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As filed with the U.S. Securities
and Exchange Commission on August 29, 2024.
Registration
No. 333-281022
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment
No. 4
To
FORM
F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FENBO
HOLDINGS LIMITED
(Exact
name of Registrant as specified in its charter)
Not
Applicable
(Translation
of Registrant’s name into English)
Cayman
Islands |
|
3634 |
|
Not
Applicable |
(State
or Other Jurisdiction
of
Incorporation or Organization) |
|
(Primary
Standard Industrial
Classification Code Number) |
|
(I.R.S.
Employer
Identification
No.) |
Unit
J, 19/F, World Tech Centre
95
How Ming Street
Kwun
Tong
Kowloon,
Hong Kong
Telephone:
+(852) 2343-3328
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Schlueter
& Associates, P.C.
5655
South Yosemite Street, Suite 350
Greenwood
Village, CO 80111
Telephone:
(303) 292-3883
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Henry
F. Schlueter, Esq.
Celia
Velletri, Esq.
Schlueter
& Associates, P.C.
5655 South Yosemite Street, Suite 350
Greenwood
Village, CO 80111
Telephone: (303) 292-3883 |
|
Rick
A. Werner, Esq.
Alok A. Choksi, Esq.
Haynes
and Boone, LLP
30
Rockefeller Plaza, 26th Floor
New
York, New York 10112
Telephone:
(212) 659-7300 |
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, 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 U.S. Securities and Exchange 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 an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.
PRELIMINARY
PROSPECTUS |
Subject
to Completion, dated August 29, 2024 |
$5,000,000
Up to 591,016 Ordinary Shares
Up to 591,016 Pre-Funded Warrants to Purchase
Up to 591,016 Ordinary Shares
Up to 591,016 Warrants to Purchase Up to
591,016 Ordinary Shares
Up to 29,550 Placement Agent Warrants to
Purchase Up to 29,550 Ordinary Shares
Up to 1,211,582 Ordinary Shares Underlying
the Warrants, Pre-Funded Warrants and Placement Agent Warrants
Fenbo
Holdings Limited
We
are offering, on a reasonable best efforts basis, up to 591,016 ordinary shares, US$0.0001 par value per share
(“Ordinary Shares), of Fenbo Holdings Limited (“FHL” or the “Company”) together with warrants
(“Warrants”, and each a “Warrant”) to purchase up to 591,016 Ordinary Shares, at an assumed combined
public offering price of $8.46 per Ordinary Share and accompanying Warrant, which is equal to the closing price of our
Ordinary Shares on the Nasdaq Capital Market (the “Nasdaq Capital Market” or “Nasdaq”) on August 9,
2024. Each Ordinary Share and accompanying Warrant is immediately separable and will be issued separately in this offering but must
be purchased together in this offering, with each Ordinary Share that we sell in this offering being accompanied by one Warrant.
Each Warrant offered hereby will have an assumed exercise price of $8.46 per Ordinary Share (representing 100% of the assumed combined
offering price per Ordinary Share and accompanying Warrant, which is equal to the closing price of our Ordinary Shares on the Nasdaq
Capital Market on August 9, 2024), will be exercisable upon issuance and will expire five (5) years from the initial date of
issuance. The aggregate initial offering price of all securities sold by us under this prospectus will not exceed $5,000,000.
We
are also offering to certain purchasers whose purchase of Ordinary Shares in this offering would otherwise result in the purchaser, together
with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of
our outstanding Ordinary Shares immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser
so chooses, pre-funded warrants (the “Pre-Funded Warrants”, and each a “Pre-Funded Warrant”) to purchase Ordinary
Shares, in lieu of Ordinary Shares that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at
the election of the purchaser, 9.99%) of our outstanding Ordinary Shares. Each Pre-Funded Warrant will be exercisable for one Ordinary
Share. The purchase price of each Pre-Funded Warrant is $8.459 (which is equal to the assumed combined public offering price
per Ordinary Share and accompanying Warrant to be sold in this offering minus $0.001, the exercise price per Ordinary Share of each Pre-Funded
Warrant). The Pre-Funded Warrants are immediately exercisable (subject to the beneficial ownership limitations) and may be exercised
at any time until all of the Pre-Funded Warrants are exercised in full. For each Pre-Funded Warrant we sell (without regard to any limitation
on exercise set forth therein), the number of Ordinary Shares we are offering will be decreased on a one-for-one basis. The Pre-Funded
Warrants and accompanying Warrants are immediately separable and will be issued separately in this offering but must be purchased together
in this offering, with each Pre-Funded Warrant that we sell in this offering being accompanied by one Warrant. This offering also relates
to the Ordinary Shares issuable upon the exercise of the Warrants, the Pre-Funded Warrants, and the Placement Agent Warrants (as defined
below). See “Description of Securities” for more information.
We
refer to the Ordinary Shares, the Warrants and the Pre-Funded Warrants, if any, to be issued in this offering, collectively, as
the “Securities.”
The
assumed combined offering price per (i) Ordinary Share and accompanying Warrant of $8.46, and (ii) Pre-Funded Warrant and accompany
Warrant of $8.459, used throughout this prospectus has been included for illustration purposes only, and may not be indicative of
the final offering price. The actual combined public offering price may differ materially from the assumed combined price used in this
prospectus and will be determined by negotiations between us and the investors in the offering, in consultation with the Placement Agent
(as defined below), based on, among other things, market conditions at the time of pricing and may be at a discount to the current market
price of our Ordinary Shares, and may not be indicative of prices that will prevail in the trading market.
Our
Ordinary Shares are listed on the Nasdaq Capital Market under the symbol “FEBO”. On August 9, 2024, the last reported
sales price of the Ordinary Shares on the Nasdaq Capital Market was $8.46. There is no established trading market for the
Warrants or the Pre-Funded Warrants, and we do not expect a market to develop. In addition, we do not intend to apply for the listing
of the Warrants or Pre-Funded Warrants on any national securities exchange or other trading market. Without an active trading
market, the liquidity of the Warrants and Pre-Funded Warrants will be limited.
We have engaged Rodman &
Renshaw LLC (the “Placement Agent”), to act as our exclusive placement agent in connection with this offering. The Placement
Agent has agreed to use its reasonable best efforts to arrange for the sale of the Securities offered by this prospectus. The Placement
Agent is not purchasing or selling any of the Securities we are offering, and the Placement Agent is not required to arrange the purchase
or sale of any specific number of Securities or dollar amount. We have agreed to pay to the Placement Agent the Placement Agent fees
set forth in the table below, which assumes that we sell all of the Securities offered by this prospectus. We have also agreed to issue
to the Placement Agent, or its designees, as compensation in connection with this offering, warrants to purchase up to 29,550
Ordinary Shares (the “Placement Agent Warrants”). There is no minimum number of Securities or amount of proceeds required
as a condition to closing in this offering. Because there is no minimum offering amount required as a condition to closing this offering,
we may sell fewer than all of the Securities offered hereby, which may significantly reduce the amount of proceeds received by us, and
investors in this offering will not receive a refund in the event that we do not sell an amount of Securities sufficient to pursue our
business goals described in this prospectus. In addition, because there is no escrow trust or similar arrangement and no minimum offering
amount, investors could be in a position where they have invested in our company, but we are unable to fulfill all of our contemplated
objectives due to a lack of interest in this offering. Further, any proceeds from the sale of Securities offered by us will be available
for our immediate use, despite uncertainty about whether we would be able to use such funds to effectively implement our business plan.
See the section entitled “Risk Factors” for more information. We will bear all costs associated with the offering. See “Plan
of Distribution” on page 119 of this prospectus for more information regarding these arrangements.
This
offering will terminate on August [●], 2024 unless we decide to terminate the offering (which we may do at any time in our discretion)
prior to that date. We will have one closing for all the Securities purchased in this offering. The combined public offering price per
Ordinary Share (or Pre-Funded Warrant in lieu thereof) and accompanying Warrant will be fixed for the duration of this offering.
We will deliver the Securities to be issued in connection with this offering delivery versus payment or receipt versus payment, as the
case may be, upon receipt of investor funds received by us.
FHL
is a holding company incorporated in the Cayman Islands with no material operations of its own. We conduct our operations in Hong Kong
through our subsidiaries, Fenbo Industries Limited (“FIL”), and Able Industries Ltd. (“AIL”), both incorporated
in Hong Kong, and in China through Fenbo Plastic Products Factory (Shenzhen) Ltd. (“FPPF”) incorporated in the People’s
Republic of China (“China” or the “PRC”) (FIL, AIL and FPPF, collectively, the “Operating Subsidiaries”).
We directly hold equity interests in our Operating Subsidiaries in China and Hong Kong, and we do not currently use a variable interest
entity (“VIE”) structure.
Investors
are cautioned that the Securities they are buying are securities of FHL, a Cayman Islands holding company, and not securities
of the Operating Subsidiaries. Investors in this offering will not directly hold equity interests in the Operating Subsidiaries.
Since
our business operations are conducted in China and Hong Kong through our Operating Subsidiaries, the Chinese government may exercise
significant oversight and discretion over the conduct of our business in China and Hong Kong and may intervene in or influence our Operating
Subsidiaries’ operations at any time, which could result in a material change in their operations and/or the value of our Ordinary
Shares.
China
and PRC shall refer to the People’s Republic of China, including Hong Kong, Macau, and Taiwan; however, the only time such jurisdictions
are not included in the definition of the PRC and China in this prospectus is when we make reference to the specific laws that have been
adopted by the PRC.
We
are an “Emerging Growth Company” and a “Foreign Private Issuer” under applicable U.S. federal securities laws
and, as such, are eligible for reduced public company reporting requirements. Please see “Implications of Being an Emerging Growth
Company” and “Implications of Being a Foreign Private Issuer” on page 15 of this prospectus for more
information.
Investing
in our Securities involves significant risks. The risks could result in a material change in the value of the Securities
we are registering for sale including the risk of losing your entire investment or could significantly limit or completely hinder our
ability to offer or continue to offer securities to investors. See “Risk Factors” beginning on page 19 of this prospectus
to read about factors you should consider before buying our Securities.
We
are subject to legal and operational risks associated with having certain of our Operating Subsidiaries’ operations in China, including
risks related to the legal, political and economic policies of the Chinese government, the relations between China and Hong Kong and
China and the United States, or Chinese or United States regulations, which risks could result in a material change in our operations
and/or cause our Ordinary Shares to significantly decline in value or become worthless and affect our ability to offer or continue to
offer securities to investors. Recently, the PRC government initiated a series of regulatory actions and made a number of public statements
on the regulation of 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, adopting new measures to extend the scope of cybersecurity
reviews, and expanding efforts in anti-monopoly enforcement. We may be subject to these regulatory actions or statements. Although we
have not engaged in any monopolistic behavior, our business does involve the collection of user data and may implicate cybersecurity
reviews. We currently expect that these new regulations may have an impact on our Operating Subsidiaries or this offering.
On
February 17, 2023, with the approval of the State Council, the China Securities Regulatory Commission (the “CSRC”) promulgated
the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (“Trial Measures”),
and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies
that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant
to the requirements of the Trial Measures within three working days following their submission of initial public offerings or
listing applications. Subsequent securities offerings of an issuer in the same overseas market where it has previously offered, and
listed securities must be filed with the CSRC within three business days after the offering is completed. If a domestic company fails
to complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such
domestic company may be subject to administrative penalties, such as an order to rectify, warnings and fines, and its controlling shareholders,
actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties,
such as warnings and fines.
As of the date of
this prospectus, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect to the
listing of our Ordinary Shares. We have been advised by the Alpha Law Firm, our PRC counsel, that, in its opinion, the filing
requirements under the Trial Measures do not apply to the Company since: (i) the revenue, total profit, total assets or net assets
of FPPF was less than 50% of that of the Company in total for the fiscal years ended December 31, 2023 and 2022; and (ii) the
majority of senior management are non-PRC citizens and reside in Hong Kong.
However,
there can be no assurance that the relevant PRC governmental authorities, including the CSRC, would reach the same conclusion as us,
or that the CSRC or any other PRC governmental authorities would not promulgate new rules or new interpretation of current rules (with
retrospective effect) to require us to obtain CSRC or other PRC governmental approvals for our recent IPO or this offering. If
we inadvertently concluded that such approvals were or are not required, our ability to offer or continue to offer our Securities
to investors could be significantly limited or completed hindered, which could cause the value of our Ordinary Shares to significantly
decline or become worthless. We may also face sanctions by the CSRC, the Cyberspace Administration of China or other PRC regulatory
agencies. These regulatory agencies may impose fines, penalties, limit our operations in China, or take other actions that could have
a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of
our Securities. See “Risk Factors” beginning on page 19 of this prospectus for a discussion of these legal
and operational risks and other information that should be considered before making a decision to purchase our Securities.
Although
Hong Kong is a Special Administrative Region and a dependency of the PRC, it has enacted its own laws pertaining to data security and
anti-monopoly concerns. Hong Kong enacted the Personal Data (Privacy) Ordinance (the “PDPO”)
to ensure an adequate level of data protection to retain its status as an international trading center and to give effect to human rights
treaty obligations. Moreover, Hong Kong has also enacted a similar piece of legislation regulating competition in the market (the
“Competition Ordinance”). The Competition Ordinance prohibits: (i) anti-competitive agreements and concerted practices; and
(ii) abuse of power with the object or effect of preventing, restricting or distorting competition in Hong Kong. If we were to be found
in violation of either of these laws, our Hong Kong Operating Subsidiaries’ operations may be restricted, and they may be required
or elect to make changes to their operations in Hong Kong so as to be in accordance with the PDPO and/or the Competition Ordinance. Moreover,
Hong Kong authorities may take other action against us, such as imposing taxes or other penalties, which could materially affect our
financial results. Thus, our revenue and business operations in Hong Kong would be adversely affected.
In
addition, the Holding Foreign Companies Accountable Act (the “HFCAA”), which prohibits foreign companies from listing their
securities on U.S. exchanges if the company’s auditor has been unavailable for Public Company Accounting Oversight Board
(United States) (“PCAOB”) inspection or investigation for three consecutive years, became law in December 2020. On December
16, 2021, the PCAOB issued a determination (the “Determination Report”) that the PCAOB is unable to inspect or investigate
completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by authorities
in those jurisdictions, and the PCAOB included in the Determination Report a list of the accounting firms that are headquartered in the
PRC or Hong Kong. On December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered
public accounting firms headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 Determination Report to the
contrary. The U.S. Securities and Exchange Commission (the “SEC”) adopted final amendments to its rules to implement
the HFCAA, which went into effect on January 20, 2022. As part of the SEC’s final rules, identified issuers will need to provide
additional disclosures in subsequent filings that prove the issuer is not owned or controlled by a governmental authority in the foreign
jurisdiction of the audit firm identified by the PCAOB in the Determination Report. The Determination Report includes our auditor, Centurion
ZD CPA & Co., which is based in Hong Kong, is registered with the PCAOB, is subject to PCAOB inspection and was last inspected in
May 2023. In the event that it is later determined that the PCAOB is unable to inspect or investigate completely our auditor or our work
papers because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause our securities
to be delisted from the applicable stock exchange. The delisting of our Ordinary Shares, or the threat of their being delisted, may materially
and adversely affect the value of your investment.
Furthermore,
on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which
was enacted on December 29, 2022, and amended the HFCAA to 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.
On
August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the
“Protocol”) to allow the PCAOB to inspect and investigate completely registered public accounting firms headquartered in
mainland China and Hong Kong, consistent with the HFCAA. Pursuant to the fact sheet with respect to the Protocol disclosed by
the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered
ability to transfer information to the SEC.
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. On December 29, 2022, the AHFCAA was enacted, which amended the HFCA Act by decreasing
the number of non-inspection years from three years to two, thus reducing the time period before our Ordinary Shares may be prohibited
from trading or delisted. Notwithstanding the foregoing, in the event it is later determined that the PCAOB is unable to inspect or investigate
completely our auditor, then such lack of inspection could cause our securities to be delisted from the stock exchange. See “Risk
Factors — Risks Related to Doing Business in the People’s Republic of China and Hong Kong — Although the audit report
included in this prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee that future
audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future, investors may be deprived of the benefits
of such inspection. Furthermore, trading in our securities may be prohibited under the HFCA Act if the SEC subsequently determines our
audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities
exchanges, such as the Nasdaq Capital Market, may determine to delist our securities. Furthermore, on June 22, 2021, the U.S. Senate
passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022, amending the HFCA Act and
requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to
PCAOB inspections for two consecutive years instead of three, thus reducing the time before the securities may be prohibited from trading
or delisted.”
As
a holding company, we will rely on dividends and other distributions on equity paid by our Hong Kong or PRC Operating Subsidiaries for
our cash and financing requirements. If our Hong Kong and PRC Operating Subsidiaries incur debt on their own behalf in the future, the
instruments governing such debt may restrict their ability to pay dividends to us. Moreover, to the extent cash is in our PRC Operating
Subsidiary, there is a possibility that the funds may not be available to fund our operations or for other uses outside the PRC due to
interventions or the imposition of restrictions and limitations by the PRC government on the ability to transfer cash. However, none
of our Operating Subsidiaries have paid any dividends or other distributions to us 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 or Hong Kong Operating
Subsidiaries via capital contribution or shareholder loans, as the case may be. As of the date of this prospectus, we have not paid any
dividends or made any distributions to any U.S. investors.
On
December 7, 2023, we transferred US$4 million to Fenbo Industries to repay IPO and other expenses totaling approximately
US$2.1 million paid by Fenbo Industries on our behalf. Other than this fund transfer, as of the date of this prospectus, there have been
no other cash flows between us and any of our subsidiaries or Operating Subsidiaries. The transfer of funds
among companies is subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law
in the Trial of Private Lending Cases (2020 Revision), (the “Provisions on Private Lending Cases”), which was implemented
on August 20, 2020, to regulate the financing activities between natural persons, legal persons, and unincorporated organizations. The
Provisions on Private Lending Cases do not prohibit using cash generated from one subsidiary to fund another subsidiary’s operations.
We have not been notified of any other restriction which could limit our PRC Operating Subsidiary’s ability to transfer
cash between subsidiaries. We intend to conduct regular review and management of all of our subsidiaries’ and Operating
Subsidiaries’ cash transfers and report to our Board of Directors.
Upon
completion of this offering, our issued and outstanding shares will consist of 11,653,516 Ordinary Shares, assuming all shares
offered are sold, no Pre-Funded Warrants are sold, and no Warrants are exercised. As of the date of this prospectus, Luxury Max
Investments Limited, a British Virgin Islands company (“LMIL”) owns 72.3% of our Ordinary Shares. We are a controlled company
as defined under Nasdaq Marketplace Rule 5615(c) because, Mr. Li Kin Shing, our controlling shareholder, and Executive Director, through
his ownership of 100% of the outstanding shares of LMIL, owns 72.3% of our total issued and outstanding Ordinary Shares, representing
72.3% of the total voting power, and will own 68.6% of our total issued and outstanding Ordinary Shares, representing 68.6%
of the total voting power, following completion of this offering, assuming all shares offered are sold, no Pre-Funded Warrants are
sold and no Warrants are exercised. Please see “Implications of Being a ‘Controlled Company’” on page 13
of this prospectus for more information.
Neither
the United States Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or
disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
| |
Per Ordinary Share and Accompanying Warrant | | |
Per Pre-Funded Warrant and Accompanying Warrant | | |
Total(1) | |
| |
| | |
| | |
| |
Public offering price | |
$ | | | |
$ | | | |
$ | | |
Placement Agent fees(2) | |
$ | | | |
$ | | | |
$ | | |
Proceeds before expenses to us(3) | |
$ | | | |
$ | | | |
$ | | |
(1) |
Assumes
no exercise of the Warrants or sale of Pre-Funded Warrants. |
(2) |
We
have also agreed to pay for certain of the Placement Agent’s offering-related expenses. In addition, we have agreed to issue
the Placement Agent, or its designees, as compensation in connection with this offering, the Placement Agent Warrants to purchase
a number of Ordinary Shares equal to 5% of the aggregate number of Ordinary Shares being offered (including the Ordinary Shares
issuable upon the exercise of any Pre-Funded Warrants being offered), at an exercise price of $[●] per Ordinary Share,
which represents 125% of the combined public offering price per Ordinary Share and accompanying Warrant. See
“Plan of Distribution” for a complete description of the compensation arrangements for the Placement Agent. |
(3) |
Because
there is no minimum number of Securities or amount of proceeds required as a condition to closing in this offering, the actual public
offering amount, Placement Agent fees, and proceeds to us, if any, are not presently determinable and may be substantially less than
the total maximum offering amounts set forth above. We estimate the total expenses of this offering payable by us, excluding the
Placement Agent fees and expenses, will be approximately $311,000. For more information, see “Plan of Distribution.” |
We expect to deliver the Securities
offered hereby against payment in New York, New York on or about August [●], 2024, subject to satisfaction of customary closing
conditions.
