Eastern International Ltd F-1/A, filed Aug 25, 2025
Eastern International Ltd. (ELOG)
As filed with the U.S. Securities and Exchange Commission on August 25, 2025
Registration No. 333-281900
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 7
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Eastern International Ltd.
东源全球股份有限公司
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
| Cayman Islands | 4731 | Not Applicable | ||
| (State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
| incorporation or organization) | Classification Code Number) | Identification number) |
Mr. Lin Tan
Suite 901-903, 9th Floor, Building #2, Qianwan Zhigu
Chuanhua Smart CenterScience and Technology City Block
Xiaoshan Economic and Technological Development Zone
Xiaoshan District, Hangzhou, Zhejiang Province, China 311231
Tel: + (86) -571-8235-6096
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168
Phone: (800) 221-0102
Fax: (800) 944-6607
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Jeffrey Li, Esq. FisherBroyles, LLP 1200 G Street NW, Suite 800 Washington, D.C. 20005 (202) 830-5905 |
Joan Wu, Esq. Hunter Taubman Fischer & Li LLC 950 Third Avenue, 19th Floor New York, New York 10022 (212) 530-2206 |
Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to section 7(a)(2)(B) of the Securities Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS Subject to Completion | Dated August 25, 2025 |
1,600,000 Ordinary Shares
Eastern International Ltd.
This is the initial public offering of the ordinary shares of Eastern International Ltd., par value $0.0001 per share (“Ordinary Shares”). We are offering on a firm commitment basis 1,600,000 Ordinary Shares. We expect the initial public offering price of the shares to be in the range of $4 to $5 per Ordinary Share. Prior to the completion of this offering, there has been no public market for our Ordinary Shares. We will apply to have our Ordinary Shares listed on the Nasdaq Capital Market (“NASDAQ”). We have reserved the trading symbol “ELOG” for listing on the NASDAQ. There is no guarantee or assurance that our Ordinary Shares will be approved for listing on NASDAQ. However, we will not complete this offering unless we are so listed.
Upon the completion of this offering, we will be a “controlled company” as defined under Nasdaq Stock Market Rules 5615(c) because Mr. Albert Wong, the Chairman of our board of directors and our Chief Executive Officer, will beneficially own 64.8% of the voting power of our total issued and outstanding shares assuming the Underwriter does not exercise its over-allotment option, or 64.1% of the voting power our total issued and outstanding shares if the Underwriter exercises its over-allotment option in full. As a “controlled company,” we are permitted to elect not to comply with certain corporate governance requirements. If we rely on these exemptions, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, and will be subject to reduced public company reporting requirements.
Investing in our Ordinary Shares is highly speculative and involves a significant degree of risk. See “Risk Factors” beginning on page 12 of this prospectus for a discussion of information that should be considered before making a decision to purchase our Ordinary Shares.
We are not a Chinese operating company but rather a Cayman Islands holding company without material operations and our business is conducted by our subsidiaries in China and this structure involves unique risks to investors. See “Risk Factors— Risks Related 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 results of operations” and “Uncertainties and quick change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material and negative impact on our business operations, decrease the value of our Ordinary Shares and limit the legal protections available to you and us.”
There are legal and operational risks associated with being based in and having all our operations in China. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. 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 December 28, 2021, Cybersecurity Review Measures was published by Cyberspace Administration of China or the CAC, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People’s Bank of China, State Administration for Market Regulation, State Administration of Radio and Television, China Securities Regulatory Commission, State Secrecy Administration and State Cryptography Administration, effective on February 15, 2022, which provides that, Critical Information Infrastructure Operators (“CIIOs”) that purchase internet products and services and Online Platform Operators engaging in data processing activities that affect or may affect national security shall be subject to the cybersecurity review by the Cybersecurity Review Office. On September 24, 2024, the State Council published the Administration Measures for Cyber Data Security, or the “Cyber Data Security Measure”, which came into effect on January 1, 2025, requires cyber data processor engaging in data processing activities that affect or may affect national security to file a national security review in accordance with relevant regulations. On July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022, which requires the data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances: (i) any data processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor who processes personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides personal information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information of more than 10,000 people to overseas since January 1st of the previous year and ; and (iv) other circumstances under which the data cross-border transfer security assessment is required as prescribed by the CAC. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (the “New Overseas Listing Rules”) with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means. Pursuant to the New Overseas Listing Rules, domestic companies that seek initial public offering or listing securities overseas, both directly and indirectly, shall file with the CSRC within three working days after the submission of overseas offering/listing application. Furthermore, upon the occurrence of any of the material events specified below after an issuer has completed its offering and listed its securities on an overseas stock exchange, the issuer shall submit a report thereof to the CSRC within three working days after the occurrence and public disclosure of the event: (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other competent authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. The New Overseas Listing Rules stipulate the legal consequences to the companies for breaches, including failure to fulfil filing obligations or filing documents having false statement or misleading information or material omissions, which may result in a fine ranging from RMB 1 million to RMB 10 million, and in cases of severe violations, the relevant responsible persons may also be barred from entering the securities market. On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secretes Protection and the National Archives Administration released the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions, which took effect on March 31, 2023. Chinese domestic enterprises seeking to offer securities and list on overseas markets, either directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that (i) providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals shall be subject to corresponding procedures in accordance with relevant laws and regulations; and (ii) any working papers formed in the territory of the PRC by securities companies and securities service agencies that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with relevant laws and regulations. As of the date of this prospectus, these new laws and guidelines have not impacted the Company’s ability to conduct its business, accept foreign investments, or list and trade on a U.S. or other foreign exchange except for the filing requirement with CSRC under New Overseas Listing Rules. The CSRC completed its review and concluded its filing procedure with a formal notice to the Company on September 29, 2024. We provide domestic and cross-border professional logistic services including project logistic and general logistic. We are not cyberspace operators with personal information of more than 1 million users or activities that affect or may affect national security and we don’t have documents and materials which may adversely affect national security or public interests. However, there are uncertainties in the interpretation and enforcement of these new laws and guidelines, which could materially and adversely impact our business and financial outlook, may impact our ability to accept foreign investments, offer our securities to investors or to list on a U.S. or other foreign exchange, and could impact our ability to conduct our business. Any change in foreign investment regulations, and other policies in China or related enforcement actions by China government could result in a material change in our operations and the value of our securities and could significantly limit or completely hinder our ability to offer our securities to investors or cause the value of our securities to significantly decline or be worthless. The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. In accordance with the HFCA Act, trading in securities of any registrant on a national securities exchange or in the over-the-counter trading market in the United States may be prohibited if the PCAOB determines that it cannot inspect or fully investigate the registrant’s auditor for three consecutive years beginning in 2021, and, as a result, an exchange may determine to delist the securities of such registrant. On December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which has shortened the Holding Foreign Companies Accountable Act’s timeline for a potential trading prohibition from three years to two years, thus reducing the time period before our securities may be prohibited from trading or delisted if our auditor is unable to meet the PCAOB inspection requirement. The Company’s auditor is headquartered in the U.S. and the Public Company Accounting Oversight Board (United States) (the “PCAOB”) currently has access to inspect the working papers of our auditor and our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated on December 15, 2022. The Holding Foreign Companies Accountable Act and related regulations currently does not affect the Company as the Company’s auditor is subject to PCAOB’s inspection and investigation. See “Risk Factors— The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly. Further implementations and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB’s determination of its lack of sufficient access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in Hong Kong and mainland China. A potential consequence is that our ordinary shares may be delisted by the exchange. The delisting of our ordinary shares, or the threat of our ordinary shares being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct full inspections of our auditor deprives our investors of the benefits of such inspections.”
We are a holding company incorporated as an exempted company with limited liability in the Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our business through our operating subsidiaries in China. Our Ordinary Shares offered in this prospectus are shares of our Cayman Islands holding company, not the shares of our operating subsidiaries.
As a holding company, we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends to us. However, our subsidiaries have not made any dividends or other distributions to our holding company or any U.S. investors as of the date of this prospectus. In the future, cash proceeds raised from overseas financing activities, including this offering, may be transferred by us to our PRC subsidiaries via capital contribution or shareholder loans, as the case may be. See “Selected Consolidated Financial Statements” on page F-2 of this prospectus.
Under existing 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 the State Administration of Foreign Exchange in China (“SAFE”) by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulations, such as the overseas investment registrations by our shareholders or the ultimate shareholders of the Company who are PRC residents. Approval from or registration with appropriate government authorities is, however, required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. For our Hong Kong and BVI subsidiaries and the holding company (“Non-PRC Entities”), there is no restrictions on foreign exchange for such entities and they are able to transfer cash among these entities, across borders and to US investors. Also, there is no regulatory restrictions and limitations on the abilities of Non-PRC Entities to distribute earnings from their businesses, including from subsidiaries to the parent company or from the holding company to the U.S. investors. However, to the extent cash/assets in the business is in PRC/Hong Kong or our PRC/Hong Kong entity, the funds/assets may not be available to fund operations or for other use outside of the PRC/Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the PRC government to transfer cash/assets. Current PRC regulations permit our PRC subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our subsidiaries in China are 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 their respective registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. See “Dividend Distribution and Cash Transfer Between the Holding Company and Subsidiaries” and “Risk Factors–Risks Related to Doing Business in China – Governmental control of currency conversion may limit our ability to transfer cash between us and our subsidiaries or investors including our ability to utilize our net revenues effectively and affect the value of your investment.”
As of the date of this prospectus, we do not have cash management policies and procedures in place that dictate how funds are transferred through our organization. Rather, the funds can be transferred in accordance with the applicable PRC laws and regulations. Under existing 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 SAFE by complying with certain procedural requirements. Therefore, WFOE is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulations, such as the overseas investment registrations by our shareholders who are PRC residents. Approval from or registration with appropriate government authorities is, however, required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. Current PRC regulations permit our PRC subsidiary to pay dividends to the Company only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our subsidiary in China 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. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. Under the existing laws of Hong Kong, funds from capital accounts can be repatriated and remitted overseas without restrictions, and there is no foreign exchange control imposed. According to the current tax practice of the Hong Kong Inland Revenue Department, dividends paid on the Ordinary Shares would not be subject to any Hong Kong tax. See “Dividend Distribution and Cash Transfer Between the Holding Company and Subsidiaries” on page 3.
The terms “the Company”, “Eastern International”, “we”, “us”, “our company”, and “our” refer to Eastern International Ltd., an exempted company incorporated under the laws of the Cayman Islands. Eastern Industrial Development Ltd. (“Eastern BVI”), a company incorporated in BVI, is a wholly owned subsidiary of Eastern International. Eastern Group Limited (“Eastern HK”), a company incorporated in Hong Kong, is a wholly owned subsidiary of Eastern BVI. and Hangzhou TC-Link Logistic Supply Chain Management Co., Ltd. (“Hangzhou TC-Link” or “WFOE”), a company incorporated in China and a wholly owned subsidiary of Eastern HK. We currently conduct substantially all of our business through Hangzhou TC-Link’s wholly owned subsidiary Suzhou TC-Link Logistics Co., Ltd. and its wholly owned subsidiaries or branches in China, including Suzhou TC-Link Logistics Co., Ltd. Shenzhen Branch office, Yancheng TC-Link Logistics Co., Ltd. Yunnan Dongyuan Dadi International Logistics Co., Ltd., Yunnan Dongyuan Dadi International Logistics Co., Ltd. Mohan Branch office, Chongqing Dayuan Logistics Co., Ltd., Wuxi TC-Link Logistics Co., Ltd., Wuxi TC-Link Logistics Co., Ltd. Dongbeitang Branch office. The securities offered in this prospectus are securities of Eastern International, our Cayman Islands holding company and investors are purchasing an interest in Eastern International, not our operating entity in China.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
| Per Share | Total | |||||||
| Public offering price | $ | $ | ||||||
| Underwriting discounts | ||||||||
| Proceeds to us, before expenses | $ | $ | ||||||
(1) |
We have agreed to pay the underwriter a discount equal to 7.25% of the public offering price. |
| (2) | We expect our total cash expense of this offering (including cash expenses payable to our underwriter for its out-of-pocket expense) not to exceed $[ ], exclusive of the discount above. These payments will further reduce proceeds available to us before expenses. For a detailed description of the compensation to be received by the underwriter, see “Underwriting.” |
We have granted the underwriter a 45-day option to purchase up to an additional 240,000 Ordinary Shares at the public offering price, less the underwriting discounts, to cover any over-allotments.
The offering is being made on a “firm commitment” basis. The underwriter is obligated to take and pay for all of the Ordinary Shares if any such Ordinary Shares are taken. We have granted the underwriters (the “Underwriter”), an option for a period of 45 days after the closing of this offering to purchase up to 15% of the total number of our Ordinary Shares to be offered by us pursuant to this offering (excluding Ordinary Shares subject to this option), solely for the purpose of covering over-allotments, at the public offering price less the underwriting discounts. If the Underwriter exercises this option in full, the total underwriting discounts payable will be $[ ] based on an assumed offering price of $[ ] per Ordinary Share, and the total gross proceeds to us, before underwriting discounts and expenses, will be $[ ].
We have agreed to issue, on the closing date of this offering, the underwriters’ warrants to Maxim Partners LLC (or any other designee of Maxim Group LLC), to purchase an amount equal to 4% of the aggregate number of Ordinary Shares sold by us in this offering with an exercisable price equal to 120% of the public offering price. For a description of other terms of the underwriters’ warrants and a description of the other compensation to be received by the underwriter, see “Underwriting.”
The Underwriter expect to deliver the Ordinary Shares against payment as set forth under “Underwriting,” on or about ●, 2025.
Maxim Group LLC
The date of this prospectus is ●, 2025
TABLE OF CONTENTS
| i |
About this Prospectus
You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or any free-writing prospectus. We are offering to sell, and seeking offers to buy, the Ordinary Shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Ordinary Shares.
For investors outside the United States, neither we nor the Underwriter have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Ordinary Shares and the distribution of this prospectus outside the United States.
We were incorporated under the laws of the Cayman Islands as an exempted company with limited liability and a majority of our outstanding securities are owned by non-U.S. residents. Under the rules of the SEC, we currently qualify for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934.
Until and including ●, 2025 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
You should rely only on the information contained in this prospectus and any free writing prospectus we may authorize to be delivered to you. Neither we nor the Underwriter have authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus and any related free writing prospectus. We and the Underwriter take no responsibility for and can provide no assurances as to the reliability of any information that others may give you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is only accurate as of the date of this prospectus, regardless of the time of delivery of this prospectus and any sale of our Ordinary Shares. Our business, financial condition, results of operations and prospects may have changed since that date.
| ii |
Other Pertinent Information
Unless otherwise indicated or the context requires otherwise, references in this prospectus to:
| ● | “Articles” refers to the amended and restated articles of association of the Company as adopted by a special resolutions passed on February 7, 2024; | |
| ● | “China” or the “PRC” are to the People’s Republic of China, excluding Taiwan and the special administrative regions of Hong Kong and Macau for the purposes of this prospectus only; |
| ● | “Chongqing Dayuan” are to Chongqing Dayuan Logistics Co., Ltd., a wholly owned subsidiary of Suzhou TC-Link and incorporated under the laws of the People’s Republic of China on April 30, 2020; | |
| ● | “Companies Act” are to the Companies Act (Revised) of the Cayman Islands as the same may be amended from time to time; | |
| ● | “Eastern BVI” are to Eastern Industrial Development Ltd. a wholly owned subsidiary of Eastern International and incorporated under laws of British Virgin Islands on August 10, 2023; | |
| ● | “Eastern HK” are to Eastern Group Limited, a wholly owned subsidiary of Eastern BVI and incorporated under the laws of the Hong Kong on September 4, 2023; | |
| ● | “Eastern International” “we,” “us,” “our company,” “the Company” and “our” are to are to Eastern International Ltd., a Cayman Islands exempted company with limited liability incorporated on July 27, 2023; | |
| ● | “EIT” is to PRC enterprise income tax; | |
| ● | “Exchange Act” are to the Securities and Exchange Act of 1934, as amended; | |
| ● | “Hangzhou TC-Link” or “WFOE” are to Hangzhou TC-Link Logistic Supply Chain Management Co., Ltd., a wholly owned subsidiary of Eastern HK and incorporated under the laws of the People’s Republic of China on September 27, 2023; | |
| ● | “Memorandum” refers to the amended and restated memorandum of association of the Company as adopted by a special resolutions passed on February 7, 2024; | |
| ● | “Memorandum and Articles of Association” refers to the Memorandum and the Articles collectively; | |
| ● | “MOFCOM” are to the Ministry of Commerce of the PRC; |
| ● | “Ordinary Share(s)” are to our ordinary shares with a par value of US$0.0001 per share; |
● |
“PCAOB” are to Public Company Accounting Oversight Board; | |
| ● | “Preferred Shares(s)” are to our preferred shares with a par value of US$0.0001 per share; |
| ● | “RMB” and “Renminbi” are to the legal currency of China; |
| ● | “SAFE” are to the State Administration of Foreign Exchange; | |
| ● | “Securities Act” to the Securities Act of 1933, as amended; | |
| ● | “Suzhou TC-Link” are to Suzhou TC-Link Logistics Co., Ltd. a wholly owned subsidiary of Hangzhou TC-Link and incorporated under the laws of the People’s Republic of China on January 9, 2006 and its branch office of Suzhou TC-Link Logistics Co., Ltd. Shenzhen Branch; | |
| ● | “U.S.” are to the United States of America; |
| ● | “US$,” “U.S. dollars,” “$” and “dollars” are to the legal currency of the United States; | |
| ● | “VIE” are to variable interest entity; and | |
| ● | “Wuxi TC-Link” are to Wuxi TC-Link Logistics Co., Ltd. a wholly owned subsidiary of Suzhou TC-Link incorporated under the laws of the People’s Republic of China on May 19, 2016 and its branch office of Wuxi TC-Link Logistics Co., Ltd. Dongbeitang Branch; | |
| ● | “Yancheng TC-Link” are to Yancheng TC-Link Logistics Co., Ltd. a wholly owned subsidiary of Suzhou TC-Link incorporated under the laws of the People’s Republic of China on June 22, 2016; | |
| ● | “Yunnan Dongyuan” are to Yunnan Dongyuan Dadi International Logistics Co., Ltd. a wholly owned subsidiary of Suzhou TC-Link incorporated under the laws of the People’s Republic of China on November 5, 2018 and its branch office of Yunnan Dongyuan Dadi International Logistics Co., Ltd. Mohan Branch. |
Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the Underwriter of its over-allotment option.
Our business is conducted by our subsidiaries in the PRC, using Renminbi (“RMB”), the currency of China. Our consolidated financial statements are presented in U.S. dollars. In this prospectus, we refer to assets, obligations, commitments, and liabilities in our consolidated financial statements in U.S. dollars. These dollar references are based on the exchange rate of RMB to U.S. dollars, 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 U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets, including accounts receivable (expressed in dollars).
| iii |
This summary highlights certain information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including our financial statements and related notes and the risks described under “Risk Factors” beginning on page 12. We note that our actual results and future events may differ significantly based upon a number of factors. This prospectus contains information from an industry report commissioned by us and prepared by CEVSN Information Consulting Co., Ltd., an independent research firm, to provide information regarding our industry and our market position in China. We refer to this report as the “CEVSN Report” The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.
Overview
We are a holding company incorporated in the Cayman Islands. Our Ordinary Shares offered in this prospectus are shares of our Cayman Islands holding company. As a holding company with no material operations of our own, we conduct our business through our operating subsidiaries in China. We own 100% equity interest of all our subsidiaries including the operating subsidiary in China and do not have a VIE structure.
We, through Suzhou TC-Link, provide domestic and cross-border professional logistic services including project logistic and general logistic for company clients. Suzhou TC-Link was established on January 9, 2006 in Jiangsu Province, China. Suzhou TC-Link has obtained the internationally recognized IS09001 certificate of high-quality service (2015 standard), and it has 4 wholly owned subsidiaries, 5 warehouses/logistic centers and 3 branch offices of its subsidiaries in China. Suzhou TC-Link was rated as a key logistics enterprise in Jiangsu Province by Industry and Information Technology Department of Jiangsu in 2018, an AAA-level credit enterprise and a Class A contractor qualification for large power products transportation by China Water Resources and Electric Power Association On Physical Distribution in 2021 and 2023, respectively, and an AAA-level logistics enterprise by China Federation of Logistics & Purchasing in 2023. Suzhou TC-Link and Yancheng TC-Link have the road transportation permits from transportation bureau for large-size items/cargo transportation and Suzhou TC-Link’s business license also includes non-vessel operating common carrier business. Suzhou TC-Link’s operating network covers key cities in mainland China, Hong Kong, Southeast Asia and Central Asia. Suzhou TC-Link has an independently developed enterprise resource planning (ERP) management system.
Our project logistic services mainly include construction project logistics and special cargo logistics for large or precision equipment. Construction project logistics range from certain stage or entire process of construction projects. including purchase, packaging, storage, loading and unloading, transportation, fixation, installation of the equipment and machinery for construction as well as other related logistic services. We primarily provide our logistic solution services for new energy projects (including wind power turbine, photovoltaic, renewable energy storage, etc.), chemical equipment, engineering and infrastructure construction projects (including roads and bridges, tunnel construction). Special cargo logistics for large or precision equipment refer to logistic services to the manufacturers or purchasers of special and customized large and/or precision equipment, such as stamping machines, lathe, aircraft engines, and others. We study the operations of our clients, analyze their logistics needs and provide them with specific solutions which will improve the cost efficiency and achieve higher services’ quality). We have provided logistic services in China for wind power turbine projects which were exported to countries including Vietnam, UAE, Australia, South Africa and Chile.
Our general logistic services refer to the transportation, warehousing, loading and unloading, and distribution of ordinary products. For instance, we provide logistic services for the household appliances manufacturers including the transportation of goods from manufacturing factories to warehouses, and to distributors’ warehouses nationwide according to customers’ instructions. Delivery can be made in whole truckload or less-than truckload. we have built a network with subsidiaries and offices in Suzhou, Wuxi, Yancheng, Chengdu, Chongqing, Guangzhou, Shenzhen, Kunming, Mohan covering most of major cities and areas in China.
The Company has started its cross-border logistic services since 2019, mainly focus on inland transportation and railway transportation between Mainland China and Southeast Asia countries for cargoes, such as bulk commodities, electronic products, tires, new energy equipment and other machineries. For example, we completed transportation from Laos to China of 707 units of 40ft containers, 914 units of 20ft containers and 244 units of open top containers for rubber, iron ore, barley and Cassava starch in 2022. We also provided service for the shipment of washing machines through China-Europe Railway Express to Europe.
The Company owns 20 trucks and has cooperative relationships with other owners and drivers for over 2,000 trucks for domestic long-distance transportation and less than carload goods. When we receive orders and projects, we make inquires to these drivers/owners and ask them to provide a fee estimate for the job. If they provide reasonable price or their prices are less than costs for which we use our own trucks, we will engage these drivers to undertake the transportation. We will provide them with time and location to load the goods and provide name, contact information and license plate of the driver and truck to our clients. After the delivery is completed, we will collect payment from the clients and pay such drivers directly. The Company also has 5 warehouses/logistic centers in three different provinces, with a total of over 25,000 square meters areas providing general and special storage, distribution and value-added services to clients, See Facilities on page 81.
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Our total revenues decreased approximately by $402,000, or 1.0%, from approximately $40.4 million for the year ended March 31, 2024 to approximately $40.0 million for the year ended March 31, 2025. Our net income increased by approximately $696,000, or 64.3%, from net income approximately $1.1 million for the year ended March 31, 2024 to net income approximately $1.8 million for the year ended March 31, 2025.
Our operating subsidiaries are incorporated and operating in mainland China and they have received all required permissions from Chinese authorities to operate its current business in China, which are Business licenses, Customs Registration Certificate, Bank Account Open Permits, and Permits for Road Transportation of general goods and large sized items/cargo.
As a logistic service provider, based on the advice of Zhonglun Law Firm, our PRC counsel, we do not believe that we and our subsidiaries are Critical Information Infrastructure Operators (“CIIO”) or Online Platform Operators as defined in Cybersecurity Review Measures published by Cyberspace Administration of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People’s Bank of China, State Administration for Market Regulation, State Administration of Radio and Television, China Securities Regulatory Commission, State Secrecy Administration and State Cryptography Administration on December 28, 2021 and became effective on February 15, 2022. As of the date of this prospectus, we and our subsidiaries (1) are not required to obtain permissions from any PRC authorities to issue our securities being registered for sale to foreign investors other than the filing requirement with CSRC within three business days after we make any oversea securities offering under New Overseas Listing Rules, (2) are not subject to permission requirements from China Securities Regulatory Commission (the “CSRC”), Cyberspace Administration of China (“CAC”) or any other authority that is required to approve of our business operations in China, and (3) have not received or were denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. On February 17, 2023, the CSRC released the New Overseas Listing Rules with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means. Pursuant to the New Overseas Listing Rules, domestic companies that seek initial public offering or listing securities overseas, both directly and indirectly, shall file with the CSRC within three working days after the submission of overseas offering/listing application. Furthermore, upon the occurrence of any of the material events specified below after an issuer has completed its offering and listed its securities on an overseas stock exchange, the issuer shall submit a report thereof to the CSRC within three working days after the occurrence and public disclosure of the event: (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other competent authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. The New Overseas Listing Rules stipulate the legal consequences to the companies for breaches, including failure to fulfil filing obligations or filing documents having false statement or misleading information or material omissions, which may result in a fine ranging from RMB 1 million to RMB 10 million, and in cases of severe violations, the relevant responsible persons may also be barred from entering the securities market. We are subject to the relevant filing procedures of the CSRC in connection with our overseas offerings under the New Overseas Listing Rules, including the public offering pursuant to this registration statement. The CSRC completed its review and concluded its filing procedure with a formal notice to the Company on September 29, 2024. On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secretes Protection and the National Archives Administration released the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions, which took effect on March 31, 2023. PRC domestic enterprises seeking to offer securities and list in overseas markets, either directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that (i) providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals shall be subject to corresponding procedures in accordance with relevant laws and regulations; and (ii) any working papers formed in the territory of the PRC by securities companies and securities service agencies that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with relevant laws and regulations. Our operating subsidiaries provide logistic services, and they are not cyberspace operators with personal information of more than 1 million users or activities that affect or may affect national security and they don’t have documents and materials which may adversely affect national security or public interests. However, given the current PRC regulatory environment, it is uncertain whether we or our PRC subsidiaries will be able to obtain such permission or be required to obtain other permission from the PRC government to list on U.S. exchanges or offer its securities overseas, and even when such permission is obtained, whether it will be denied or rescinded. If we or our subsidiaries do not receive or maintain such permissions or approvals, inadvertently conclude that such permissions or approvals are not required, or applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, it could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors, cause the value of our securities to significantly decline or become worthless and could result in a material and negative impact on our business operations, including fines or penalties imposed by the relevant PRC regulatory authority, revocation our subsidiaries’ business licenses and suspension of their respective business operations.
Our independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is headquartered in the U.S., and has been inspected by the PCAOB on a regular basis with the last inspection in 2023 and is not subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated on December 15, 2022. The Holding Foreign Companies Accountable Act and related regulations currently does not affect the Company as the Company’s auditor is subject to PCAOB’s inspection and investigation. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination, 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 it relates to our audit. If it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction or any other reasons, the lack of inspection could cause the trading in our securities to be prohibited under the Holding Foreign Companies Accountable Act, and as a result Nasdaq may delist our securities. If our securities are unable to be listed on another securities exchange, such a delisting would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our Ordinary Shares. Further, new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our Ordinary Shares on Nasdaq, which could materially impair the market for and market price for our securities.
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Dividend Distribution and Cash Transfer Between the Holding Company and Subsidiaries
Our PRC operating entity receives substantially all of our revenue in RMB. Under our current corporate structure, to fund any cash and financing requirements. We may rely on dividend payments from Eastern HK and WFOE. WFOE receives dividend payments from our operating subsidiaries. WFOE may make distribution of such payments to Eastern HK as dividends.
Under existing 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 SAFE by complying with certain procedural requirements. Therefore, WFOE is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulations, such as the overseas investment registrations by our shareholders who are PRC residents. Approval from or registration with appropriate government authorities is, however, required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions.
Current PRC regulations permit our PRC subsidiary to pay dividends to the Company only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our subsidiary in China 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. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. Under the existing laws of Hong Kong, funds from capital accounts can be repatriated and remitted overseas without restrictions, and there is no foreign exchange control imposed. According to the current tax practice of the Hong Kong Inland Revenue Department, dividends paid on the Ordinary Shares would not be subject to any Hong Kong tax.
As of the date of this prospectus, WFOE has not made any dividends or distributions to Eastern HK, and Eastern HK has not made any dividends or distribution to the holding company, and no dividends or distributions have been made by the Company to its shareholders. We intend to keep any future earnings to re-invest in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Under the Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in 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.
Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%. Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Tax Evasion With Respect to Taxes On Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5%, if the recipient of the relevant dividends qualifies certain necessary requirements, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. The 5% withholding tax rate, however, does not automatically apply and in current practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC 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 Taxation Arrangement with respect to any dividends paid by WFOE to its immediate holding company, Eastern HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Eastern HK intends to apply for the tax resident certificate if and when WFOE plans to declare and pay dividends to Eastern HK.
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Our Competitive Strengths
We believe the following strengths differentiate us from our competitors and are key drivers of our success:
(1) Technical and qualification advantages
We are committed to become one of the leading comprehensive project logistics service providers in China and Southeast Asia countries. As a logistics supplier for construction and engineering projects in China, we have obtained relevant technical qualifications and government permits necessary for providing such services legally, such as large-cargo transportation permit and non-vessel operating carrier qualification approved and granted by the transportation authorities. We have also obtained a Class A contractor qualification for large cargo transportation issued by China Water Resources and Electric Power Material Circulation Association. To obtain these qualifications, the applicants are typically subject to stringent assessment and verification by relevant authorities which is a major barrier for other business trying to enter into this area.
(2) Geographic Advantage
The Company is located in Eastern China, an economically developed region in mainland China. The businesses in this region have expanded across Chinese and overseas markets.
The Company’s operating headquarters are located in Suzhou city, and it has wholly-owned subsidiaries in Wuxi, Yancheng, Chongqing, and Kunming. Yancheng is a base for China’s offshore wind power turbine industry, a pioneer for China’s offshore wind power turbine development. The company has established long-term strategic cooperation with Sheyang Port in Yancheng, and Yangjiang Port in Guangdong, and seized the opportunity to tap into regional resources and gained unique prime location advantages to access to the massive offshore wind power turbine industry in China.
(3) Brand Advantages
After nearly 20 years of development, the Company’s reputation in the Chinese project logistics industry has been well recognized by the industry. The Company has established long-term strategic cooperation with leading domestic enterprises in wind power turbine, photovoltaic, power storage, electrical appliances, daily chemical, chemical equipment and other industries (including well-known state-owned large enterprises, and listed leading enterprises, etc.). The Company was featured in the economic programs on China central TV in March 2019 and January 2024, respectively.
(4) Talents Advantages
Over 78.94% of our management and finance professionals have college degree or above. The average age of our management and financial professionals is 40 years old. Over 61.11% of our technicians have a college degree or above and more than 80% of our technicians have over 15 years of experience in the industry. The project logistics industry requires comprehensive talents with diverse skills, knowledge and backgrounds in operations, management, e-commerce, marketing, third-party logistics management, and other related fields. China’s project logistics industry will face a relative shortage of high-end talents for a long period of time.
After years of development, the Company has established a professional and stable logistics business team, with certain talent and team advantages. At present, the core management personnel of the Company are stable and most of them having more than 15 years of experience in the logistics industry. Our team has a deep understanding of the project logistics industry and can accurately grasp the industry’s development trends. Based on the Company’s well-developed operating system and information system, the business team can quickly respond to various market demands and provide customers with timely and efficient engineering logistics services.
However, our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our senior management does not have experience managing a publicly-traded company and such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. See Risk Factors - Risks Related to Our Business - The relative lack of public company experience of our management team may put us at a competitive disadvantage.
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Our Growth Strategy
We are committed to become one of the leading comprehensive project logistics service providers in China and Southeast Asia countries, with following strategies to further our growth.
Expand Market Share in China We will leverage our existing advantages in terms of brand, talent, and technology to fulfil our expansions in Chinese domestic project logistics and general logistics market. With a successful initial public offering and listing on Nasdaq, we believe our existing clients have more confidence in us and with additional financing and resources from the capital market, we can increase our capacity to meet with our clients’ needs. We will also explore in providing our services to new clients of other related industries that we are not currently serving with our experience, capacity, connection and resources Recently, we have been engaged in trial orders for the transportation of aircraft engines and other precision equipment and will further explore this market as there is much potentials.
Developing markets in Southeast Asia Countries. To meet the increasing needs for logistics services for the business expansion and commercial development by Chinese companies in Southeast Asia countries, we plan to expand our project logistics services to these countries to follow the steps of our existing clients that are the industry leaders and are involving in the construction of manufacturing plants and infrastructure projects in the Southeast Asia countries.
Extension of Service Scopes. We will extend our services to cover more areas along the supply chain system, to provide additional upstream and downstream services, enable our clients to enhance their operation efficiency and quality, including the hoisting and installation of machineries, parts and engines replacement, repair and maintenance. Also, to apply such services to new clients in various industries such as the providing of services to the aviation industry in the moving of aircraft engines.
Improve engineering technology and equipment. We plan to actively develop and optimize our logistics management system to provide an integrated platform for the entire management and operation uses. We will also aggressively upgrade and update our technology, know-how, equipment and tools to cope with our development, improve our competitiveness, better control operating cost, reduce energy consumption and carbon emissions.
Seeking Strategic Partnership and Acquisition Opportunities. We will seek opportunities to establish long term strategic partnership with industry leaders and their stakeholders in various industries, and will explore opportunities in acquisitions of good assets and targets to further increase our business scales.
Corporate History and Structure
Eastern International Ltd. is a holding company incorporated in the Cayman Islands on July 27, 2023. Eastern International Ltd. established its directly wholly owned subsidiary, Eastern Industrial Development Ltd. (“Eastern BVI”) on August 10, 2023. Eastern BVI established its directly wholly owned subsidiary Eastern Group Limited (“Eastern HK”) on September 4, 2023. Eastern HK established a wholly foreign-owned subsidiary Hangzhou TC-Link Logistics Supply Chain Management Co., Ltd. (“Hangzhou TC-Link” or “WFOE”) in China on September 27, 2023. Eastern International Ltd., Eastern BVI, Eastern HK and WFOE have no material operations. In anticipation of this offering, we completed a reorganization of the Company by October 16, 2023.
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The Ordinary Shares offered in this offering are shares of the Cayman Islands holding company. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our subsidiary based in China.
Since Eastern International Ltd. and its subsidiaries are effectively controlled by the same controlling shareholders before and after the Reorganization, they are considered under common control. The above-mentioned transactions were accounted for as a recapitalization. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
Upon the Reorganization, the Company has subsidiaries in countries and jurisdictions including PRC, Hong Kong and BVI. Details of the subsidiaries of the Company are set out below:
| Name of Entity | Date
of Incorporation | Place
of Incorporation | %
of Ownership | Principal Activities | ||||||||
| Eastern BVI | 8/10/2023 | BVI | 100 | Holding Company | ||||||||
| Eastern HK | 9/4/2023 | Hong Kong | 100 | Holding Company | ||||||||
| Suzhou TC-Link | 1/9/2006 | China | 100 | Logistic Services (Transportation and warehouse subleasing services) | ||||||||
| Hangzhou TC-Link | 9/27/2023 | China | 100 | Logistic Services (Transportation and warehouse subleasing services) | ||||||||
| Yancheng TC-Link | 6/22/2016 | China | 100 | Logistic Services (Transportation and warehouse subleasing services) | ||||||||
| Yunnan Dongyuan | 11/5/2018 | China | 100 | Transportation services | ||||||||
| Chongqing Dayuan | 4/30/2020 | China | 100 | Transportation services | ||||||||
| Wuxi TC-Link | 5/19/2016 | China | 100 | Warehouse subleasing services | ||||||||
The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities, as of the date of this prospectus and immediately upon the completion of this offering, assuming no exercise of the over-allotment by the Underwriter:
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As a result of our corporate structure, the Company’s ability to pay dividends may depend upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.
We have adopted a dual-class share structure such that our shares consist of Ordinary Shares and Preferred Shares. In respect of matters requiring the votes of shareholders, each Ordinary Share is entitled to one (1) vote and each Preferred Share is entitled to ten (10) votes. The Preferred Shares may be converted into Ordinary Shares by its holder at any time at the option of the holder. We will sell Ordinary Shares in this offering. We have authorized 50,000,000 Preferred Shares and our Chairman and Chief Executive Officer Mr. Albert Wong beneficially owns all 1,000,000 issued and outstanding Preferred Shares and 4,266,000 Ordinary Shares. Mr. Albert Wong will hold 64.8% of the aggregate voting power of our total issued and outstanding shares immediately upon the completion of this offering, assuming the underwriters do not exercise their over-allotment option, and will hold 64.1% of the aggregate voting power of our total issued and outstanding shares immediately upon the completion of this offering assuming the underwriters exercise their over-allotment option in full; and therefore will continue to have, substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions.
On February 21, 2024, the Company issued 417,000 Ordinary Shares to four investors, including 317,000 Ordinary Shares to third party investors and 100,000 Ordinary Shares to our chief financial officer, in a private placement transaction for aggregated proceeds of $834,000.
Implications of Being a “Foreign Private Issuer”
We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:
| ● | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; |
| ● | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies; |
| ● | we are not required to provide the same level of disclosure on certain issues, such as executive compensation; |
| ● | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; |
| ● | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and |
| ● | our insiders are not required to comply with Section 16 of the Exchange Act requiring such individuals and entities to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction. |
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Implications of Being an “Emerging Growth Company”
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting and financial disclosure requirements that are applicable to other public companies that are not emerging growth companies, including but not limited to (1) presenting only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations in this prospectus, (2) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), (3) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (4) exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these exemptions. As a result, investors may find investing in our Ordinary Shares less attractive.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. As a result, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of such extended transition period.
We could remain an emerging growth company for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
Implications of Being a “Controlled Company”
Under the Nasdaq rules, a “controlled company” is a company with more than 50% of its voting power held by a single person, entity or group. Public Companies that qualify as a “Controlled Company” with securities listed on the Nasdaq Stock Market (Nasdaq), must comply with the exchange’s continued listing standards to maintain their listings. Nasdaq has adopted qualitative listing standards. Companies that do not comply with these corporate governance requirements may lose their listing status. Under Nasdaq rules, a controlled company is exempt from certain corporate governance requirements including:
| ● | the requirement that a majority of the board of directors consist of independent directors; |
| ● | the requirement that a listed company have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; |
| ● | the requirement that a listed company have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and |
| ● | the requirement for an annual performance evaluation of the nominating and governance committee and compensation committee. |
Controlled companies must still comply with the exchange’s other corporate governance standards. These include having an audit committee and the special meetings of independent or non-management directors.
Upon the completion of this offering, Mr. Albert Wong, the Chairman of our board of directors and our Chief Executive Officer, Mr. Albert Wong, the Chairman of our board of directors and our Chief Executive Officer, will beneficially own 64.8% of the voting power for election of directors assuming the Underwriter does not exercise its over-allotment option, or 64.1% of the voting power for election of directors if the Underwriter exercises its over-allotment option in full. As a result, upon completion of this offering, we will be a “controlled company” as defined under the Nasdaq Stock Market Rules. As a “controlled company,” we will be permitted to elect not to comply with certain corporate governance requirements. See “Risk Factors—Risks related to our Ordinary Shares and this offering— We will be a “controlled company” as defined under the Nasdaq Stock Market Rules. As a result, we may rely on exemptions from certain corporate governance requirements and holders of our Ordinary Shares may not have the same protections generally available to shareholders of other companies listed on stock exchanges in the United States.”
Corporate Information
Our principal executive offices are located at Suite 901-903, 9th Floor, Building #2, Qianwan Zhigu, Chuanhua Smart CenterScience and Technology City Block, Xiaoshan Economic and Technological Development Zone, Xiaoshan District, Hangzhou, Zhejiang Province, China 311231. Our telephone number at this address is +86-571-8235-6096. Our registered office in the Cayman Islands is located at 3-212 Governors Square, 23 Lime Tree Bay Avenue, P.O. Box 30746, Seven Mile Beach, Grand Cayman KY1-1203, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc. located at 122 East 42nd Street, 18th Floor, New York, NY 10168. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is www.elogint.com. The information contained on our website is not a part of this prospectus.
Summary of Risk Factors
We are a holding company incorporated in the Cayman Islands, investing in our Ordinary Shares involves significant risks. All of our revenues were generated by our PRC operating subsidiary. You should carefully consider all of the information in this prospectus before making an investment in our Ordinary Shares. We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects.
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Risks Related to Our Business
| ● | We have a substantial customer concentration, with a limited number of customers accounting for a large portion of our revenues. (see page 12 of this prospectus) |
| ● | We face risks associated with the items we deliver and the contents of shipments handled through our logistics networks, including real or perceived quality issues with the services, and risks inherent in the logistics industry, including personal injury, product damage, and transportation-related incidents. (see page 13 of this prospectus) |
| ● | Uncertain economic or social conditions may adversely impact demand for our products or cause our customers and other business partners to suffer financial hardship, which could adversely impact our business. (see page 12 of this prospectus) |
| ● | A significant change in customer relationships or in customer demand for our services could have a significant impact on our business (see page 12 of this prospectus) |
| ● | Our business may be affected by fluctuations in China’s transportation market. (see page 14 of this prospectus) |
| ● | We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. (see page 19 of this prospectus) |
| ● | We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations. (see page 20 of this prospectus) |
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 results of operations. (see page 22 of this prospectus) |
| ● | We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have. Any limitation on the ability of our WFOE to pay dividends to us could have a material adverse effect on our ability to conduct our business. (see page 24 of this prospectus) |
| ● | PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of this offering to make loans to our PRC subsidiaries or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business. (see page 25 of this prospectus) |
| ● | Uncertainties and quick change in the PRC legal system with little advance notice could result in a material and negative impact our business operations, decrease the value of our Ordinary Shares and limit the legal protections available to you and us. (see page 24 of this prospectus) |
| ● | 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 could result in a material change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors and, and cause the value of our Ordinary Shares to significantly decline or be worthless. (see page 27 of this prospectus) |
| ● | Because we are a Cayman Islands corporation 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. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. (see page 27 of this prospectus) |
| 9 |
| ● | The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly. Further implementations and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB’s determination of its lack of sufficient access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in mainland China. A potential consequence is that our Ordinary Shares may be delisted by the exchange. The delisting of our Ordinary Shares, or the threat of our Ordinary Shares being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct full inspections of our auditor deprives our investors of the benefits of such inspections. (see page 28 of this prospectus) |
| ● | We have completed the required filings with the CSRC for this offering. However, the approval, filing, and/or other administration requirements of the CSRC or other PRC governmental authorities may be required in connection with our future securities offerings under PRC law, and, if required, we cannot assure you that we will be able to timely make such filing, in which case we may face sanctions by the CSRC or other PRC regulatory agencies for failure to timely file with the CSRC for such offerings. (see page 30 of this prospectus) |
| ● | Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China. (see page 33 of this prospectus) |
Risks Related to Our Ordinary Shares and This Offering
| ● | There has been no public market for our shares prior to this offering, and if an active trading market does not develop you may not be able to resell our shares at or above the price you paid, or at all. (see page 34 of this prospectus) |
| ● | We have broad discretion in the use of the net proceeds from this offering and may not use them effectively. (see page 36 of this prospectus) |
| ● | We are not likely to pay cash dividends in the foreseeable future. (see page 37 of this prospectus) |
These risks are discussed more fully in the section titled “Risk Factors” beginning on page 12 of this prospectus, and other information included in this prospectus, for a discussion of these and other risks and uncertainties that we face.
| 10 |
| Below is a summary of the terms of the offering: | ||
| Issuer | Eastern International Ltd. | |
| Securities being offered: | 1,600,000 Ordinary Shares. | |
| Initial offering price: | We currently estimate that the initial public offering price will be between $4.00 and $5.00 per Ordinary Share. | |
| Number of Ordinary Shares outstanding before the offering: | 10,417,000 of our Ordinary Shares are outstanding as of the date of this prospectus. | |
| Over-allotment option | We have granted the Underwriter an option for a period of 45 days to purchase up to an aggregate of 240,000 additional Ordinary Shares. | |
| Number of Ordinary Shares Outstanding After the Offering: | 12,017,000 Ordinary Shares assuming no exercise of the Underwriter’s over-allotment option.
12,257,000 Ordinary Shares assuming full exercise of the Underwriter’s over-allotment option. | |
| Gross proceeds to us, net of underwriting discounts but before expenses1: | Between $5,936,000 and $7,420,000, based on an offering price between $4.00 and $5.00. | |
| Use of proceeds: | We intend to use the net proceeds of this offering: (1) approximately 20% for development of project logistic business in Southeast Asia; (2) approximately 20% for investment in equipment and machines and other capital expenditure; (3) approximately 10% for development of logistic management system and internal training for employees to improve management and technical skills; (4) approximately 10% for potential acquisition of high quality logistic team or company; and (5) approximately 40% for working capital and other general corporate purposes, see “Use of Proceeds” on page 44. | |
| Lock-up | All of our directors and officers and certain shareholders have agreed with the Underwriter, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our Ordinary Shares or securities convertible into or exercisable or exchangeable for our Ordinary Shares for a period of six months after the effectiveness of the registration statement, of which this prospectus forms a part. See “Shares Eligible for Future Sale” and “Underwriting” for more information. | |
| Transfer Agent | VStock Transfer, LLC | |
| Proposed Nasdaq Symbol: | ELOG | |
| Risk factors: | Investing in our Ordinary Shares involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 12. | |
| 1 | Excludes Ordinary Shares pursuant to the Underwriter’s over-allotment option. |
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An investment in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our Ordinary Shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our Ordinary Shares could decline, and you may lose all or part of your investment.
Risks Related to Our Business
Uncertain economic or social conditions may adversely impact demand for our services or cause our customers and other business partners to suffer financial hardship, which could adversely impact our business.
Our business could be negatively impacted by reduced demand for our services related to one or more significant local, regional or global economic or social disruptions. These disruptions have included and may in the future include: a slow-down, recession or inflationary pressures in the general economy; reduced market growth rates; tighter credit markets for our suppliers, vendors or customers; a significant shift in government policies; significant social unrest; the deterioration of economic relations between countries or regions, including potential negative consumer sentiment toward non-local service providers; or the inability to conduct day-to-day transactions through our financial intermediaries to pay funds to or collect funds from our customers, vendors and suppliers. Additionally, these and other economic conditions may cause our suppliers, distributors, contractors or other third-party partners to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results of operations could be adversely affected.
Customers may also suffer financial hardships due to economic conditions such that their accounts become uncollectible or are subject to longer collection cycles.
We have a substantial customer concentration, with a limited number of customers accounting for a large portion of our revenues.
We derive a large portion of our revenues from a few major customers. For the year ended March 31, 2025, three customers accounted for approximately 20%, 12% and 11% of the Company’s total revenues, respectively. For the year ended March 31, 2024, two customers accounted for approximately 35% and 23% of the Company’s total revenues, respectively. There are inherent risks whenever a large percentage of the total revenue is concentrated with one customer. It is not possible for us to predict the future level of demand for our services that will be generated by such customers or the future demand for our services by such customers. If such customers experience declining or delayed demands due to market, economic or competitive conditions, we could be pressured to reduce our prices or they could decrease the purchase quantity of our services, which could have an adverse effect on our margins and financial position, and could negatively affect our revenues and results of operations. If our largest customer terminates the purchase of our services, such termination would materially negatively affect our revenues, results of operations and financial condition.
We rely on a limited number of vendors, and the loss of our significant vendor could harm our business, and the loss of any one of such vendors could have a material adverse effect on our business.
We purchase a significant portion of our supplies from a few major suppliers. For the year ended March 31, 2025, three suppliers accounted for approximately 23%, 17%, and 11% of the total purchases. For the year ended March 31, 2024, one supplier accounted for approximately 32% of the total purchases. If any of these suppliers increase the price for raw materials, we could be pressured to increase our prices or reduce our profit margin, which could cause us to lose customers and negatively affect our revenues and profit margin.
A significant change in customer relationships or in customer demand for our services could have a significant impact on our business.
We provide most of our services via large construction company customers and small retailers, which include mass merchandisers, e-commerce (including social commerce) channels. Our success depends on our ability to successfully manage relationships with our customers, which includes our ability to offer terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued concentration among our customers could create significant cost and margin pressure on our business, and our business performance could suffer if we cannot reach agreement with a key customer on terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the spending in projects and our services due to slow down of general economy in China and decrease in infrastructure investment.
We face intense competition which could adversely affect our results of operations and market share.
The industries we operate in are highly competitive and fragmented and we may compete with a broad range of companies, such as integrated supply chain solution and service providers, and express and freight delivery service providers. Specifically, there are multiple existing market players that offer integrated supply chain solutions and logistics services, and there may be new entrants emerging in each of the markets we operate in, which compete to attract, engage and retain consumers and merchants. These companies may have greater financial, technological, research and development, marketing, distribution, and other resources than we do. They may also have longer operating histories, a larger customer base or broader and deeper market coverage. As a result, our competitors may be able to respond more quickly and effectively to new or evolving opportunities, technologies, standards or user requirements than we do and may have the ability to initiate or withstand significant regulatory changes and industry evolvement. Furthermore, when we expand into other markets, we will face competition from new competitors, domestic or foreign, who may also enter markets where we currently operate or plan to operate.
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Any significant increase in competition may have a material adverse effect on our revenue and profitability as well as on our operations and business prospect. We cannot assure you that we will be able to continuously distinguish our services from those of our competitors, preserve and improve our relationships with various participants in the logistics industry, or increase or even maintain our existing market share. We may experience the loss of market share, and our financial condition and results of operations may deteriorate if we fail to compete effectively.
In addition, many operators in the logistics industry have consolidated in recent years to create larger enterprises with greater bargaining power, which created greater competitive pressures on us. If this consolidation trend continues, this industry will be more competitive. New partnerships and strategic alliances in the logistics industry also can alter market dynamics and adversely impact our businesses and competitive positioning. If we cannot equip ourselves with necessary resources and skills, we may lose our market share as competition increases. In addition, our current and potential competitors may also establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and offerings. If we are unable to anticipate or react to these competitive challenges, our competitive position could be undermined, and we could experience a decline in growth which may adversely affect our business, financial condition and results of operations. Further, certain large retailers or e-commerce platforms may establish or further develop their own logistics networks leveraging on their established warehousing and delivery capacities in selected areas in order to gain control of the consumer touchpoint and to create synergies with their businesses. They may also compete with us for qualified delivery personnel and warehouse staff with competitive remuneration. Any of the above could adversely affect our results of operations and market share.
We face risks associated with the items we deliver and the contents of shipments handled through our logistics networks, including real or perceived quality issues with the services, and risks inherent in the logistics industry, including personal injury, product damage, and transportation-related incidents.
We handle a large volume of parcels, equipment and freights across our logistics network, and face challenges with respect to the protection and examination of these items. Parcels, equipment and freights delivered by us may be delayed, stolen, damaged or lost during delivery for various reasons, and we may be perceived or found liable for such incidents. In addition, we may fail to screen parcels and detect unsafe, prohibited or restricted items. Unsafe items, such as flammables and explosives, toxic or corrosive items and radioactive materials, may damage other parcels in our network, harm the personnel and facilities of us, or even injure the recipients. Furthermore, if we fail to prevent prohibited or restricted items from entering into our network and if we participate in the transportation and delivery of such items unknowingly, we may be subject to administrative or even criminal penalties, and if any personal injury or property damage is concurrently caused, we may also be liable for civil compensation.
The delivery of parcels, equipment and freights also involves inherent risks. We constantly use a large number of vehicles and personnel in transportation, and are therefore subject to risks associated with transportation safety. The insurance maintained by us may not fully cover the liabilities caused by transportation related injuries or losses. From time to time, the vehicles and personnel of our third-party business partners may be involved in transportation and vehicle accidents, and the parcels carried by them may be lost or damaged. In addition, frictions or disputes may occasionally arise from the direct interactions between the pickup and delivery personnel with senders and recipients. Personal injuries or property damages may arise if such incidents escalate.
Any of the foregoing could disrupt our services, cause us to incur substantial expenses and divert the time and attention of our management. We may face claims and incur significant liabilities if found liable or partially liable for any of injuries, damages or losses. Claims against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. Any uninsured or underinsured loss could negatively influence our business and financial condition. Governmental authorities may also impose significant fines on us or require us to adopt costly preventive measures. Furthermore, if our services are perceived to be insecure or unsafe by our customers, our business volume may be significantly reduced, and our business, financial condition and results of operations may be materially and adversely affected.
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We may be exposed to credit risks in relation to defaults from customers.
Our exposure to credit risk may be influenced mainly by the individual characteristics of each customer as well as the industry or country in which the customers operate, and may be concentrated on few number of customers. Although we will monitor our exposure to credit risk on an ongoing basis and make periodic judgment on impairment of overdue receivables based on the likelihood of collectability, we cannot assure you that all of our customers are creditworthy and reputable and will not default on payments in the future. If we encounter significant delays or defaults in payment by our customers or are otherwise unable to recover our accounts receivables, our cash flow, liquidity and financial condition may be materially and adversely affected.
Failure to successfully implement our business strategy, effectively respond to changes in market dynamics and satisfactorily meet customer demand will cause our future financial results to suffer.
We are making significant investments and other decisions in connection with our long-term business strategy including our ability to expand the breadth and depth of our solutions and services and further invest in technologies. Such initiatives and enhancements may require us to make significant capital expenditures. Additionally, in developing our business strategy, we make certain assumptions including, but not limited to, those related to customer demand and preferences, competition landscape and the economy in China and globally. However, the actual market, economic and other conditions may be different from our assumptions. As the technology, customer behavior and market conditions continue to evolve, it is important that we maintain the relevance of our brand and service offerings to our customers. If we are not able to successfully implement our business strategies and effectively respond to changes in market dynamics, our future financial results will suffer. We have also incurred, and may continue to incur, increased operating expenses in connection with certain changes to our business strategies.
In addition, we make planning and spending decisions, including capacity expansion, procurement commitments, personnel needs and other resource requirements based on our estimate of customer demand. In particular, we may potentially experience capacity and resource shortages in fulfilling customer orders during peak season of e-commerce consumption or following special promotional campaigns on any e-commerce platforms. Failure to meet customer demand in a timely fashion or at all will adversely affect our competitive position, financial condition and results of operations.
Our business may be affected by fluctuations in China’s transportation market.
We are sensitive to changes in overall economic conditions that impact cargo volumes and truck capacity. China’s transportation market historically has experienced cyclical fluctuations due to economic slowdowns, downturns in business cycles of shippers, volatility in energy price, pandemic and other economic factors beyond our control. Deterioration in the economic environment subjects our business to various risks, including the following that may have a material and adverse impact on our operating results and cause us not to achieve growth or profitability:
| ● | a reduction in overall infrastructure projects and cargo volumes reduces our revenue and opportunities for growth; in addition, a decline in the volume of cargo shipped due to a downturn in shippers’ business cycles or other factors generally results in decreases in order pricing, as truckers compete for orders to maintain productivity, which will affect our monetization opportunities; |
| ● | a number of our cooperative trucking companies may go out of business and we may be unable to have sufficient truckers/driver to meet shippers’ demand when the market recovers; and |
| ● | we may not be able to appropriately adjust our expenses to changing market activities. In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing marketing activities. In periods of rapid change, it is more difficult to match our staffing levels to our business needs. In addition, we have other expenses that are fixed for a period of time, and we may not be able to adequately adjust them in a period of rapid change in market activities. |
| 14 |
We may be unable to obtain adequate amount of cargo space to meet our customers’ needs.
We typically obtained cargo space from carriers through forwarding agent under Freight Forwarding Agreement. Pursuant to the Freight Forwarding Agreement, we may procure cargo space on specified routes for an agreed freight carriage capacity that the shipping carriers provide and we agree to obtain during the term of the contract. If we wish to obtain more cargo space than the allocated under the freight forwarding agreements, such additional cargo space will be subject to the latest market price, and there is no guarantee that we will be able to obtain such additional cargo space at all. Further, since cargo space offered by our suppliers is on a first-come-first-served basis with no formal agreement for guaranteed supply of cargo space from our suppliers other than those under freight forwarding agreements, there is no assurance that we will be able to source cargo space within our customers’ expected timeframe cost-effectively. We cannot guarantee that this will not happen in the future and if we cannot obtain sufficient cargo space from our suppliers to meet our customers’ demand, in particular during peak seasons, our reputation within the industry could be damaged.
If we fail to cost-efficiently attract new customers to use our services, or to maintain relationships with existing customers, our business and results of operations could be adversely affected.
The success of our business depends in part on our ability to cost-effectively attract and retain new customers and increase engagement of existing customers by providing additional solutions and services. We believe that our selling and marketing efficiency, consistent and reliable services and rapid responses to changing customer preferences have been critical in promoting awareness of our services, which in turn drive customer growth and engagement. However, if our promotional activities and marketing strategies do not work efficiently, we cannot maintain our selling and marketing expenses at a reasonable level.
In addition, if the customers do not perceive our services to be timely and reliable, we may not be able to attract and retain customers and increase their use of our services. If we fail to cost-effectively retain customers and increase their use of our services, our business and results of operations could be adversely and materially affected.
Further, while we currently believe we can achieve profitability and grow cash flows organically through further penetration of existing customers and by expanding our customer base, we may not be able to effectively and successfully implement such strategies and realize our stated goals. Our goals may be negatively affected by a failure to further penetrate our existing customer base, expand our service offerings, pursue new customer opportunities, manage the operations and expenses of new or growing service offerings or otherwise achieve growth of our service offerings.
If we become subject to additional scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our Ordinary Shares, especially if such matter cannot be addressed and resolved favorably.
Recently, 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. Much of the scrutiny, criticism and negative publicity has centerd around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases, has become virtually worthless. Many of these companies have been subject to shareholder lawsuits and SEC enforcement actions and have conducted 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 this offering. If we become the subject of any unfavourable 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 may be a major distraction to our management. If such allegations are not proven to be groundless, our business operations will be severely hindered and your investment in our Ordinary Shares could be rendered worthless.
We may incur net losses in the future.
We generated net profit of $1,780,028 and $1,083,700 in the fiscal years of March 31, 2025 and 2024, respectively. We cannot assure you that we will be able to generate net income or will have retained earnings in the future. The fiscal years as of March 31, 2023 was dominated by responses to the COVID-19 outbreaks and control measures taken by local government to prevent the spread of COVID-19. We will continue to grow our business, attract customers and partners and further enhance and develop our products and services. Our efforts in new products and business development may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. As a result of the foregoing and other factors, we may incur net losses in the future and may not be able to maintain profitability.
We may need additional capital, and financing may not be available on terms acceptable to us, or at all.
Although we believe that our current cash and cash equivalents, anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for at least 12 months following this offering, we may need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
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We may incur substantial debt in the future, which may adversely affect our financial condition and negatively affect our operations.
We may decide in the future to finance our business and operations through incurring debt. The incurrence of debt could have a variety of negative effects, including:
| ● | default and foreclosure on our assets if our operating revenue is insufficient to repay debt obligations; |
| ● | acceleration of obligations to repay the indebtedness (or other outstanding indebtedness), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and |
| ● | creating potential limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate. |
The occurrence of any of these risks could adversely affect our operations or financial condition.
Our interim results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our interim results of operations, including the levels of our net revenues, expenses, net income (loss) and other key metrics, may vary significantly in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may not be meaningful, especially given our limited operating history. Accordingly, the results for any interim period are not necessarily an indication of future performance. Fluctuations in interim results may adversely affect the market price of our Ordinary Shares. Factors that may cause fluctuations in our interim financial results include:
| ● | our ability to attract new clients and retain existing clients; |
| ● | changes in our mix of services and introduction of new services; | |
| ● | the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and manufacturing facility; | |
| ● | our decision to manage client volume growth during the period; | |
| ● | the impact of competitors or competitive services; | |
| ● | increases in our costs and expenses that we may incur to grow and expand our operations and to remain competitive; | |
| ● | changes in the legal or regulatory environment or proceedings, or export licensing or enforcement by government regulators, including fines, orders or consent decrees; | |
| ● | general economic, industry and market conditions; and |
| ● | the timing of expenses related to the development or acquisition of technologies or businesses. |
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From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.
We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our marketplace and better serve our customers. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:
| ● | difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business; |
| ● | inability of the acquired technologies, services or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; |
| ● | difficulties in retaining, training, motivating and integrating key personnel; |
| ● | diversion of management’s time and resources from our normal daily operations; |
| ● | difficulties in successfully incorporating licensed or acquired technology and rights into our system and services; |
| ● | difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations; |
| ● | difficulties in retaining relationships with customers, employees and suppliers of the acquired business; |
| ● | risks of entering markets in which we have limited or no prior experience; |
| ● | regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business; |
| ● | assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; |
| ● | failure to successfully further develop the acquired business and technology; |
| ● | liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; |
| ● | potential disruptions to our ongoing businesses; and |
| ● | unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions. |
We may not make any investments or acquisitions, or future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced our existing services or that any new or enhanced d services, if developed, will achieve market acceptance or prove to be profitable.
