the delivery or disclosure to Purchaser or any other Person of any documentation or other information by Seller or any other Person with respect to any one or more of the foregoing.
SECTION 5.2 Purchaser’s Representation and Warranty. The Purchaser represents and warrants to the Seller that:
(a) the Purchaser is a company duly organized and validly existing under the laws of the HKSAR and is duly authorized to conduct business and in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not reasonably be expected to have, individually or in the aggregate, a materiel adverse effect on its ability to consummate the transactions contemplated herein;
(b) the Purchaser has the requisite corporate power and authority to execute and deliver this Agreement and to carry out the provisions of this Agreement. This Agreement and the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and this Agreement constitutes, and a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except us such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting creditors’ rights generally or by general principles of equity.
(c) no consent, approval, permit or authorization of, license or order of, or registration, declaration, filing with, or notice to, any Governmental Authority (such consents, approvals, authorizations, licenses, orders, registrations, filings and notices, together with any consents, approvals, actions or notices required to be obtained from any Governmental Authority, collectively, the “Consents”) is required to be obtained, made or given by the Purchaser in connection with (i) the execution and delivery by the Purchaser of this Agreement, (ii) the performance by the Purchaser of its obligations under this Agreement or (iii) the consummation by the Purchaser of the transactions contemplated by this Agreement; in each case, other than where the lack thereof would not be reasonably expected to have, individually or in the aggregate, a material adverse effect;
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(d) the execution, delivery and performance by the Purchaser of this Agreement, the compliance by the Purchaser with all the provisions hereof and thereof on part of the Purchaser and the consummation of the transactions contemplated hereby and thereby on part of the Purchaser will not conflict with or result in (i) any violation of the provisions of the Articles of Incorporation or its internal rules or any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over it or any of its properties or assets, other than any such conflicts, breaches, violations or defaults, or (ii) any breach or violation of any of the terms or provisions of, or constitute a default under, any material Contract to which the Purchaser is a party or by which the Purchaser is bound.
ARTICLE VI
EQUIPMENT VERIFICATION
SECTION 6.1 Joint Verification. After the Effective Date and prior to November 26, 2023 with respect to Equipment, both parties shall appoint qualified personnel to jointly verify the Equipment at the Seller’s site. The Seller agrees to fix any of the Equipment which does not conform to the Specifications or in the event of no Specifications, have the ordinary functionality of like equipment as soon as practical thereafter, but no later than the Delivery Date. The Equipment shall be deemed having the ordinary functionality or conforming to the Specifications, as applicable, at the time of joint verification unless otherwise the Purchaser raises any objection to any or all of the Equipment during the course of the joint verification. The foregoing Equipment status shall be the only criteria for the Purchaser to verify the Equipment in the verification report as set forth in Section 6.2.
SECTION 6.2 Purchaser’s Acceptance & Verification. After each batch of Equipment is delivered from Seller to the Installation Site, the Purchaser shall submit its verification report for each batch of Equipment to the Seller within six (6) weeks. The Purchaser’s failure to submit such report for each batch of Equipment will be deemed acceptance of the Equipment and Purchaser shall not be entitled to any claim. In the event that any of the Equipment does not conform to the status of Equipment which has been jointly verified under Section 6.1, both parties agree to negotiate in good faith to solve such non-conformance before any remedies are sought. For any of the Equipment which does not conform to the status of Equipment which has been jointly verified under Section 6.1 as stated in the foregoing verification report, the Purchaser could claim to such non-conformance and deduct its break down Sale Price from the total Sale Price, which shall be the sole and exclusive remedy under this Agreement.
ARTICLE VII
ASSIGNMENT OF WARRANTIES & LICENSE OF SOFTWARE
SECTION 7.1 Assignment of Warranties. To the extent that any manufacturer’s maintenance, overhaul facilities, warranties, service life policies, patent indemnities, and other warranties with respect to the Equipment are still in effect and transferable, the Seller agrees to assign or cause to be assigned, such warranties to the Purchaser on each of the Delivery Dates and to take such other steps as will enable the Purchaser to assert warranty claims directly with the manufacturers.
SECTION 7.2 Assignment of Software License and Documentation. The Seller agrees to assign or cause to be assigned to the Purchaser any and all (i) Manufacturer’s software and all other Manufacturer’s intellectual properties and (ii) the Manufacturer’s manuals, operation instructions and all other documentation in connection with the Equipment on each of the Delivery Dates; provided however that the Equipment shall be restored by the Seller prior to the respective Delivery Date to the status that the Manufacturer delivered to the Seller (“Manufacturer Status”). If any of the Equipment cannot be restored to the Manufacturer Status, the Seller shall grant to the Purchaser a perpetual, non-exclusive and non-sublicensed license to use any and all improvements, updates, upgrades and derivatives that the Seller created or made to the Equipment (“Improvement”).