You should rely only on
information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you.
Neither the delivery of this prospectus nor the sale of our Securities means that the information contained in this prospectus, or any
free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus is not an offer
to sell or the solicitation of an offer to buy our Securities in any circumstances under which the offer or solicitation is unlawful
or in any state or other jurisdiction where the offer is not permitted. The information contained in this prospectus is accurate only
as of its date regardless of the time of delivery of this prospectus or of any sale of our Securities.
No person is authorized
in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby, or
any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information
or representation is given or made, such information or representation may not be relied upon as having been authorized by us.
For investors outside the United States: Neither
we nor the Placement Agent have done anything that would permit this offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about
and to observe any restrictions relating to this offering and the distribution of this prospectus.
Rodman & Renshaw LLC
The
date of this prospectus is , 2024.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the “SEC”).
You should rely only on the information contained in this prospectus, any related prospectus supplement, or in any free writing prospectus
we may authorize to be delivered or made available to you.
This
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to
the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies
of some of the documents referred to herein have been filed, will be filed, or will be incorporated by reference as exhibits to
the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below. You
should read this prospectus in its entirety before making an investment decision. You should also read and consider the information
in the documents to which we have referred you in the section of the prospectus entitled “Where You Can Find Additional
Information.”
Neither
the Company nor the Placement Agent has authorized anyone to provide you with any information or to make any representations other than
as contained in this prospectus or in any related free writing prospectus. Neither the Company nor the Placement Agent take responsibility
for, or provide any assurance about the reliability of, any information that others may give you. This prospectus is an offer to sell
only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained
in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale
of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.
For
investors outside the United States: neither the Company nor the Placement Agent has 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 Securities and the distribution of this prospectus outside the United States.
We
obtained statistical data, market data and other industry data and forecasts used in this prospectus from market research, publicly available
information, and industry publications. While we believe that the statistical data, industry data, forecasts and market research are
reliable, we have not independently verified the data.
PRESENTATION
OF FINANCIAL INFORMATION
Basis
of Presentation
Unless
otherwise indicated, all financial information contained in this prospectus is prepared and presented in accordance with generally accepted
accounting principles in the United States of America (“U.S. GAAP” or “GAAP”).
Certain
amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, amounts, percentages
and other figures shown as totals in certain tables or charts may not be the arithmetic aggregation of those that precede them and amounts,
and figures expressed as percentages in the text may not total 100% or, when aggregated, may not be the arithmetic aggregation of the
percentages that precede them.
Financial
Information in U.S. Dollars
Our
reporting currency is the Hong Kong dollar. For the purpose of presenting these financial statements of our Operating Subsidiary, FPPF,
using RMB as functional currency, the Company’s assets and liabilities are expressed in Hong Kong dollars at the exchange rate
on the balance sheet date, which is 0.9126, 0.8866 and 0.8176 as of December 31, 2023, December 31, 2022 and December 31, 2021, respectively;
shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange
rate during the period, which is 0.9070, 0.8642 and 0.8292 for the years ended December 31, 2023, December 31, 2022 and 2021, respectively.
This
prospectus also contains translations of Hong Kong dollars into U.S. dollars for the convenience of the reader. Unless otherwise stated,
all translations of Hong Kong dollars into U.S. dollars were made at US$0.12803 to HK$1, the exchange rates set forth in the statistical
releases of the Federal Reserve Board on December 29, 2023. We make no representation that the Hong Kong dollar or U.S. dollar
amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Hong Kong dollars, as the case may
be, at any particular rate or at all.
MARKET
AND INDUSTRY DATA
Certain
market data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys,
reports of governmental and international agencies and industry publications and surveys. Industry publications and third-party research,
surveys and reports generally indicate that their information has been obtained from sources believed to be reliable. This information
involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Our estimates involve
risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors”
in this prospectus.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking
statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use
of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry
Overview” and “Business.” These statements relate to events that involve known and unknown risks, uncertainties, and
other factors, including those listed under “Risk Factors,” which may cause our actual results, performance, or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In
some cases, these forward-looking statements can be identified by words or phrases such as “believe,” “plan,”
“expect,” “intend,” “should,” “seek,” “estimate,” “will,” “aim”
and “anticipate,” or other similar expressions, but these are not the exclusive means of identifying such statements. All
statements other than statements of historical fact included in this document, including those regarding future financial position and
results, business strategy, plans and objectives of management for future operations (including development plans and dividends) and
statements on future industry growth are forward-looking statements. In addition, we and our representatives may from time to time make
other oral or written statements that are forward-looking statements, including in our periodic reports that we will file with the SEC,
other information sent to our shareholders and other written materials.
These
forward-looking statements are subject to risks, uncertainties, and assumptions, some of which are beyond our control. In addition, these
forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual
outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including,
without limitation, the risk factors set forth in “Risk Factors” and in this section of the prospectus.
Important
factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited
to, regional, national, or global political, economic, business, competitive, market and regulatory conditions and the following:
|
● |
our
Operating Subsidiaries’ business strategies, operating plans, and business prospects; |
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|
|
|
● |
our
Operating Subsidiaries’ capital commitment plans and funding requirements; |
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|
● |
our
ability to effectuate and manage our Operating Subsidiaries’ planned business expansion; |
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|
|
|
● |
our
Operating Subsidiaries’ ability to attract customers and maintain customer loyalty; |
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|
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|
● |
our
Operating Subsidiaries’ ability to retain senior management team members and recruit qualified and experienced new team members; |
|
|
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|
● |
our
Operating Subsidiaries’ ability to maintain their competitiveness and operational efficiency; |
|
|
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● |
our
Operating Subsidiaries’ prospective financial conditions; |
|
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|
● |
general
economic market and business and financial conditions in Hong Kong, the PRC and globally; |
|
|
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|
● |
laws,
regulations, and rules for the personal care electric appliance industry in Hong Kong, the PRC and globally; |
|
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|
● |
future
trends, developments, and conditions in the personal care electric appliance industry in Hong Kong, the PRC and globally; |
|
|
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|
● |
certain
statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” with respect
to trends in prices, volumes, and operations; |
|
|
|
|
● |
our
ability to execute strategies for our Operating Subsidiaries; |
|
|
|
● |
changes
in the need for capital and the availability of financing and capital to fund those needs; |
|
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|
● |
our
ability to anticipate and respond to changes in the markets in which our Operating Subsidiaries operate, and to client demands, trends
and preferences; |
|
|
|
● |
exchange
rate fluctuations, including fluctuations in the exchange rates of currencies that are used in our Operating Subsidiaries’
business; |
|
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|
● |
changes
in interest rates or rates of inflation; |
|
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|
● |
legal,
regulatory, and other proceedings arising out of our Operating Subsidiaries’ operations; and |
|
|
|
|
● |
other
factors that are described in “Risk Factors.” |
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 nor 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 reference 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 or performance may be materially different from what we expect.
This
prospectus contains certain data and information that we obtained from various research and other publications. Statistical data in these
publications also include projections based on a number of assumptions. The markets for personal care electric appliances / hair styling
products may not grow at the rate projected by such market data, or at all. Failure of our industry to grow at the projected rate may
have a material and adverse effect on our business and the market price of our Ordinary Shares. 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.
DEFINITIONS
“AIL”
means Able Industries Ltd., a private company limited by shares incorporated on November 7, 2005, under the laws of Hong Kong and one
of our Operating Subsidiaries conducting business operations in Hong Kong.
“Articles
of Association” means the memorandum and articles of association of our Company adopted on September 30, 2022, and as further supplemented,
amended, or otherwise modified from time to time, a copy of which is filed as Exhibit 3.1 to our Registration Statement filed with the
SEC on September 11, 2023.
“Business
Day” means a day (other than a Saturday, Sunday, or public holiday in the U.S.) on which licensed banks in the U.S. are generally
open for normal business to the public.
“BVI”
means the British Virgin Islands.
“CAGR”
means compound annual growth rate.
“Companies
Act” means the Companies Act (as revised) of the Cayman Islands, as amended, supplemented and/or otherwise modified from time to
time.
“Companies
Ordinance” means the Companies Ordinance (Chapter 622 of the laws of Hong Kong) as amended, supplemented, or otherwise modified.
“Controlling
Shareholder” means for the purposes of our Company, Mr. Li Kin Shing, individually, and Luxury Max Investments Limited, a British
Virgin Islands company, as a group, where the context requires.
“COVID-19”
means the Coronavirus Disease 2019.
“EIT
Law” or “EIT Rules” means the Enterprise Income Tax Law of the People’s Republic of China.
“EU”
means the European Union.
“Exchange
Act” means the United States Securities Exchange Act of 1934, as amended.
“FHL”
or “Company” means Fenbo Holdings Limited, an exempted company limited by shares incorporated on September
30, 2022, under the laws of the Cayman Islands.
“FIL”
means Fenbo Industries Ltd., a private company limited by shares incorporated on June 17, 1993, under the laws of Hong Kong and one of
our Operating Subsidiaries conducting business operations in Hong Kong.
“FPPF”
means Fenbo Plastic Products Factory (Shenzhen) Ltd., a limited liability company incorporated on October 19, 2010, under the laws of
the PRC, which is our Operating Subsidiary conducting business operations in the PRC.
“Group,”
“our Group,” “we,” “us,” or “our” means the Company and its subsidiaries or any
of them, or where the context so requires, in respect of the period before the Company became the holding company of its present
subsidiaries, such subsidiaries as if they were subsidiaries of the Company at the relevant time or the businesses which have
since been acquired or carried on by them or, as the case may be, their predecessors.
“Hong
Kong dollars” or “HKD” or “HK$” means Hong Kong dollars, the lawful currency of Hong Kong.
“Hong
Kong Operating Subsidiaries” means FIL and AIL.
“Independent
Third Party” means a person or company who or which is independent of and is not a 5% owner of, does not control and is not controlled
by or under common control with any 5% owner and is not the spouse nor descendant (by birth or adoption) of any 5% owner of the Company.
“Initial
Public Offering” or “IPO” refers to the closing on December 1, 2023 of our initial public offering of 1,000,000 Ordinary
Shares at a public offering price of $5.00 for total gross proceeds of $5,000,000. On November 30, 2023, we commenced the listing of
our Ordinary Shares on the Nasdaq Capital Market under the ticker symbol “FEBO”.
“LMIL”
means Luxury Max Investments Limited, a British Virgin Islands company incorporated on October 21, 2022, which is a holding company not
conducting any business operations but owning 8,000,000 shares (72.32%) of the total issued and outstanding shares of the
Company, and whose total issued, and outstanding shares are owned by Mr. Li Kin Shing, a Controlling Shareholder and Executive Director
of the Company.
“Nasdaq
Market” means an online global electronic
marketplace for buying and selling securities, which operates 25 markets, 1 clearinghouse and 5 central securities depositories in the
United States and Europe.
“Operating
Subsidiaries” means FIL, AIL and FPPF.
“PRC”
or “China” means the People’s Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, the
Macau Special Administrative Region of the People’s Republic of China and Taiwan.
“PRC
Operating Subsidiary” means FPPF.
“Principal
Shareholder” means LMIL, a British Virgins Islands company beneficially owned 100% by Mr. Li Kin Shing, our Executive Director.
“Reorganization”
means the reorganization arrangements undertaken by our Group in preparation for the listing on the Nasdaq Market, which are described
in more detail in “History and Corporate Structure” in this prospectus.
“RLHL”
means Rich Legend Holdings Limited, a BVI business company limited by shares incorporated on October 21, 2022, under the laws of the
BVI and the holding company of our Operating Subsidiaries.
“RMB”
means Renminbi, the lawful currency of the PRC.
“Securities
Act” means the U.S. Securities Act of 1933, as amended.
“SEC”
or “Securities and Exchange Commission” means the United States Securities and Exchange Commission.
“US$,”
“$” or “USD” means United States dollar(s), the lawful currency of the United States.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be
important to you, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated
financial statements and notes to those statements, included elsewhere in this prospectus, before deciding to invest in our Securities.
This prospectus includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking
Statements.” Unless otherwise stated, all references to “us,” “our,” “we,” the “Company,”
and similar designations refer to Fenbo Holdings Limited, a Cayman Islands exempted company limited by shares.
Overview
and Corporate History
FHL,
incorporated on September 30, 2022, under the laws of the Cayman Islands, is the holding company of our Operating Subsidiaries, AIL,
FIL and FPPF. Through our Operating Subsidiaries, we represent over 30 years of experience producing personal care electric appliances
(principally electrical hair styling products) and toy products to overseas markets. Our operating history began in 1993 when FIL was
founded in Hong Kong by Mr. Li Kin Shing as a toy manufacturer and distributor. As the toy market deteriorated, he founded AIL in 2005
in Hong Kong, and shifted our operations to the manufacturing and sales of personal care electric appliances. Our manufacturing subsidiary,
FPPF, located in Guangdong, PRC, was formed in the PRC on October 19, 2010, and is capable of producing over three million units per
year based on management’s calculation and internal analysis. We currently act as both an original equipment manufacturer
(“OEM”) and original design manufacturer (“ODM”).
Since
2006, the Company has served as an OEM for Spectrum Brands, a global home essential company, and its sole customer, producing electrical
hair styling products, under the “Remington” brand which Spectrum Brands has the right of the use of, and which are currently
sold to Europe, United States and Latin America.
The
use of a variable interest entity (“VIE”) to circumvent restrictions on foreign ownership is a
longstanding industry practice and well known to officials and regulators in China; however, VIEs are not formally recognized under Chinese
law. Recently, the government of China provided new guidance to and placed restrictions on China-based companies raising capital offshore,
including through VIE structures. Although the China Securities Regulatory Commission published that they do not object to the use of
VIE structures for Chinese companies to raise capital from non-Chinese investors, there is no guarantee that the Chinese government or
a Chinese regulator will not otherwise interfere with the operation of VIE structures. We do not utilize a VIE structure.
Reorganization
Effective
November 18, 2022, our Group completed a reorganization to consolidate its business operations in Hong Kong and the PRC into an offshore
corporate holding structure to expand our manufacturing and sales operations and in anticipation of listing on a recognized securities
market. The Company was incorporated on September 30, 2022. For details, please refer to the section headed “History and
Corporate Structure” on page 67 of this prospectus.
The
major steps of the Reorganization were as follows:
|
(i) |
incorporation
on September 30, 2022, of Fenbo Holdings Limited in the Cayman Islands as an exempted company with limited liability with an authorized
share capital of $30,300.00 consisting of 303,000,000 shares of a nominal or par value of US$0.0001 each; at incorporation, one Ordinary
Share was issued as fully paid to the nominee of the secretarial company engaged by us, and such share was subsequently transferred
to Mr. Li Kin Shing on the same day; an additional 9,999 Ordinary Shares were allotted and issued to Mr. Li Kin Shing on November
14, 2022; on November 15, 2022, LMIL acquired 10,000 Ordinary Shares, representing the entire issued
share capital of FHL in consideration for 1 share, credited as fully paid, issued by LMIL to Mr. Li Kin Shing; |
|
(ii) |
incorporation
on October 21, 2022, of RLHL as a limited liability company in the BVI authorized to issue a maximum of 50,000
shares with a par value of US$1.00 each; at incorporation, one share was issued as fully paid to the initial subscriber and transferred
to Mr. Li Kin Shing on the same day; |
|
|
|
|
(iii) |
on
November 17, 2022, RLHL acquired 1,999,999 shares and one (1) share in the issued share capital of FIL from Mr. Li Kin Shing and
Mr. Li Siu Lun Allan, representing in aggregate its entire issued share capital, at a consideration of 5 shares, credited as fully
paid, issued by RLHL and a cash consideration of HK$100, respectively; upon completion of the acquisition, FIL and FPPF became indirect
wholly owned subsidiaries of the Company; |
|
(iv) |
on
November 17, 2022, RLHL acquired the entire issued share capital of AIL from Mr. Li Kin Shing, at a consideration of 4 shares, credited
as fully paid, issued by RLHL; upon completion of the acquisition AIL became an indirect wholly owned subsidiary of the Company;
and |
|
|
|
|
(v) |
on
November 18, 2022, FHL acquired the entire issued share capital of RLHL from Mr. Li Kin Shing in consideration for the issuance and
allotment of 9,990,000 Ordinary Shares of the Company at a par value of US$0.0001 each to LMIL. |
Following
the Reorganization, on August 11, 2023, LMIL completed a private placement of an aggregate of 2,000,000 Ordinary Shares owned by it at
a price of $2.50 per share to: Yuk Tong Lam (500,000 Ordinary Shares), Majestic Dragon Investment Co. Limited (500,000 Ordinary shares),
Top Dragon International Limited (300,000 Ordinary Shares), Smart Tech Group Limited (300,000 Ordinary Shares), and Power Ocean Ventures
Limited (400,000 Ordinary Shares).
Therefore,
as a result of the Reorganization and the private placement, as of the date of this prospectus: (i) LMIL which is 100% owned by Mr. Li
Kin Shing, owns 8,000,000 Ordinary Shares, representing 72.32% of our Company, (ii) our Company is a holding company and owns
100% of RLHL, (iii) RLHL owns 100% of FIL and AIL and (iv) FIL owns 100% of FPPF. We do not utilize
a VIE structure.
Purchasers
in this offering are buying shares of the Company, whereas all of our operations are conducted
through our Operating Subsidiaries. At no time will the Company’s shareholders directly own shares of the Operating Subsidiaries.
We
are and will be a “controlled company” as defined under the Nasdaq Stock Market Rules because, immediately after the completion
of this offering, our Controlling Shareholder, will own 68.6% of our total issued and outstanding Ordinary Shares, representing
68.6% of the total voting power. Please see “-Implications of Being a ‘Controlled Company’” below for
more information.
Initial
Public Offering
On
December 1, 2023, we closed on our Initial Public Offering of 1,000,000 Ordinary Shares at a price of $5.00 per share and on January
16, 2024 the representative of the underwriters in the IPO partially exercised the over-allotment option to purchase an additional
62,500 Ordinary Shares at the IPO price of $5.00 per share. In addition, certain selling shareholders sold an aggregate of 2,000,000
Ordinary Shares in the IPO. The gross proceeds of the IPO to us, before underwriting discounts and commissions and estimated
offering expenses, were approximately $5,312,500 (including the partial exercise of the over-allotment option). We did not receive
any of the proceeds from the sale of Ordinary Shares by the selling shareholders. On November 30, 2023, we commenced the listing
of our Ordinary Shares on the Nasdaq Capital Market under the ticker symbol “FEBO”.
Business
of the Operating Subsidiaries
Our
mission is to be an industry leader in providing personal care electric appliances.
Competitive
Strengths
We
believe the following competitive strengths differentiate us from our competitors:
|
● |
Long
term and stable relationship with “Spectrum Brands”, a diversified global branded consumer products and home essentials
company, which owns the right to use the Remington trademark for personal care products and our sole customer for whom we
develop, and supply products sold under the Remington brand (see “Risk Factors — Risks Related to Our Operating
Subsidiaries’ Business Operations); |
|
● |
R&D
department with substantial industry experience and market awareness permitting it to anticipate market changes and proactively develop
innovative and trendy products; |
|
● |
Stringent
adherence to quality control; and |
|
● |
Management
members that have decades of operating history, deep industry knowledge, proven track records, and established presence in the industry. |
Our
Strategies
We
intend to pursue the following strategies to further expand our business:
|
● |
Upgrade
and expand our existing production capacity, and capability by purchasing and installing new equipment, such as our plastic injection
molding production line and other ancillary equipment in the SZ Factory. |
|
● |
Strengthen
and reinforce our engineering, research, and product development capabilities by recruiting additional engineers and/or research
and development personnel which will better position us to expand the range of product / models and lines available for our current
sole customer and potential future ODM and OBM customers. |
|
● |
Penetrate
and further expand into existing and new geographic markets by enhancing our sales and marketing efforts and establishing new subsidiary
or representative offices and in new or existing geographical markets such as United States to (i) strengthen our support services
to our sole existing customer, Spectrum Brands, to provide a more timely response to their requirements thus solidifying our relationship
and potentially resulting in our engagement by Spectrum Brands for additional products; and (ii) explore cooperative opportunities
with other potential new customers, thereby capturing new sales opportunities and expanding our market share. |
REGULATORY
APPROVAL OF THE PRC
Permission
Required from Hong Kong and Chinese Authorities
As
of the date of this prospectus, neither we nor our Operating Subsidiaries are required to obtain any permission or approval from the
Hong Kong authorities to operate our business or issue our Ordinary Shares to foreign investors. We are also not required to obtain permissions
or approvals from any PRC authorities before listing in the U.S. and to issue our Ordinary Shares to foreign investors, including the
CSRC or the Cyberspace Administration of China (“CAC”).
However,
in the event that (i) the PRC government expanded the categories of industries and companies whose foreign securities offerings are subject
to review by the CSRC or the CAC and that we are required to obtain such permissions or approvals; or (ii) we inadvertently concluded
that relevant permissions or approvals were not required or that we did not receive or maintain relevant permissions or approvals required,
any action taken by the PRC government could significantly limit or completely hinder the operations of our Operating Subsidiaries and
our ability to offer or continue to offer securities to investors and could cause the value of our Ordinary Shares to significantly
decline or become worthless.