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Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.
Our business operations depend on the continued services of our senior management, particularly the executive officers named in this prospectus. While we have the ability to provide different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.
If the basic salary of certain employees fails to meet the local minimum salary standard, we may be faced with labor disputes or additional compensation costs.
The remuneration we pay to our employees in general consists of basic salary, subsidy and performance bonuses subject to different departments. In accordance with the Labor Contract Law of People’s Republic of China, if the salary paid by the employer to its employee is below the local minimum salary standard, the labour administrative authorities shall order the employer to pay the shortfall; where payment is not made within the stipulated period, the employer shall be ordered to pay compensation to the employee based on 50% to 100% of the amount payable. In principle, each province has its own local minimum standard and the local minimum salary standard is subject to change each year. Our basic salary for our employees in China has been meeting the current local minimum salary standard. However, we cannot assure you that we can adjust the employees’ basic salary in time to meet the changing minimum standard. In such cases, we may be faced with labour disputes or additional compensation.
Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We believe our success depends on the efforts and talent of our employees, including sales and marketing, service and financial personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled marketing, technical, and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services could be damaged, resulting in a material adverse effect on our business.
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Insurance and claims expenses could significantly reduce our earnings.
Although we maintain auto insurance for our vehicles, cargo insurance for parcels and freights and property insurance for our warehouses, our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. This, along with legal expenses, incurred but not reported claims and other uncertainties can cause unfavorable differences between actual claim costs and our reserve estimates. We reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.
We maintain insurance with licensed insurance carriers above the amounts which we retain. Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other retained amounts. Insurance carriers have raised premiums for many businesses, including transportation companies. As a result, our insurance and claims expense could increase, or we could raise our deductible when our policies are renewed or replaced. Our operating results and financial condition could be materially and adversely affected if (i) cost per claim, premiums, or the number of claims significantly exceeds our estimates, (ii) we experience a claim in excess of our coverage limits, (iii) our insurance carriers fail to pay on our insurance claims or (iv) we experience a claim for which coverage is not provided.
We may have exposure to greater than anticipated tax liabilities.
We are subject to enterprise income tax, value-added tax, and other taxes in each province and city in China where we have operations. Our tax structure is subject to review by various local tax authorities. The determination of our provision for income tax and other tax liabilities requires significant judgment. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate decisions by the relevant tax authorities may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations.
Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information technology (“IT”) systems to sophisticated and targeted measures known as advanced persistent threats. While we employ measures to prevent, detect, address and mitigate these threats (including access controls, data encryption, vulnerability assessments, management training, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. While no cybersecurity attack to date has had a material impact on our financial condition, results of operations or liquidity, the threat remains and the potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, domain names, copyrights, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality agreements with all our employees and officers as well as non-compete agreements with our executive officers to protect our proprietary rights. See “Business—Intellectual Property” and “Regulation—Regulation on Intellectual Property Rights.” Thus, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated, circumvented or misappropriated, or that such intellectual property will be sufficient to provide us with competitive advantages. In addition, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all and we might have to invest on research and development on our own technologies in such areas.
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It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.
Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.
The relative lack of public company experience of our management team may put us at a competitive disadvantage.
Our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002, (“Sarbanes-Oxley”). Our senior management does not have experience managing a publicly-traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may be unable to implement programs and policies in an effective and timely manner or that adequately respond to the increased legal, regulatory and reporting requirements associated with being a publicly traded company. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price.
We rely on our information systems to manage our logistic and otherwise oversee our operations. Any malfunction of our systems could harm our ability to conduct our business operations.
We depend on a variety of information technology systems for the efficient functioning of our business, including, without limitation, management, logistics, website, and other aspects of operations. Our technology systems may not deliver desired results or may do so on a delayed schedule. Any improper functioning of our technology systems could cause interruptions or deoptimization of our operations. Our technology systems are subject to damage or interruption from power surges and outages, facility damage, physical theft, computer and telecommunications failures, inadequate or ineffective redundancy, malicious code (including computer viruses, worms, ransomware, or similar), cyberattacks (including account compromise; phishing; spamming; denial of service attacks; and application, network or system vulnerability exploitation), software upgrade failures or code defects, natural disasters and human error. Design defects or damage or interruption to these systems may require a significant investment to fix or replace, disrupt our operations, result in the loss or corruption of critical data, and harm our reputation, all of which could materially and adversely affect our business or results of operations.
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Our business depends on the continued success of our brand, and if we fail to maintain and enhance the recognition of our brand, or the recognition of our brand is adversely affected by any negative publicity concerning us, our reputation and operating results may be harmed.
We believe that our brand equity is an important competitive edge of ours and has earned us loyal customers. A well-recognized brand is critical to maintaining and expanding our customer base. From time to time, we conduct marketing activities to enhance our brand and to guide public perception of our brand and services. In order to create and maintain brand awareness and brand loyalty, to influence public perception and to retain existing and attract new customers, we may need to increase our marketing expenditures. We cannot assure you, however, that such marketing activities and the increased marketing expenditure may yield the brand promotion effect we expect. If we do not continue to maintain and strengthen our brand image and grow the value of our brand, we may lose the opportunity to build critical customers, and our business and operating results may be adversely affected.
Negative publicity about us and our business, shareholders, affiliates, directors, officers, other employees, business partners, users, businesses with similar names to ours without our authorization, as well as the industry in which we operate, can harm our brand and reputation. Negative publicity concerning these parties could be related to a wide variety of matters, including, but are not limited to:
| ● | alleged misconduct or other improper activities committed by our directors, officers and other employees, in particular with respect to employees’ unlawful actions in business executions; |
| ● | false or malicious allegations or rumors about us or our directors, shareholders, affiliates, officers and other employees; |
| ● | Problems, accidence and damages caused by our services; |
| ● | complaints by our users and customers about our services; |
| ● | security breaches of confidential customer or transaction data; |
| ● | employment-related claims relating to alleged wrongful discharge, employment discrimination, wage and hour violations; and |
| ● | governmental and regulatory investigations or penalties resulting from our failure to comply with applicable laws and regulations. |
In addition to traditional media, there has been increasing use of social media platforms and similar media in China that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on instant messaging applications and social media platforms is virtually immediate without affording us an opportunity for redress or correction. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our company, shareholders, affiliates, directors, officers and other employees may be posted on such platforms at any time. The risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm our reputation, business, financial condition and results of operations.
Increasing focus with respect to environmental, social and governance matters may impose additional costs on us or expose us to additional risks. Failure to comply with the laws and regulations on environmental, social and governance matters may subject us to penalties and adversely affect our business, financial condition and results of operation.
The PRC government and public advocacy groups have been increasingly focused on environment, social and governance (“ESG”) issues in recent years, making our business more sensitive to ESG issues and changes in governmental policies and laws and regulations associated with environment protection and other ESG-related matters. Investor advocacy groups, certain institutional investors, investment funds, and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. Regardless of the industry, increased focus from investors and the PRC government on ESG and similar matters may hinder access to capital, as investors may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. In the PRC, there are comprehensive environmental regulations and policies governing our services in general, and the PRC may adopt more stringent standards in terms of ESG matters in the future. Any ESG concern or issue could increase our regulatory compliance costs. The heightened ESG standards may also increase our cost of revenues as they cause our suppliers and business partners to incur extra expenses in ensuring ESG-friendly sourcing and transportation processes. If we do not adapt to or comply with the evolving expectations and standards on ESG matters from investors and the PRC government or are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and the business, financial condition, and the price of our Ordinary Shares could be materially and adversely effected.
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Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse impact on our business, financial condition and results of operations.
In accordance with the relevant laws and regulations in jurisdictions in which we operate, we are required to maintain various approvals, licenses, permits and filings to operate our business. These approvals, licenses, permits and filings are obtained upon satisfactory compliance with, among other things, the applicable laws and regulations. If government authorities in jurisdictions where we operate require additional licenses or permits or provides more strict supervision requirements in the future, or if we have to obtain relevant licenses or permits in a short period of time, there is no guarantee that we would be able to obtain such licenses or permits or meet all the supervision requirements in a timely manner, or at all.
Disruptions in our PRC subsidiaries’ logistic management could adversely affect our PRC subsidiaries’ transportation capabilities and delivery timelines, as well as our results of operations.
Our PRC subsidiaries’ ability to transport and deliver our services as promised to our clients depends on a consistent and reliable logistic management. This logistic management is subject to various risks, including geopolitical events and trade restrictions. Changes in international trade policies, export or import restrictions, and geopolitical instability between China and the United States or other regions could disrupt the flow of services and increase costs. Furthermore, the uncertainty surrounding these tariffs and potential future trade actions can disrupt our logistic management planning, potentially leading to delays in shipments and impacting our PRC subsidiaries’ operations.
Changes in geopolitical and foreign trade policies, including additional tariffs or global trade conflicts, may adversely impact our business and operating results.
Changes in foreign trade policies, such as the imposition of new tariffs, duties, or other trade barriers, can potentially increase the cost of our services, and reduce our competitiveness in the market. Additionally, ongoing or escalating trade conflicts between major economies can create uncertainty and volatility, which may result in retaliatory tariffs, trade restrictions, and other measures that can adversely affect our ability to conduct business. Such conflicts can also lead to disruptions in the availability of our products, delays in shipments, and increased costs, all of which can negatively impact our operations and financial performance. Failure to effectively manage these risks could have a material adverse effect on our operations, financial condition, and results of operations.
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 results of operations.
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, in addition to the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, cybersecurity, anti-monopoly, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things, and such change of rules and policies can happen quickly with little advance notice.
The PRC government imposes controls on the convertibility of RMB into foreign currencies and the remittance of currency out of Mainland China. We mainly rely on dividend payments from our PRC subsidiaries to fund any additional cash and financing requirements we may have. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations.
The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, 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 through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
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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, and the rate of growth has been slowing since 2012. 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, lead to reduction in demand for the Company’s products and services, which adversely affects 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 over capital investments or changes in tax regulations. In addition, in the past, the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and results of operations.
Furthermore, we and our China-based operating entities, 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.
Given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our shares to significantly decline or be worthless.
Increases in labor costs in the PRC may adversely affect our business and results of operations.
The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to those who pay for our products and services, our profitability and results of operations may be materially and adversely affected.
In addition, we are required by PRC laws and regulations to enter into labor contracts with our employees and pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. In addition, pursuant to the PRC Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employee’s 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 PRC 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.
In October 2010, the Standing Committee of the National People’s Congress (“SCNPC”) promulgated the PRC Social Insurance Law, effective on July 1, 2011 and amended and became effective on December 29, 2018. On April 3, 1999, the State Council promulgated the Regulations on the Administration of Housing Funds, which was amended on March 24, 2002 and March 24, 2019 and came into effect on the same day. Companies registered and operating in China are required under the Social Insurance Law and the Regulations on the Administration of Housing Funds to apply for social insurance registration and housing fund deposit registration within 30 days of their establishment and to pay for their employee’s different social insurance, including pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to the extent required by law. We could be subject to orders by the competent labor authorities for rectification and failure to comply with the orders may further subject us to administrative fines.
As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practices do not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. We cannot assure you that we have complied or will be able to comply with all labor-related laws and regulations including those relating to obligations to make social insurance payments and contribute to the housing provident funds. If we are deemed to have violated relevant labor laws and regulations, we could be involved in labor-law related disputes, required to provide additional compensation to our employees and our business, financial condition and results of operations will be adversely affected.
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Uncertainties and quick change in the PRC legal system with little advance notice could result in a material and negative impact our business operations, decrease the value of our Ordinary Shares and limit the legal protections available to you and us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves uncertainties.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.
Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.
Such uncertainties, including uncertainty 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.
We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have. Any limitation on the ability of our WFOE to pay dividends to us could have a material adverse effect on our ability to conduct our business.
We are a holding company, and we may rely on dividends and other distributions on equity to be paid by our wholly-owned WFOE for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our WFOE incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
Under PRC laws and regulations, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our operating entities may allocate a portion of their after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at their discretion. Each of our PRC subsidiaries may allocate a portion of their after-tax profits based on PRC accounting standards to a discretionary surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE.
Any limitation on the ability of WFOE to pay dividends or make other distributions to us, could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
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PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of this offering to make loans to our PRC subsidiaries or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting our operations in China through our PRC subsidiaries. We may make loans to our PRC subsidiaries, or we may make additional capital contributions to our WFOE.
Any loans by us to our WFOE, which is treated as a foreign-invested enterprise under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to WFOE to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of the State Administration of Foreign Exchange, or SAFE. We may also decide to finance WFOE by means of capital contributions. These capital contributions must be filed with the PRC Ministry of Commerce or its local counterpart. With respect to the proceeds we expect to receive from this offering, they will be a capital contribution or a loan to our subsidiaries in China. If it is a capital contribution, the PRC subsidiaries would, within 30 days from the occurrence of the change in registered capital and total investment amount, fill in and submit online a “Filing Declaration Form for Change of Foreign Investment Enterprise” and related documents, and complete filing formalities for the change through the integrated management system. In addition, we will finance the activities of our operating subsidiaries with the proceeds from this offering in RMB.
On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not be altered without SAFE approval, and such RMB capital may not, in any case, be used to repay RMB loans if the proceeds of such loans have not been used. Such requirements are also known as the “payment-based foreign currency settlement system” established under the SAFE Circular 142. Violations of SAFE Circular 142 could result in severe monetary or other penalties. Furthermore, SAFE promulgated the Circular of State Administration of Foreign Exchange on Issues Relating to Strengthening Administration of Foreign Exchange Businesses on November 19, 2010, or Circular No. 59, which was repealed by the Circular of the State Administration of Foreign Exchange on the Publication of 34 Repealed and Invalidated Normative Documents on Foreign Exchange Management, and the Supplementary Circular of General Affairs Department of State Administration of Foreign Exchange on Issues Relating to Improving the Relevant Business Operations of Administration of Foreign Exchange Settlement for Payment of Foreign Currency Capital Funds of Foreign Investment Enterprises on July 18, 2011, known as Circular No. 88, which was repealed by the Circular on the Reform of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, tightening the examination on the authenticity of settlement of net proceeds from an offering and requiring that the settlement of net proceeds shall be in accordance with the description in its prospectus.
On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or the SAFE Notice 13, which became effective on June 1, 2015 and was abolished in part on December 30, 2019. Pursuant to SAFE Notice 13, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations, or FDI registration, from qualified banks. The qualified banks, under the supervision of SAFE, will directly examine applications and manage registrations. For any entity that fails to comply with the FDI registration requirements of the SAFE Notice 13, the SAFE would conduct business control over the capital account information system of such entity, and banks would not carry out foreign exchange businesses under the capital account for such entity. After the non-compliant entity submitting the satisfied information and reasons to the SAFE as required, the SAFE would cancel business control. But the entity violating foreign exchange regulations would be subject to administrative punishment according to the SAFE Notice 13.
On March 30, 2015, SAFE issued the Circular on the Reform of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises (“SAFE Circular 19”), which became effective on June 1, 2015, had been abolished in part on December 30, 2019 and revied on March 23, 2023. SAFE Circular 19 abolished the application of SAFE Circular 142, Circular 36 and Circular No. 88 when it becomes effective. Pursuant to SAFE Circular 19, foreign-invested enterprises may either continue to follow the payment-based foreign currency settlement system or elect to follow the “conversion-at-will” of the foreign currency settlement system. Where a foreign-invested enterprise follows the conversion-at-will of the foreign currency settlement system, it may convert any or 100% amount of the foreign currency in its capital account into RMB at any time. The converted RMB will be kept in a designated account known as “Settled but Pending Payment Account,” and if the foreign-invested enterprise needs to make further payment from such designated account, it still needs to provide supporting documents and go through the review process with its bank. In addition, foreign-invested enterprises shall not use its capital and RMB obtained from foreign exchange settlement for purposes within the following negative list: (a) directly or indirectly for expenditures outside of its business scope or expenditures prohibited by national laws and regulations; (b) directly or indirectly for investment in securities, except as otherwise prescribed by applicable laws and regulations; (c) directly or indirectly for the disbursing RMB entrusted loans (other than as permitted in its business scope); (d) for repayment of inter-corporate borrowings (including money advanced by third parties) and the repayment of certain RMB bank loans that have been sub-lent to third parties; and (e) for the expenditures related to the purchase of real estate which is not for self-use, unless it is a foreign-invested real estate enterprise.
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SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardising the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, revised on December 4, 2023, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from this offering, to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer to and use in China the net proceeds from this offering, which may adversely affect our business, financial condition and results of operations.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, including SAFE Circular 16 or SAFE Circular 19, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our WFOE or with respect to future capital contributions by us to our WFOE. As of the date of this prospectus, our WFOE has completed the process of the FDI registration. However, if our WFOE fail to maintain FDI registration may result in restrictions on the settlement of the foreign exchange of WFOE, and our ability to use the proceeds we expect to receive from this offering and any other offerings and to capitalize or otherwise fund our PRC operations may be negatively affected.
We may not be able to obtain certain treaty benefits on dividends paid by our WFOE to us through our Hong Kong subsidiary.
Under the Enterprise Income Tax Law, dividends generated from retained earnings after January 1, 2008 from a PRC company to a foreign parent company are subject to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, or the Hong Kong Tax Treaty, which became effective on December 8, 2006, as amended, a company incorporated in Hong Kong, such as Eastern HK, will be subject to withholding income tax at a rate of 5% on dividends it receives from its WFOE if it holds a 25% or more interest in that particular WFOE, or 10% if it holds less than a 25% interest in that subsidiary. On October 27, 2009, the SAT promulgated a tax notice or Circular 601, which provides that tax treaty benefits will be denied to “conduit” or shell companies without business substance, and a beneficial ownership analysis will be used based on a “substance-over-the-form” principle to determine whether or not to grant tax treaty benefits. On June 29, 2012, the SAT issued the Announcement of the State Administration of Taxation regarding Recognition of “Beneficial Owner” under Tax Treaties, or Announcement 30. Then on February 3, 2018, the SAT further issued the Announcement of the State Administration of Taxation on Issues Relating to “Beneficial Owner” in Tax Treaties (“Announcement 9”), which repealed Announcement 30, providing that a comprehensive analysis should be made when determining the beneficial owner status based on various factors that are supported by various types of documents. As a result, although our WFOE is wholly owned by Eastern HK, we cannot assure you that we would be entitled to the tax treaty benefits and enjoy the favorable 5% rate applicable under the Hong Kong Tax Treaty on dividends payable by WFOE. If Eastern HK cannot be recognized as the beneficial owner of the dividends to be paid by our WFOE to us, such dividends will be subject to a normal withholding tax of 10% as provided by the Enterprise Income Tax Law.
Litigation and negative publicity surrounding China-based companies listed in the U.S. may result in increased regulatory scrutiny of us and negatively impact the trading price of our Ordinary Shares and could have a material adverse effect upon our business, including our results of operations, financial condition, cash flows and prospects.
We believe that litigation and negative publicity surrounding companies with operations in China that are listed in the U.S. have negatively impacted stock prices for such companies. Various equity-based research organizations have published reports on China-based companies after examining, among other things, their corporate governance practices, related party transactions, sales practices and financial statements that have led to special investigations and stock suspensions on national exchanges. Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion of management resources and energy, potential costs to defend ourselves against rumours, decreases and volatility in the trading price of our Ordinary Shares, and increased directors and officers’ insurance premiums and could have a material adverse effect upon our business, including our results of operations, financial condition, cash flows and prospects.
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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 could result in a material change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors and, and cause the value of our 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 through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to 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 and to return to a more centrally planned economy 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.
As such, our business is subject to various government and regulatory interferences. 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 its business or industry, which could result in a material change in our operation and the value of our Ordinary Shares.
Furthermore, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently not required to obtain permission from any of the PRC central or local government and has not received any denial to list on the U.S. exchange, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded, which could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our shares to significantly decline or be worthless.
On December 28, 2021, Cybersecurity Review Measures was published by the CAC, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People’s Bank of China, State Administration for Market Regulation, State Administration of Radio and Television, China Securities Regulatory Commission, State Secrecy Administration and State Cryptography Administration, effective on February 15, 2022.
According to the provisions of the Cybersecurity Review Measures, the situations that need to be reviewed by the CAC include: (i) the network platform operators who have personal information of more than 1 million users go public abroad; (ii) the procurement of network products and services by key information infrastructure operators affects or may affect national security; (iii) network platform operators carry out data processing activities that affect or may affect national security.
The main business of the Company’s operating entities is to provide domestic and cross-border professional logistics services. As of the date of this prospectus, the customers and clients of the Company’s operating entities are PRC enterprises and institutions rather than individual users, and the Company’s operating entities do not have personal information of more than 1 million users. According to the guidance of our PRC counsel after consulting with CAC, it is confirmed that only companies offering abroad with personal information of more than 1 million users are required to apply for network security review. Therefore, our PRC counsel understands that the Company’s current offering and listing should not belong to the situation that it is necessary to apply for network security review as stipulated in Articles 5 and 7 of the Cybersecurity Review Measures.
As of the date of this prospectus, the Company’s operating entities have not received the notice from the relevant PRC regulatory authorities that the Company and its operating entities are identified as key information infrastructure operators and relevant network facilities and information systems are identified as key information infrastructure, nor have they received the notice from the relevant national or local PRC regulatory authorities that the Company and its operating entities are required to fulfill their network security review obligations, so the Company and its operating entities should not belong to the “key information infrastructure operator” as stipulated in the Regulations on the Security Protection of Key Information Infrastructure . Therefore, our PRC counsel believes that there is no case that the Company and its operating entities should conduct a network security review because of the procurement of network products and services by key information infrastructure operators affects or may affect national security, and there is no need to apply for a network security review because of this situation.
As of the date of this prospectus, the Company and its operating entities have not been notified or recognized as “network platform operators” by any PRC regulatory authorities. According to the definition of “national security” in the National Security Law of People’s Republic of China and the seven national security risk factors listed in Article 10 of the Cybersecurity Review Measures, our PRC counsel believes that the Company and its operating entities are unlikely to affect or may affect the national security situation because of data processing activities, so it is unnecessary to voluntarily apply for the network security review because of this situation.
Because we are a Cayman Islands corporation 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. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.
We are incorporated in the Cayman Islands and conduct our operations primarily in China. All of our assets are located outside of the United States and the proceeds of this offering will primarily be held in banks outside of the United States. In addition, majority of our directors and officers reside in Hong Kong, except for Mr. Lin Tan who is a resident of China and Mr. Yu-yun Tristan Kuo who is a resident 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. If you want to enforce a judgment of the United States in Hong Kong, it must be a final judgment conclusive upon the merits of the claim, for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts. 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. Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States. See “Enforceability of Civil Liabilities.”
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It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. 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 Unities 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 the PRC. 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. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.
The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly. Further implementations and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB’s determination of its lack of sufficient access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in Hong Kong and mainland China. A potential consequence is that our Ordinary Shares may be delisted by the exchange. The delisting of our Ordinary Shares, or the threat of our Ordinary Shares being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct full inspections of our auditor deprives our investors of the benefits of such inspections.
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. In accordance with the HFCA Act, trading in securities of any registrant on a national securities exchange or in the over-the-counter trading market in the United States may be prohibited if the PCAOB determines that it cannot inspect or fully investigate the registrant’s auditor for three consecutive years beginning in 2021, and, as a result, an exchange may determine to delist the securities of such registrant. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted if our auditor is unable to meet the PCAOB inspection requirement. On December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”), was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
On November 5, 2021, the SEC adopted the PCAOB rule to implement HFCA Act, which provides a framework for the PCAOB to determine whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On December 2, 2021, SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. 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 (the “Commission-Identified Issuers”). A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended March 31, 2022, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended March 31, 2023.
On December 16, 2021, the PCAOB issued its determinations (the “Determination”) that they are unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong. The Determination includes lists of public accounting firms headquartered in mainland China and Hong Kong that the PCAOB is unable to inspect or investigate completely.
On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China governing inspections and investigations of audit firms based in China and Hong Kong. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate 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 Board will consider the need to issue a new determination.
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The enactment of the HFCA Act and related regulations and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could cause investors uncertainty for affected issuers and the market price of our Ordinary Shares could be adversely affected, and we could be delisted if our auditor is unable to meet the PCAOB inspection requirement.
The lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors. As a result, investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China and Hong Kong makes it more difficult to evaluate the effectiveness of these accounting firm’s audit procedures and quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections.
Our auditor, WWC, P.C., an independent registered public accounting firm that is headquartered in the United States, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts inspections to assess its compliance with the applicable professional standards. Our auditor has been inspected by the PCAOB on a regular basis with the last inspection in 2023 and it is not included in the PCAOB Determinations. However, 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 it relates to our audit. If it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction or any other reasons, the lack of inspection could cause the trading in our securities to be prohibited under the Holding Foreign Companies Accountable Act, and as a result Nasdaq may delist our securities. If our securities are unable to be listed on another securities exchange, such a delisting would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our Ordinary Shares. Further, new laws and regulations or changes in laws and regulations in both the United States and China could affect the listing and trading our Ordinary Shares on Nasdaq, which could materially impair the market for and market price of our securities.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.
Substantially all of our revenues from domestic sales and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the proceeds from this offering. Our reporting currency is the U.S. dollar while the functional currency for our operating entities is RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.
There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our Ordinary Shares in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from this initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the market price of our Ordinary Shares.
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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 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 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 of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive principally all of our revenues in RMB. Under our current corporate structure, our company in the Cayman Islands will rely on dividend payments from our WFOE to fund any cash and financing requirements we may have. Under existing 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 SAFE by complying with certain procedural requirements. Therefore, our WFOE is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.
Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our business. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. If we fail to make adequate payments in the future, we may be required to make up the contributions for these plans. In an extreme situation, where we failed to contribute social security premiums in full amount and do not a provide guarantee, the social security premiums collection agency may apply to a Chinese court for seizure, foreclosure or auction of our properties of value equivalent to the amount of social security premiums payable, and the proceeds from auction shall be used for contribution of social security premiums. As of the date of this prospectus, we had not received any notice from the local authorities or court or any claim or request from these employees in this regard. If we are subject to deposit, seizure, foreclosure or auction in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.
We have completed the required filings with the CSRC for this offering. However, the approval, filing, and/or other administration requirements of the CSRC or other PRC governmental authorities may be required in connection with our future securities offerings under PRC law, and, if required, we cannot assure you that we will be able to timely make such filing, in which case we may face sanctions by the CSRC or other PRC regulatory agencies for failure to timely file with the CSRC for such offerings.
On February 17, 2023, the CSRC released the New Overseas Listing Rules with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means. Pursuant to the New Overseas Listing Rules, domestic companies that seek initial public offering or listing securities overseas, both directly and indirectly, shall file with the CSRC within three working days after the submission of overseas offering/listing application. Furthermore, upon the occurrence of any of the material events specified below after an issuer has completed its offering and listed its securities on an overseas stock exchange, the issuer shall submit a report thereof to the CSRC within three working days after the occurrence and public disclosure of the event: (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other competent authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. The New Overseas Listing Rules stipulate the legal consequences to the companies for breaches, including failure to fulfil filing obligations or filing documents having false statement or misleading information or material omissions, which may result in a fine ranging from RMB 1 million to RMB 10 million, and in cases of severe violations, the relevant responsible persons may also be warned and each imposed a fine of between RMB 500,000 and RMB 5,000,000. We are subject to the relevant filing procedures of the CSRC in connection with our overseas offerings under the New Overseas Listing Rules, including the public offering pursuant to this registration statement. As of the date of this prospectus, we have duly completed the required filings with the CSRC for this offering in accordance with the requirements under the New Overseas Listing Rules. The CSRC completed its review and concluded its filing procedure with a formal notice to the Company on September 29, 2024.
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On February 24, 2023, the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China jointly revised the Provisions on Strengthening Confidentiality and Archives Administration in Overseas Issuance and Listing of Securities (the “Confidentiality and Archives Administration Provisions”), which came into effect on March 31, 2023. The Confidentiality and Archives Administration Provisions require that, overseas listed PRC domestic enterprises, as well as those to be listed, shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
If it is determined that we are subject to any other approval, filing, other authorization or requirements of the CSRC or other PRC governmental authorities for this offering and listing on a U.S. exchange, or future capital raising activities, we may fail to obtain such approval, filing or meet such requirements in a timely manner or at all, or filing completion could be rescinded. Also, if we or any of our PRC subsidiaries do not receive or maintain such permissions or approvals, inadvertently conclude that such permissions or approvals are not required, or applicable laws, regulations, or interpretations change and we or our subsidiaries are required to obtain such permissions or approvals in the future, it could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our securities to significantly decline or become worthless.
PRC regulations relating to offshore investment activities by PRC residents may limit our WFOE’s ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014, which requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. Thereafter, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015 and was abolished in part on December 30, 2019, which amends SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
If our shareholders who are PRC residents or entities do not complete their registration as required, our WFOE may be prohibited from distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our WFOE.
Our major shareholders who are PRC residents are currently undergoing registration process required under SAFE Circular 37. However, we cannot provide assurance of successful registration. Also, we may not be informed of the identities of all the PRC residents holding direct or indirect interests in our Company, and we cannot provide any assurance that these PRC residents will comply with our request to make or obtain any applicable registrations or continuously comply with all requirements under SAFE Circular 37 or other related rules. Failure or inability of the relevant shareholders and entities to comply with the registration procedures set forth in these regulations may subject us to fines and legal sanctions, such as restrictions on our cross-border investment activities, limitations on our ability to contribute additional capital to our WFOE and WFOE’s ability to distribute dividends and the proceeds from any reduction in capital, share transfer or liquidation to us. Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing applicable foreign exchange restrictions. As a result, our business operations and our ability to distribute profits to you could be materially and adversely affected.
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Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the WFOE of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our directors, executive officers and other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less than one year will be subject to these regulations when our Company becomes an overseas listed company upon the completion of this offering. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additional capital into our WFOE and limit our WFOE’s ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Regulation—Regulations on Stock Incentive Plans.”
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, 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 located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’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 Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Taxation—People’s Republic of China Taxation.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” As all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our Ordinary Shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our Ordinary Shares.
In addition to the uncertainty as to the application of the “resident enterprise” classification, we cannot assure you that the PRC government will not amend or revise the taxation laws, rules and regulations to impose stricter tax requirements or higher tax rates. Any of such changes could materially and adversely affect our financial condition and results of operations.
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Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China.
From time to time, the Company may receive requests from certain U.S. agencies to investigate or inspect the Company’s operations, or to otherwise provide information. While the Company will be compliant with these requests from these regulators, there is no guarantee that such requests will be honoured by those entities who provide products or services to us or with whom we associate, especially those entities located in China. Furthermore, an on-site inspection of our facilities by any of these regulators may be limited or entirely prohibited. Such inspections, though permitted by the Company and its affiliates, are subject to the unpredictability of the Chinese enforcers, and may therefore be impossible to facilitate.
We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of our operating company’s equity interests. Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
Under Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.
In February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfers of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbours for internal group restructurings and the purchase and sale of equity through a public securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, 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 PRC resident enterprise.
On October 17, 2017, the SAT promulgated the Bulletin of SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (“Bulletin 37”), which became effective on December 1, 2017, and Circular 698 was then replaced effective December 1, 2017. Bulletin 37, among other things, simplified procedures of withholding and payment of income tax levied on non-resident enterprises.
We face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our Company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59 or Circular 7 and Bulletin 37, and may be required to expend valuable resources to comply with Circular 59, Circular 7 and Bulletin 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
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The PRC tax authorities have the discretion under SAT Circular 59, Circular 7 and Bulletin 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59 or Circular 7 and Bulletin 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.
In addition, in accordance with the Individual Income Tax Law promulgated by SC NPC, latest amended on August 31, 2018 and effective January 1, 2019, where an individual carries out other arrangements without reasonable business purpose and obtains improper tax gains, the tax authorities shall have the right to make tax adjustments based on a reasonable method, and levy additional tax and collect interest if there is a need to levy additional tax after making tax adjustments. As a result, our beneficial owners, who are PRC residents, may be deemed to have carried out other arrangements without reasonable business purpose and obtained improper tax gains for such indirect transfer, and thus be levied tax.
Changes in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China, our principal place of business.
Political events, international trade disputes, and other disruptions to international commerce could harm the global economy and adversely affect the business, customers, suppliers, and other business partners of our subsidiaries in the PRC. Recent shifts in U.S. tariff policies, including increased tariffs on goods imported from China and other regions, as well as the potential for additional protectionist measures, may impact our PRC subsidiaries’ business and operations.
Moreover, political uncertainty surrounding international trade disputes, particularly the ongoing tension between the U.S. and China, could damage consumer confidence and decision-making, leading to a material adverse effect on our PRC subsidiaries’ business. Such uncertainty may also limit our PRC subsidiaries’ access to new business opportunities, negatively impacting their operations. Additionally, current and potential future actions by the U.S. or the PRC that affect trade relations could contribute to global economic instability, which may harm our PRC subsidiaries’ business or financial performance. The financial condition of our PRC subsidiaries’ customers could also be adversely affected by trade-related disruptions, and we cannot predict the extent or form of future actions or escalations.
Our financial performance could be materially and adversely affected by rising costs associated with inflation and the imposition of U.S. tariffs on imports from China.
Our business is susceptible to the effects of inflation, which can lead to higher costs of our operations. This includes increased cost of our service, as well as rising expenses for maintaining our vehicles and equipment. If the overall price level in the economy increases, our operating expenses are expected to increase as well, potentially impacting our profitability.
Furthermore, recent trade policies enacted by the U.S. have imposed tariffs on a wide range of goods imported from China. These increased costs may discourage importers from bringing in goods at previous volumes. As a result, our clients who rely on our logistics services for Chinese imports may reduce their shipments to avoid higher expenses. This decline in shipping demand could lead to fewer service requests, ultimately resulting in a reduction in our client base and overall revenue. Additionally, the uncertainty surrounding future trade regulations may cause potential clients to delay or reconsider entering into new logistics agreements, further impacting our business growth.
The future of these tariff policies and their wider impact on inflation are uncertain. The duration and scope of these measures, as well as potential responses from other countries, could significantly influence our business. We cannot predict the ultimate consequences of these developments, and there is no assurance that we will be able to fully absorb or mitigate the negative financial impacts resulting from increased costs driven by both general inflation and these tariffs.
Risks Related to Our Ordinary Shares and This Offering
There has been no public market for our shares prior to this offering, and if an active trading market does not develop you may not be able to resell our shares at or above the price you paid, or at all.
Prior to this public offering, there has been no public market for our Ordinary Shares. We will apply to have our Ordinary Shares listed on NASDAQ. If an active trading market for our Ordinary Shares does not develop after this offering, the market price and liquidity of our Ordinary Shares will be materially adversely affected. The public offering price for our Ordinary Shares will be determined by negotiations between us and the underwriters and may bear little or no relationship to the market price for our Ordinary Shares after the public offering. You may not be able to sell any Ordinary Shares that you purchase in the offering at or above the public offering price. Accordingly, investors should be prepared to face a complete loss of their investment.
Our Ordinary Shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Assuming our Ordinary Shares begin trading on NASDAQ, our Ordinary Shares may be “thinly-traded”, meaning that the number of persons interested in purchasing our Ordinary Shares at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that we are relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on the share price. A broad or active public trading market for our Ordinary Shares may not develop or be sustained.
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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 Ordinary Shares may view as beneficial.
We have adopted a dual-class share structure such that our shares consist of Ordinary Shares and Preferred Shares. In respect of matters requiring the votes of shareholders, each Ordinary Share is entitled to one vote and each Preferred Share is entitled to ten (10) votes. The Preferred Shares may be converted into Ordinary Shares by its holder. We will sell Ordinary Shares in this offering.
We have authorized 50,000,000 Preferred Shares and our Chairman and Chief Executive Officer Mr. Albert Wong, beneficially owns all of the 1,000,000 issued and outstanding Preferred Shares. These Preferred Shares will constitute approximately 64.8% of the aggregate voting power of our total issued and outstanding shares immediately upon the completion of this offering, assuming the underwriters do not exercise their over-allotment option and 64.1% of the aggregate voting power of our total issued and outstanding shares immediately upon the completion of this offering, assuming the underwriters exercise their over-allotment option in full.
As a result of this dual-class share structure, the holder of our Preferred Shares will have concentrated control over the outcome of matters put to a vote of shareholders and have significant influence over our business, including decisions regarding mergers, consolidations, liquidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. The holder of Preferred Shares may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the Ordinary Share. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Ordinary Shares may view as beneficial.
Our Chairman and Chief Executive Officer, Albert Wong will be able to control and exert significance influence over our company following this offering, and his interest may be different from or conflict with that of the holders of our Ordinary Shares.
Our Chairman of the board of directors and Chief Executive Officer, Mr. Albert Wong will control more than 50% of the voting power of our Company after the offering. As a major shareholder of the Company, Mr. Wong is and will continue to be able to exert a significant degree of influence or actual control over the elections of our directors, other management and affairs and control matters requiring an approval from a majority of shareholders, including the merger, consolidation or sale of all or substantially all of our assets, and any other significant transaction. Mr. Wong’s interest might not always be aligned with the interests of our other shareholders.
If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline.
Any trading market for our Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.
The market price for our Ordinary Shares may be volatile.
The trading price of our Ordinary Shares may be volatile and could fluctuate widely due to factors beyond our control. This may happen because of the broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. A number of Chinese companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances of these Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading performance of our Ordinary Shares, regardless of our actual operating performance.
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The market price for our Ordinary Shares may be volatile and subject to wide fluctuations due to factors such as:
| ● | the perception of U.S. investors and regulators of U.S. listed Chinese companies; |
| ● | actual or anticipated fluctuations in our operating results; |
| ● | changes in financial estimates by securities research analysts; |
| ● | negative publicity, studies or reports; |
| ● | conditions in Chinese logistics related markets; |
| ● | our capability to catch up with the technology innovations in the industry; |
| ● | changes in the economic performance or market valuations of other logistics and related services companies; |
| ● | announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; |
| ● | addition or departure of key personnel; |
| ● | fluctuations of exchange rates between RMB and the U.S. dollar; and |
| ● | general economic or political conditions in China. |
In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Ordinary Shares.
Because our initial public offering price is substantially higher than our pro forma net tangible book value per share, you will experience immediate and substantial dilution.
If you purchase Ordinary Shares in this offering, you will pay more for your Ordinary Shares than the amount paid by existing shareholders for their Ordinary Shares on a per Ordinary Share basis. As a result, you will experience immediate and substantial dilution of $3.19 per Ordinary Share, representing the difference between (i) our as adjusted net tangible book value per Ordinary Share of $1.31 as of March 31, 2025, after giving effect to this offering, and (ii) the assumed initial public offering price per share of $4.50 per Ordinary Share, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus. See “Dilution” for a more complete description of how the value of your investment in our Ordinary Shares will be diluted upon the completion of this offering.
Volatility in our Ordinary Share price may subject us to securities litigation.
The market for our Ordinary Shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could harm our business.
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In order to raise sufficient funds to enhance operations, we may have to issue additional securities at prices which may result in substantial dilution to our shareholders.
If we raise additional funds through the sale of equity or convertible debt, our current shareholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of Ordinary Shares outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our Ordinary Shares. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations and financial condition.
We are not likely to pay cash dividends in the foreseeable future.
We currently intend to retain any future earnings for use in our operations and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate. Should we determine to pay dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from WFOE. WFOE may, from time to time, be subject to restrictions on its ability to make distributions to us, including restrictions on the conversion of RMB into U.S. dollars or other hard currency, and other regulatory restrictions.
You may face difficulties in protecting your interests as a shareholder, as Cayman Islands law provides substantially less protection when compared to the laws of the United States and it may be difficult for a shareholder of ours to effect service of process or to enforce judgements obtained in the United States courts.
Our corporate affairs are governed by our Memorandum and Articles of Association and by the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, 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 of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England and Wales, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law may be narrower in scope or less developed than they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. In addition, while under Delaware law, controlling shareholders owe fiduciary duties to the companies they control and their minority shareholders, under Cayman Islands law, our controlling shareholders do not owe any such fiduciary duties to our company or to our minority shareholders. Accordingly, our controlling shareholders may exercise their powers as shareholders, including the exercise of voting rights in respect of their shares, in such manner as they think fit.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association and any special resolutions passed by such companies, and the register of mortgages and charges of such companies) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our Memorandum and Articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
Currently, all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. All of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
As a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
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We are a foreign private issuer within the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:
| ● | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; |
| ● | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies; |
| ● | we are not required to provide the same level of disclosure on certain issues, such as executive compensation; |
| ● | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; |
| ● | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and |
| ● | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction. |
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to file reports on Form 6-K as a foreign private issuer. 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.
Because we are a foreign private issuer and are exempt from certain NASDAQ corporate governance standards applicable to U.S. issuers, you may have less protection than you would have if we were a domestic issuer.
The Nasdaq Listing Rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to follow home country practice in lieu of the above requirements. The Company currently intends to follow the requirements of the Nasdaq Listing Rules without relying on the exemption provided for foreign private issuers under Marketplace Rule 5615(a)(3). However, we may choose to rely on such exemption to follow certain corporate governance practices of our home country practice in the future. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors. Thus, although a director must act in the best interests of the Company, it is possible that fewer board members will 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 Listing Rules also requires U.S. domestic issuers to have a compensation committee of at least two members and each committee member must be an independent director. We, as a foreign private issuer, are not subject to such requirement. The Nasdaq 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 for certain ordinary share issuances. We intend to comply with the requirements of the Nasdaq Listing Rules in determining whether shareholder approval is required on such matters and to appoint a nominating and corporate governance committee. However, we may consider following home country practice in lieu of the requirements under the Nasdaq Listing Rules with respect to certain corporate governance standards in the future which may afford less protection to investors.
Although as a foreign private issuer we are exempt from certain corporate governance standards applicable to US domestic issuers, if we cannot satisfy, or continue to satisfy, the initial listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them.
We are seeking to have our securities approved for listing on the Nasdaq Capital Market upon consummation of this offering. We cannot assure you that we will be able to meet those initial listing requirements at that time. Even if our securities are listed on Nasdaq Capital Market, we cannot assure you that our securities will continue to be listed on Nasdaq Capital Market.
In addition, following this offering, in order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules the Nasdaq Capital Market, including those regarding minimum stockholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.
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If the Nasdaq Capital Market delists our securities from trading, we could face significant consequences, including:
| ● | a limited availability for market quotations for our securities; |
| ● | reduced liquidity with respect to our securities; |
| ● | a determination that our Ordinary Shares is a “penny stock,” which will require brokers trading in our Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares; |
| ● | limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
We will be a “controlled company” as defined under the Nasdaq Stock Market Rules. As a result, we may rely on exemptions from certain corporate governance requirements and holders of our Ordinary Shares may not have the same protections generally available to shareholders of other companies listed on stock exchanges in the United States.
Because more than 50% of the voting power for the election of our directors will be controlled by our Chief Executive Officer and chairman of the board of directors, Mr. Albert Wong following the completion of this offering, we will be a “controlled company” as defined under Rule 5615(c)(1) of the Nasdaq Listing Rules. As a “controlled company”, we qualify for, exemptions from several of Nasdaq’s corporate governance requirements, including requirements that:
| ● | a majority of the board of directors consist of independent directors; |
| ● | compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee comprised solely of independent directors; and |
| ● | director nominees be selected or recommended to the board of directors by a majority of its independent directors or by a nominating committee that is composed entirely of independent directors. |
We currently do not intend to rely on the corporate governance exemptions available to “controlled companies”, however, we may choose to rely on such exemptions in the future. Accordingly, to the extent that we may choose to rely on one or more of these exemptions, our shareholders would not be afforded the same protections generally as shareholders of other Nasdaq-listed companies as long as Mr. Wong controls more than 50% of the voting power of our Company and our board determines to rely upon one or more of such exemptions.
We are an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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As an “emerging growth company” under applicable law, we will be subject to reduced disclosure requirements. Such reduced disclosures may make our Ordinary Shares less attractive to investors.
For as long as we remain an “emerging growth company”, as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Because of these reduced regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile.
If we are classified as a passive foreign investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.
A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either
| ● | At least 75% of our gross income for the year is passive income; or | |
| ● | The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%. |
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.
U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.
Depending on the amount of cash we raise in this offering, 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 year, at least 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.
For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”
Our board of directors may refuse the registration of the transfer of Ordinary Shares in certain circumstances.
Our board of 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. Our board of directors may also decline to register any transfer of such Ordinary Share unless: (i) 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; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) the Ordinary Share transferred is fully paid and free of any lien in favor of us; (v) any fee related to the transfer has been paid to us; and (vi) the transfer is not more than four joint holders.
If our board of directors refuse to register a transfer, they are required, within three months after the date on which the instrument of transfer was lodged, to send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, on 10 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and our register of members closed at such times and for such periods as our board of directors may, in their absolute discretion, from time to time determine. The registration of transfers, however, may not be suspended, and the register may not be closed, for more than 30 days in any year.
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This, however, will not affect market transactions of the Ordinary Shares purchased by investors in the public offering. Where the Ordinary Shares are listed on a stock exchange, the Ordinary Shares may be transferred without the need for a written instrument of transfer, if the transfer is carried out in accordance with the rules of the stock exchange and other requirements applicable to the Ordinary Shares listed on the stock exchange.
We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”
Upon consummation of this offering, we will incur significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the NASDAQ Capital Market, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We will incur additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
We are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our Company and, as a result, the value of our Ordinary Shares.
Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.
Upon completion of this offering, we will become a public company in the United States subject to Section 404 of the Sarbanes-Oxley Act of 2002 which requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending March 31, 2027. In addition, once we cease to be an “emerging growth company” as such term is defined under the JOBS Act, and if the value of our non-affiliated float of our common stock exceeds certain amounts, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation, testing and any required remediation.
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During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.
If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our Ordinary Shares may be volatile which could subject us to securities litigation and make it more difficult for you to sell your shares.
As a company conducting a relatively small public offering, we are subject to the risk that a small number of investors will purchase a high percentage of the offering. While the underwriters are required to sell shares in this offering to at least 300 unrestricted round lot shareholders (a round lot shareholder is a shareholder who purchases at least 100 shares) and at least 50% of the minimum required number of round lot holders must each hold unrestricted shares with a minimum market value of $2,500 in order to ensure that we meet the Nasdaq initial listing standards, we have not otherwise imposed any obligations on the underwriters as to the maximum number of shares they may place with individual investors. If, in the course of marketing the offering, the underwriters were to determine that demand for our shares was concentrated in a limited number of investors and such investors determined to hold their shares after the offering rather than trade them in the market, other shareholders could find the trading and price of our shares affected (positively or negatively) by the limited availability of our shares. If this were to happen, investors could find our shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their stock price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their shares.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
| ● | our goals and strategies; |
| ● | our future business development, financial conditions and results of operations; |
| ● | the expected growth of the logistics marketplace in China; |
| ● | fluctuations in interest rates; |
| ● | our expectations as to increase of customers and clients of our services; |
| ● | our expectations regarding demand for and market acceptance of our services; |
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| ● | our expectations regarding our relationships with suppliers and vendors; |
| ● | competition in our industry; |
| ● | relevant government policies and regulations relating to our services and industry; and | |
| ● | impact of COVID-19 and other pandemic on our business and financial conditions. |
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulation” and other sections in this prospectus. You should thoroughly read this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of our Ordinary Shares. In addition, the rapidly changing nature of the logistics markets results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
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Based upon an initial public offering price of $4.50 per Ordinary Share (the mid-point of the estimated public offering price range shown on the cover page of this prospectus), we estimate that we will receive net proceeds from this offering, after deducting the estimated underwriting discounts, and the estimated offering expenses payable by us, of $5,344,694 if the Underwriter does not exercise its over-allotment option, and $6,335,594 if the Underwriter exercises its over-allotment option in full.
We plan to use the net proceeds of this issue as follows: 1) approximately 20% for development of project logistic business in Southeast Asia; (2) approximately 20% for investment in equipment and machines and other capital expenditure; (3) approximately 10% for development of logistic management system and internal training for employees to improve management and technical skills; (4) approximately 10% for potential acquisition of high quality logistic team or company; and (5) approximately 40% for working capital and other general corporate purposes.
The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See “Risk Factors—Risks Related to our Ordinary Shares and this Offering and —You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase the price of our Ordinary Shares.”
In utilizing the proceeds of this issue, according to Chinese laws and regulations, we can only provide funds to our Chinese subsidiaries through loans or investment. On the premise of meeting the applicable requirements for government registration and approval, we can provide inter-company loans to our Chinese subsidiary within the statutory limit or provide additional capital contributions to our Chinese subsidiaries to finance their capital expenditure or working capital. We cannot assure you that if we do, we will be able to obtain the government registration or approval in time. See “Risk Factors - Risks Related to Doing Business in China - PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of this offering to make loans to our PRC subsidiaries or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.”
We plan to use approximately $0.8 million out of the proceeds to pay the costs and expenses associated with being a public company. This portion of the offering proceeds will be immediately available to us following the closing of the offering as it will not be remitted to China.
Approximately $2 million of the proceeds will be immediately remitted to China following the completion of this offering to fund the registered capital of the WFOE. Except that, in using the proceeds of this offering, we are permitted under PRC laws and regulations as an offshore holding company to provide funding to our WFOE in China only through loans or capital contributions, subject to the approval of government authorities and limit on the amount of capital contributions and loans. Subject to satisfaction of applicable government registration and approval requirements, we may extend inter-company loans to our WFOE in China or make additional capital contributions to our wholly-foreign-owned subsidiaries to fund its capital expenditures or working capital. For an increase of registered capital of our WFOE, we need to file with MOFCOM or its local counterparts. If we provide funding to our WFOE through loans, the total amount of such loans may not exceed the amount that equals to 2.5 times of the shareholders equity of the borrower. Such loans must be registered with SAFE or its local branches, which usually takes up to 20 working days to complete. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors—Risks Related Doing Business in China—PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of this offering to make loans to our PRC subsidiaries or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.”
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We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
Our board of directors has complete discretion in deciding whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always 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. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our WFOE.
Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to Eastern HK only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our subsidiaries in the PRC are required to set aside at least 10% of their respective after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their respective registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.
The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in complying with the administrative requirements necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiary are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our Ordinary Shares.
Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. Eastern HK may be considered a non-resident enterprise for tax purposes, so that any dividends our WFOE pays to Eastern HK may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%. See “Taxation—People’s Republic of China Enterprise Taxation.”
In order for us to pay dividends to our shareholders, we will rely on payments made by our operating subsidiaries, and the distribution of such payments to Eastern International and Eastern BVI from Eastern HK as dividends from WFOE. If our operating subsidiaries in China incur debt in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.
Pursuant 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 and other applicable PRC laws, the 10% withholding tax rate may be lowered to 5% if the recipient of the relevant dividends qualifies certain necessary requirements, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. The 5% withholding tax rate, however, does not automatically apply and in general, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC 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 Taxation Arrangement with respect to any dividends paid by our WFOE to its immediate holding company, Eastern HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Eastern HK intends to apply for the tax resident certificate if and when WFOE plans to declare and pay dividends to Eastern HK. See “Risk Factors—Risks Relating to Doing Business in China— We rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us could have a material adverse effect on our ability to conduct our business.”
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The following tables set forth our capitalization as of March 31, 2025:
| ● | on an actual basis; |
| ● | on an unaudited adjusted basis to reflect the issuance and sale of the Ordinary Shares by us in this offering at the assumed initial public offering price of $4.50 per share, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts, and estimated offering expenses payable by us. |
The adjustments reflected below are subject to change and are based upon available information and certain assumptions that we believe are reasonable. Total shareholders’ equity and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this capitalization table in conjunction with “Use of Proceeds,” “Summary Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.
| As
of March 31, 2025 | ||||||||
| Shareholders’ Equity | Actual* | As adjusted | ||||||
| Preferred shares, US$0.0001, 50,000,000 preferred shares authorized and 1,000,000 preferred shares issued and outstanding | $ | 100 | $ | 100 | ||||
| Ordinary Shares, par value $0.0001 per share, 450,000,000 shares authorized, 10,417,000 shares issued and outstanding on an actual basis*, 12,017,000 shares issued and outstanding on an adjusted basis (assuming 1,600,000 shares to be issued in this offering without over-allotment) | 1,042 | 1,202 | ||||||
| Additional paid-in capital | 8,040,388 | 13,384,922 | ||||||
| Statutory reserves | 888,085 | 888,085 | ||||||
| Retained earnings | 3,219,808 | 3,219,808 | ||||||
| Accumulated other comprehensive loss | (683,335 | ) | (683,335 | ) | ||||
| Total Shareholders’ Equity | 11,466,088 | 16,810,782 | ||||||
| Total Capitalization | $ | 11,466,088 | $ | 16,810,782 | ||||
| * | Shares and per share data are presented on a retroactive basis to reflect the recapitalization on February 7, 2024. |
If the Underwriter’s over-allotment option to purchase additional shares from us was exercised in full, pro forma (i) Ordinary Shares would be 12,257,000 shares, (ii) additional paid-in capital would be $14,375,798, (iii) total shareholders’ equity would be $17,801,682, and (iv) total capitalization would be $17,801,682.
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If you invest in our Ordinary Shares, your interest will be diluted for each Ordinary Share you purchase to the extent of the difference between the initial public offering price per Ordinary Share and our net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.
Our net tangible book value as of March 31, 2025, was $10,584,226, or $1.02 per Ordinary Share. Net tangible book value represents the amount of our total consolidated tangible assets (excluding the deferred offering costs), less the amount of our total consolidated liabilities. Dilution is determined by subtracting the net tangible book value per Ordinary Share (as adjusted for the offering) from the initial public offering price per Ordinary Share and after deducting the underwriting discounts, and the estimated offering expenses payable by us.
Dilution to New Investors if the Offering Amount is Sold without Exercise of the Over-allotment Option
After giving effect to our sale of 1,600,000 Ordinary Shares offered in this offering based on the assumed initial public offering price of $4.50 per Ordinary Share, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deduction of the underwriting discounts, and the estimated offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2025, would have been $15,928,920, or $1.33 per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of $0.31 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of $3.17 per Ordinary Share to investors purchasing Ordinary Shares in this offering. The as adjusted information discussed above is illustrative only.
The following table illustrates this per share dilution:
No Exercise of Over- Allotment Option | ||||
| Assumed Initial public offering price per Ordinary Share | $ | 4.5 | ||
| Net tangible book value per Ordinary Share as of March 31, 2025 | 1.02 | |||
| Increase in net tangible book value per Ordinary Share attributable to payments by new investors | 0.31 | |||
| Pro forma net tangible book value per Ordinary Share immediately after this offering | 1.33 | |||
| Amount of dilution in net tangible book value per Ordinary Share to new investors in the offering | $ | 3.17 | ||
A $1.00 increase (decrease) in the assumed public offering price of $0.12 per Ordinary Share would increase (decrease) our pro forma as adjusted net tangible book value after giving effect to this offering by $1,468,000, the pro forma as adjusted net tangible book value per Ordinary Share after giving effect to this offering by $1.45 per Ordinary Share, and the dilution in pro forma as adjusted net tangible book value per Ordinary Share to new investors in this offering by Ordinary Shares $4.05 per Ordinary Share, assuming no change to the number of Ordinary Shares offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts, and estimated offering expenses.
The following table sets forth, on an as adjusted basis as of March 31, 2025, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per Ordinary Share paid before deducting the underwriting discounts, and estimated offering expenses.
| Ordinary
Shares purchased | Total consideration | Average price per Ordinary | ||||||||||||||||||
| Over-allotment option not exercised | Number | Percent | Amount | Percent | Share | |||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Existing shareholders | 10,417,000 | 86.69 | % | $ | 8,042 | 52.76 | % | $ | 0.77 | |||||||||||
| New investors | 1,600,000 | 13.31 | % | 7,200 | 47.24 | % | 4.5 | |||||||||||||
| Total | 12,017,000 | 100.00 | % | 15,242 | 100.00 | % | 1.27 | |||||||||||||
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Dilution to New Investors if the Offering Amount is Sold with Full Exercise of the Over-allotment Option
After giving effect to our sale of 1,840,000 Ordinary Shares offered in this offering based on the assumed initial public offering price of $4.50 per Ordinary Share, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deduction of the underwriting discounts, and the estimated offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2025, would have been $16,919,820, or $1.38 per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of $0.36 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of $3.12 per Ordinary Share to investors purchasing Ordinary Shares in this offering. The as adjusted information discussed above is illustrative only.
The following table illustrates this per share dilution:
Full
Exercise of Option | ||||
| Assumed Initial public offering price per Ordinary Share | $ | 4.5 | ||
| Net tangible book value per Ordinary Share as of March 31, 2025 | 1.02 | |||
| Increase in net tangible book value per Ordinary Share attributable to payments by new investors | 0.36 | |||
| Pro forma net tangible book value per Ordinary Share immediately after this offering | 1.38 | |||
| Amount of dilution in net tangible book value per Ordinary Share to new investors in the offering | $ | 3.12 | ||
A $1.00 increase (decrease) in the assumed public offering price of $0.14 per Ordinary Share would increase (decrease) our pro forma as adjusted net tangible book value after giving effect to this offering by $1,688,200, the pro forma as adjusted net tangible book value per Ordinary Share after giving effect to this offering by $1.52 per Ordinary Share, and the dilution in pro forma as adjusted net tangible book value per Ordinary Share to new investors in this offering by Ordinary Shares $3.98 per Ordinary Share, assuming no change to the number of Ordinary Shares offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts, and estimated offering expenses.
The following table sets forth, on an as adjusted basis as of March 31, 2025, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per Ordinary Share paid before deducting the underwriting discounts, and estimated offering expenses.
| Ordinary
Shares purchased | Total consideration | Average price per Ordinary | ||||||||||||||||||
| Over-allotment option exercised in full | Number | Percent | Amount | Percent | Share | |||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Existing shareholders | 10,417,000 | 84.99 | % | $ | 8,042 | 49.27 | % | $ | 0.77 | |||||||||||
| New investors | 1,840,000 | 15.01 | % | 8,280 | 50.73 | % | 4.50 | |||||||||||||
| Total | 12,257,000 | 100.00 | % | 16,322 | 100.00 | % | 1.33 | |||||||||||||
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Our business is primarily conducted in China and all of our revenues are received and denominated in RMB. Capital accounts of our condensed financial statements are translated into U. S. dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the period. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into United States dollars at the rates used in translation.
The Company’s financial information is presented in U.S. dollars. Any transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of operations as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholder’s equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
The exchange rates in effect as of March 31, 2025 and March 31, 2024 were RMB1 for $0.1378 and $0.1385, respectively. The average exchange rates for the years ended March 31, 2025 and 2024 were RMB1 for $0.1386 and $0.1395, respectively.
As of July 1, 2025, the exchange rate was RMB 1 to $0.1395.
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ENFORCEABILITY OF CIVIL LIABILITIES
We were incorporated in the Cayman Islands in order to enjoy the following benefits:
| ● | political and economic stability; | |
| ● | an effective judicial system; | |
| ● | a favourable tax system; | |
| ● | the absence of exchange control or currency restrictions; and | |
| ● | the availability of professional and support services. |
However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:
The Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and
Cayman Islands companies may not have standing to sue before the federal courts of the United States.
Our memorandum and articles of association does not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated. Currently, all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. Among our executive officers and directors, Albert Wong, Ching Hei Li, Chung Leung Cheung, Chun Pong (Colman) Chiu and Shiu Wing Joseph Chow are residents of Hong Kong and Lin Tan is a resident of China and they are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. Our independent director Mr. Yu-yun Tristan Kuo is a U.S. citizen and resident. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
Ogier, our counsel as to Cayman Islands and Zhonglun Law Firm, our counsel as to PRC law have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:
| ● | recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or | |
| ● | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
Cayman Islands
We have been advised by Ogier that there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgements), although the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment, without any re-examination or re-litigation of matters adjudicated upon, provided such judgment (i) is given by a foreign court of competent jurisdiction, (ii) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (iii) is final, (iv) is not in respect of taxes, a fine or a penalty, (v) has not been obtained by fraud; and (vi) is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.
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There is uncertainty as to whether the courts of the Cayman Islands would recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Such uncertainty relates to whether a judgment obtained from the United States courts under the civil liability provisions of the securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company or its directors and officers. Because the courts of the Cayman Islands have yet to rule on whether such judgments are penal or punitive in nature, it is uncertain whether they would be enforceable in the Cayman Islands.
PRC
Zhonglun Law Firm has further advised us that the recognition and enforcement of foreign judgments are subject to compliance with the PRC Civil Procedures Law and relevant civil procedure requirements in the PRC. 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 where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments.
It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. In China, there are significant legal and other obstacles to obtain information needed for investigations or litigation originated outside China or otherwise with respect to foreign entities. 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 may not be efficient in the absence of a 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 investigations or evidence collection activities within the territory of the PRC. 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 State Council and the competent departments of the State Council. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.
Although in 2017 an intermediate court of Wuhan, Hubei Province recognized and enforced the judgment from a Los Angeles Court, based on reciprocal treatment because a California court recognized and enforced a judgment of Hubei Province, China, in 2009, such recognition and enforcement is case specific and did not set as a binding precedent. There is no guarantee for further recognition and enforcement in the future. In addition, according to the PRC Civil Procedures Law, courts in the PRC 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 law 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 or in the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC, if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit.