ARTICLE VIII
DISCLAIMER
Except to the extent specified in this Agreement, the seller disclaims any and all warranties, express, implied or otherwise, regarding its accuracy, completeness, flawlessness, non-infringement, or performance. In no event shall either party be liable to the other party or parties for any special, indirect, incidental, punitive, exemplary or consequential damages of any kind, including but not limited to, loss of profits, loss of use, or damages to the other party’s or parties’ business reputation however caused and on any theory of liability, whether in an action for contract, strict liability or tort (including negligence) or otherwise, whether or not the first party has been advised of the possibility of such damage and notwithstanding the failure of essential purpose of any remedy, except that any such limitation on liability shall not apply in the case of fraud, gross negligence, intentional misrepresentation or criminal activity.
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ARTICLE IX
MATERIAL DEFAULT AND TERMINATION
SECTION 9.1 Default by Seller. Upon the occurrence of any of the following events, and except as is otherwise provided for in this Agreement, the Purchaser may terminate this Agreement without prejudice to any and all rights and remedies available in the Purchaser, if:
(a) The Seller delays delivery of the related Equipment to the Purchaser on any of the Delivery Dates as set forth in Section 3 and fails to cure such default for more than thirty (30) days; or
(b) The Seller fails or defaults in the performance of any material obligation or covenant under this Agreement and fails to cure such default for more than thirty (30) days after the Seller’s receipt of written notice from the Purchaser of such default or breach; or
(c) Any representation or warranty made by the Seller hereunder is breached.
SECTION 9.2 Default by Purchaser. Upon the occurrence of any of the following events, and except as is otherwise provided for in this Agreement, the Seller may terminate this Agreement without prejudice to any and all rights and remedies available to the Seller, if:
(a) The Purchaser delays any payment in accordance with the payment schedule as set forth in Section 2.4 and fails to cure such default for more than thirty (30) days; or
(b) The Purchaser fails or defaults in the performance of any material obligation or covenant under this Agreement and fails to cure such default for more than thirty (30) days after the Purchaser’s receipt of written notice from the Seller of such default or breach; or
(c) Any representation or warranty made by the Purchaser hereunder is breached.
SECTION 9.3 Termination Due to Share Purchase Agreement. In the event that the share purchase transactions under the Share Purchase Agreement fails to be consummated or the Share Purchase Agreement has been, terminated, either party may terminate this Agreement with the thirty-day prior written notice to the other party. Upon termination of this Agreement in accordance with this Section, the Seller shall promptly return any and all payment to the Purchaser and the Purchaser shall promptly return the Equipment to the Seller.
ARTICLE X
NON-COMPETITION
Within five (5) years commencing from the Effective Date, the Seller shall not establish any and all production line or capacity to compete with the Purchaser with respect to the Equipment.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Confidentiality. Each of the parties shall hold, and shall cause its representatives to hold, in confidence this Agreement, all documents and information furnished to it by or on behalf of the other party in connection with the transactions contemplated hereby. Each party hereto shall hold in strictest confidence any information and material which is related to the other party’s business or is designated by the other party as proprietary and confidential, herein or otherwise. It is understood that this confidentiality clause does not include information which: (i) is now or hereafter in the public domain through no fault of the party being provided the confidential information; (ii) prior to disclosure hereunder, is property within the rightful possession of the party being provided the confidential information; (iii) subsequent to disclosure hereunder, is lawfully received from a third party with no restriction on further disclosure; or (iv) is obligated to be produced under order of a court of competent jurisdiction, unless made the subject of a confidentiality agreement or protective order in connection with such proceeding, which the parties in all cases will attempt to obtain. Neither party hereto shall disclose such information to any third party without prior written authorization of the other party.
SECTION 11.2 Taxes. Any and all taxes so incurred from or in connection with this Agreement shall be borne by the parties hereto in accordance with the applicable laws.
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SECTION 11.3 Notices. All notices and other communications pertaining to this Agreement shall be in writing and shall be deemed duly to have been given if personally delivered to the other party or if sent by the certified mail, return receipt requested, postage prepaid. All notices or communications between the Purchaser and the Seller pertaining to this Agreement shall be addressed as follows:
If to CCSC:
CCSC Interconnect Technology Limited
1301-03, 13f, The Shatin Galleria
18-24 Shan Mei Street Shatin, Hong Kong
Attention: LAW Chee Hui
If to WSYQR:
WSYOR
Room 22, A Block 10/f Manning
Ind Building 116-118 How Ming
Street, Kwun Tong Kowloon HK
Attention:
Either party may change its notification address by giving written notice to that effect to the other party in the manner provided herein.