RECENT
REGULATORY DEVELOPMENT IN CHINA
Recently,
the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas 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 a VIE 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 a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital
market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement
and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system
of extraterritorial application of the PRC securities laws. On December 24, 2021, the CSRC, together with other relevant government
authorities in China issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing
by Domestic Companies (the “Administration Provisions”), and the Administrative Measures for the Filing of Overseas Securities
Offering and Listing by Domestic Companies (the “Measures”).
Furthermore,
on July 10, 2021, the CAC issued a revised draft of the Cybersecurity Review Measures (“Revised Draft”), which required that,
among others, in addition to Critical Information Infrastructure Operator (“CIIO”), any Data Processing Operator (“DPO”)
controlling personal information of no less than one million users that seeks to list in a foreign stock exchange should also be subject
to cybersecurity review, and further listed the factors to be considered when assessing the national security risks of the relevant activities.
On December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and several other administrations
jointly issued the revised Measures for Cybersecurity Review, or the “Revised Review Measures”, which became effective and
replaced the existing Measures for Cybersecurity Review on February 15, 2022. According to the Revised Review Measures, if an “online
platform operator” that is in possession of personal data of more than one million users intends to list in a foreign country,
it must apply for a cybersecurity review. Based on a set of Q&As published on the official website of the State Cipher Code Administration
in connection with the issuance of the Revised Review Measures, an official of the said administration indicated that an online platform
operator should apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators.
Moreover, the CAC released the draft of the Regulations on Network Data Security Management in November 2021 for public consultation,
which among other things, stipulates that a data processor listed overseas must conduct an annual data security review by itself or by
engaging a data security service provider and submit the annual data security review report for a given year to the municipal cybersecurity
department before January 31 of the following year. Given the recency of the issuance of the Revised Review Measures, there is a general
lack of guidance, and substantial uncertainties exist with respect to their interpretation and implementation.
Given
the nature of our Operating Subsidiaries’ business, we believe this risk is not significant. Our Operating Subsidiaries
do not have any customers in China and are not CIIOs nor a DPO as defined in the Revised Review Measures. We do not currently expect
the Revised Review Measures to have an impact on our Operating Subsidiaries’ business, operations or this offering as we do not
believe that our Operating Subsidiaries are deemed to be operators of critical information infrastructure or data processors controlling
personal information of no less than one million users, that are required to file for cybersecurity review before listing in the U.S.
since (i) FIL and AIL are incorporated and operating in Hong Kong and the Revised Review Measures remain unclear whether they shall be
applicable to a Hong Kong company; (ii) FIL’s subsidiary in mainland China is directly owned, does not use a VIE structure and
its sole customer is; (iii) as of the date of this prospectus, none of the Operating Subsidiaries have collected any personal information
of PRC individuals; and (iv) as of the date of this prospectus, none of the Operating Subsidiaries have been informed by any PRC governmental
authority of any requirement that they file for a cybersecurity review. Therefore, we believe that our Operating Subsidiaries are not
covered by the permission and requirements from the CSRC or the CAC.
Nevertheless,
since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making
bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or
promulgated. If the Revised Review Measures are adopted into law in the future and if any of the Operating Subsidiaries are deemed an
“operator of critical information infrastructure” or a “data processor” controlling personal information of no
less than one million users, the listing of our Ordinary Shares on U.S. exchanges could be subject to CAC’s cybersecurity review.
If we become subject to the CAC or any other governmental agency, we cannot assure you that we will be able to list our Ordinary Shares
on U.S. exchanges, or continue to offer securities to investors, which would materially affect the interest of the investors and cause
significantly depreciation of the price of our Ordinary Shares or render them worthless.
On
February 17, 2023, with the approval of the State Council, the CSRC promulgated
the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (“Trial Measures”),
and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that
seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the
requirements of the Trial Measures within three working days following their submission of initial public offerings or listing
applications. Subsequent securities offerings of an issuer in the same overseas market where it has previously offered, and listed
securities must be filed with the CSRC within three business days after the offering is completed. If a domestic company fails to
complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic
company may be subject to administrative penalties, such as an order to rectify, warnings and fines, and its controlling shareholders,
actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties,
such as warnings and fines.
As
of the date of this prospectus, (1) we and our PRC Subsidiary have received from PRC authorities all requisite licenses, permissions
or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied, and (2)
we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect to the listing of our Ordinary
Shares, and, in the opinion of our PRC legal counsel, the Alpha Law Firm, the filing requirements under the Trial Measures do not
apply to the Company since: (i) the revenue, total profit, total assets or net assets of FPPF was less than 50% of that of the Company
in total for the fiscal years ended December 31, 2023 and 2022, and (ii) the majority of senior management are non-PRC
citizens and reside in Hong Kong.
However,
there can be no assurance that the relevant PRC governmental authorities, including the CSRC, would reach the same conclusion as us,
or that the CSRC, CAC or any other PRC governmental authorities would not promulgate new rules or new interpretation of current rules
(with retrospective effect) to require us to obtain CSRC, CAC, or other PRC governmental approvals for our recent IPO or this
offering. If we inadvertently concluded that such approvals were or are not required, our ability to offer or continue to offer
our Securities to investors could be significantly limited or completed hindered, which could cause the value of our Ordinary
Shares to significantly decline or become worthless. We may also face sanctions by the CSRC, the CAC or other PRC regulatory agencies.
These regulatory agencies may impose fines, penalties, limit our operations in China, or take other actions that could have a material
adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our Securities.
See “Risk Factors” beginning on page 19 for a discussion of these legal and operational risks and other information
that should be considered before making a decision to purchase our Securities.
HOLDING
FOREIGN COMPANIES ACCOUNTABLE ACT (the “HFCA Act or the “HFCAA”)
The
HFCA Act was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed audit reports issued by
a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021,
the SEC shall prohibit the company’s shares from being traded on a national securities exchange or in the over-the-counter trading
market in the United States.
On
March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements
of the HFCA Act. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection”
year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA
Act, including the listing and trading prohibition requirements described above.
On
June 22, 2021, the U.S. Senate passed a bill, enacted on December 29, 2022, which amended the HFCAA to require the SEC to prohibit an
issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive
years instead of three consecutive years.
On
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.
The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public
accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a
position taken by an authority in foreign jurisdictions (“Commission-Identified Issuers”). The final amendments require Commission-Identified
Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the
public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign
issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of
its consolidated foreign operating entities. Further, the release provides notice regarding the procedures the SEC has established to
identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCA
Act. The SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. 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 December
31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering
the fiscal year ended December 31, 2022. The final amendments became effective on January 10, 2022.
On
December 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered
public accounting firms headquartered in Mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.
The PCAOB made its determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities
under the HFCA Act. The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms Subject to the Mainland
China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively. Our auditor is headquartered
in Hong Kong, appears as part of the report, and is listed under its Appendix B: Registered Public Accounting Firms Subject to the Hong
Kong Determination.
On
August 26, 2022, the PCAOB signed a Statement of Protocol (the “SOP”) Agreement with the CSRC and China’s Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigations (together,
the “SOP Agreements”), establish a specific, accountable framework to make possible complete inspections and investigations
by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. Under the SOP Agreements the PCAOB shall
have independent discretion to select any firms for inspection or investigation and has the unfettered ability to retain any information
as needed. If the PCAOB continues to be prohibited from conducting complete inspections and investigations of PCAOB-registered public
accounting firms in mainland China and Hong Kong, the PCAOB is likely to determine by the end of 2022 that positions taken by authorities
in the PRC obstructed its ability to inspect and investigate registered public accounting firms in mainland China and Hong Kong completely,
then the companies audited by those registered public accounting firms would be subject to a trading prohibition on U.S. markets pursuant
to the Holding Foreign Companies Accountable Act. See “Risk Factors — Risks Relating to Doing Business in the People’s
Republic of China and Hong Kong — Although the audit report included in this prospectus is prepared by U.S. auditors who
are currently inspected by the PCAOB, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB
and, as such, in the future, investors may be deprived of the benefits of such inspection. Furthermore, trading in our securities may
be prohibited under the HFCA Act if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable
to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq Capital Market, may determine
to delist our securities. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable
Act, which was enacted on December 29, 2022, amending the HFCA Act and requiring the SEC to prohibit an issuer’s securities from
trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus
reducing the time before the securities may be prohibited from trading or delisted.” on page 24. We cannot assure
you whether Nasdaq or other regulatory authorities will apply additional or more stringent criteria to us. Such uncertainty could cause
the market price of our Ordinary Shares to be materially and adversely affected.
Our
auditor, Centurion ZD CPA & Co. (“Centurion ZD”), the independent registered public accounting firm that issues the audit
report included 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 Centurion ZD’s
compliance with applicable professional standards. Centurion ZD is headquartered in Hong Kong and has been inspected by the PCAOB on
a regular basis, with the last inspection in May 2023.
Implications
of Being a Holding Company - Transfers of Cash to and from Our Subsidiaries
As
a holding company, we will rely on dividends and other distributions on equity paid by our Operating Subsidiaries for our cash and financing
requirements. We are permitted under the laws of the Cayman Islands and our memorandum and articles of association (as amended from time
to time) to provide funding to our subsidiaries incorporated in China and Hong Kong, through loans or capital contributions. Our subsidiaries
are permitted under the respective laws of China and Hong Kong to provide funding to us through dividends without restrictions on the
amount of the funds, other than as limited by the amount of their distributable earnings. However, to the extent that cash is in our
PRC or Hong Kong Operating Subsidiaries, there is a possibility that the funds may not be available to fund our operations or for other
uses outside of the PRC or Hong Kong due to interventions or the imposition of restrictions and limitations by the PRC or the Hong Kong
government on the ability to transfer cash. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments
governing such debt may restrict their ability to pay dividends to us. As of the date of this prospectus, our subsidiaries have not experienced
any difficulties or limitations on their ability to transfer cash between each other; nor do they maintain cash management policies or
procedures dictating the amount of such funding or how funds are transferred. None of our Operating Subsidiaries have paid any dividends,
other distributions or transferred assets to our holding company 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 or Hong Kong Operating Subsidiaries
via capital contribution or shareholder loans, as the case may be. As of the date of this prospectus, we have made one cash transfer
of US$4 million to Fenbo Industries Limited but have not paid any dividends or made any distributions to U.S. investors. See
“Risk Factors – Risks Related to Our Corporate Structure - We will rely on dividends and other distributions on equity
paid by our Operating Subsidiaries to fund our cash and financing requirements, and any limitation on the ability of our Operating subsidiaries
to make payments to us could have a material adverse effect on our ability to conduct our business” on page 19 of
this prospectus.
The
structure of cash flows within our organization, and a summary of the applicable regulations, is as follows:
1.
Our equity structure is a direct holding structure, that is, the overseas entity that is applying to trade on the Nasdaq Capital Market
in the United States is Fenbo Holdings Limited, an exempted company incorporated under the laws of the Cayman Islands with limited liability.
See “History and Corporate Structure” on page 67 of this prospectus for further details.
2.
Within our direct holding structure, the cross-border transfer of funds within our corporate group is legal and compliant with the laws
and regulations of the BVI, PRC, Hong Kong, and the Cayman Islands. After investors’ funds enter Fenbo Holdings Limited, the funds
are first transferred to RLHL which then transfers them to AIL and to FIL which can then transfer the funds to and FPPF.
3.
If the Company intends to distribute dividends, AIL will transfer the dividends to RLHL in accordance with the laws and regulations of
Hong Kong. RLHL will then transfer the dividends to FHL in accordance with the laws and regulations of the BVI. FHL will then transfer
the dividends to all of its shareholders respectively in proportion to the Ordinary Shares they hold in accordance with the laws
and regulations of the Cayman Islands, regardless of whether the shareholders are U.S. investors or investors in other countries or regions.
Summary
Risk Factors and Challenges
Investing
in our Securities involves risks. The risks summarized below are qualified by reference to “Risk Factors” beginning
on page 19 of this prospectus, which you should carefully consider before making a decision to purchase our Securities.
If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely
affected. In such case, the trading price of our Ordinary Shares would likely decline, and you may lose part or all of your investment.
These
risks include but are not limited to the following:
Risks
Related to Our Business and Corporate Structure
|
● |
We
have continuedly suffered net losses from operations, and we may not be able to sustain profitability. See “Risk Factors
– Risks Related to Our Business and Corporate Structure” on page 19. |
|
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● |
We
will rely on dividends and other distributions on equity paid by our Operating Subsidiaries to fund our cash and financing requirements,
and any limitation on the ability of our Operating Subsidiaries to make payments to us could have a material adverse effect on our
ability to conduct our business, including any restrictions imposed under the Companies Ordinance of Hong Kong. Moreover, to the
extent that cash is in our Hong Kong Operating Subsidiaries, there is a possibility that the funds may not be available to fund our
operations or for other uses outside of Hong Kong due to interventions or the imposition of restrictions and limitations by the Hong
Kong government on the ability to transfer cash. See “Risk Factors - Risks Related to Our Business and Corporate
Structure - on page 19. |
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● |
Our
corporate structure may involve unique risks for investors and could be disallowed by Chinese regulatory authorities. See “Risk
Factors – Risks Related to Our Business and Corporate Structure” on page 20. |
|
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If
we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results
of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely
affected. See “Risk Factors – Risks Related to Our Business and Corporate Structure” on page 20. |
Risks
Related to Doing Business in the People’s Republic of China and Hong Kong
|
● |
A
downturn in the Hong Kong, Chinese or global economy, or a change in economic and political policies of China, could materially and
adversely affect our Operating Subsidiaries’ business and financial condition. See “Risk Factors - Risks Related to Doing
Business in the People’s Republic of China and Hong Kong” on page 21. |
|
|
|
|
● |
Although
we are based in Hong Kong and conduct operations in both Hong Kong and China, if we should become subject to the recent scrutiny,
criticism and negative publicity involving U.S. listed China-based companies, we may have to expend significant resources to investigate
and/or defend allegations, which could harm our Operating Subsidiaries’ business operations, this offering and our reputation
and could result in a loss of your investment in our Securities if such allegations cannot be addressed and resolved favorably.
See “Risk Factors - Risks Related to Doing Business in the People’s Republic of China and Hong Kong” on page 23.
|
|
● |
There
are political risks associated with conducting business in Hong Kong. See “Risk Factors - Risks Related to Doing Business in
the People’s Republic of China and Hong Kong” on page 23. |
|
|
|
|
● |
The
PCAOB’s HFCAA Determination Report dated December 16, 2021, that the Board is unable to inspect or investigate completely registered
public accounting firms headquartered in China or Hong Kong, a Special Administrative Region and dependency of the PRC, because of
a position taken by one or more authorities in China or Hong Kong (“the Determination”) could result in the prohibition
of trading in our securities by not being allowed to list on a U.S. exchange, and as a result an exchange may determine to delist
our securities, which would materially affect the interest of our investors. See “Risk Factors - Risks Related to Doing Business
in the People’s Republic of China and Hong Kong” on page 24. |
|
|
|
|
● |
We
may become subject to a variety of PRC laws and other regulations regarding data security or securities offerings that are conducted
overseas and/or other foreign investment in China-based issuers, and any failure to comply with applicable laws and regulations could
have a material and adverse effect on our business, financial condition and results of operations and may hinder our ability to offer
or continue to offer securities to investors and cause the value of our Ordinary Shares to significantly decline or be worthless.
See “Risk Factors - Risks Related to Doing Business in the People’s Republic of China and Hong Kong” on
page 29. |
Risks
Related to Our Operating Subsidiaries’ Business Operations
|
● |
We
rely on one major customer, Spectrum Brands, and our future success in this market is dependent upon the continued demand by this
customer and our ability to attract new customers and expand our customer base. If we fail to retain this customer or any decline
in or loss of demand from this customer for any reason, may have a negative impact on our revenues, and an adverse effect on our
business, financial condition, and results of operations. In addition, our dependence on a single customer in this market exposes
us to the risk that current or future economic conditions could negatively affect our major customer and cause them to significantly
reduce operations and demand for our products. See “Risk Factors - Risks Related to our Operating Subsidiaries’ Business
Operations” on page 32. |
|
|
|
|
● |
Our
ability to deliver products to our key customer in a timely manner and to satisfy our customers’ fulfillment standards are
subject to several factors, some of which are beyond our control. See “Risk Factors - Risks Related to our Operating Subsidiaries’
Business Operations” on page 32. |
|
|
|
|
● |
To
compete successfully in the global marketplace, we must develop and introduce innovative new products to meet changing consumer preferences.
See “Risk Factors - Risks Related to our Operating Subsidiaries’ Business Operations” on page 33.
|
|
|
|
|
● |
Our
business may be adversely impacted by product defects or other quality issues which could
subject us to product liability claims, which could affect our reputation, sales,
and profitability. See “Risk Factors - Risks Related to our Operating Subsidiaries’
Business Operations” on page 34.
|
Risks
Related to Our Operating Subsidiaries’ Industry
|
● |
An
economic downturn may adversely affect consumer discretionary spending and demand for our products and services. See “Risk
Factors - Risks Related to Our Operating Subsidiaries’ Industry” on page 37. |
|
|
|
|
● |
We may not be able to keep pace with rapid technological
changes and competition in our industry. See “Risk Factors - Risks
Related to Our Operating Subsidiaries’ Industry” on page 37. |
|
|
|
|
● |
Compliance
with governmental regulations could increase our operating costs and interfere with our business
efforts. See “Risk Factors - Risks Related
to Our Operating Subsidiaries’ Industry” on page 37.
|
Risks
Related to Our Securities and the Offering:
|
● |
The Warrants are speculative
in nature. See “Risk Factors - Risks Related to Our Securities and the Offering” on page 39. |
|
|
|
|
● |
Until holders of the Warrants
and the Pre-Funded Warrants acquire Ordinary Shares upon exercise of those warrants, the holders will have no rights with respect
to the Ordinary Shares issuable upon exercise of those warrants. See “Risk Factors - Risks Related to Our Securities and the
Offering” on page 39. |
|
|
|
|
● |
There is no established public
trading market for the Warrants, or the Pre-Funded Warrants being offered in this offering, and we do not expect a market to develop.
In addition, we do not intend to apply to list the Warrants or the Pre-Funded Warrants on any national securities exchange or other
nationally recognized trading system, including The Nasdaq Capital Market. Without an active trading market, the liquidity of the
Warrants and the Pre-Funded Warrants will be limited. See “Risk Factors - Risks Related to Our Securities and the Offering”
on page 39. |
|
|
|
|
● |
An active trading market for our
Ordinary Shares may not continue and the trading price for
our Ordinary Shares may fluctuate significantly. See “Risk Factors - Risks Related to Our Securities and the Offering”
on page 42. |
|
|
|
|
● |
Because
we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return
on your investment. See “Risk Factors - Risks Related to Our Securities and the Offering” on page 43. |
|
● |
As
an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate
governance matters that differ significantly from the Nasdaq listing rules and corporate governance standards. See “Risk Factors
- Risks Related to Our Securities and the Offering” on page 43. |
|
|
|
|
● |
You
may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because
we are incorporated under Cayman Islands law. See “Risk Factors - Risks Related to Our Securities and the Offering” on
page 44. |
Implications
of Being a “Controlled Company”
Controlled
companies are exempt from the majority of independent director requirements. Controlled companies are subject to an exemption from Nasdaq
standards requiring that the board of a listed company consist of a majority of independent directors within one year of the listing
date.
Public
companies that qualify as a “Controlled Company” with securities listed on the Nasdaq Stock Market, 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 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. Under the 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 Nasdaq Capital Market’s other corporate governance standards. These include having an audit
committee and the special meetings of independent or non-management directors.
LMIL,
which is 100% owned by Mr. Li Kin Shing, our Controlling Shareholder, is the owner of record of an aggregate of 8,000,000 Ordinary Shares,
representing 72.32% of the total voting power. Depending on the number of Ordinary Shares sold in this offering, our Controlling Shareholder
may continue to control more than 50% of our issued and outstanding Ordinary Shares after this offering. If this offering is sold in
full, LMIL will own approximately 68.6% of the then total issued and outstanding Ordinary Shares. As a result, we will continue
to be a “controlled company” as defined under Nasdaq Listing Rule 5615(c) because our Controlling Shareholder will hold more
than 50% of the voting power for the election of directors. Therefore, the Controlling Shareholder of FHL will be able to exert significant
control over our management and affairs requiring shareholder approval, including approval of significant corporate transactions. This
concentration of ownership may not be in the best interests of all of our shareholders. As a “controlled company,” we are
permitted to elect not to comply with certain corporate governance requirements. As of the date of this prospectus, we have not relied
on these exemptions, but we may elect to do so in the future.