SH Wong & Co, our counsel as to the laws of Hong Kong, has advised us that there is uncertainty as to whether the courts of Hong Kong would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
A judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty), and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained by fraud, (b) the proceedings in which the judgment was obtained were opposed to natural justice, (c) its enforcement or recognition would be contrary to the public policy of Hong Kong, (d) the court of the United States was not jurisdictionally competent, or (e) the judgment was in conflict with a prior Hong Kong judgment.
Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States.
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CORPORATE HISTORY AND STRUCTURE
Eastern International Ltd. (“Eastern International” or the “Company”) is an exempted company incorporated in the Cayman Islands with limited liability on July 27, 2023 as a holding company. The Company, through its operating subsidiaries in China engages in logistic business and services.
Eastern International Ltd. established its directly wholly owned subsidiary Eastern Industrial Development Ltd., a company incorporated in BVI on August 10, 2023. Eastern Industrial Development Ltd. established its directly wholly owned subsidiary Eastern Group Limited, a Hong Kong company, on September 4, 2023. Eastern Group Limited established Hangzhou TC-Link Logistic Supply Chain Management Co., Ltd. in China on September 27, 2023. Upon our restructure completed on October 16, 2023, Eastern Industrial Development Ltd. owns 100% interest of Suzhou TC-Link Logistics Co., Ltd. Thereafter, we conduct our operations primarily through Suzhou TC-Link Logistics Co., Ltd. and its subsidiaries and branches including Suzhou TC-Link Logistics Co., Ltd. Shenzhen Branch, Yancheng TC-Link Logistics Co., Ltd. Yunnan Dongyuan Dadi International Logistics Co., Ltd., Yunnan Dongyuan Dadi International Logistics Co., Ltd. Mohan Branch, Chongqing Dayuan Logistics Co., Ltd., Wuxi TC-Link Logistics Co., Ltd., Wuxi TC-Link Logistics Co., Ltd. Dongbeitang Branch.
Upon the Reorganization, the Company has subsidiaries in countries and jurisdictions including PRC, Hong Kong. Details of the subsidiaries of the Company are set out below:
| Name of Entity | Date
of Incorporation |
Place
of Incorporation |
%
of Ownership |
Principal Activities | |||||
| Eastern BVI | 8/10/2023 | BVI | 100 | Holding Company | |||||
| Eastern HK | 9/4/2023 | Hong Kong | 100 | Holding Company | |||||
| Suzhou TC-Link | 1/9/2006 | China | 100 | Logistic Services (Transportation and warehouse subleasing services) | |||||
| Hangzhou TC-Link | 9/27/2023 | China | 100 | Logistic Services (Transportation and warehouse subleasing services) | |||||
| Yancheng TC-Link | 6/22/2016 | China | 100 | Logistic Services (Transportation and warehouse subleasing services) | |||||
| Yunnan Dongyuan | 11/5/2018 | China | 100 | Transportation services | |||||
| Chongqing Dayuan | 4/30/2020 | China | 100 | Transportation services | |||||
| Wuxi TC-Link | 5/19/2016 | China | 100 | Warehouse subleasing services | |||||
The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities, as of the date of this prospectus and immediately upon the completion of this offering, assuming no exercise of the over-allotment option by the Underwriter.
For details of each principal shareholder’s ownership, please refer to the beneficial ownership table in the section captioned “Principal Shareholders.”
Corporate Information
Our principal executive offices are located at Suite 901-903, 9th Floor, Building #2, Qianwan Zhigu, Chuanhua Smart Center Science and Technology City Block, Xiaoshan Economic and Technological Development Zone, Xiaoshan District, Hangzhou, Zhejiang Province, China 311231. Our telephone number at this address is +86 571-8235-6096. Our registered office in the Cayman Islands is located at 3-212 Governors Square, 23 Lime Tree Bay Avenue, P.O. Box 30746, Seven Mile Beach, Grand Cayman KY1-1203, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc. located at 122 East 42nd Street, 18th Floor, New York, NY 10168. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is www.elogint.com. The information contained on our website is not a part of this prospectus.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of financial condition and results of operations contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus.
Overview
Eastern International Ltd. (the “Company” or “we”) is an exempted company incorporated under the laws of the Cayman Islands with limited liability on July 27, 2023 as a holding company. We through our subsidiaries in People’s Republic of China (the “PRC” or “China”) provide logistic services to company and retail clients, including transportation services and warehouse subleasing services. Our transportation services include project logistic, cross border logistic and basic logistic. We are a holding company incorporated in the Cayman Islands. Our Ordinary Shares offered in this prospectus are shares of our Cayman Islands holding company. As a holding company with no material operations of our own, we conduct our business through our operating subsidiaries in China. We own 100% equity interest of all our subsidiaries including the operating subsidiaries in China (collectively, the “PRC operating subsidiaries”) and do not have a VIE structure.
Our PRC operating subsidiaries include Suzhou TC-Link and its subsidiaries. Suzhou TC-Link was established on January 9, 2006 in Jiangsu Province, China.
In connection with its proposed initial public offering, the Company undertook a reorganization of its legal structure (the “Reorganization”). On July 27, 2023, the Company was incorporated in the Cayman Islands with limited liability and an authorized share capital of US$50,000 divided into 450,000,000 Ordinary Shares with a par value of US$0.0001 each and 50,000,000 Preferred Shares with a par value US$0.0001 each. On July 27, 2023, the Company issued 10,000,000 Ordinary Shares to the original shareholders of Suzhou TC-Link Logistics Co., Ltd. (“Suzhou TC-Link”) in exchange for all equity interest of Suzhou TC-Link. On August 10, 2023, Eastern Industrial Development Ltd. (“Eastern BVI”) was incorporated in British Virgin Islands as a wholly owned subsidiary of the Company. On September 4, 2023, Eastern Group Limited (“Eastern HK”) was incorporated in Hong Kong as a wholly owned subsidiary of Eastern BVI. On September 27, 2023, Hangzhou TC-Link Logistics Supply Chain Management Co., Ltd. (“Hangzhou TC-Link” or “WFOE”) was incorporated under the laws of the PRC as a wholly owned subsidiary of Eastern HK. On October 16, 2023, WFOE acquired 100% of the equity interest of Suzhou TC-Link from its shareholders for the Company to newly issue 10,000,000 ordinary shares to such shareholders, after which WFOE owns 100% of the equity interests of the PRC operating subsidiaries. On February 7, 2024, the Company issued 1,000,000 Preferred Shares to the controlling shareholder of the Company. On February 21, 2024, the Company issued 417,000 Ordinary Shares to four investors, including 317,000 Ordinary Shares to third party investors and 100,000 Ordinary Shares to our chief financial officer, in a private placement transaction for aggregated proceeds of $834,000.
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After the Reorganization, the Company, together with its wholly-owned subsidiaries, are effectively controlled by the same controlling shareholder before the Reorganization. As such, the Reorganization is considered as a recapitalization of entities under common control. The Company has retroactively restated all shares and per share data for all the periods presented.
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-50-25, the Reorganization has been accounted for as a recapitalization among entities under common control since the same shareholder controlled all these entities prior to and after the Reorganization. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. The results of operations for the period presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period. By eliminating the effects of intra-entity transactions in determining the results of operations for the period before the Reorganization, those results will be substantially the same as the results of operations for the period after the date of Reorganization.
We, through Suzhou TC-Link, provide domestic and cross-border professional logistic services including project logistic and general logistic for company clients. Suzhou TC-Link was established on January 9, 2006 in Jiangsu Province, China. Suzhou TC-Link has obtained the internationally recognized IS09001 certificate of high-quality service (2015 standard), and it has 4 wholly owned subsidiaries, 5 warehouses/logistic centers and 3 branch offices of its subsidiaries in China. Suzhou TC-Link was rated as a key logistics enterprise in Jiangsu Province by Industry and Information Technology Department of Jiangsu in 2018, an AAA-level credit enterprise and a Class A contractor qualification for large power products transportation by China Water Resources and Electric Power Association On Physical Distribution in 2021 and 2023, respectively, and an AAA-level logistics enterprise by China Federation of Logistics & Purchasing in 2023. Suzhou TC-Link and Yancheng TC-Link have the road transportation permits from transportation bureau for large-size items/cargo transportation and Suzhou TC-Link’s business license also includes non-vessel operating common carrier business. Suzhou TC-Link’s operating network covers key cities in mainland China, Hong Kong, Southeast Asia and Central Asia. Suzhou TC-Link has an independently developed enterprise resource planning (ERP) management system.
Our project logistic services mainly include construction project logistics and special cargo logistics for large or precision equipment. Construction project logistics range from certain stage or entire process of construction projects. including purchase, packaging, storage, loading and unloading, transportation, fixation, installation of the equipment and machinery for construction as well as other related logistic services. We primarily provide our logistic solution services for new energy projects (including wind power turbine, photovoltaic, renewable energy storage, etc.), chemical equipment, engineering and infrastructure construction projects (including roads and bridges, tunnel construction). Special cargo logistics for large or precision equipment refer to logistic services to the manufacturers or purchasers of special and customized large and/or precision equipment, such as stamping machines, lathe, aircraft engines, and others. We study the operations of our clients, analyze their logistics needs and provide them with specific solutions which will improve the cost efficiency and achieve higher services’ quality). We have provided logistic services in China for wind power turbine projects which were exported to countries including Vietnam, UAE, Australia, South Africa and Chile.
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Our general logistic services refer to the transportation, warehousing, loading and unloading, and distribution of ordinary products. For instance, we provide logistic services for the household appliances manufacturers including the transportation of goods from manufacturing factories to warehouses, and to distributors’ warehouses nationwide according to customers’ instructions. Delivery can be made in whole truckload or less-than truckload. we have built a network with subsidiaries and offices in Suzhou, Wuxi, Yancheng, Chengdu, Chongqing, Guangzhou, Shenzhen, Kunming, Mohan covering most of major cities and areas in China.
The Company has started its cross-border logistic services since 2019, mainly focus on inland transportation and railway transportation between Mainland China and Southeast Asia countries for cargoes, such as bulk commodities, electronic products, tires, new energy equipment and other machineries. For example, we completed transportation from Laos to China of 707 units of 40ft containers, 914 units of 20ft containers and 244 units of open top containers for rubber, iron ore, barley and Cassava starch in 2022. We also provided service for the shipment of washing machines through China-Europe Railway Express to Europe.
The Company owns 20 trucks and has cooperative relationships with other owners and drivers for over 2,000 trucks for domestic long-distance transportation and less than carload goods. When we receive orders and projects, we make inquires to these drivers/owners and ask them to provide a fee estimate for the job. If they provide reasonable price or their prices are less than costs for which we use our own trucks, we will engage these drivers to undertake the transportation. We will provide them with time and location to load the goods and provide name, contact information and license plate of the driver and truck to our clients. After the delivery is completed, we will collect payment from the clients and pay such drivers directly. The Company has 5 warehouses/logistic centers and has long term leases for warehouses and storage space for over 25,000 square meters. As a part of the logistic services, the Company also provides warehouse subleasing services.
After years of development, we have built our strengths in logistics technology and service models, as well as a stable, professional and talented core business team. We have provided logistics services to large corporate clients, mostly industry leaders from different areas, such as renewable energy, household appliances and construction industry, and we believe our relationship with these clients are stable and renewable based on our competitive strengths and track record.
Key Financial Performance Indicators
To assess the performance of our business, we consider a variety of financial and operating measures. The key financial performance indicators we use include revenues, gross profit and gross margin, operating expenses, and income from operations. Our review of these indicators reveals the results of our business performance and provides timely and meaningful feedbacks to key operating decisions and allow our business to respond promptly to competitive market conditions and different demands and preferences from our customers. The key measures that we use to evaluate the performance of our business are set forth below and are discussed in greater details under “Results of Operations”.
Revenues
Our revenues are derived from transportation services and warehouse subleasing services provided to our customers. Our revenues are affected by the regional and global economic and social conditions, as well as our ability to promptly respond to changes in demand for our services in a particular region or industry. Furthermore, our revenues are also impacted by our ability to attract more customers to use our services and increase our market share.
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Gross Profit and Gross Margin
Gross profit is calculated as the difference between revenues and cost of revenues. Gross margin is gross profit divided by revenues. Gross profit and gross margin are measures used by our management to evaluate the profitability of services we provided to our customers as well as how well our business strategy is executed and performed. Our gross profit and gross margin are impacted by many internal and external factors, such as market condition that affects our bargain power, our ability of effective cost control, overall Chinese and global economy.
Operating Expenses
Our operating expenses consist of selling expenses and general and administrative expenses.
Our selling expenses primarily include salaries and benefits for our sales personnel, travelling, entertainment and insurance expenses. We expect that our overall selling expenses to increase in the foreseeable future if our business further grows.
Our general and administrative expenses primarily include employee salaries and benefits, depreciation, office lease expenses, travelling and entertainment expenses, legal and consulting fees, insurance and other miscellaneous administrative expenses. We expect our general and administrative expenses to increase in the foreseeable future, as we plan to hire additional personnel and incur additional expenses in connection with the expansion of our business operations.
Income from Operations
Income from operations is calculated as gross profit minus operating expenses. Income from operations excludes interest income, interest expenses, foreign exchange transaction gain (loss), other income (expenses) and income tax expenses. We use income from operations as an indicator of the productivity of our business and our ability to manage expenses.
Results of Operations
This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The results of operations in any period are not necessarily indicative of our future trends.
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For the Years Ended March 31, 2025 and 2024
The following table summarizes the results of our operations for the years ended March 31, 2025 and 2024, respectively, and provides information regarding the dollar and percentage changes during such years.
| For the Years Ended March 31, | Variance | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| Revenues | $ | 40,041,691 | $ | 40,443,629 | $ | (401,938 | ) | (1.0 | )% | |||||||
| Cost of revenues | (34,041,850 | ) | (35,424,962 | ) | (1,383,112 | ) | (3.9 | )% | ||||||||
| Gross profit | 5,999,841 | 5,018,667 | 981,174 | 19.6 | % | |||||||||||
| Gross Margin | 15.0 | % | 12.4 | % | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling expenses | (774,484 | ) | (712,338 | ) | 62,146 | 8.7 | % | |||||||||
| General and administrative expenses | (2,958,148 | ) | (2,871,937 | ) | 86,211 | 3.0 | % | |||||||||
| Total operating expenses | (3,732,632 | ) | (3,584,275 | ) | 148,357 | 4.1 | % | |||||||||
| Income from operations | 2,267,209 | 1,434,392 | 832,817 | 58.1 | % | |||||||||||
| Interest income | 790 | 2,644 | (1,854 | ) | (70.1 | )% | ||||||||||
| Interest expenses | (143,602 | ) | (97,552 | ) | 46,050 | 47.2 | % | |||||||||
| Foreign exchange transaction gain | 215 | 19,600 | (19,385 | ) | (98.9 | )% | ||||||||||
| Gain on disposal of property and equipment | 40,620 | 5,562 | 35,058 | 630.3 | % | |||||||||||
| Government subsidies | 16,642 | 27,202 | (10,560 | ) | (38.8 | )% | ||||||||||
| Insurance indemnity | 171,718 | 128,442 | 43,276 | 33.7 | % | |||||||||||
| Other income, net | 17,542 | 15,199 | 2,343 | 15.4 | % | |||||||||||
| Income before income taxes | 2,371,134 | 1,535,489 | 835,645 | 54.4 | % | |||||||||||
| Income tax expenses | (591,108 | ) | (451,789 | ) | 139,319 | 30.8 | % | |||||||||
| Net income | $ | 1,780,026 | $ | 1,083,700 | $ | 696,326 | 64.3 | % | ||||||||
Revenues
We generated our revenue primarily from providing (i) transportation services and (ii) warehouse subleasing services to our customers. Total revenues decreased by $401,938, or 1.0%, from $40,443,629 for the year ended March 31, 2024 to $40,041,691 for the year ended March 31, 2025. This decrease was primarily caused by the decrease in transportation services while partially offset by the increase in warehouse subleasing services.
| For the Years Ended March 31, | Variance | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| Revenues from | ||||||||||||||||
| transportation services | $ | 35,253,906 | $ | 37,578,532 | $ | (2,324,626 | ) | (6.2 | )% | |||||||
| warehouse subleasing services | 4,787,785 | 2,865,097 | 1,922,688 | 67.1 | % | |||||||||||
| Total Revenues | $ | 40,041,691 | $ | 40,443,629 | $ | (401,938 | ) | (1.0 | )% | |||||||
Transportation services
Our transportation services are composed of project logistic (including cross border logistic) and general logistic. Project logistic aims to ship oversized cargo, and the entire transport process is more complicated with more uncertainties when compared to general logistic.
Our revenues from transportation services decreased by $2,324,626 or 6.2% from $37,578,532 for the year ended March 31, 2024 to $35,253,906 for the year ended March 31, 2025, which is primarily due to the decrease in revenues from project logistic by $2,312,446 from $23,438,068 for fiscal year 2024 to $21,125,622 for fiscal year 2025. This was caused by lower demand for nationwide transportations in fiscal year 2025, leading to a shift toward regional transportations with lower contract prices. As a result, despite that we completed more project logistic orders (3,533 in fiscal year 2025 versus 2,947 in fiscal year 2024), the average order price for project logistic fell from approximately $7,953 for fiscal year 2024 to approximately $5,980 for fiscal year 2025.
Additionally, revenues from general logistic remained stable from $14,140,464 for fiscal year 2024 to $14,128,284 for fiscal year 2025.
Warehouse subleasing services
Our revenues from warehouse subleasing services increased by $1,922,688 or 67.1% from $2,865,097 for the year ended March 31, 2024 to $4,787,785 for the year ended March 31, 2025. In fiscal year 2025, in an effort to expand our warehouse subleasing business, management team took a deep dive into the market and we gain several new customers, and 9 of which had become major customers for the year, representing more than 30% of warehouse subleasing revenues for the year, contributing to the increase in our warehouse subleasing revenues.
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Cost of revenues
Our cost of revenues for transportation services mainly consisted of outsourced shipping services, fuel, salaries paid to drivers, depreciation, fleet maintenance, tolls and customs fees. Cost of revenues for warehouse subleasing services mainly consisted of lease expenses of warehouse buildings, utilities, maintenance, fuel and warehouse handling fees. The following table sets forth the breakdown of our cost of revenues by category for the years ended March 31, 2025 and 2024, respectively.
| For the Years Ended March 31, | Variance | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| Cost of revenues for | ||||||||||||||||
| transportation services | $ | 29,765,104 | $ | 32,997,049 | $ | (3,231,945 | ) | (9.8 | )% | |||||||
| warehouse subleasing services | 4,276,746 | 2,427,913 | 1,848,833 | 76.1 | % | |||||||||||
| Total cost of revenues | $ | 34,041,850 | $ | 35,424,962 | $ | (1,383,112 | ) | (3.9 | )% | |||||||
Cost of revenues decreased by $1,383,112 or 3.9% from $35,424,962 for the year ended March 31, 2024 to $34,041,850 for the year ended March 31, 2025. Overall, the change is in line with the change of revenues.
Our cost of transportation services decreased by $3,231,945 or 9.8% from $32,997,049 for the year ended March 31, 2024 to $29,765,104 for the year ended March 31, 2025. The change is in line with revenues from transportation services. Please refer to change in gross margin for transportation services below.
Our cost of warehouse subleasing services increased by $1,848,833 or 76.1% from $2,427,913 for the year ended March 31, 2024 to $4,276,746 for the year ended March 31, 2025. The change is in line with increase of revenues from warehouse subleasing services. Please also refer to the changes in gross margin for warehouse subleasing services below.
Gross profit
The following table sets forth the breakdown of our gross profit and gross margin by category for the years ended March 31, 2025 and 2024, respectively.
| For the Years Ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Variance | ||||||||||||||||||||||
| Gross Profit | Gross Margin | Gross Profit | Gross Margin | Gross Profit | Gross Margin | |||||||||||||||||||
| Gross profit of | (pp* | ) | ||||||||||||||||||||||
| transportation services | $ | 5,488,802 | 15.6 | % | $ | 4,581,483 | 12.2 | % | $ | 907,319 | 3.4 | |||||||||||||
| warehouse subleasing services | 511,039 | 10.7 | % | 437,184 | 15.3 | % | 73,855 | (4.6 | ) | |||||||||||||||
| Total | $ | 5,999,841 | 15.0 | % | $ | 5,018,667 | 12.4 | % | $ | 981,174 | 2.6 | |||||||||||||
*percentage point
Our gross profit increased by $981,174 from $5,018,667 for the year ended March 31, 2024 to $5,999,841 for the year ended March 31, 2025, primarily due to the increase in our gross margin from 12.4% for the year ended March 31, 2024 to 15.0% for the year ended March 31, 2025.
Gross profit for transportation services was $5,488,802 for the year ended March 31, 2025, which increased by $907,319 as compared to fiscal year 2024, primarily due to the increase in gross margin for transportation services from 12.2% for the year ended March 31, 2024 to 15.6% for the year ended March 31, 2025, while partially offset by the decrease in revenues. As a significant component of the transportation costs, fuel prices went down in fiscal year 2025 along with the drop in crude oil prices, which improved gross margin for our transportation services.
Gross profit for warehouse subleasing services was $511,039 for the year ended March 31, 2025, which increased by $73,855 as compared to fiscal year 2024, which was driven by the increase in revenues from warehouse subleasing services, while partially offset by the decrease in gross margin for warehouse subleasing services from 15.3% for the year ended March 31, 2024 to 10.7% for the year ended March 31, 2025. Since we obtained two new warehouses under operating leases in fiscal year 2025, we were unable to fully utilize the entire space in the year, which resulted in lower gross margin for our warehouse subleasing services compared to fiscal year 2024.
Operating Expenses
The following table sets forth the breakdown of our operating expenses for the years ended March 31, 2025 and 2024:
| For the years ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | Variance | ||||||||||||||||||||||
| Amount | As a percentage of revenue | Amount | As a percentage of revenue | Amount | % | |||||||||||||||||||
| Revenues | $ | 40,041,691 | 100.0 | % | $ | 40,443,629 | 100.0 | % | $ | (401,938 | ) | (1.0 | )% | |||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Selling expenses | 774,484 | 1.9 | % | 712,338 | 1.8 | % | 62,146 | 8.7 | % | |||||||||||||||
| General and administrative expenses | 2,958,148 | 7.4 | % | 2,871,937 | 7.1 | % | 86,211 | 3.0 | % | |||||||||||||||
| Total operating expenses | $ | 3,732,632 | 9.3 | % | $ | 3,584,275 | 8.9 | % | $ | 148,357 | 4.1 | % | ||||||||||||
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Selling expenses
Our selling expense increased by $62,146 or 8.7% from $712,338 for the year ended March 31, 2024 to $774,484 for the year ended March 31, 2025. As a percentage of revenues, our selling expenses accounted for 1.9% and 1.8% of our total revenues for the years ended March 31, 2025 and 2024, respectively. The increase in selling expenses was primarily due to $35,524 increase in staff costs and benefits paid to our sales force, and $34,363 increase in entertainment expenses, as the Company continued to invest in sales and marketing activities to stay competitive in the market, while partially offset by $40,090 decrease in car maintenance and insurance.
General and administrative expenses
Our general and administrative expenses were $2,958,148 for the year ended March 31, 2025, which increased by $86,211 from $2,871,937 for the year ended March 31, 2024. As a percentage of revenues, general and administrative expenses accounted for 7.4% and 7.1% of revenues for the years ended March 31, 2025 and 2024, respectively. Major changes in general and administrative expenses included (i) $167,534 increase in professional service fees paid for the intended initial public offering, such as audit fees and consulting fees, (ii) $48,442 increase in lease expenses as we opened a new office in Hangzhou City in fiscal year 2025 to facilitate future growth, and (iii) $53,220 increase in travel expenses due to increased administrative activities; while partially offset by (i) $145,652 decrease in employee salaries and benefits since we adjusted the salaries of our management team in order to economize on group expenses, (ii) $16,433 decrease in provision for expected credit losses, and (iii) $16,201 decrease in depreciation as we disposed a commercial vehicle in the year.
Interest expenses
Interest expenses increased by $46,050 or 47.2% from $97,552 for the year ended March 31, 2024 to $143,602 for the year ended March 31, 2025. Since we continued to invest in our business in fiscal year 2025, our PRC operating subsidiaries have made more borrowings from the banks and other institutions in the PRC during the year ended March 31, 2025 in order to meet our needs for working capital.
Gain on disposal of property and equipment
Our gain on disposal of property and equipment increased by $35,058 from $5,562 for the year ended March 31, 2024 to $40,620 for the year ended March 31, 2025. Our PRC operating subsidiaries disposed five retired transportation vehicles and a commercial vehicle in fiscal year 2025.
Government subsidies
Our income from government subsidies decreased by $10,560 from $27,202 for the year ended March 31, 2024 to $16,642 for the year ended March 31, 2025. These subsidies are from local government of Pu’Er City, Yunnan province to reimburse the Company’s railway costs incurred in transporting the city’s local produces, including timber, coffee beans, tea and sugar. Such subsidies were unconditional, non-recurring and discretionary. In fiscal year 2025, the city has continued to reduce such subsidies.
Insurance indemnity
Our insurance indemnity received from insurance companies has increased by $43,276 from $128,442 for the year ended March 31, 2024 to $171,718 for the year ended March 31, 2025, which was due to the increase in damage/losses from $184,188 for fiscal year 2024 to $257,158 for fiscal year 2025.
Income tax expenses
Our income tax expenses were $591,108 and $451,789 for the years ended March 31, 2025 and 2024, respectively, which were mainly resulted from income before tax in amounts of $2,371,134 and $1,535,489 for the years ended March 31, 2025 and 2024, respectively. We were subject to income tax on entity basis on income derived from the location in which each entity is domiciled.
The Company is incorporated in the Cayman Islands as an exempted company and is not subject to tax on income or capital gain under the laws of the Cayman Islands.
Eastern BVI is incorporated in the British Virgin Islands as a holding company and is currently exempted from income and corporate tax under the current laws of British Virgin Islands. In addition, the British Virgin Islands does not levy capital gains tax on it.
Eastern HK is incorporated in Hong Kong as a holding company with no activities. Under Hong Kong’s two-tier tax rates regime, the first 2 million Hong Kong Dollar (“HKD”) of profits will be taxed at 8.25%, and the profits above HKD 2 million will be taxed at 16.5%. Eastern HK is not subject to income tax for the years ended March 31, 2025 and 2024 as it had no operating activities during these years.
Under the Enterprise Income Tax (“EIT”) Law of the PRC, domestic enterprises and Foreign Investment Enterprises (“FIE”) are usually subject to a unified 25% income tax rate while preferential tax rates, tax holidays and certain tax exemptions may be granted on case-by-case basis.
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According to the Circular on the Implementation of the Positive Policy on Inclusive Tax Relief for Small and Micro Enterprises (Cai Shui (2019) No. 13), as enacted by Ministry of Finance and State Taxation Administration of the PRC, an enterprise is recognized as a small-scale and low-profit enterprise if all of the followings are met (i) its taxable income does not exceed RMB3 million; (ii) total number of its employees does not exceed 300; and (iii) amount of its total assets does not exceed RMB50 million. A small-scale and low-profit enterprise receives a tax preference including a preferential tax rate of 5% on its taxable income below RMB1 million and another preferential tax rate of 10% on its taxable income between RMB1 million and RMB3 million. This policy was originally effective since January 1, 2019 until December 31, 2021. Subsequently, Ministry of Finance and State Taxation Administration of the PRC have made supplements to this policy on March 14, 2022, March 26, 2023 and August 6, 2023, respectively, which have stated that since January 1, 2022, if an entity is identified as a small-scale and low-profit enterprise based on the above rules, it is entitled to a preferential tax rate of 5% on its taxable income, and such tax relief has been extended to December 31, 2027 at the same time. As a result, for the year ended March 31, 2024, Wuxi TC-Link, Yunnan Dongyuan and Chongqing Dayuan are qualified for small and low-profit enterprises with an income tax rate of 5%, while for the year ended March 31, 2025, Wuxi TC-Link, Yancheng TC-Link, Yunnan Dongyuan and Chongqing Dayuan are qualified for small and low-profit enterprises with an income tax rate of 5%.
Our effective income tax rate was 24.9% and 29.4% for the years ended March 31, 2025 and 2024, respectively. As our taxable income grows in fiscal year 2025, we made more rational tax plannings by taking advantage of our PRC operating subsidiaries being qualified for the 5% preferential tax rate. As a result, our effective income tax rate dropped.
Net income
As a result of the foregoing, we reported a net income of $1,780,026 and $1,083,700 for the years ended March 31, 2025 and 2024, respectively.
Liquidity and Capital Resources
We are a holding company incorporated in the Cayman Islands. We conduct our operations primarily through our fully owned subsidiaries in China. As a result, our ability to pay dividends depends upon dividends paid by the subsidiaries. If our PRC subsidiaries incur debt on their behalf in the future, the instruments governing their debt may restrict their ability to pay dividends ultimately to us. In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, our PRC subsidiaries are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capitals. The statutory reserve funds are not distributable as cash dividends. As of March 31, 2025 and 2024, the balances of the required statutory reserves were $888,085 and $675,027, respectively. Additionally, the paid-in capitals are also considered as restricted. Accordingly, as of March 31, 2025 and 2024, total restricted net assets amounted to $8,929,615 and $8,715,157, respectively.
As of March 31, 2025, we had cash of $846,409, notes receivable of $1,805,140 and accounts receivable of $14,320,898. As of report date, approximately $1,776,216, or 98.4%, of notes receivable balance as of March 31, 2025 has been collected, and $8.04 million, or 56.2%, of accounts receivable balance as of March 31, 2025 has been collected. As of March 31, 2025, our current assets were approximately $19.7 million, and our current liabilities were approximately $12.1 million. Accordingly, our working capital as of March 31, 2025 was about $7.6 million.
We have historically funded our working capital needs from capital contributions from shareholders, borrowings from financial institutions and related parties. Our working capital requirements are influenced by the level of our operations, our ability to manage accounts receivable collection and payments to suppliers.
As of March 31, 2025, $832,398 of our cash were held by our PRC operating subsidiaries with banks and financial institutions inside China. Substantially all of our operations are conducted in China and all of our revenues and expenses are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with applicable supporting documentation. These currency exchange regulations may restrict the ability of our PRC subsidiaries to transfer their net assets to us through loans, advances or cash dividends. Furthermore, as an offshore holding company with PRC entities, we may only transfer funds to or finance our PRC operating entities by means of loans or capital contributions. Any capital contributions or loans that we make to our PRC operating entities, including from the proceeds of this offering, are subject to PRC regulations and approvals.
On a recurring basis, the primary future cash needs of the Company will be focused on operating activities, working capital, capital expenditures, investment, regulatory and compliance costs. We believe that our existing resources, including cash generated from operations, will be sufficient to meet our working capital requirement for our current operations over the next twelve months. In order to fully implement its business plan and sustain continued growth, the Company may also need to raise capital from outside investors.
For the Years Ended March 31, 2025 and 2024
The following table sets forth summary of our cash flows for the years ended March 31, 2025 and 2024, respectively.
| For the years ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (2,158,708 | ) | $ | (629,761 | ) | ||
| Net cash (used in) provided by investing activities | (337,784 | ) | 44,248 | |||||
| Net cash provided by financing activities | 1,176,298 | 1,848,254 | ||||||
| Effect of exchange rate changes on cash | (3,856 | ) | (55,378 | ) | ||||
| Net (decrease) increase in cash | (1,324,050 | ) | 1,207,363 | |||||
| Cash, beginning of the year | 2,170,459 | 963,096 | ||||||
| Cash, end of the year | $ | 846,409 | $ | 2,170,459 | ||||
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Operating Activities
Net cash used in operating activities was $2,158,708 and $629,761 for the years ended March 31, 2025 and 2024, respectively.
For the year ended March 31, 2025, our net cash used in operating activities was $2,158,708, which was primarily resulted from (i) increase in accounts receivable by $1,655,731, as some of our customers slowed down their payments due to the general economic downturn; (ii) increase in other current assets by $866,022, as we have several on-going project logistic transportations as of March 31, 2025, the balance of advances to employees increased when compared with beginning of the year; and (iii) increase in other non-current assets by $1,165,934, as we have gained several new customers for our transportation services in fiscal year 2025, and we made security deposits to them; while partially offset by (i) net income of $1,780,026; and (ii) increase in income taxes payable by $293,220, as our current PRC income tax provisions increased.
For the year ended March 31, 2024, our net cash used in operating activities was $629,761, which was primarily resulted from (i) increase in accounts receivable by $2,659,755; and (ii) increase in notes receivable by $954,131, both are because our revenues have increased significantly in fiscal year 2024 as compared to the fiscal year 2023; while partially offset by (i) net income of $1,083,700; and (ii) increase in accounts payable by $1,566,498, as our purchases have increased significantly in fiscal year 2024 due to the growth of our business.
Investing Activities
Net cash used in investing activities was $337,784 for the year ended March 31, 2025, which was due to $397,441 spent in the purchase of equipment, while partially offset by $59,657 proceeds received from disposal of equipment since we disposed several retired vehicles in fiscal year 2025 and we replaced them with new ones.
Net cash provided by investing activities was $44,248 for the year ended March 31, 2024, which was primarily provided by $51,681 proceeds received in disposal of property and equipment.
Financing Activities
Net cash provided by financing activities was $1,176,298 for the year ended March 31, 2025, which was primarily resulted from $5,051,065 proceeds received from bank and other borrowings; while partially offset by (i) $3,258,829 repayments of bank and other borrowings; and (ii) $419,470 costs paid for initial public offering.
Net cash provided by financing activities was $1,848,254 for the year ended March 31, 2024, which was primarily resulted from (i) $4,463,451 proceeds received from bank and other borrowings; and (ii) $834,000 capital contribution from four investors in a private placement; while partially offset by (i) $3,012,373 repayments of bank and other borrowings; and (ii) $402,097 expenses paid for initial public offering.
Off-balance Sheet Commitments and Arrangements
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 interest 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 that engages in leasing, hedging or research and development services with us.
Critical Accounting Policies
We prepare our financial statements in accordance with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. We use historical data to assist in the forecast of our future results. Deviations from our projections are addressed when our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.
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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) leases.
Accounts receivable, net
Accounts receivable represents amounts invoiced and revenue recognized prior to invoicing when the Company has satisfied its performance obligation and has the unconditional right to payment, which are recorded net of allowance for expected credit losses on such receivables. The credit term is negotiable with different customers which is generally within 90 days after transportation services are completed.
The estimated credit losses charged are classified as “operating expenses” in the consolidated statements of income and comprehensive income. In determining the amount of expected credit losses, the Company considers historical collectability based on past due status, age of the accounts receivable balances, credit quality of the customers based on ongoing credit evaluations, as well as reasonable and supportable forecasts of future losses. Accounts receivable are written off after all collection efforts have ceased.
Revenue recognition
The Company generates revenues from (i) provision of transportation services and (ii) warehouse subleasing services. The Company accounts for recognition of revenues from provision of transportation services under Accounting Standards Codification 606 “Revenue from Contracts with Customers” (“ASC 606”).
The five-step model defined by ASC 606 requires the Company to (1) identify its contracts with customers, (2) identify its performance obligations under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to its performance obligations in those contracts, and (5) recognize revenue when each performance obligation under those contracts is satisfied.
A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct. The transaction price is the amount of consideration a company expects to be entitled from a customer in exchange for providing the goods or services.
The unit of account for revenue recognition is a performance obligation (a good or service). A contract may contain one or more performance obligations. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. Otherwise, performance obligations are combined with other promised goods or services until the Company identifies a bundle of goods or services that is distinct. Promises in contracts which do not result in the transfer of a good or service are not performance obligations, as well as those promises that are administrative in nature, or are immaterial in the context of the contract. The Company has addressed whether various goods and services promised to the customer represent distinct performance obligations. The Company applied the guidance of ASC Topic 606-10-25-16 through 18 in order to verify which promises should be assessed for classification as distinct performance obligations.
The transaction price is allocated to each performance obligation in the contract on the basis of the relative stand-alone selling prices of the promised goods or services. The individual standalone selling price of a good or service that has not previously been sold on a stand-alone basis, or has a highly variable selling price, is determined based on the residual portion of the transaction price after allocating the transaction price to goods and/or services with an observable stand-alone selling price. A discount or variable consideration is allocated to one or more, but not all, of the performance obligations if it relates specifically to those performance obligations.
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Transaction price is the amount of consideration in the contract to which the Company expects to be entitled in exchange for transferring the promised goods or services. The transaction price may be fixed or variable and is adjusted for the time value of money if the contract includes a significant financing component. Consideration payable to a customer is deducted from the transaction price if the Company does not receive a separate identifiable benefit from the customer. When consideration is variable, if applicable, the estimated amount is included in the transaction price to the extent that it is highly probable that a significant reversal of the cumulative revenue will not occur when the uncertainty associated with the variable consideration is resolved. Revenue is reported net of value added tax (“VAT”) and the Company does not offer any credits or discounts, rebates, price concessions or other similar privileges to customers. Due to the nature of services, the Company does not permit refund to customers.
The core principle underlying ASC 606 is that the Company will recognize revenue to represent the transfer of goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.
The Company enters into a distinct contract with its customers for the provision of transportation services. Under each contract, the Company is committed to transport the customer’s goods, cargos or project components from one point to another as designated by the customer.
The Company’s work generally includes planning, loading, shipping, unloading, and performing safety checks during the entire process. The Company is also responsible for purchasing insurances to cover the entire transportation process. In applying ASC 606-10-25-21 (a), all these above series of tasks are interrelated and are not separable or distinct as the Company’s customers cannot benefit from any standalone task and they are indispensable to transport the customer’s items to its designated location. Accordingly, each contract has only one performance obligation.
The contract price is negotiated on a case-by-case basis, which is mainly based on the transportation distance, weight, size of the items to be transported and whether there are any particular insured requirements for the goods and cargos to be delivered. Once the contract is signed, the price is fixed and set forth in the contract. For transportation contracts, the Company generally offers a credit term of 90 days upon the completion of transportation.
In applying ASC 606-10-25-27, the Company recognizes revenue from transportation services over a period of time, because the customer simultaneously receives and consumes the benefit of our service as the items are transported from one location to another. That is, if the Company is unable to complete delivery to the final location, another entity would not need to reperform the transportation service already performed. The entire transportation process generally takes 2 to 15 days, and the Company uses time-based method to measure progress toward completion, as it best depicts the value of service transferred to the customer.
For each of transportation, the Company enters into separate arrangement with insurance companies for any damages/losses during the course of transportation, in which all damages/losses are bore by the Company will be claimed from the insurance companies. Any costs incurred for any damages/losses by the Company was recognized as cost of revenues and any reimbursement of the claims received from insurance companies was recognized as insurance indemnity (other income) in the statements of operations and other comprehensive loss. The compensation from insurance plan is generally fully cover the costs incurred by the Company in any damages/losses.
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In some cases, we might subcontract a part of the transportation job to third party suppliers due to the limitation of our transportation team and our fleet. In accordance with ASC 606, we evaluate whether it is appropriate to record the gross amount of the contract price and related costs or the net amount earned as commissions. We conclude that we act as a principal in such cases because (i) we are primarily responsible for the promised services in the contract, which means we will be held accountable for the customer’s entire loss if the transportation could not be completed as expected and agreed; (ii) we have sole discretion in establishing the contract price that the customer pays to us, despite how much we pay to the subcontractor, who was separately engaged and the choice of party of subcontractor is on our decision; (iii) we are subject to capital risk that we need to pay our subcontractor with agreed terms even if the customer hasn’t paid to us or is in default; and (iv) the subcontractors do not perform any value-added services but merely follow our instructions for the delivery. As a result, we recognize revenue on the gross basis.
The Company recognizes revenue from subleasing warehouse spaces in accordance with ASC 842, as discussed in the “Leases” part below.
Leases
The Company utilizes ASC 842 to account for leases for all periods presented. ASC 842 supersedes the lease requirements in ASC 840 “Leases”, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. All leases of the Company are accounted for as operating leases.
| (a) | The Company as a lessee |
The Company determines if an arrangement is a lease at inception. On the Company’s consolidated balance sheets, our warehouse and office leases are included in operating lease right of use (“ROU”) assets, net, and operating lease liabilities, current and non-current.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Significant judgment may be required when determining whether a contract contains a lease, the length of the lease term, the allocation of the consideration in a contract between lease and non-lease components, and the determination of the discount rate included in our warehouse and office leases. We review the underlying objective of each contract, the terms of the contract, and consider our current and future business conditions when making these judgments.
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Any lease with a term of 12 months or less is considered short-term. As permitted by ASC 842, short-term leases are excluded from the ROU asset and lease liabilities on the consolidated balance sheets. Consistent with all other operating leases, short-term lease expense is recorded on a straight-line basis over the lease term.
The Financial Accounting Standards Board (“FASB”) issued a Q&A in March 2020 that focused on the application of lease guidance in ASC 842 for lease concessions related to the effects of COVID-19. The FASB staff has said that entities can elect to not evaluate whether concessions granted by lessors related to COVID-19 are lease modifications. Entities that make this election can then apply the lease modification guidance in ASC 842 or account for the concession as if it were contemplated as part of the existing contract.
The Company has elected to not treat the concessions as lease modifications and will instead account for the lease concessions as if they were contemplated as part of the existing leases. The Company has recorded negative variable lease expense and adjusted lease liabilities at the point in which the rent concession has become accruable.
The Company evaluates the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows.
| (b) | the Company as a lessor |
The Company leases warehouse buildings from third party owners, whose warehouse buildings are ready to use. The Company then subleases the spaces in the warehouse buildings that it leases from the owners with the desired effect of generating a spread between its leasing cost and rental income to generate profit margins. Under the terms and conditions of the agreements, the Company acts as a principal in the transaction because the Company takes the risk of loss from lack of rental income if the Company fails to procure a lessee for such spaces during the lease period. Accordingly, the Company recognizes rental income using the gross method.
The Company enters into rental agreements with lessees, together with providing supplemental management services which include handling, repairing and maintenance, disinfection the warehouse spaces, etc. The agreements generally have a duration for one year. According to the agreements, lessees are required to pay monthly or quarterly rent at the beginning of each month or quarter, which are recorded as liabilities until the Company has met the performance obligation, which is to provide warehouse spaces to the lessees for their use. The agreements do not include options to extend or to terminate the lease or contain any bargain purchase options for the lessees. When the performance obligations are met, i.e. when the lessees used the warehouse spaces, the Company records revenue using the straight-line method to its results of operations on a monthly basis over the lease period. The monthly rental amount is fixed and there is no variable consideration in the transaction prices.
Income taxes
The Company is not subject to tax on income or capital gains under the current laws of the Cayman Islands and its subsidiary in British Virgin Islands is not subject to tax on income or capital gains under the current laws of the British Virgin Islands.
The Company’s subsidiaries in the PRC and Hong Kong are subject to the income taxes of the PRC and Hong Kong, respectively. No taxable income was generated outside the PRC for the years ended March 31, 2025 and 2024. The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not that they will either expire before the Company is able to realize the benefits, or future deductibility is uncertain.
ASC 740-10-25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures.
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Quantitative and Qualitative Disclosures about Market Risks
Liquidity risk
We are exposed to liquidity risk, which is the risk that we will be unable to provide sufficient capital resources and liquidity to meet our commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will turn to other financial institutions to obtain short-term funding to meet the liquidity shortage.
Inflation risk
Inflationary factors, such as increases in personnel and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues from our services do not increase with such increased costs.
Interest rate risk
Our exposure to interest rate risk primarily relates to the interest rate that our deposited cash can earn, on the other hand, interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates. An increase, however, may raise the cost of any debt we incur in the future.
Foreign currency translation and transaction
Our operating transactions and assets and liabilities are mainly denominated in RMB. RMB is not freely convertible into foreign currencies for capital account transactions. The value of RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk.
Recently Issued Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company consolidated financial statements.
We have engaged CEVSN Information Consulting Co., Ltd. (“CEVSN”) to prepare a commissioned industry report that analyses the logistics industry in China. All information and data presented in this section have been derived from CEVSN’s industry report dated June 25, 2025, unless otherwise noted. The following discussion includes projections for future growth, which may not occur at the rates that are projected or at all.
China Logistics Industry Development Landscape
Development of Logistics Services
The emergence and development of logistics service industry benefits a lot from the economic globalization. Driven by economic globalization, resource allocation has expanded from a factory, region, or country to the entire world. The modern logistics service industry has reduced costs and improved efficiency through modern transportation methods, information technology, and internet, playing an increasingly important role in trade and resource allocation domestically and globally. At the same time, the modern logistics service industry is also considered as the artery and backbone of national economy, and its level of development has become an important indicator of a country’s modernization and comprehensive strength.
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(1) Development History
With the stable growth of China economy and the continuous expansion of household consumption, logistics demand is also constantly increasing. The total values for logistics in China in 2024 was RMB 360.6 trillion, a year-on-year increase of 2.33%. According to data from National Logistic Industry Operation Status Reports from 2020 to 2024 of the China Federation of Logistics and Purchasing (“CFLP”), from 2020 to 2024, the total values for logistics in China increased by 1.20 times, with a compound annual growth rate of 4.70%.
From the perspective of the structure of the total logistics volume, the proportion of industrial goods-related logistics to the total logistics demand accounts for 88.3%. Calculated at comparable prices, the total industrial goods-related value in logistics in 2024 was RMB 318.4 trillion, a year-on-year increase of 5.8%. The logistics demand structure changes in sync with economic restructuring and industrial upgrading, and the overall stability and progress of industrial logistics provide ample development opportunities for one-stop comprehensive logistics services.
The total amount and growth for logistics in China from 2020 to 2024
Data sources: CFLP, CEVSN
In terms of freight volume, the data from the 2024 Transportation Industry Development Statistics Report by the Ministry of Transport of China shows that the national freight transportation volume reached 56.875 billion tons in 2024. Among them, the road freight volume is 41.880 billion tons, the waterway freight volume is 9.811 billion tons, the railway freight volume is 5.175 billion tons, and the civil air freight volume is 8.9816 million tons. Compared with 2020, the national freight volume has increased by 22.47%, with an average annual compound growth rate of 5.20%.
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China’s cargo transportation volume and growth from 2020 to 2024
Data sources: Ministry of Transport of China, CEVSN
Due to strong demand in China’s logistics industry, the total cost of logistics has also been increasing year by year. According to data from National Logistic Industry Operation Status Reports from 2020 to 2024 of the China Federation of Logistics and Purchasing, the total cost of logistics in China in 2024 was RMB 19.0 trillion, a year-on-year increase of 4.40%. Compared to 2020, the total logistics cost in China has increased by 1.28 times. At present, according to international practice the logistics efficiency of the entire economy is evaluated by the ratio of the total logistics costs to GDP. The lower the ratio, the higher the logistics efficiency and the higher the level of logistics development of the economy.
With the widespread use of information technology and automated and intelligent equipment in the industry, logistics efficiency in China has gradually improved. In 2024, the total cost of logistics in China accounted for 14.1% of the national GDP, a decrease from 14.7% in 2020. China has achieved logistics cost reduction and efficiency improvement. In the future, with the advancement of information technology, specialization, and centralization in the logistics industry, China’s logistics industry will have greater development space.
The proportion of total logistics cost to GDP in China (from 2020 to 2024)
Data sources: CFLP, CEVSN
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(2) China logistics industry maintains high level of prosperity.
The scale of modern logistics industry is closely related to development of the macro-economy. The stable growth of China’s economy provides a good external environment for the steady development of logistics industry. The Logistics Performance Index (LPI) of China’s logistics industry in May 2025 was 50.6%, down 0.5 percentage points from the previous month. looking ahead, the pace of logistics infrastructure and investment progress has accelerated. The business activity expectation index will remain in the high prosperity range above 55% for three consecutive months, and the overall market outlook is optimistic.
China Logistics Performance Index from January 2021 to May 2025
Data sources: CFLP, CEVSN
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(3) Market Size
In 2020, the annual operating revenue of China’s logistics industry was RMB10.5 trillion, increasing to RMB13.8 trillion by 2024, a year-on-year increase of 4.55%.
The operating revenue and growth of logistics industry in China from 2020 to 2024
Data sources: CFLP, CEVSN
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General logistics Development
(1) Development History
In recent years, China’s economy has maintained stable growth, providing an economic foundation for the stable development of the logistics industry. According to the “Statistics Bulletin of the National Economic and Social Development of the People’s Republic of China in 2024” released by the National Bureau of Statistics, the annual gross domestic product (GDP) in 2024 was RMB 134.91 trillion, an increase of 5.0% over the previous year. The stable growth of the economy is the foundation for the development of the general logistics industry. In recent years, the domestic general logistics industry has been continuously developing, with both the number of logistic enterprises and the market size showing a continuous growth trend.
(2) Market Size
General logistics plays an important role in China’s logistics industry. With stable economic growth, the demand for general logistics from downstream users continues to increase. In 2024, the scale of China’s general logistics market reached RMB 368.70 billion, a year-on-year increase of 3.25%.
The market scale and growth for general logistics in China from 2020 to 2024
Data sources: CEVSN
The general logistics industry mainly focuses on industrial products and consumer goods. Among them, industrial products account for 32.9%, while consumer goods account for 22.2%. These two industries are also closely related to the economy and people’s lives.
Market share of general logistics by industry in China
Data sources: CEVSN
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Development of Project Logistics
(1) Development History
Driven by the overall development of China’s logistics industry, project logistics, as a specialized segment, is also showing a rapid development trend. Some professional logistics companies or comprehensive logistics companies in China have entered the project logistics business. The rapid development of construction industry including energy sector, industrial production lines, infrastructure, special security, traditional chemicals, and substitute energy sectors in particular such as wind and solar power sectors in China, have played a positive role in advancing the steady development of project logistics industry.
The project logistics industry in China started relatively late and has a relatively low proportion in the logistics industry. On the one hand, it is due to the low awareness of project logistics among domestic users in China. On the other hand, there are relatively few companies engaged in project logistics due to technology, talent and brand barriers. With the changes in market demand, especially the development of energy, infrastructure, and chemical industries, the professional project logistics enterprises are in demand for heavy-cargo transportation. Therefore, in recent years, the proportion of project logistics volume to the overall logistics volume has been continuously increasing.
The proportion of China’s project logistics market to the contract logistics market from 2020 to 2024
Data sources: CEVSN
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(2) Market Size
In 2020, the size of China’s project logistics market was RMB 28.60 billion, and in 2021, the market size was RMB 32.64 billion, a year-on-year increase of 14.10%; The market size in 2022 was RMB35.05 billion, a year-on-year increase of 7.40%; The market size in 2023 was RMB36.49 billion, a year-on-year increase of 4.10%; The market size in 2024 was RMB 38.09 billion, a year-on-year increase of 4.40%.
The market size and growth for project logistics in China from 2020 to 2024
Data sources: CEVSN
(3) Development Trends and Prospects
China has a vast geographical area, and the energy, chemical, and infrastructure industries are pillars of the national economy. The per capita infrastructure capital in China is only 20-30% of that of developed countries, so there is still a lot of room for improvement. The imbalanced and insufficient development in China is still a prominent problem and the gap in development levels between urban and rural areas are still significant. Some rural infrastructure in the central and western regions is relatively poor, and filling the development gap also means ample investment opportunities. In recent years, the high-tech manufacturing industry such as electronics, medicine and the high-tech services industry such as e-commerce have maintained a great growth momentum, and there is still considerable potential in these areas in the future. The transformation and upgrading of infrastructure and traditional facilities such as transportation, energy, and water conservancy in China, as well as the construction of new infrastructure such as 5G, ultra-high voltage, intercity highways, and big data centers, will effectively drive investment. This provides new opportunities and prospects for the development of the project logistics industry. However, the project logistics companies in China are generally scattered, small, and not well managed. Compared with their foreign counterparts, China project logistics companies still have great room for improvement in terms of operational scale, profit margin, management level, service philosophy and awareness. However, it is precisely the existence of this gap that gives project logistics companies great space for growth. On the other hand, China’s economy has always been a strong engine for the recovery of the world economy. The “Belt and Road Initiative” also brings a lot more business opportunities for cross-border project logistics companies.
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Overview
We are a holding company incorporated in the Cayman Islands. Our Ordinary Shares offered in this prospectus are shares of our Cayman Islands holding company. As a holding company with no material operations of our own, we conduct our business through our operating subsidiaries in China. We own 100% equity interest of all our subsidiaries including the operating subsidiary in China and do not have a VIE structure.
We, through Suzhou TC-Link, provide domestic and cross-border professional logistic services including project logistic and general logistic for company clients. Suzhou TC-Link was established on January 9, 2006 in Jiangsu Province, China. Suzhou TC-Link has obtained the internationally recognized IS09001 certificate of high-quality service (2015 standard), and it has 4 wholly owned subsidiaries and 5 warehouses/logistic centers and 3 branch offices of its subsidiaries in China. Suzhou TC-Link was rated as a key logistics enterprise in Jiangsu Province by Industry and Information Technology Department of Jiangsu in 2018, an AAA-level credit enterprise and a Class A contractor qualification for large power products transportation by China Water Resources and Electric Power Association On Physical Distribution in 2021 and 2023, respectively, and an AAA-level logistics enterprise by China Federation of Logistics & Purchasing in 2023. Suzhou TC-Link and Yancheng TC-Link have the road transportation permits from transportation bureau for large-size items/cargo transportation and Suzhou TC-Link’s business license also includes non-vessel operating common carrier business. Suzhou TC-Link’s operating network covers key cities in mainland China, Hong Kong, Southeast Asia and Central Asia. Suzhou TC-Link has an independently developed enterprise resource planning (ERP) management system.
Our project logistic services mainly include construction project logistics and special cargo logistics for large or precision equipment. Construction projects logistics range from certain stage or entire process of construction projects. including purchase, packaging, storage, loading and unloading, transportation, fixation, installation of the equipment and machinery for the construction as well as other related logistic services. We primarily provide our logistic solution services for new energy projects (including wind power turbine, photovoltaic, renewable energy storage, etc.), chemical equipment, engineering and infrastructure construction projects (including roads and bridges, tunnel construction). Special cargo logistics for large or precision equipment refer to logistic services to the manufacturers or purchasers of special and customized large and/or precision equipment, such as stamping machines, lathe, aircraft engines, and others. We study the operations of our clients, analyze their logistics needs and provide them with specific solutions which will improve the cost efficiency and achieve higher services’ quality. We have provided logistic services in China for wind power turbine projects which were exported to countries including Vietnam, UAE, Australia, South Africa and Chile.
Our general logistic services refer to the transportation, warehousing, loading and unloading, and distribution of ordinary products. For instance, we provide logistics services for the household appliances manufacturers including the transportation of goods from manufacturing factories to warehouses, and to distributors’ warehouses nationwide according to customers’ instructions. Delivery can be made in whole truckload or less-than truckload. we have built a network with subsidiaries and offices in Suzhou, Wuxi, Yancheng, Chengdu, Chongqing, Guangzhou, Shenzhen, Kunming, Mohan covering most of major cities and areas in China.
The Company has started its cross-border logistic services since 2019, mainly focus on inland transportation and railway transportation between Mainland China and Southeast Asia countries for cargoes, such as bulk commodities, electronic products, tires, new energy equipment and other machineries. For example, we completed transportation from Laos to China of 707 units of 40ft containers, 914 units of 20ft containers and 244 units of open top containers for rubber, iron ore, barley and Cassava starch in 2022. We also provided service for the shipment of washing machines through China-Europe Railway Express to Europe.
The Company owns 20 trucks and has cooperative relationships with other owners and drivers for over 2,000 trucks for domestic long-distance transportation and less than carload goods. When we receive orders and projects, we make inquires to these drivers/owners and ask them to provide a fee estimate for the job. If they provide reasonable price or their prices are less than costs for which we use our own trucks, we will engage these drivers to undertake the transportation. We will provide them with time and location to load the goods and provide name, contact information and license plate of the driver and truck to our clients. After the delivery is completed, we will collect payment from the clients and pay such drivers directly. The Company also has 5 warehouses/logistic centers in three different provinces, with a total of over 25,000 square meters areas providing general and special storage, distribution and value-added services to clients.
Our operating subsidiaries are incorporated and operating in mainland China and they have received all required permissions from Chinese authorities to operate its current business in China, including Business licenses, Customs Registration Certificate, Bank Account Open Permits, Permits for Road Transportation of general goods and large cargo.
Our Customers
We make the development of important large corporate client as its core strategy. Our main clients are multinational companies, large domestic companies and publicly listed companies, many of which are industry leaders or well-known state-owned enterprises. Leveraging our professional construction project technology, we provide customized and integrated logistic solution services that meet the needs of many major industry customers, and has accumulated rich experience through cooperation with our customers. The Company mainly provides logistics services for clients in the renewable energy, household appliances, health and beauty products, and construction industries. Since its inception, the number of high-quality clients of the Company has steadily increased and its main business has shown a stable growth trend. The Company is committed to establish long term cooperative relationships with large corporate clients such as publicly listed companies, multinational companies and well-known brands. At present, the Company has established long-term and stable cooperative relationships with industry leaders from different areas, including Goldwind, CSSC Haizhuang Windpower Co., Ltd., Shanghai Huaneng, Jiangxi Electric Power Group, Guizhou Electric Power Group, Hydroelectric Fourth Bureau, Trina Solar, JD Logistics, Wuhu Ande Zhilian, Aisen (China), Goodbaby, Marco, China Post and Longrich.
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Marketing
We focus on the industries that are in line with the future development of the country and have a great potential for future market development. In these industries, we combine our own advantages and operational experience, and focus on developing customers in the fields of new energy, chemical equipment, automotive, consumer products and large construction project. We actively develop our sales network, and strive to become the leading force in segmented market.
Competition
The Company mainly provides overall logistic solution services to customers with a specialty in construction logistics solutions. It requires extensive experience, well developed technology, professional management and marketing teams, as well as qualifications for large-scale transportation and operations equipment.
We compete with Chinese state-owned logistics enterprises and private or stock holding logistic enterprises in China. The state-owned companies have the advantages of strong cash flow, extensive business connections, large team and personnel, full transportation service scopes, long history and extensive experience and a reserve of professional personnel. However, their shortcomings are also very obvious. Due to the structure and ownership reasons, it has low efficiency and employees are lock of motivation to provide best services to the customers.
For other private or stock-holding logistics enterprises in China, they have a few advantages such as flexible marketing policies, high employee motivation, and their shortcomings include short history, lack of experience and professional personnel, limited funds and scale, and inconsistent management competency.
We have set development goals and strategies to compete with these competitors. On the one hand, wet fully utilize and leverage our industry experience, technological heritage, and resources. On the other hand, we have formulated various policies to encourage employees to actively strive for excellence by providing systematic training in technology, safety, experience, and other aspects so as to improve efficiency in management and prevent risks in safety.
Our Competitive Strengths
We believe the following strengths differentiate us from our competitors and are key drivers of our success:
(1) Technical and qualification advantages
We are committed to become one of the leading comprehensive project logistics service providers in China and Southeast Asia countries. As a logistics supplier for construction and engineering projects in China, we have obtained relevant technical qualifications and government permits necessary for providing such services legally, such as large-cargo transportation permit and non-vessel operating carrier qualification approved and granted by the transportation authorities. We have also obtained a Class A contractor qualification for large cargo transportation issued by China Water Resources and Electric Power Material Circulation Association. To obtain these qualifications, the applicants are typically subject to stringent assessment and verification by relevant authorities which is a major barrier for other business trying to enter into this area.
Project logistics has very strict and complex operational management processes.
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In 2019, the Company undertook the transportation of a 6 Megawatt (MW) wind power turbine prototypes for a leading domestic wind power enterprise. The transport of a large new model like this is known as notoriously difficult in the industry as there is no experience to refer to. The wind power turbine blades were 83.6 meters long, the main engine tower was 437 tons in weight, the diameter was 7.5 meters (the largest in Asia at the time), and the transportation distance was 130 kilometers. After multiple road surveys and optimal route planning by the company’s engineers and technical personnel, the transportation was carried out successfully under safe escort. We exceeded the customer’s expectation, received its recognition and became its long-term transportation service supplier. This successful shipment was in a special report on China Central TV Channel 4 in March 2019.
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(2) Geographic Advantage
The Company is located in Eastern China, an economically developed region in mainland China. The businesses in this region have expanded across Chinese and overseas markets.
The Company’s operating headquarters are located in Suzhou city, and it has wholly-owned subsidiaries in Wuxi, Yancheng, Chongqing, and Kunming. Yancheng is a base for China’s offshore wind power turbine industry, a pioneer for China’s offshore wind power turbine development. The company has established long-term strategic cooperation with Sheyang Port in Yancheng, and Yangjiang Port in Guangdong, and seized the opportunity to tap into regional resources and gained unique prime location advantages to access to the massive offshore wind power turbine industry in China.
(3) Brand Advantages
After nearly 20 years of development, the Company’s reputation in the Chinese project logistics industry has been well recognized by the industry. The Company has established long-term strategic cooperation with leading domestic enterprises in wind power turbine, photovoltaic, power storage, electrical appliances, daily chemical, chemical equipment and other industries (including well-known state-owned large enterprises, and listed leading enterprises, etc.). The Company was featured in the economic programs on China central TV in March 2019 and January 2024, respectively.