SECTION 11.4 Waiver. Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall neither be considered a waiver nor deprive that party of any right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing and signed by the party to be charged therewith.
SECTION 11.5 Modifications. No revision or modification of this Agreement shall be effective unless in writing and executed by authorized representative of both parties.
SECTION 11.6 Assignment. This Agreement, and the rights and obligations created hereunder, shall not be assignable or delegable by either party hereto without the prior consent in writing of the other party hereto. Notwithstanding the above, Purchaser hereby agrees that Seller may assign the payment, which Purchaser has to pay to Seller in respect of any Installment of this Agreement.
SECTION 11.7 Severability. If any portion of this Agreement is held invalid, such invalidity shall not affect the validity of the remaining portions of the Agreement, and the parties will substitute for any such invalid portion hereof a provision which best approximates the effect and intent of the invalid provision.
SECTION 11.8 Language. This Agreement is in English language only.
SECTION 11.9 Governing Law and Jurisdiction This Agreement shall be governed by the laws of the HKSAR
SECTION 11.10 Headings. The paragraph titles of this Agreement are for conveniences only and shall not define or limit any of the provisions hereof.
SECTION 11.11 Entire Agreement. This Agreement, the documents referenced herein and all Exhibits hereto are intended as the complete and exclusive statement of the agreement between the parties hereto with respect to the subject matter hereof, and supersede all prior agreements and negotiations related thereto.
SECTION 11.12 Binding Effect. The provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, and permitted assigns.
SECTION 11.13 Cooperation. Each party hereto will promptly, at any time and from time to time, execute and deliver to the other party hereto such further instruments and documents, and take such further action, as the former party may from time to time request to establish and protect its rights, interests, and remedies created under this Agreement.
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SECTION 11.14 Survival. The representations and warranties contained in Articles 1, 8 and 11 shall survive termination of this Agreement. It is hereby agreed that the warranties, representations, acknowledgements and indemnities given and made pursuant to this Agreement shall be continuing obligations and shall survive the completion or termination of this Agreement.
SECTION 11.15 Counterparts. Provided that all parties hereto execute a copy of this Agreement, this Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Executed copies of this Agreement may be delivered by facsimile transmission or other comparable means. This Agreement shall be deemed fully executed and entered into on the date of execution by the last signatory required hereby.
In Witness Whereof, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.
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Exhibit 12.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kung Lok Chiu, certify that:
1. I have reviewed this annual report on Form 20-F of CCSC Technology International Holdings Limited (the “Company”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date: July 17, 2025
| By: | /s/ Kung Lok Chiu | |
| Name: | Kung Lok Chiu | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 12.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chee Hui Law, certify that:
1. I have reviewed this annual report on Form 20-F of CCSC Technology International Holdings Limited (the “Company”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
Date: July 17, 2025
| By: | /s/ Chee Hui Law | |
| Name: | Chee Hui Law | |
| Title: | Chief Financial Officer (Principal Accounting and Financial Officer) |
Exhibit 13.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of CCSC Technology International Holdings Limited (the “Company”) on Form 20-F for the year ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kung Lok Chiu, Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 17, 2025
| By: | /s/ Kung Lok Chiu | |
| Name: | Kung Lok Chiu | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 13.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of CCSC Technology International Holdings Limited (the “Company”) on Form 20-F for the year ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chee Hui Law, Chief Financial Officer (Principal Accounting and Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 17, 2025
| By: | /s/ Chee Hui Law | |
| Name: | Chee Hui Law | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) |
Exhibit 15.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in this Registration Statement on Form F-3 [FILE NO. 333-284474] of our report dated July 22, 2024, with respect to the consolidated financial statements of CCSC Technology International Holdings Limited included in this Annual Report on Form 20-F for the year ended March 31, 2025.
/s/ Marcum Asia CPAs LLP
New York, New York
July 17, 2025
Exhibit 15.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use of our report dated July 17, 2025, with respect to the consolidated balance sheets of CCSC Technology International Holdings Limited. and its subsidiaries, relating to consolidated statements of operations and comprehensive (loss)/income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the year ended March 31, 2025, and the related notes included in its Annual Report on Form 20-F.
/s/ Enrome LLP
Enrome LLP
Singapore
July 17, 2025
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