Implications
of Being an Emerging Growth Company
As
a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), enacted in April 2012, or the JOBS Act. An “emerging
growth company” may take advantage of reduced reporting requirements that are otherwise applicable to larger public companies.
In particular, as an emerging growth company, we:
|
● |
may
present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of
Financial Condition and Results of Operations, or “MD&A”; |
|
|
|
|
● |
are
not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing
how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis”; |
|
|
|
|
● |
are
not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over
financial reporting pursuant to the Sarbanes-Oxley Act of 2002; |
|
|
|
|
● |
are
not required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements
(commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes); |
|
|
|
|
● |
are
exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer
pay ratio disclosure; |
|
● |
are
eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the
JOBS Act; and |
|
|
|
|
● |
will
not be required to conduct an evaluation of our internal control over financial reporting. |
We
intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the
adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may
make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that
have opted out of the phase-in periods under §107 of the JOBS Act.
We
will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual
gross revenues of at least US$1.235 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion
of the IPO; (iii) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in
non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act
which would occur if the market value of our Ordinary Shares that are held by non-affiliates exceeds US$700 million as of the last
business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be
entitled to the exemptions provided in the JOBS Act discussed above.
Implications
of Being a Foreign Private Issuer
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. |
Furthermore,
Nasdaq Rule 5615(a)(3) provides that a foreign private issuer, such as us, may rely on our home country corporate governance practices
in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), provided that we nevertheless comply with Nasdaq’s
Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and that we have an audit committee
that satisfies Rule 5605(c)(3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). If
we rely on our home country corporate governance practices in lieu of certain of the rules of Nasdaq, our shareholders may not have the
same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. If
we choose to do so, we may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.
Impact
of COVID-19
Beginning
in late 2019, the outbreak of the COVID-19 pandemic resulted in quarantines, travel restrictions, and temporary closure of stores and
facilities in Hong Kong and elsewhere. The COVID-19 pandemic caused companies like us and our business partners to implement temporary
adjustments to work schedules and travel plans, mandating employees to work from home and collaborate remotely. As a result, we may have
experienced lower efficiency and productivity, internally and externally, which may adversely affect our service quality.
Furthermore,
our results of operations have been severely affected by the COVID-19 pandemic due to the instability of global financial markets and
other economic and financial challenges brought about by COVID-19 including a decline in general economic activities.
Hong
Kong lifted its travel restrictions and quarantine requirements in April 2023. We continue to actively monitor the development of COVID-19,
including outbreaks driven by its variants, and may take further actions to alter our business operations as may be required by governmental
authorities or which we determine are in the best interests of our employees, customers, suppliers, and shareholders.
However,
the extent of the impact of COVID-19 on our future financial results will be dependent on future developments, such as the potential resurgence of the pandemic, future government actions in response to the pandemic and the overall
impact of the COVID-19 pandemic on the global economy.
Corporate
Information
We
were incorporated in the Cayman Islands on September 30, 2022, for the purpose of being the holding company for the listing on the Nasdaq
Capital Market. Our registered office in the Cayman Islands is at Quality Corporate Services Ltd., Suite 102, Cannon Place, P.O. Box
712, North Sound Rd., George Town, Grand Cayman, KYI-9006 Cayman Islands. Our principal executive office is at Unit J, 19/F, World Tech
Centre, 95 How Ming Street, Kwun Tong, Kowloon, Hong Kong. Our telephone number at this location is +852 2343 3328. Our website address
is http://www.fenbo.com. The information contained on our website does not form part of, and is not incorporated by reference
into, this prospectus. Our agent for service of process in the United States is Cogency Global Inc., 122 E. 42nd Street,
18th Floor, New York, New York 10168.
Because
we are incorporated under the laws of the Cayman Islands, you may encounter difficulty protecting your interests as a shareholder, and
your ability to protect your rights through the U.S. federal court system may be limited. Please refer to the sections entitled “Risk
Factors – Risks Related to our Securities and the Offering” on page 38 of this prospectus, and “Enforceability
of Civil Liabilities” on page 50 of this prospectus for more information.
THE
OFFERING
Securities
being offered: |
|
Up
to 591,016 Ordinary Shares, $0.0001 par value per share, and accompanying Warrants to purchase up to 591,016 Ordinary
Shares at an assumed combined public offering price of $8.46 per Ordinary Share and accompanying Warrant (which was the closing
price of our Ordinary Shares on Nasdaq on August 9, 2024). Each Warrant will have an assumed exercise price of $8.46
per Ordinary Share (100% of the assumed combined public offering price per Ordinary Share and accompanying Warrant),
is exercisable immediately and will expire five years from the date of issuance. Each Ordinary Share and accompanying Warrant is
immediately separable upon issuance and will be issued separately in this offering. The aggregate initial offering price of all securities
sold by us under this prospectus will not exceed $5,000,000. |
|
|
|
|
|
We are also offering to certain purchasers, if any, whose
purchase of Ordinary Shares in this offering would otherwise result in the purchaser, together with its affiliates and certain related
parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Ordinary Shares immediately
following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, Pre-Funded Warrants in
lieu of Ordinary Shares that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election
of the purchaser, 9.99%) of our outstanding Ordinary Shares. The assumed combined offering price of each Pre-Funded Warrant and accompanying
Warrant is $8.459 (which is equal to the assumed combined public offering price per Ordinary Share and accompanying Warrant
to be sold in this offering minus $0.001, the exercise price per Ordinary Share of each Pre-Funded Warrant). The Pre-Funded Warrants
are immediately exercisable (subject to the beneficial ownership limitations) and may be exercised at any time until all of the Pre-Funded
Warrants are exercised in full. There is no expiration date for the Pre-Funded Warrants. For each Pre-Funded Warrant we sell (without
regard to any limitation on exercise set forth therein), the number of Ordinary Shares we are offering will be decreased on a one-for-one
basis. Each Pre-Funded Warrant and accompanying Warrant is immediately separable upon issuance and will be issued separately in this
offering but must be purchased together in this offering. This offering also relates to the Ordinary Shares issuable upon the exercise
of the Pre-Funded Warrants. For more information regarding the Pre-Funded Warrants, you should carefully read the section titled
“Description of Securities—Pre-Funded Warrants being Offered.” |
|
|
|
Warrants
to be offered by us |
|
Warrants
to purchase an aggregate of up to 591,016 Ordinary Shares, subject to adjustment as
set forth therein. Each Warrant will have an assumed exercise price of $8.46 per Ordinary
Share (100% of the assumed combined public offering price per Ordinary Share and
accompanying Warrant), will be immediately exercisable and will expire on the five-year
anniversary of the initial issuance date.
Each
Warrant is exercisable for one Ordinary Share, subject to adjustment in the event of share dividends, share splits, share combinations,
reclassifications, reorganizations, or similar events affecting our Ordinary Shares as described herein. The Ordinary Shares and accompanying Warrants, and the Pre-Funded
Warrants and accompanying Warrants, as the case may be, can only be purchased together in this offering but will be issued separately
and will be immediately separable upon issuance. This offering also relates to the Ordinary Shares issuable upon the exercise of
the Warrants. For more information regarding the Warrants, you should carefully read the section titled “Description of Securities—Warrants
being Offered.” |
|
|
|
Offering
size |
|
Up
to $5,000,000. |
|
|
|
Assumed
combined public offering price: |
|
$8.46
per Ordinary Share and accompanying Warrant
(which was the closing price of our Ordinary Shares on Nasdaq on August 9, 2024) and $8.459 per Pre-Funded Warrant
and accompanying Warrant. |
|
|
|
Ordinary
Shares outstanding prior to this offering: |
|
11,062,500
Ordinary Shares. |
|
|
|
Ordinary
Shares to be outstanding immediately after this offering: |
|
11,653,516
Ordinary Shares (assuming no exercise of any
Warrants and no sale of any Pre-Funded Warrants). |
|
|
|
Placement
Agent Warrants
|
|
The
registration statement of which this prospectus is a part also registers the Placement Agent
Warrants to purchase up to 29,550 Ordinary Shares (equal to 5% of the aggregate
number of Ordinary Shares (including the Ordinary Shares issuable upon the exercise of any
Pre-Funded Warrants) being offered) to be issued to the Placement Agent, or its designees,
as a portion of the Placement Agent compensation payable in connection with this offering,
as well as the Ordinary Shares issuable upon the exercise of the Placement Agent Warrants.
The Placement Agent Warrants will be exercisable at any time, and from time to time, in whole
or in part, during the five-year period commencing after the date of the commencement
of sales in the offering at an exercise price of $[●] per Ordinary Share
(125% of the combined public offering price per Ordinary Shares and accompanying Warrant).
Please see “Plan of Distribution—Placement Agent Warrants” for a description
of these warrants.
|
|
|
|
Gross
Proceeds |
|
We
expect that we will receive gross proceeds of $5,000,000 from this offering, assuming that the total offering is sold at
an assumed combined offering price per Ordinary Share and accompanying Warrant of $8.46, which was the closing price of our
Ordinary Shares on Nasdaq on August 9, 2024 (assuming no sale of any Pre-Funded Warrants). |
|
|
|
Use
of Proceeds |
|
We
currently intend to use the net proceeds, if any, from this offering as follows: (i) approximately 20% for research and development
on new products; (ii) approximately 40% for development of our own branded products; (iii) approximately 30% for formation of a
sales team for marketing of our own branded products; and (iv) approximately 10% for working capital. See “Use of Proceeds”
on page 52 of this prospectus. |
|
|
|
Risk
Factors |
|
Investing
in our Securities involves a high degree of risk and purchasers of our Securities may lose part or all of their investment.
See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our Securities
beginning on page 19. |
|
|
|
Lock-Up |
|
We and each
of our directors, executive officers and shareholders owning 5% or more of our Ordinary Shares including our Controlling Shareholder,
have agreed, subject to certain exceptions, for a period of ninety (90) days after the closing of this offering, not to offer,
sell, or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or any securities convertible into or exercisable
or exchangeable for Ordinary Shares of the Company. See “Plan of Distribution—Lock-Up Agreements.” |
|
|
|
Dividend
Policy |
|
We
do not intend to pay any dividends on our Ordinary Shares for the foreseeable future. Instead, we anticipate that all of our earnings,
if any, will be used for the operation and growth of our business. See “Dividends and Dividend Policy” for more information. |
|
|
|
Reasonable
Best Efforts |
|
We
have agreed to offer and sell the Securities offered hereby to the purchasers through the Placement Agent. The Placement Agent
is not required to buy or sell any specific number or dollar amount of the Securities offered hereby, but it will use its reasonable
best efforts to solicit offers to purchase the Securities offered by this prospectus. See “Plan of Distribution” on
page 119 of this prospectus. |
|
|
|
Listing |
|
Our
Ordinary Shares are listed on the Nasdaq Capital Market. There is no established trading market for the Warrants or Pre-Funded
Warrants, and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the Warrants or
Pre-Funded Warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of
the Warrants and Pre-Funded Warrants will be limited. |
|
|
|
Trading
symbol |
|
FEBO |
|
|
|
Transfer
agent |
|
Vstock
Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598; telephone: 212-828-8436, toll-free: 855-9VSTOCK; facsimile: 646-536-3179 |
SUMMARY
FINANCIAL DATA
You
should read the following summary financial data together with our financial statements and the related notes appearing at the end of
this prospectus, “Selected Consolidated Financial and Other Data,” “Capitalization” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” We have derived the financial data for years ended December
31, 2023, and 2022 from our consolidated financial statements included in this prospectus.
Results of Operations Data: | |
For the year ended December 31, 2022 | | |
For the year ended December 31, 2023 | | |
For the year ended December 31, 2023 | |
| |
| HKD’000 | | |
| HKD”000 | | |
| USD’000 | |
Revenues | |
| 119,728 | | |
| 119,110 | | |
| 15,249 | |
Net income (loss) | |
| 8,965 | | |
| (1,462 | ) | |
| (188 | ) |
Net income (loss) per share attributable to ordinary shareholders (cents) | |
| 86.53 | | |
| (14.50 | ) | |
| (1.86 | ) |
Weighted average number of Ordinary Shares outstanding | |
| 10,000,000 | | |
| 10,084,932 | | |
| 10,084,932 | |
Balance Sheet Data: | |
For the year ended December 31, 2022 | | |
For the year ended December 31, 2023 | | |
For the year ended December 31, 2023 | |
| |
| HKD’000 | | |
| HKD”000 | | |
| USD’000 | |
Cash | |
| 13,853 | | |
| 46,342 | | |
| 5,933 | |
Working capital | |
| 29,981 | | |
| 54,929 | | |
| 7,031 | |
Total assets | |
| 79,936 | | |
| 102,978 | | |
| 13,184 | |
Total liabilities | |
| 43,892 | | |
| 43,202 | | |
| 5,532 | |
Total shareholders’ equity | |
| 36,044 | | |
| 59,776 | | |
| 7,652 | |
RISK
FACTORS
Investing
in our Securities is highly speculative and involves a significant degree of risk. You should carefully consider the following
risks, as well as other information contained in this prospectus, before making an investment in our Company. The risks discussed below
could materially and adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay
dividends and the trading price of our Ordinary Shares. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash
flows and ability to pay dividends, and you may lose all or part of your investment. You should carefully review the “Special
Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus.
Risks
Related to Our Business and Corporate Structure
We
have continuedly suffered losses from operations, and we may not be able to sustain profitability.
Our
losses from operations for the years ended December 31, 2022 and 2023 were HK$2.5 million and HK$0.4 million respectively. The decrease
in loss from operations of HK$2.1 million during the year ended December 31, 2023 was primarily due to the combined effect of increase
in gross profit of HK$3.3 million, but the revenue for the year ended December 31, 2023 remained the same as the prior year and the increase
in general and administrative expenses of HK$1.2 million during the year ended December 31, 2023. If we fail to generate sufficient revenues
to operate profitably on a consistent basis or if we are unable to fund our continuing losses, you could lose all or part of your investment.
We
will rely on dividends and other distributions on equity paid by our Operating Subsidiaries to fund our cash and financing requirements,
and any limitation on the ability of our Operating Subsidiaries to make payments to us could have a material adverse effect on our ability
to conduct our business.
Our
Company is a holding company, and we will rely on dividends and other distributions on equity paid by our Operating Subsidiaries for
our cash and financing requirements. Within our direct holding structure, the cross-border transfer of funds within our corporate group
is legal and compliant with the laws and regulations of the BVI, PRC, Hong Kong, and the Cayman Islands. Our subsidiaries are permitted
under the respective laws of China and Hong Kong to provide funding to us through dividends without restrictions on the amount of the
funds, other than as limited by the amount of their distributable earnings. However, to the extent cash is in our Hong Kong Operating
Subsidiaries, there is a possibility that the funds may not be available to fund our operations or for other uses outside of Hong Kong
due to interventions or the imposition of restrictions and limitations by the Hong Kong government on the ability to transfer cash.
If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict their ability
to pay dividends to us.
After
investors’ funds enter FHL, the funds can be directly transferred to RLHL which will then directly transfer the funds to AIL and
FIL, which then can then transfer the funds to FPPF. If the Company intends to distribute dividends, AIL will transfer the dividends
to FIL in accordance with the laws and regulations of Hong Kong. FIL will then transfer the funds to RLHL which will then transfer the
funds to FHL, which will then distribute the dividends to all of its shareholders respectively in proportion to the Ordinary Shares
they hold in accordance with the laws and regulations of the Cayman Islands, regardless of whether the shareholders are U.S. investors
or investors in other countries or regions.
Under
the laws of Cayman Islands and our Articles of Association, our Company is permitted to provide funding to its subsidiaries through loans
or capital contributions, provided that such funding is in the best interest of our Company. Our Board of Directors has complete discretion
as to whether to distribute dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may
exceed the amount recommended by our Board of Directors. In either case, all dividends are subject to certain restrictions under Cayman
Islands law, namely that the Company may only pay dividends out of profits or share premium and provided that under no circumstances
may a dividend be paid if this would result in the Company being unable to pay its debts as they fall due in the ordinary course of business.
The Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Under
the Companies Ordinance of Hong Kong, dividends may only be paid out of distributable profits (that is, accumulated realized profits
less accumulated realized losses) or other distributable reserves. Dividends cannot be paid out of share capital. There are no restrictions
or limitation under the laws of Hong Kong imposed on the conversion of HK dollars into foreign currencies and the remittance of currencies
out of Hong Kong, nor is there any restriction on foreign exchange to transfer cash between our Company and its subsidiaries, across
borders and to U.S investors, nor on distributing earnings from our Operating Subsidiaries’ businesses to our Company and U.S.
investors and amounts owed. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong
in respect of dividends.
Under
PRC laws, rules and regulations, our PRC subsidiaries are required to set aside at least 10% of their after-tax profits each year after
making up for previous years’ accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such
fund reaches 50% of their registered capital. As of December 31, 2023, these restricted assets totaled approximately HK$2,806,000 (US$359,000).
However, there can be no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer or distribute
cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions
outside of China and may adversely affect our business, financial condition, and results of operations.
Neither
the Company nor any of its Operating Subsidiaries has paid dividends or made distributions to U.S. investors. No funds have been transferred
by the holding companies to the Operating Subsidiaries for the fiscal years ended December 31, 2023, 2022 or 2021, and through the date
of this prospectus, to fund their business operations. In the future, any cash proceeds raised from overseas financing activities may
be transferred by us to our Operating Subsidiaries via capital contribution or shareholder loans, as the case may be.
Moreover,
to the extent that cash is in our PRC or Hong Kong Operating Subsidiaries, there is a possibility that the funds may not be available
to fund our operations or for other uses outside of the PRC or Hong Kong due to interventions or the imposition of restrictions and limitations
by the PRC or Hong Kong government on the ability to transfer cash. Any limitation on the ability of our Operating Subsidiaries
to pay dividends or make other distributions to us could materially and adversely affect our financial position and the value of our
Ordinary Shares.
Our
corporate structure may involve unique risks and could be disallowed by Chinese regulatory authorities. Any PRC regulations
pertaining to our corporate structure, loans to and investment in PRC entities by offshore holding companies may delay us from making
loans or capital contributions to our Operating Subsidiaries, which could materially and adversely affect their liquidity and their ability
to fund and expand their businesses, which could cause our Ordinary Shares to significantly decline in value or become worthless.
With
regards to our corporate structure, any funds we may transfer to our PRC Operating Subsidiary, either as a loan or as an increase in
registered capital, are subject to approval by or registration with relevant government authorities in China, regardless of the amount
of the transfer. According to the relevant PRC regulations, capital contributions to our PRC Operating Subsidiary are subject to the
submission of reports of changes through the enterprise registration system and registration with a local bank authorized by SAFE. In
addition, any foreign loan procured by our PRC Operating Subsidiaries is required to be registered with SAFE, and such loan is required
to be registered with the NPRC. We may not be able to complete such registrations or obtain necessary approvals on a timely basis with
respect to future capital contributions or foreign loans by us to our PRC Operating Subsidiaries. If we fail to complete such registration
or other procedures, our ability to maintain our corporate structure while capitalizing our PRC Operating Subsidiaries’ operations
may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
If
we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results
of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected.
Prior
to our IPO, we were a private company with limited accounting personnel. Furthermore, prior to our IPO, our management had not performed
an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting
firm had not conducted an audit of our internal control over financial reporting. Effective internal control over financial reporting
is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed
to prevent fraud.
Our
failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements
that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors
to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of the
Ordinary Shares.
After
the closing of our IPO, we became a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the
Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal control over financial reporting
in our annual report on Form 20-F. In addition, if we cease to be an “emerging growth company,” as such term is defined in
the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control
over financial reporting on an annual basis. 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, as a public company, our reporting obligations may place a burden 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.
During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify
material weaknesses and deficiencies in our internal control over financial reporting. The Public Company Accounting Oversight Board,
or PCAOB, has defined a material weakness as “a deficiency, or a combination of deficiencies in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim statements will not be prevented
or detected on a timely basis.”
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. Generally speaking, 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, harm our
results of operations and lead to a decline in the trading price of our Ordinary Shares. Additionally, ineffective internal control over
financial reporting could expose us to increased risk of fraud, misuse of corporate assets and legal actions under the United States
securities laws and subject us to potential delisting from the Nasdaq Capital Market to regulatory investigations and to civil or criminal
sanctions.
Risks
Related to Doing Business in the People’s Republic of China and Hong Kong
A
downturn in the Hong Kong, China or global economy, or a change in economic and political policies of China, could materially and adversely
affect our Operating Subsidiaries’ business and financial condition.
Our
Operating Subsidiaries’ business, prospects, financial condition, and results of operations may be influenced to a significant
degree by political, economic, and social conditions in Hong Kong and China generally. 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. 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. 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 our PRC Operating Subsidiary.
Economic
conditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy
may affect our current customers’ and potential customers’ businesses and have a negative impact on our Operating Subsidiaries’
business, results of operations and financial condition. Additionally, continued turbulence in the international markets may adversely
affect our ability to access the capital markets to meet liquidity needs.