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(4) Talents Advantages
Over 78.94% of our management and finance professionals have college degree or above. The average age of our management and financial professionals is 40 years old. Over 61.11% of our technicians have a college degree or above and more than 80% of our technicians have over 15 years of experience in the industry. The project logistics industry requires comprehensive talents with diverse skills, knowledge and backgrounds in operations, management, e-commerce, marketing, third-party logistics management, and other related fields. China’s project logistics industry will face a relative shortage of high-end talents for a long period of time.
After years of development, the Company has established a professional and stable logistics business team, with certain talent and team advantages. At present, the core management personnel of the Company are stable and most of them having more than 15 years of experience in the logistics industry. Our team has a deep understanding of the project logistics industry and can accurately grasp the industry’s development trends. Based on the Company’s well-developed operating system and information system, the business team can quickly respond to various market demands and provide customers with timely and efficient engineering logistics services.
However, our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our senior management does not have experience managing a publicly-traded company and such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. See Risk Factors - Risks Related to Our Business - The relative lack of public company experience of our management team may put us at a competitive disadvantage.
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Our Growth Strategy
We are committed to become one of the leading comprehensive project logistics service providers in China and Southeast Asia countries, with following strategies to further our growth.
Expand Market Share in China We will leverage our existing advantages in terms of brand, talent, and technology to fulfil our expansions in Chinese domestic project logistics and general logistics market. With a successful initial public offering and listing on Nasdaq, we believe our existing clients have more confidence in us and with additional financing and resources from the capital market, we can increase our capacity to meet with our clients’ needs. We will also explore in providing our services to new clients of other related industries that we are not currently serving with our experience, capacity, connection and resources Recently, we have been engaged in trial orders for the transportation of aircraft engines and other precision equipment and will further explore this market as there is much potentials.
Developing markets in Southeast Asia Countries. To meet the increasing needs for logistics services for the business expansion and commercial development by Chinese companies in Southeast Asia countries, we plan to expand our project logistics services to these countries to follow the steps of our existing clients that are the industry leaders and are involving in the construction of manufacturing plants and infrastructure projects in the Southeast Asia countries.
Extension of Service Scopes. We will extend our services to cover more areas along the supply chain system, to provide additional upstream and downstream services, enable our clients to enhance their operation efficiency and quality, including the hoisting and installation of machineries, parts and engines replacement, repair and maintenance. Also, to apply such services to new clients in various industries such as the providing of services to the aviation industry in the moving of aircraft engines.
Improve engineering technology and equipment. We plan to actively develop and optimize our logistics management system
to provide an integrated platform for the entire management and operation uses. We will also aggressively upgrade and update our technology,
know-how, equipment and tools to cope with our development, improve our competitiveness, better control operating cost, reduce energy
consumption and carbon emissions.
Seeking Strategic Partnership and Acquisition Opportunities. We will seek opportunities to establish long term strategic partnership with industry leaders and their stakeholders in various industries, and will explore opportunities in acquisitions of good assets and targets to further increase our business scales.
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Employees
As of March 31, 2025 and March 31, 2024, we had 133 and 131 employees, respectively. The following table sets forth the breakdown of our employees as of March 31, 2025, by function:
| Category | Number
of Employees | Percentage
of workforce | ||||||
| Management and Administrative | 23 | 17.29 | % | |||||
| Accounting | 11 | 8.27 | % | |||||
| Engineering and Technical | 23 | 17.29 | % | |||||
| Marketing and Sales | 9 | 6.77 | % | |||||
| Transportation | 15 | 11.28 | % | |||||
| On Site Support | 33 | 24.81 | % | |||||
| Customer Service | 12 | 9.02 | % | |||||
| Dockworker | 6 | 4.51 | % | |||||
| Welfare | 1 | 0.75 | % | |||||
| Total | 133 | 100 | % | |||||
As of March 31, 2025, 9 of our employees were based in Hangzhou, China, where our principal executive offices are. Also, 46 of our employees were based in Suzhou, China, where our operating headquarters are. 39 of our employees were based in Wuxi, China, 26 of our employees were based in Yancheng, China, 9 of our employees were based in Yunan, China, and 4 of our employees were based in Chongqing, China.
As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds, namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan, and a housing provident fund. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses, and certain allowances for our employees, up to a maximum amount specified by the local government from time to time. As of the date of this prospectus, we have made adequate employee benefit payments. However, if the relevant authorities found that we failed to make adequate payments, we may be required to make up the contributions for these plans as well as to pay late fees and fines. See “Risk Factors—Risks Related to Doing Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.”
We enter into standard labour and confidentiality agreements with our employees. We believe that we maintain a good working relationship with our employees, and we have not experienced any major labour disputes.
Facilities
Our principal executive office is located in Hangzhou city, Zhejiang Province, China, where we lease approximately 619.42 square meters for office space. The leases will expire on April 30, 2027, which can be renewed upon mutual agreement with our landlord. Our leases premises from unrelated parties who either have valid title to the relevant properties or proper authorization from the titleholder to sublease the property, as disclosed in the following table:
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| Property Address | Lessor | Annual Rent | Lease Expiration Date | Purposes/Use | ||||||
| Suite 901-903, 9rd Floor, Building #2,Qianwan Zhigu, Chuanhua Smart Center, Science and Technology City Block, Xiaoshan Economic and Technological Development Zone, Xiaoshan District, Hangzhou, Zhejiang Province, China. | HaichuangZhihui(Zhejiang) Technology Industry Development Co., Ltd. | RMB 406,959 | April 30, 2027 | Office | ||||||
| E031-E032 Commercial Street, Xinzhuang Town, Changshu City, Jiangsu Province, China | Jiangsu Longrich Bioscience Co., Ltd. | RMB 154,704 | December 31, 2026 | Office | ||||||
| Room 601, Taifucang Comprehensive Building, No. 9 Shihua Road, Futian Free Trade Zone, Shenzhen, Guangdong Province, China | Shenzhen Taifu Logistics Co., Ltd. | RMB77,760 | December 31, 2026 | Office | ||||||
| No. 1-1408 & 1409, Mingdu Building, No. 88 Huishan Avenue, Huishan District, Wuxi City, Jiangsu Province, China | Jiangsu Jiuzi Dayun Information Technology Co., Ltd. | RMB 107,890 | November 15, 2026 | Office | ||||||
| 21st Floor, Building A, Kunbaida International Plaza, Haiyuan North Road, High tech Zone, Kunming City, Yunnan Province, China | Yunnan Liaotong Industrial Co., Ltd. | RMB 55,303.2 | December 31, 2025 | Office | ||||||
| 2nd&3rd Floor, Building 3, No. 7-3-1, Binglan Road, Mohan Economic Development Zone, Xishuangbanna Prefecture, China | Central Reserve Grain Xishuangbanna Direct Warehouse Co., Ltd. | RMB 41,000 | December 31, 2025 | Office | ||||||
| No.1-2, Building 5, Juxing Garden Community, Lijiatuo Street, Banan District, Chongqing, China | Yuanguo Wang | RMB 15,000 | June 30, 2026 | Office | ||||||
| Room 101, Building 40, Yueda Tianshan Waterfront Garden, No. 8 Tianshan South Road, Yancheng Economic and Technological Development Zone， Yancheng, Jiangsu Province, China. | Qingqing Ye |
RMB 200,000 | December 31, 2027 | Office | ||||||
| No. 3 Sudong Road, Changshu City, Jiangsu Province, China. | Changxi Supply Chain Management (Changshu) Co., Ltd. | RMB 1,776,857.55 | September 30, 2027 | Warehouse | ||||||
RMB 868,439.3 |
March 31, 2026 |
Warehouse | ||||||||
| No. 6 Xigang East Road, Dongbeitang, Xishan District, Wuxi City, Jiangsu Province, China | Wuxi Hailian Shipbuilding Interior Decoration Co., Ltd. | RMB 2,000,000 | March 15, 2030 | Warehouse &Office | ||||||
| No. 33 Xingyonghe Road, Xiejiazhuang, Taihe Town, (Kaisen (Guangzhou) Warehouse Port,) Baiyun District, Guangzhou, Guangdong Province, China | Guangzhou Langda Warehousing and Logistics Co., Ltd. | RMB 336,000 | December 31, 2025 | Warehouse | ||||||
| No. 1099, Section 3, Chenglong Avenue, Longquanyi District, Chengdu, Sichuan Province, China | Sichuan Longliqi Industrial Co., Ltd. | RMB 280,320 | July 31, 2027 | Warehouse | ||||||
RMB 272,160 |
November 30, 2027 |
Warehouse | ||||||||
| No.1 Post and Telecommunications Road, Sheyang Port Economic Development Zone, Sheyang County, Yancheng City, Jiangsu Province, China. | Jiangsu Yancheng Port Wind Power Equipment Import and Export Port Co., Ltd. | RMB 1,440,000 | September 1, 2025 |
Shipping Yard | ||||||
| B9 Warehouse, No. 566 Shengbao Road, Nanpeng Street, Banan District, Chongqing, China | Chongqing Road Transport (Group) Co., Ltd. Southern Freight Market Management Branch |
RMB 64,800 |
January 1,2026 |
Warehouse | ||||||
We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
Insurance
The Company carries auto insurance for our vehicles, cargo insurance for parcels and freights and property insurance for our warehouses. Each of our operating subsidiaries offers employees social security insurance including endowment insurance, medical insurance, unemployment insurance, maternity insurance, employment injury insurance and housing provident fund as required by China government regulations.
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.
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REGULATIONS
This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.
The relevant regulations promulgated by such government authorities are described below.
Regulations Relating to Foreign Investment
The PRC Foreign Investment Law
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which has taken effect on January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies a 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 China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.
According 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 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 China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.
According to the Foreign Investment Law, the State Council will publish or approve to publish a catalogue for special administrative measures, or the “negative list.” The Foreign Investment Law grants national treatment to foreign invested entities, except for those foreign invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list”. The NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2024 Edition) (the “2024 Negative List”) on September 6, 2024, which took effect on November 1, 2024. Compared to the last Special Administrative Measures for Market Access of Foreign Investment (Negative List) promulgated by the NDRC and the MOFCOM in December 2021, the 2024 Negative List cuts down the number of items restricted or prohibited to foreign investors from 31 to 29, widening access to more industries and fields. However, the 2024 Negative List prescribes that any domestic enterprise engaging in businesses prohibited by the Negative List that lists, issues securities and trades shares overseas must obtain pre-approval consent from relevant competent regulator; overseas investors must not engage in the operation and management of the enterprise, and the percentage of foreign shareholding is subject to the relevant provisions in the administrative measures for domestic securities investments by foreign investors. The Foreign Investment Law provides that foreign invested entities operating in foreign restricted or prohibited industries will require market entry clearance and other approvals from relevant PRC governmental authorities.
Furthermore, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.
In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; foreign-invested enterprises are allowed to issue stocks and corporate bonds; 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; mandatory technology transfer is prohibited; and the capital contributions, profits, capital gains, proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or proceeds received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMB or a foreign currency. Also, foreign investors or the foreign investment enterprise should be imposed legal liabilities for failing to report investment information in accordance with the requirements.
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This new Foreign Investment Law has provided a more transparent foreign investment environment in China. Particularly, this new law has changed the regulatory procedure from a pre-approval requirement to the negative list system, which means the foreign invested company may engage in any business activities that are not in the negative list and pre-approval is not required anymore.
Negative List Relating to Foreign Investment
Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalog of Industries for Foreign Investment promulgated and as amended from time to time by MOFCOM and National Development and Reform Commission (the “NDRC”). The NDRC and the MOFCOM promulgated the 2024 Negative List. Industries listed in the 2024 Negative List are divided into two categories: restricted and prohibited. Industries not listed in the 2024 Negative List are generally deemed as constituting a third “permitted” category. Establishment of wholly foreign-owned enterprises is generally allowed in permitted industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in the 2024 Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations. Any domestic enterprise engaging in businesses prohibited by the Negative List that lists, issues securities and trades shares overseas must obtain pre-approval consent from relevant competent regulator; overseas investors must not engage in the operation and management of the enterprise, and the percentage of foreign shareholding is subject to the relevant provisions in the administrative measures for domestic securities investments by foreign investors.
On December 26, 2019, the State Council issued the Implementation Regulations for the Foreign Investment Law, or the Implementation Regulations which came into effect on January 1, 2020. According to the Implementation Regulations, in the event of any discrepancies between the Foreign Investment Law, the Implementation Regulations and relevant provisions on foreign investment promulgated prior to January 1, 2020, the Foreign Investment Law and the Implementation Regulations shall prevail. The Implementation Regulations also indicated that foreign investors that invest in sectors on the Negative List in which foreign investment is restricted shall comply with special measures with respect to shareholding, senior management personnel and other matters stipulated in the Negative List.
Our operating subsidiaries engage in the business of logistic services including project logistic, cross border logistic and general logistic, which are not within the category for which foreign investment is restricted under the current 2024 Negative List or other PRC Laws.
Regulations Relating to Intellectual Property Rights
The PRC has adopted comprehensive legislation governing intellectual property rights, including trademarks and domain names.
Trademark.
The Trademark Law of the PRC promulgated in August 1982 which took effect in March 1983 (the “Trademark Law”), and revised in February 1993, October 2001, August 2013 and April 2019, and its implementation rules protect registered trademarks. The Trademark Office of National Intellectual Property Administration, PRC, formerly the PRC Trademark Office of the State Administration of Market Regulation is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where registration is sought for a trademark that is identical or similar to another trademark which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, such application for registration of this trademark may be rejected. Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked.
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Domain Name.
Domain names are protected under the Administrative Measures for Internet Domain Names promulgated by MIIT on August 24, 2017, effective on November 1, 2017 (the “Domain Name Measures”). MIIT is the major regulatory body responsible for the administration of the PRC internet domain names. The Domain Names Measures has adopted a “first come, first served” principle with respect to the registration of domain names. According to the Domain Name Measures, domain name applicants are required to duly register their domain names with domain name registration service institutions. The applicants will become the holder of such domain names upon the completion of the registration procedures.
The Company has registered its trademark and domain names with competent regulatory agencies in China. We may be, from time to time in the future, subject to legal proceedings and claims relating to the intellectual property rights of others. See Risk Factors- Risks Related to Our Business: We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
Regulations Relating to Dividend Withholding Tax
Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Tax Evasion With Respect to Taxes On Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. Accordingly, Eastern HK may be able to enjoy the 5% withholding tax rate for the dividends it receives from the WFOE, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations, and obtains the approvals as required under the Administrative Measures. However, according to Circular 81, if the relevant tax authorities consider the transactions or arrangements that we have made are for the primary purpose of enjoying a favourable tax treatment, the relevant tax authorities may adjust the favourable withholding tax in the future.
Regulations on Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, promulgated by SCNPC and implemented in January 2008 and amended in February 2017, and December 2018, respectively, and (ii) the implementation rules to the EIT Law, promulgated by the State Council and implemented in January 2008 and amended in April 2019, and December 2024, respectively. The EIT Law imposes a uniform enterprise income tax rate of 25% on all resident enterprises in the PRC, including foreign-invested enterprises and domestic enterprises, unless they qualify for certain exceptions.
In addition, according to the EIT Law and its implementation rules, enterprises registered in countries or regions outside the PRC with “de facto management bodies” located within China may be considered to be PRC resident enterprises and will be subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The implementation rules of the EIT Law define “de facto management bodies” as establishments that exercise full and substantial control over and overall management of the business, productions, personnel, accounts, and properties of an enterprise. The only detailed guidance currently available for the definition of “de facto management body” as well as the determination and administration of tax residency status of offshore-incorporated enterprises are set forth in the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies issued by the SAT in April 2009, or Circular 82, and the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Overseas Incorporated Resident Enterprises (Trial Version) issued by the SAT in July 2011, or Bulletin No. 45, which provides guidance on the administration as well as the determination of the tax residency status of a Chinese-controlled offshore-incorporated enterprise, defined as an enterprise that is incorporated under the law of a foreign country or territory and that has a PRC company or PRC corporate group as its primary controlling shareholder.
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According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met:
| ● | the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC; | |
| ● | decisions relating to the enterprise’s financial and human resource matters are made or are subject to the approval of organizations or personnel in the PRC; | |
| ● | the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and | |
| ● | 50% or more of voting board members or senior executives habitually reside in the PRC. |
Bulletin No. 45 further clarifies certain issues related to the determination of tax resident status and competent tax authorities. It also specifies that when provided with a copy of Recognition of Residential Status from a resident Chinese-controlled offshore-incorporated enterprise, a payer does not need to withhold income tax when paying certain PRC-sourced income such as dividends, interest and royalties to such Chinese-controlled offshore-incorporated enterprise.
We believe that we are not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities, and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its worldwide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our Ordinary Shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise.
Regulations on Income Tax for Share Transfers
According to the Announcement of the SAT on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or Circular 7, promulgated by the SAT in February 2015, if a non-resident enterprise, such as the Company, transfers the equity interests of a PRC resident enterprise indirectly through the transfer of the equity interests of an offshore holding company (other than a purchase and sale of shares issued by a PRC resident enterprise through or in a public securities market) without a reasonable commercial purpose, the PRC tax authorities have the power to reassess the nature of the transaction and treat the indirect equity transfer 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 PRC withholding tax at a rate of up to 10%. Under the terms of Circular 7, the transfer which meets all of the following circumstances shall be directly deemed as having no reasonable commercial purposes: (i) over 75% of the value of the equity interests of the offshore holding company are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over 90% of the total properties of the offshore holding company are investments within PRC territory, or in the year before the indirect transfer, over 90% of the offshore holding company’s revenue is directly or indirectly derived from PRC territory; (iii) the function performed and risks assumed by the offshore holding company are insufficient to substantiate its corporate existence; and (iv) the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on the direct transfer of the PRC taxable properties. In October 2017, the SAT issued the Bulletin of SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which, among others, repeals certain rules stipulated in Circular 7. Bulletin 37 further details and clarifies the tax withholding methods in respect of income of non-resident enterprises.
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Regulations on PRC Value-Added Tax and Business Tax
Pursuant to applicable PRC tax regulations, any entity or individual conducting business in the service industry is generally required to pay a business tax at the rate of 5% on the revenues generated from providing such services. However, if the services provided are related to technology development and transfer, such business tax may be exempted subject to approval by the relevant tax authorities. Pursuant to the Provisional Regulations on Value-Added Tax of the PRC and its implementation regulations, unless otherwise specified by relevant laws and regulations, any entity or individual engaged in the sales of goods, provision of processing, repairs and replacement services, and importation of goods into China is generally required to pay a value-added tax, or VAT, for revenues generated from sales of products, while qualified input VAT paid on taxable purchase can be offset against such output VAT.
In November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax. In March 2016, the Ministry of Finance and the State Administration of Taxation further promulgated the Notice on Fully Promoting the Pilot Plan for Replacing Business Tax by Value-Added Tax, which became effective on May 1, 2016. Pursuant to the pilot plan and relevant notices, VAT is generally imposed in lieu of business tax in the modern service industries, including the VATS, on a nationwide basis. VAT of a rate of 6% applies to revenue derived from the provision of some modern services. Certain small taxpayers under PRC law are subject to reduced value-added tax at a rate of 3%. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the modern services provided.
On April 4, 2018, the Ministry of Finance and the State Administration of Taxation issued the Notice on Adjustment of VAT Rates, which came into effect on May 1, 2018. According to the abovementioned notice, the taxable goods previously subject to VAT rates of 17% and 11%, respectively, become subject to lower VAT rates of 16% and 10%, respectively, starting from May 1, 2018. Furthermore, according to the Announcement on Relevant Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previously subject to VAT rates of 16% and 10%, respectively, become subject to lower VAT rates of 13% and 9%, respectively, starting from April 1, 2019.
Regulations on Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, which were most recently amended in August 2008. Under the Foreign Exchange Administration Regulations, payments of current account items, such as profit distributions, interest payments, and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.
In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises (“SAFE Circular 142”), regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC.
In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not, in any case, be used to repay RMB loans if the proceeds of such loans have not been used. Any violation of Circular 142 may result in severe penalties, including substantial fines.
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In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expense accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders, no longer require approval or verification from SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously.
In addition, SAFE promulgated another circular in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration, and banks must process foreign exchange business relating to direct investment in the PRC based on the registration information provided by SAFE and its branches.
In July 2014, SAFE further reformed the foreign exchange administration system in order to satisfy and facilitate the business and capital operations of Foreign-Invested Enterprises and issued the Circular of the State Administration of Foreign Exchange on the Pilot Reform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-Invested Enterprises in Certain Areas (“Circular 36”), in July 2014. This circular suspends the application of Circular 142 in certain areas and allows a Foreign-Invested Enterprise registered in such areas to use the RMB capital converted from foreign currency registered capital for equity investments within the PRC.
On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015 and was abolished in part on December 30, 2019. Pursuant to SAFE Notice 13, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, will directly examine applications and manage registrations.
On March 30, 2015, SAFE promulgated SAFE Circular 19 to expand the reform nationwide. SAFE Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015, and had been abolished in part on December 30, 2019, revied on March 23, 2023. SAFE Circular 19 allows foreign-invested enterprises to make equity investments by using RMB funds converted from foreign exchange capital. However, Circular 19 continues to prohibit foreign-invested enterprises from, among other things, using RMB funds converted from foreign exchange capital for expenditure beyond the enterprise’s business scope, providing entrusted loans, or repaying loans between non-financial enterprises.
On June 9, 2016, SAFE issued SAFE Circular 16, which took effect on the same day and was revised on December 4, 2023. Compared to SAFE Circular 19, SAFE Circular 16 provides that, in addition to foreign exchange capital, foreign debt funds and proceeds remitted from foreign listings should also be subject to the discretional foreign exchange settlement. In addition, it also lifted the restriction that foreign exchange capital under the capital accounts and the corresponding RMB capital obtained from foreign exchange settlement should not be used for repaying the inter-enterprise borrowings (including advances by a third party) or repaying bank loans in RMB that had been sub-lent to the third party.
In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or 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 profits. Moreover, pursuant to 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.
Based on the foregoing, if we intend to provide funding to our WFOE through capital injection, we should file with the State Administration for Market Regulation or its local counterparts, via the foreign investment comprehensive administrative system and register such funding with local banks for foreign exchange related matters.
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In October 2019, SAFE promulgated Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment (“[2019] Circular 28”) to further promote the facilitation of cross-border trade and investment and relax certain restriction on foreign exchange settlement. In December 2023, SAFE promulgated Notice on Further Deepening the Reform to Facilitate Cross-border Trade and Investment (“[2023] Circular 28”), which revised certain rules stipulated in [2019] Circular 28. PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the implementation of SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentations about or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations.
All our current major shareholders have completed the initial registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37. Failure to comply with the registration procedures set forth in Circular 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, the capital inflow from the offshore entities and settlement of foreign exchange capital, and may also subject relevant onshore company or PRC residents to penalties under PRC foreign exchange administration regulations.
Regulations on Stock Incentive Plans
SAFE promulgated the Stock Option Rules in February 2012, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plans in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of the participants. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas-listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents.
We have not adopted any stock incentive plans as of the date of this prospectus.
Regulations on Dividend Distribution
Under our current corporate structure, we may rely on dividend payments from WFOE, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing requirements we may have. The principal regulations governing the distribution of dividends of foreign-invested enterprises include the newly enacted Foreign-Investment Law, which came into effect on January 1st, 2020, and its implementation rules. Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.
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Regulations on Overseas Listings
On February 17, 2023, the CSRC released the New Overseas Listing Rules with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means. Pursuant to the New Overseas Listing Rules, domestic companies that seek initial public offering or listing securities overseas, both directly and indirectly, shall file with the CSRC within three working days after the submission of overseas offering/listing application. Furthermore, upon the occurrence of any of the material events specified below after an issuer has completed its offering and listed its securities on an overseas stock exchange, the issuer shall submit a report thereof to the CSRC within three working days after the occurrence and public disclosure of the event: (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other competent authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. The New Overseas Listing Rules stipulate the legal consequences to the companies for breaches, including failure to fulfil filing obligations or filing documents having false statement or misleading information or material omissions, which may result in a fine ranging from RMB 1 million to RMB 10 million, and in cases of severe violations, the relevant responsible persons may also be warned and each imposed a fine of between RMB500,000 and RMB5,000,000. We are subject to the relevant filing procedures of the CSRC in connection with our overseas offerings under the New Overseas Listing Rules, including the public offering pursuant to this registration statement.
On February 24, 2023, the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China jointly revised the Confidentiality and Archives Administration Provisions, which came into effect on March 31, 2023. The Confidentiality and Archives Administration Provisions require that, overseas listed PRC domestic enterprises, as well as those to be listed, shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
See “Risk Factors—Risks Related to Doing Business in China— We have completed the required filings with the CSRC for this offering. However, the approval, filing, and/or other administration requirements of the CSRC or other PRC governmental authorities may be required in connection with our future securities offerings under PRC law, and, if required, we cannot assure you that we will be able to timely make such filing, in which case we may face sanctions by the CSRC or other PRC regulatory agencies for failure to timely file with the CSRC for such offerings.”
Regulations Relating to Employment
Pursuant to the Labor Law of PRC, promulgated by SCNPC in July 1994 and revised in August 2009 and December 2018 (the “Labor Law”), and the Labor Contract Law of PRC, promulgated by SCNPC in June 2007 and amended in December 2012 (the “Labor Contract Law”), employers must execute written employment contracts with full-time employees. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a written employment contract with the employee and paying the employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result in criminal liabilities.
Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds based on local annual minimum salary standard or certain percentage of the local annual average compensations to works (“Social Insurance Payment Base”). We participate in employee benefit plans and have made contributions to such plans required by current PRC laws and regulations. If enterprises are required to contribute to the plans or funds based on a higher Social Insurance Payment Base under the new regulations or policies in the future, we may have to make more contributions to such plans for our employees.
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We intend to comply with the new regulations and policies applicable to employee benefit plans set forth through time. As of the date of this prospectus, we have signed written employment contracts with all of our employees and paid all the benefits packages as required by law. In addition, the PRC Individual Income Tax Law requires companies operating in China to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment.
Regulations Relating to Road Transportation
Pursuant to the Regulations on Road Transportation promulgated by the State Council in April 2004 and most recently amended in July 2023, and the Provisions on Administration of Road Freight Transportation and Stations (Sites) issued by the Ministry of Transport in June 2005 and most recently amended in November 2023, or the Road Freight Provisions, the business operations of road freight transportation refer to commercial road freight transportation activities that provide public services. The road freight transportation includes general road freight transportation, special road freight transportation, road transportation of large articles, and road transportation of dangerous cargos. Special road freight transportation refers to freight transportation using special vehicles such as vehicles with containers, refrigeration equipment, or tank containers. The Road Freight Provisions set forth detailed requirements with respect to vehicles and drivers.
Under the Road Freight Provisions, anyone engaging in the business of operating road freight transportation or stations (sites) must obtain a road transportation operation permit from the local county-level competent authority for transportation, and each vehicle used for road freight transportation must have a road transportation certificate from the same authority. The incorporation of a subsidiary of a road freight transportation operator that intends to engage in road transportation business is subject to the same approval procedure. If a road freight transportation operator intends to establish a branch, it should file with the local competent authority for transportation where the branch is to be established.
Although the road transportation operation permits have no limitation with respect to geographical scope, several provincial governments in China, including Shanghai and Beijing, promulgated local rules on administration of road transportation, stipulating that permitted operators of road freight transportation registered in other provinces should also make filing with the local road transportation administrative bureau where it carries out its business.
Pursuant to the Administrative Provisions Concerning the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated by the Ministry of Transport, which took effect on September 21, 2016 and most recently amended in August 2021, cargo vehicles running on public roads shall not carry cargo weighing more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth in the same regulation. Vehicle operators who violate this regulation may be subject to a fine of up to RMB30,000 for each violation. In the event of repeated violations, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of the relevant vehicle. In the event more than 10% of the total vehicles of any road transportation enterprise are not in compliance with this regulation in any year, such road transportation enterprise shall suspend its business for rectification and its road transportation license may be revoked.
Regulations Relating to Non-Vessel Operating Common Carrier
Pursuant to the Regulations on International Maritime Transport promulgated by the State Council on December 11, 2001 and most recently amended on July 20, 2023 and Implementing Rules for the Regulations on International Maritime Transport promulgated by the Ministry of Transport on January 20, 2003 and most recently amended on November 10, 2023, Non-vessel operating common carriers (“NVOCC”) shall mean carriers that undertake to carry cargo of consignors, issue their own bills of lading or other transport documents, collect freight from the consignors, complete international maritime transport through international shipping operators, and bear carrier liability in the international maritime transport activities undertaken by them. The NVOCC performs the following activities relating to the entrusted cargo and carried out for the purpose of accomplishing such activities, including (1) conclusion of an international cargo transport contract in the capacity of a carrier with a consignor; (2) receipt and delivery of cargo in the capacity of a carrier; (3) issue of bills of lading or other transport documents; (4) collection of transport fees and other remuneration for services rendered; (5) booking of cabin or shipping space and cargo handling with international shipping operators or other transport operators; (6) payment of freight or other transport fees; (7) container de-consolidation and assembly business activities; and (8) other related business activities.
According to the Regulations on International Maritime Transport and its implementation rules, all NVOCC shall, within 15 days from the date of operation, file a record with the department responsible for transportation of local government.
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Regulations Relating to Customs Declaration
Pursuant to the Customs Law of the PRC promulgated by SCNPC on January 22, 1987, most recently amended on April 29, 2021, the consignor or consignee of the goods exported or imported as well as a customs declaration enterprise must register themselves for declaration activities at customs in accordance with the law. Anyone who is not registered at the customs shall not conduct declaration activities. Customs brokers or customs declaration persons shall not make customs declaration illegally on behalf of others or conduct customs declaration activities beyond their business scope. Pursuant to the Administrative Provisions of the Customs on Record-filing of Customs Declaration Entities promulgated by the General Administration of Customs (the “GAC”) on November 19, 2021 and became effective on January 1, 2022, a consignor or consignee of imported and exported goods as well as customs declaration enterprise shall go through customs declaration entity record-filing formalities with the competent customs in accordance with the applicable provisions. Customs declaration entities may handle customs declarations business within the customs territory of the PRC.
On April 16, 2018, the GAC circulated the Announcement on Matters relating to the Consolidation of Enterprises’ Qualifications for Customs Declaration and Declaration for Inspection and Quarantine (“Announcement 28”), the record-filing for declaration agencies for inspection and quarantine and the registration for customs declaration enterprises will be consolidated into the registration for customs declaration enterprises. From April 20, 2018, an enterprise will simultaneously become qualified for the customs declaration and the declaration for inspection and quarantine, once it has registered itself or filed a record with the customs and the customs will approve and issue the Certificate of the Customs of the People’s Republic of China on Registration of the Customs Declaration Entity and the Registration Form for Declaration Enterprises for Entry-Exit Inspection and Quarantine affixed with its special seal for registration and record-filing to the registered or recorded enterprise simultaneously.
On October 26, 2018, the GAC circulated the Announcement on Matters Related to Promoting the Integration of Customs Inspection and Optimizing the Registration of Customs Declaration which had been abolished on January 1, 2025, according to which, from October 29, 2018, the Certificate of the Customs of the People’s Republic of China on Registration of the Customs Declaration Entity issued by the customs to the customs declaration enterprise that has completed the registration automatically reflects the two qualifications for customs declaration and the declaration for inspection and quarantine. The original “Registration Form for Declaration Enterprises for Entry-Exit Inspection and Quarantine” and “Registration Form for Entry-Exit Inspection and Quarantine Reporters” will no longer be issued. Any enterprises engaged in the business of making customs declarations and making the declaration for inspection and quarantine as an agent should obtain relevant certificate and make filings for customs declaration persons as prescribed by the foresaid regulations.
Regulations Relating to Import and Export Goods
Pursuant to the Foreign Trade Law which was promulgated by SCNPC on May 12, 1994 and was most recently amended on December 30, 2022 and the Administrative Regulations for the Import and Export of Goods which were issued by the State Council on December 10, 2001 and were amended on March 10, 2024, certain goods are allowed to be imported into or exported out of China freely while certain goods are prohibited or restricted from being imported into or exported out of China due to their impact on national security, life and health of people, animals or plants, the development of certain domestic industries, or other reasons stipulated in relevant laws and regulations. No one shall import or export goods that are prohibited from being imported into or exported out of China. The import and export of goods that are restricted from being imported into or exported out of China shall be in compliance with relevant restrictive laws and regulations.
Before December 30, 2022, according to the then-effective Foreign Trade Law, and the Measures for the Record-Filing and Registration of Foreign Trade Operators promulgated by MOC on June 25, 2004, and most recently amended on May 10, 2021, foreign trade operators which engage in the import and export of goods shall go through the record-filing and registration with MOC or an authority authorized by MOC, unless laws, administrative regulations and rules of MOC provide that it is unnecessary to go through such formalities. If foreign trade operators fail to go through the formalities for record-filing and registration in accordance with relevant provisions, the PRC customs authority shall refuse to handle the declaration and clearance formalities of their imports and exports. On December 30, 2022, the Foreign Trade Law of the PRC was amended, and foreign trade operators were no longer required to go through the record registration formalities.
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According to the Customs Law of the PRC, unless otherwise provided for, the declaration of import or export goods and the payment of customs duties may be made by the consignees or consigners themselves, and such formalities may also be completed by their entrusted customs brokers that have registered with the PRC customs authority. The Tariff Law of the PRC, promulgated by SCNPC on April 26, 2024 and implemented on December 1, 2024, further stipulated that, unless otherwise provided by the relevant laws and regulations, goods permitted to be imported into or exported out of China shall be subject to payment of customs duties. The consignees of imported goods, consigners of exported goods and carriers or recipients of inward articles shall undertake the obligation of the payment of customs duties. The State Council also promulgated implementation rules and tariff schedules to regulate the items and rates of the customs duties.
According to the Import and Export Commodity Inspection Law promulgated by SCNPC on February 21, 1989 and most recently amended on April 29, 2021 and its implementation rules, the imported and exported goods that are subject to compulsory inspection listed in the catalog compiled by the import and export commodity inspection department established by the State Council shall be inspected by the commodity inspection organizations, and the imported and exported goods that are not subject to statutory inspection shall be subject to random inspection. Consignees and consignors or their entrusted customs brokers may apply for inspection to the goods inspection authorities.
Regulations Relating to Leasing
We lease properties for our offices, sorting hubs, pickup and dispatch outlets and other facilities. Pursuant to the Law on Administration of Urban Real Estate of the PRC which took effect on January 1, 1995 with the latest amendment on August 26, 2019, which became effective on January 1, 2020, lessors and lessees are required to enter into a written lease contract, containing such provisions as the term of the lease, the use of the premises, rental price, liability for repair, and other rights and obligations of both parties. Both lessor and lessee are also required to file for registration and record the lease contract with the real estate administration department. Pursuant to implementing rules stipulated by certain provinces or cities, if the lessor and lessee fail to go through the registration procedures, both lessor and lessee may be subject to fines.
According to Civil Code of the PRC, or Civil Code which was promulgated by the National People’s Congress and took effect on January 1, 2021, with the consent of the lessor, the lessee may sublease the leased object to a third person. Where the lessee subleases the leased object, the lease contract between the lessee and the lessor shall continue to be valid, and the lessee shall be liable to the lessor for compensation for any loss caused to the leased object by the third person. Where the lessee subleases the leased object without the consent of the lessor, the lessor may rescind the contract.
Regulations Relating to Fire Protection
Pursuant to Fire Protection Law of the PRC, or the Fire Protection Law, promulgated by the Standing committee of the National People’s Congress on April 29, 1998 with the latest amendment on April 29, 2021, we shall perform the following fire safety and protection responsibilities: (1) implement a fire safety accountability system, and formulate their own fire safety regulations and operating rules and firefighting and emergency evacuation plans; (2) install firefighting facilities and equipment, set up fire protection safety signs and conduct regular inspection and maintenance to ensure that such facilities and equipment remain in good condition and functional in accordance with relevant State and industrial standards; (3) conduct a comprehensive inspection of firefighting facilities in buildings at least once a year to ensure that such facilities remain in good condition and functional; relevant inspection records shall be complete and accurate and shall be kept for future reference; (4) guarantee that fire escapes and exits and passageways for fire engines are kept clear and fire compartments, smoke bays and firebreaks conform to fire protection technical standards; (5) organise fire protection inspections in order to remove any potential fire hazard in time; (6) organise target-specific fire drills; and (7) other fire safety and protection responsibilities required by laws and regulations.
In China, all kinds of warehouses that store goods operated by the state, collectives, and individuals shall comply with the Administrative Rules for Warehouses on Fire Prevention promulgated by the Ministry of Public Security on April 10, 1990, the Code of Design on Building Fire Protection and Prevention promulgated by the Ministry of Housing and Urban-Rural Development with the latest amendment on March 30, 2018, and the General Fire Code for Buildings promulgated by the Ministry of Housing and Urban-Rural Development on January 19, 2023, which repealed certain rules stipulated in the Code of Design on Building Fire Protection and Prevention. Pursuant to the Administrative Rules for Warehouses on Fire Prevention, the warehouse shall designate a key leader as the person in charge of fire prevention, who is fully responsible for the fire safety management of the warehouse, and the goods stored in the warehouse shall be classified, piled, grouped and piled, and necessary fire distances shall be reserved. The total storage capacity of a warehouse and the fire protection distance from buildings, etc. must comply with the provisions of the Code of Design on Building Fire Protection and Prevention.
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Regulations Relating to Internet Information Security and Privacy Protection
In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in December 2011 and effective March 2012, an internet information service provider may not collect any user personal information or provide any such information to third parties without the consent of the user. An internet information service provider must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An internet information service provider is also required to properly maintain the user’s personal information, and in case of any leak or likely leak of the user’s personal information, the internet information service provider must take immediate remedial measures and, in severe circumstances, immediately report to the telecommunications authority. As required under the Personal Information Protection Law of the People’s Republic of China was promulgated by the Standing Committee of the National People’s Congress on August 20, 2021 and came into effect on November 1, 2021, the personal information of a natural person shall be protected by law, and no organization or individual may infringe upon the personal information rights and interests of natural persons.
On December 28, 2012, SCNPC issued Decision of the Standing Committee of the National People’s Congress on Strengthening Information Protection on Networks, pursuant to which network service providers and other enterprises and institutions shall, when gathering and using electronic personal information of citizens in business activities, publish their collection and use rules and adhere to the principles of legality, rationality and necessarily, explicitly state the purposes, manners and scopes of collecting and using information, and obtain the consent of those from whom information is collected, and shall not collect and use information in violation of laws and regulations and the agreement between both sides; and the network service providers and other enterprises and institutions and their personnel must strictly keep such information confidential and may not divulge, alter, damage, sell, or illegally provide others with such information.
On July 16, 2013, MIIT issued the Provisions on the Protection of Personal Information of Telecommunication and Internet User, which was effective on September 1, 2013. The requirements under this order are stricter and wider compared to the above decision issued by the National People’s Congress. According to the provisions, if a network service provider wishes to collect or use personal information, it may do so only if such collection is necessary for the services it provides. Furthermore, it must disclose to its users the purpose, method and scope of any such collection or usage, and must obtain consent from the users whose information is being collected or used. Network service providers are also required to establish and publish their protocols relating to personal information collection or usage, keep any collected information strictly confidential and take technological and other measures to maintain the security of such information. Network service providers are required to cease any collection or usage of the relevant personal information, and provide services for the users to de-register the relevant user account, when a user stops using the relevant Internet service. Network service providers are further prohibited from divulging, distorting or destroying any such personal information, or selling or providing such personal information unlawfully to other parties. In addition, if a network service provider appoints an agent to undertake any marketing or technical services that involve the collection or usage of personal information, the network service provider is required to supervise and manage the protection of the information. The provisions state, in broad terms, that violators may face warnings, fines, public exposure and, criminal liability whereas the case constitutes a crime.
On June 1, 2017, the Cybersecurity Law of the PRC promulgated in November 2016 by SCNPC became effective. This law also absorbed and restated the principles and requirements mentioned in the aforesaid decision and order, and further provides that, where an individual finds any network operator collects or uses his or her personal information in violation of the provisions of any law, regulation or the agreement of both parties, the individual shall be entitled to request the network operator to delete his or her personal information; if the individual finds that his or her personal information collected or stored by the network operator has any error, he or she shall be entitled to request the network operator to make corrections, and the network operator shall take measures to do so. Pursuant to this law, the violators may be subject to: (i) warning; (ii) confiscation of illegal gains and fines equal to one to ten times of the illegal gains; or if without illegal gains, fines up to RMB1,000,000; or (iii) an order to shut down the website, suspend the business operation for rectification, or revoke business license. Besides, responsible persons may be subject to fines between RMB10,000 and RMB100,000.
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In August 2021, the Standing Committee of the National People’s Congress officially promulgated the Personal Information Protection Law, which came into effect from November 1, 2021. The Personal Information Protection Law provides detailed rules on handling personal information and legal responsibilities, including but not limited to the scope of personal information and the ways of processing personal information, the establishment of rules for processing personal information, and the individual’s rights and the processor’s obligations in the processing of personal information. The Personal Information Protection Law also strengthens the punishment for those who illegally process personal information.
On December 28, 2021, the CAC and 12 other relevant PRC government authorities published the amended Cybersecurity Review Measures, which came into effect on February 15, 2022 and supersede and replace the Cybersecurity Review Measures previously promulgated on April 13, 2020. The final Cybersecurity Review Measures provide that the purchase of network products and services by a “critical information infrastructure operator” (the “CIIO”) and the data processing activities of a “network platform operator” that affect or may affect national security shall be subject to the cybersecurity review. If a “network platform operator” that possesses the personal information of more than one million users seeks to be listed in a foreign country, it must apply for a cybersecurity review with the Cybersecurity Review Office. Our main business is logistic services including project logistic, cross border logistic and general logistic. In addition, our customers and service objects are mainly domestic enterprises and institutions, rather than individual users, and we do not possess personal information of more than one million users. Therefore, we do not need to declare the cybersecurity review to the Cybersecurity Review Office.
On July 7, 2022, the CAC promulgated Measures for the Security Assessment of Outbound Data Transfer (Version 1.0), which came into effect on September 1, 2022. On March 22, 2024, the CAC promulgated Measures for the Security Assessment of Outbound Data Transfer (Version 2.0), which came into effect on March 22, 2024. On June 27, 2025, the CAC promulgated Measures for the Security Assessment of Outbound Data Transfer (Version 3.0), which came into effect on June 27, 2025. According to such Measures, a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration if it provides data to abroad under any of the following circumstances: (i) such data processor provides material data to abroad; (ii) the critical information infrastructure operator or such data processor that has processed personal data of over one million people provides personal data to abroad; (iii) the data processor that has provided personal data of over 100,000 people or sensitive personal data of over 10,000 people cumulatively since January 1 of the previous year provides personal data to abroad; and (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the National Cyberspace Administration. The Guidelines for the Application for the Security Assessment of Outbound Data Transfer (First Edition) that was issued by the CAC and came into effect on August 31, 2022 further clarifies, among others, the scope of application, methods for declaration and the declaration process of the Security Assessment of Outbound Data Transfer.
Directors and Executive Officers
The following table sets forth information regarding our executive officers and directors as of the date of this prospectus.
| Directors and Executive Officers | Age | Position/Title | |||
| Albert Wong | 58 | Chief Executive Officer, Director and Chairman of the Board | |||
| Ching Hei Li | 67 | Director | |||
| Chung Leung Cheung | 68 | Chief Financial Officer | |||
| Lin Tan | 56 | Chief Operating Officer | |||
| Yu-yun Tristan Kuo* | 69 | Independent Director | |||
| Chun Pong (Colman) Chiu* | 47 | Independent Director | |||
| Shiu Wing Joseph Chow* | 53 | Independent Director |
| * | Each of Yu-yun Tristan Kuo, Colman Chiu and Shiu Wing Joseph Chow has been appointed as an independent director of the Board, effective upon the effectiveness of the registration statement on Form F-1, of which this prospectus is a part. |
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Biography
Albert Wong. Mr. Wong was appointed as the Chief Executive Officer (“CEO”) of the Company on February 8, 2024 and a director of the Company on July 27, 2023. Since Sept 2023, Mr. Wong has served as a director of Hangzhou TC-Link. From Feb 2006 to Sept 2023, Mr. Wong served as a director of Suzhou TC-Link. Mr. Wong has served as Chairman of the Board of Eastern Worldwide Company, Limited in Hong Kong since 1996. Mr. Wong was the Honorary President of Hong Kong Logistics Association and was conferred as its Life Honorary President in 2018. Mr. Wong received “Man of Year 2016” award from Esquire Magazine and was selected as “Hong Kong Tatler-Society Top 500” by Hong Kong Tatler. Mr. Albert received his MBA from Barrington University, USA in 2002 and received his PhD of Business Administration from International American University in 2012.
Chinghei Li. Mr. Li was appointed as a director of the Company on February 8, 2024. Since September 2023, Mr. Li has served as a director of Hangzhou TC-Link. Mr. Li has served as the General Manager of Eastern Worldwide Company, Limited in Hong Kong since 1994. From February 2006 to September 2023, Mr. served as a director of Suzhou TC-Link. From 1992 to 1994, Mr. Li worked as the Marketing Manager in Sankyu U.S.A. Inc. in Los Angeles. From 1982 to 1992, Mr. Li served as the Logistics Manager of Eastern Worldwide Co., Ltd.
Chungleung Cheung. Mr. Cheung was appointed as the Chief Financial Officer (“CFO”) of the Company on February 8, 2024. Mr. Cheung has served as a director of Hangzhou TC-Link since September 2023. From 1979 to January 31, 2024. Mr. Cheung served as the General Manager of the Finance and Administration Department of Eastern Worldwide Company, Limited in Hong Kong. From February 2006 to September 2023, Mr. Cheung served as a director of Suzhou TC-Link. In 2001, Mr. Cheung became a senior member of the Institute of Public Accountants in Australia (FIPA). Mr. Cheung became a senior member of the Institute of Financial Accountants in the UK (FIFA) in 1990 and a senior member of the Hong Kong Registered Financial Planners Association (FHKRFP) in 2003. Mr. Cheung completed the Certificate in Accountancy course from the Hong Kong Polytechnic University in 1980.
Lin Tan. Mr. Tan was appointed as Chief Operating Officer (COO) of the Company on February 8, 2024. Since September 2023, Mr. Tan has served as a director and chief executive officer of Hangzhou TC-Link. Since January 2006, Mr. Tan has served as a director and chief executive officer of Suzhou TC-Link. From 2000 to 2016, Mr. Tan has served as vice president of Eastern Worldwide Company, Limited Shenzhen Branch. From 1994 to 2000, Mr. Tan worked at Shenkyu Logistics, a Sino-Japanese joint venture and was responsible for transportation, storage yard and engineering logistics management. Mr. Tan graduated from Chongqing Jiaotong University in July 1992 with a bachelor’s degree in Transportation Management. Mr. Tan received MBA certificates from Tsinghua University in China and the University of Northern Virginia in the USA in August 2009 and June 2010, respectively.
Y. Tristan Kuo. Mr. Kuo has served as a board member, chairman of the audit committee and a member of compensation committee and corporate governance and nominating committee of Jowell Global Ltd. (Nasdaq: JWEL) since December 23, 2020. Since September 2022, Mr. Kuo has served as a board member, chairman of the audit committee and a member of compensation committee and corporate governance and nominating committee of Cine Top Culture Holdings Limited. Since August 29, 2022, Mr. Kuo has served as a consultant and was the chief financial officer of Aerkomm Inc. (EuroNext-Paris: AKOM, OTCQX: AKOM) from April 10, 2017 to August 28, 2022. From November 1, 2019 to December 16, 2021, Mr. Kuo has served as a board member, chairman of the audit committee and a member of compensation committee and corporate governance and nominating committee of Oriental Culture Holding LTD. (Nasdaq: OCG). From April 2016 to February 2020, Mr. Kuo served as vice president of investor relations and board secretary of Nutrastar International, Inc. From August 2015 to April 2017, Mr. Kuo served as chief financial officer of Success Holding Group International, Inc. From December 2014 to August 2015, Mr. Kuo served as engagement partner of Tatum. From August 2014 to May 2015, Mr. Kuo served as a member of board of directors and chairman of the audit committee of KBS Fashion Group Limited (NASDAQ: KBSF). From June 2012 to November 2013, Mr. Kuo served as chief financial officer of Crown Bioscience, Inc. Mr. Kuo was the chief financial officer of China Biologic Products (NASDAQ: CBPO) from June 2008 to May 2012 and was the vice president-finance of China Biologic Products September 2007 to May 2008. Mr. Kuo received Master of Arts in Accounting from The Ohio State University in February 1982 and his Bachelor of Arts in Economics from Soochow University in Taiwan in May 1977. We believe that Mr. Kuo’s expertise and knowledge of accounting and management will benefit the Company’s operations and make him a valuable member of the board of directors and its committees.
Chun Pong (Colman) Chiu. Mr. Chiu has been served as an executive director of investment banking and equity capital market department of TFI Capital Limited Since July 2022. From May 2021 to July 2022, Mr. Chiu served as a director of Advent Corporate Finance Limited. From October 2019 to May 2021, Mr. Chiu served as an executive director and advisor of TD King Capital Limited. From August 2015 to July 2019, Mr. Chiu served as a director of South China Finance and Management Limited. From July 2009 to July 2015, Mr. Chiu served as a vice president of Longrun Tea Company Limited where he was responsible for fundraising and providing capital market advisory. Mr. Chiu also worked at the corporate finance department of ABN AMRO, DBS Asia Capital Limited and Shenyin Wanguo Capital (H.K.) Limited. Mr. Chiu received his Master of Finance from The University of Hong Kong in 2005.
Shiu Wing Joseph Chow. From 1999 to 2007, Mr. Chow has worked in general commercial and intellectual property law. From 2007 to August, 2015, Mr. Chow practiced at Maurice WM Lee, a law firm in Hong Kong, and held the position of partner at the time of his departure. From August 2015 to March 2017, Mr. Chow worked as consultant at C.T. Chan & Co., a law firm in Hong Kong. Since October 2013, Mr. Chow has been an independent non-executive director of Integrated Waste Solution Group Holdings Limited (HKSE: 0923). Since February 29, 2024, Mr. Chow has served as an independent director of Intelligent Group Ltd. Since March 2017, Mr. Chow has been a co-founder and partner of Wellington Legal, a full service law firm in Hong Kong. Since September, 2018, Mr. Chow has been a director of Jump Start Media, a startup innovation media platform incorporated in Hong Kong that aims to support regional startups in Asia. Since September, 2020, Mr. Chow has been a Director of Solaris Fund Management. Since June, 2021, Mr. Chow has been a director of Blue Safari Group Acquisition Corporation (NASDAQ: BSGA), a SPAC that has entered into a definitive merger agreement for a business combination with Bitdeer Technologies Holding Company, a technology company in the field of cryptocurrency mining. Mr. Chow obtained a Bachelor of Laws from the City University of Hong Kong in 1996, and a Post-Graduate Certificate in Laws from the University of Hong Kong in 1997, and was admitted in Hong Kong as a solicitor in 1999.
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Employment Agreements, Director Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers. Pursuant to these agreements, each of our executive officers is employed for an initial term of one year, renewable upon mutual agreement of the Company and the executive officer.
The executive officers are entitled to a fixed salary and to participate in our equity incentive plans, if any, and other company benefits, each as determined by the board of directors from time to time.
We may terminate the executive officer’s employment for cause, at any time, without notice or remuneration, for certain acts, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or material breach of any term of any employment or other services, confidentiality, intellectual property or non-competition agreements with the Company. In such case, the executive officer will solely be entitled to accrued and unpaid salary through the effective date of such termination, and his/her right to all other benefits will terminate, except as required by any applicable law. The executive officer is not entitled to severance payments upon any termination.
The executive officer may voluntarily terminate his/her employment for any reason, and such termination shall take effect 30 days after the receipt by the Company of the notice of termination. Upon the effective date of such termination, the executive officer shall be entitled to (a) accrued and unpaid salary and vacation through such termination date; and (b) all other compensation and benefits that were vested through such termination date. In the event the executive officer is terminated without notice, it shall be deemed a termination by the Company for cause.
Each of our executive officers has agreed not to use for his or her personal purposes nor divulge, furnish, or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret information or knowledge of the Company, whether developed by him or herself or by others.
In addition, each executive officer has agreed to be bound by non-competition restrictions during the term of his or her employment and for six months following the last date of employment.
Each executive officer also has agreed not to (i) solicit or induce, on his or her own behalf or on behalf of any other person or entity, any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates; or (ii) solicit or induce, on his or her own behalf or on behalf of any other person or entity, any customer or prospective customer of the Company or any of their respective affiliates to reduce its business with the Company or any of its affiliates.
We will enter into director agreements with each of our independent directors, which agreements set forth the terms and provisions of their respective engagements.
In addition, we will enter into indemnification agreements with each of our directors and executive officers that provide such persons with additional indemnification beyond that provided in our current Memorandum and Articles of Association.
Compensation of Directors and Executive Officers
For the fiscal years ended March 31, 2025 and 2024, we paid $116,251 (RMB843,600) and $136,345 (RMB977,200) to our executive officer for his services and we did not pay our directors for their services solely as our directors during the fiscal years ended March 31, 2025 and 2024. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan.
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Board of Directors and Committees
Our board of directors will consist of five directors. The NASDAQ Capital Market corporate governance rules require that a majority of an issuer’s board of directors must consist of independent directors. We will have a majority of independent directors serving on our board of directors.
Our board of directors may exercise all the powers of our Company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of our Company or of any third party. None of our non-executive directors has a service contract with us that provides for severance payments upon termination of service.
We will establish an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee. Each of the committees of the board of directors is described below.
Audit Committee
Chun Pong (Colman) Chiu, Shiu Wing Joseph Chow, Y. Tristan Kuo have been appointed as members of our Audit Committee, effective upon the effectiveness of the registration statement, of which this prospectus is a part; Y. Tristan Kuo will serve as the chairman of the Audit Committee. All members of our Audit Committee satisfy the independence standards promulgated by the SEC and by NASDAQ as such standards apply specifically to members of audit committees.
We have adopted and approved a charter for the Audit Committee. In accordance with our Audit Committee Charter, our Audit Committee shall:
| ● | evaluate the independence and performance of, and assess the qualifications of, our independent auditor, and engage such independent auditor; | |
| ● | approve the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approve in advance any non-audit service to be provided by the independent auditor; | |
| ● | monitor the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law; | |
| ● | review the financial statements to be included in our Annual Report on Form 20-F and Current Reports on Form 6-K and review with management and the independent auditors the results of the annual audit and reviews of our quarterly financial statements; | |
| ● | oversee all aspects of our systems of internal accounting control and corporate governance functions on behalf of the board of directors; | |
| ● | review and approve in advance any proposed related-party transactions and report to the full board of directors on any approved transactions; and | |
| ● | provide oversight assistance in connection with legal, ethical, and risk management compliance programs established by management and the board of directors, including Sarbanes-Oxley Act implementation, and make recommendations to the board of directors regarding corporate governance issues and policy decisions. |
We have determined that Y. Tristan Kuo possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC.
Compensation Committee
Chun Pong (Colman) Chiu, Shiu Wing Joseph Chow, Y. Tristan Kuo have been appointed as the members of our Compensation Committee, effective upon the effectiveness of the registration statement, of which this prospectus is a part; Chun Pong (Colman) Chiu will serves as the chairman of the Compensation Committee. All members of our Compensation Committee are qualified as independent under the current definition promulgated by NASDAQ. We have adopted a charter for the Compensation Committee.
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In accordance with the Compensation Committee’s Charter, the Compensation Committee is responsible for overseeing and making recommendations to the board of directors regarding the salaries and other compensation of our executive officers and general employees and providing assistance and recommendations with respect to our compensation policies and practices. The Compensation Committee shall:
| ● | approve compensation principles that apply generally to Company employees; | |
| ● | make recommendations to the board of directors with respect to incentive compensation plans and equity-based plans taking into account the results of the most recent rules to provide the shareholders with an advisory vote on executive compensation, generally known as “Say on Pay Votes” (Section 951 in The Dodd-Frank Wall Street Reform and Consumer Protection Act), if any; | |
| ● | administer and otherwise exercise the various authorities prescribed for the Compensation Committee by the Company’s incentive compensation plans and equity-based plans; | |
| ● | select a peer group of companies against which to benchmark/compare the Company’s compensation systems for principal officers elected by the board of directors; | |
| ● | annually review the Company’s compensation policies and practices and assess whether such policies and practices are reasonably likely to have a material adverse effect on the Company; | |
| ● | determine and oversee stock ownership guidelines and stock option holding requirements, including periodic review of compliance by principal officers and members of the board of directors; |
Corporate Governance and Nominating Committee
Chun Pong (Colman) Chiu, Shiu Wing Joseph Chow, Y. Tristan Kuo have been appointed as the members of our Corporate Governance and Nominating Committee, effective upon the effectiveness of the registration statement, of which this prospectus is a part; Shiu Wing Joseph Chow will serve as the chairman of the Corporate Governance and Nominating Committee. All members of our Corporate Governance and Nominating Committee are qualified as independent under the current definition promulgated by NASDAQ. We have adopted a charter for the Corporate Governance and Nominating Committee.
In accordance with its charter, the Corporate Governance and Nominating Committee is responsible for identifying and proposing new potential director nominees to the board of directors for consideration and reviewing our corporate governance policies. The Corporate Governance and Nominating shall:
| ● | Identify and screen individuals qualified to become Board members consistent with the criteria approved by the board of directors, and recommend to the board of directors’ director nominees for election at the next annual or special meeting of shareholders at which directors are to be elected or to fill any vacancies or newly created directorships that may occur between such meetings; | |
| ● | Recommend directors for appointment to Board committees; | |
| ● | Make recommendations to the board of directors as to determinations of director independence; | |
| ● | Oversee the evaluation of the board of directors; | |
| ● | Make recommendations to the board of directors as to compensation for the Company’s directors; and | |
| ● | Review and recommend to the board of directors the Corporate Governance Guidelines and Code of Business Conduct and Ethics for the Company. |
Director Independence
Our board of directors reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly, and the Company has determined that Chun Pong (Colman) Chiu, Shiu Wing Joseph Chow, Y. Tristan Kuo are “independent directors” as defined by NASDAQ.
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Code of Ethics
We have adopted a code of ethics that applies to all executive officers, directors, and employees. The code of ethics codifies the business and ethical principles that govern all aspects of our business.
Family Relationships
There is no family relationship among any of our directors or executive officers.
Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our Company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also have a duty to exercise the skills they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our Memorandum and Articles of Association as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. Our company has a right to seek damages against any director who breaches a duty owed to us. Our board of directors has all the powers necessary for managing and for directing and supervising our business affairs. The functions and powers of our board of directors include, among others:
| ● | convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings; | |
| ● | declaring dividends and distributions; | |
| ● | appointing officers and determining the term of office of the officers; | |
| ● | exercising the borrowing powers of our Company and mortgaging the property of our Company; and | |
| ● | approving the transfer of shares in our Company, including the registration of such shares in our share register. |
Terms of Directors and Officers
Our directors may be appointed by a resolution of our board of directors or an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until they are removed from office by ordinary resolution of our shareholders. A director will cease to be a director if, among other things, the director (a) becomes bankrupt or makes any arrangement or composition with his creditors; (b) is found to be or becomes of unsound mind; (c) resigns his office by notice in writing to the Company; (d) is removed from office by ordinary resolution of the Company; or (e) is removed from office pursuant to the relevant provision of the Articles.
Our officers are appointed by and serve at the discretion of the board of directors.
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The following table sets forth information regarding the beneficial ownership of each class of the Company’s voting securities as of the date of this prospectus by our officers, directors, and 5% or more beneficial owners of each class of the Company’s voting securities. There is no other person or group of affiliated persons known by us to beneficially own 5% or more of our voting securities.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security, of which that person has a right to acquire beneficial ownership within 60 days.
Applicable percentage ownership prior to the offering is based on 10,417,000 Ordinary Shares outstanding as of the date of this prospectus. The table also lists the percentage ownership after this offering based on Ordinary Shares and preferred shares outstanding immediately after the completion of this offering sale of 1,600,000 Ordinary Shares, assuming the Underwriter does not exercise its over-allotment option.
Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all shares shown as beneficially owned by him, subject to applicable community property laws.
| Ordinary Shares Beneficially Owned Prior to This Offering | Ordinary Shares Beneficially Owned After This Offering | Preferred Shares Beneficially Owned Prior to and After This Offering | Aggregated Voting Power Before This Offering | Aggregated Voting Power After This Offering | ||||||||||||||||||||||||||||||||||||
| Name of Beneficial Owners | Number | % | Number | % | Number | % | Number | % | Number | % | ||||||||||||||||||||||||||||||
| Directors and Executive Officers: | ||||||||||||||||||||||||||||||||||||||||
| Albert Wong(1) | 4,266,000 | 40.95 | 4,266,000 | 35.5 | 1,000,000 | 100 | 14,266,000 | 69.9 | 14,266,000 | 64.8 | ||||||||||||||||||||||||||||||
| Ching Hei Li | 323,110 | 3.10 | 323,110 | 2.69 | - | 323,110 | 1.6 | 323,110 | 1.5 | |||||||||||||||||||||||||||||||
| Chung Leung Cheung | 423,110 | 4.06 | 423,110 | 3.52 | - | 423,110 | 2.1 | 423,110 | 1.9 | |||||||||||||||||||||||||||||||
| Lin Tan(2) | 488,320 | 4.69 | 488,320 | 4.06 | - | 488,320 | 2.4 | 488,320 | 2.2 | |||||||||||||||||||||||||||||||
| Yu-yun Tristan Kuo | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Chun Pong (Colman) Chiu | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Shiu Wing Joseph Chow | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| All directors and executive officers as a group (7 individuals) | 5,550,540 | 52.8 | 5,550,540 | 46.2 | 15,550,540 | 76.2 | 15,550,540 | 70.6 | ||||||||||||||||||||||||||||||||
| 5% or More Shareholders: | ||||||||||||||||||||||||||||||||||||||||
| Eastern1 Holdings Ltd.(3) | 3,578,170 | 34.35 | 3,578,170 | 29.8 | 3,578,170 | 17.5 | 3,578,170 | 16.3 | ||||||||||||||||||||||||||||||||
| Ms. Weimei Huang(3) | 3,578,170 | 34.35 | 3,578,170 | 29.8 | 3,578,170 | 17.5 | 3,578,170 | 16.3 | ||||||||||||||||||||||||||||||||
| Eastern Worldwide Logistics Group Inc.(1) | 4,266,000 | 40.95 | 4,266,000 | 35.5 | 14,266,000 | 69.9 | 14,266,000 | 64.8 | ||||||||||||||||||||||||||||||||
(1) |
Mr. Albert Wong, Chairman of our Board and Chief Executive Officer of the Company, is the 70% shareholder of Eastern Worldwide Logistics Group Inc. a Samoa company. The registered address of Eastern Worldwide Logistics Group Inc. is Portcullis Chambers, P.O. Box 1225, Apia, Samoa. Mr. Albert Wong also owns all 1,000,000 of the Company’s outstanding preferred shares, and each holder of one preferred share has the right to 10 votes at a meeting of the shareholders of the Company. |
| (2) | Mr. Lin Tan, our Chief Operating Officer is the sole shareholder of Eastern2 Holdings Ltd. The registered address of Eastern2 Holdings Ltd. is Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands |
| (3) | Ms. Weimei Huang is the sole shareholder of Eastern1 Holdings Ltd. The registered address of Eastern1 Holdings Ltd. is Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands. |
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Employment Agreements, Director Agreements and Indemnification Agreements
See “Management—Employment Agreements, Director Agreements and Indemnification Agreements.”
The relationship and the nature of related party transactions are summarized as follow:
| Name of Related Parties | Relationship to the Company | Nature of Transactions | ||
| Jiangsu Longrich Bioscience Co. Ltd. (“Longrich Bioscience”) | A former shareholder of Suzhou TC-Link * | Revenue, working capital loan | ||
| Jiangsu Longrich Group Co., Ltd. | Shareholder of Longrich Bioscience | Revenue | ||
| Colori Inc. and its subsidiaries | Subsidiaries of Longrich Bioscience | Revenue, purchase | ||
| Shanghai Juhao Information Technology Co., Ltd. | Under common control with Longrich Bioscience | Revenue | ||
| Eastern Worldwide Company, Limited | Controlled by a major shareholder of the Company, Mr. Albert Wong | Purchase | ||
| Eastern Worldwide Logistics Group Inc. | Controlled by a major shareholder of the Company, Mr. Albert Wong | Working capital loan | ||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | Controlled by a major shareholder of the Company, Mr. Albert Wong | Revenue, working capital loan | ||
| Lin Tan | Chief Operating Officer (“COO”) of the Company | Working capital loan | ||
| Jinghong Jiang | Former Chief Accountant of the Company | Working capital loan |
*Jiangsu Longrich Bioscience Co. Ltd. (“Longrich Bioscience”) was a former shareholder of Suzhou TC-Link until Longrich Bioscience transferred all of its shares in Suzhou TC-Link to an individual on March 20, 2023, before Reorganization.
Details of related party balances are summarized as follow:
Accounts receivable from related parties
| As of March 31, 2025 | As of March 31, 2024 | As of March 31, 2023 | ||||||||||
| Jiangsu Longrich Bioscience Co. Ltd. | $ | - | $ | - | $ | 318,636 | ||||||
| Colori Inc. and its subsidiaries | - | - | 253,169 | |||||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | 695,671 | 407,831 | 236,759 | |||||||||
| Shanghai Juhao Information Technology Co., Ltd. | - | - | 9,350 | |||||||||
| Accounts receivable from related parties, gross | 695,671 | 407,831 | 817,914 | |||||||||
| Less: allowance for expected credit losses | (54,332 | ) | (2,971 | ) | (81 | ) | ||||||
| Accounts receivable from related parties, net | $ | 641,339 | $ | 404,860 | $ | 817,833 | ||||||
Accounts payable to related parties
| As of March 31, 2025 | As of March 31, 2024 | As of March 31, 2023 | ||||||||||
| Colori Inc. and its subsidiaries | $ | - | $ | - | $ | 62,302 | ||||||
| Accounts payable to related parties | $ | - | $ | - | $ | 62,302 | ||||||
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Amounts due from related parties
| As of March 31, 2025 | As of March 31, 2024 | As of March 31, 2023 | ||||||||||
| Eastern Worldwide Logistics Group Inc. | $ | 136,416 | $ | 137,099 | $ | - | ||||||
| Colori Inc. and its subsidiaries | - | - | 21,842 | |||||||||
| Jiangsu Longrich Group Co., Ltd. | - | - | 728 | |||||||||
| Amounts due from related parties | $ | 136,416 | $ | 137,099 | $ | 22,570 | ||||||
Amounts due to related parties
| As of March 31, 2025 | As of March 31, 2024 | As of March 31, 2023 | ||||||||||
| Lin Tan | $ | 203,695 | $ | 311,193 | $ | 162,244 | ||||||
| Jinghong Jiang | - | 90,000 | - | |||||||||
| Jiangsu Longrich Bioscience Co. Ltd. | - | - | 3,472 | |||||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | - | - | 590 | |||||||||
| Amounts due to related parties | $ | 203,695 | $ | 401,193 | $ | 166,306 | ||||||
Amounts due from (to) related parties were interest-free, unsecured and due (repayable) on demand. The Company made (obtained) funds to (from) its related parties for business purposes. As of July 4, 2025, 43.6% of the amount due from Eastern Worldwide Logistics Group Inc. as of March 31, 2025 has been settled; and 0% of the amounts due to related parties as of March 31, 2025 have been repaid.
Details of related party transactions are summarized as follow:
Revenues from related party customer
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Colori Inc. and its subsidiaries | $ | - | $ | - | $ | 860,145 | ||||||
| Jiangsu Longrich Bioscience Co. Ltd. | - | - | 321,156 | |||||||||
| Shanghai Juhao Information Technology Co., Ltd. | - | - | 33,220 | |||||||||
| Jiangsu Longrich Group Co., Ltd. | - | - | - | |||||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | 335,598 | 282,564 | - | |||||||||
| Revenues from related party customers | $ | 335,598 | $ | 282,564 | $ | 1,214,521 | ||||||
Purchases from related party suppliers
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Colori Inc. and its subsidiaries | $ | - | $ | - | $ | 82,414 | ||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | 8,581 | - | - | |||||||||
| Eastern Worldwide Company, Limited | - | 574 | - | |||||||||
| Purchases from related party suppliers | $ | 8,581 | $ | 574 | $ | 82,414 | ||||||
Properties leased from related parties
For the years ended March 31, 2025, 2024 and 2023, the Company’s PRC operating subsidiaries have entered into operating leases to rent warehouse buildings and office spaces from certain related parties, please refer to Note 6 for details. Lease expenses incurred for operating leases with related parties were:
| For the years ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Jiangsu Longrich Bioscience Co. Ltd. | $ | - | $ | - | $ | 22,579 | ||||||
| Colori Inc. and its subsidiaries | - | - | 57,166 | |||||||||
| Lease expenses to related parties | $ | - | $ | - | $ | 79,745 | ||||||
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We are a Cayman Islands exempted company with limited liability and our affairs are governed by our Memorandum and Articles of Association, as amended and restated from time to time, the Companies Act, and the common law of the Cayman Islands.
Our authorized share capital consists of: (i) 450,000,000 Ordinary Shares, par value $0.0001 per share and (ii) 50,000,000 Preferred Shares, par value $0.0001 per share. As of the date of this prospectus, 10,417,000 Ordinary Shares and 1,000,000 Preferred Shares are issued and outstanding.
Our Memorandum and Articles of Association
Ordinary Shares
Dividends. Subject to any rights and restrictions of any other class or series of shares, our board of directors has complete discretion in deciding whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always 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.
However, no dividend shall bear interest against the Company.
Voting Rights. Each Ordinary Share shall be entitled to one vote on all matters subject to vote at general and special meetings of our Company and each preferred share shall be entitled to ten (10) votes on all matters subject to vote at general and special meetings of our Company. Voting at any meeting of shareholders is by show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded. A poll may be demanded by the chairman of such meeting or any one or more shareholders who together hold not less than 10% of the nominal value of the total issued voting shares of our Company present in person or by proxy. An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the Ordinary Shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the outstanding Ordinary Shares at a meeting. A special resolution will be required for important matters such as making changes to our Memorandum and Articles of Association.
There are no limitations on non-residents or foreign shareholders in the Memorandum and Articles of Association to hold or exercise voting rights on the Ordinary Shares of our Company. However, no person will be entitled to vote at any general meeting or at any separate meeting of the holders of the Ordinary Shares unless the person is registered as of the record date for such meeting and unless all calls or other sums presently payable by the person in respect of Ordinary Shares in the Company have been paid.
Winding Up; Liquidation. Upon the winding up of our company, after the full amount that holders of any issued shares ranking senior to the Ordinary Shares as to distribution on liquidation or winding up are entitled to receive has been paid or set aside for payment, the holders of our Ordinary Shares are entitled to receive any remaining assets of the Company available for distribution as determined by the liquidator. The assets received by the holders of our Ordinary Shares in a liquidation may consist in whole or in part of property, which is not required to be of the same kind for all shareholders.
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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 days prior to the specified time and place of payment. Any Ordinary Shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares. We may issue shares that are, or at its option or at the option of the holders are, subject to redemption on such terms and in such manner as it may, before the issue of the shares, determine. Under the Companies Act, shares of a Cayman Islands exempted company may be redeemed or repurchased out of profits of the company, out of the proceeds of a fresh issue of shares made for that purpose or out of capital, provided the memorandum and articles authorize this and it has the ability to pay its debts as they come due in the ordinary course of business.
No Preemptive Rights. Holders of Ordinary Shares will have no preemptive or preferential right to purchase any securities of our company.
Variation of Rights Attaching to Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Act, be materially adversely varied with the written consent of the holders of all of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.
Anti-Takeover Provisions. Some provisions of our current 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 authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders.
Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:
| ● | does not have to file an annual return of its shareholders with the Registrar of Companies; | |
| ● | is not required to open its register of members for inspection; | |
| ● | does not have to hold an annual general meeting; | |
| ● | may issue shares with no par value; | |
| ● | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); | |
| ● | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; | |
| ● | may register as an exempted limited duration company; and | |
| ● | may register as a segregated portfolio company. |
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
| 104 |
Preferred Shares
Conversion. Each Preferred Share is convertible into one (1) Ordinary Share at any time at the option of the holder thereof. In no event shall Ordinary Shares be convertible into Preferred Shares.
Voting Rights. Each share of Preferred Shares shall have the voting rights equal to ten (10) Ordinary Shares.
Dividends. Except for voting rights and conversion rights as set out hereof, the Ordinary Shares and the Preferred Shares shall rank pari passu with one another and shall have the same rights, preferences, privileges and restrictions.
Assignment and Transfer. The holders of Preferred Shares shall have the right to transfer each share of the Preferred Shares to any third party at any time in such holder’s sole and absolute discretion, subject to compliance with applicable securities laws. Upon any sale, transfer, assignment or disposition of any Preferred Share by a shareholder to any person who is not an affiliate of such shareholder, or upon a change of control of any Preferred Share to any person who is not an affiliate of the registered shareholder of such Preferred Share, such Preferred Share shall be automatically and immediately converted into one (1) Ordinary Share.
Warrants
There are no outstanding warrants to purchase any of our securities. We have agreed to issue to the Underwriter (defined below), on the closing date of this offering, warrants exercisable at a price equal to 120% of the public offering price of the ordinary shares offered hereby, to purchase 4% of the aggregate number of ordinary shares sold in this offering. See “Underwriter’s Warrant” on page 117 for more information about these warrants.
Options
There are no outstanding options to purchase any of our securities.
Differences in Corporate Law
The Companies Act is modelled after that of English law but does not follow many recent English law statutory enactments. In addition, the 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 Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.
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 provided that the laws of the foreign jurisdiction permit such merger or consolidation. 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 new 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 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 shareholders 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 affected in compliance with these statutory procedures.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose, a subsidiary is a company of which at least 90% of the issued shares entitled to vote are owned by the parent company.
The consent of each holder of a fixed or floating security interest of a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
Except in certain limited circumstances, a dissenting shareholder of a Cayman Islands constituent company is entitled to payment of the fair value of his or her shares upon dissenting from a merger or consolidation. The exercise of such 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, except for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, Those provisions provide that if a majority in number representing 75% in value of the creditors or class of creditors (as the case may be) present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Grand Court of the Cayman Islands, be binding on all the creditors or the class of creditors, as the case may be, and also on the company or, where a company is in the course of being wound up, on the liquidator and contributories of the company. Alternatively, if 75% in value of the members or class of members (as the case may be) present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Grand Court of the Cayman Islands, be binding on all the members or the class of members, as the case may be, and also on the company or, where a company is in the course of being wound up, on the liquidator and contributories of the company. 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: (a) the statutory provisions as to the required majority vote have been met; (b) 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; (c) the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and (d) 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 shareholders 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 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.
| 105 |
If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, 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 and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands courts can be expected to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivative actions in the name of the company to challenge:
(a) an act which is illegal or ultra vires with respect to the company and is therefore incapable of ratification by the shareholders;
(b) an act which, although not ultra vires, requires authorization by a qualified (or special) majority (that is, more than a simple majority) which has not been obtained; and
(c) an act which constitutes a “fraud on the minority” where the wrongdoers are themselves in control of the company.
Indemnification of Directors and Executive Officers and Limitation of Liability. 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 Articles permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers. 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 executive officers that provide such persons with additional indemnification beyond that provided in our Articles.
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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 acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the 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 owes three types of duties to the company: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties. The Cayman Companies Act 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 amended articles of association, as amended and restated from time to time. We have the right to seek damages where certain duties owed by any of our directors are breached.
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.
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.
Cayman Islands law does not provide shareholders any right to put proposals before a meeting or requisition a general meeting. However, these rights may be provided in the memorandum and articles of association. Our current Memorandum and Articles of Association allow our shareholders holding not less than one-third of all voting power of our share capital in issue to requisition a shareholder’s meeting. Other than this right to requisition a shareholders’ meeting, our current Memorandum and Articles of Association do not provide our shareholders other right to put proposal before a meeting. As a Cayman Islands exempted 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 current Memorandum and Articles of Association do not provide for cumulative voting. As a result, our shareholders are not afforded any fewer protections or rights on this issue than shareholders of a Delaware corporation.
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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 current Memorandum and Articles of Association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.
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.
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 not with the effect of constituting a fraud on the minority shareholders.
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 super majority 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. Under the Companies Act and our current Memorandum and Articles of Association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.
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 Cayman Islands law and our current Memorandum and Articles of Association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the sanction of an ordinary resolution passed at a general meeting of the holders of the shares of that class or the written consent the holders of all of the issued shares of that class.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands law, our current Memorandum and Articles of Association may only be amended with a special resolution of our shareholders.
Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our current memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our current Memorandum and Articles of Association governing the ownership threshold above which shareholder ownership must be disclosed.
Anti-money Laundering — Cayman Islands
In order to comply with legislation or regulations aimed at the prevention of money laundering, we are required to adopt and maintain anti-money laundering procedures and may require subscribers to provide evidence to verify their identity and source of funds. Where permitted, and subject to certain conditions, we may also delegate the maintenance of our anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.
We reserve the right to request such information as is necessary to verify the identity of a subscriber. In some cases the directors may be satisfied that no further information is required since an exemption applies under the Anti-Money Laundering Regulations (Revised) of the Cayman Islands, as amended and revised from time to time (the “Regulations”). Depending on the circumstances of each application, a detailed verification of identity might not be required where:
| (a) | the subscriber makes the payment for their investment from an account held in the subscriber’s name at a recognized financial institution; or | |
| (b) | the subscriber is regulated by a recognized regulatory authority and is based or incorporated in, or formed under the law of, a recognized jurisdiction; or | |
| (c) | the application is made through an intermediary which is regulated by a recognized regulatory authority and is based in or incorporated in, or formed under the law of a recognized jurisdiction and an assurance is provided in relation to the procedures undertaken on the underlying investors. |
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For the purposes of these exceptions, recognition of a financial institution, regulatory authority, or jurisdiction will be determined in accordance with the Regulations by reference to those jurisdictions recognized by the Cayman Islands Monetary Authority as having equivalent anti-money laundering regulations.
In the event of delay or failure on the part of the subscriber in producing any information required for verification purposes, we may refuse to accept the application, in which case any funds received will be returned without interest to the account from which they were originally debited.
We also reserve the right to refuse to make any redemption payment to a shareholder if our directors or officers suspect or are advised that the payment of redemption proceeds to such shareholder might result in a breach of applicable anti-money laundering or other laws or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure our compliance with any such laws or regulations in any applicable jurisdiction.
If any person resident in the Cayman Islands knows or suspects or has reason for knowing or suspecting that another person is engaged in criminal conduct or is involved with terrorism or terrorist property and the information for that knowledge or suspicion came to their attention in the course of their business in the regulated sector, or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) a nominated officer (appointed in accordance with the Proceeds of Crime Act (Revised) of the Cayman Islands) or the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Act (Revised), if the disclosure relates to criminal conduct or money laundering or (ii) to a police constable or a nominated officer (pursuant to the Terrorism Act (Revised) of the Cayman Islands) or the Financial Reporting Authority, pursuant to the Terrorism Act (Revised), if the disclosure relates to involvement with terrorism or terrorist financing and terrorist property. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.
Data Protection in the Cayman Islands — Privacy Notice
This privacy notice explains the manner in which we collect, process, and maintain personal data about our investors pursuant to the Data Protection Act (Revised) of the Cayman Islands, as amended from time to time and any regulations, codes of practice, or orders promulgated pursuant thereto (the “DPA”).
We are committed to processing personal data in accordance with the DPA. In our use of personal data, we will be characterized under the DPA as a “data controller,” whilst certain of our service providers, affiliates, and delegates may act as “data processors” under the DPA. These service providers may process personal information for their own lawful purposes in connection with services provided to us.
For the purpose of this privacy notice, “you” or “your” shall mean the subscriber and shall also include any individual connected to the subscriber.
By virtue of your investment in our Company, we and certain of our service providers may collect, record, store, transfer, and otherwise process personal data by which individuals may be directly or indirectly identified. We may combine personal data that you provide to us with personal data that we collect from, or about you. This may include personal data collected in an online or offline context including from credit reference agencies and other available public databases or data sources, such as news outlines, websites and other media sources and international sanctions lists.
Your personal data will be processed fairly and for lawful purposes, including (a) where the processing is necessary for us to perform a contract to which you are a party or for taking pre-contractual steps at your request, (b) where the processing is necessary for compliance with any legal, tax, or regulatory obligation to which we are subject, or (c) where the processing is for the purposes of legitimate interests pursued by us or by a service provider to whom the data are disclosed, or (d) where you otherwise consent to the processing of personal data for any other specific purpose. As a data controller, we will only use your personal data for the purposes for which we collected it. If we need to use your personal data for an unrelated purpose, we will contact you.
We anticipate that we will share your personal data with our service providers for the purposes set out in this privacy notice. We may also share relevant personal data where it is lawful to do so and necessary to comply with our contractual obligations or your instructions or where it is necessary or desirable to do so in connection with any regulatory reporting obligations. In exceptional circumstances, we will share your personal data with regulatory, prosecuting, and other governmental agencies or departments, and parties to litigation (whether pending or threatened), in any country or territory including to any other person where we have a public or legal duty to do so (e.g. to assist with detecting and preventing fraud, tax evasion, and financial crime or compliance with a court order).
Your personal data shall not be held by our Company for longer than necessary with regard to the purposes of the data processing.
We will not sell your personal data. Any transfer of personal data outside of the Cayman Islands shall be in accordance with the requirements of the DPA. Where necessary, we will ensure that separate and appropriate legal agreements are put in place with the recipient of that data.
We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction, or damage to the personal data.
If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation to your investment into our Company, this will be relevant for those individuals and you should transmit this document to those individuals for their awareness and consideration.
You have certain rights under the DPA, including (a) the right to be informed as to how we collect and use your personal data (and this privacy notice fulfils our obligation in this respect), (b) the right to obtain a copy of your personal data, (c) the right to require us to stop direct marketing, (d) the right to have inaccurate or incomplete personal data corrected, (e) the right to withdraw your consent and require us to stop processing or restrict the processing, or not begin the processing of your personal data, (f) the right to be notified of a data breach (unless the breach is unlikely to be prejudicial), (g) the right to obtain information as to any countries or territories outside the Cayman Islands to which we, whether directly or indirectly, transfer, intend to transfer, or wish to transfer your personal data, general measures we take to ensure the security of personal data, and any information available to us as to the source of your personal data, (h) the right to complain to the Office of the Ombudsman of the Cayman Islands, and (i) the right to require us to delete your personal data in some limited circumstances.
If you do not wish to provide us with requested personal data or subsequently withdraw your consent, you may not be able to invest in our Company or remain invested in our Company as it will affect our ability to manage your investment.
If you consider that your personal data has not been handled correctly, or you are not satisfied with our responses to any requests you have made regarding the use of your personal data, you have the right to complain to the Cayman Islands’ Ombudsman. The Ombudsman can be contacted by calling +1 (345) 946-6283 or by email at info@ombudsman.ky.
Economic Substance Legislation of the Cayman Islands
The Cayman Islands, together with several other non-European Union jurisdictions, have introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act (Revised) (the “Substance Act”) came into force in the Cayman Islands in January 2019 introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities.” An exempted company incorporated in the Cayman Islands as is our Company is an in-scope Cayman Islands entity; however, it does not include an entity that is tax resident outside the Cayman Islands. Based on the current interpretations of the Substance Act, our Company is a “pure equity holding company” and will therefore likely be subject to more limited substance requirements. However, as it is a relatively new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. Failure to satisfy applicable requirements may subject us to penalties under the Substance Act.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there was no established public trading market for our Ordinary Shares. We cannot assure you that a liquid trading market for our Ordinary Shares will develop on NASDAQ or be sustained after this offering. Future sales of substantial amounts of Ordinary Shares in the public market, or the perception that such sales may occur, could adversely affect the market price of our Ordinary Shares. Further, since a large number of our Ordinary Shares will not be available for sale shortly after this offering because of the contractual and legal restrictions on resale described below, sales of substantial amounts of our Ordinary Shares in the public market after these restrictions lapse, or the perception that such sales may occur, could adversely affect the prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have an aggregate of 12,017,000 Ordinary Shares outstanding, assuming no exercise of the Underwriter’s over-allotment option. The Ordinary Shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act.
As of the date of this prospectus, 10,417,000 Ordinary Shares held by existing shareholders are deemed “restricted securities” as that term is defined in Rule 144 and may not be resold except pursuant to an effective registration statement or an applicable exemption from registration, including Rule 144. A total of 9,078,710 Ordinary Shares will be subject to “lock-up” agreements described below on the effective date of this offering. Upon expiration of the lock-up period of six (6) months after the date of this prospectus, outstanding shares will become eligible for sale, subject in most cases to the limitations of Rule 144. The remaining 1,338,290 shares may be sold in accordance with Rule 144.
The following table summarizes the total shares potentially available for future sale.
| Days After Date of this Prospectus | Shares Eligible for Sale | Comment | ||
| Upon Effectiveness | 1,600,000 | Freely tradable shares sold in the offering. | ||
| 90 days | 1,338,290 | Shares saleable under Rule 144. | ||
| Six months | 9,078,710 | Shares saleable after expiration of the lock-up. |
Rule 144
All of our Ordinary Shares that will be issued and outstanding upon the completion of this offering, other than those Ordinary Shares sold in this offering, are “restricted securities” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as those provided by Rule 144 and Rule 701 promulgated under the Securities Act. In general, under Rule 144, beginning ninety days after the date of this prospectus, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any shares of our share capital that such person has held for at least six months, including the holding period of any prior owner other than one of our affiliates, without regard to volume limitations, except that sales of our share capital by any such person would be subject to the availability of current public information about us if the shares to be sold were held by such person for less than one year.
Beginning ninety days after the date of this prospectus, our affiliates who have beneficially owned shares of our share capital for at least six months, including the holding period of any prior owner other than another of our affiliates, would be entitled to sell within any three-month period those shares and any other shares they have acquired that are not restricted securities, provided that the aggregate number of shares sold does not exceed the greater of:
| ● | 1% of the number of shares of our authorized share capital then outstanding, which will equal approximately 120,170 Ordinary Shares immediately after this offering assuming no exercise of the Underwriter’s over-allotment option; or | |
| ● | the average weekly trading volume in our Ordinary Shares on the listing exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales under Rule 144 by our affiliates are generally subject to the availability of current public information about us, as well as certain “manner of sale” and notice requirements.
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Rule 701
In general, under Rule 701 under the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our Ordinary Shares from us in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell those Ordinary Shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. If any of our employees, executive officers or directors purchase shares under a written compensatory plan or contract, they may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares would be required to wait until 90 days after the date of this prospectus before selling any such shares. We do not currently have any compensatory stock plan for our employees, consultants or advisors.
Regulation S
Regulation S provides generally that sales made in offshore transactions are not subject to the registration or prospectus-delivery requirements of the Securities Act.
Lock-up Agreements
We and each of our officers, directors and certain shareholders have agreed, subject to certain exceptions, not to, directly or indirectly, offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of, or enter into any swap or other transaction that is designed to, or could be expected to, result in the disposition of any of our Ordinary Shares or other securities convertible into or exchangeable or exercisable for our Ordinary Shares or derivatives of our Ordinary Shares (whether any such swap or transaction is to be settled by delivery of securities, in cash, or otherwise), owned by these persons prior to this offering or acquired in this offering or Ordinary Shares issuable upon exercise of options or warrants held by these persons until after six (6) months following the effective of the registration statement of which this prospectus forms a part.
The following discussion of material Cayman Islands, PRC and United States federal income tax consequences of an investment in our Ordinary Shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our Ordinary Shares, such as the tax consequences under state, local and other tax laws. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Ogier, our Cayman Islands counsel. To the extent that the discussion relates to matters of PRC tax law, it represents the opinion of Zhonglun Law Firm, our PRC counsel.
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. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands). The Cayman Islands is a party to a double tax treaty entered with the United Kingdom in 2010 but is otherwise 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 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 Ordinary Shares, nor will gains derived from the disposal of our Ordinary Shares be subject to Cayman Islands income or corporation tax.
The Cayman Islands enacted the International Tax Co-operation (Economic Substance) Act (Revised) together with the Guidance Notes published by the Cayman Islands Tax Information Authority from time to time. The Company is required to comply with the economic substance requirements from July 1, 2019 and make an annual report in the Cayman Islands as to whether or not it is carrying on any relevant activities and if it is, it must satisfy an economic substance test.
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People’s Republic of China Taxation
Under the EIT Law, an enterprise established outside the PRC with a “de facto management body” within the PRC is considered a PRC resident enterprise for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income as well as tax reporting obligations. Under the Implementation Rules, 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, SAT Circular 82 issued in April 2009 specifies that certain offshore-incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if all of the following conditions are met: (a) senior management personnel and core management departments in charge of the daily operations of the enterprises have their presence mainly in the PRC; (b) their financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) major assets, accounting books and company seals of the enterprises, and minutes and files of their board’s and shareholders’ meetings are located or kept in the PRC; and (d) half or more of the enterprises’ directors or senior management personnel with voting rights habitually reside in the PRC. Further to SAT Circular 82, the SAT issued SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration details of determination on PRC resident enterprise status and administration on post-determination matters. If the PRC tax authorities determine that the Company is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavourable PRC tax consequences could follow. For example, our subsidiaries in China may be subject to enterprise income tax at a rate of 25% with respect to its worldwide taxable income. Also, a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares or Ordinary Shares and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares or Ordinary Shares.
It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or Ordinary Shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. See “Risk Factors—Risk Factors Relating to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC resident enterprise for PRC enterprise income tax purposes. Such classification would likely result in unfavourable 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”.
The SAT issued SAT Circular 59 together with the Ministry of Finance in April 2009 and SAT Circular 698 in December 2009. Both SAT Circular 59 and SAT Circular 698 became effective retroactively as of January 1, 2008, and Circular 7, in replacement of some of the existing rules in Circular 698, became effective in February 2015. On October 17, 2017, the SAT promulgated Bulletin 37, and Circular 698 was replaced effective December 1, 2017. Under Circular 7, where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned such taxable assets, may report such indirect transfer to the relevant tax authority. Using a “substance over form” principle, 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. We and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59 or Circular 7 and Bulletin 37, and may be required to expend valuable resources to comply with Circular 59, Circular 7 and Bulletin 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars. In addition, in accordance with the Individual Income Tax Law promulgated by SCNPC, latest amended on August 31, 2018, and effective January 1, 2019, where an individual carries out other arrangements without reasonable business purpose and obtains improper tax gains, the tax authorities shall have the right to make tax adjustments based on a reasonable method, and levy additional tax and collect interest if there is a need to levy additional tax after making tax adjustments. As a result, our beneficial owners, who are PRC residents, may be deemed to have carried out other arrangements without reasonable business purpose and obtained improper tax gains for such indirect transfer, and thus be levied tax. See “Risk Factors—Risk Factors Relating to Doing Business in China—We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of our operating company’s equity interests. Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.”
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Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Tax Evasion With Respect to Taxes on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a resident enterprise of the counter-party to such Tax Arrangement should meet the following conditions, among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must directly own the required percentage of equity interests and voting rights in such PRC resident enterprise; and (ii) it should directly own such percentage in the PRC resident enterprise anytime in the 12 months prior to receiving the dividends. According to the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements, or the Administrative Measures, promulgated by the SAT on October 14, 2019, implemented on January 1, 2020, if a non-resident taxpayer meet the conditions for enjoying the treatment under tax agreements, he can enjoy such treatment at the time of tax declaration or through the withholding agent at the time of withholding declaration and accept subsequent management from the tax authorities. In the case of source withholding and designated withholding, if a non-resident taxpayer believes that he meets the conditions for enjoying such treatment and needs to enjoy it, he shall take the initiative to propose to the withholding agent and submit relevant report forms and materials to the withholding agent. Accordingly, Eastern HK may be able to enjoy the 5% withholding tax rate for the dividends it receives from the WFOE, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations, and obtains the approvals as required under the Administrative Measures. However, according to Circular 81, if the relevant tax authorities consider the transactions or arrangements that we have made are for the primary purpose of enjoying a favourable tax treatment, the relevant tax authorities may adjust the favourable withholding tax in the future.
United States Federal Income Tax Considerations
The following is a discussion of United States federal income tax considerations relating to the acquisition, ownership, and disposition of our Ordinary Shares by a U.S. Holder, as defined below, that acquires our Ordinary Shares in this offering and holds our Ordinary Shares as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any United States 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 does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (such as, for example, certain financial institutions, insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations)), investors who are not U.S. Holders, investors that own (directly, indirectly, or constructively) 10% or more of our voting stock, investors that hold their Ordinary Shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction), or investors that have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not address any tax laws other than the United States federal income tax laws, including any state, local, alternative minimum tax or non-United States tax considerations, or the Medicare tax. Each potential investor is urged to consult its tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations of an investment in our Ordinary Shares.
General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our Ordinary Shares that is, for United States federal income tax purposes, (i) an individual who is a citizen or treated as a tax resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code.
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If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our Ordinary Shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding our Ordinary Shares are urged to consult their tax advisors regarding an investment in our Ordinary Shares.
The discussion set forth below is addressed only to U.S. Holders that purchase Ordinary Shares in this offering. Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares.
Taxation of Dividends and Other Distributions on our Ordinary Shares
Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of 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 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 passive foreign investment company (as discussed below) 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 no income tax treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the Ordinary Shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on NASDAQ. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Ordinary Shares, including the effects of any change in law after the date of this prospectus.
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 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.
Taxation of Dispositions of Ordinary Shares
Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the Ordinary Shares for more than one year, you may be eligible for reduced tax rates on any such capital gains. The deductibility of capital losses is subject to limitations.
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Passive Foreign Investment Company (“PFIC”)
A non-U.S. corporation is considered a PFIC 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 this offering 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 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 this offering) on any particular quarterly testing date for purposes of the asset test.
We must make a separate determination each year as to whether we are a PFIC. Depending on the amount of cash we raise in this offering, 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, at least 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. Although the law in this regard is unclear, we treat our consolidated affiliated entities, as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. In particular, because the value of our assets for purposes of the asset test will generally be determined based on the market price of our 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 Ordinary Shares and the amount of cash we raise in this offering. Accordingly, fluctuations in the market price of the 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 this offering. 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 Ordinary Shares from time to time and the amount of cash we raise in this offering) that may not be within our control. If we are a PFIC for any year during which you hold Ordinary Shares, the shares will continue to be treated as stock in a PFIC for all succeeding years during which you hold Ordinary Shares. However, if we cease to be a PFIC and you did not previously make a timely “mark-to-market” election as described below, you may avoid some of the adverse effects of the PFIC regime by making a “purging election” (as described below) with respect to the Ordinary Shares.
If we are a PFIC for your taxable year(s) during which you hold Ordinary Shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as an excess distribution. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares; | |
| ● | the amount allocated to 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 Ordinary Shares cannot be treated as capital, even if you hold the Ordinary Shares as capital assets.
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A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to hold) 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 Ordinary Shares as of the close of such taxable year over your adjusted basis in such 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 Ordinary Shares over their fair market value as of the close of the taxable year. However, such ordinary loss is allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale or disposition of the Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary Shares. Your basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “—Taxation of Dividends and Other Distributions on our 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 Ordinary Shares are regularly traded on NASDAQ and if you are a holder of 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 with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. 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 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 Ordinary Shares and any gain realized on the disposition of the Ordinary Shares.
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 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 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 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 Ordinary Shares for tax purposes.
You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed above.
Information Reporting and Backup Withholding
Dividend payments with respect to our Ordinary Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.
Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to our Ordinary Shares, subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares. Failure to report the information could result in substantial penalties. You should consult your own tax advisor regarding your obligation to file Form 8938.
We expect to enter into an underwriting agreement dated on the date of this prospectus with the underwriters named below, for whom Maxim Group LLC is acting as the representative with respect to the Ordinary Shares in this offering (the “Underwriting Agreement”). The underwriters may retain other brokers or dealers to act as sub-agents on its behalf in connection with this offering and may pay any sub-agent a solicitation fee with respect to any securities placed by it. Under the terms and subject to the conditions contained in the Underwriting Agreement, we have agreed to issue and sell to the Underwriter the number of shares indicated below:
| Name | Number of shares | |||
| Maxim Group LLC | ||||
| Total |
The underwriters and the representative are collectively referred to as the “underwriters” and the “representative”, respectively. The underwriters are offering the shares subject to its acceptance of the shares from us and subject to prior sale. The Underwriting Agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the Underwriter’s over-allotment option described below.
Over-Allotment Option
We have agreed to grant to the Underwriter an over-allotment option, exercisable within 45 days after the date of this prospectus, to purchase up to an additional 240,000 Ordinary Shares (15% of the Ordinary Shares offered to the public) at the public offering price listed on the cover page of this prospectus, less underwriting discounts. The option may be exercised in whole or in part, and may be exercised more than once, during the 45-day option period. The Underwriter may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering contemplated by this prospectus.
Discounts and Expenses
The Underwriter has advised us that it proposes to offer the ordinary shares to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession. The Underwriter may allow, and certain dealers may reallow, a discount from the concession to certain brokers and dealers. After this offering, the initial public offering price, concession and reallowance to dealers may be reduced by the Underwriter No change in those terms will change the amount of proceeds to be received by us as set forth on the cover of this prospectus. The securities are offered by the Underwriter as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part.
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The underwriting discount is equal to 7.25% of the public offering price on each of the Ordinary Shares being offered.
The table below shows the initial public offering price per Ordinary Share, underwriting discounts to be paid by us, and the proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the Underwriter’s option to purchase up to an additional 240,000 Ordinary Shares.
| Total | ||||||||||||
| Per Share | No Exercise of Over-allotment Option | Full
Exercise of Over-allotment Option | ||||||||||
| Initial public offering price(1) | $ | $ | $ | |||||||||
| Underwriting discounts to be paid by us | $ | $ | $ | |||||||||
| Proceeds, before expenses, to us | $ | $ | $ | |||||||||
| (1) | Initial public offering price per share is assumed as $4.50 per Ordinary Share, the mid-point of the estimated public offering price range shown on the cover page of this prospectus. |
We have agreed to reimburse the Underwriter up to a maximum of $200,000 for out-of-pocket accountable expenses in the event of a closing of this offering, and shall not exceed $115,000 in the event that there is not a closing of this offering, including, but not limited to travel, due diligence expenses, reasonable fees and expenses of its legal counsel, roadshow, and background check of the Company’s principals.
We paid an advanced expense deposit of $50,000 to the Underwriter upon the execution of the engagement letter between us and the Underwriter dated February 8, 2024 (the “Engagement Letter”) for the Underwriter’s anticipated out-of-pocket expenses; any expense deposits will be returned to us to the extent the Underwriter’s out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).
Except as disclosed in this prospectus, the Underwriter has not received and will not receive from us any other item of compensation or expense in connection with this offering considered by FINRA to be underwriting compensation under FINRA Rule 5110.
We have applied to list our Ordinary Shares on the Nasdaq Capital Market under the symbol “ELOG”. There is no assurance that such application will be approved, and if our application is not approved, this offering may not be completed.
Underwriters’ Warrants
In addition, we have agreed to grant warrants (the “Underwriters’ Warrants”) to Maxim Partners LLC to purchase a number of Ordinary Shares equal to 4% of the total number of Ordinary Shares sold in this offering. The Underwriters’ Warrants shall have an exercise price equal to 120% of the offering price of the Ordinary Shares sold in this offering. The Underwriter’s Warrants will be non- exercisable for six months from the commencement of sales of this offering. The Underwriters’ Warrants will be exercisable for 5 years from the commencement of sales of this offering and will terminate on the fifth anniversary of the commencement of sales of this offering in compliance with FINRA Rule 5110(g)(8)(A). The Underwriters’ Warrants can be exercised in whole or in part. The Underwriters’ Warrants and the underlying shares will be deemed compensation by FINRA, and therefore will be subject to FINRA Rule 5110(e). In accordance with FINRA Rule 5110(e)(1), and except as otherwise permitted by FINRA rules, neither the Underwriters’ Warrants nor any of our shares issued upon exercise of the Underwriters’ Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days beginning from the date of commencement of sales of this offering. In addition, although the Underwriters’ Warrants and the underlying Ordinary Shares will be registered in the registration statement of which this prospectus forms a part, we have also agreed that the Underwriters’ Warrants will provide for registration rights in certain cases. These registration rights apply to all of the securities directly and indirectly issuable upon exercise of the underwriter warrants. In compliance with FINRA Rule 5110(g)(8), the unlimited piggyback registration right provided will not be greater than seven years from the commencement of sales of this offering, and the two demand registration rights will not be greater than five years from rom the commencement of sales of this offering. The warrants to be received by the underwriters do not contain more than one demand right at the issuer’s expense pursuant to FINRA Rule 5110(g)(8)(B). We agreed to maintain an effective registration statement on Form F-1 (or Form F-3, if we are eligible to use such form) until such date that is the earlier of the date when all of the Ordinary Shares underlying the representative’s warrants have been publicly sold by holder of such warrants or such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Ordinary Shares underlying the representative’s warrants without registration.
Right of First Refusal
In addition, for a period of twelve (12) months from the closing of this offering, the Company agrees to grant the Underwriter the right of first refusal to act as sole managing underwriter and sole book runner, sole placement agent, or sole sales agent, for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for which the Company retains the service of an underwriter, agent, advisor, finder or other person or entity in connection with such offering during such twelve (12) month period of the Company, or any successor to or any subsidiary of the Company. The Company shall not offer to retain any entity or person in connection with any such offering on terms more favorable than terms on which it offers to retain the Underwriter.
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Lock-up Agreements
We have agreed that, subject to certain exceptions, we will not without the prior written consent of the underwriters, during the period ending 6 months after the closing of the offering (the “restricted period”):
| ● | sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of our Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of our Company, except for the shares or options issued under the Company’s incentive plan; | |
| ● | file or cause to be filed any registration statement with the SEC relating to the offering of any shares of capital stock of our Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of our Company; or | |
| ● | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of our Company whether any such transaction described above is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise. |
Each of our directors and officers named in the section “Management”, and all of our existing shareholders that own 5% or more of our total outstanding shares have agreed that, subject to certain exceptions, such director, executive officer or shareholder will not, without the prior written consent of the underwriters, for a period of six (6) months after the closing of the offering:
| ● | offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or capital stock of our Company including any securities convertible into or exercisable or exchangeable for such Ordinary Shares or capital stock, or | |
| ● | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such Ordinary Shares or capital stock whether any such transaction described above is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise. |
Pricing of the Offering
Prior to this offering, there has been no public market for the Ordinary Shares. The initial public offering price will be determined by negotiations between us and the underwriters. In determining the initial public offering price, the underwriter and we expect to consider a number of factors, including:
| ● | the information set forth in this prospectus and otherwise available to the underwriters; | |
| ● | our prospects and the history and prospects for the industry in which we compete; | |
| ● | an assessment of our management; | |
| ● | our prospects for future earnings; | |
| ● | the general condition of the securities markets at the time of this offering; | |
| ● | the recent market prices of, and demand for, publicly traded securities of generally comparable companies; and | |
| ● | other factors deemed relevant by the underwriters and us. |
The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change due to market conditions and other factors. Neither the underwriters nor we can assure investors that an active trading market will develop for our Ordinary Shares or that the shares will trade in the public market at or above the initial public offering price.
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Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act. If we are unable to provide this indemnification, we will contribute to payments that the underwriters may be required to make for these liabilities.
Listing
We have applied to have our Ordinary Shares approved for listing on the Nasdaq under the symbol “ELOG”. We make no representation that such application will be approved or that our Ordinary Shares will trade on such market either now or at any time in the future; notwithstanding the foregoing, we will not close this offering unless such Ordinary Shares will be so listed at completion of this offering.
Electronic Distribution
A prospectus in electronic format may be made available on websites or through other online services maintained by Underwriter or by its affiliates. Other than the prospectus in electronic format, the information on the Underwriter’s website and any information contained in any other website maintained by it is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the Underwriter in its capacity as an underwriter, and should not be relied upon by investors. The Ordinary Shares to be sold pursuant to internet distributions will be allocated on the same basis as other allocations.
No Prior Public Market
Prior to this offering, there has been no public market for our securities and the public offering price for our Ordinary Shares will be determined through negotiations between us and the Underwriter. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the Underwriter believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. The offering price for our Ordinary Shares in this offering has been arbitrarily determined by the Company in its negotiations with the underwriters and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company.
Offers Outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Ordinary Shares offered by this prospectus in any jurisdiction where action for that purpose is required. The Ordinary Shares offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such Shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any Ordinary Shares offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Price Stabilization, Short Positions
In connection with this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our Ordinary Shares. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under option to purchase additional shares. The underwriters can close out a covered short sale by exercising the option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the option to purchase additional shares. The underwriters may also sell shares in excess of the option to purchase additional shares, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
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The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing our Ordinary Shares in this offering because such underwriter repurchases those shares in stabilizing or short covering transactions.
Finally, the underwriters may bid for, and purchase, our Ordinary Shares in market making transactions, including “passive” market making transactions as described below.
These activities may stabilize or maintain the market price of our Ordinary Shares at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the Nasdaq, in the over-the-counter market, or otherwise.
Selling Restrictions
No action may be taken in any jurisdiction (except in the United States) that would permit a public offering of the Ordinary Shares, or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the Ordinary Shares may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the Ordinary Shares may be distributed or published, in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such country or jurisdiction.
In addition to the public offering of the Ordinary Shares in the United States, the underwriters may, subject to applicable foreign laws, also offer the Ordinary Shares in certain countries and regions.
Cayman Islands. This prospectus does not constitute an invitation or offer to the public in the Cayman Islands of the Ordinary Shares, whether by way of sale or subscription. The underwriter has not offered or sold, and will not offer or sell, directly or indirectly, any Ordinary Shares in the Cayman Islands.
Hong Kong. This prospectus may not be circulated or distributed in Hong Kong. Please note that the Ordinary Shares have not been offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the Ordinary Shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Ordinary Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder.
People’s Republic of China. This prospectus has not been and will not be circulated or distributed in the PRC, and Ordinary Shares may not be offered or sold, and will not be offered or sold to any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC.
Taiwan. The Ordinary Shares have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that require a registration, filing or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer or sell the Ordinary Shares in Taiwan.
Notice to prospective investors in the European Economic Area
In relation to each Member State of the European Economic Area (each a “Relevant Member State”), an offer to the public of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of our common stock may be made at any time:
| ● | To any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation; | |
| ● | To fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or | |
| ● | In any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer or shares of our common stock shall result in a requirement for the publication by us or any placement agent of a prospectus pursuant to Article 3 of the Prospectus Regulation.
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For the purposes of this provision, the expression an “offer to public” in relation to our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and our common stock to be offered so as to enable an investor to decide to purchase our common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
This European Economic Area selling restriction is in addition to any other selling restrictions set out below.
Notice to prospective investors in France
Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be (1) released, issued, distributed or caused to be released, issued or distributed to the public in France; or (2) used in connection with any offer for subscription or sale of the shares to the public in France.
Such offers, sales and distributions will be made in France only:
| (a) | to qualified investors (investisseurs estraint) and/or to a restricted circle of investors (cercle estraint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with, articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1of the French Code monétaire et financier; | |
| (b) | to investment services providers authorized to engage in portfolio management on behalf of third parties; or | |
| (c) | in a transaction that, in accordance with article L.411-2-II-1° -or-2° -or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Réglement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public á l’épargne). |
The shares may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.
Notice to prospective investors in Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Notice to prospective investors in Korea
The shares have not been and will not be registered under the Financial Investments Services and Capital Markets Act of Korea and the decrees and regulations thereunder (the “FSCMA”), and the shares have been and will be offered in Korea as a private placement under the FSCMA. None of the shares may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder (the “FETL”). Furthermore, the purchaser of the shares shall comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the shares. By the purchase of the shares, the relevant holder thereof will be deemed to represent and warrant that if it is in Korea or is a resident of Korea, it purchased the shares pursuant to the applicable laws and regulations of Korea.
Notice to prospective investors in Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the shares has been or will be registered with the Securities Commission of Malaysia (“Commission”) for the Commission’s approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services License; (iii) a person who acquires the shares, as principal, if the offer is on terms that the shares may only be acquired at a consideration of not less than RM250,000 (or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of the primary residence of the individual; (v) an individual who has a gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding 12 months; (vi) an individual who, jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding 12 months; (vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the shares is made by a holder of a Capital Markets Services License who carries on the business of dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Commission under the Capital Markets and Services Act 2007.
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Notice to prospective investors in Singapore
The securities represented may not be offered or sold, nor may any document or other material in connection with such securities be distributed, either directly or indirectly, (i) to persons in Singapore other than under circumstances in which such offer or sale does not constitute an offer or sale of such securities to the public in Singapore or (ii) to the public or any member of the public in Singapore other than pursuant to, and in accordance with the conditions of, an exemption invoked under division 5a or part iv of the companies act, chapter 50 of Singapore and to persons to whom the securities may be offered or sold under such exemption.
Notice to prospective investors in United Kingdom
None of our common stock have been offered or will be offered to the public in the United Kingdom except that our common stock may be offered to the public in the United Kingdom at any time:
| ● | To any legal entity which is a qualified investor as defined in as defined under Article 2 of the UK Prospectus Regulation; |
| ● | To fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
| ● | In any other circumstances falling within Section 86 of the FSMA, |
provided that no such offer or shares of our common stock shall result in a requirement for the publication by us or any placement agent of a prospectus pursuant to Section 85 of the FSMA.
For the purposes of this provision, the expression an “offer to public” in relation to our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and our common stock to be offered so as to enable an investor to decide to purchase our common stock, and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018, and the expression “FSMA” means the Financial Services and Markets Act 2000.
In addition, in the United Kingdom, this prospectus is only addressed to and directed as qualified investors who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order or (ii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order, with all such persons together being referred to as relevant persons. Any investment or investment activity to which this prospectus relates is available only to relevant persons and will only be engaged with relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.
Notice to prospective investors in the Russian Federation
This prospectus or information contained therein is not an offer, or an invitation to make offers, sell, purchase, exchange or transfer any securities in the Russian Federation to or for the benefit of any Russian person or entity, and does not constitute an advertisement or offering of any securities in the Russian Federation within the meaning of Russian securities laws. Information contained in this prospectus is not intended for any persons in the Russian Federation who are not “qualified investors” within the meaning of Article 51.2 of the Federal Law no. 39-FZ dated 22 April 1996 “On the securities market” (as amended) (“Russian QIs”) and must not be distributed or circulated into the Russian Federation or made available in the Russian Federation to any persons who are not Russian QIs, unless and to the extent they are otherwise permitted to access such information under Russian law.
Notice to prospective investors in Kazakhstan
This prospectus does not constitute an offer, or an invitation to make offers, to sell, purchase, exchange or otherwise transfer shares in Kazakhstan to or for the benefit of any Kazakhstan person or entity, except for those persons or entities that are capable to do so under the legislation of the Republic of Kazakhstan and any other laws applicable to such capacity of such persons or entities. This prospectus shall not be construed as an advertisement (i.e., information intended for an unlimited group of persons which is distributed and placed in any form and aimed to create or maintain interest in the Company and its merchandise, trademarks, works, services and/or its securities and promote their sales) in, and for the purpose of the laws of, Kazakhstan, unless such advertisement is in full compliance with Kazakhstan laws.
Notice to prospective investors in Israel
In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares under the Israeli Securities Law, 5728—1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728—1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the “Addressed Investors”) or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728—1968, subject to certain conditions (the “Qualified Investors”). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. The Company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728—1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our shares to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
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Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728—1968. In particular, we may request, as a condition to be offered shares, that each Qualified Investor will represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728—1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728—1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728—1968 and the regulations promulgated thereunder in connection with the offer to be issued shares; (iv) that the shares that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728—1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728—1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.
Notice to prospective investors in the United Arab Emirates
This prospectus has not been reviewed, approved or licensed by the Central Bank of the United Arab Emirates (the ‘‘UAE’’), the Securities and Commodities Authority (the ‘‘SCA’’) or any other relevant licensing authority in the UAE (including any licensing authority incorporated under the laws and regulations of any of the free zones established and operating in the UAE including, without limitation, the DFSA, a regulatory authority of the Dubai International Financial Centre and the Financial Services Marketing Authority of the Abu Dhabi Global Market), and does not constitute a public offer of securities in the UAE in accordance with the Commercial Companies Law, Federal Law No. 1 of 2015 (as amended) or otherwise, does not constitute an offer in the UAE in accordance with the SCA Chairman Resolution No. 3/R.M. of 2017 Concerning the Regulation of Promotion and Introduction, and further does not constitute the brokerage of securities in the UAE in accordance with the Board Decision No. 27 of 2014 Concerning Brokerage in Securities.
This prospectus is not intended to, and does not, constitute an offer, sale or delivery of shares or other securities under the laws of the UAE. Each underwriter has represented and agreed that the shares have not been and will not be registered with the SCA or the UAE Central Bank, the Dubai Financial Market, the Abu Dhabi Securities Market or any other UAE regulatory authority or exchange. The issue and/or sale and/or marketing of the shares has not been approved or licensed by the SCA, the UAE Central Bank or any other relevant licensing authority in the UAE. The SCA accepts no liability in relation to the marketing, issuance and/or sale of the shares and is not making any recommendation with respect to any investment. Nothing contained in this prospectus is intended to constitute UAE investment, legal, tax, accounting or other professional advice. This prospectus is for the information of prospective investors only and nothing in this prospectus is intended to endorse or recommend a particular course of action. Prospective investors should consult with an appropriate professional for specific advice rendered on the basis of their situation.
Notice to prospective investors in the Dubai International Financial Centre (“DIFC”)
This prospectus relates to an Exempt Offer as that term is defined in Article 14(3)(a) of the DIFC Markets Law 2012 (as amended) and Rule 2.3 of the Markets Rulebook of the Dubai Financial Services Authority (“DFSA”). This prospectus Supplement is intended for distribution only to persons of a type specified in Rules 2.3.1(a) and 2.3.1(b) of the DFSA Markets Rulebook. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents relating to Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus, you should consult an authorized financial advisor.
Notice to prospective investors in United Arab Emirates Outside of the DIFC and the ADGM
This prospectus has not been reviewed, approved, or licensed by the Securities and Commodities Authority (“SCA”) and does not constitute a public offering of securities in the UAE as that term is defined in SCA Chairman Resolution No. 13/R.M. of 2021 Concerning the Regulations Manual of the Financial Activities and Status Regularization Mechanisms Rulebook (“SCA Rulebook”). This Prospectus Supplement will only be made available on an exempt Private Offering basis pursuant to Article 6, Chapter 5, of Section 3 of the SCA Rulebook to Professional Investors or Counterparties, as each of the terms is defined in the SCA Rulebook, respectively, or on a reverse solicitation basis. Nothing in this Prospectus Supplement constitutes the provision of any type of financial service engagement in any of the financial activities set out in Article 1, Chapter 2 of the SCA Rulebook.
The SCA accepts no liability in relation to the marketing, issuance and/or sale of the shares and is not making any recommendation with respect to any investment. Nothing contained in this prospectus is intended to constitute UAE investment, legal, tax, accounting or other professional advice. This prospectus is for the information of prospective investors only and nothing in this prospectus is intended to endorse or recommend a particular course of action. Prospective investors should consult with an appropriate professional for specific advice rendered on the basis of their situation.
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Notice to prospective investors in Abu Dhabi Global Market (“ADGM”)
This Prospectus Supplement relates to an Exempt Offer as that term is defined in Rule 4.3.1 of the Markets Rulebook of the Financial Services Regulatory Authority (“FSRA”). This Prospectus Supplement is intended for distribution only to persons of a type specified in 4.3.1 of the FSRA Markets Rulebook. It must not be delivered to, or relied on by, any other person. The FSRA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The FSRA has not approved this Prospectus Supplement nor taken steps to verify the information set forth herein and has no responsibility for the Prospectus Supplement. The Common Shares to which this Prospectus Supplement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Common Shares offered should conduct their own due diligence on the Common Shares. If you do not understand the contents of this Prospectus Supplement you should consult an authorized financial advisor.
Notice to prospective investors in Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. This document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.
Notice to prospective investors in Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to prospective investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the securities may only be made to persons, or the Exempt Investors, who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances and, if necessary, seek expert advice on those matters.
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EXPENSES RELATING TO THIS OFFERING
Set forth below is an itemization of the total expenses, excluding underwriting discounts, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee, and the NASDAQ listing fee, all amounts are estimates.
| SEC registration fee | $ | 1,424 | ||
| NASDAQ listing fee | 50,000 | |||
| FINRA filing fee | 4,000 | |||
| Printing and engraving expenses | 11,194 | |||
| Legal fees and expenses | 580,000 | |||
| Accounting fees and expenses | 270,000 | |||
| Investor relationship expenses | 30,000 | |||
| Miscellaneous expenses | 314,688 | |||
| Total expenses | $ | 1,261,306 |
These expenses will be borne by us. Underwriting discounts will be borne by us in proportion to the numbers of Ordinary Shares sold in the offering.
The Company is being represented by FisherBroyles, LLP, with respect to legal matters of United States federal securities law. The validity of the Ordinary Shares offered by this prospectus and legal matters as to Cayman Islands law will be passed upon for us by Ogier. The Company is being represented by Zhonglun Law Firm with regard to PRC law. FisherBroyles, LLP, may rely upon by Zhonglun Law Firm with respect to matters governed by PRC law. Hunter Taubman Fischer & Li LLC is acting as U.S. counsel for the underwriter. Commerce & Finance Law Offices is acting as the PRC counsel for the underwriter. Hunter Taubman Fischer & Li LLC may rely upon Commerce & Finance Law Offices with respect to matters governed by PRC law.
The consolidated financial statements as of and for the years ended March 31, 2025 and 2024 included herein and in the registration statement have been so included in reliance on the report of WWC, P.C., an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.
The office of WWC, P.C. is located at 2010 Pioneer Ct, San Mateo, CA 94403.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the Ordinary Shares described herein. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. We anticipate making these documents publicly available, free of charge, on our website at www.elogint.com as soon as reasonably practicable after filing such documents with the SEC. The information on our website is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus. We have included our website address as an inactive textual reference only.
You can read the registration statement and our future filings with the SEC, over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document that we file with the SEC at its public reference room at 100 F Street, N.E., Washington, DC 20549.
You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room.
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EASTERN INTERNATIONAL LTD. AND ITS SUBSIDIARIES
TABLE OF CONTENTS
| Consolidated Financial Statements |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Eastern International Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Eastern International Ltd. and its subsidiaries (collectively, the “Company”) as of March 31, 2025 and 2024, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WWC, P.C.
WWC, P.C.
Certified Public Accountants
PCAOB ID No.1171
We have served as the Company’s auditor since 2023.
San Mateo, California
July 18, 2025
| F-2 |
EASTERN INTERNATIONAL LTD. AND ITS SUBSIDIARIES
(Amounts in U.S. dollars, except for share and per share data, or otherwise noted)
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 846,409 | $ | 2,170,459 | ||||
| Notes receivable | 1,805,140 | 1,606,260 | ||||||
| Accounts receivable, net | ||||||||
| - third parties | 13,679,559 | 12,409,525 | ||||||
| - a related party | 641,339 | 404,860 | ||||||
| Contract assets | 31,709 | 147,334 | ||||||
| Advances to suppliers | 286,507 | 315,214 | ||||||
| Amount due from a related party | 136,416 | 137,099 | ||||||
| Other current assets, net | 2,253,850 | 1,411,107 | ||||||
| Total current assets | 19,680,929 | 18,601,858 | ||||||
| Non-current assets | ||||||||
| Property and equipment, net | 461,205 | 174,008 | ||||||
| Operating lease right of use assets, net | 1,795,668 | 2,949,385 | ||||||
| Deferred offering costs | 881,862 | 462,701 | ||||||
| Deferred tax assets | 40,949 | 38,225 | ||||||
| Other non-current assets | 1,920,878 | 765,274 | ||||||
| Total non-current assets | 5,100,562 | 4,389,593 | ||||||
| Total Assets | $ | 24,781,491 | $ | 22,991,451 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Bank and other borrowings | $ | 3,766,634 | $ | 1,994,380 | ||||
| Accounts payable | 4,877,717 | 5,122,963 | ||||||
| Contract liabilities | 117,191 | 241,008 | ||||||
| Amounts due to related parties | 203,695 | 401,193 | ||||||
| Operating lease liabilities, current | 451,363 | 743,025 | ||||||
| Income taxes payable | 850,308 | 561,537 | ||||||
| Dividends payable | 1,072,040 | 1,077,445 | ||||||
| Other current liabilities | 777,550 | 893,441 | ||||||
| Total current liabilities | 12,116,498 | 11,034,992 | ||||||
| Non-current Liabilities | ||||||||
| Operating lease liabilities, non-current | 1,198,905 | 2,206,360 | ||||||
| Total non-current liabilities | 1,198,905 | 2,206,360 | ||||||
| Total Liabilities | 13,315,403 | 13,241,352 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred shares, par value $0.0001 each, 50,000,000 shares authorized, 1,000,000 issued and outstanding as of March 31, 2025 and 2024* | 100 | 100 | ||||||
| Ordinary Shares, par value $0.0001 each, 450,000,000 shares authorized, 10,417,000 issued and outstanding as of March 31, 2025 and 2024* | 1,042 | 1,042 | ||||||
| Additional paid-in capital | 8,040,388 | 8,038,988 | ||||||
| Statutory reserves | 888,085 | 675,027 | ||||||
| Retained earnings | 3,219,808 | 1,652,840 | ||||||
| Accumulated other comprehensive loss | (683,335 | ) | (617,898 | ) | ||||
| Total Shareholders’ Equity | 11,466,088 | 9,750,099 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 24,781,491 | $ | 22,991,451 | ||||
*Retrospectively restated for effect of share reorganization (see Note 1).
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
EASTERN INTERNATIONAL LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in U.S. dollars, except for share and per share data, or otherwise noted)
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | ||||||||
| - third parties | $ | 39,706,093 | $ | 40,161,065 | ||||
| - a related party | 335,598 | 282,564 | ||||||
| Total Revenues | 40,041,691 | 40,443,629 | ||||||
| Cost of Revenues | ||||||||
| - third parties | (34,033,269 | ) | (35,424,388 | ) | ||||
| - related parties | (8,581 | ) | (574 | ) | ||||
| Total Cost of Revenues | (34,041,850 | ) | (35,424,962 | ) | ||||
| Gross Profit | 5,999,841 | 5,018,667 | ||||||
| Operating Expenses | ||||||||
| Selling expenses | (774,484 | ) | (712,338 | ) | ||||
| General and administrative expenses | (2,958,148 | ) | (2,871,937 | ) | ||||
| Total operating expenses | (3,732,632 | ) | (3,584,275 | ) | ||||
| Income from Operations | 2,267,209 | 1,434,392 | ||||||
| Other Income (Expenses) | ||||||||
| Interest income | 790 | 2,644 | ||||||
| Interest expenses | (143,602 | ) | (97,552 | ) | ||||
| Foreign currency transaction gain | 215 | 19,600 | ||||||
| Gain on disposal of property and equipment | 40,620 | 5,562 | ||||||
| Government subsidies | 16,642 | 27,202 | ||||||
| Insurance indemnity | 171,718 | 128,442 | ||||||
| Other income, net | 17,542 | 15,199 | ||||||
| Total other income, net | 103,925 | 101,097 | ||||||
| Income Before Income Taxes | 2,371,134 | 1,535,489 | ||||||
| Income tax expenses | (591,108 | ) | (451,789 | ) | ||||
| Net Income | 1,780,026 | 1,083,700 | ||||||
| Other Comprehensive Loss | ||||||||
| Foreign currency translation adjustment | (65,437 | ) | (475,894 | ) | ||||
| Comprehensive Income | $ | 1,714,589 | $ | 607,806 | ||||
| Earnings Per Share* | ||||||||
| -Basic | $ | 0.17 | $ | 0.11 | ||||
| -Diluted | $ | 0.16 | $ | 0.10 | ||||
| Weighted Average Shares Outstanding* | ||||||||
| -Basic | 10,417,000 | 10,044,434 | ||||||
| -Diluted | 11,417,000 | 11,044,434 | ||||||
*Retrospectively restated for effect of share reorganization (see Note 1).
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
EASTERN INTERNATIONAL LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED MARCH 31, 2025, 2024 AND 2023
(Amounts in U.S. dollars, except for share and per share data, or otherwise noted)
| Ordinary Shares* | Preferred Shares* | Additional | Accumulated other | |||||||||||||||||||||||||||||||||
| No. of Shares | Amount | No. of Shares | Amount | paid-in capital | Statutory reserves | Retained earnings | comprehensive loss | Total | ||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | 10,000,000 | $ | 1,000 | 1,000,000 | $ | 100 | $ | 7,196,943 | $ | 610,984 | $ | 1,872,121 | $ | (142,004 | ) | $ | 9,539,144 | |||||||||||||||||||
| Contribution from shareholders | 417,000 | 42 | - | - | 833,958 | - | - | - | 834,000 | |||||||||||||||||||||||||||
| Amortization of restricted shares of a subsidiary | - | - | - | - | 8,087 | - | - | - | 8,087 | |||||||||||||||||||||||||||
| Net income for the year | - | - | - | - | - | - | 1,083,700 | - | 1,083,700 | |||||||||||||||||||||||||||
| Appropriation to statutory reserves | - | - | - | - | - | 64,043 | (64,043 | ) | - | - | ||||||||||||||||||||||||||
| Cash dividends declared | - | - | - | - | - | - | (1,238,938 | ) | - | (1,238,938 | ) | |||||||||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | - | - | - | (475,894 | ) | (475,894 | ) | |||||||||||||||||||||||||
| Balance as of March 31, 2024 | 10,417,000 | $ | 1,042 | 1,000,000 | $ | 100 | $ | 8,038,988 | $ | 675,027 | $ | 1,652,840 | $ | (617,898 | ) | $ | 9,750,099 | |||||||||||||||||||
| Amortization of restricted shares of a subsidiary | - | - | - | - | 1,400 | - | - | - | 1,400 | |||||||||||||||||||||||||||
| Net income for the period | - | - | - | - | - | - | 1,780,026 | - | 1,780,026 | |||||||||||||||||||||||||||
| Appropriation to statutory reserves | - | - | - | - | - | 213,058 | (213,058 | ) | - | - | ||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | - | - | - | (65,437 | ) | (65,437 | ) | |||||||||||||||||||||||||
| Balance as of March 31, 2025 | 10,417,000 | $ | 1,042 | 1,000,000 | $ | 100 | $ | 8,040,388 | $ | 888,085 | $ | 3,219,808 | $ | (683,335 | ) | $ | 11,466,088 | |||||||||||||||||||
*Retrospectively restated for effect of share reorganization (see Note 1).
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
EASTERN INTERNATIONAL LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in U.S. dollars, except for share and per share data, or otherwise noted)
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,780,026 | $ | 1,083,700 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation | 88,722 | 115,150 | ||||||
| Provision for expected credit losses | 76,755 | 93,188 | ||||||
| Gain on disposal of property and equipment | (40,620 | ) | (5,562 | ) | ||||
| Amortization of restricted shares of a subsidiary | 1,400 | 8,087 | ||||||
| Deferred tax expenses | (2,932 | ) | (7,427 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Notes receivable | (208,095 | ) | (954,131 | ) | ||||
| Accounts receivable - third parties | (1,364,222 | ) | (3,032,632 | ) | ||||
| Accounts receivable - related parties | (291,509 | ) | 372,877 | |||||
| Contract assets | 115,529 | (136,705 | ) | |||||
| Advances to suppliers | 27,278 | 204,771 | ||||||
| Other current assets | (866,022 | ) | (543,037 | ) | ||||
| Other non-current assets | (1,165,934 | ) | (197,335 | ) | ||||
| Accounts payables - third parties | (220,778 | ) | 1,626,197 | |||||
| Accounts payables - related parties | - | (59,699 | ) | |||||
| Contract liabilities | (123,294 | ) | 32,276 | |||||
| Income taxes payable | 293,220 | 334,544 | ||||||
| Lease liabilities | (146,215 | ) | - | |||||
| Other current liabilities | (112,017 | ) | 435,977 | |||||
| Net cash used in operating activities | (2,158,708 | ) | (629,761 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Additions to property and equipment | (397,441 | ) | (7,433 | ) | ||||
| Proceeds from disposal of property and equipment | 59,657 | 51,681 | ||||||
| Net cash (used in) provided by investing activities | (337,784 | ) | 44,248 | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from bank and other borrowings | 5,051,065 | 4,463,451 | ||||||
| Repayments of bank and other borrowings | (3,258,829 | ) | (3,012,373 | ) | ||||
| Borrowings (repayments to) from related parties | (196,468 | ) | 126,766 | |||||
| Contribution from shareholders | - | 834,000 | ||||||
| Withholding tax paid on the dividends declared | - | (161,493 | ) | |||||
| Deferred offering costs | (419,470 | ) | (402,097 | ) | ||||
| Net cash provided by financing activities | 1,176,298 | 1,848,254 | ||||||
| Effect of exchange rate changes on cash | (3,856 | ) | (55,378 | ) | ||||
| Net (decrease) increase in cash | (1,324,050 | ) | 1,207,363 | |||||
| Cash, beginning of year | 2,170,459 | 963,096 | ||||||
| Cash, end of year | $ | 846,409 | $ | 2,170,459 | ||||
| Supplemental disclosure information: | ||||||||
| Cash paid for income tax | $ | 324,307 | $ | 176,886 | ||||
| Cash paid for interest | $ | 143,602 | $ | 97,552 | ||||
| Supplemental non-cash activities: | ||||||||
| Initial recognition of lease obligations related to right-of-use assets | $ | 1,894,422 | $ | 29,269 | ||||
| Early terminated operating lease right of use assets | $ | 2,296,658 | $ | 552,651 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
EASTERN INTERNATIONAL LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and nature of business
Business
Eastern International Ltd. (the “Company”) is a limited liability company incorporated under the laws of the Cayman Islands on July 27, 2023 as a holding company. The Company, through its subsidiaries in People’s Republic of China (the “PRC” or “China”), is engaged in the business of provision of logistic services for entities, including transportation services and warehouse subleasing services.
Corporate Structure
The Company’s operating entities in the PRC are as described below:
| (1) | Suzhou TC-Link Logistics Co., Ltd. (“Suzhou TC-Link”), a wholly-owned subsidiary of Hangzhou TC-Link Logistics Supply Chain Management Co., Ltd. (“Hangzhou TC-Link”), was incorporated in the PRC on January 9, 2006. Suzhou TC-Link is engaged in transportation and warehouse subleasing business. |
| (2) | Wuxi TC-Link Logistics Co., Ltd. (“Wuxi TC-Link”) was incorporated in the PRC on May 19, 2016 as a wholly-owned subsidiary of Suzhou TC-Link. Wuxi TC-Link in engaged in warehouse subleasing business. |
| (3) | Yancheng TC-Link Logistics Co., Ltd. (“Yancheng TC-Link”) was incorporated in the PRC on June 22, 2016 as a wholly-owned subsidiary of Suzhou TC-Link. Yancheng TC-Link is engaged in transportation and warehouse subleasing business. |
| (4) | Yunnan Dongyuan Dadi International Logistics Co., Ltd. (“Yunnan Dongyuan”) was incorporated in the PRC on November 5, 2018 as a wholly-owned subsidiary of Suzhou TC-Link. Yunnan Dongyuan is engaged in transportation business. |
| (5) | Chongqing Dayuan Logistics Co., Ltd. (“Chongqing Dayuan”) was incorporated in the PRC on April 30, 2020 as a wholly-owned subsidiary of Suzhou TC-Link. Chongqing Dayuan is engaged in transportation business. |
The above operating subsidiaries are collectively referred to as the “PRC operating subsidiaries”. Prior to the Reorganization (described below), the PRC operating subsidiaries were ultimately owned by several individual shareholders.
Reorganization
In connection with its proposed initial public offering, the Company undertook a reorganization of its legal structure (the “Reorganization”). The Reorganization involved the following procedures:
| (1) | On July 27, 2023, the Company was incorporated in the Cayman Islands with limited liability with authorized share capital of 500,000,000 Ordinary Shares at US$0.0001 each. On the same date, the Company issued 10,000,000 Ordinary Shares of the Company to the existing shareholders of Suzhou TC-Link in proportion of their existing shareholdings in Suzhou TC-Link for a consideration of US$7,197,943 in aggregate in exchange for the issued shares of Suzhou TC-Link. As a result, no change in proportion of shareholding of existing shareholders in Suzhou TC-Link after the issuance. |
On February 7, 2024, the board of directors approved to revise the memorandum of articles of association of the Company in which the authorized share capital of US$50,000 are divided into (i) 450,000,000 Ordinary Shares with par value of US$0.0001 each; and (ii) 50,000,000 Preferred Shares with par value of US$0.0001 each. In accordance with the revised memorandum and articles of association of the Company, its Preferred Shares vary from Ordinary Shares in terms of voting rights and conversion rights:
| a) | Voting rights: for all matters subject to vote at the general meetings of the Company, each Ordinary Share is entitled to one vote, while each Preferred Share is entitled to ten votes; | |
| b) | Conversion rights: each Preferred Share is eligible to conversion into one Ordinary Share at any time at the option of the holder, while in no event shall Ordinary Shares be convertible into Preferred Shares. |
The revised memorandum and articles of association clearly states that, except for the differences in voting rights and conversion rights as set above, Ordinary Shares and Preferred Shares of the Company shall rank pari passu with one another and shall have the same rights, preferences, privileges and restrictions.
On February 7, 2024, the Company issued 1,000,000 Preferred Shares to Mr. Albert Wong, Chairman, Chief Executive Officer and a controlling shareholder of the Company for an aggregate cash consideration of US$100 which was paid on March 12, 2024 as part of Reorganization. As a result, the voting power of Mr. Albert Wong increased from 42.66% to 71.33% after the issuance of Preferred Shares.
| (2) | On August 10, 2023, Eastern Industrial Development Ltd. (“Eastern BVI”) was incorporated in British Virgin Islands as a wholly-owned subsidiary of the Company. |
| (3) | On September 4, 2023, Eastern Group Limited (“Eastern HK”) was incorporated in Hong Kong as a wholly-owned subsidiary of Eastern BVI. |
| (4) | On September 27, 2023, Hangzhou TC-Link Logistics Supply Chain Management Co., Ltd. (“Hangzhou TC-Link”), a new wholly foreign-owned enterprise (“WFOE”) was incorporated under the laws of the PRC as a wholly-owned subsidiary of Eastern HK. |
| (5) | On October 16, 2023, WFOE acquired 100% of the equity interest of Suzhou TC-Link from the above-mentioned existing shareholders of Suzhou TC-Link for cash consideration $7,198,043 and therefore owns 100% of the equity interests of the PRC operating subsidiaries. |
| F-7 |
After a series of Reorganization as discussed above, the Company, together with its wholly-owned subsidiaries, are effectively controlled by the same controlling shareholders before and after the Reorganization. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-50-25, the Reorganization has been accounted for as a recapitalization among entities under common control since the same shareholder controlled all these entities prior to and after the Reorganization. As such, the Reorganization is considered as a recapitalization of entities under common control. The Company has retroactively restated all ordinary shares and per share data for all the periods presented. The consolidation of the Company and its subsidiaries have been accounted for using a historical cost basis and presented assuming that the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. Results of operations for the periods presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions. Furthermore, ASC 805-50-45-5 indicates that the financial statements and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information.
Details of the subsidiaries as of the date of the report are set out below:
| Name of Entity | Date of Incorporation |
Place of Incorporation |
Percentage of direct or indirect ownership by the Company |
Principal Activities | ||||||||
| Eastern BVI | August 10, 2023 | British
Virgin Islands |
100 | % | Holding company | |||||||
| Eastern HK | September 4, 2023 | Hong Kong | 100 | % | Holding company | |||||||
| Hangzhou TC-Link | September 27, 2023 | PRC | 100 | % | Logistic Services (Transportation and warehouse subleasing services) | |||||||
| Suzhou TC-Link | January 9, 2006 | PRC | 100 | % | Transportation and warehouse subleasing services | |||||||
| Wuxi TC-Link | May 19, 2016 | PRC | 100 | % | Warehouse subleasing services | |||||||
| Yancheng TC-Link | June 22, 2016 | PRC | 100 | % | Transportation and warehouse subleasing services | |||||||
| Yunnan Dongyuan | November 5, 2018 | PRC | 100 | % | Transportation services | |||||||
| Chongqing Dayuan | April 30, 2020 | PRC | 100 | % | Transportation services | |||||||
Note 2 – Summary of significant accounting policies
Basis of presentation and principles of consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and have been consistently applied. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All significant inter-company balances and transactions between the Company and its subsidiaries are eliminated upon consolidation.
Foreign currency transactions
The Company uses United States Dollar (“$” or “US$”) as its reporting currency. The functional currency of the Company and Eastern BVI is US$, while Eastern HK is Hong Kong dollars (“HKD”) and the PRC subsidiaries is Renminbi (“RMB”), which are its respective local currencies based on the criteria of ASC 830, “Foreign Currency Matters”.
In the consolidated financial statements of the Company, transactions in currencies other than the functional currencies are measured and recorded in the functional currencies using the exchange rates in effect at the dates of the transactions. At the balance sheet dates, monetary assets and liabilities that are denominated in currencies other than the functional currencies are translated into the functional currencies using the exchange rates at the balance sheet dates. All gains and losses arising from foreign currency transactions are recorded in the consolidated statements of income and comprehensive income during the years in which they occur.
| F-8 |
Translation of amounts from RMB and HKD into U.S. dollars has been made at the following exchange rates:
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Average rate – HKD:US$ exchange rate | 7.7930 | 7.8259 | ||||||
| Average rate – RMB:US$ exchange rate | 7.2163 | 7.1671 | ||||||
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Year-end spot rate – HKD:US$ exchange rate | 7.7799 | 7.8246 | ||||||
| Year-end spot rate – RMB:US$ exchange rate | 7.2567 | 7.2203 | ||||||
Use of estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Significant items subject to such estimates and assumptions include, but are not limited to, the allowance for expected credit losses, impairment of long-lived assets, interest rate of lease and provision for income taxes. Actual results could differ from those estimates.
Recently adopted accounting pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new accounting standard introduced the current expected credit losses methodology (“CECL”) for estimating allowances for credit losses. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loans and trade receivables. ASU 2016-13 is effective for the Company, as an Emerging Growth Company (“EGC”), for annual and interim reporting periods beginning after December 15, 2022. The Company adopted the standard on April 1, 2023 using the modified retrospective method for all financial assets in scope. The adoption of the standard did not have a material impact on our consolidated statements of income, or consolidated statements of cash flows.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting: Improvements to Reportable Segment Disclosures,” which focuses on improving reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. A public entity shall disclose for each reportable segment the significant expense categories and amounts that are regularly provided to the CODM and included in reported segment profit or loss. ASU 2023-07 also requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Entities are permitted to disclose more than one measure of a segment’s profit or loss if such measures are used by the CODM to allocate resources and assess performance, as long as at least one of those measures is determined in a way that is most consistent with the measurement principles used to measure the corresponding amounts in the consolidated financial statements. ASU 2023-07 is applied retrospectively to all periods presented in financial statements, unless it is impracticable. This update will be effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company has adopted ASU 2023-07 on April 1, 2024, which was applied retrospectively to all prior periods presented. See Note 13 for further information.
Cash
Cash included cash on hand and cash held in banks. As of March 31, 2025 and 2024, cash balance of $832,398 and $1,483,672 were maintained at banks in the PRC, respectively, which were not FDIC insured. As of March 31, 2025 and 2024, cash balance of $10,907 and $680,708 were maintained at banks in Hong Kong, respectively, which were also not FDIC insured. However, management believes that the Company is not exposed to any significant credit risk on its cash.
Notes receivable
Notes receivable are negotiable documents issued by financial institutions in the PRC on the Company’s customers’ behalf to the Company. These notes do not carry a stated interest rate, but have a specific due date usually for a period of six months. These notes can either be endorsed by the Company to other third parties as payment, or can be factored to other financial institutions before maturity. Accordingly, these notes receivable are short-term in nature. As of report date, $1,776,216 or 98.4% of the notes receivable balance as of March 31, 2025 had been collected within the expiry date while the remaining balances are not yet expired. Hence, the Company provided no allowance on notes receivable as of March 31, 2025 and 2024 as the expected credit loss would be immaterial, if any.
Accounts receivable, net
Accounts receivable represents amounts invoiced and revenue recognized prior to invoicing when the Company has satisfied its performance obligation and has the unconditional right to payment, which are recorded net of allowance for expected credit losses on such receivables. The credit term is negotiable with different customers which is generally within 90 days after transportation services are completed.
The estimated credit losses charged are classified as “operating expenses” in the consolidated statements of income and comprehensive income. In determining the amount of expected credit losses, the Company considers historical collectability based on past due status, age of the accounts receivable balances, credit quality of the customers based on ongoing credit evaluations, as well as reasonable and supportable forecasts of future losses. Accounts receivable are written off after all collection efforts have ceased. As of March 31, 2025 and 2024, the allowance for expected credit losses for accounts receivable amounted to $169,297 and $94,046, respectively. For the years ended March 31, 2025 and 2024, the recognized allowance for expected credit losses on accounts receivable were $76,146 and $91,020, respectively.
| F-9 |
Advances to suppliers
Advances to suppliers consist of refundable prepayments made to suppliers for subcontracting transportation services that have not been received as of year-end.
Other current assets
Other current assets mainly included security deposits paid to containers for cross-border transportation, which is refundable upon the transportation services completed, petty cash advanced to employees for the expenses to be incurred during their involvement in the transportation services processes and prepaid input value-added taxes to be deducted with the output value-added taxes when services provided which is expected to be within 12 months and etc. The Company maintains an allowance for expected credit losses on other current assets based on the age and past record on the collectability of other current assets, as well as reasonable and supportable forecasts on future losses. As of March 31, 2025 and 2024, the allowance for expected credit losses on other current assets amounted to $4,234 and $3,647, respectively. For the years ended March 31, 2025 and 2024, the recognized allowance for expected credit losses were $609 and $2,168, respectively.
Deferred offering costs
The Company follows the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal and other expenses incurred through the balance sheet date that are directly related to the intended initial public offering (“IPO”). Deferred offering costs will be charged to shareholders’ equity upon the completion of the IPO. Should the IPO prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to statements of income. As of March 31, 2025 and 2024, the Company deferred $881,862 and $462,701 of offering costs.
Other non-current assets
Other non-current assets mainly included (i) security deposits paid to customers that use the Company’s transportation services on a long-term basis, as a guarantee for the safety of customers’ goods during the transportation processes; and (ii) security deposits associated with the Company’s operating leases for warehouse buildings and office spaces for those leases with expiry date more than one year from the date of the financial year end. The Company evaluates the impairment of its other non-current assets consistent with the approach applied for its other financial assets. For the years ended March 31, 2025 and 2024, the Company did not have any impairment loss against its other non-current assets.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.
Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment are as follows:
| Useful life | ||||
| Vehicles | 4 years | |||
| Machinery and equipment | 4 - 5 years | |||
| Office equipment | 3 years | |||
Expenditures for repairs and maintenance, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful lives of assets are capitalized.
The cost and related accumulated depreciation of assets sold or otherwise retired are removed from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment of long-lived assets
Long-lived assets are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable in accordance with FASB ASC 360, “Property, Plant and Equipment”. In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in accordance with FASB ASC 360-10-15. To the extent that estimated future undiscounted cash inflows attributable to the asset, less estimated future undiscounted cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such an asset and its fair value. Assets to be disposed of and for which there is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying value or fair value less costs to sell. There were no impairments of these assets as of March 31, 2025 and 2024.
Leases
The Company utilizes ASC 842 to account for leases for all periods presented. ASC 842 supersedes the lease requirements in ASC 840 “Leases”, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. All leases of the Company are accounted for as operating leases.
| (a) | The Company as a lessee |
The Company determines if an arrangement is a lease at inception. On the Company’s consolidated balance sheets, our warehouse and office leases are included in operating lease right of use (“ROU”) assets, net, and operating lease liabilities, current and non-current.
| F-10 |
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Significant judgment may be required when determining whether a contract contains a lease, the length of the lease term, the allocation of the consideration in a contract between lease and non-lease components, and the determination of the discount rate included in our warehouse and office leases. We review the underlying objective of each contract, the terms of the contract, and consider our current and future business conditions when making these judgments.
Any lease with a term of 12 months or less is considered short-term. As permitted by ASC 842, short-term leases are excluded from the ROU asset and lease liabilities on the consolidated balance sheets. Consistent with all other operating leases, short-term lease expense is recorded on a straight-line basis over the lease term.
The Financial Accounting Standards Board (“FASB”) issued a Q&A in March 2020 that focused on the application of lease guidance in ASC 842 for lease concessions related to the effects of COVID-19. The FASB staff has said that entities can elect to not evaluate whether concessions granted by lessors related to COVID-19 are lease modifications. Entities that make this election can then apply the lease modification guidance in ASC 842 or account for the concession as if it were contemplated as part of the existing contract.
The Company has elected to not treat the concessions as lease modifications and will instead account for the lease concessions as if they were contemplated as part of the existing leases. The Company has recorded negative variable lease expense and adjusted lease liabilities at the point in which the rent concession has become accruable.
The Company evaluates the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the years ended March 31, 2025 and 2024, the Company did not have any impairment loss against its operating lease right of use assets.
| (b) | the Company as a lessor |
The Company leases warehouse buildings from third party owners, whose warehouse buildings are ready to use. The Company then subleases the warehouse buildings that it leases from the owners with the desired effect of generating a spread between its leasing cost and rental income to generate profit margins. Under the terms and conditions of the agreements, the Company acts as a principal in the transaction because the Company takes the risk of loss from lack of rental income if the Company fails to procure a tenant during the lease period. Accordingly, the Company recognizes rental income using the gross method.
The Company enters into rental agreements with tenants, together with providing supplemental management services which include handling, repairing and maintenance, disinfection, etc. The agreements generally have a duration for one year. According to the agreements, tenants are required to pay monthly or quarterly rent at the beginning of each month or quarter, which are recorded as liabilities until the Company has met the performance obligation, which is to provide warehouse space to the tenants for their use. The agreements do not include options to extend or to terminate the lease or contain any bargain purchase options for the tenants. When the performance obligations are met, i.e. when the tenants used the warehouse building, the Company records revenue using the straight-line method to its results of operations on a monthly basis over the lease period. The monthly rental amount is fixed and there is no variable consideration in the transaction prices.
Bank and other borrowings
Bank and other borrowings are initially recognized at fair values, net of upfront fees incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in statements of income over the period of the borrowings using the effective interest method.
Accounts payable
Accounts payable represent payables to our suppliers for outsourced transportation and handling services provided to us. Accounts payable are generally settled within 3 months upon completion of their services.
Fair value of financial instruments
ASC 820 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs used in the valuation technique are observable or unobservable. The hierarchy is as follows:
● Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
● Level 3 – inputs to the valuation methodology are unobservable.
| F-11 |
Unless otherwise disclosed, the fair values of the Company’s other financial instruments including cash, notes receivable, accounts receivable, advances to suppliers, amounts due from (to) related parties, other assets, bank and other borrowings, accounts payable, contract liabilities and other current liabilities are approximated to their recorded values due to their short-term maturities.
Revenue recognition
The Company generates revenues from (i) provision of transportation services and (ii) warehouse subleasing services. The Company accounts for recognition of revenues from provision of transportation services under Accounting Standards Codification 606 “Revenue from Contracts with Customers” (“ASC 606”).
The five-step model defined by ASC 606 requires the Company to (1) identify its contracts with customers, (2) identify its performance obligations under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to its performance obligations in those contracts, and (5) recognize revenue when each performance obligation under those contracts is satisfied.
A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct. The transaction price is the amount of consideration a company expects to be entitled from a customer in exchange for providing the goods or services.
The unit of account for revenue recognition is a performance obligation (a good or service). A contract may contain one or more performance obligations. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. Otherwise, performance obligations are combined with other promised goods or services until the Company identifies a bundle of goods or services that is distinct. Promises in contracts which do not result in the transfer of a good or service are not performance obligations, as well as those promises that are administrative in nature, or are immaterial in the context of the contract. The Company has addressed whether various goods and services promised to the customer represent distinct performance obligations. The Company applied the guidance of ASC Topic 606-10-25-16 through 18 in order to verify which promises should be assessed for classification as distinct performance obligations.
The transaction price is allocated to each performance obligation in the contract on the basis of the relative stand-alone selling prices of the promised goods or services. The individual standalone selling price of a good or service that has not previously been sold on a stand-alone basis, or has a highly variable selling price, is determined based on the residual portion of the transaction price after allocating the transaction price to goods and/or services with an observable stand-alone selling price. A discount or variable consideration is allocated to one or more, but not all, of the performance obligations if it relates specifically to those performance obligations.
Transaction price is the amount of consideration in the contract to which the Company expects to be entitled in exchange for transferring the promised goods or services. The transaction price may be fixed or variable and is adjusted for the time value of money if the contract includes a significant financing component. Consideration payable to a customer is deducted from the transaction price if the Company does not receive a separate identifiable benefit from the customer. When consideration is variable, if applicable, the estimated amount is included in the transaction price to the extent that it is highly probable that a significant reversal of the cumulative revenue will not occur when the uncertainty associated with the variable consideration is resolved. Revenue is reported net of value added tax (“VAT”) and the Company does not offer any credits or discounts, rebates, price concessions or other similar privileges to customers. Due to the nature of services, the Company does not permit refund to customers.
The core principle underlying ASC 606 is that the Company will recognize revenue to represent the transfer of services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of services transfers to a customer.
The Company enters into a distinct contract with its customers for the provision of transportation services. Under each contract, the Company is committed to transport the customer’s goods, cargos or project components from one point to another as designated by the customer.
The Company’s work generally includes planning, loading, shipping, unloading, and performing safety checks during the entire process. The Company is also responsible for purchasing insurances to cover the entire transportation process. In applying ASC 606-10-25-21 (a), all these above series of tasks are interrelated and are not separable or distinct as the Company’s customers cannot benefit from any standalone task and they are indispensable to transport the customer’s items to its designated location. Accordingly, each contract has only one performance obligation.
The contract price is negotiated on a case-by-case basis, which is mainly based on the transportation distance, weight, size of the items to be transported and if there are any particular insured requirements for the products to be delivered. Once the contract is signed, the price is fixed and set forth in the contract. In practice, the Company generally offers a credit term of 90 days upon the completion of transportation. The consideration was allocated to the single performance obligation.
In applying ASC 606-10-25-27, the Company recognizes revenue from transportation services over a period of time, because the customer simultaneously receives and consumes the benefit of our service as the items are transported from one location to another. That is, if the Company is unable to complete delivery to the final location, another entity would not need to reperform the transportation service already performed. The entire transportation process generally takes 2 to 15 days, and the Company uses time-based method to measure progress toward completion, as it best depicts the value of service transferred to the customer.
For each of major transportation transaction, the Company enters into separate arrangements with insurance companies for insuring any damages/losses during the course of transportation, in which damages/losses bore by the Company will be covered by the insurance companies. Any costs incurred for any damages/losses by the Company were recognized as cost of revenues and any reimbursement of the claims received from insurance companies was recognized as insurance indemnity (other income) in the statements of income and comprehensive income. During the years ended March 31, 2025 and 2024, the Company incurred $257,158 and $184,188, respectively, which were recognized in cost of revenues for damage/losses during the course of transportation services and received compensation of $171,718 and $128,442, respectively, from insurance companies which were recognized as insurance indemnity.
| F-12 |
In some cases, we might subcontract certain transportation jobs to third party suppliers due to the limitation of our transportation team and our fleet. In accordance with ASC 606, we evaluate whether it is appropriate to record the gross amount of the contract price and related costs or the net amount earned as commissions. We conclude that we act as a principal in such cases because (i) we are primarily responsible for the promised services in the contract, which means we will be held accountable for the customer’s entire loss if the transportation could not be completed as expected and agreed; (ii) we have sole discretion in establishing the contract price that the customer pays to us, despite how much we pay to the subcontractor, who was separately engaged and the choice of party of subcontractor is on our decision; (iii) we are subject to capital risk that we need to pay our subcontractor with agreed terms even if the customer hasn’t paid to us or is in default; and (iv) the subcontractors do not perform any value-added services but merely follow our instructions for the delivery. As a result, we recognize revenue on the gross basis.
The Company recognizes revenue from subleasing warehouse spaces in accordance with ASC 842, as discussed in the “Leases” part above.
Contract assets and liabilities
Contract assets include billed and unbilled amounts resulting from in-transit transportations, as the Company can only have the unconditional right to payment once a transportation has been completed. As of March 31, 2025 and 2024, the Company recognized contract assets of $31,709 and $147,334, respectively.
Contract liabilities are recognized for contracts where payment has been received in advance of the transfer of service. Balance for contract liabilities can vary significantly depending on the timing of when an order is placed and when service occurs.
Cost of revenues
Cost of revenues for transportation services mainly consisted of outsourced shipping services, fuel, salaries paid to drivers, depreciation of vehicles, fleet maintenance, tolls and customs fees. Cost of revenues for warehouse subleasing services mainly consisted of lease expenses of warehouse buildings, utilities, maintenance, and warehouse handling fees.
Selling expenses
Selling expenses primarily include salaries, social security and other benefits paid to sales personnel, travelling, entertainment and insurance premiums for transportation services.
General and administrative expenses
General and administrative expenses mainly consist of employee salaries and benefits, depreciation, office lease expenses, travelling and entertainment expenses, legal fees, consulting fees and other miscellaneous administrative expenses.
Other income (expenses)
Other income (expenses) mainly included interest income, interest expenses, foreign currency transaction gain, gain on disposal of property and equipment, government subsidies and insurance indemnity.
Income from government subsidies amounted to $16,642 and $27,202 for the years ended March 31, 2025 and 2024. During the years ended March 31, 2025 and 2024, the Company received subsidies from local government of Pu’Er City, Yunnan province to reimburse the Company’s railway costs incurred in transporting the city’s local produces, including timber, coffee beans, tea and sugar. Such subsidies were unconditional, non-recurring and discretional. The Company recognizes a government subsidy as other income when it has been received.
Employee benefit plan
Full time employees of the PRC subsidiaries participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance and other welfare benefits are provided to employees. For the years ended March 31, 2025 and 2024, the Company has made contributions of $290,113 and $317,537 to the government mandated multi-employer defined contribution plan, respectively.
Income taxes
The Company is not subject to tax on income or capital gains under the current laws of the Cayman Islands and its subsidiary in British Virgin Islands is not subject to tax on income or capital gains under the current laws of the British Virgin Islands.
The Company’s subsidiaries in the PRC and Hong Kong are subject to the income taxes of the PRC and Hong Kong, respectively. No taxable income was generated outside the PRC for the years ended March 31, 2025 and 2024. The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not that they will either expire before the Company is able to realize the benefits, or future deductibility is uncertain.
ASC 740-10-25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There were no material uncertain tax positions as of March 31, 2025 and 2024. As of March 31, 2025, the tax years ended January 1, 2020 through December 31, 2024 for the Company’s PRC subsidiaries remain open for statutory examination by the PRC tax authorities.
| F-13 |
VAT
The Company’s PRC subsidiaries are general taxpayers and are subject to an applicable VAT tax rate of 9% for revenues from transportation services and 6% for rental income from warehouse subleasing services. VAT is reported as a deduction to revenues when incurred. Entities that are VAT general taxpayers are allowed to offset qualified input VAT tax paid to suppliers against their output VAT liabilities. All of the VAT returns filed by our subsidiaries in the PRC have been and remain subject to examination by the tax authorities for five years from the date of filing.
Related parties and transactions
The Company identifies related parties, accounts for, and discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.
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 850 does not provide accounting or measurement guidance for such transactions, it nonetheless requires their disclosure. See Note 9 to the consolidated financial statements for further details.
Comprehensive income
Comprehensive income consists of two components, net income and other comprehensive loss. We present comprehensive income in accordance with ASC Topic 220, Comprehensive Income. ASC Topic 220 states that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the consolidated financial statements. The components of comprehensive income were the net income for the years presented and the foreign currency translation adjustments.
Earnings per share (“EPS”)
The Company computes earnings per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average number of ordinary shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the years ended March 31, 2025 and 2024, the dilutive effect of the Company’s Preferred Shares issued and outstanding which are convertible to ordinary shares for each Preferred Share was taken into consideration in calculation of diluted EPS.
Statement of cash flows
In accordance with ASC 230, “Statement of Cash Flows”, cash flows from the Company’s operations are formulated based upon the local currencies, and then translated at average exchange rates for the periods. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Concentrations
For the years ended March 31, 2025 and 2024, the percentage of the Company’s revenues for major customers consisted of the following:
| For the years ended March 31, | ||||||||
| Customer | 2025 | 2024 | ||||||
| A | 20 | % | 35 | % | ||||
| B | 12 | % | - | |||||
| C | 11 | % | 23 | % | ||||
As of March 31, 2025 and 2024, the percentage of the Company’s accounts receivable for major customers consisted of the following:
| As of March 31, | ||||||||
| Customer | 2025 | 2024 | ||||||
| A | 22 | % | 37 | % | ||||
| C | - | 15 | % | |||||
For the years ended March 31, 2025 and 2024, the percentage of the Company’s purchases from major suppliers consisted of the following:
| For the years ended March 31, | ||||||||
| Supplier | 2025 | 2024 | ||||||
| Z | 23 | % | 32 | % | ||||
| Y | 17 | % | - | |||||
| X | 11 | % | - | |||||
| F-14 |
As of March 31, 2025 and 2024, the percentage of the Company’s accounts payable for major suppliers consisted of the following:
| As of March 31, | ||||||||
| Supplier | 2025 | 2024 | ||||||
| Y | 34 | % | 19 | % | ||||
| X | 24 | % | 14 | % | ||||
| W | - | 17 | % | |||||
Risks and uncertainties
Economic and political risk
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
In addition, the PRC subsidiaries’ sales, purchases and expense transactions are denominated in RMB, and all of the PRC subsidiaries’ assets and liabilities are also denominated in RMB. RMB is not freely convertible into foreign currencies under current PRC law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.
Credit risk
Financial assets of the Company that potentially subject to credit risk mainly consist of cash, notes receivable, accounts receivable, advance to suppliers and other current assets.
The Company’s cash deposits are maintained with high credit quality institutions, the composition and maturities of which are regularly monitored by management. In the PRC, an individual entity’s deposit maintained at a bank is insured for a maximum of RMB500,000 (equivalent to approximately $70,000) in the event of bank failure. In Hong Kong, an individual entity’s deposit maintained at a bank is insured for a maximum of HKD800,000 (equivalent to approximately $102,000) in the event of bank failure. In British Virgin Islands and Cayman Islands, entity’s deposit is not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance. As of March 31, 2025, cash balance of $832,398 was maintained at financial institutions in the PRC, of which approximately $368,498 was insured; and cash balance of $10,907 was maintained at financial institutions in Hong Kong, of which the entire balance was insured.
In terms of accounts receivable and other current assets, the Company maintains allowances for expected credit losses as contra accounts, as mentioned above. Whilst for notes receivable and advances to suppliers, the Company has provided no allowance as of March 31, 2025 and 2024 because the account balances were usually collected (realized) within 6 months, and therefore management considered the provision for impairment would be immaterial, if any.
Interest rate risk
As of March 31, 2025 and 2024, the Company had no significant exposure on interest rate risk.
Foreign currency risk
While the Company’s reporting currency is US$, substantially all of the Company’s revenues and cost of revenues and expenses are denominated in RMB. Substantially all of our assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates against US$, the value of the Company’s RMB revenues, net income and assets as expressed in its US$ financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates while revenues and expenses are translated at the average exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive loss, a component of equity. As of March 31, 2025, the Company’s accumulated other comprehensive loss was $683,335. The Company has not entered into any hedging transactions in an effort to reduce its exposure to foreign exchange risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. As of March 31, 2025, the Company was not subject to significant liquidity risk.
| F-15 |
Recent accounting pronouncements
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848). ASU No. 2021-01 is an update of ASU No. 2020-04, which is in response to concerns about structural risks of interbank offered rates, and particularly the risk of cessation of LIBOR. Regulators have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. ASU No. 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU No. 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU No. 2021-01 update clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in this update are effective immediately through December 31, 2022, for all entities. On December 21, 2022, the FASB issued a new Accounting Standards Update ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, that extends the sunset (or expiration) date of ASC Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform. The Company does not expect the cessation of LIBOR to have a material impact on its financial position, results of operations, cash flows or 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 U.S. Securities and Exchange Commission (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 compare entities subject more easily 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 not become effective for any entity. The Company does not expect the adoption of ASU 2023-06 to have a material impact on the Company’s consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements and disclosures.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated balance sheets, statements of income and comprehensive income and cash flows.
Note 3 – Accounts receivable, net
Accounts receivable, net, consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Accounts receivable from third parties | $ | 13,794,524 | $ | 12,500,600 | ||||
| Accounts receivable from related parties | 695,671 | 407,831 | ||||||
| Accounts receivable, gross | 14,490,195 | 12,908,431 | ||||||
| Less: allowance for expected credit losses | (169,297 | ) | (94,046 | ) | ||||
| Accounts receivable, net | $ | 14,320,898 | $ | 12,814,385 | ||||
The movement of the allowance for expected credit losses was as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at the beginning of year | $ | 94,046 | $ | 3,887 | ||||
| Allowance for expected credit losses | 76,146 | 91,020 | ||||||
| Exchange realignment | (895 | ) | (861 | ) | ||||
| Balance at the end of year | $ | 169,297 | $ | 94,046 | ||||
| F-16 |
Note 4 – Other current assets, net
As of March 31, 2025 and 2024, other current assets, net, consisted of the followings:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Deposits to containers (1) | $ | 381,716 | $ | 383,641 | ||||
| Advance to employees (2) | 1,588,490 | 743,568 | ||||||
| Prepaid input value-added taxes | 71,692 | 57,499 | ||||||
| Others | 216,186 | 230,046 | ||||||
| Other current assets, gross | 2,258,084 | 1,414,754 | ||||||
| Less: allowance for expected credit losses | (4,234 | ) | (3,647 | ) | ||||
| Other current assets, net | $ | 2,253,850 | $ | 1,411,107 | ||||
| (1) | The balance represented the security deposits paid to the containers for cross-border transportation services, which is refundable upon the services were completed. |
| (2) | The balance represented petty cash advanced to employees in charge of each transportation deal for the expenses to be incurred during the transportation services processes when transporting oversized cargo (such as wind turbines) to remote rural areas, usually, there will be complicated road conditions, and we generally advance decent amount of petty cash to employees in charge for these projects in order to cover spontaneous fees such as to widen country roads, dismantle obstacles, set up temporary bridges, etc. in order to complete the transportation process. Such fees will be reimbursed by the customer to the employees in charge directly after the completion of the delivery, and the employee will return the advances to the Company after receiving the reimbursement from the customer. As of report date, 2025, $720,211 or 45.34% of the outstanding balance as of March 31, 2025 has been reimbursed by our customers and repaid from employees. |
The movement of the allowance for expected credit losses for other current assets was as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at the beginning of year | $ | 3,647 | $ | 1,571 | ||||
| Allowance for expected credit losses | 609 | 2,168 | ||||||
| Exchange realignment | (22 | ) | (92 | ) | ||||
| Balance at the end of year | $ | 4,234 | $ | 3,647 | ||||
Note 5 – Property and equipment, net
Property and equipment, net, consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Vehicles | $ | 1,002,913 | $ | 1,127,379 | ||||
| Machinery and equipment | 637,029 | 481,774 | ||||||
| Office equipment | 160,226 | 81,772 | ||||||
| Subtotal | 1,800,168 | 1,690,925 | ||||||
| Less: accumulated depreciation | (1,338,963 | ) | (1,516,917 | ) | ||||
| Property and equipment, net | $ | 461,205 | $ | 174,008 | ||||
Depreciation expenses were $88,722 and $115,150 for the years ended March 31, 2025 and 2024, respectively.
Note 6 – Operating lease right of use assets, net and operating lease liabilities
The Company is an intermediate lessor, which is an entity that is both a lessee and a lessor of the same underlying asset, accounts for the head lease and the sublease as two separate contracts unless specified contract combination criteria are met. The Company accounts for the head lease in accordance with lessee accounting, and accounts for the sublease in accordance with lessor accounting. The Company does not offset lease income and lease expenses. The recognition of whether a contract arrangement contains a lease is made by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all the economic benefits from and has the ability to direct the use of the asset.
The Company’s major operating leases consisted of the following properties:
| 1) | On August 1, 2021, Suzhou TC-Link entered into a three-year lease agreement with a third party to lease a warehouse building with 1,200 square meters for storage use in Chengdu City, the PRC. The lease term is from August 1, 2021 to July 31, 2024 with monthly lease payment of RMB20,160. On August 1, 2024, the lease has been renewed for three years from August 1, 2024 to July 31, 2027 with monthly lease payment remains unchanged. |
| 2) | On November 30, 2024, Suzhou TC-Link entered into a two-and-half-year lease agreement with a third party to lease a warehouse space with 6,445.86 square meters in Suzhou City, the PRC. The lease term is from March 1, 2025 to September 30, 2027 with effective monthly lease payment of RMB94,224.92. |
| 3) | On December 31, 2019, Wuxi TC-Link entered into a five-year lease agreement with a third party to lease a warehouse building with 12,000 square meters in Wuxi City, the PRC. The lease term is from March 16, 2020 to March 15, 2025 with effective monthly lease payment of RMB166,667. On January 8, 2025, the lease has been renewed for five years from March 16, 2025 to March 15, 2030 with monthly lease payment remains unchanged. |
| 4) | On July 1, 2021, Wuxi TC-Link entered into an eight-year lease agreement with a third party to lease a warehouse building with 17,069.57 square meters in Wuxi City, the PRC. The lease term is from July 1, 2021 to June 30, 2029 with effective monthly lease payment of RMB347,917. On March 31, 2025, the lease has been terminated by mutual consent. Since the lease was terminated in its entirety, the remaining right of use asset and lease liability, with their carrying amounts of RMB12,400,386 ($1,718,386) and RMB16,608,281 ($2,301,495), respectively, were derecognized at the time of termination. |
| 5) | On January 12, 2024, Hangzhou TC-Link entered into a three-year lease agreement with a third party to lease an office space with 619.42 square meters in Hangzhou City, the PRC. The lease term is from May 1, 2024 to April 30, 2027 with effective monthly lease payment of RMB28,001.77. |
| 6) | On December 1, 2024, Hangzhou TC-Link entered into a three-year lease agreement with a third party to lease a warehouse building with 1,350 square meters in Chengdu City, the PRC. The lease term is from December 1, 2024 to November 30, 2027 with effective monthly lease payment of RMB21,600. |
| 7) | On December 20, 2024, Yancheng TC-Link entered into a three-year lease agreement with a third party to lease an office space with 602.52 square meters in Yancheng City, the PRC. The lease term is from January 1, 2025 to December 31, 2027 with effective monthly lease payment of RMB16,666.67. |
| F-17 |
Right of use assets, net, consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cost | $ | 4,685,119 | $ | 5,110,751 | ||||
| Less: accumulated amortization | (2,889,451 | ) | (2,161,366 | ) | ||||
| Right of use assets, net | $ | 1,795,668 | $ | 2,949,385 | ||||
Operating lease liabilities consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease liabilities, current | $ | 451,363 | $ | 743,025 | ||||
| Operating lease liabilities, non-current | 1,198,905 | 2,206,360 | ||||||
| Total operating lease liabilities | $ | 1,650,268 | $ | 2,949,385 | ||||
The weighted-average remaining lease terms and discount rates of the Company’s operating leases are as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (years) | 3.86 | 4.81 | ||||||
| Weighted average discount rate | 7.02 | % | 5.61 | % | ||||
The lease expenses related to the Company’s operating leases were $887,252 and $842,494 for the years ended March 31, 2025 and 2024, respectively.
The following table summarizes the maturity of lease liabilities as of March 31, 2025:
| 12 months ending March 31, | Amount | |||
| 2026 | $ | 554,908 | ||
| 2027 | 615,640 | |||
| 2028 | 348,715 | |||
| 2029 | 252,851 | |||
| 2030 | 126,425 | |||
| Total lease payments | 1,898,539 | |||
| Less: imputed interests | (248,271 | ) | ||
| Operating lease liabilities on consolidated balance sheets | $ | 1,650,268 | ||
Note 7 – Other non-current assets
As of March 31, 2025 and 2024, other non-current assets consisted of the followings:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Security deposits paid to customers (1) | $ | 1,830,225 | $ | 704,569 | ||||
| Operating lease deposits | 24,529 | 15,235 | ||||||
| Others | 66,124 | 45,470 | ||||||
| Other non-current assets | $ | 1,920,878 | $ | 765,274 | ||||
| (1) | The Company has entered into framework agreements with several major customers in order to establish long-term relationship with these customers. According to the agreements, the Company has maintained a security deposit at each of these customers as a guarantee for the safety of their goods during the transportation processes. These agreements have no fixed term and can be terminated at will. According to the agreements, the Company is entitled to have the security deposit back once the cooperative agreement is terminated. Management classified as non-current assets since they expect no termination in the foreseeable future. |
| F-18 |
Note 8 – Bank and other borrowings
Bank and other borrowings consisted of term loans borrowed from banks and other financial institutions in the PRC by the Company’s PRC operating subsidiaries as working capital funds.
As of March 31, 2025 and 2024, the Company’s bank and other borrowings consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Agricultural Bank of China | $ | 1,378,037 | $ | 1,384,984 | ||||
| Shenzhen Qianhai WeBank Co., Ltd.* | 776,294 | 193,901 | ||||||
| Bank of Communications | 413,411 | 415,495 | ||||||
| Changshu Rural Commercial Bank | 413,411 | - | ||||||
| China Merchants Bank | 413,411 | - | ||||||
| Prince Jewellery & Watch (Shanghai) Co., Ltd. | 275,607 | - | ||||||
| Bank of Jiangsu* | 96,463 | - | ||||||
| Total bank and other borrowings | $ | 3,766,634 | $ | 1,994,380 | ||||
Detailed information of bank and other borrowings are as follows:
| Initial | Interest rate | Balance as of March 31, (in US$) | ||||||||||||||||||||||
| Lender | Inception date | Maturity date | Currency | principal | (per annum) | 2025 | 2024 | |||||||||||||||||
| Agricultural Bank of China | March 20, 2025 | March 19, 2026 | RMB | 10,000,000 | 3.40 | % | 1,378,037 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | January 20, 2025 | January 26, 2027 | RMB | 1,000,000 | 7.11 | % | 137,804 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | March 19, 2025 | March 14, 2027 | RMB | 1,000,000 | 6.01 | % | 137,804 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | March 19, 2025 | March 14, 2027 | RMB | 1,000,000 | 8.01 | % | 137,804 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | March 19, 2025 | March 14, 2027 | RMB | 1,000,000 | 8.01 | % | 137,804 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | March 19, 2025 | March 26, 2027 | RMB | 1,000,000 | 8.54 | % | 137,804 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | June 3, 2024 | June 3, 2026 | RMB | 500,000 | 5.40 | % | 45,934 | - | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd.* | March 19, 2025 | March 26, 2027 | RMB | 300,000 | 7.07 | % | 41,340 | - | ||||||||||||||||
| Bank of Communications | March 7, 2025 | March 7, 2026 | RMB | 3,000,000 | 3.80 | % | 413,411 | - | ||||||||||||||||
| Changshu Rural Commercial Bank | August 30, 2024 | August 29, 2025 | RMB | 3,000,000 | 3.35 | % | 413,411 | - | ||||||||||||||||
| China Merchants Bank | January 2, 2025 | July 2, 2025 | RMB | 3,000,000 | 2.70 | % | 413,411 | - | ||||||||||||||||
| Prince Jewellery & Watch (Shanghai) Co., Ltd. | February 5, 2025 | February 5, 2026 | RMB | 2,000,000 | 3.10 | % | 275,607 | - | ||||||||||||||||
| Bank of Jiangsu* | March 19, 2025 | March 26, 2027 | RMB | 700,000 | 7.07 | % | 96,463 | - | ||||||||||||||||
| Agricultural Bank of China | March 22, 2024 | March 21, 2025 | RMB | 10,000,000 | 3.40 | % | - | 1,384,984 | ||||||||||||||||
| Bank of Communications | March 26, 2024 | March 26, 2025 | RMB | 3,000,000 | 3.80 | % | - | 415,495 | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd. | December 11, 2023 | April 10, 2024 | RMB | 1,000,000 | 9.00 | % | - | 138,498 | ||||||||||||||||
| Shenzhen Qianhai WeBank Co., Ltd. | November 13, 2023 | May 13, 2024 | RMB | 500,000 | 11.71 | % | - | 55,403 | ||||||||||||||||
| Total | 3,766,634 | 1,994,380 | ||||||||||||||||||||||
*Borrowings from Shenzhen Qianhai WeBank Co., Ltd. and Bank of Jiangsu contain clauses which allow borrowers to make early repayments without penalties. Considering the interest rates of these borrowings are significantly higher than the Company’s other borrowings, the Company intend to repay these borrowings as soon as it has available funds, usually within one year from the commencement of each borrowing. Therefore, these borrowings are presented as current liabilities despite that their original maturities exceed one year.
| F-19 |
All of the Company’s borrowings are guaranteed by Lin Tan, COO of the Company and bear fixed interest rates.
Other than the borrowings described above, the Company’s PRC operating subsidiaries have borrowed 13 loans from Shenzhen Qianhai WeBank Co., Ltd. with an aggregated principal of RMB8,250,000 and interest rates ranging from 6.8% to 14.71% per annum and repaid them in full within the year ended March 31, 2025.
Note 9 – Related party balances and transactions
The details of the related parties involved in related party balances and transactions are summarized as follow:
| Name of Related Parties | Relationship to the Company | Nature of Transactions | ||
| Eastern Worldwide Logistics Group Inc. | Controlled by a major shareholder of the Company, Mr. Albert Wong | Working capital loan | ||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | Controlled by a major shareholder of the Company, Mr. Albert Wong | Revenue, purchase, working capital loan | ||
| Eastern Worldwide Company, Limited | Controlled by a major shareholder of the Company, Mr. Albert Wong | Purchase | ||
| Lin Tan | Chief Operating Officer (“COO”) of the Company | Working capital loan | ||
| Jinghong Jiang | Former Chief Accountant of the Company | Working capital loan |
Details of related party balances are summarized as follow:
Account receivable from a related party
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | $ | 695,671 | $ | 407,831 | ||||
| Account receivable from a related party, gross | 695,671 | 407,831 | ||||||
| Less: allowance for expected credit losses | (54,332 | ) | (2,971 | ) | ||||
| Account receivable from a related party, net | $ | 641,339 | $ | 404,860 | ||||
Amount due from a related party
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Eastern Worldwide Logistics Group Inc. | $ | 136,416 | $ | 137,099 | ||||
| Amount due from a related party | $ | 136,416 | $ | 137,099 | ||||
Amounts due to related parties
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Lin Tan | $ | 203,695 | $ | 311,193 | ||||
| Jinghong Jiang | - | 90,000 | ||||||
| Amounts due to related parties | $ | 203,695 | $ | 401,193 | ||||
Amounts due from (to) related parties were interest-free, unsecured and due (repayable) on demand. The Company made (obtained) funds to (from) its related parties for business purposes. As of the report date, a 14.6% of account receivable from Shenzhen Eastern Worldwide Logistics Co., Ltd. as of March 31, 2025 has been settled, a 43.6% of the amount due from Eastern Worldwide Logistics Group Inc. as of March 31, 2025 has been settled; and 0% of the amounts due to related parties as of March 31, 2025 have been repaid.
Details of related party transactions are summarized as follow:
Revenues from a related party customer
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | $ | 335,598 | $ | 282,564 | ||||
| Revenues from a related party customer | $ | 335,598 | $ | 282,564 | ||||
Purchases from related party suppliers
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Shenzhen Eastern Worldwide Logistics Co., Ltd. | $ | 8,581 | $ | - | ||||
| Eastern Worldwide Company, Limited | - | 574 | ||||||
| Purchases from related party suppliers | $ | 8,581 | $ | 574 | ||||
| F-20 |
Note 10 – Contract liabilities
As of March 31, 2025 and 2024, the Company had contract liabilities of $117,191 and $241,008, respectively. In terms of warehouse subleasing services, rentals are generally required to be paid in advance. In addition, certain transportation service contracts would require the customer to pay a portion of the total price before services are rendered. These advanced payments from customers for services to be performed in the future are recognized as contract liabilities, and the Company reduces such liabilities and recognizes revenues after it fulfills pertinent performance obligations, usually within one year.
The movement of contract liabilities was as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at the beginning of year | $ | 241,008 | $ | 219,701 | ||||
| Advances received from customers | 737,909 | 1,188,015 | ||||||
| Amount recognized as revenue during the year | (861,203 | ) | (1,155,739 | ) | ||||
| Exchange realignment | (523 | ) | (10,969 | ) | ||||
| Balance at the end of year | $ | 117,191 | $ | 241,008 | ||||
Note 11 – Other current liabilities
As of March 31, 2025 and 2024, other current liabilities consisted of the following:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Accrued salaries | $ | 127,565 | $ | 213,037 | ||||
| Value-added taxes payable | 361,921 | 472,679 | ||||||
| Security deposits from suppliers (1) | 83,750 | 99,463 | ||||||
| Other tax surcharges payable | 10,329 | 18,785 | ||||||
| Others | 193,985 | 89,477 | ||||||
| Total other current liabilities | $ | 777,550 | $ | 893,441 | ||||
| (1) | In some cases, the Company may outsource some of the transportation services to third party suppliers, and receives security deposits from such suppliers to guarantee the completion of the transportation services. These security deposits are short-term in nature and will be returned to suppliers when the transportation services are completed. |
Note 12 – Shareholders’ equity
Ordinary shares and Preferred Shares
The Company is established under the laws of the Cayman Islands on July 27, 2023 with limited liability with authorized share capital of 500,000,000 Ordinary Shares at US$0.0001 each. On the same date, the Company issued 10,000,000 Ordinary Shares of the Company to the existing shareholders of Suzhou TC-Link in proportion of their existing shareholdings in Suzhou TC-Link for a consideration of US$7,197,943 in aggregate in exchange for the issued shares of Suzhou TC-Link. As a result, no change in proportion of shareholding of existing shareholders in Suzhou TC-Link after the issuance.
On February 7, 2024, the board of directors approved to revise the memorandum and articles of association of the Company in which the authorized share capital of US$50,000 are divided into (i) 450,000,000 Ordinary Shares with par value of US$0.0001 each; and (ii) 50,000,000 Preferred Shares with par value of US$0.0001 each. In accordance with the revised memorandum and articles of association of the Company, its Preferred Shares vary from Ordinary Shares in terms of voting rights and conversion rights:
a) Voting rights: for all matters subject to vote at the general meetings of the Company, each Ordinary Share is entitled to one vote, while each Preferred Share is entitled to ten votes;
b) Conversion rights: each Preferred Share is eligible to conversion into one Ordinary Share at any time at the option of the holder, while in no event shall Ordinary Shares be convertible into Preferred Shares.
The revised memorandum of articles of association clearly states that, except for the differences in voting rights and conversion rights as set above, Ordinary Shares and Preferred Shares of the Company shall rank pari passu with one another and shall have the same rights, preferences, privileges and restrictions.
On February 7, 2024, the Company issued 1,000,000 Preferred Shares to Mr. Albert Wong, Chairman, Chief Executive Officer and a controlling shareholder of the Company for an aggregate cash consideration of US$100 which was paid on March 12, 2024 as part of Reorganization. As a result, the voting power of Mr. Albert Wong increased from 42.66% to 71.33% after the issuance of Preferred Shares.
In terms of the 10,000,000 Ordinary Shares and 1,000,000 Preferred Shares issued as part of the Reorganization, the Company has retroactively restated all shares and per share data for all the periods presented, as discussed in Note 1. Accordingly, as of March 31, 2023, 10,000,000 Ordinary Shares and 1,000,000 Preferred Shares were issued and outstanding with a par value of $0.0001, respectively.
On February 21, 2024, the Company issued 417,000 Ordinary Shares to four new individual investors for aggregate proceeds of $834,000 at a price of $2.0 per share. Accordingly, the Company has 10,417,000 Ordinary Shares and 1,000,000 Preferred Shares issued and outstanding as of March 31, 2024.
Additional paid-in capital
Additional paid-in capital originally consisted of contributions made to Suzhou TC-Link from its original shareholders during the period of February 2006 to October 2019. These contributions were RMB48,356,336 in aggregate, and were translated to US$ based on exchange rates on their respective transaction dates, which were $7,217,178 in aggregate.
| F-21 |
Suzhou TC-Link was previously listed on National Equities Exchange and Quotations (“NEEQ”) platform of the PRC. On December 4, 2020, the board of Suzhou-TC Link has passed a resolution to repurchase its own shares (“Suzhou-TC Link Shares”) on NEEQ with numbers ranging from 275,000 to 550,000 shares at repurchase price of no more than RMB2.5 per share. The repurchased Suzhou-TC Link Shares will be used in share-based compensation. Subsequently, Suzhou TC-Link has completed the repurchase of 540,000 Suzhou-TC Link Shares within the period from January 7, 2021 to January 27, 2021 at repurchased cost of RMB792,106 ($122,585) in aggregate, which was paid in cash. The company recorded the repurchased Suzhou-TC Link Shares as treasury shares at original cost. At the time of repurchase, Suzhou-TC Link had 39,700,000 Suzhou-TC Link Shares issued and outstanding.
On July 6, 2021, the board of directors of Suzhou TC-Link has passed a resolution to grant 540,000 restricted shares of Suzhou TC-Link (“Suzhou TC-Link Restricted Shares”) to Suzhou TC-Link’s certain executives, key employees and directors. The grant price for Suzhou TC-Link Restricted Shares was RMB1.2 each. The Suzhou TC-Link Restricted Shares shall vest in three tranches, based on achieving designated amount of revenues in each of the next three years (for the years ended December 31, 2020, 2021 and 2022). On July 31, 2021, the Company has granted its 540,000 Suzhou-TC Link Shares under treasury shares as Suzhou TC-Link Restricted Shares to the grantees and received cash consideration of RMB648,000 ($100,281) in aggregate from the grantees. The fair value of the Suzhou TC-Link Restricted Shares on grant date was RMB1.48 each. The Company recognizes the difference of fair value and price received as expenses during the vesting periods of three tranches. For the years ended March 31, 2022, 2023, 2024 and 2025, expenses for share-based compensation amounted to RMB37,800 ($5,890), RMB45,360 ($6,620) and RMB57,960 ($8,087) and RMB10,080 ($1,400), respectively, which were recognized in general and administrative expenses in the consolidated statements of income. As of May 31, 2024, the share-based compensation expenses are fully recognized.