Changes
in the policies, regulations and rules, and the enforcement of laws of the PRC government may be implemented quickly with little advance
notice and could have a significant impact upon our Operating Subsidiaries’ ability to operate profitably in the PRC. The PRC legal
system also embodies uncertainties, which could limit law enforcement availability. Therefore, our assertions and beliefs of the risk
imposed by the PRC legal and regulatory system cannot be certain.
The
PRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence.
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 several decades has significantly enhanced the protections afforded to various forms
of foreign investment in China. Our Operating Subsidiaries are subject to PRC laws and regulations. However, these laws and regulations
change frequently, and the interpretation and enforcement thereof involve uncertainties. For instance, we may have to resort to administrative
and court proceedings to enforce the legal protections to which we are entitled to by law or contract. However, since PRC administrative
and court authorities have significant discretion in interpreting statutory and contractual terms, it may be difficult to evaluate the
outcome of administrative court proceedings and the level of law enforcement that we would receive in more developed legal systems. Such
uncertainties, including the inability of our Operating Subsidiaries to enforce their contracts, could affect our business and operation.
In addition, confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, we
cannot predict the effect of future developments in the PRC legal system, particularly with regard to our business, including the promulgation
of new laws. This may include changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations
by national laws. These uncertainties could limit the availability of law enforcement.
The
Chinese government may exercise significant oversight and discretion over the conduct of our Operating Subsidiaries’ business and
may intervene in or influence their operations at any time, which could result in a material change in their operations and/or the value
of our Ordinary Shares. Changes in the policies, regulations, rule, and the enforcement of laws of the Chinese government may also be
implemented quickly with little advance notice. Therefore, our assertions and beliefs concerning the risk imposed by the PRC legal and
regulatory system cannot be certain.
Our
Company is a holding company, and we conduct our operation through our Operating Subsidiaries in Hong Kong and the PRC. The PRC government
may choose to exercise significant oversight and discretion, and the regulations to which our Operating Subsidiaries are subject may
change rapidly and with little notice to them or our shareholders. As a result, the application, interpretation and enforcement of new
and existing laws and regulations in China are often uncertain. In addition, these laws and regulations may be interpreted and applied
inconsistently by different agencies or authorities, and inconsistently with our Operating Subsidiaries’ current policies and practices.
New laws, regulations and other government directives in China may also be costly to comply with, and such compliance or any associated
inquiries or investigations or any other government actions may:
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subject
us to remedies, administrative penalties and even criminal liabilities that may harm our Operating Subsidiaries’ business,
including fines assessed for our Operating Subsidiaries current or historical operations, or demands or orders that our Operating
Subsidiaries modify or even cease their business practices. |
We
are aware that, recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations
in certain areas 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 a VIE structure, adopting new measures
to extend the scope of cybersecurity reviews and expanding the efforts in anti-monopoly enforcement. These regulatory actions and statements
emphasize the need to strengthen the administration over illegal securities activities and the supervision of China-based companies seeking
overseas listings. Additionally, companies are required to undergo a cybersecurity review if they hold large amounts of data related
to issues of national security, economic development, or public interest before carrying out mergers, restructuring or splits that affect
or may affect national security. These statements were recently issued, and their official guidance and interpretation remain unclear
at this time. While we believe that our Operating Subsidiaries’ operations are not currently being affected, they may be subject
to additional and stricter compliance requirements in the near term. Compliance with new regulatory requirements or any future implementation
rules may present a range of new challenges which may create uncertainties and increase our Operating Subsidiaries’ cost of operations.
The
Chinese government may intervene or influence our Operating Subsidiaries’ operations at any time and may exert more control over
offerings conducted overseas and foreign investment in China-based issuers, which may result in a material change in our Operating Subsidiaries’
operations and/or the value of our Ordinary Shares. Any legal or regulatory changes that restrict or otherwise unfavorably impact our
Operating Subsidiaries’ ability to conduct their business could decrease demand for their services, reduce revenues, increase costs,
require them to obtain more licenses, permits, approvals or certificates, or subject them to additional liabilities. To the extent that
any new or more stringent measures are implemented, our business, financial condition and results of operations could be adversely affected,
and the value of our Ordinary Shares could decrease or become worthless.
Although
we are based in Hong Kong and conduct operations in China and Hong Kong, if we should become subject to the recent scrutiny, criticism
and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate and/or
defend the allegations, which could harm our Operating Subsidiaries’ business operations, this offering and our reputation and
could result in a loss of your investment in our Securities if such allegations cannot be addressed and resolved favorably.
During
the last several years, U.S. listed public companies that have substantially all of their operations in China have been the subject of
intense scrutiny by investors, financial commentators, and regulatory agencies. Much of the scrutiny has centered on financial
and accounting irregularities and mistakes, lack of effective internal controls over financial reporting and, in many cases, allegations
of fraud. The Chinese government also may exercise significant oversight and discretion over the conduct of our business in China and
Hong Kong and may intervene or influence our Operating Subsidiaries’ operations at any time, which could result in a material change
in their operations and/or the value of our Ordinary Shares. Moreover, as a result of this scrutiny, the publicly traded stock of many
U.S.-listed Chinese companies that have been the subject of such scrutiny has sharply decreased in value. Many of these companies are
now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations into the
allegations.
Although
we are based in Hong Kong, if we should become the subject of any such scrutiny, whether any allegations are true or not, we may have
to expend significant resources to investigate such allegations and/or defend the Company. Such investigations or allegations would be
costly and time-consuming, likely would distract our management from our normal business and could result in our reputation being harmed.
The price of our Ordinary Shares could decline because of such allegations, even if the allegations are false.
There
are political risks associated with conducting business in Hong Kong.
Any
adverse economic, social and/or political conditions, material social unrest, strike, riot, civil disturbance, or disobedience, as well
as significant natural disasters, may affect the market and adversely affect the business operations of the Company. Hong Kong is a special
administrative region of the PRC, and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, Hong Kong’s
constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial
powers, including that of final adjudication under the principle of “one country, two systems.” However, there is no assurance
that there will not be any changes in the economic, political, and legal environment in Hong Kong in the future. Since our operation
is based in Hong Kong, any change of such political arrangements may pose immediate threat to the stability of the economy in Hong Kong,
thereby directly and adversely affecting our results of operations and financial positions.
Under
the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China, Hong Kong is exclusively in charge
of its internal affairs and external relations, while the government of the PRC is responsible for its foreign affairs and defense. As
a separate customs territory, Hong Kong maintains and develops relations with foreign states and regions. Based on certain recent developments,
including the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region
issued by the Standing Committee of the PRC National People’s Congress in June 2020, the U.S. State Department has indicated that
the United States no longer considers Hong Kong to have significant autonomy from China and, at the time President Trump signed an executive
order and Hong Kong Autonomy Act, or HKAA, to remove Hong Kong’s preferential trade status and to authorize the U.S. administration
to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong
Kong’s autonomy. The United States may impose the same tariffs and other trade restrictions on exports from Hong Kong that it places
on goods from mainland China. These and other recent actions may represent an escalation in political and trade tensions involving the
U.S, China, and Hong Kong, which could potentially harm our business.
Given
the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our Operating Subsidiaries’
business operations, which could in turn adversely and materially affect our business, results of operations and financial condition.
It is difficult to predict the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore,
legislative, or administrative actions in respect of China-U.S. relations could cause investor uncertainty for affected issuers, including
us, and the market price of our Ordinary Shares could be adversely affected.
Changes
in international trade policies, trade disputes, barriers to trade or the emergence of a trade war may dampen growth in Hong Kong, China,
and other potential markets in which our Operating Subsidiaries’ will seek to expand.
Political
events, international trade disputes and other business interruptions could harm or disrupt international commerce and the global economy
and could have a material adverse effect on our Operating Subsidiaries and their customers both current and potential new customers.
International trade disputes could result in tariffs and other protectionist measures, which may materially and adversely affect our
Operating Subsidiaries’ business.
Tariffs
could increase the cost of our products which could affect customers’ investment decisions. In addition, political uncertainty,
such as the recent invasion by Russia in Ukraine, and surrounding international trade disputes and their potential of escalation to trade
wars and global recession, could have a negative effect on customer confidence, which could materially and adversely affect our Operating
Subsidiaries’ business. Our Operating Subsidiaries may also have access to fewer business opportunities, and their operations may
be negatively impacted as a result. In addition, the current and future actions, or escalations by either the United States or China,
including those sanctions imposed by the United States and other countries on Russia, and that affect trade relations may cause global
economic turmoil and potentially have a negative impact on our Operating Subsidiaries’ markets, their business, or their results
of operations, as well as the financial condition of their customers. We cannot provide any assurances as to whether such actions will
occur or the form that they may take.
Although
the audit report included in this prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee
that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future, investors may be deprived
of the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the HFCA Act if the SEC subsequently
determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S.
national securities exchanges, such as the Nasdaq Capital Market, may determine to delist our securities. Furthermore, on June 22, 2021,
the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022, amending the
HFCA Act and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not
subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time before the securities may be prohibited
from trading or delisted.
As
an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB,
our auditor is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with
the laws of the United States and professional standards. The PCAOB is currently unable to conduct inspections without the approval of
the Chinese government authorities. Currently, our U.S. auditor is inspected by the PCAOB, and we have a manufacturing subsidiary
operating in mainland China. We cannot assure you that our auditor’s work will continue to be able to be inspected by
the PCAOB.
Inspections
of other auditors conducted by the PCAOB outside mainland China have at times identified deficiencies in those auditors’ audit
procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.
The lack of PCAOB inspections of audit work undertaken in mainland China prevents the PCAOB from regularly evaluating auditors’
audits and their quality control procedures.
As
part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law,
in particular mainland China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress
which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit
work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based
Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning
in 2025, the delisting from U.S. national securities exchanges, such as the Nasdaq Capital Market, of issuers included on the SEC’s
list for three consecutive years. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations
within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets.
On
May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed
by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in
the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was
signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued
recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with
respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States.
In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated
with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such
risks.
On
March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements
in the HFCA Act. On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements
in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued
by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate.
We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year under a process
to be subsequently established by the SEC. The final amendments require any identified registrant to submit documentation to the SEC
establishing that the registrant is not owned or controlled by a government entity in the public accounting firm’s foreign jurisdiction,
and also require, among other things, disclosure in the registrant’s annual report regarding the audit arrangements of, and government
influence on, such registrants. Under the HFCA Act, our securities may be prohibited from trading on Nasdaq or other U.S. stock exchanges
if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our Ordinary Shares being
delisted.
On
June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022,
amending the HFCA Act and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its
auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time before our Ordinary Shares
may be prohibited from trading or delisted.
On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCA Act, whether the Board is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On
November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable
Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to
inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by
one or more authorities in that jurisdiction.
On
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.
The rules apply to Commission-Identified Issuers. The final amendments require Commission-Identified
Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the
public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign
issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of
its consolidated foreign operating entities. Further, the release provides notice regarding the procedures the SEC has established to
identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCA
Act. The SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. 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 December
31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering
the fiscal year ended December 31, 2022. The final amendments became effective on January 10, 2022.
On
December 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered
public accounting firms headquartered in Mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.
The PCAOB made its determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities
under the HFCA Act. The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms Subject to the Mainland
China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively. Our auditor, Centurion
ZD is headquartered in Hong Kong, and appears as part of the report as Appendix B: Registered Public Accounting Firms Subject to the
Hong Kong Determination.
On
August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the “MOF”),
and the PCAOB signed a Statement of Protocol (the “Protocol”) to allow the PCAOB to inspect and investigate completely registered
public accounting firms headquartered in mainland China and Hong Kong, consistent with the HFCA Act. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB
shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer
information to the SEC.
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. On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was
enacted, which amended the HFCA Act by decreasing the number of non-inspection years from three years to two, thus reducing the time
period before our common stock may be prohibited from trading or delisted. Notwithstanding the foregoing, in the event it is later determined
that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could cause our securities to
be delisted from the stock exchange.
The
SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described
above. Future developments in respect of increasing U.S. regulatory access to audit information are uncertain, as the legislative developments
are subject to the legislative process and the regulatory developments are subject to the rule-making process and other administrative
procedures.
While
the CSRC, the SEC and the PCAOB have entered into the SOP Agreements regarding the inspection of PCAOB-registered accounting firms in
mainland China and Hong Kong, there can be no assurance that we will be able to comply with requirements imposed by U.S. regulators if
there is significant change to current political arrangements between mainland China and Hong Kong. Delisting of our Ordinary Shares
would force holders of our Ordinary Shares to sell their Ordinary Shares. The market price of our Ordinary Shares could be adversely
affected as a result of anticipated negative impacts of these executive or legislative actions upon, regardless of whether these executive
or legislative actions are implemented and regardless of our actual operating performance.
The
enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong
National Security Law”) could impact our Hong Kong subsidiaries, including two of our Operating Subsidiaries.
On
June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law
defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories
of offenses — secession, subversion, terrorist activities and collusion with a foreign country or external elements to endanger
national security — and their corresponding penalties. On July 14, 2020, the former U.S. President, Donald Trump, signed the Hong
Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities
who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020, the U.S. government
imposed HKAA-authorized sanctions on eleven individuals, including HKSAR chief executive Carrie Lam. On October 14, 2020, the U.S. State
Department submitted to relevant committees of Congress the report required under the HKAA, identifying persons materially contributing
to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA
further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly
conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect
foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted.
It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong
Kong. If any our Operating Subsidiaries are determined to be in violation of the Hong Kong National Security Law or the HKAA by competent
authorities, our business operations, financial position, and results of operations could be materially and adversely affected.
Our
business depends on our ability to collect, use, maintain and otherwise process data, including personal data, relating to the production
of our products, the engineering and design of new products and product lines, and sales and marketing efforts. Any limitation imposed
on our collection, use, maintenance, or other processing of this data could significantly diminish the value of our Company and
cause us to lose revenue. Compliance with Hong Kong’s Personal Data (Privacy) Ordinance and any other regulations, legislation
or self-regulations relating to data protection, data privacy, cybersecurity, e-commerce, and advertising may entail significant
expenses. Uncertainties regarding the application or interpretation of existing or newly adopted laws and regulations could also threaten
our ability to collect, use, maintain and otherwise process this data which, in turn, could materially harm our business and subject
us to significant costs and legal liability for non-compliance.
Our
Operating Subsidiaries’ business and operations in Hong Kong are subject to data privacy related laws and regulations. In particular,
the Personal Data (Privacy) Ordinance (Chapter 486 of the laws of Hong Kong) (“PDPO”) imposes a duty on any data user who,
either alone or jointly with other persons, controls the collection, holding, processing or use of any personal data which relates directly
or indirectly to a living individual and can be used to identify that individual. Under the PDPO, data users shall take all practicable
steps to protect the personal data they hold from any unauthorized or accidental access, processing, erasure, loss, or use. Once collected,
such personal data should not be kept longer than necessary for the fulfilment of the purpose for which it is or is to be used and shall
be erased if it is no longer required, unless erasure is prohibited by law or is not in the public interest.
The
PDPO also confers on the Privacy Commissioner for Personal Data (“Privacy Commissioner”) power to conduct investigations
and institute prosecutions. The data protection principles (collectively, the “DPP”), which are contained in Schedule 1 to
the PDPO, outline how data users should collect, handle, and use personal data, complemented by other provisions imposing further compliance
requirements. The collective objective of DPPs is to ensure that personal data is collected on a fully informed basis and in a fair manner,
with due consideration towards minimizing the amount of personal data collected. Once collected, the personal data should be processed
in a secure manner and should only be kept for as long as necessary for the fulfillment of the purposes of using the data. Use of the
data should be limited to or related to the original collection purpose. Data subjects are given certain rights, inter alia: (a) the
right to be informed by a data user whether the data user holds personal data of which the individual is the data subject; (b) if the
data user holds such data, to be supplied with a copy of such data; and (c) the right to request correction of any data they consider
to be inaccurate. The Commissioner may carry out criminal investigations and institute prosecution for certain offenses. Depending on
the severity of the cases, the Privacy Commissioner will decide whether to prosecute or refer cases involving suspected commission to
the Department of Justice of Hong Kong. Victims may also seek compensation by civil action from data users for damage caused by a contravention
of the PDPO. The Commissioner may provide legal assistance to the aggrieved data subjects if the Commissioner deems fit to do so.
If
our Operating Subsidiaries conducting business operations in Hong Kong have violated certain provisions of the PDPO, we could face significant
civil penalties and/or criminal prosecution. Based on advice of counsel, we believe we have established the necessary protocols and data
collection standards to ensure compliance with the PDPO.
Moreover,
the increase in attention to and regulation of data protection, data privacy and cybersecurity across the globe in recent years will
require us to further devote resources and incur additional costs associated with compliance. Although we strive to comply with applicable
laws and regulations regarding data protection and data privacy and to inform our suppliers and customer of our business practices, it
is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our data collection,
use, maintenance, and other processing practices or that it may be argued that our practices do not comply with Hong Kong’s
Personal Data (Privacy) Ordinance. Due to rapid changes in technology and the inconsistent interpretations of privacy and data collection
and protection laws and regulations, we may be required to materially change the way we do business. The challenges imposed by the ongoing
need to remain compliant with such laws and regulations, as well as the need to implement any changes due to newly introduced laws and
regulations, may slow our growth, and if we are not able to cope with these challenges as effectively as other companies, we will be
competitively disadvantaged.
We
are incorporated under the laws of the Cayman Islands and are subject to its Data Protection Act, which regulates our collection and
processing of personal data of our investors.
We
collect, process, and maintain personal data about investors of the Company pursuant to the Data Protection Act, 2021 Revision, of the
Cayman Islands, as amended from time to time as well as 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.” By virtue of your investment in the Company, we and certain of our third-party
service providers may collect, record, store, transfer and otherwise process personal data by which individuals may be directly or indirectly
identified. Your personal data will be processed fairly and for lawful purposes, including: (i) 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; (ii) where the processing is necessary
for compliance with any legal, tax, or regulatory obligations to which we are subject; or (iii) where the processing is for the purposes
of legitimate interests pursued by us or by a service provider to whom the data are disclosed. As a data controller, we will only use
your personal data for the purposes for which we collected it. We anticipate that we will share your personal data with our third-party
service providers for certain purposes. 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).
A
cyberattack, security breach or other unauthorized access or interruption to our information technology systems or those of any third-party
service providers could harm our reputation and subject us to significant liability.
We
are fully aware that cybersecurity threats, privacy breaches, insider threats or other incidents and malicious internet-based activity
continue to increase, evolve in nature, and become more sophisticated. Information security risks for companies such as ours have significantly
increased in recent years in part because of the proliferation of new technologies, the use of internet and telecommunications technologies
to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, and other
external parties, as well as nation-state and nation-state-supported actors. Many companies that provide services similar to ours have
also reported a significant increase in cyberattack activity since the beginning of the COVID-19 pandemic.
On
April 16, 2024, our Board of Directors approved the authorization of an amendment to the Company’s Audit Committee Charter (the
“Audit Committee Charter”) pursuant to which it adopted a cybersecurity policy (the “Cybersecurity Policy”) and
further approving that the Audit Committee will have full authority and powers to implement the Cybersecurity Policy. The Audit Committee
Charter provides the members of the Audit Committee with authorization and authority to conduct continuous analysis of and review for
any potential cybersecurity risks as part of the Company’s overall risk management program and to create a cyber-resilient organization,
which will contribute to the value preservation of the Company. The Audit Committee Charter further provides authority and responsibility
to the members of the Audit Committee to: (i) understand the economic drivers and impact of cyber risk, including the financial impact
to our Company; (ii) align cyber-risk management policies with the Company’s business needs by integrating cyber-risk analysis
into significant business decisions; (iii) ensure our Company’s organizational structure supports cybersecurity goals; and (iv)
incorporate cybersecurity expertise into board governance. See “Management – Audit Committee Charter”.
In
addition, because we may utilize a third-party contractor to provide these services to us, including cloud, software, data center and
other critical technology, to collect and maintain personal data on our shareholders, we rely heavily on the data security practices
and policies adopted by these third-party service providers. Our ability to monitor our third-party service providers’ data security
is limited. A vulnerability in our or our third-party service providers’ software or systems, a failure of our third-party service
providers’ safeguards, policies or procedures, or a breach of a software or systems could result in the compromise of the confidentiality,
integrity or availability of the data housed. We cannot guarantee that any similar incidents may not occur again and adversely affect
our shareholders. We and our third-party service providers and partners may be unable to anticipate or prevent techniques used in the
future to obtain unauthorized access or to sabotage systems and we cannot guarantee that applicable recovery systems, security protocols,
network protection mechanisms and other procedures are or will be adequate to prevent network and service interruption, system failure
or data loss. In addition, we may also become liable in the event our or our third-party service providers are subject to security breaches,
privacy breaches or other cybersecurity threats. This could expose us to a risk of litigation, indemnity obligations and damages, cause
us to incur significant liability and financial loss and be subject to regulatory scrutiny, investigations, proceedings and fines and
penalties, and require us to expend significant capital and other resources to alleviate problems caused by any such cybersecurity attack
or other security breach or incident and implement additional security measures.