On June 13, 2022, one director who received 54,000 Suzhou TC-Link Restricted Shares in the aforementioned share-based compensation had passed away. As a result, Suzhou TC-Link repurchased the 54,000 Suzhou TC-Link Restricted Shares granted to this director at cost of RMB64,152 ($9,341) from the spouse of this director, which were cancelled after repurchased.
On February 29, 2024, the Company received capital contributions of $834,000 in an aggregate from four new individual investors for the issuance of 417,000 Ordinary Shares, as mentioned above, in which $42 was credited to Ordinary Share at par value and the remaining $833,958 was credited to additional paid-in capital.
Statutory reserves
The Company’s PRC operating subsidiaries are required to make appropriations to certain reserves, 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 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. As of March 31, 2025 and 2024, the aggregate balance for statutory reserves were $888,085 and $675,027, respectively.
Restricted net assets
The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its PRC entities. Relevant PRC statutory laws and regulations permit payments of dividends by the PRC entities only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. However, PRC laws restrict a certain portion of the PRC entities’ net assets, equivalent to the balances of paid-in capital and statutory reserve, to be distributed in any form to the Company.
The restricted net assets that include paid-in capital and statutory reserve funds amounted to $8,929,615 and $8,715,157 as of March 31, 2025 and 2024, respectively.
Dividends
On September 30, 2023, the board of directors of Suzhou TC-Link has declared cash dividends of RMB9,039,288 ($1,238,938) to all existing shareholders of Suzhou TC-Link registered on the date of declaration. On October 19, 2023, the Company has withheld and paid RMB1,259,814 ($161,493) corporate income tax and individual income taxes to PRC tax authorities for the cash dividends on behalf of the shareholders. As of March 31, 2025 and the date of this report, the remaining RMB7,779,474 ($1,072,040) cash dividends payable remained outstanding. The dividends payable are not interest bearing, and will be paid to former shareholders of Suzhou TC-Link as soon as the Company has sufficient cash. Accordingly, dividends payable are presented as current liabilities.
Note 13 – Segment reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. 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 (“CODM”) for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CEO is the CODM. Management, including the CODM, reviews operation results by revenues, gross profit and gross margin, operating expenses and income from operations of different services, while gross profit is the profitability measure used by the CODM in making decisions about allocating resources and assessing performances. Based on management’s assessment, the Company has determined that it has two reportable segments as defined by ASC 280, which are transportation services and warehouse subleasing services.
| F-22 |
The following table presents summary information by segment for the years ended March 31, 2025 and 2024, respectively:
| For the year ended March 31, 2025 | ||||||||||||
Transportation services | Warehouse subleasing services | Total | ||||||||||
| Revenues - third parties | $ | 34,918,308 | $ | 4,787,785 | $ | 39,706,093 | ||||||
| Revenues - a related party | 335,598 | - | 335,598 | |||||||||
| Cost of revenues - third parties | (29,756,523 | ) | (4,276,746 | ) | (34,033,269 | ) | ||||||
| Cost of revenues - related parties | (8,581 | ) | - | (8,581 | ) | |||||||
| Gross profit | 5,488,802 | 511,039 | 5,999,841 | |||||||||
| Gross margin | 15.6 | % | 10.7 | % | 15.0 | % | ||||||
| Reconciliation to income before income taxes | ||||||||||||
| Selling expenses | (643,448 | ) | (131,036 | ) | (774,484 | ) | ||||||
| General and administrative expenses | (2,069,571 | ) | (485,263 | ) | (2,554,834 | ) | ||||||
| Insurance indemnity | 171,718 | - | 171,718 | |||||||||
| Government subsidies | 16,642 | - | 16,642 | |||||||||
| Unallocated income (expenses) | ||||||||||||
| - Audit and other professional fees | (371,314 | ) | ||||||||||
| - Compensation of a director | (32,000 | ) | ||||||||||
| - Interest expenses, net | (142,812 | ) | ||||||||||
| - Other income | 58,377 | |||||||||||
| Income before income taxes | $ | 2,371,134 | ||||||||||
| Other segment disclosures | Transportation services | Warehouse subleasing services | Total | |||||||||
| Depreciation (1) | $ | 76,825 | $ | 11,897 | $ | 88,722 | ||||||
| Capital expenditures | 328,280 | 69,161 | 397,441 | |||||||||
| Income tax expenses | (539,869 | ) | (51,239 | ) | (591,108 | ) | ||||||
| Segment assets as of March 31, 2025 | $ | 18,502,486 | $ | 6,279,005 | $ | 24,781,491 | ||||||
| For the year ended March 31, 2024 | ||||||||||||
Transportation services | Warehouse subleasing services | Total | ||||||||||
| Revenues - third parties | $ | 37,295,968 | $ | 2,865,097 | $ | 40,161,065 | ||||||
| Revenues - related parties | 282,564 | - | 282,564 | |||||||||
| Cost of revenues - third parties | (32,997,049 | ) | (2,427,339 | ) | (35,424,388 | ) | ||||||
| Cost of revenues - related parties | - | (574 | ) | (574 | ) | |||||||
| Gross profit | 4,581,483 | 437,184 | 5,018,667 | |||||||||
| Gross margin | 12.2 | % | 15.3 | % | 12.4 | % | ||||||
| Reconciliation to income before income taxes | ||||||||||||
| Selling expenses | (690,873 | ) | (21,465 | ) | (712,338 | ) | ||||||
| General and administrative expenses | (1,954,189 | ) | (819,748 | ) | (2,773,937 | ) | ||||||
| Insurance indemnity | 128,442 | - | 128,442 | |||||||||
| Government subsidies | 27,202 | - | 27,202 | |||||||||
| Unallocated (expenses) income | ||||||||||||
| - Audit fees | (90,000 | ) | ||||||||||
| - Compensation of a director | (8,000 | ) | ||||||||||
| - Interest expenses, net | (94,908 | ) | ||||||||||
| - Other income, net | 40,361 | |||||||||||
| Income before income taxes | $ | 1,535,489 | ||||||||||
| F-23 |
| Other segment disclosures | Transportation services | Warehouse subleasing services | Total | |||||||||
| Depreciation (1) | $ | 109,633 | $ | 5,517 | $ | 115,150 | ||||||
| Capital expenditures | 7,384 | 49 | 7,433 | |||||||||
| Income tax (expenses) benefit | (457,759 | ) | 5,970 | (451,789 | ) | |||||||
| Segment assets as of March 31, 2024 | $ | 18,573,064 | $ | 4,418,387 | $ | 22,991,451 | ||||||
| (1) | the amounts of depreciation disclosed by reportable segments are included in cost of revenues and general and administrative expenses. |
Substantially all of the Company’s assets are located in the PRC. For the years ended March 31, 2025 and 2024, substantially all of the Company’s revenues were generated within the PRC, respectively. As a result, management deems it not necessary to present revenues by geographic areas.
Note 14 - General and administrative expenses
For the years ended March 31, 2025 and 2024, the Company’s general and administrative expenses mainly consisted of:
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Employee salaries and benefits | $ | 1,621,580 | $ | 1,767,232 | ||||
| Consulting and service fees | 521,001 | 353,467 | ||||||
| Travelling expenses | 192,858 | 139,638 | ||||||
| Entertainment expenses | 183,511 | 188,579 | ||||||
| Lease expenses | 129,460 | 81,018 | ||||||
| Office expenses | 40,747 | 35,061 | ||||||
| Provision for expected credit losses | 76,755 | 93,188 | ||||||
| Depreciation | 40,251 | 56,452 | ||||||
| Car rental and insurance | 19,459 | 29,360 | ||||||
| Other miscellaneous administrative expenses | 132,526 | 127,942 | ||||||
| Total general and administrative expenses | $ | 2,958,148 | $ | 2,871,937 | ||||
Note 15 – Income taxes
The Company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled.
The Company is incorporated in the Cayman Islands as an exempted company and is not subject to tax on income or capital gain under the laws of the Cayman Islands.
Eastern BVI is incorporated in the British Virgin Islands as a holding company and is currently exempted from income and corporate tax under the current laws of the British Virgin Islands. In addition, the British Virgin Islands does not levy capital gains tax on it.
Eastern HK is incorporated in Hong Kong as a holding company with no operation. Under Hong Kong’s two-tier tax rates regime, the first 2 million Hong Kong Dollar (“HKD”) of profits will be taxed at 8.25%, and the profits above HKD 2 million will be taxed at 16.5%. Eastern HK is not subject to income tax for the years ended March 31, 2025 and 2024 as it had no operating activities during the years.
Under the Enterprise Income Tax (“EIT”) Law of the PRC, domestic enterprises and Foreign Investment Enterprises (“FIE”) are usually subject to a unified 25% income tax rate while preferential tax rates, tax holidays and certain tax exemptions may be granted on case-by-case basis.
According to the Circular on the Implementation of the Positive Policy on Inclusive Tax Relief for Small and Micro Enterprises (Cai Shui (2019) No. 13), as enacted by Ministry of Finance and State Taxation Administration of the PRC, an enterprise is recognized as a small-scale and low-profit enterprise if all of the followings are met (i) its taxable income does not exceed RMB3 million; (ii) total number of its employees does not exceed 300; and (iii) amount of its total assets does not exceed RMB50 million. A small-scale and low-profit enterprise receives a tax preference including a preferential tax rate of 5% on its taxable income below RMB1 million and another preferential tax rate of 10% on its taxable income between RMB1 million and RMB3 million. This policy was originally effective since January 1, 2019 until December 31, 2021. Subsequently, Ministry of Finance and State Taxation Administration of the PRC have made supplements to this policy on March 14, 2022, March 26, 2023 and August 6, 2023, respectively, which have stated that since January 1, 2022, if an entity is identified as a small-scale and low-profit enterprise based on the above rules, it is entitled to a preferential tax rate of 5% on its taxable income, and such tax relief has been extended to December 31, 2027 at the same time. As a result, for the year ended March 31, 2024, Wuxi TC-Link, Yunnan Dongyuan and Chongqing Dayuan are qualified for small and low-profit enterprises with an income tax rate of 5%, while for the year ended March 31, 2025, Wuxi TC-Link, Yancheng TC-Link, Yunnan Dongyuan and Chongqing Dayuan are qualified for small and low-profit enterprises with an income tax rate of 5%.
| F-24 |
Income tax expenses
Income taxes expenses consisted of the following:
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Current | ||||||||
| PRC income tax provision | $ | 594,040 | $ | 459,215 | ||||
| Deferred | ||||||||
| PRC income tax | (2,932 | ) | (7,426 | ) | ||||
| Income tax expenses | $ | 591,108 | $ | 451,789 | ||||
The following table reconciles the PRC statutory rate to the Company’s effective tax rates:
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| The PRC statutory tax rate | 25.0 | % | 25.0 | % | ||||
| Effect of tax exempted entities in Cayman Islands and BVI | 4.2 | % | 1.7 | % | ||||
| Effect of the PRC preferential tax rates | -5.6 | % | -10.6 | % | ||||
| Non-deductible expenses | 1.2 | % | 13.0 | % | ||||
| Effect of changes in valuation allowance | 0.1 | % | 0.3 | % | ||||
| Effective tax rate | 24.9 | % | 29.4 | % | ||||
Deferred tax assets
Significant components of deferred tax assets were as follows:
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax assets derived from | ||||||||
| Allowance for expected credit losses | $ | 35,743 | $ | 18,785 | ||||
| Net operating losses (“NOLs”) | 9,819 | 27,459 | ||||||
| Less: valuation allowance on NOLs of Chongqing Dayuan | (4,613 | ) | (8,019 | ) | ||||
| Deferred tax assets, net | $ | 40,949 | $ | 38,225 | ||||
*The Company has provided full allowance on deferred tax assets of Chongqing Dayuan because management considers there will not be sufficient taxable income for Chongqing Dayuan to utilize its deferred tax assets in the foreseeable future.
Note 16 – Commitments and contingencies
Lease commitments
The Company entered into operating leases to lease warehouse buildings and office spaces for operations and business development. Our commitments for minimum lease payments under these operating leases as of March 31, 2025 are disclosed in Note 6.
Contingencies
In the ordinary course of business, the Company may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from such claims, when a loss is assessed to be probable, and the amount of the loss is reasonably estimable. In the opinion of management, there were no pending or threatened claims and litigation as of March 31, 2025 and 2024 and through the report date of these consolidated financial statements.
Note 17 –Earnings per share (“EPS”)
The basic earnings per share is calculated as the net income for the year attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares of the Company in issue during the year.
The diluted earnings per share is calculated as the net income for the year attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares used in the calculation which is the weighted average number of ordinary shares in issue plus the number of preferred shares being convertible to ordinary shares (details were discussed in Note 12 above).
| F-25 |
The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share:
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Basic earnings per share computation: | ||||||||
| Numerator: | ||||||||
| Net income available to ordinary shareholders | $ | 1,780,026 | $ | 1,083,700 | ||||
| Denominator: | ||||||||
| Weighted average ordinary shares outstanding – basic | 10,417,000 | 10,044,434 | ||||||
| Basic earnings per share | 0.17 | 0.11 | ||||||
| Diluted earnings per share computation: | ||||||||
| Numerator: | ||||||||
| Net income available to ordinary and preferred shareholders | $ | 1,780,026 | $ | 1,083,700 | ||||
| Denominator: | ||||||||
| Weighted average ordinary shares outstanding – basic | 10,417,000 | 10,044,434 | ||||||
| Convertible preferred shares - dilutive | 1,000,000 | 1,000,000 | ||||||
| Weighted average ordinary shares outstanding – diluted | 11,417,000 | 11,044,434 | ||||||
| Diluted earnings per share | 0.16 | 0.10 | ||||||
Note 18 – Subsequent events
The Company evaluated all events and transactions that occurred after March 31, 2025, up through July 18, 2025, which is the date that these consolidated financial statements are available to be issued, there were no other any material subsequent events that require disclosure in these consolidated financial statements.
Note 19 – Condensed financial statements of the parent company
Pursuant to the requirements of Rule 12-04(a), 5-04(c), and 4-08(e)(3) of Regulation S-X, the condensed financial statements of the parent company shall be filed when the restricted net assets of consolidated subsidiaries exceed 25% of consolidated net assets as of the end of the most recently completed fiscal year. The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with such requirement and concluded that it was applicable to the Company that the restricted net assets of the Company’s PRC subsidiaries exceeded 25% of the consolidated net assets of the Company. Therefore, the condensed financial statements of the parent company are included herein.
For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the Company’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances, or cash dividends without the consent of a third party.
The condensed financial statements of the parent company have been prepared using the same accounting policies as set out in the Company’s consolidated financial statements.
The footnote disclosures contain supplemental information relating to the operations of the parent company and, as such, these condensed financial statements should be read in conjunction with the notes to the consolidated financial statements of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The parent company did not declare or pay any dividend for the periods presented. As of March 31, 2025 and 2024, there were no material commitments and contingencies, significant provisions for long-term obligations, or guarantees, except for those separately disclosed in the consolidated financial statements, if any.
| F-26 |
EASTERN INTERNATIONAL LTD.
PARENT COMPANY CONDENSED BALANCE SHEETS
| As of March 31, | ||||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 2,909 | $ | 670,596 | ||||
| Total current assets | 2,909 | 670,596 | ||||||
| Non-current assets | ||||||||
| Deferred offering costs | 822,204 | 418,390 | ||||||
| Amount due from a subsidiary (1) | 3,332,003 | 3,332,003 | ||||||
| Investment in a subsidiary | 3,865,940 | 3,865,940 | ||||||
| Total non-current assets | 8,020,147 | 7,616,333 | ||||||
| Total assets | $ | 8,023,056 | $ | 8,286,929 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | - | 30,000 | ||||||
| Amount due to related parties | - | 210,000 | ||||||
| Amount due to subsidiaries | $ | 500,649 | $ | 120,730 | ||||
| Total liabilities | 500,649 | 360,730 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred shares, par value $0.0001 each, 50,000,000 shares authorized, 1,000,000 issued and outstanding as of March 31, 2025 and 2024* | $ | 100 | $ | 100 | ||||
| Ordinary Shares, par value $0.0001 each, 450,000,000 shares authorized, 10,417,000 issued and outstanding as of March 31, 2025 and 2024* | 1,042 | 1,042 | ||||||
| Additional paid-in capital | 8,030,901 | 8,030,901 | ||||||
| Accumulated deficit | (509,636 | ) | (105,844 | ) | ||||
| Total shareholders’ equity | 7,522,407 | 7,926,199 | ||||||
| Total liabilities and shareholders’ equity | $ | 8,023,056 | $ | 8,286,929 | ||||
*Retrospectively restated for effect of share reorganization (see Note 1).
| (1) | $3,332,003 amount due from a subsidiary represent the portion of capital contribution that WFOE received on behalf of the Company from several then existing shareholders of Suzhou TC-link as a part of the Reorganization. As these shareholders are PRC citizens, they are restricted from sending cash to overseas based on Regulations on Foreign Exchange Management of the PRC. Accordingly, WFOE has received this portion of contribution on behalf of the Company in order to complete the Reorganization. |
| F-27 |
EASTERN INTERNATIONAL LTD.
PARENT COMPANY STATEMENTS OF LOSS
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| General and administrative expenses | $ | (403,792 | ) | $ | (107,596 | ) | ||
| Interest income | - | 9 | ||||||
| Foreign currency translation gain | - | 1,743 | ||||||
| Net loss | (403,792 | ) | (105,844 | ) | ||||
EASTERN INTERNATIONAL LTD.
PARENT COMPANY STATEMENTS OF CASH FLOWS
| For the years ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (403,792 | ) | $ | (105,844 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Accrued expenses | (30,000 | ) | 30,000 | |||||
| Amount due from a subsidiary | - | (3,332,003 | ) | |||||
| Net cash used in operating activities | (433,792 | ) | (3,407,847 | ) | ||||
| Cash flows from investing activities | ||||||||
| Investment in a subsidiary | - | (3,865,939 | ) | |||||
| Net cash used in investing activities | - | (3,865,939 | ) | |||||
| Cash flows from financing activities: | ||||||||
| (Repayments to) borrowings from related parties | (210,000 | ) | 210,000 | |||||
| Borrowings from subsidiaries | 379,919 | 104,436 | ||||||
| Proceeds from shareholders’ contribution | - | 8,032,043 | ||||||
| Deferred offering costs | (403,814 | ) | (402,097 | ) | ||||
| Net cash (used in) provided by financing activities | (233,895 | ) | 7,944,382 | |||||
| Net (decrease) increase in cash | (667,687 | ) | 670,596 | |||||
| Cash, beginning of the year | 670,596 | - | ||||||
| Cash, end of the year | $ | 2,909 | $ | 670,596 | ||||
| F-28 |
1,600,000 Ordinary Shares
Eastern International Inc.
Until ●, 2025 all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Maxim Group LLC
The date of this prospectus is ●, 2025.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6. Indemnification of Directors and Officers
We are a Cayman Islands exempted company with limited liability. Cayman Islands law does not limit the extent to which a company’s 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. The Articles provides for indemnification of our officers and directors for any liability incurred in their capacities as such, except through their own willful negligence or default.
Pursuant to the indemnification agreements, the form of which will be filed as an exhibit to this registration statement, 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 such a director or officer.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 7. Recent Sales of Unregistered Securities
During the past three years, we have issued the following securities. We believe that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering. No underwriter was involved in these issuances of securities.
Ordinary Shares:
| Purchaser | Date of Issuance | Number of Ordinary Shares | Consideration | |||||||
| ICS Corporate Services (Cayman) Limited | July 27, 2023 | 1 | $ | 0.0001 | ||||||
| Eastern1 Holdings Ltd. | July 27, 2023 | 3,578,170 | $ | 357.817 | ||||||
| Eastern2 Holdings Ltd. | July 27, 2023 | 488,320 | $ | 48.832 | ||||||
| Eastern3 Holdings Ltd. | July 27, 2023 | 428,790 | $ | 42.879 | ||||||
| Eastern4 Holdings Ltd. | July 27, 2023 | 340,270 | $ | 34.027 | ||||||
| Chung Leung Cheung | July 27, 2023 | 323,110 | $ | 32.311 | ||||||
| Ching Hei Li | July 27, 2023 | 323,110 | $ | 32.311 | ||||||
| Yuet Man Wong | July 27, 2023 | 252,230 | $ | 25.223 | ||||||
| Eastern Worldwide Logistics Group Inc. | July 27, 2023 | 4,266,000 | $ | 426.60 | ||||||
| Yi Tak Wong | February 21, 2024 | 63,000 | $ | 126,000 | ||||||
| Edwin ING | February 21, 2024 | 191,000 | $ | 382,000 | ||||||
| Au Yeung Fung Ying Michelle | February 21, 2024 | 63,000 | $ | 126,000 | ||||||
| Chung Leung Cheung | February 21, 2024 | 100,000 | $ | 200,000 | ||||||
Upon our incorporation on July 27, 2023, we issued 10,000,000 Ordinary Shares to nine shareholders in connection with the incorporation of the Company, among which 1 share was issued to our registered office provider as initial subscriber, who then transferred the share Eastern1 Holdings Ltd. on the same day. These issuances were exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions.
Preferred Shares:
| Purchaser | Date of Issuance |
Number of Securities |
Consideration | ||||||
| Albert Wong | February 7, 2024 | 1,000,000 | $ | 100 | |||||
| II-1 |
ITEM 8. Exhibits and Financial Statement Schedules
(a) Exhibits
The following exhibits are filed as part of this registration statement:
| * | To be filed by amendment |
| ** | Filed herewith |
| *** | Previously filed |
| (b) | Financial Statement Schedules |
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or the notes thereto.
| II-2 |
ITEM 9. Undertakings
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) To file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F (17 CFR 249.220f)” at the start of any delayed offering or throughout a continuous offering.
(5) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(6) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
| II-3 |
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the Underwriter at the closing specified in the Underwriting Agreements certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
| II-4 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Suzhou, on August 25, 2025.
| Eastern International Ltd. | ||
| By: | /s/ Albert Wong | |
| Name: | Albert Wong | |
| Title: | Chief Executive Officer and Chairman of the Board of Directors | |
| (Principal Executive Officer) | ||
Each person whose signature appears below constitutes and appoints Albert Wong as attorneys-in-fact with full power of substitution, for him or her in any and all capacities, to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act of 1933, as amended (the “Securities Act”), and any rules, regulations, and requirements of the Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of ordinary shares of the registrant (the “Shares”), including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to the Registration Statement on Form F-1 (the “Registration Statement”) to be filed with the Securities and Exchange Commission with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that such attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Albert Wong | Chief Executive Officer and Chairman of Board and Director | August 25, 2025 | ||
| Albert Wong | (Principal Executive Officer) | |||
| /s/ Chungleung Cheung | Chief Financial Officer | August 25, 2025 | ||
| Chungleung Cheung | (Principal Financial Officer and Principal Accounting Officer) |
|||
| /s/ Chinghei Li | Director | August 25, 2025 | ||
| Chinghei Li |
| II-5 |
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Eastern International Inc. has signed this registration statement on August 25, 2025.
Authorized U.S. Representative COGENCY GLOBAL INC. | ||
| /s/ Colleen A. DeVries | ||
| Name: | Colleen A. DeVries | |
| Title: | Senior Vice President | |
| II-6 |
Exhibit 1.1
EASTERN INTERNATIONAL LTD.
UNDERWRITING AGREEMENT
[ ], 2025
MAXIM GROUP LLC
300 Park Avenue, 16th Floor
New York, NY 10022
As Representative of the Underwriters
named on Schedule I hereto
Ladies and Gentlemen:
The undersigned, Eastern International Ltd. 东源全球股份有限公司, an exempted company duly incorporated with limited liability under the laws of the Cayman Islands (the “Company”), hereby confirms its agreement (this “Agreement”) to issue and sell to the underwriter or underwriters, as the case may be, named in Schedule I hereto (each, an “Underwriter” and, collectively, the “Underwriters;”), for whom Maxim Group LLC is acting as representative (in such capacity, the “Representative”), (A) an aggregate of 1,600,000 ordinary shares (the “Firm Shares”) par value $0.0001 per share of the Company (“Ordinary Shares”) and (B) at the election of the Representative, (i) up to an additional 240,000 Ordinary Shares (the “Option Shares”, and together with the Firm Shares, the “Shares”). The offering and sale of the Shares contemplated by this Agreement is referred to herein as the “Offering”.
1. Securities; Over-Allotment Option.
(a) Purchase of Firm Shares. On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell, severally and not jointly, to the several Underwriters, an aggregate of 1,600,000 Firm Shares at a purchase price of $[ ] per Firm Share which represents a 7.25% discount to the public offering price per Firm Share (the “Purchase Price”).
(b) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule I attached hereto and made a part hereof.
(c) Payment and Delivery. Delivery and payment for the Firm Shares shall be made at 10:00 a.m., New York time, on the second Business Day following the effective date (the “Effective Date”) of the Registration Statement (as hereinafter defined) (or the third Business Day following the Effective Date, if the Registration Statement is declared effective after 4:30 p.m. New York time), or at such time as shall be agreed upon by the Representative and the Company at the offices of the Representative or at such other place as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.” The closing of the payment of the purchase price for, and delivery of certificates representing, the Firm Shares is referred to herein as the “Closing.” Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the full fast transfer facilities of the Depository Trust Company (the “DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two Business Day prior to the Closing Date. The Company will permit the Representative to examine and package the Firm Shares for delivery, at least one Business Day prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all the Firm Shares.
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(d) Over-allotment Option. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Representative on behalf of the Underwriters is hereby granted an option (the “Over-Allotment Option”) to purchase up to an additional 240,000 Option Shares. The purchase price to be paid for the Option Shares subject to the Over-Allotment Option will be equal to $[ ] per Option Share.
(e) Exercise of Option. The Over-allotment Option granted pursuant to Section 1(d) hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Closing Date. The Underwriters will not be under any obligation to purchase any of such Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of written notice to the Company from the Representative, setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for such Option Shares, which will not be later than three Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of the Representative or at such other place as shall be agreed upon by the Company and the Representative. If such delivery and payment for all of the Option Shares does not occur on the Closing Date, the date and time of the closing for such Option Shares will be as set forth in the notice (hereinafter the “Option Closing Date”). Upon exercise of the Over-allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Shares specified in such notice. If any Option Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Option Shares (subject to such adjustments to eliminate fractional securities as the Representative may determine) that bears the same proportion to the number of Firm Shares to be purchased as set forth on Schedule I opposite the name of such Underwriter bears to the total number of Firm Shares.
(f) Payment and Delivery of Option Shares. Payment for Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds by deposit of the price for the Option Shares being purchased to the Company upon delivery to the Underwriters of certificates (in form and substance satisfactory to the Underwriters) representing such Option Shares (or through the full fast transfer facilities of DTC) for the account of the Underwriters. The certificates representing the Option Shares to be delivered will be in such denominations and registered in such names as the Representative requests not less than two Business Day prior to the Closing Date or the Option Closing Date, as the case may be, and will be made available to the Representative for inspection, checking and packaging at the aforesaid office of the Company’s transfer agent or correspondent not less than one Business Day prior to the Closing Date or the Option Closing Date, as the case may be.
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(g) Representative’s Warrants. The Company hereby agrees to issue to the Representative (and/or its designees) on the Closing Date, Warrants to purchase 64,000 Ordinary Shares (the “Closing Representative’s Warrants”) and, on each Option Closing Date, Warrants to purchase a number of Ordinary Shares up to an aggregate of four percent (4%) of the number of Shares issued at such Option Closing Date (the “Option Representative’s Warrants” and, together with the Closing Representative’s Warrants, the “Representative’s Warrants”). The Representative’s Warrants shall be exercisable, in whole or in part, commencing six (6) months from the commencement of the sales of this Offering and expiring five (5) years after the commencement of sales of this Offering, at an initial exercise price of $[ ] per Ordinary Share, which is equal to one hundred and twenty percent (120%) of the Offering price of a Share. The Representative’s Warrants and the Ordinary Shares issuable upon exercise of the Representative’s Warrants are hereinafter referred to collectively as the “Representative’s Securities.” The Representative’s Securities and the Shares shall be collectively referred to as the “Securities.”
2. Representations and Warranties of the Company. The Company represents, warrants and covenants to, and agrees with, each of the Underwriters that, as of the date hereof and as of the Closing Date:
(a) The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form F-1 (Registration No. 333-281900), and amendments thereto, and related preliminary prospectuses for the registration under the Securities Act of 1933, as amended (the “Securities Act”), of the Securities which registration statement, as so amended (including post-effective amendments, if any), has been declared effective by the Commission and copies of which have heretofore been delivered to the Underwriters. The registration statement, as amended at the time it became effective, including the prospectus, financial statements, schedules, exhibits and other information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act, is hereinafter referred to as the “Registration Statement.” If the Company has filed or is required pursuant to the terms hereof to file a registration statement pursuant to Rule 462(b) under the Securities Act registering additional Securities (a “Rule 462(b) Registration Statement”), then, unless otherwise specified, any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration Statement, which, if filed, becomes effective upon filing, no other document with respect to the Registration Statement has heretofore been filed with the Commission. All of the Securities have been registered under the Securities Act pursuant to the Registration Statement or, if any Rule 462(b) Registration Statement is filed, will be duly registered under the Securities Act with the filing of such Rule 462(b) Registration Statement. The Company has responded to all requests of the Commission for additional or supplemental information. Based on communications from the Commission, no stop order suspending the effectiveness of either the Registration Statement or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or, to the Company’s knowledge, threatened by the Commission. The Company, if required by the Securities Act and the rules and regulations of the Commission (the “Rules and Regulations”), proposes to file the Prospectus with the Commission pursuant to Rule 424(b) under the Securities Act (“Rule 424(b)”). The prospectus, in the form in which it is to be filed with the Commission pursuant to Rule 424(b), or, if the prospectus is not to be filed with the Commission pursuant to Rule 424(b), the prospectus in the form included as part of the Registration Statement at the time the Registration Statement became effective, is hereinafter referred to as the “Prospectus,” except that if any revised prospectus or prospectus supplement shall be provided to the Underwriters by the Company for use in connection with the Offering which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the term “Prospectus” shall also refer to such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Underwriters for such use. Any preliminary prospectus or prospectus subject to completion included in the Registration Statement or filed with the Commission pursuant to Rule 424 under the Securities Act is hereafter called a “Preliminary Prospectus.” Any reference herein to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the exhibits incorporated by reference therein pursuant to the Rules and Regulations on or before the Effective Date of the Registration Statement, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be. Any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Securities Exchange Act of 1934, as amended, and together with the Rules and Regulations promulgated thereunder (the “Exchange Act”) after the Effective Date, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed. All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of the foregoing, shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). The Prospectus delivered to the Underwriters for use in connection with the Offering was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T promulgated by the Commission.
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(b) At the time of the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b), when any supplement to or amendment of the Prospectus is filed with the Commission, when any document filed under the Exchange Act was or is filed, at all other subsequent times until the completion of the public offer and sale of the Securities, and at the Closing Date, if any, the Registration Statement and the Prospectus and any amendments thereof and supplements or exhibits thereto complied or will comply in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations, and did not and will not, as of the date of such amendment or supplement, contain an untrue statement of a material fact and did not and will not, as of the date of such amendment or supplement, omit to state any material fact required to be stated therein or necessary in order to make the statements therein: (i) in the case of the Registration Statement, not misleading, and (ii) in the case of the Prospectus, in light of the circumstances under which they were made as of its date, not misleading. When any Preliminary Prospectus was first filed with the Commission (whether filed as part of the registration statement for the registration of the Securities or any amendment thereto or pursuant to Rule 424(a) under the Securities Act) and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (b), however, with respect to any information contained in or omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representative specifically for use therein. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of: the statements set forth in the “Underwriting” section of the Prospectus only insofar as such statements relate to the names and corresponding share amounts set forth in the table of Underwriters, the amount of selling concession and re-allowance or to over-allotment and related activities that may be undertaken by the Underwriters and the paragraphs relating to Electronic Distribution Offers, Outside the United States Selling Restrictions and stabilization by the Underwriters (the “Underwriters’ Information”).
(c) Neither: (i) any Issuer-Represented General Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time (as defined below) and the Statutory Prospectus (as defined below), all considered together (collectively, the “General Disclosure Package”), nor (ii) any individual Issuer-Represented Limited-Use Free Writing Prospectus(es) (as defined below) when considered together with the General Disclosure Package, includes or included as of the Applicable Time any untrue statement of a material fact or omits or omitted as of the Applicable Time to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any Statutory Prospectus included in the Registration Statement, the General Disclosure Package or any Issuer-Represented Limited-Use Free Writing Prospectus (as defined below) in conformity with the Underwriters’ Information. Each of (i) any electronic road show or investor presentation (including without limitation any “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act) delivered to and approved by the Underwriters for use in connection with the marketing of the Offering as of the time of their use and at the Closing Date and on each Option Closing Date, if any and (ii) any individual Written Testing-the-Waters Communication (as defined herein), when considered together with the General Disclosure Package at the Closing Date and on each Option Closing Date, if any, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
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(d) Each Issuer-Represented Free Writing Prospectus, as of its issue date and at all subsequent times until the Closing Date or until any earlier date that the Company notified or notifies the Representative as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the then-current Registration Statement, Statutory Prospectus or Prospectus. If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained in the then-current Registration Statement, Statutory Prospectus or Prospectus relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has notified or will notify promptly the Representative so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is promptly amended or supplemented by the Company, at its own expense, to eliminate or correct such conflict, untrue statement or omission. The preceding two sentences do not apply to statements in or omissions from any Issuer-Represented Free Writing Prospectus in conformity with the Underwriters’ Information.
(e) The Company has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Securities other than the General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus or the Prospectus or other materials permitted by the Securities Act to be distributed by the Company. Unless the Company obtains the prior consent of the Representative, the Company has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Securities Act, required to be filed with the Commission; provided that the prior written consent of the Representative shall be deemed to have been given in respect of any free writing prospectus referenced on Schedule II attached hereto. The Company has complied and will comply with the requirements of Rules 164 and 433 under the Securities Act applicable to any Issuer-Represented Free Writing Prospectus as of its issue date and at all subsequent times through the Closing Date, including timely filing with the Commission where required, legending and record keeping. To the extent an electronic road show is used, the Company has satisfied and will satisfy the conditions in Rule 433 under the Securities Act to avoid a requirement to file with the Commission any electronic road show.
(f) The Representative agrees that, unless it obtains the prior written consent of the Company, it will not make any offer relating to the Securities that would constitute an Issuer-Represented Free Writing Prospectus or that would otherwise (without taking into account any approval, authorization, use or reference thereto by the Company) constitute a “free writing prospectus” required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act; provided that the prior written consent of the Company hereto shall be deemed to have been given in respect of any Issuer-Represented General Free Writing Prospectuses referenced on Schedule II attached hereto.
(g) As used in this Agreement, the terms set forth below shall have the following meanings:
(i) “Applicable Time” means [ ], 2025, ____a.m/p.m. (Eastern time) on the date of this Agreement.
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(ii) “Statutory Prospectus” as of any time means the prospectus that is included in the Registration Statement immediately prior to that time. For purposes of this definition, information contained in a form of prospectus that is deemed retroactively to be a part of the Registration Statement pursuant to Rule 430A or 430B shall be considered to be included in the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule 424(b) under the Securities Act.
(iii) “Issuer-Represented Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, relating to the Securities that (A) is required to be filed with the Commission by the Company, or (B) is exempt from filing pursuant to Rule 433(d)(5)(i) under the Securities Act because it contains a description of the Securities or of the Offering that does not reflect the final terms or pursuant to Rule 433(d)(8)(ii) because it is a “bona fide electronic road show,” as defined in Rule 433 under the Securities Act, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Securities Act.
(iv) “Issuer-Represented General Free Writing Prospectus” means any Issuer-Represented Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule II to this Agreement.
(v) “Issuer-Represented Limited-Use Free Writing Prospectus” means any Issuer-Represented Free Writing Prospectus that is not an Issuer-Represented General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writing Prospectus also includes any “bona fide electronic road show,” as defined in Rule 433 under the Securities Act, that is made available without restriction pursuant to Rule 433(d)(8)(ii), even though not required to be filed with the Commission.
(vi) WWC, P.C. (the “Auditor”), whose reports relating to the Company are included in the Registration Statement, the General Disclosure Package and the Prospectus is an independent registered public accounting firm as required by the Securities Act, the Exchange Act and the Rules and Regulations and the Public Company Accounting Oversight Board (the “PCAOB”). To the Company’s knowledge, the Auditor is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”). The Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
(h) Subsequent to the respective dates as of which information is presented in the Registration Statement, the General Disclosure Package and the Prospectus, and except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus: (i) the Company has not declared, paid or made any dividends or other distributions of any kind on or in respect of its capital stock, and (ii) there has been no material adverse change (or, to the knowledge of the Company, any development which would reasonably be expected to result in a material adverse change in the future), whether or not arising from transactions in the ordinary course of business, in or affecting: (A) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company; (B) the long-term debt or capital stock of the Company; or (C) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Representative Warrants, the Registration Statement, the General Disclosure Package and the Prospectus (a “Material Adverse Change”). Since the date of the latest balance sheet presented in the Registration Statement, the General Disclosure Package and the Prospectus, the Company has not incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company, except for liabilities, obligations and transactions which are disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.
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(i) As of the dates indicated in the Registration Statement, the General Disclosure Package and the Prospectus, the authorized, issued and outstanding shares of capital stock of the Company were as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column headed “Actual” under the section thereof captioned “Capitalization” and, after giving effect to the Offering and the other transactions (excluding the offer and sale of the Option Shares) contemplated by this Agreement, the Registration Statement, the General Disclosure Package and the Prospectus, will be as set forth in the column headed “As Adjusted” in such section. All of the issued shares of capital stock of the Company, including the outstanding Ordinary Shares of the Company, have been duly authorized and validly issued and are fully paid and nonassessable and have been issued in compliance with all applicable state, federal and securities laws and none of those shares was issued in violation of any preemptive rights, rights of first refusal or other similar rights to the extent any such rights were not waived; the Shares have been duly authorized and, when issued and delivered against payment therefore as provided in this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of the Securities is not subject to any preemptive rights, rights of first refusal or other similar rights that have not heretofore been waived (with copies of such waivers provided to the Underwriters); and no holder of any Shares or any Ordinary Shares is or will be subject to personal liability by reason of being such a holder. The Securities conform to the descriptions thereof contained in the Registration Statement, the General Disclosure Package and the Prospectus.
(j) Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, (A) there are no outstanding rights (contractual or otherwise), warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity interest in the Company or any of its Subsidiaries and (B) there are no contracts, agreements or understandings between the Company and/or any of its Subsidiaries and any person granting such person the right to require the Company to file a registration statement under the Securities Act or otherwise register any securities of the Company owned or to be owned by such person and any such rights so disclosed have been waived by the holders thereof in connection with this Agreement and the transactions contemplated hereby including the Offering;
(k) The Company is a “foreign private issuer” within the meaning of Rule 405 under the Securities Act.
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(l) The Ordinary Shares underlying the Representative’s Warrants have been duly authorized and reserved for issuance, conform to the description thereof in the Registration Statement, the General Disclosure Package and the Prospectus and have been validly reserved for issuance and will, upon exercise of the Representative’s Warrants and payment of the exercise price thereof, be duly and validly issued, fully paid and non-assessable and will not have been issued in violation of or be subject to preemptive or similar rights to subscribe for or purchase securities of the Company and the holders thereof will not be subject to personal liability by reason of being such holders.
(m) The subsidiaries of the Company (the “Subsidiaries”), together with their respective jurisdictions of incorporation are listed on Schedule IV hereto. Each of the Subsidiaries is directly or indirectly wholly-owned by the Company and no person or entity has any right to acquire any equity interest in any of the Subsidiaries. Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company holds no ownership or other interest, nominal or beneficial, direct or indirect, in any corporation, partnership, joint venture or other business.
(n) The Company and each of its Subsidiaries has been duly incorporated and validly exists as a company, in good standing under the laws of the jurisdiction of its incorporation or has been duly formed and validly exists as a limited liability company under the laws of the jurisdiction of its formation. The Company and each of its Subsidiaries has all requisite power and authority to carry on its business as it is currently being conducted and as described in the Registration Statement, the General Disclosure Package and the Prospectus, and to own, lease and operate its properties. The Company and each of its Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except, in each case, for those failures to be so qualified or in good standing which (individually and in the aggregate) would not reasonably be expected to have a material adverse effect on: (i) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company and its Subsidiaries, considered as a whole; (ii) the long-term debt or capital stock of the Company; or (iii) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Registration Statement, the General Disclosure Package and the Prospectus (any such effect being a “Material Adverse Effect”).
(o) To the knowledge of the Company, neither the Company nor any of its Subsidiaries is: (i) in violation of its amended and restated memorandum and articles of incorporation or bylaws or other organizational documents (ii) in default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject; and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any lien, security interest, charge or other encumbrance (a “Lien”) upon any of its property or assets pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, or (iii) in violation in any respect of any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, foreign or domestic, except, in the case of subsections (ii) and (iii) above, for such violations or defaults which (individually or in the aggregate) would not reasonably be expected to have a Material Adverse Effect.
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(p) The Company has full right, power and authority to execute and deliver this Agreement, the Representative’s Warrants and all other agreements, documents, certificates and instruments required to be delivered pursuant to this Agreement and the Representative’s Warrants. The Company has duly and validly authorized this Agreement, the Representative’s Warrants and each of the transactions contemplated thereby. This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(q) When issued, the Representative’s Warrants will constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment of the respective exercise prices therefor, the number and type of securities of the Company called for thereby in accordance with the terms thereof and the Representative’s Warrants are enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under foreign, federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(r) The execution, delivery, and performance by the Company of this Agreement, the Representative’s Warrants and all other agreements, documents, certificates and instruments required to be delivered pursuant to this Agreement, and the Representative’s Warrants and consummation of the transactions contemplated hereby and thereby do not and will not: (i) conflict with, require consent under or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any Lien upon any property or assets of the Company of any of its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement, instrument, franchise, license or permit to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of their respective properties, operations or assets may be bound or (ii) violate or conflict with any provision of the certificate of incorporation, by-laws, or other organizational documents of the Company or any of its Subsidiaries, or (iii) violate or conflict with any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, domestic or foreign applicable to the Company or any of its Subsidiaries, including the China Securities Regulatory Commission (the “CSRC”), or (iv) except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, trigger a reset or repricing of any outstanding securities of the Company or any of its Subsidiaries.
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(s) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company and each of its Subsidiaries have all material consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate their respective properties and conduct their respective businesses as they are now being conducted and as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, and each such Consent is valid and in full force and effect, except which (individually or in the aggregate), in each such case, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received notice of any investigation or proceedings which results in or, if decided adversely to the Company or any of its Subsidiaries could reasonably be expected to result in, the revocation of, or imposition of a materially burdensome restriction on, any Consent. No Consent contains a materially burdensome restriction not adequately disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.
(t) The Company and each of its Subsidiaries is in compliance with all material applicable laws, rules, regulations, ordinances, directives, judgments, decrees and orders, foreign and domestic, except for any non-compliance the consequences of which would not have or reasonably be expected to have a Material Adverse Effect.
(u) The Company has filed with the Commission a Form 8-A (File Number 001-________) providing for the registration of the Ordinary Shares (the “Form 8-A Registration Statement”). The Ordinary Shares are registered pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Form 8-A Registration Statement was declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Ordinary Shares under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
(v) The Ordinary Shares have been approved for listing on the NASDAQ Capital Market, subject to official notice of issuance (the “Exchange”), and the Company has taken no action designed to, or likely to have the effect of, delisting the Ordinary Shares from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing.
(w) No consent of, with or from any judicial, regulatory or other legal or governmental agency or body or any third party, foreign or domestic is required for the execution, delivery and performance of this Agreement or the Representative’s Warrants or the consummation of each of the transactions contemplated hereby and thereby, including the issuance, sale and delivery of the Securities to be issued, sold and delivered hereunder, except (i) such as may have previously been obtained (with copies of such consents provided to the Underwriters), (ii) the registration under the Securities Act of the Securities, which has become effective, (iii) such consents as may be required under state securities or blue sky laws or the by-laws and rules of the Nasdaq Capital Market, and (iii) the FINRA’s approval in connection with the purchase and distribution of the Securities by the Underwriters, each of which has been obtained and is in full force and effect.
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(x) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no judicial, regulatory, arbitral or other legal or governmental proceeding or other litigation or arbitration, domestic or foreign, pending to which the Company or any of its Subsidiaries is a party or of which any property, operations or assets of the Company or any of its Subsidiaries is the subject which, individually or in the aggregate, if determined adversely to the Company or any of its Subsidiaries would reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, no such proceeding, litigation or arbitration is threatened or contemplated and the defense of any such proceedings, litigation and arbitration against or involving the Company or any of its Subsidiaries would not reasonably be expected to have a Material Adverse Effect.
(y) The financial statements, including the notes thereto, and the supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus comply in all material respects with the requirements of the Securities Act and the Exchange Act, and present fairly in all material respects the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company. Except as otherwise stated in the Registration Statement, the General Disclosure Package and the Prospectus, said financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved, except in the case of unaudited financials which are subject to normal year end adjustments and do not contain certain footnotes. The supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly in all material respects the information required to be stated therein. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the General Disclosure Package or the Prospectus. The other financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly in all material respects the information included therein and have been prepared on a basis consistent with that of the financial statements that are included in the Registration Statement, the General Disclosure Package and the Prospectus and the books and records of the respective entities presented therein.
(z) There are no pro forma or as adjusted financial statements which are required to be included in the Registration Statement, the General Disclosure Package and the Prospectus in accordance with Regulation S-X which have not been included as so required. The pro forma and pro forma as adjusted financial information included in the Registration Statement, the General Disclosure Package and the Prospectus has been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Rules and Regulations and include all adjustments necessary to present fairly in accordance with GAAP the pro forma and as adjusted financial position of the respective entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods specified. The assumptions used in preparing the pro forma and pro forma as adjusted financial information included in the Registration Statement, the General Disclosure Package and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein. The related pro forma and pro forma as adjusted adjustments give appropriate effect to those assumptions; and the pro forma and pro forma as adjusted financial information reflect the proper application of those adjustments to the corresponding historical financial statement amounts.
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(aa) The statistical, industry-related and market-related data included in the Registration Statement, the General Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.
(bb) The Company has established and maintains disclosure controls and procedures over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) and such controls and procedures are designed to ensure that information relating to the Company required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company has utilized such controls and procedures in preparing and evaluating the disclosures in the Registration Statement, in the General Disclosure Package and in the Prospectus.
(cc) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company’s board of directors has validly appointed an audit committee whose composition satisfies the requirements of the rules and regulations of the Nasdaq Stock Market and the board of directors and/or audit committee has adopted a charter that satisfies the requirements of the rules and regulations of the Nasdaq Stock Market. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, neither the board of directors nor the audit committee has been informed, nor is the Company aware, of: (i) any 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; or (ii) 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.
(dd) Neither the Company nor any of its Subsidiaries nor any of their respective Affiliates (as defined in the Securities Act) has taken, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.
(ee) Neither the Company nor any of its Subsidiaries nor any of their respective Affiliates has, prior to the date hereof, made any offer or sale of any securities which are required to be “integrated” pursuant to the Securities Act or the Rules and Regulations with the offer and sale of the Securities pursuant to the Registration Statement. Except as disclosed in the Registration Statement, the General Disclosure Package, and the Prospectus, neither the Company nor any of its Affiliates has sold or issued any securities during the six-month period preceding the date of the Prospectus, including but not limited to any sales pursuant to Rule 144A or Regulation D or Regulation S under the Securities Act.
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(ff) To the knowledge of the Company, all information contained in the questionnaires completed by each of the Company’s officers and directors and 5% holders immediately prior to the Offering and provided to the Representative as well as the biographies of such officers and directors in the Registration Statement are true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the questionnaires completed by the directors and officers to become inaccurate and incorrect.
(gg) To the knowledge of the Company, no director or officer of the Company is subject to any non-competition agreement or non-solicitation agreement with any current employer or prior employer which could materially affect his or her ability to be and act in his or her respective capacity of the Company.
(hh) The Company is not and, at all times up to and including consummation of the transactions contemplated by this Agreement, and after giving effect to application of the net proceeds of the Offering, will not be, subject to registration as an “investment company” under the Investment Company Act of 1940, as amended, and is not and will not be an entity “controlled” by an “investment company” within the meaning of such act.
(ii) To the knowledge of the Company, no relationship, direct or indirect, exists between or among any of the Company or, to the knowledge of the Company, any Affiliate of the Company, on the one hand, and any director, officer, shareholder, customer or supplier of the Company or, to the knowledge of the Company, any Affiliate of the Company, on the other hand, which is required by the Securities Act, the Exchange Act or the Rules and Regulations to be described in the Registration Statement or the Prospectus which is not so described as required. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members. The Company has not, in violation of Sarbanes-Oxley, directly or indirectly extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company, except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.
(jj) The Company is in material compliance with the rules and regulations promulgated by the Nasdaq Stock Market (to the extent applicable to the Company prior to the listing of the Ordinary Shares on the Nasdaq Capital Market following the Closing) or any other governmental or self-regulatory entity or agency, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. Without limiting the generality of the foregoing: (i) all members of the Company’s board of directors who are required to be “independent” (as that term is defined under applicable laws, rules and regulations), including, without limitation, all members of the audit committee of the Company’s board of directors, meet the qualifications of independence as set forth under applicable laws, rules and regulations and (ii) the audit committee of the Company’s board of directors has at least one member who is an “audit committee financial expert” (as that term is defined under applicable laws, rules and regulations).
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(kk) To the knowledge of the Company, except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there are no contracts, agreements or understandings between the Company or any of its Subsidiaries and any Person that would give rise to a valid claim against the Company or any of its Subsidiaries or, to the knowledge of the Company, any Underwriter for a brokerage commission, finder’s fee, financial consulting fee or other like payment in connection with the transactions contemplated by this Agreement or, to the knowledge of the Company, any arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, shareholders, partners, employees or Affiliates that may affect the Underwriters’ compensation as determined by FINRA.
(ll) The Company and each of its Subsidiaries owns or leases all such properties (other than intellectual property, which is covered by Section 2(mm)) as are necessary to the conduct of its business as presently operated as described in the Registration Statement, the General Disclosure Package and the Prospectus. The Company and each of its Subsidiaries has good and marketable title in fee simple subject to the local laws and regulations to all real property and good and marketable title to all personal property owned by it, in each case free and clear of all Liens except such as are described in the Registration Statement, the General Disclosure Package and the Prospectus or such as do not (individually or in the aggregate) materially affect the business or prospects of the Company or any of its Subsidiaries. Any real property and buildings held under lease or sublease by the Company or any of its Subsidiaries are held by it under valid, subsisting and, to the Company’s knowledge, enforceable leases with such exceptions as are not material to, and do not materially interfere with, the use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has received any notice of any claim adverse to its ownership of any real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company or any of its Subsidiaries.
(mm) The Company and each of its Subsidiaries: (i) owns, possesses, or has the adequate right to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade secrets and other unpatented and/or unpatentable material proprietary or confidential information, systems or procedures, “Intellectual Property”) necessary for the conduct of its businesses as being conducted and as described in the Registration Statement, the General Disclosure and Prospectus and (ii) has no knowledge that the conduct of its business conflicts or will conflict with the intellectual property rights of others, and has not received any notice of any claim of conflict with, any right of others. Except as set forth in the Registration Statement, the General Disclosure Package or the Prospectus, neither the Company nor any of its Subsidiaries has granted or assigned to any other Person any right to sell any of the products or services of the Company or any of its Subsidiaries. To the Company’s knowledge, there is no infringement by third parties of any such Intellectual Property; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the rights of the Company or any of its Subsidiaries in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any of its Subsidiaries infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, neither the Company nor any of its Subsidiaries has received any claim for royalties or other compensation from any Person, including any employee of the Company or any of its Subsidiaries who made inventive contributions to the technology or products of the Company or any of its Subsidiaries that are pending or unsettled, and except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus neither the Company nor any of its Subsidiaries has any obligation to pay material royalties to any Person on account of inventive contributions.
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(nn) The agreements and documents described in the Registration Statement, the General Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein. Each agreement or other instrument (however characterized or described) to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or business are or may be bound or affected and (i) that is referred to in the Registration Statement, the General Disclosure Package or the Prospectus or attached as an exhibit thereto, or (ii) is material to the businesses of the Company and its Subsidiaries, has been duly and validly executed by the Company or its Subsidiary, as the case may be, is in full force and effect in all material respects and is enforceable against the Company in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the foreign, federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and none of such agreements or instruments has been assigned by the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any other party is in breach or default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a breach or default thereunder, in any such case, which would result in a Material Adverse Effect.
(oo) The disclosures in the Registration Statement, the General Disclosure Package and the Prospectus concerning the effects of foreign, federal, state and local regulation on the respective businesses of the Company and each of its Subsidiaries as currently contemplated are correct in all material respects and do not omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
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(pp) Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has made or filed all United States federal, state and local income and all Cayman Islands, Singapore and other foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. No deficiency assessment with respect to a proposed adjustment of the federal, state, local or foreign taxes of the Company or any of its Subsidiaries is pending or, to the Company’s knowledge, threatened There is no tax lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or any of its Subsidiaries, other than liens for taxes not yet delinquent, or being contested in good faith by appropriate proceedings and for which reserves in accordance with GAAP have been established in the Company’s books and records. The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges in the nature of taxes, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.
(qq) No labor disturbance or dispute by or with the employees of the Company or any of its Subsidiaries which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, currently exists or, to the Company’s knowledge, is threatened. The Company and each of its Subsidiaries is in compliance in all material respects with the labor and employment laws and collective bargaining agreements and extension orders applicable to its employees.
(rr) To the best knowledge of the Company after all due inquiry/investigation, the Company’s and its Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform as required in connection with the operation of the business of the Company and its Subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company and its Subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal Data”)) used in connection with their businesses, and there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person, nor any incidents under internal review or investigations relating to the same. The Company and its Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any governmental authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification, except where the failure of any of the foregoing would not have a Material Adverse Change.
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(ss) Each of the Company and its Subsidiaries has complied with all applicable laws concerning cybersecurity, data protection, confidentiality and archive administration (collectively, the “Data Protection Laws”); (B) neither the Company nor any Subsidiaries is, or is expected to be classified as, a “critical information infrastructure operator” under the Cybersecurity Law of the PRC; (C) neither the Company nor any of its Subsidiaries is subject to any investigation, inquiry or sanction relating to cybersecurity, data privacy, confidentiality or archive administration, or any cybersecurity review by the Cyberspace Administration of China (“CAC”), the CSRC, or any other relevant governmental authority; (D) neither the Company nor any of its Subsidiaries has received any notice (including, without limitation, any enforcement notice, de-registration notice or transfer prohibition notice), letter, complaint or allegation from the relevant cybersecurity, data privacy, confidentiality or archive administration governmental authority alleging any breach or non-compliance by it of the applicable Data Protection Laws or prohibiting the transfer of data to a place outside the relevant jurisdiction; (E) neither the Company nor any of its Subsidiaries has received any claim for compensation from any person in respect of its business under the applicable Data Protection Laws and industry standards in respect of inaccuracy, loss, unauthorized destruction or unauthorized disclosure of data and there is no outstanding order against the Company or any of its Subsidiaries in respect of the rectification or erasure of data; (F) no warrant has been issued authorizing the cybersecurity, data privacy, confidentiality or archive administration governmental authority (or any of its officers, employees or agents) to enter any of the premises of the Company or any of its Subsidiaries for the purposes of, inter alia, searching them or seizing any documents or other materials found there; (G) neither the Company nor any of its Subsidiaries has received any communication, enquiry, notice, warning or sanctions with respect to the Cybersecurity Law of the PRC or from the CAC or pursuant to the Data Protection Laws (including, without limitation, the CSRC Archive Rules (as defined below)); (H) the Company is not aware of any pending or threatened investigation, inquiry or sanction relating to cybersecurity, data privacy, confidentiality or archive administration, or any cybersecurity review, by the CAC, the CSRC, or any other relevant governmental authority on the Company or any of its Subsidiaries or any of their respective directors, officers and employees; (I) the Company is not aware of any pending or threatened actions, suits, claims, demands, investigations, judgments, awards and proceedings on the Company and any of its Subsidiaries or any of their respective directors, officers and employees pursuant to the Data Protection Laws (including, without limitation, the CSRC Archive Rules); and (J) neither the Company nor any of its Subsidiaries has received any objection to the transactions contemplated under this Agreement from the CSRC, the CAC or any other relevant governmental authority , except where in the case of (A), (D), (E), (F), (G), (H) and (I), any such breach, violation or default would not, in dividually or in the aggregate, have a Material Adverse Effect.
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(tt) Except as disclosed in the Registration Statement, to the knowledge of the Company the General Disclosure Package and the Prospectus, and would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect, the Company and each of its Subsidiaries has at all times operated its business in material compliance with all Environmental Laws (as hereinafter defined), and no material expenditures are or will be required in order to comply therewith. Neither the Company nor any of its Subsidiaries has received any notice or communication that relates to or alleges any actual or potential violation or failure to comply with any Environmental Laws that would, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. As used herein, the term “Environmental Laws” means all applicable laws and regulations, including any licensing, permits or reporting requirements, and any action by a federal state or local government entity pertaining to the protection of the environment, protection of public health, protection of worker health and safety, or the handling of hazardous materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq.
(uu) Except as would not result in a Material Adverse Effect, neither the Company nor any of its Subsidiaries has failed to file with the applicable regulatory authorities any filing, declaration, listing, registration, report or submission that is required to be so filed for the business operation of the Company and its Subsidiaries as currently conducted. All such filings were in material compliance with applicable laws when filed and no deficiencies have been asserted in writing by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions. The Company and each of its Subsidiaries holds, and is in material compliance with, all franchises, grants, authorizations, licenses, permits, easements, consents, certificates and orders (“Permits”) of any governmental or self-regulatory agency, authority or body required for the conduct of the business of the Company and its Subsidiaries as currently conducted, and all such Permits are in full force and effect, in each case except where the failure to hold, or comply with, any of them is not reasonably likely to result in a Material Adverse Effect.
(vv) Neither the Company nor any Subsidiary of the Company nor, to the knowledge of the Company, any other person associated with or acting on behalf of the Company or any Subsidiary including, without limitation, any director, officer, agent or employee of the Company or any Subsidiary, has, directly or indirectly, while acting on behalf of the Company or such Subsidiary: (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful payment.
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(ww) Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve
(xx) The operations of the Company and each of its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record keeping and reporting requirements and money laundering statutes of the Cayman Islands, China, and the United States and, to the Company’s knowledge, all other jurisdictions to which the Company is subject, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(yy) Neither the Company nor any of its Subsidiaries nor to the knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), the United Nations Security Council, the Monetary Authority of Singapore or other relevant authorities (collectively, “Sanctions”) nor located, organized or resident in a country or territory that is the subject of Sanctions. The Company will not directly or indirectly use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any joint venture partner or other person or entity, for the purpose of funding or financing the activities or business of or with any Person or in any country or territory that. At the time of such funding or facilitation is the subject of to any Sanctions, or in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the Offering). For the past five years, neither the Company nor any of its Subsidiaries has knowingly engaged in, is not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
(zz) Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. To the Company’s knowledge, there are no other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its Affiliates that may affect the Underwriters’ compensation, as determined by FINRA. Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to (i) any person, as a finder’s fee, investing fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who provided capital to the Company, (ii) any FINRA member, or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member participating in the Offering within the 12-month period prior to the date on which the Registration Statement was filed with the Commission (the “Filing Date”) or thereafter. To the Company’s knowledge, no (i) officer or director of the Company or its Subsidiaries, (ii) owner of 10% or more of the Company’s unregistered securities or that of its Subsidiaries or (iii) owner of any amount of the Company’s unregistered securities acquired within the 180-day period prior to the Filing Date, has any direct or indirect affiliation or association with any FINRA member participating in the Offering. The Company will advise the Underwriters and their respective counsel if it becomes aware that any officer, director or stockholder of the Company or its Subsidiaries is or becomes an affiliate or associated person of a FINRA member participating in the Offering.
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(aaa) Except for key man insurance to cover the loss of key personnel or as disclosed in the Prospectus, the Company and each of its Subsidiaries maintains insurance in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect, except where the failure to maintain such insurance could not reasonably be expected to have Material Adverse Effect. The Company reasonably believes that it and each of its Subsidiaries will be able to renew its existing insurance as and when such coverage expires or will be able to obtain replacement insurance adequate for the conduct of its respective business and the value of its respective properties at a cost that would not have a Material Adverse Effect.
(bbb) Except as disclosed in the General Disclosure Package and the Prospectus, under current laws and regulations of the Cayman Islands, all dividends and other distributions declared and payable on the Securities may be paid by the Company to the holder thereof in United States dollars and freely transferred out of the Cayman Islands and all such payments made to holders thereof or therein who are non-residents of the Cayman Islands will not be subject to income, withholding or other taxes under laws and regulations of the Cayman Islands and will otherwise be free and clear of any other tax, duty, withholding or deduction in the Cayman Islands and without the necessity of obtaining any governmental authorization in the Cayman Islands.