We
currently do not maintain cybersecurity insurance, and in the event that we were to seek to obtain such insurance coverage, it may not
be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims in connection with cybersecurity
liabilities. Insurers could also deny coverage as to any future claim.
We
may become subject to a variety of PRC laws and other regulations regarding data security or securities offerings that are conducted
overseas and/or other foreign investment in China-based issuers, and any failure to comply with applicable laws and regulations could
have a material and adverse effect on our business, financial condition and results of operations and may hinder our ability to offer
or continue to offer our Securities to investors and cause the value of our Ordinary Shares to significantly decline or be worthless.
On
June 10, 2021, the Standing Committee of the National People’s Congress enacted the PRC Data Security Law, which took effect on
September 1, 2021. The law requires data collection to be conducted in a legitimate and proper manner and stipulates that, for the purpose
of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for
data security.
On
July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly
issued a document to crack down on certain activities in the securities market and promote the high-quality development of the capital
markets, 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
August 20, 2021, the 30th meeting of the Standing Committee of the 13th National People’s Congress voted and passed the “Personal
Information Protection Law of the People’s Republic of China”, or the “PRC Personal Information Protection Law”,
which became effective on November 1, 2021. The PRC Personal Information Protection Law applies to the processing of personal information
of natural persons within the territory of China that is carried out outside of China where (1) such processing is for the purpose of
providing products or services for natural persons within China, (2) such processing is to analyze or evaluate the behavior of natural
persons within China, or (3) there are any other circumstances stipulated by related laws and administrative regulations.
On
December 24, 2021, the CSRC, together with other relevant government authorities
in China issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies
(Draft for Comments), and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments)
(“Draft Overseas Listing Regulations”). The Draft Overseas Listing Regulations requires that a PRC domestic enterprise seeking
to issue and list its shares overseas (“Overseas Issuance and Listing”) shall complete the filing procedures of and submit
the relevant information to CSRC. The Overseas Issuance and Listing includes direct and indirect issuance and listing. Where an enterprise
whose principal business activities are conducted in the PRC seeks to issue and list its shares in the name of an overseas enterprise
(“Overseas Issuer”) on the basis of the equity, assets, income or other similar rights and interests of the relevant PRC
domestic enterprise, such activities shall be deemed an indirect overseas issuance and listing (“Indirect Overseas Issuance and
Listing”) under the Draft Overseas Listing Regulations.
On
December 28, 2021, the CAC jointly with the relevant authorities formally published Measures for Cybersecurity Review (2021) which took
effect on February 15, 2022 and replace the former Measures for Cybersecurity Review (2020) issued on April 13, 2020. Measures for Cybersecurity
Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services and online platform
operators (together with the operators of critical information infrastructure, the “Operators”) carrying out data processing
activities that affect or may affect national security, shall conduct a cybersecurity review, any and online platform operator who controls
more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if
it seeks to be listed in a foreign country.
Our
Operating Subsidiaries may in the future collect and store certain data (including certain personal information) from our customers,
who may be PRC individuals, in connection with our business and operations and for “Know Your Customers” purposes (to combat
money laundering). Given that: (i) two of our Operating Subsidiaries are incorporated and located in Hong Kong and the other Operating
Subsidiary is incorporated and located in China; (ii) we have an Operating Subsidiary engaged in business operations in mainland China;
and (iii) pursuant to the Basic Law of the Hong Kong Special Administrative Region (the “Basic Law”), which is a national
law of the PRC and the constitutional document for Hong Kong, national laws of the PRC shall not be applied in Hong Kong, except for
those listed in Annex III of the Basic Law (which is confined to laws relating to defense and foreign affairs, as well as other matters
outside the autonomy of Hong Kong), we currently may expect the Measures for Cybersecurity Review (2021), the PRC Personal Information
Protection Law and the Draft Overseas Listing Regulations to have an impact on our Operating Subsidiaries or this offering.
These
statements and regulatory actions are new, and it is highly uncertain how soon the legislative or administrative regulation making bodies
will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,
if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business
operations of our Operating Subsidiaries, their respective abilities to accept foreign investments and the listing of our Ordinary Shares
on a U.S. or other foreign exchanges. There remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity
laws and regulations. If the Draft Overseas Listing Regulations are adopted into law in the future and becomes applicable to our Operating
Subsidiaries, if any of our Operating Subsidiaries is deemed to be an “Operator” required to file for cybersecurity review
before listing in the United States or if the Measures for Cybersecurity Review (2021) or the PRC Personal Information Protection Law
becomes applicable to our Operating Subsidiaries, the business operations of our Operating Subsidiaries and the listing of our Ordinary
Shares in the United States could be subject to the CAC’s cybersecurity review or CSRC Overseas Issuance and Listing review in
the future. If our Operating Subsidiaries become subject to the CAC or CSRC review, we cannot assure you that our Operating Subsidiaries
will be able to comply with the regulatory requirements in all respects, and the current practice of collecting and processing personal
information may be ordered to be rectified or terminated by regulatory authorities. In the event of a failure to comply, our Operating
Subsidiaries may become subject to fines and other penalties, which may have a material adverse effect on our business, operations, and
financial condition, may hinder our ability to offer or continue to offer securities to investors and cause the value of our Ordinary
Shares to significantly decline or be worthless.
If
the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment
in China-based issuers, such action may significantly limit or completely hinder our ability to offer or continue to offer securities
to investors and cause the value of our Ordinary Shares to significantly decline or be worthless. As of the date of this prospectus,
and based on the advice of the Alpha Law Firm, our PRC counsel, we believe that we are in full compliance with the
rules and regulations promulgated by the CAC and CSRC and associated policies as issued to current date.
These
recent statements, laws, and regulations by the Chinese government, including the Measures for Cybersecurity Review (2021), the PRC Personal
Information Protection Law and the Draft Overseas Listing Regulations, have indicated an intent to exert greater oversight and control
over offerings that are conducted overseas and/or foreign investments in China-based issuers. It is uncertain whether the Chinese government
will adopt additional requirements or extend the existing requirements to apply to our Operating Subsidiaries located in Hong Kong. We
could be subject to approval or review of Chinese regulatory authorities to pursue this offering. Any future action by the PRC government
expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC could significantly
limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities
to significantly decline or be worthless.
If
the Chinese government were to impose new requirements for approval from the PRC authorities to issue the Company’s Ordinary Shares
to foreign investors or list on a foreign exchange, such action could significantly limit or completely hinder our ability to offer or
continue to offer securities to investors and cause such securities to significantly decline in value or become worthless.
Recently,
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.
Based
on the advice of PRC counsel, the Alpha Law Firm, and our understanding of currently applicable PRC laws and regulations, the Company and
its PRC subsidiaries: (i) are not currently required to obtain permissions from any PRC authorities to operate or to issue securities
to foreign investors; (ii) are not subject to permission requirements from the CSRC,
the CAC or any other entity that is required to approve their operations; and
(iii) have not been denied any permissions by any PRC authorities. In addition, Fenbo Industries Limited, our Hong Kong subsidiary that
owns 100% of the outstanding shares of Fenbo Plastic Products Factory (Shenzhen) Ltd., is afforded the legal protections of national
treatment under the Foreign Investment Law of the People’s Republic of China.
If
we have erroneously concluded that these permission requirements do not apply to us, or if applicable laws, regulations, or interpretations
change, and it is determined in the future that the permission requirements become applicable to us, we may be subject to review, may
face challenges in addressing these requirements and may incur substantial costs in complying with these requirements, which could result
in material adverse changes in our business operations and financial position. In addition, if we are not able to fully comply with the
Measures for Cybersecurity Review (2021 version) or if the Opinions come into effect and are determined to be applicable to us, our ability
to offer or to continue to offer securities to investors may be significantly limited or completely hindered, and our Securities
may significantly decline in value or become worthless.
Given
the current PRC regulatory environment, it is uncertain whether the Company will be required to obtain permission from the PRC government
to list on U.S. exchanges in the future, and if such permission is required, whether it will be denied or later rescinded. We have been
closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities
required for overseas listings, including this offering. As of the date of this prospectus, we have not received any inquiry, notice,
warning, sanctions, or regulatory objection to our recent IPO or this offering from the CSRC or other PRC governmental authorities.
However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related
to overseas securities offerings and other capital markets activities.
According
to the Administration Provision and the Measures (Draft for Comments), only new offerings and refinancing by existent overseas listed
Chinese companies will be required to go through the filing process with PRC administrations; other existent overseas listed companies
will be allowed sufficient transition period to complete their filing procedure, which means if we complete the offering prior to the
effectiveness of Administration Provisions and Measures, we will certainly go through the filing process in the future, perhaps because
of refinancing or given by sufficient transition period to complete filing procedure as an existent overseas listed Chinese company.
On
February 17, 2023, with the approval of the State Council, the CSRC promulgated the Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which became effective on March 31,
2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly,
shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following
their submission of initial public offerings or listing applications. Subsequent securities offerings of an issuer in the same overseas
market where it has previously offered, and listed securities must be filed with the CSRC within three business days after the offering
is completed. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any
major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify,
warnings and fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons
may also be subject to administrative penalties, such as warnings and fines; (ii) if the issuer meets both of the following criteria,
the overseas offering and listing conducted by such issuer shall be deemed an indirect overseas offering and listing by a PRC domestic
company: (A) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its
audited consolidated financial statements for the most recent fiscal year were derived from PRC domestic companies; and (B) the majority
of the issuer’s business activities are carried out in mainland China, or its main place(s) of business are located in mainland
China, or the majority of its senior management team in charge of its business operations and management are PRC citizens or have their
usual place(s) of residence located in mainland China; and (C) where a PRC domestic company is seeking an indirect overseas offering
and listing in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures
with the CSRC, and where an issuer makes an application for an initial public offering or listing in an overseas market, the issuer shall
submit filings with the CSRC within three business days after such application is submitted.
If
it is determined in the future that the approval of the CSRC, the CAC or any other regulatory authority is required for our IPO or
this offering, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies may impose
fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in China, delay
or restrict the repatriation of the proceeds from our IPO or this offering into China or take other actions that could have a
material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our
Securities. The CSRC, the CAC, or other PRC regulatory agencies also may take actions requiring us, or making it advisable for
us, to halt this offering before settlement and delivery of our Ordinary Shares. Consequently, if you engage in market trading or other
activities in anticipation of and prior to settlement and delivery of our Ordinary Shares, you do so at the risk that settlement and
delivery may not occur. In addition, if the CSRC, the CAC or other regulatory PRC agencies later promulgate new rules requiring that
we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures
are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have
a material adverse effect on the trading price of our Securities.
Risks
Related to Our Operating Subsidiaries’ Business Operations
We
rely on one major customer, and if we fail to retain this customer or attract new customers, our business, financial condition, results
of operations, and growth prospects will be harmed.
We
rely on one key customer who contributed approximately 100% of our total revenues for the fiscal years ended December 31, 2023,
2022 and 2021. We do not have a long-term agreement with our key customer and their purchases are made on an order-by-order basis.
Our business with this customer has been, and we expect it will continue to be, conducted based on the actual orders received from time
to time. Our sole customer is not obligated in any way to continue placing orders with us at the same or increasing levels, or at all.
Our customer’s level of demand for our products may fluctuate significantly from period to period. Such fluctuation is attributable
mainly to changes in our customer’s business strategies, operational needs, product portfolio as well as consumer trends. The loss
of our sole customer, or if we are unable to attract new customers or if our existing customer decreases their spending on the products
we offer, or fails to make repeat purchases of our products, will harm our business, financial condition, results of operations, and
growth prospects.
Our
one key customer may take actions that adversely affect our gross profit and operating results.
We
are dependent upon our one key customer whose bargaining strength is substantial and growing. We may be negatively affected by changes
in their policies, such as price and term demands, special packaging, shorter lead times for the delivery of products, smaller and more
frequent shipments, or other conditions. If we do not effectively respond to these demands, this customer could decrease their purchases
from us and a reduction in the demand for our products or the costs of complying with their business demands could have a material adverse
effect on our business, operating results, and financial condition.
Our
ability to deliver products to our key customer in a timely manner and to satisfy our customer’s fulfillment standards are
subject to several factors, some of which are beyond our control.
Our
key customer places great emphasis on timely delivery of our products for specific selling seasons, especially during our third fiscal
quarter, and on the fulfillment of consumer demand throughout the year. We cannot control all of the various factors that might affect
our product delivery. Production delays, difficulties encountered in shipping from overseas, customs clearance delays, and operational
issues with any of the third-party logistics providers we use are on-going risks of our business. Accordingly, we are subject to risks,
including labor disputes, inclement weather, public health crises (such as pandemics and epidemics), natural disasters, possible acts
of terrorism, port and canal backlogs and blockages, availability of shipping containers, and increased security restrictions associated
with the carriers’ ability to provide delivery services to meet our shipping needs. These risks have been exacerbated by surges
in demand and shifts in shopping patterns related to COVID-19, which has resulted in carrier-imposed capacity restrictions, carrier delays,
and longer lead times for our products. Failure to deliver products to our key customer in a timely and effective manner could damage
our reputation and result in the loss of our key customer or reduced orders, which could have a material adverse effect on our business,
operating results, and financial condition.
To
compete successfully in the global marketplace, we must develop and introduce innovative new products to meet changing consumer preferences.
Our
long-term success in the competitive personal care electric appliance industry depends on our ability to develop and commercialize a
continuing stream of innovative new products that meet changing consumer preferences and take advantage of opportunities sooner than
our competition. We face the risk that our competitors will introduce innovative new products that compete with our products. There are
numerous uncertainties inherent in successfully developing and commercializing new products on a continuing basis and new product launches
may not deliver expected growth in sales or operating income. If we are unable to develop and introduce a continuing stream of competitive
new products it may have an adverse effect on our business, operating results, and financial condition.
Our
Operating Subsidiaries may not be able to obtain or maintain all necessary licenses, permits and approvals and to make all necessary
registrations and filings for their business activities in multiple jurisdictions and related to residents.
In
accordance with the relevant laws and regulations in the PRC, our Operating Subsidiaries are required to maintain various approvals,
licenses and permits to operate their businesses, including, but not limited to, business licenses. These approvals, licenses and permits
are obtained upon satisfactory compliance with, among other things, the applicable laws, and regulations.
Our
Operating Subsidiaries may be subject to a large number of regulatory measures imposed by various governmental entities in the PRC as
follows: (i) Regulations Relating to Competition; (ii) Electronical Commerce Law; (iii) Regulations Relating to Intellectual Property:
Copyright, Trademark, Patent and Domain Name; (iv) Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans
to their PRC Subsidiaries; (v) Regulations Relating to Foreign Exchange; (vi) Regulations Relating to Dividend Distributions; (vii) Regulations
Relating to Overseas Listings; (viii) Regulations Relating to Employment; (ix) Regulations Relating to Customer Rights Protection; and
(x) Regulations Relating to Tax: Income Tax, Value-Added Tax. As of the date of this prospectus, our Operating Subsidiaries have received
all necessary governmental approvals and licenses for operations in the PRC and have not been denied any such licenses or approvals.
Moreover,
our Operating Subsidiaries are also subject to laws, regulations and policies relating to the protection of the environment and to workplace
health and safety and may be adversely affected by new and changing laws and regulations. They are required to adopt measures to control
the discharge of polluting matters, toxic substances or hazardous substances and noise at their facilities in accordance with such applicable
laws and regulations and to implement such measures that ensure the safety and health of their employees. Changes to current laws, regulations
or policies or the imposition of new laws, regulations, and policies in the personal care electric appliance industry could impose new
restrictions or prohibitions on their current practices. Our Operating Subsidiaries may incur significant costs and expenses and need
to budget additional resources to comply with any such requirements, which may have a material and adverse effect on their business,
financial condition, results of operations and prospects.
As
of the date of this prospectus, our Operating Subsidiaries have received all substantial and necessary governmental approvals for operations
in the PRC and Hong Kong. However, in the event that our Operating Subsidiaries fail to renew the relevant licenses or filings, there
is no assurance that our Operating Subsidiaries can find suitable suppliers in a timely manner or on reasonable commercial terms, or
that such suppliers will at all times perform in a satisfactory level. Therefore, our Operating Subsidiaries’ business, reputation,
prospects, results of operations and financial condition may be materially and adversely affected. For further discussion, including
the possible consequences for non-compliance, see “Regulatory Environment.”
Significant
changes in or our compliance with regulations, interpretations or product certification requirements could adversely impact our operations.
We
are subject to U.S. and foreign regulations, including environmental, health and safety laws, and industry-specific product certifications.
Our products we sell are subject to product safety laws and regulations in various jurisdictions. These laws and regulations specify
product safety testing requirements, and set product identification, labeling and claim requirements.
Significant
new regulations, material changes to existing regulations, or greater oversight, enforcement, or changes in interpretation of existing
regulations, could further delay or interrupt distribution of our products in the U.S. and other countries, result in fines or penalties
or cause our costs of compliance to increase. We cannot guarantee that our products will receive regulatory approval in all countries.
Some of our personal care electronic appliances require various safety certifications, including UL certifications. Significant new certification
requirements or changes to existing certification requirements could further delay or interrupt distribution of our products or make
them more costly to produce.
We
are not able to predict the nature of potential changes to, or enforcement of laws, regulations, product certification requirements,
repeals, or interpretations. Nor are we able to predict the impact that any of these changes would have on our business in the future.
Further, if we were found to be noncompliant with applicable laws and regulations in these or other areas, we could be subject to governmental
or regulatory actions, including fines, import detentions, injunctions, product withdrawals or recalls or asset seizures, any of which
could have a material adverse effect on our business, results of operations and financial condition.
Our
business may be adversely impacted by product defects or other quality issues which could subject us to product liability claims, which
could affect our reputation, sales, and profitability.
Product
defects or other quality issues can occur throughout the product development, design, and manufacturing processes. Any product defects
or any other failure of our products or substandard product quality could expose us to product liability claims if one of our products
is alleged to have caused bodily injury or other adverse effects, harm our brand and reputation and result in adverse publicity, lost
revenues, delivery delays, product recalls, weakened relationships with our customer and other business partners, administrative penalties,
and significant warranty and other expenses. Although we carry product liability insurance, we cannot be sure that we have obtained a
sufficient amount of insurance coverage, that asserted claims will be within the scope of coverage of the insurance or that we will have
sufficient resources to satisfy any asserted claims arising from defects in our products or otherwise.
Our
Operating Subsidiaries’ business and operations may be materially and adversely affected in the event of a re-occurrence or a prolonged
global pandemic outbreak of COVID-19.
The
global pandemic outbreak of COVID-19 announced by the World Health Organization in early 2020 has disrupted our Operating Subsidiaries’
operations and the operations of their customers, suppliers and/or sub-contractors. If the development of the COVID-19 outbreak becomes
more severe or new and more deadly variants occur resulting in more stringent regulatory measures being taken, such as complete lockdowns,
our Operating Subsidiaries may be forced to close down their businesses after any prolonged disruptions to their operations, and our
Operating Subsidiaries may experience a termination of certain of their contracts by their customer. In such event, our Operating Subsidiaries’
operations may be severely disrupted, which may have a material and adverse effect on our business, financial condition, and results
of operations. In addition, if any of our Operating Subsidiaries’ employees are suspected of having contracted COVID-19, some or
all of such employees may be quarantined, and our Operating Subsidiaries will be required to disinfect their workplaces and facilities.
In the event that our Operating Subsidiaries’ employees are placed under quarantine orders, our Operating Subsidiaries may face
a shortage of labor and their operations may be severely disrupted. Our Operating Subsidiaries’ revenue and profitability may also
be materially affected if the COVID-19 outbreak or new outbreaks continue to materially affect the overall economic and market conditions
in Hong Kong or China, as the economic slowdown and/or negative business sentiment could potentially have an adverse impact on our Operating
Subsidiaries’ business and operations. We are uncertain as to when any new outbreaks of COVID-19 will be contained, and we cannot
predict if the impact of any such outbreaks or associated lockdown measures will be short-lived or long-lasting. If the outbreaks of
COVID-19 are not effectively controlled within a short period of time, our business, financial condition, results of operations and prospects
may be materially and adversely affected.
The
first cases of the BA.5 variant of COVID-19 in China were detected in the first week of July. In Shanghai, authorities ordered mass testing
for 12 of its 16 districts in response to new infections linked to a karaoke bar. Although the Chinese government lifted a months-long
lockdown in Shanghai in June 2022, Shanghai remains subject to COVID-19 restrictions based on frequent testing. As of the date of this
prospectus, our Operating Subsidiaries’ business operations have not been adversely affected by the BA.5 variant.
Global
climate change and related legal and regulatory developments could negatively affect our business, results of operations, liquidity,
and financial condition.
The
effects of climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere, such
as droughts, heat waves, flooding, wildfires, increased storm severity, sea level rise, and power
outages or shortages, particularly in certain regions in which we operate, may materially adversely impact our business. China, where
our manufacturing operations are conducted, is presently undergoing the worst heat wave in 60 years while also contending with a prolonged
drought drying up reservoirs and crippling hydropower stations. This has resulted in power shortages and factories having to cease or
limit their production operations. While the Company has not experienced any disruptions in the operations of its manufacturing operating
subsidiary, any such disruptions could have a material adverse effect on its business, operations, liquidity, and financial condition.
An
economic downturn may adversely affect consumer discretionary spending and demand for our products and services.
Our
products and services may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such
discretionary items include general economic conditions and other factors, such as consumer confidence in future economic conditions,
consumer sentiment, the availability and cost of consumer credit, levels of unemployment, and tax rates. Unfavorable economic conditions
may lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not
grow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services may
have an adverse effect on our operating results and financial condition.
The
war in Ukraine and shipping disruptions in the Red Sea could materially and adversely affect our business and results of operations.
The
recent outbreak of war in Ukraine has already affected global economic markets, including a dramatic increase in the price of oil and
gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s
recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, the European
Union, and other countries against Russia and possibly countries that support, directly or indirectly, Russia’s incursion. Russia’s
military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the businesses
of our customers, even though we do not have any direct exposure to Russia or the adjoining geographic regions. The extent and duration
of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions
caused by Russian military action or resulting sanctions may magnify the impact of other risks described herein. We cannot predict the
progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control.
Prolonged unrest intensified military activities or more extensive sanctions impacting the region could have a material adverse effect
on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of
operations and prospects.
Recently
there have been shipping disruptions in the Red Sea and surrounding waterways due to attacks on marine vessels by the Houthi movement
which controls part of Yemen. These disruptions may impact our ability to distribute our products to our customers in a cost-effective
and timely manner and to meet our customers’ demands, all of which could have an adverse effect on financial condition and results
of operations.
Our
Operating Subsidiaries rely on our management team and employees in their business.
Our
experienced executive directors and senior management team are one of the key factors contributing to our Operating Subsidiaries’
success. Their extensive experience and knowledge of the personal care electric appliance industry help formulate and implement business
strategy and foster growth of our Operating Subsidiaries’ business. Particularly, we rely on our Executive Director, Mr. Li Kin
Shing, in the overall management, strategic planning and development and daily operation of our Operating Subsidiaries. The loss of services
of our Executive Director or of senior management members without timely and suitable replacement may cause disruption or loss of our
Operating Subsidiaries’ business operation and prospects. Please refer to “Management – Executive Officers and Directors,”
“– Independent Non-Executive Directors” and “– Senior Management/Key Personnel” in this prospectus
for details about the experience and roles of our Executive Directors, independent non-executive Directors, and senior management.
Aside
from our key management, our Operating Subsidiaries also rely on our employees for their daily operations. Our Operating Subsidiaries’
results of operations and business performance may be materially and adversely affected if we cannot retain the services of our employees
and recruit suitable replacements in a timely manner.
Our
Operating Subsidiaries derive a significant portion of their revenue from international operations and are exposed to foreign exchange
risk. Moreover, fluctuations in exchange rates could have a material and adverse effect on our results of operations and
the value of your investment.
Most
of our Operating Subsidiaries’ sales are settled in USD. Our Operating Subsidiaries currently do not have a foreign currency hedging
policy. For the fiscal year ended December 31, 2023, our Operating Subsidiaries recorded a net foreign exchange gain of approximately
HK$213,000. For the fiscal year ended December 31, 2022, our Operating Subsidiaries did not record any foreign exchange gain or loss
whereas for the fiscal year ended December 31, 2021, our Operating Subsidiaries recorded a net foreign exchange gain of approximately
HK$459,000. Significant volatility in foreign exchange rates may negatively affect our results of operations and other comprehensive
income.
In
addition, our Operating Subsidiaries’ revenues and expenses will also be denominated in Hong Kong dollars. Although the exchange
rate between of the Hong Kong dollar to the U.S. dollar has been pegged since 1983, we cannot assure you that the Hong Kong dollar will
remain pegged to the U.S. dollar. Any significant fluctuations in the exchange rates between Hong Kong dollars and U.S. dollars may have
a material adverse effect on our Operating Subsidiaries’ revenue and financial condition. For example, to the extent that we are
required to convert U.S. dollars we receive from this offering into Hong Kong dollars for our Operating Subsidiaries’ operations,
fluctuations in the exchange rates of the Hong Kong dollar against the U.S. dollar would have an adverse effect on the amounts we receive
from the conversion. We have not used any forward contracts, futures, swaps, or currency borrowings to hedge our exposure to foreign
currency risk.
Our
Operating Subsidiaries are exposed to the credit risk of their customers.
The
credit risk exposure of our Operating Subsidiaries mainly arises from trade receivables from our customers. As of December 31, 2023,
2022 and 2021, our Operating Subsidiaries’ accounts receivables amounted to approximately HK$31,486,000, HK$32,938,000 and HK$46,395,000,
respectively, which represented approximately 30.6%, 41.2% and 49.3% of total assets, respectively. For the fiscal years ended December
31, 2023, 2022 and 2021, our Operating Subsidiaries did not record any impairment/reversal of accounts receivables. However, our Operating
Subsidiaries are still subject to the credit risk of their customers and their liquidity is dependent on their customers making prompt
payments.
Furthermore,
our Operating Subsidiaries’ suppliers generally offer them a credit period of 30 days to 60 days, while our Operating Subsidiaries
generally grant their customers a credit period ranging from 30 days to 90 days. The longer credit period granted to our Operating Subsidiaries’
customers compared to that offered by their suppliers indicates a potential risk of a possible cash flow shortage, which may affect the
liquidity of their business. In the event that our Operating Subsidiaries experience a cash flow shortage when their customers do not
make settlements on a timely manner, the financial position, profitability, and cash flow of our Operating Subsidiaries may be adversely
affected.
Our
Operating Subsidiaries may be harmed by negative publicity.
Our
Operating Subsidiaries operate in highly competitive industries, and there are other companies in the market that offer similar products
and services. They derive most of their customers through word of mouth and rely on the positive feedback of their customers. Thus, customer
satisfaction with our Operating Subsidiaries’ products is critical to the success of their business. If our Operating Subsidiaries
fail to meet our customer’s expectations, there may be negative feedback which may have an adverse impact on our Operating Subsidiaries’
business and reputation. In the event that our Operating Subsidiaries are unable to maintain a high level of customer satisfaction, or
any customer dissatisfaction is inadequately addressed, our Operating Subsidiaries’ business, financial condition, results of operations
and prospects may also be adversely affected.
Our
Operating Subsidiaries’ reputation may also be adversely affected by negative publicity in reports and publications such as major
newspapers and forums or any other negative publicity or rumors. There is no assurance that our Operating Subsidiaries will not experience
negative publicity in the future or that such negative publicity will not have a material and adverse effect on their reputation or prospects.
This may result in our Operating Subsidiaries’ being unable to attract new customers or retain existing customers and may in turn
adversely affect their business and results of operations.
We
may be unable to successfully implement our business strategies and future plans for our Operating Subsidiaries.
As
part of our business strategies and future plans, we intend to expand our Operating Subsidiaries’ operations. While we have planned
such expansion based on our outlook regarding our Operating Subsidiaries’ business prospects, there is no assurance that such expansion
plans will be commercially successful or that the actual outcome of those expansion plans will match our expectations. The success and
viability of our expansion plans are dependent upon our ability to successfully implement our development projects, hire and retain skilled
employees to carry out our Operating Subsidiaries’ product development and new market strategies and future plans and implement
strategic business development and marketing plans effectively and upon an increase in demand for their products by existing and new
customers in the future.
Further,
the implementation of our business strategies and future plans for our Operating Subsidiaries’ business operations may require
substantial capital expenditure and additional financial resources and commitments. There is no assurance that these business strategies
and future plans will achieve the expected results or outcome such as an increase in revenue that will be commensurate with our investment
costs or the ability to generate any cost savings, increased operational efficiency and/or productivity improvements to our Operating
Subsidiaries’ operations. There is also no assurance that we will be able to obtain financing on terms that are favorable, if at
all. If the results or outcome of our future plans do not meet our expectations, including if our Operating Subsidiaries fail to achieve
a sufficient level of revenue or fail to manage their costs efficiently, we may not be able to recover our investment costs, and our
business, financial condition, results of operations and prospects may be adversely affected.
Risks
Related to Our Operating Subsidiaries’ Industry
An
economic downturn may adversely affect consumer discretionary spending and demand for our products and services.
Our
personal care electric appliance products may be considered discretionary items for consumers. Factors affecting the level of consumer
spending for such discretionary items include general economic conditions and other factors, such as consumer confidence in future economic
conditions, consumer sentiment, the availability and cost of consumer credit, levels of unemployment, and tax rates. Unfavorable economic
conditions may lead consumers to delay or reduce purchases of our products and consumer demand for our products and services may not
grow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services may
have an adverse effect on our operating results and financial condition.
We
may not be able to keep pace with rapid technological changes and competition in our industry.
While
we believe that we have hired or engaged personnel and outside consultants who have the experience and ability necessary to keep pace
with advances in technology, and while we continue to seek out and develop “next generation” technology through our research
and development efforts, there is no guarantee that we will be able to keep pace with technological developments and market demands in
this industry and market. In addition, our industry is highly competitive. Although we believe that we have developed strategic relationships
to best penetrate our existing markets, we face competition from other manufacturers of products similar to our products, which could
adversely affect our consolidated financial condition, results of operations and cash flows.
Compliance
with governmental regulations could increase our operating costs and interfere with our business efforts.
Most
U.S. federal, state and local authorities require certification by Underwriters Laboratory, Inc., an independent, not-for-profit corporation
engaged in the testing of products for compliance with certain public safety standards, or other safety regulation certification prior
to marketing electrical appliances. Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products.
Our products, or additional electrical appliances which we may develop, may not meet the specifications required by these authorities.
A determination that our products are not in compliance with these rules and regulations could result in the imposition of fines or awards
of damages to private litigants.
The
enactment in the U.S. of the Uyghur Forced Labor Prevention Act (the “UFLPA”) and similar pending legislation in the territories
in which our subsidiaries operate could have a material adverse effect on our ability to conduct our business.
The
UFLPA prohibits the importation of goods into the United States manufactured wholly or in part with forced labor in the PRC,
especially from the Xinjiang Uyghur Autonomous Region (“Xinjiang”). It establishes a rebuttable presumption that the
importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in Xinjiang are not
entitled to entry to the U.S. and requires the importer of record to comply with specified conditions and prove by clear and
convincing evidence, that the goods, wares, articles, or merchandise were not produced using forced labor.
While
our manufacturing facilities are located in the PRC, they are not located in Xinjiang and are staffed by our own employees with no
raw materials being sourced from Xinjiang. We are confident that our supply chain management system will rebut the presumption that
our products are tainted with forced or prison labor and therefore we do not anticipate any material or adverse effect on our
business operations, financial position, and results of operations.
Risks
Related to Our Securities and the Offering
As
of the date of this prospectus, we: (i) are not required to obtain permissions from any PRC authorities to operate or issue our Ordinary
Shares to foreign investors; (ii) are not subject to permission requirements from the CSRC,
the CAC or any other entity that is required to approve of our PRC subsidiaries’
operations; and (iii) have not received or were denied such permissions by any PRC authorities. Given the current PRC regulatory environment,
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.
As
of the date of this prospectus, we: (i) are not required to obtain permissions from any PRC authorities to operate or issue our Ordinary
Shares to foreign investors; (ii) are not subject to permission requirements from the CSRC, the CAC or any other entity that is required
to approve of our PRC subsidiaries’ operations; and (iii) have not received or were denied such permissions by any PRC authorities.
We are also currently not required to obtain any pre-approval from Chinese authorities to list on a U.S. stock exchange, including the
NYSE, Nasdaq, or any of the Nasdaq Markets. Given the current PRC regulatory environment, 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. As of the date of this prospectus, we have not received any inquiry, notice, warning, sanctions,
or regulatory objection to our recent IPO or this offering from the CSRC or other PRC governmental authorities. However, if we
are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not
be able to list on a U.S. exchange, which would materially affect the interest of our investors.
In
response to recent data security concerns arising from overseas listings of Chinese internet companies operating in the PRC, on January
4, 2022, the CAC issued revised measures to expand the types of businesses and
circumstances that would require cybersecurity review by the CAC. We believe that we may be directly subject to these regulatory actions
or statements as our Operating Subsidiaries’ business involves the collection of user data and may implicate cybersecurity and
involve any other type of restricted industry. Because these statements and regulatory actions are new, however, it is highly uncertain
how soon legislative or administrative regulation making bodies in China will respond to them, or what existing or new laws or regulations
will be modified or promulgated, if any, or what the potential impact any such modified or new laws and regulations will be on our Operating
Subsidiaries’ daily business operations or our ability to accept foreign investments and list on a U.S. exchange. For further information,
see “Risks Factors – Risks Related to Doing Business in the People’s Republic of China and Hong Kong.”
Any
future action by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign
investment in China-based issuers or expanding the categories of industries and companies whose foreign securities offerings are subject
to government review could significantly limit or completely hinder our ability to offer or continue to offer securities to investors
and cause the value of our Securities to significantly decline or the Securities to become worthless.
Recent
statements by the Chinese government have indicated an intent to exert greater oversight and control over offerings that are conducted
overseas and/or over foreign investments in China-based issuers. On July 6, 2021, the General Office of the Communist Party of China
Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities
market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental
authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based
companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
Additionally,
we could be subject to various government and regulatory interference in the regions in which we operate, which could result in a material
change in our operations and the value of the securities. Pursuant to Article 6 of the Revised Draft, companies holding data of more
than one million users must now apply for cybersecurity approval when seeking overseas listings because of the risk that such data and
personal information could be “affected, controlled, and maliciously exploited by foreign governments.” As confirmed by our
PRC counsel, the Alpha Law Firm, we currently are not subject to cybersecurity review with the CAC to conduct business operations in China,
given that: (i) we are not the “operator of critical information infrastructure” or “online platform operator”,
(ii) we do not possess a large amount of personal information in our business operations, and (iii) as of the date of this prospectus,
we have not been involved in any investigations initiated by the CAC, nor have we received any inquiry, notice, warning or sanction in
such respect.
On
February 17, 2023, with the approval of the State Council, the CSRC promulgated
the Trial Measures”, and
five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that
seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the
requirements of the Trial Measures within three working days following their submission of initial public offerings or listing
applications. Subsequent securities offerings of an issuer in the same overseas market where it has previously offered, and listed
securities must be filed with the CSRC within three business days after the offering is completed. If a domestic company fails to
complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic
company may be subject to administrative penalties, such as an order to rectify, warnings and fines, and its controlling shareholders,
actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties,
such as warnings and fines.
As
of the date of this prospectus, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect
to the listing of our Ordinary Shares, and, in the opinion of our PRC legal counsel, the Alpha Law Firm, the filing requirements under
the Trial Measures do not apply to the Company since: (i) the revenue, total profit, total assets or net assets of FPPF was less
than 50% of that of the Company in total for the fiscal years ended December 31, 2023 and 2022; and (ii) the majority of
senior management are non-PRC citizens and reside in Hong Kong.
However,
there can be no assurance that the relevant PRC governmental authorities, including the CSRC, would reach the same conclusion as us,
or that the CSRC or any other PRC governmental authorities would not promulgate new rules or new interpretation of current rules (with
retrospective effect) to require us to obtain CSRC or other PRC governmental approvals for our recent IPO or this offering. If
we inadvertently concluded that such approvals were or are not required, our ability to offer or continue to offer our Securities
to investors could be significantly limited or completed hindered, which could cause the value of our Ordinary Shares to significantly
decline or become worthless. We may also face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies
may impose fines, penalties, limit our operations in China, or take other actions that could have a material adverse effect on our business,
financial condition, results of operations and prospects, as well as the trading price of our Securities.
The
promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, may restrict or otherwise unfavorably
impact our ability or way to conduct business and may require us to change certain aspects of our business to ensure compliance, which
could decrease demand for our services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates,
or subject us to additional liabilities.
The
Warrants are speculative in nature.
The Warrants do not confer
any rights of Ordinary Share ownership on their holders, such as voting rights or the right to receive dividends, but merely represent
the right to acquire Ordinary Shares at a fixed price for a limited period of time. Specifically, commencing on the date of issuance,
holders of the Warrants may exercise their right to acquire the underlying Ordinary Shares and pay an assumed exercise price of $8.46
per Ordinary Share (100% of the assumed combined public offering price of an Ordinary Share and accompanying Warrant), prior
to five years from the date of issuance. After the five-year anniversary of their initial issuance, any unexercised Warrants will expire
and have no further value. Moreover, following this offering, the market value of the Warrants is uncertain and there can be no assurance
that the market value of the Warrants, if any, will equal or exceed their public offering prices. There can be no assurance that the
market price of the Ordinary Shares will ever equal or exceed the exercise price of the Warrants, and consequently, whether it will ever
be profitable for holders of Warrants to exercise the Warrants.
Holders
of the Warrants and Pre-Funded Warrants offered hereby will have no rights as shareholders with respect to the Ordinary Shares issuable
upon exercise of such warrants until such holders exercise their Warrants or Pre-Funded Warrants, as applicable, and acquire our Ordinary
Shares, except as otherwise provided in the Warrants or Pre-Funded Warrants, as applicable.
Until holders of the Warrants or Pre-Funded Warrants acquire Ordinary Shares
upon exercise of those warrants, holders of such Warrants or Pre-Funded Warrants will have no rights with respect to the Ordinary Shares
issuable upon exercise of those warrants, except as provided in the Warrants or Pre-Funded Warrants, as applicable. Upon exercise of the
Warrants or Pre-Funded Warrants, as applicable, such holders will be entitled to the rights of a shareholder as to the purchased Ordinary
Shares only as to matters for which the record date occurs after the exercise date.
There
is no public market for the Warrants or Pre-Funded Warrants to purchase our Ordinary Shares being offered in this offering.
There is no established
public trading market for the Warrants or Pre-Funded Warrants being offered in this offering, and we do not expect a
market to develop. In addition, we do not intend to apply to list the Warrants or Pre-Funded Warrants on any national
securities exchange or other nationally recognized trading system, including The Nasdaq Capital Market. Without an active trading
market, the liquidity of the Warrants and Pre-Funded Warrants will be limited.
There
may not be an active trading market for our Ordinary Shares and the trading price for our Ordinary Shares may be negatively affected
by the lack of active trading.
We
cannot assure you that there will be an active public market for our Ordinary Shares after this offering. The absence of an active public
market for our Ordinary Shares may cause the market price and liquidity of our Ordinary Shares to be materially and adversely affected.
The assumed combined public offering price per Ordinary Share and accompanying Warrant in this offering was based on the closing sales
price on Nasdaq of the Company’s Ordinary Shares on August 9, 2024, and we can provide no assurance that the trading price
of our Ordinary Shares will rise above such public offering price. As a result, investors in our Ordinary Shares may experience a significant
decrease in the value of their Ordinary Shares.
We
may not maintain the listing of our Ordinary Shares on the Nasdaq Capital Market, which could limit investors’ ability to make
transactions in our Ordinary Shares and subject us to additional trading restrictions.
Our Ordinary Shares are
listed on the Nasdaq Capital Market. In order to continue
listing our shares on the Nasdaq Capital Market, we must maintain certain financial and share price levels and we may be unable to meet
these requirements in the future. We cannot assure you that our Ordinary Shares will continue to be listed on Nasdaq in the future.
If
Nasdaq delists our Ordinary Shares and we are unable to list our shares on another national securities exchange, we expect that our shares
could be quoted on an over-the-counter market in the United States. If this were to occur, we could face significant material adverse
consequences, including:
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limited availability of market quotations for our Ordinary Shares; |
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reduced
liquidity for our Ordinary Shares; |
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a
determination that our Ordinary Shares are “penny stock,” which will require brokers trading in our 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; |
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limited amount of news and analyst coverage; and |
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decreased ability to issue additional securities or obtain additional financing in the future. |
As
long as our Ordinary Shares are listed on Nasdaq, U.S. federal law prevents or preempts states from regulating their sale. However, the
law does allow states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then
states can regulate or bar their sale. Further, if we were no longer listed on Nasdaq, we would be subject to regulations in each state
in which we offer our shares.
Nasdaq
may apply additional and more stringent criteria for our continued listing.