(ccc) The choice of the laws of the State of New York as the governing law of this Agreement and the Representative’s Warrants is a valid choice of law under the laws of the Cayman Islands and will be honored by courts in the Cayman Islands The Company has the power to submit, and pursuant to Section 15 of this Agreement, has legally, validly, effectively and irrevocably submitted, to the personal jurisdiction of each United States federal court and New York state court located in the Borough of Manhattan, in the City of New York, New York, U.S.A. (each, a “New York Court”), and the Company has the power to designate, appoint and authorize, and pursuant to Section 15 of this Agreement, has legally, validly, effectively and irrevocably designated, appointed and authorized an agent for service of process in any action arising out of or relating to this Agreement, the Registration Statement, the Prospectus or the Securities in any New York Court, and service of process effected on such authorized agent will be effective to confer valid personal jurisdiction over the Company as provided in Section 15 hereof.
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(ddd) Except as provided by laws or statutes generally applicable to transactions of the type described in this Agreement, neither the Company nor any of its respective properties, assets or revenues has any right of immunity under the Cayman Islands, China, New York or United States law, from any legal action, suit or proceeding, from the giving of any relief in any Cayman Islands, China, New York or United States federal court, from service of process, attachment upon or prior judgment, or attachment in aid of execution of judgment, or from execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement. To the extent that the Company or any of its respective properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, the Company waives or will waive such right to the extent permitted by law and has consented to such relief and enforcement as provided in Section 15 of this Agreement.
(eee) Each of this Agreement and the Representative’s Warrants is in proper form under the laws of the Cayman Islands for the enforcement thereof against the Company, and to ensure the legality, validity, enforceability or admissibility into evidence in the Cayman Islands of this Agreement and the Representative’s Warrants, it is not necessary that this Agreement or the Representative’s Warrants be filed or recorded with any court or other authority in the Cayman Islands or, except as disclosed in the most recent Preliminary Prospectus or Prospectus, that any stamp or similar tax in the Cayman Islands be paid on or in respect of this Agreement, the Representative’s Warrants or any other documents to be furnished hereunder. Any final judgment for a fixed sum of money rendered by a New York Court having jurisdiction under its own domestic laws in respect of any suit, action or proceeding against the Company based upon this Agreement or the Representative’s Warrants and any instruments or agreements entered into for the consummation of the transactions contemplated herein and therein would be recognized and enforced against the Company by the Cayman Islands courts, without re-examination or re-litigation of matters adjudicated upon, provided such judgment: (a) is given by a foreign court of competent jurisdiction; (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty; (e) was not obtained by fraud; and (f) is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. The Company is not aware of any reason why the enforcement in the Cayman Islands of such a New York Court judgment would be, as of the date hereof, contrary to public policy of the Cayman Islands.
(fff) The issuance and sale of the Ordinary Shares, the listing and trading of the Ordinary Shares on Nasdaq and the consummation of the transactions contemplated by this Agreement has fully complied with the requirements of the applicable laws and regulations, including the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and related regulations, rules or guidelines and the Provisions on Strengthening the Confidentiality and Archive Management Work Relating to the Overseas Securities Offering and Listing (the “Confidentiality Provisions”). The Company has duly completed the required filings with CSRC for the issuance and sale of the Ordinary Shares, the listing and trading of the Ordinary Shares on Nasdaq and the consummation of the transactions contemplated by this Agreement. All such authorizations and filings are valid and in full force and effect and the Company and its Subsidiaries are in compliance with the terms and conditions of such all such authorizations and filings, and contain no burdensome restrictions or conditions; and neither the Company nor any of its Subsidiaries has received notice of any revocation, termination or modification of, or non-compliance with, any such authorization or filings or has any reason to believe that any such authorization or filings will be revoked.
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(ggg) Each of the letters, filings, correspondences, communications, documents, responses, undertakings and submissions in any form, including any amendments, supplements and/or modifications thereof, made or to be made to the CSRC, relating to or in connection with the offering of the Ordinary Shares pursuant to the CSRC Filing Rules (as defined below) and other applicable rules and requirements of the CSRC (including, without limitation, the filing report of the Company in relation to this Offering, including any amendments, supplements and/or modifications thereof, submitted to the CSRC pursuant to Article 13 of the CSRC Filing Rules (the “CSRC Filing Report”) and supplementary explanation, filings and/or responses for the purpose of replying to queries and comments raised by the CSRC) (the “CSRC Filings”) is and remains complete, true and accurate and not misleading in any respect, and does not omit any information which would make the statements made therein, in light of the circumstances under which they were made, misleading in any respect. The Company has complied with all requirements and timely submitted all requisite filings in connection with the Offering (including, without limitation, the CSRC Filing Report) with the CSRC pursuant to the CSRC Filing Rules and all applicable laws, and the Company has not received any notice of rejection, withdrawal or revocation from the CSRC in connection with such CSRC Filings. Each of the CSRC Filings made by or on behalf of the Company is in compliance with the disclosure requirements pursuant to the CSRC Filing Rules. The Company has not submitted any undertakings in connection with the Company or this Offering to CSRC or other PRC regulators that the Representative are not aware of.
(hhh) As used in this Agreement, references to matters being “material” with respect to the Company or any of its Subsidiaries shall mean a material event, change, condition, status or effect related to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, prospects, operations or results of operations of the Company and such Subsidiaries either individually or taken as a whole, as the context requires.
(iii) As used in this Agreement, the term “knowledge of the Company” (or similar language) shall mean the knowledge of the executive officers of the Company who are named in the Prospectus, with the assumption that such executive officers shall have made reasonable and diligent inquiry of the matters presented (with reference to what is customary and prudent for the applicable individuals in connection with the discharge by the applicable individuals of their duties as executive officers of the Company).
(jjj) Any certificate signed by or on behalf of the Company and delivered to the Underwriters or to Hunter Taubman Fischer & Li LLC (“Underwriters’ Counsel”) shall be deemed to be a representation and warranty by the Company to each Underwriter listed on Schedule I hereto as to the matters covered thereby.
3. Offering. Upon authorization of the release of the Securities by the Representative, the Underwriters propose to offer the Securities for sale to the public upon the terms and conditions set forth in the Prospectus.
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4. Covenants of the Company. The Company acknowledges, covenants and agrees with the Representative that:
(a) The Registration Statement and any amendments thereto have been declared effective, and if Rule 430A is used or the filing of the Prospectus is otherwise required under Rule 424(b), the Company will file the Prospectus (properly completed if Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time period and will provide evidence satisfactory to the Representative of such timely filing. The Company will file with the Commission all Issuer Free Writing Prospectuses in the time and manner required under Rules 433(d) or 163(b)(2), as the case may be.
(b) During the period beginning on the date hereof and ending on the later of the Closing Date or such date as, in the opinion of Underwriters’ Counsel, the Prospectus is no longer required by law to be delivered (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act is no longer required to be provided), in connection with sales by an underwriter or dealer (the “Prospectus Delivery Period”), prior to amending or supplementing the Registration Statement or the Prospectus, the Company shall furnish to the Representatives for review a copy of each such proposed amendment or supplement, and the Company shall not file any such proposed amendment or supplement to which the Representatives reasonably object within 36 hours of delivery thereof to the Representatives and Underwriters’ Counsel
(c) After the date of this Agreement, the Company shall promptly advise the Representative in writing (i) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (ii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any prospectus, the General Disclosure Package or the Prospectus, (iii) of the time and date that any post-effective amendment to the Registration Statement becomes effective, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order preventing or suspending its use or the use of any prospectus, the General Disclosure Package, the Prospectus or any Issuer-Represented Free Writing Prospectus, or of any proceedings to remove, suspend or terminate from listing the Ordinary Shares from any securities exchange upon which they are listed for trading, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order at any time, the Company will use its reasonable efforts to obtain the lifting of such order at the earliest possible moment. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b), 430A and 430B, as applicable, under the Securities Act and will use its commercially reasonable efforts to confirm that any filings made by the Company under Rule 424(b) or Rule 433 were received in a timely manner by the Commission (without reliance on Rule 424(b)(8) or Rule 164(b)).
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(d) During the Prospectus Delivery Period, the Company will comply in all material respects with all requirements imposed upon it by the Securities Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, and by the Exchange Act so far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof, the General Disclosure Package, the Registration Statement and the Prospectus. If during such period any event occurs as a result of which the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the General Disclosure Package ) would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which such statements were made, not misleading, or if during such period it is necessary or appropriate in the opinion of the Company or its counsel or the Representative or Underwriters’ Counsel to amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the General Disclosure Package) to comply with the Securities Act or to file under the Exchange Act any document which would be deemed to be incorporated by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, the Company will promptly notify the Representative and will amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the General Disclosure Package) or file such document (at the expense of the Company) so as to correct such statement or omission or effect such compliance.
(i) If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Statutory Prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has promptly notified or promptly will notify the Representative and has promptly amended or will promptly amend or supplement, at its own expense, such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(e) The Company will promptly deliver to the Underwriters and Underwriters’ Counsel a signed copy of the Registration Statement, as initially filed and all amendments thereto, including all consents and exhibits filed therewith, and will maintain in the Company’s files manually signed copies of such documents for at least five (5) years after the date of filing thereof. The Company will promptly deliver to each of the Underwriters such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement, and all amendments of and supplements to such documents, if any, and all documents which are exhibits to the Registration Statement and Prospectus or any amendment thereof or supplement thereto, as the Underwriters may reasonably request. Prior to 10:00 a.m., New York time, on the Business Day next succeeding the date of this Agreement and from time to time thereafter, the Company will furnish the Underwriters with copies of the Prospectus in New York City in such quantities as the Underwriters may reasonably request.
(f) The Company consents to the use and delivery of the Preliminary Prospectus by the Underwriters in accordance with Rule 430 and Section 5(b) of the Securities Act.
(g) If the Company elects to rely on Rule 462(b) under the Securities Act, the Company shall both file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the Securities Act by the earlier of: (i) 10:00 p.m., New York City time, on the date of this Agreement, and (ii) the time that confirmations are given or sent, as specified by Rule 462(b)(2).
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(h) The Company will use its commercially reasonable efforts, in cooperation with the Representative, at or prior to the time of effectiveness of the Registration Statement, to qualify the Securities for offering and sale under the securities laws relating to the offering or sale of the Securities of such jurisdictions, domestic or foreign, as the Representative may reasonably designate and to maintain such qualification in effect for so long as required for the distribution thereof, except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction, to execute a general consent to service of process in any such jurisdiction, or to subject itself to taxation in any such jurisdiction if it is otherwise not so subject.
(i) During the six-month period following the date of this Agreement (the “Company Lock-up Period”), the Company may not, without the prior written consent of the Representative, (i) offer, sell, issue, agree or contract to sell or issue or grant any option for the sale of any securities of the Company, except for (A) the issuance of securities under any equity compensation plan of the Company, (B) the issuance of Ordinary Shares upon the exercise or conversion of securities that are issued and outstanding on the date of this Agreement and are described in the Registration Statement and the Prospectus, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price or conversion price of such securities (other than in connection with stock splits, adjustments or combinations as set forth in such securities) or to extend the term of such securities, and (C) the issuance of securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith within 180 days following the Closing Date, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities; or (ii) file any registration statement relating to the offer or sale of any of the Company’s securities.
(j) Schedule II hereto contains a complete and accurate list of the Company’s executive officers, directors and holders of 5% or more of the Company’s Ordinary Shares (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Annex I (the “Lock-Up Agreement”), prior to the execution of this Agreement.
(k) If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in a Lock-Up Agreement described in Section 4(j) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by (i) a press release substantially in the form of Annex VI hereto through a major news service or (ii) any other method that satisfies the obligations described in FINRA Rule 5131(d)(2) at least two business days before the effective date of the release or waiver.
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(l) The Company shall comply with the PRC Overseas Investment and Listing Regulations, and shall use commercially reasonable efforts to cause its securityholders that are Chinese residents or Chinese citizens, or that are directly or indirectly owned or controlled by Chinese residents or Chinese citizens, to comply with the PRC Overseas Investment and Listing Regulations applicable to them, including, without limitation, requesting each such shareholder to complete any registration and other procedures required under applicable PRC Overseas Investment and Listing Regulations (including any applicable rules and regulations of the SAFE).
(m) Where there is any material information that shall be reported to the CSRC pursuant to the applicable laws (including, without limitation, the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and supporting guidelines issued by the CSRC (effective from March 31, 2023), as amended, supplemented or otherwise modified from time to time (the “CSRC Filing Rules”) and the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies issued by the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection of the PRC, and National Archives Administration of the PRC, as amended, supplemented or otherwise modified from time to time (the “CSRC Archive Rules”), the Company shall promptly notify the CSRC or the relevant PRC governmental authority and provide it with such material information in accordance with the applicable laws, and promptly notify the Representative of such material information to the extent permitted by the applicable laws.
(n) For a period of at least two (2) years from the Effective Date, the Company shall retain a nationally recognized PCAOB registered independent public accounting firm reasonably acceptable to the Representative. The Representative acknowledges that the Auditor is acceptable to the Representative.
(o) During the period of one (1) year from the Effective Date, the Company will make available to the Representative copies of all reports or other communications (financial or other) furnished to security holders or from time to time published or publicly disseminated by the Company, and will deliver to the Representative: (i) as soon as practicable after they are available, copies of any reports, financial statements and proxy or information statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as the Representative may from time to time reasonably request in writing pursuant to a specific regulatory or liability issue or; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
(p) The Company will not issue press releases or engage in any other publicity, without the Representative’s prior written consent, for a period ending at 5:00 p.m. Eastern time on the first Business Day following the fortieth (40th) day following the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business, or as required by law.
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(q) The Company hereby grants the Representative the right of first refusal for a period of twelve (12) months after the closing of this Offering to act as the sole managing underwriter and book runner, or sole placement agent or sales agent, for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for which the Company retains the service of an underwriter, agent, advisor, finder or other person or entity in connection with such offering during such twelve (12) month period of the Company, or any successor to or any subsidiary of the Company. The Company shall not offer to retain any entity or person in connection with any such offering on terms more favorable than terms on which it offers to retain the Representative. Such offer shall be made in writing in order to be effective. The Representative shall notify the Company within ten (10) business days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If the Representative should decline such retention, the Company shall have no further obligations to the Representative with respect to the offering for which it has offered to retain the Representative, except as otherwise provided for herein.
(r) The Company will apply the net proceeds from the sale of the Securities as set forth under the caption “Use of Proceeds” in the Prospectus.
(s) The Company will use its commercially reasonable efforts to effect and maintain the listing of the Ordinary Shares on the Nasdaq Stock Market, the NYSE, or the NYSE American for at least three (3) years after the Closing Date.
(t) The Company, during the Prospectus Delivery Period, will file all documents required to be filed with the Commission pursuant to the Securities Act, the Exchange Act and the Rules and Regulations within the time periods required thereby.
(u) The Company will use its commercially reasonable efforts to do and perform all things required to be done or performed under this Agreement by the Company prior to the Closing Date, and to satisfy all conditions precedent to the delivery of the Securities.
(v) The Company will not take, and will use its commercially reasonable efforts to cause its Affiliates not to take, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.
(w) The Company shall cause to be prepared and delivered to the Representative, at its expense, within two (2) Business Days from the effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters in connection with the Offering. As used herein, the term “Electronic Prospectus” means a form of prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to the Representative, that may be transmitted electronically by the other Underwriters to offerees and purchasers of the Securities for at least the period during which a Prospectus relating to the Securities is required to be delivered under the Securities Act; (ii) it shall disclose the same information as the paper prospectus and prospectus filed pursuant to EDGAR, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to the Representative, that will allow recipients thereof to store and have continuously ready access to the prospectus at any future time, without charge to such recipients (other than any fee charged for subscription to the Internet as a whole and for on-line time).
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(x) The Company represents and agrees that, unless it obtains the prior written consent of the Representative, and the Representative represents and agrees that, unless it obtains the prior written consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Securities Act, required to be filed with the Commission; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the free writing prospectuses included in Schedule II. Any such free writing prospectus consented to by the Company and the Representative is hereinafter referred to as a “Permitted Free Writing Prospectus.” Each of the Company and the Representative represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping.
5. Payment of Expenses.
(a) Whether or not the transactions contemplated by this Agreement, the Registration Statement and the Prospectus are consummated or this Agreement is terminated, the Company hereby agrees to pay all reasonable and documented costs and expenses incident to the performance of its obligations hereunder including the following:
(i) all filing fees and communication expenses related to the registration of the Securities to be sold in the Offering including all expenses in connection with the preparation, printing, formatting for EDGAR and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and any and all amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers;
(ii) all fees and expenses in connection with filings with FINRA;
(iii) all fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Securities under the Securities Act and the Offering;
(iv) all fees and expenses in connection with listing the Ordinary Shares on the Nasdaq Capital Market;
(v) the costs of all mailing and printing of the underwriting documents (including this Agreement, any blue sky surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney);
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(vi) all reasonable travel expenses of the Company’s officers and employees and any other expenses incurred in connection with attending or hosting meetings with prospective purchasers of the Securities;
(vii) any stock transfer taxes payable upon the transfer of securities by the Company to the Underwriters and any other taxes incurred by the Company in connection with this Agreement or the Offering;
(viii) the costs associated with book building, prospectus tracking and compliance software and the cost of preparing certificates representing the Securities;
(ix) the cost and charges of any transfer agent or registrar for the Ordinary Shares;
(x) any reasonable cost and expenses in conducting background checks of the Company’s officers and directors by a background search firm acceptable to the Representative;
(xi) fees of Underwriters’ Counsel;
(xii) the cost of preparing, printing and delivering certificates representing each of the Securities;
(xiii) all other costs, fees and expenses incident to the performance of the Company obligations hereunder which are not otherwise specifically provided for in this Section 5;.
The Company and the Representative acknowledge that the Company has previously paid to the Representative advances in an amount of $50,000 (the “Advance”) against the Representative’s out-of-pocket expenses. Any portion of the Advance not used shall be returned back to the Company to the extent not incurred. The Representative’s total out-of-pocket accountable expenses (including its legal fees and expenses) in connection with the Offering shall not exceed $200,000 in the event of a Closing of the Offering, and shall not exceed $115,000 in the event that there is not a Closing of the Offering.
(b) Notwithstanding anything to the contrary in this Section 5, in the event that this Agreement is terminated by the Company, pursuant to Section 11(b) hereof, or subsequent to a Material Adverse Change, the Company will pay the out-of-pocket expenses actually incurred as allowed under FINRA Rule 5110 by the Underwriters through the date of such termination (including the fees and disbursements of Underwriters’ Counsel ) which shall not exceed $115,000 in the event that there is not a Closing of the Offering.
6. Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Firm Shares or the Option Shares, as the case may be, as provided herein shall be subject to: (i) the accuracy of the representations and warranties of the Company herein contained, as of the date hereof and as of the Closing Date and the Option Closing Date, (ii) the absence of any misstatement or omission in any certificates, opinions, written statements or letters furnished to the Representative or to Underwriters’ Counsel pursuant to this Section 6, (iii) the performance by the Company of its obligations hereunder, and (iv) each of the following additional conditions. For purposes of this Section 6, the terms “Closing Date” and “Closing” shall refer to the Closing Date for the Firm Shares or the Option Closing Date the Option Shares, as the case may be, and each of the foregoing and following conditions must be satisfied as of each Closing.
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(a) The Registration Statement shall have become effective and all necessary regulatory or listing approvals shall have been received not later than 5:30 p.m., New York time, on the date of this Agreement, or at such later time and date as shall have been consented to in writing by the Representative. If the Company shall have elected to rely upon Rule 430A under the Securities Act, the Prospectus shall have been filed with the Commission in a timely fashion in accordance with the terms hereof and a form of the Prospectus containing information relating to the description of the Securities and the method of distribution and similar matters shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period; and, at or prior to the Closing Date or the actual time of the Closing, no stop order suspending the effectiveness of the Registration Statement or any part thereof, or any amendment thereof, nor suspending or preventing the use of the General Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall have been issued; no proceedings for the issuance of such an order shall have been initiated or threatened; any request of the Commission for additional information (to be included in the Registration Statement, the General Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or otherwise) shall have been complied with to the Representative’s satisfaction; and FINRA shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.
(b) The Representative shall not have reasonably determined, and advised the Company, that the Registration Statement, the General Disclosure Package or the Prospectus, or any amendment thereof or supplement thereto, or any Issuer Free Writing Prospectus, contains an untrue statement of fact which, in the Representative’s reasonable opinion, is material, or omits to state a fact which, in the Representative’s reasonable opinion, is material and is required to be stated therein or necessary to make the statements therein not misleading; provided, however, that if in the Representative’s opinion such deficiency is curable Representative shall have given the Company reasonable notice of such deficiency and a reasonable chance to cure such deficiency.
(c) The Representative shall have received the written opinions of (i) FisherBroyles, LLP, the U.S., legal counsel for the Company, dated as of the Closing Date and addressed to the Representative substantially in the form attached hereto as Annex II, (ii) Ogier, Cayman Islands counsel for the Company dated as of the Closing Date and addressed to the Representative substantially in the form attached hereto as Annex III, and (iii) Zhonglun Law Firm, legal advisors as to PRC law for the Company dated as of the Closing Date and addressed to the Representative substantially in the form attached hereto as Annex IV
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(d) The Representative shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated as of each Closing Date to the effect that: (i) the condition set forth in subsection (a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of the applicable Closing Date, the representations and warranties of the Company set forth in Sections 1 and 2 hereof are accurate, (iii) as of the applicable Closing Date, all agreements, conditions and obligations of the Company to be performed or complied with hereunder on or prior thereto have been duly performed or complied with, (iv) the Company has not sustained any material loss or interference with their respective businesses, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, (v) no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission, (vi) there are no pro forma or as adjusted financial statements that are required to be included or incorporated by reference in the Registration Statement and the Prospectus pursuant to the Rules and Regulations which are not so included or incorporated by reference, and (vii) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus there has not been any Material Adverse Change or any development involving a prospective Material Adverse Change, whether or not arising from transactions in the ordinary course of business.
(e) On the date of this Agreement and on each Closing Date, the Representative shall have received a “cold comfort” letter from the Auditor as of the date of delivery and addressed to the Representative and in form and substance satisfactory to the Representative and Underwriters’ Counsel, confirming that they are independent certified public accountants with respect to the Company within the meaning of the Securities Act and the Rules and Regulations, and stating, as of the date of delivery (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five (5) days prior to the date of such letter), the conclusions and findings of such firm with respect to the financial information and other matters relating to the Registration Statement and the Prospectus covered by such letter.
(f) Subsequent to the execution and delivery of this Agreement and prior to each Closing Date, there shall not have been any change in the capital stock or long-term debt of the Company or any change or development involving a change, whether or not arising from transactions in the ordinary course of business, in the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company including but not limited to the occurrence of any fire, flood, storm, explosion, accident, act of war or terrorism or other calamity, the effect of which, in any such case described above, is, in the sole judgment of the Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the Offering on the terms and in the manner contemplated in the Prospectus (exclusive of any supplement).
(g) Prior to the execution and delivery of this Agreement, the Representative shall have received a lock-up agreement from each Lock-Up Party, duly executed by the applicable Lock-Up Party, in each case substantially in the form attached hereto as Annex I.
(h) The Ordinary Shares shall have been registered under the Exchange Act and, as of the Closing Date, the Ordinary Shares shall be listed and admitted and authorized for trading on the Nasdaq Capital Market and satisfactory evidence of such action shall have been provided to the Representative. The Company shall have taken no action designed to, or likely to have the effect of terminating the registration of the Ordinary Shares under the Exchange Act or delisting or suspending from trading the Ordinary Shares from the Nasdaq Capital Market, nor has the Company received any information suggesting that the Commission or the Nasdaq Capital Market is contemplating terminating such registration of listing. The Shares and the Ordinary Shares underlying the Representative’s Warrants shall be DTC eligible.
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(i) FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.
(j) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of each Closing Date, prevent the issuance or sale of the Securities; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of each Closing Date, prevent the issuance or sale of the Securities or materially and adversely affect or potentially and adversely affect the business or operations of the Company.
(k) On each Closing Date, the Company shall have furnished the Representative with a Certificate of Good Standing for the Company certified by the Registrar of Companies of the Cayman Islands.
(l) The Company shall have furnished the Representative and Underwriters’ Counsel with such other certificates, opinions or other documents as they may have reasonably requested.
(m) On each Closing Date, there shall have been issued to the Representative, a Representative’s Warrant in the form attached hereto as Annex V.
(n) The CSRC has accepted the CSRC Filings and published the filing results in respect of the CSRC Filings on its website, and such notice of acceptance and/or filing results published not having otherwise been rejected, withdrawn, revoked or invalidated.
If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Underwriters’ Counsel pursuant to this Section 6 shall not be reasonably satisfactory in form and substance to the Representative and to Underwriters’ Counsel, all obligations of the Underwriters hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the Closing. Notice of such cancellation shall be given to the Company in writing or by telephone. Any such telephone notice shall be confirmed promptly thereafter in writing.
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7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter, its officers, directors and employees, and each Person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise(including in settlement of any litigation if such settlement is effected with the written consent of the Company), insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in (A) the Registration Statement, including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Rules and Regulations, the General Disclosure Package, the Prospectus, or any amendment or supplement thereto (including any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus), (B) any Issuer Free Writing Prospectus or in any other materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities, including any road show or investor presentations made to investors by the Company (whether in person or electronically) (collectively “Marketing Materials”); (C) any filings or reports filed by the Company under the Exchange Act or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such indemnified party for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage, liability or action; or (D) the filing of the CSRC Filings in connection with this Offering and any amendments or supplements thereto, and any information contained in the CSRC Filings (including any amendments or supplements thereto) or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iii) in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the General Disclosure Package, the Prospectus, or any such amendment or supplement, any Issuer Free Writing Prospectus or any other Marketing Materials, in reliance upon and in conformity with the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Preliminary Prospectus, the indemnity agreement contained in this Section 7(a) shall not inure to the benefit of an Underwriter to the extent that any loss, liability, claim, damage or expense of such Underwriter results from the fact that a copy of the Prospectus was not given or sent to the Person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Securities to such Person as required by the Securities Act and the rules and regulations thereunder, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under this Agreement. The Company agrees promptly to notify each Underwriter of the commencement of any litigation or proceedings against the Company or any of its officers, directors or Controlling Persons in connection with the issue and sale of the Securities or in connection with the Registration Statement or Prospectus.
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(b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement, and each other Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or any related Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with the Underwriters’ Information; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the aggregate underwriting discount applicable to the Securities to be purchased by such Underwriter hereunder. The parties agree that such information provided by or on behalf of any Underwriter through the Representative consists solely of the material referred to in the last sentence of Section 2(b) hereof.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of any claims or the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the claim or the commencement thereof (but the failure so to notify an indemnifying party shall not relieve the indemnifying party from any liability which it may have under this Section 7 to the extent that it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability that such indemnifying party may have otherwise than on account of the indemnity agreement hereunder). In case any such claim or action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate, at its own expense in the defense of such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided however, that counsel to the indemnifying party shall not (except with the written consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, (iii) the indemnifying party does not diligently defend the action after assumption of the defense, or (iv) such indemnified party or parties shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party, or any of them, in conducting the defense of any such action or there may be legal defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the indemnifying parties and shall be paid as incurred. No indemnifying party shall, without the prior written consent of the indemnified parties (which consent shall not be unreasonably delayed, withhold or denied), effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 7 or Section 8 hereof (whether or not the indemnified party is an actual or potential party thereto), unless (x) such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such claim, investigation, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or any failure to act, by or on behalf of the indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment.
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8. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 7 is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from Persons, other than the Underwriters, who may also be liable for contribution, including Persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company and the Underwriters from the Offering or, if such allocation is not permitted by applicable law, in such proportions as are appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company bears to (y) the underwriting discount or commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of each of the Company and of the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any judicial, regulatory or other legal or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 8: (i) no Underwriter shall be required to contribute any amount in excess of the aggregate discounts and commissions applicable to the Securities underwritten by it and distributed to the public and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each Person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Underwriter, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of the immediately preceding sentence. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise. The obligations of the Underwriters to contribute pursuant to this Section 8 are several in proportion to the respective number of Securities to be purchased by each of the Underwriters hereunder and not joint.
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9. Underwriter Default.
(a) If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares hereunder, and if the securities with respect to which such default relates (the “Default Securities”) do not (after giving effect to arrangements, if any, made by the Representative pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares, each non-defaulting Underwriter, acting severally and not jointly, agrees to purchase from the Company that number of Default Securities that bears the same proportion of the total number of Default Securities then being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule I hereto bears to the aggregate number of Firm Shares set forth opposite the names of the non-defaulting Underwriters, subject, however, to such adjustments to eliminate fractional shares as the Representative in its sole discretion shall make.
(b) In the event that the aggregate number of Default Securities exceeds 10% of the number of Firm Shares, the Representative may in its discretion arrange for itself or for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase the Default Securities on the terms contained herein. In the event that within 48 hours after such a default the Representative does not arrange for the purchase of the Default Securities as provided in this Section 9, this Agreement shall thereupon terminate, without liability on the part of the Company with respect thereto (except in each case as provided in Sections 5, 7, 8, 9 and 11(d)) or the Underwriters, but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Company for damages occasioned by its or their default hereunder.
(c) In the event that any Default Securities are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date for a period, not exceeding five (5) Business Days, in order to effect whatever changes may thereby be necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the reasonable opinion of Underwriters’ Counsel, may thereby be made necessary or advisable. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 9 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares.
10. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Company and the Underwriters contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, including the agreements contained in Sections 5, 10, 14 and 15, the indemnity agreements contained in Section 7 and the contribution agreements contained in Section 8 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling Person thereof or by or on behalf of the Company, any of its officers and directors or any controlling Person thereof, and shall survive delivery of and payment for the Securities to and by the Underwriters. The representations contained in Section 2 hereof and the covenants and agreements contained in Sections 5, 7, 8, this Section 10 and Sections 12, 13, 14 and 15 hereof shall survive any termination of this Agreement, including termination pursuant to Section 9 or 11 hereof. The representations and covenants contained in Sections 2, 3 and 4 hereof shall survive termination of this Agreement if any Securities are purchased pursuant to this Agreement.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the later of: (i) receipt by the Representative and the Company of notification of the effectiveness of the Registration Statement or (ii) the execution of this Agreement. Notwithstanding any termination of this Agreement, the provisions of this Section 11 and of Sections 5, 7, 8, 12, 13, 14 and 15, inclusive, shall remain in full force and effect at all times after the execution hereof. If this Agreement is terminated after any Securities have been purchased hereunder, the provisions of Sections 2, 3 and 4 hereof shall survive termination of this Agreement.
(b) The Representative shall have the right to terminate this Agreement at any time prior to the consummation of the Closing if: (i) any domestic or international event or act or occurrence has materially disrupted, or in the reasonable opinion of the Representative will in the immediate future materially disrupt, the market for the Company’s securities or securities in general; or (ii) trading on the New York Stock Exchange or the Nasdaq Stock Market shall have been suspended or been made subject to material limitations, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York Stock Exchange or the Nasdaq Stock Market or by order of the Commission, FINRA or any other governmental authority having jurisdiction; or (iii) a banking moratorium has been declared by any state or federal authority or if any material disruption in commercial banking or securities settlement or clearance services shall have occurred; (iv) any downgrading shall have occurred in the Company’s corporate credit rating or the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act) or if any such organization shall have been publicly announced that it has under surveillance or review, with material negative implications, its rating of any of the Company’s debt securities; or (v) (A) there shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United States or there is a declaration of a national emergency or war by the United States, excluding a national emergency declared related to the COVID-19 pandemic, or (B) there shall have been any other calamity or crisis or any change in political, financial or economic conditions if the effect of any such event in (A) or (B), in the reasonable judgment of the Representative, is so material and adverse that such event makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Shares on the terms and in the manner contemplated by the Prospectus.
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(c) Any notice of termination pursuant to this Section 11 shall be in writing.
(d) If this Agreement shall be terminated pursuant to any of the provisions hereof or if the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Representative, reimburse the Underwriters for those out-of-pocket expenses (including the reasonable fees and expenses of Underwriters’ Counsel), actually incurred by the Underwriters in connection herewith less the Advance previously paid which shall not exceed $115,000 in the event that there is not a Closing of the Offering unless it is due to inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof.
12. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing, and:
(a) if sent to the Representative or any Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to:
Maxim Group LLC
300 Park Avenue, 16th Floor
New York, NY 10022
Attention: James Siegel
Email: jsiegel@maximgrp.com
with a copy to Underwriters’ Counsel at:
Hunter Taubman Fischer & Li LLC
950 Third Avenue, 19th Floor
New York, New York 10022
Attention: Joan Wu, Esq.
Email: jwu@htflawyers.com
(b) if sent to the Company, shall be mailed, delivered, or faxed and confirmed in writing to the Company and its counsel at the addresses set forth in the Registration Statement.
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13. Parties; Limitation of Relationship. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriters, the Company and the controlling Persons, directors, officers, employees and agents referred to in Sections 7 and 8 hereof, and their respective successors and assigns, and no other Person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and said controlling Persons and their respective successors, officers, directors, heirs and legal representative, and it is not for the benefit of any other Person. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of Securities from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of laws principles (other than Section 5-1401 of the General Obligations Law).
15. Submission to Jurisdiction, Etc. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Company irrevocably (a) submits to the jurisdiction of any court of the State of New York for the purpose of any suit, action, or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated by this Agreement, the Registration Statement and the Prospectus (each, a “Proceeding”), (b) agrees that all claims in respect of any Proceeding may be heard and determined in any such court, (c) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, (d) agrees not to commence any Proceeding other than in such courts, and (e) waives, to the fullest extent permitted by law, any claim that such Proceeding is brought in an inconvenient forum. EACH OF THE COMPANY (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT, AND THE PROSPECTUS.
16. Entire Agreement. This Agreement, together with the exhibits, schedules and annexes attached hereto and as the same may be amended from time to time in accordance with the terms hereof, constitutes the entire agreement of the parties to this Agreement and supersedes all prior or contemporaneous written or oral agreements, understandings, promises and negotiations with respect to the subject matter hereof.
17. Severability. If any term or provision of this Agreement or the performance thereof shall be invalid or unenforceable to any extent, such invalidity or unenforceability shall not affect or render invalid or unenforceable any other provision of this Agreement and this Agreement shall be valid and enforced to the fullest extent permitted by law.
18. Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.
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19. Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
20. No Fiduciary Relationship. The Company hereby acknowledges that the Underwriters are acting solely as underwriters in connection with the offering of the Company’s Securities. The Company further acknowledge that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, shareholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the offering of the Company’s Securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company hereby further confirms its understanding that no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the Offering contemplated hereby or the process leading thereto, including any negotiation related to the pricing of the Securities; and the Company has consulted its own legal and financial advisors to the extent it has deemed appropriate in connection with this Agreement and the Offering. The Company and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
21. Judgment Currency. The obligation of the Company in respect of any sum due to any Underwriter under this Agreement shall, notwithstanding any judgment in a currency other than U.S. dollars (the “Judgment Currency”), not be discharged until the first business day, following receipt by such Underwriter of any sum adjudged to be so due in the Judgment Currency, on which (and only to the extent that) such Underwriter may in accordance with normal banking procedures purchase U.S. dollars with the Judgment Currency; if the U.S. dollars so purchased are less than the sum originally due to such Underwriter hereunder, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Underwriter hereunder, such Underwriter agrees to pay to the Company an amount equal to the excess of the U.S. dollars so purchased over the sum originally due to such Underwriter hereunder.
22. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile or other electronic transmission shall constitute valid and sufficient delivery thereof.
23. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.
24. Time is of the Essence. Time shall be of the essence of this Agreement. As used herein, the term “Business Day” shall mean any day other than a Saturday, Sunday or any day on which the major stock exchanges in New York, New York are not open for business.
[Signature Pages Follow]
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If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us.
| Very truly yours, | ||
| Eastern International Ltd. | ||
| By: | ||
| Name: | Albert Wong | |
| Title: | Chief Executive Officer | |
Accepted by the Representative, acting for themselves and as
Representative of the Underwriters named on Schedule I attached hereto,
as of the date first written above:
| MAXIM GROUP LLC | ||
| By: | ||
| Name: | Ritesh M. Veera | |
| Title: | Co-Head of Investment Banking | |
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SCHEDULE I
| Name of Underwriter | Number of Firm Shares Being Purchased | Number of Option Shares Being Purchased | ||
| Maxim Group LLC | ||||
| Total |
| 1 |
SCHEDULE II
Lock-Up Parties
Directors & Officers
| 1. | Albert Wong | |
| 2. | Chung Leung Cheung | |
| 3. | Ching Hei Li | |
| 4. | Lin Tan | |
| 5. | Yu-yun Tristan Kuo | |
| 6. | Chun Pong (Colman) Chiu | |
| 7. | Shiu Wing Joseph Chow |
5% shareholders
| 1. | Eastern1 Holdings Ltd. | |
| 2. | Weimei Huang | |
| 3. | Eastern
Worldwide Logistics Group Inc. |
| 2 |
SCHEDULE III
Free Writing Prospectus
Free Writing Prospectus filed with the SEC on January 10, 2025, July 28, 2025 and July 29, 2025.
| 3 |
SCHEDULE IV
Subsidiaries
| Name | Place of Incorporation | |
| Eastern Industrial Development Ltd. | British Virgin Islands | |
| Eastern Group Limited | Hong Kong | |
| Suzhou TC-Link Logistics Co., Ltd. | People’s Republic of China | |
| Hangzhou TC-Link Logistics Supply Chain Management Co., Ltd. | People’s Republic of China | |
| Wuxi TC-Link Logistics Co., Ltd. | People’s Republic of China | |
| Yancheng TC-Link Logistics Co., Ltd. | People’s Republic of China | |
| Yunan Dongyuan Dali International Logistics Co., Ltd. | People’s Republic of China | |
| Chongqing Dayuan Logistics Co., Ltd. | People’s Republic of China |
| 4 |
ANNEX I
Form of Lock-Up Agreement
________, 2025
Maxim Group LLC
300 Park Avenue, 16th Floor
New York, NY 10022
Ladies and Gentlemen:
The undersigned understands that Maxim Group LLC (the “Representative”) proposes to enter into an Underwriting Agreement (the “Underwriting Agreement “) with Eastern International Ltd., an exempted company duly incorporated with limited liability under the laws of the Cayman Islands (the “Company”), providing for the public offering (the “Public Offering”) of Ordinary Shares par value $0.0001 per share (the “Ordinary Shares”).
To induce the Representative to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, the undersigned will not, during the period commencing on the date of the Underwriting Agreement and ending six months after such date (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or any securities convertible into or exercisable or exchangeable for Ordinary Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Public Offering; provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities (i) as a bona fide gift, by will or intestacy, (ii) by operation of law, such as pursuant to a qualified domestic order or as required by a divorce settlement, or (iii) to a family member or trust for the benefit of a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; or (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Representative a lock-up agreement substantially in the form of this lock-up agreement and (ii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing restrictions shall be equally applicable to any Securities that the undersigned may purchase in the Public Offering; (ii) the Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending release or waiver; and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
No provision in this lock-up agreement shall be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable for or convertible into Ordinary Shares, as applicable; provided that the undersigned does not transfer the Ordinary Shares acquired on such exercise, exchange or conversion during the Lock-Up Period, unless otherwise permitted pursuant to the terms of this lock-up agreement. In addition, no provision herein shall be deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period) or a sale of 100% of the Company’s outstanding Ordinary Shares.
The undersigned understands that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned understands that, if the Underwriting Agreement is not executed by ______________, 2025, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the securities to be sold thereunder, then this lock-up agreement shall be void and of no further force or effect.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative.
| Very truly yours, | ||
| (Name - Please Print) | ||
| (Signature) | ||
| (Name of Signatory, in the case of entities - Please Print) | ||
| (Title of Signatory, in the case of entities - Please Print) | ||
| Address: | ||
ANNEX II
Form of U.S. Securities Counsel Opinion
[Intentionally Omitted.]
ANNEX III
Form of Cayman Islands Counsel Opinion
[Intentionally Omitted.]
Annex IV
Form of Opinion of PRC Counsel
[Intentionally Omitted.]
ANNEX V
Form of Representative’s Warrant
THESE SECURITIES OR THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF SIX (6) MONTHS FOLLOWING THE COMMENCEMENT OF SALES OF THE OFFERING TO ANYONE OTHER THAN (I) MAXIM PARTNERS LLC, OR A REPRESENTATIVE OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF MAXIM PARTNERS LLC, OR OF ANY SUCH UNDERWRITERS OR SELECTED DEALER.
ORDINARY SHARES PURCHASE WARRANT
EASTERN INTERNATIONAL LTD.
| Warrant Shares: [ ] | Original Issuance Date: [ ], 2025 |
THIS ORDINARY SHARES PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Maxim Partners LLC or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on [ ], 2030 (the “Termination Date”)1 but not thereafter, to subscribe for and purchase from Eastern International Ltd., an exempted company duly incorporated with limited liability under the laws of the Cayman Islands (the “Company”), up to [ ] ordinary shares of the Company, par value $0.0001 each (the “Ordinary Shares”, the Ordinary Shares underlying this Warrant, as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one Ordinary Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Underwriting Agreement (the “Agreement”), dated [ ], 2025 by and between the Company and Maxim Group, LLC, as representative of the several underwriters.
1 Fifth anniversary of commencement of the sales of the Offering.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per Ordinary Share under this Warrant shall be $[ ] (which is 120% of the offering price per Ordinary Share in the offering contemplated by the Agreement) (the “Exercise Price”).
c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering the Warrant Shares, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then, provided that the Trading Price, as defined below, is equal to or greater than the Exercise Price, on the Termination Date, this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Ordinary Shares on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day (such applicable price for (a), the “Trading Price”);
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed or quoted on a Trading Market, the bid price of the Ordinary Shares for the time in question (or the nearest preceding date) on the Trading Market on which the Ordinary Shares then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Ordinary Shares are traded on OTCQB or OTCQX, the volume weighted average sales price of the Ordinary Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Ordinary Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Ordinary Shares are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Ordinary Share so reported, or (d) in all other cases, the fair market value of an Ordinary Share as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Ordinary Shares for such date (or the nearest preceding date) on the Trading Market on which the Ordinary Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Ordinary Shares are traded on OTCQB or OTCQX , the volume weighted average sales price of the Ordinary Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Ordinary Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Ordinary Shares are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Ordinary Share so reported, or (d) in all other cases, the fair market value of an Ordinary Share as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Provided that the Trading Price is equal to or greater than the Exercise Price, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c) and if no effective registration statement registering the Warrant Shares.
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder either by (A) crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder, or (B) if there is no effective registration statement and the Warrant is exercised via cashless exercise at a time when such Warrant Shares would be eligible for resale under Rule 144 by a non-affiliate of the Company, such Warrant Shares are delivered to Holder’s broker, and the Company receives a statement from Holder’s broker that it has received instructions to sell the Warrant Shares or that it would take responsibility that the sales of the Warrant Shares will only be made if the Warrant Shares are eligible to be sold under Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after the later of (a) the delivery of the aggregate Exercise Price to the Company and (b) the delivery of the seller’s representation letter and broker representation letter to the transfer agent of the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after the later of (a) the delivery to the Company of the Notice of Exercise and (b) the delivery of seller’s representation letter and broker representation letter to the transfer agent of the Company (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Ordinary Shares on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to use commercially reasonable efforts to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Ordinary Shares as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, Ordinary Shares to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Ordinary Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of Ordinary Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Ordinary Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Ordinary Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Ordinary Shares upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round down to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which transfer taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of Ordinary Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Ordinary Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Ordinary Shares which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any other Ordinary Share equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding Ordinary Shares, a Holder may rely on the number of outstanding Ordinary Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of Ordinary Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of Ordinary Shares then outstanding. In any case, the number of outstanding Ordinary Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding Ordinary Shares was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on Ordinary Shares or any other equity or equity equivalent securities payable in Ordinary Shares (which, for avoidance of doubt, shall not include any Ordinary Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Ordinary Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Ordinary Shares into a smaller number of shares, or (iv) issues by reclassification of Ordinary Shares, any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) [Reserved].
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time, the Company grants, issues or sells any Ordinary Share equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Ordinary Shares, by way of return of capital or otherwise, other than cash (including, without limitation, any distribution of stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Ordinary Shares as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (other than solely with respect to a name change of the Company), (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Ordinary Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Ordinary Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares are effectively converted into or exchanged for other securities, cash or property (other than a reclassification in which the Company’s shareholders remain the same), or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Ordinary Shares (not including any Ordinary Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of Ordinary Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of Ordinary Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one Ordinary Share in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Ordinary Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. .
f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of Ordinary Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Ordinary Shares (excluding treasury shares, if any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Ordinary Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Ordinary Shares, (C) the Company shall authorize the granting to all holders of the Ordinary Shares rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Ordinary Shares, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Ordinary Shares are converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Ordinary Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Ordinary Shares of record shall be entitled to exchange their Ordinary Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Report on Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer of Warrant.
a) Transferability. Pursuant to FINRA Rule 5110(g)(1) and the Agreement, neither this Warrant nor any Warrant Shares issued upon exercise of this Warrant shall be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of one hundred eighty (180) days immediately following the date of effectiveness or commencement of sales of the offering pursuant to which this Warrant is being issued, except the transfer of any security:
(i) by operation of law or by reason of reorganization of the Company;
(ii) to any FINRA member firm participating in the offering and the officers and partners thereof, if all securities so transferred remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period;
(iii) if the aggregate amount of securities of the Company held by the Holder or related person do not exceed 1% of the securities being offered;
(iv) that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity in the fund; or
(v) the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period.
Subject to the foregoing restrictions, compliance with any applicable securities laws, and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Original Issuance Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant or Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Registration Rights
a) Demand Registration.
i. Grant of Right. Unless all of the Registrable Securities (defined as below) are included in an effective registration statement with a current prospectus or are eligible for resale pursuant to Rule 144 of the Securities Act, the Company, upon written demand (“Initial Demand Notice”) of the Holder(s) of at least 51% of the Warrant Shares (“Majority Holders”), agrees to register on two occasions only (each, a “Demand Registration”) under the Securities Act all or any portion of the Warrant Shares requested by the Majority Holders in the Initial Demand Notice (the “Registrable Securities”). On such occasion, the Company will file a registration statement covering the Registrable Securities within 60 days after receipt of the Initial Demand Notice and use its commercially reasonable efforts to have such registration statement declared effective as soon as possible thereafter. A demand for registration may be made at any time during which the Majority Holders hold any of the Warrant Shares. Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Section 5 a): (A) with respect to securities that are not Registrable Securities; (B) during any Scheduled Black-Out Period; (C) if the aggregate offering price of the Registrable Securities to be offered is less than $250,000, unless the Registrable Securities to be offered constitute all of the then-outstanding Registrable Securities; or (D) within 180 days after the effective date of a prior registration in respect of the Ordinary Shares, including a Demand Registration (or, in the event that Holders were prevented from including any Registrable Securities requested to be included in a Piggyback Registration pursuant to Section 5(b), within 90 days after the effective date of such prior registration in respect of the Ordinary Shares. For purposes of this Agreement, a “Scheduled Black-Out Period” shall mean the periods from and including the day that is ten days prior to the last day of a fiscal quarter of the Company to and including the day that is two days after the day on which the Company publicly releases its earnings for such fiscal quarter. The Initial Demand Notice shall specify the number of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will notify all holders of the Warrant Shares of the demand within ten days from the date of the receipt of any such Initial Demand Notice. Each holder of the Warrant Shares who wishes to include all or a portion of such holder’s Warrant Shares in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “Demanding Holder”) shall so notify the Company within 15 days after the receipt by the holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Warrant Shares included in the Demand Registration. The term of the Demand Registration shall not be more than five-years from the Effective Date.
ii. Effective Registration. A registration will not count as a Demand Registration until the registration statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Warrant with respect thereto.
iii. Terms. In connection with the first Demand Registration, the Company and the Holders will discuss and mutually agree in writing about the allocation and responsibilities of fees and expenses attendant to registering the Registrable Securities, including the reasonable expenses of one legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In connection with the second Demand Registration, the Holders shall bear all fees and expenses attendant to registering the Registrable Securities including the reasonable expenses of the Company’s legal counsel. The Company agrees to qualify or register the Registrable Securities in such states as are reasonably requested by the Majority Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a state in which such registration would cause (i) the Company to be obligated to qualify to do business in such state, or would subject the Company to taxation as a foreign corporation doing business in such jurisdiction or (ii) the principal shareholders of the Company to be obligated to escrow their shares of Ordinary Shares of the Company. The Company shall cause any registration statement filed pursuant to the demand rights granted under Section 5(a)(iii) to remain effective until all Registrable Securities are sold.
iv. Deferred Filing. Notwithstanding the foregoing, if the Board of Directors of the Company determines in its good faith judgment that the filing of a registration statement in connection with a Demand Registration (i) would be seriously detrimental to the Company in that such registration would interfere with a material corporate transaction or (ii) would require the disclosure of material non-public information concerning the Company that at the time is not, in the good faith judgment of the Board of Directors, in the best interests of the Company to disclose and is not, in the opinion of the Company’s counsel, otherwise required to be disclosed, then the Company shall have the right to defer such filing for the period during which such registration would be seriously detrimental under clause (i) or would require such disclosure under clause (ii); provided, however, that (x) the Company may not defer such filing for a period of more than one hundred and twenty (120) days after receipt of any demand by the Holders and (y) the Company shall not exercise its right to defer a Demand Registration more than once in any 12-month period. The Company shall give written notice of its determination to the Holders to defer the filing and of the fact that the purpose for such deferral no longer exists, in each case, promptly after the occurrence thereof.
v. No Cash Settlement Option. The Company is only required to use its commercially reasonable efforts to cause a registration statement covering issuance of the Registrable Securities to be declared effective, and once effective, only to use its commercially reasonable efforts to maintain the effectiveness of the registration statement. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in no event is the Company obligated to settle any Warrants, in whole or in part, for cash in the event it is unable to register the Registrable Securities.
b) Piggy-Back Registration.
i. Piggy-Back Rights. If at any time during the five year period after the Effective Date, the registration statement filed pursuant to this Section 5(a) is no longer effective and the Registrable Securities are not eligible for resale pursuant to Rule 144 of the Securities Act, the Company proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company including, without limitation, pursuant to Section 5(a)), other than a registration statement (i) filed in connection with any employee share option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing shareholders, or (iii) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities as soon as practicable but in no event less than ten days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Warrant Shares held by such holder (the “Piggy-Back Registrable Securities”), as such holders may request in writing within five days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Piggy-Back Registrable Securities to be included in such registration and shall use its commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Piggy-Back Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Piggy-Back Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Piggy-Back Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggy-Back Registration.
ii. [Reversed]
iii. Withdrawal. Any holder of Piggy-Back Registrable Securities may elect to withdraw such holder’s request for inclusion of such Piggy-Back Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the registration statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a registration statement at any time prior to the effectiveness of the registration statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Piggy-Back Registrable Securities in connection with such Piggy-Back Registration as provided in Section 5(b)(iv).
iv. Terms. The Company and the Holders will discuss and mutually agree in writing about the allocation and responsibility of all fees and expenses attendant to registering the Piggy-Back Registrable Securities including the expenses of one legal counsel selected by the Holders to represent them in connection with the sale of the Piggy-Back Registrable Securities but the Holders shall pay any and all underwriting commissions related to the Piggy-Back Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Piggy-Back Registrable Securities with not less than fifteen days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each applicable registration statement filed (during the period in which the Warrant is exercisable) by the Company until such time as all of the Piggy-Back Registrable Securities have been registered. The Holders of the Piggy-Back Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice, within ten days of the receipt of the Company’s notice of its intention to file a registration statement. The Company shall cause any registration statement filed pursuant to the above “piggyback” rights to remain effective for at least nine (9) months from the date that the Holders of the Piggy-Back Registrable Securities are first given the opportunity to sell all of such securities. Notwithstanding the provisions of this Section 5(b), such “piggy-back” registration rights shall terminate on the third anniversary of the Original Issuance Date of the Warrants in accordance with FINRA Rule 5110(g)(8)(D).
c) General Terms. These additional terms shall relate to registration under Sections 5(a) above:
i. Indemnification.
(w) The Company shall, to the fullest extent permitted by applicable law, indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against litigation, commenced or threatened, or any claim whatsoever whether arising out of any action between the underwriter and the Company or between the underwriter and any third party or otherwise) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement; provided, however, that, with respect to any Holder of Registrable Securities, this indemnity shall not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the registration statement (or any amendment thereto), or any preliminary prospectus or the prospectus (or any amendment or supplement thereto).
(x) The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement(or any amendment thereto), or any preliminary prospectus or the prospectus (or any amendment or supplement thereto).
(y) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve the indemnifying party from any liability it may have under this Agreement, except to the extent that the indemnifying party is prejudiced thereby. If it so elects, after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it; provided, however, that the indemnified party shall be entitled to participate in (but not control) the defense of such action with counsel chosen by it, the reasonable fees and expenses of which shall be paid by such indemnified party, unless a conflict would arise if one counsel were to represent both the indemnified party and the indemnifying party, in which case the reasonable fees and expenses of counsel to the indemnified party shall be paid by the indemnifying party or parties. In no event shall the indemnifying party or parties be liable for a settlement of an action with respect to which they have assumed the defense if such settlement is effected without the written consent of such indemnifying party, or for the reasonable fees and expenses of more than one counsel for (i) the Company, its officers, directors and controlling persons as a group, and (ii) the selling Holders and their controlling persons as a group, in each case, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances; provided, however, that if, in the reasonable judgment of an indemnified party, a conflict of interest may exist between such indemnified party and the Company or any other of such indemnified parties with respect to such claim, the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel.
(z) If the indemnification provided for in or pursuant to Section 5(b)(i) is due in accordance with the terms hereof, but held by a court of competent jurisdiction to be unavailable or unenforceable in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the indemnifying party on the one hand and of the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, and by such party’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
ii. [Intentionally Omitted]
iii. Supplemental Prospectus. Each Holder agrees, that upon receipt of any notice from the Company of the happening of any event as a result of which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, such Holder will immediately discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder’s receipt of the copies of a supplemental or amended prospectus, and, if so desired by the Company, such Holder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of such destruction) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. Immediately after discovering of such an event which causes the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, the Company shall prepare and file, as soon as practicable, a supplement or amendment to the prospectus so that such registration statement does not include any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and distribute such supplement or amendment to each Holder.
Section 6. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Ordinary Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Ordinary Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the applicable exercise price therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Non-waiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Ordinary Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| EASTERN INTERNATIONAL LTD. | ||
| 东源全球股份有限公司 | ||
| By: | ||
| Name: | Albert Wong | |
| Title: | Chief Executive Officer | |
NOTICE OF EXERCISE
TO: EASTERN INTERNATIONAL LTD.
(1) The undersigned hereby elects to purchase [ ] Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
______________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
______________________
______________________
______________________
[SIGNATURE OF HOLDER]
Name of Investing Entity:___________________________________________________________________________
Signature of Authorized Signatory of Investing Entity:_____________________________________________________
Name of Authorized Signatory:_______________________________________________________________________
Title of Authorized Signatory:________________________________________________________________________
Date:__________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | ||
| Address: | (Please Print) | |
| Phone Number: | ||
| Email Address: | (Please Print) | |
| Dated: ___________ __, _____ | ||
| Holder’s Signature: | ||
| Holder’s Address: |
Warrant Exercise Log
| Date | Number of Warrant Shares Available to be Exercised | Number of Warrant Shares Exercised | Number of Warrant Shares Remaining to be Exercised | |||
|
ANNEX VI
FORM OF PRESS RELEASE
[to be attached]
Exhibit 5.2
 |
1200 G Street, Suite 800 Washington, D.C. 20005 www.FisherBroyles.com |
| August 25, 2025 |
To: Eastern International Ltd
3-212 Governors Square,
23 Lime Tree Bay Avenue,
P.O. Box 30746,
Seven Mile Beach,
Grand Cayman KY1-1203,
Cayman Islands
Ladies and Gentlemen:
We have acted as U.S. counsel to Eastern International Ltd, a Cayman Islands limited company (the “Company”), in connection with the Registration Statement on Form F-1 (File No. 333-281900) (as amended, the “Registration Statement”) filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) for the registration of 1,840,000 ordinary shares, which includes up to 240,000 ordinary shares, par value $0.0001 per share, issuable upon exercise of the over-allotment option granted to the underwriters by the Company, and up to 73,600 ordinary shares, par value $0.0001 per share, issuable upon exercise of warrants (the “Warrants”) being granted to the representative of underwriters pursuant to the Underwriting Agreement among the Company and the underwriters named therein (the “Underwriting Agreement”).
You have requested our opinion as to the matters set forth below in connection with the issuance of the Warrants. For purposes of rendering that opinion, we have examined: (i) the Registration Statement; (ii) the most recent prospectus included in the Registration Statement on file with the Commission as of the date of this opinion letter; (iii) the Underwriting Agreement, (iv) the Warrants; and (v) the records of corporate actions of the Company relating to the Registration Statement, the Underwriting Agreement and the Warrants and other relevant matters in connection therewith. We have also made such other investigation as we have deemed appropriate in connection with the issuance of our opinion. We have examined and relied upon certificates of public officials and, as to certain matters of fact that are material to our opinion, we have also relied on certificates of officers of the Company and have not independently verified the factual matters set forth in such certificates.
For purposes of this opinion letter, we have made the assumptions that are customary in opinion letters of this kind, including without limitation: (i) that each document submitted to or reviewed by us is accurate and complete; (ii) that each such document that is an original is authentic and each such document that is a copy conforms to an authentic original; (iii) that all signatures on each such document are genuine; (iv) the legal capacity of all natural persons executing such documents; (v) that each such document, other than the Warrants with respect to the Company, constitutes a legal, valid, and binding obligation of each party thereto, enforceable against each such party in accordance with its terms; (vi) that there are no documents or agreements by or among any of the parties thereto, other than those referenced in this opinion letter, that could affect the opinion expressed herein, and no undisclosed modifications, waivers or amendments (whether written or oral) to any of the documents reviewed by us in connection with this opinion letter; (vii) that the Company is and shall remain validly existing as a limited company under the laws of the laws the Cayman Islands; and (viii) that all parties have complied with all state and federal statutes, rules and regulations applicable to them relating to the transactions set forth in the Underwriting Agreement and Warrants. We have further assumed that the Company does not in the future issue so many ordinary shares that there are insufficient remaining authorized but unissued ordinary shares for issuance pursuant to exercise of the Warrants. We have also assumed that all of the ordinary shares issuable or eligible for issuance pursuant to exercise of the Warrants following the date hereof will be issued for not less than par value. We have not verified any of the foregoing assumptions.
| 1 |
The opinion expressed in this opinion letter is based on the facts in existence and the laws in effect on the date hereof and is limited to the federal laws of the United States of America and the laws of the State of New York which, based on our experience, are applicable to transactions of the type contemplated by the Warrants. Except as expressly set forth in this opinion letter, we are not opining on specialized laws that are not customarily covered in opinion letters of this kind, such as tax, insolvency, antitrust, pension, employee benefit, environmental, intellectual property, banking, consumer lending, insurance, labor, health and safety, anti-money laundering, anti-terrorism and state securities laws, including procedures governing reviews thereunder by the Committee on Foreign Investment in the United States, or on the rules of any self-regulatory organization, securities exchange, contract market, clearing organization or other platform, vehicle or market for trading, processing, clearing or reporting transactions. We are not opining on any other law or the law of any other jurisdiction, including any foreign jurisdiction or any county, municipality or other political subdivision or local governmental agency or authority.
Based on the foregoing, and subject to the foregoing and the additional qualifications and other matters set forth below, it is our opinion that when the Warrants are duly executed and delivered in accordance with the Underwriting Agreement and as contemplated by the Registration Statement and the Underwriting Agreement, such Warrants will constitute valid and binding obligations of the Company enforceable in accordance with their terms, except: (a) as such enforceability may be limited by bankruptcy, insolvency, orderly liquidation or resolution, fraudulent transfer and conveyance, preference, reorganization, receivership, conservatorship, moratorium, or similar laws affecting the rights and remedies of creditors generally, and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law), including but not limited to principles limiting the availability of specific performance and injunctive relief, and concepts of materiality, reasonableness, good faith and fair dealing; (b) as enforceability of any indemnification or contribution provision may be limited under applicable federal and state securities laws; and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm in the Registration Statement under the caption “Legal Matters.” In giving our consent, we do not hereby admit that we are in the category of persons whose consent is required in a Registration Statement under Section 7 of the Securities Act or the rules and regulations thereunder
| Very truly yours, | |
| /s/ FisherBroyles, LLP | |
| FISHERBROYLES, LLP |
| 2 |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the inclusion of our report dated July 18, 2025 in the Amendment No. 7 of Registration Statement on Form F-1, under the Securities Act of 1933 (File No. 333-281900) with respect to the consolidated balance sheets of Eastern International Ltd. and its subsidiaries (collectively the “Company”) as of March 31, 2025 and 2024, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2025, and the related notes included herein.
We also consent to the reference to our firm under the heading “Experts” in the Registration Statement.
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| San Mateo, California | WWC, P.C. |
| August 25, 2025 | Certified Public Accountants |
| PCAOB ID No. 1171 |