Nasdaq
Listing Rule 5101 provided Nasdaq with broad discretionary authority over our Initial Public Offering and further provides
Nasdaq with such discretionary authority over the continued listing of our securities in Nasdaq. In general, Nasdaq
may use such discretion to deny initial listings, apply additional or more stringent criteria for the initial or continued listings
of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or
occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even
though the securities meet all enumerated criteria for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion
to deny initial or continued listings or to apply additional and more stringent criteria in the instances, including but not limited
to where: (i) the company engaged an auditor that has not been subject to an inspection by PCAOB, an auditor that PCAOB cannot
inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company’s
audit; (ii) where a company planned a small public offering, which would result in insiders holding a large portion of the company’s
listed securities; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S.
shareholders, operations, or members of the board of directors or management. For the any aforementioned concerns, we may be subject
to the additional and more stringent criteria of Nasdaq for our continued listing of our Ordinary Shares.
Purchasers who purchase our Securities in
this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit
of a securities purchase agreement.
In addition to rights and remedies
available to all purchasers in this offering under federal securities and state laws, the purchasers that enter into a securities purchase
agreement will also be able to bring claims of breach of contract against us. The ability to pursue a claim for breach of contract provides
those investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement including:
(i) timely delivery of shares; (ii) agreement to not enter into variable rate financings for six (6) months from closing,
subject to certain exceptions; (iii) agreement to not enter into any financings for ninety (90) days from closing; and (iv) indemnification
for breach of contract.
Purchasers who purchase our Securities in this
offering pursuant to a securities purchase agreement may experience difficulties in pursuing any claims against us and our management
under such agreement, as all claims under such agreement shall be brought in the state and federal courts sitting in the City of New
York, Borough of Manhattan and shall be governed by, construed, and enforced in accordance with the internal laws of the State of
New York.
Any and all claims, including
those derived from U.S. state and federal securities laws and the rules and regulations promulgated thereunder, that purchasers who purchase
our Securities in this offering pursuant to a securities purchase agreement may have against us or our management, shall be brought
in the state and federal courts sitting in the City of New York, Borough of Manhattan and shall be governed by, construed, and enforced
in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. These
provisions may result in risks to you including, but not limited to, increased costs to bring a claim, and thus, may discourage claims
or limit your ability to bring a claim under such securities purchase agreement in a judicial forum that you find favorable, and there
is uncertainty as to whether a court of competent jurisdiction would enforce these provisions. Further, because these provisions also
apply to U.S. federal securities law claims, please note that by agreeing to such securities purchase agreement, you cannot waive our
compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.
Certain
recent initial public offerings of companies with smaller public floats have experienced extreme stock price and volume fluctuations
seemingly unrelated to company performance. Such volatility, if it should occur to us, may make it difficult for prospective investors
to assess the rapidly changing value of our Ordinary Shares.
Certain
recent instances of extreme stock price and volume fluctuations have been seemingly unrelated to company performance following a number
of recent initial public offerings, particularly among companies with relatively smaller public floats, and we expect that such instances
may continue and/or increase in the future. The trading price of our Ordinary Shares has been, and following this offering
is likely to continue to be, volatile, and our Ordinary Shares may be subject to rapid and substantial price volatility.
Such volatility, including any stock run-ups, may be unrelated or disproportionate to our actual or expected operating performance and
financial condition or prospects and may distort the market perception of our Ordinary Shares, price and our company’s financial
performance and public image, negatively affect the long-term liquidity of our Ordinary Shares, regardless of our actual or expected
operating performance. If we encounter such volatility, it will likely make it difficult and confusing for prospective investors to assess
the rapidly changing value of our Ordinary Shares and understand the value thereof.
We
also anticipate that our Ordinary Shares are likely to be more sporadically and thinly traded than that of larger, more established companies
with larger public floats. As a consequence of this lack of liquidity, the trade of relatively small quantities of Ordinary Shares by
our stockholders may disproportionately influence the price of those shares in either direction. The price of our Ordinary Shares could,
for example, decline precipitously in the event that a large number of our Ordinary Shares are sold on the market without commensurate
demand as compared to a larger, more established issuer that could better absorb those sales without adverse impact on its stock price.
This is a reasonable best efforts offering,
with no minimum amount of Securities is required to be sold, and we may not raise the amount of capital we believe is required for our
business plans, including our near-term business plans, nor will investors in this offering receive a refund in the event that we do
not sell an amount of Securities sufficient to pursue the business goals outlined in this prospectus.
The Placement Agent has
agreed to use its reasonable best efforts to solicit offers to purchase the Securities in this offering. The Placement Agent has no obligation
to buy any of the Securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the Securities.
We may sell fewer than all of the Securities offered hereby, which may significantly reduce the amount of proceeds received by us, and
investors in this offering will not receive a refund in the event that we do not sell an amount of Securities sufficient to support our
business goals and continued operations, including our near-term continued operations. Thus, we may not raise the amount of capital we
believe is required for our operations in the short-term and may need to raise additional funds to complete such short-term operations.
Such additional capital may not be available or available on terms acceptable to us, or at all.
There is no required minimum number of Securities that must be sold as
a condition to completion of this offering, and we have not, nor will we, establish an escrow account in connection with this offering.
Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, the Placement
Agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth herein.
Because there is no escrow account and no minimum offering amount, investors could be in a position where they have invested in us, but
we are unable to fulfill our objectives due to a lack of interest in this offering. Further, because there is no escrow account in operation
and no minimum investment amount, any proceeds from the sale of Securities offered by us will be available for our immediate use, despite
uncertainty about whether we would be able to use such funds to effectively implement our business plan. Investor funds will not be returned
under any circumstances whether during or after the offering.
We have broad discretion
in how we use the net proceeds of this offering, and we may not use these proceeds effectively or in ways with which you agree.
Our management will have
broad discretion as to the application of the net proceeds of this offering and could use them for purposes other than those contemplated
at the time of the offering. We currently intend to use the net proceeds, if any, from this offering as follows: (i) approximately 20%
for research and development on new products; (ii) approximately 40% for development of our own branded products; (iii) approximately
30% for formation of a sales team for marketing of our own branded products; and (iv) approximately 10% for working capital. Our shareholders
may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use
the net proceeds for corporate purposes that may not increase the market price of our Ordinary Shares or other securities. See the section
of this prospectus titled “Use of Proceeds” on page 52.
You may experience future dilution as
a result of this and future equity offerings or other equity issuances.
In order to raise additional
capital, we believe that we will offer and issue additional Ordinary Shares or other securities convertible into or exchangeable for
Ordinary Shares in the future. We cannot assure you that we will be able to sell Ordinary Shares or other securities in any other offering
at a price per share that is equal to or greater than the combined offering price per Ordinary Share and accompanying Warrant in this offering, and investors purchasing
other securities in the future could have rights superior to existing shareholders. The price per share at which we sell additional Ordinary
Shares or other securities convertible into or exchangeable for Ordinary Shares in future transactions may be higher or lower than the
combined offering price per Ordinary Share and accompanying Warrant in this offering. Further, we may choose to raise additional capital due to market conditions or strategic considerations
even if we believe we have sufficient funds for our current or future operating plan.
New
investors in our Securities will experience immediate and substantial dilution after this offering.
The effective public offering
price per Ordinary Share will be substantially higher than the as adjusted net tangible book value per share of the outstanding Ordinary
Shares immediately after this offering. Based on an effective public offering price of $8.46 per Ordinary Share, the closing sale
price of our Ordinary Shares on Nasdaq on August 9, 2024, and our net tangible book value as of December 31, 2023, if you purchase
our Securities (assuming no sale of Pre-Funded Warrants) in this offering you will pay more for your Ordinary Shares than the amounts
paid by our existing shareholders for their Ordinary Shares and you will suffer immediate dilution of approximately $7.45 per
Ordinary Share in as adjusted net tangible book value. In addition, the Ordinary Shares issuable upon the exercise of the Warrants to
be issued pursuant to the offering will further dilute the ownership interest of shareholders not participating in this offering and
holders of Warrants who have not exercised their Warrants. As a result of this dilution, investors purchasing Securities in this offering
may receive significantly less than the full purchase price that they paid for the Ordinary Shares purchased in this offering in the
event of a liquidation. To the extent Ordinary Shares are issued under outstanding options and warrants at exercise prices lower than
the public offering price of our Ordinary Shares in this offering, including the Ordinary Shares underlying the Pre-Funded Warrants,
holders will incur further dilution.
If
securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market
price and trading volume of our Ordinary Shares could decline.
The
market price and trading volume of our Ordinary Shares will be heavily influenced by the way
analysts interpret our financial information and other disclosures. We do not have control over these analysts. If few securities analysts
commence coverage of us, or if industry analysts cease coverage of us, our Ordinary Share price could be negatively affected. If securities
or industry analysts do not publish research or reports about our business, downgrade our Ordinary Shares, or publish negative reports
about our business, our Ordinary Share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish
reports on us regularly, demand for our Ordinary Shares could decrease, which might cause our Ordinary Share price to decline and could
decrease the trading volume of our Ordinary Shares.
The
sale or availability for sale of substantial amounts of our Ordinary Shares could adversely affect their market price.
Sales
of substantial amounts of our Ordinary Shares in the public market, or the perception that these sales could occur, could adversely affect
the market price of our Ordinary Shares, and could materially impair our ability to raise capital through equity offerings in the future.
As of the date of this prospectus, we currently have 11,062,500 Ordinary Shares outstanding, of which 3,062,500 Ordinary Shares
are freely tradable without restriction or further registration under the Securities Act. The remaining shares may also be sold in the
public market in the future in accordance with Rule 144 and Rule 701 under the Securities Act. We cannot predict what effect, if any,
market sales of Ordinary Shares held by our Controlling Shareholder or any other shareholder or the availability of these Ordinary Shares
for future sale will have on the market price of our shares.
Short
selling may drive down the market price of our Ordinary Shares.
Short
selling is the practice of selling shares that the seller does not own but rather has borrowed from a third party with the intention
of buying identical shares back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the shares between the sale of the borrowed shares and the purchase of the replacement shares, as the short seller expects to pay
less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the shares to decline,
many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its
business prospects in order to create negative market momentum and generate profits for themselves after selling the shares short. These
short attacks have, in the past, led to the selling of shares in the market. If we were to become the subject of any unfavorable
publicity, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate
such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained
in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues
of commercial confidentiality.
Because
we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return
on your investment.
We
currently intend to retain all of our available funds and any future earnings after this offering to fund the development and growth
of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on
an investment in our Ordinary Shares as a source for any future dividend income. Our Board of Directors has complete discretion as to
whether to distribute dividends, subject to certain requirements of Hong Kong law. Even if our Board of Directors decides to declare
and 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 as determined by our Board of Directors. Accordingly, the return
on your investment in our Ordinary Shares will likely depend entirely upon any future price appreciation of our Ordinary Shares. There
is no guarantee that our Ordinary Shares will appreciate in value after this offering or even maintain the price at which you purchased
our shares. You may not realize a return on your investment in our Ordinary Shares and you may even lose your entire investment.
As
an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate
governance matters that differ significantly from Nasdaq Capital Market corporate governance listing standards. These practices may afford
less protection to shareholders than they would enjoy if we complied fully with Nasdaq Capital Market corporate governance listing standards.
As
a foreign private issuer whose Ordinary Shares are currently listed on the Nasdaq Capital Market, we rely on a provision
in the Nasdaq Capital Market corporate governance listing standards that allows us to follow Cayman Islands law with regard to certain
aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant respects
from the corporate governance requirements applicable to U.S. companies listed on the Nasdaq Capital Market.
For
example, we are exempt from Nasdaq Capital Market regulations that require a listed U.S. company to:
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have a majority of the
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require non-management
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have an independent compensation
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have an independent nominating
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seek shareholder approval
for the implementation of certain equity compensation plans and dilutive issuances of Ordinary Shares, such as transactions, other
than a public offering, involving the sale of 20% or more of our Ordinary Shares for less than the greater of the book or market
value of the shares. |
As
a foreign private issuer, we are permitted to follow home country practice in lieu of the above requirements. Our audit committee is
required to comply with the provisions of Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on the Nasdaq
Capital Market. Therefore, we have a fully independent audit committee in accordance with Rule 10A-3 of the Exchange Act. However, because we are a foreign private issuer,
our audit committee is not subject to additional Nasdaq Capital Market corporate governance requirements applicable to listed U.S. companies,
including the requirements to have a minimum of three members and to affirmatively determine that all members are “independent,”
using more stringent criteria than those applicable to us as a foreign private issuer.
Further,
because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to U.S. domestic issuers, including:
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the rules under the Exchange
Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; |
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the sections of the Exchange
Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
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the sections of the Exchange
Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit
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the selective disclosure
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We
are required to file annual reports on Form 20-F within four months of the end of each fiscal year. In addition, we intend
to publish our financial results on a semi-annual basis through press releases distributed pursuant to the rules and regulations of the
Nasdaq Capital Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K.
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 if you were investing in a U.S. domestic issuer.
We
may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.
As
discussed above, we are a foreign private issuer and, therefore, we are not required to comply with all of the periodic disclosure and
current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last Business
Day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect
to us on June 30, 2025. In the future, we would lose our foreign private issuer status if: (i) more than 50% of our outstanding
voting securities are owned by U.S. residents; and (ii) a majority of our directors or executive officers are U.S. citizens or residents,
or we fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we were to lose our foreign
private issuer status, we would be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer
forms, which are more detailed and extensive than the forms available to a foreign private issuer. We would also have to comply with
U.S. federal proxy requirements, and our officers, directors and 10% shareholders would become subject to the short-swing profit disclosure
and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain
corporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer,
we would incur significant additional legal, accounting, and other expenses that we do not incur as a foreign private issuer.
We
incur significantly increased costs and devote substantial management time as a result of the listing of our Ordinary Shares on the Nasdaq
Capital Market.
We
incur additional legal, accounting, and other expenses as a public reporting company, particularly after we cease to qualify as an emerging
growth company. For example, we are required to comply with the additional requirements of the rules and regulations of the SEC and Nasdaq
rules, including applicable corporate governance practices. Compliance with these requirements increases our legal and financial compliance
costs and makes some activities more time-consuming and costly. In addition, our management and other personnel will need to divert attention
from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate
the number of additional costs incurred as a result of becoming a public company or the timing of such costs.
In
addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for
public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations
and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application
in practice may evolve over time as new guidelines are provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to
invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative
expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our
efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due
to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings against us, and
our business may be adversely affected.
You
may have more difficulties protecting your interests than you would as a shareholder of a U.S. corporation.
We
are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed
by our Articles of Association, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action
against our directors and us, actions by minority shareholders and the fiduciary duties 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 English common law, 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 are not as clearly established as 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 the standing to initiate a shareholder derivative action in a federal court of the
United States.
Shareholders
of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to obtain copies of the register of members
or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles of association.
A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any country or territory,
whether within or outside the Cayman Islands, as the company may determine from time to time. There is no requirement for an exempted
company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are,
accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available
at its registered office, in electronic form or any other medium, such register of members, including any branch register of member,
as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority
Act (2021 Revision) of the Cayman Islands. This may make it more difficult for you to obtain the information needed to establish
any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.
Certain
corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from requirements for companies
incorporated in other jurisdictions such as U.S. states. Currently, we plan to rely on home country practice with respect to any corporate
governance matter. Accordingly, our shareholders may be afforded less protection than they otherwise would under rules and regulations
applicable to U.S. domestic issuers.
As
a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our
management, members of the Board of Directors or controlling shareholders than they would as shareholders of a company incorporated in
a U.S. state. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies
incorporated in a U.S. state and their shareholders, see “Certain Cayman Islands Company Considerations — Comparison of Cayman
Islands Corporate Law and U.S. Corporate Law” on page 108 of this prospectus.
You
may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China or Hong Kong
against us or our management named in this prospectus based on foreign laws.
We
are an exempted company incorporated under the laws of the Cayman Islands, we conduct a substantial amount of operations in China, and
a substantial portion of our assets are located in China and Hong Kong. In addition, certain senior executive officers reside within
China and/or Hong Kong for a significant portion of the time and are either PRC or Hong Kong nationals. As a result, it may be difficult
for our shareholders to effect service of process upon us or those persons inside China or Hong Kong. In addition, neither China nor
Hong Kong has treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many
other countries and regions. Therefore, recognition and enforcement in China or Hong Kong of judgments of a court in any of these non-PRC
or Hong Kong jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.
Shareholder
claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue
as a matter of law or practicality in China or Hong Kong. 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 local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another
country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory
authorities in the United States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article
177 of the PRC Securities Law which took effect in March 2020, no overseas securities regulator is allowed to directly conduct investigation
or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC or Hong Kong
securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities
business activities to overseas parties.
Certain
judgments obtained against us by our shareholders may not be enforceable.
We
are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all
of our current directors and officers are nationals and residents of countries other than the United States and substantially all of
the assets of these persons 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.
Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment
against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands,
see “Enforceability of Civil Liabilities.” As a result of all of the above, our shareholders may have more difficulties 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.
Our
Ordinary Shares may be subject to rapid and substantial price and trading volume volatility unrelated to our
performance, which could result in substantial losses to investors.
Our
Ordinary Shares may be subject to rapid and substantial price and trading volume volatility and their trading price could fluctuate
widely due to factors beyond our control. We have a relatively small public float due to the relatively small size of our IPO
and the concentrated ownership of our Ordinary Shares among our executive officers and directors. As a result of our small public
float, our Ordinary Shares may be less liquid and have greater stock price volatility than the shares of companies with broader public
ownership. This may also 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 the PRC or Hong Kong that may have listed their securities in the
United States. In addition to market and industry factors, the price and trading volume for our Ordinary Shares may be highly volatile
for factors specific to our Operating Subsidiaries’ operations, including the following:
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fluctuations in our Operating Subsidiaries’ revenues,
earnings, and cash flow; |
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changes in financial estimates by securities analysts; |
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additions or departures of key personnel; |
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release of lock-up or other transfer restrictions on
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potential litigation or regulatory investigations. |
Any
of these factors may result in significant and sudden changes in the volume and price at which our shares will trade.
In
addition, the share price of a number of companies involved in initial public offerings, particularly among companies with relatively
smaller public floats, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of these companies. Such rapid and substantial price volatility, including any stock run-up, may be unrelated to
our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess
the rapidly changing value of our shares. This volatility may prevent you from being able to sell your Ordinary Shares at or above
the price you paid for your Ordinary Shares. If the market price of our Ordinary Shares after this offering does not exceed the
public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.
Furthermore,
in the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management’s attention and other resources from our business and operations and require us to incur significant expenses
to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be
required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
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.
We
are a non-U.S. corporation and, as such, we will be classified as a passive foreign investment company, which is known as a PFIC, for
any taxable year if, for such year, either
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At least 75% of our gross income for the year is passive
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of our assets (determined at the end of each quarter) during the taxable year that produce passive income or that are held for the
production of passive income is at least 50%. |
Passive
income generally includes dividends, interest, rents, royalties (other than rents or royalties derived from the active conduct of a trade
or business) and gains from the disposition of passive assets.
If
we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a 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.
It
is possible that for our current taxable year or for any subsequent year more than 50% of our assets may be assets which produce passive
income. We will make this determination following the end of any particular tax year. We treat our 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 “Material Tax Considerations - Passive Foreign Investment Company Considerations.”
We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various
requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth
company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain
information they may deem important.
The
JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words,
an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of the extended transition period, although we have early adopted certain
new and revised accounting standards based on transition guidance permitted under such standards. As a result of this election, our future
financial statements may not be comparable to other public companies that comply with the public company effective dates for these new
or revised accounting standards.
Our
Executive Director has substantial influence over the Company. His interests may not be aligned with the interests of our other shareholders,
and it could present or cause a change of control or other transactions.
Prior
to this offering, through his 100% ownership of LMIL, Mr. Li Kin Shing, our Executive Director, beneficially owns 72.32% of our issued
and outstanding Ordinary Shares. Upon completion of this offering, Mr. Li Kin Shing’s beneficial ownership will be decreased to
approximately 68.6%, and our public shareholders will beneficially own approximately 31.4% of our issued and outstanding
Ordinary Shares assuming the sale of all Securities offered in this offering (assuming no exercise of the Warrants and no sale of any
Pre-Funded Warrants). As a result, we will continue to be a “controlled company” as defined under Nasdaq Listing Rule 5615(c)
because our Controlling Shareholder will hold more than 50% of the voting power for the election of directors.
Accordingly,
the Controlling Shareholder of FHL will be able to exert significant control over our management and affairs requiring shareholder
approval, including mergers, consolidations, the election of directors and other significant corporate actions, including the power
to prevent or cause a change in control. The interests of our largest shareholder may differ from the interests of our other shareholders.
Without the consent of our Controlling Shareholder, we may be prevented from entering into transactions that could be beneficial
to us or our other shareholders. The concentration in the ownership of our shares may cause a material decline in the value of our shares.
For more information regarding our principal shareholders and their affiliated entities, see “Principal Shareholder”.
There
are uncertainties with respect to indirect transfers of assets (including equity interests) of our Operating Subsidiaries in the PRC.
The
Announcement of the State Administration of Taxation on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises
(“Announcement No. 37”) and the Announcement on Certain Issues Concerning Enterprise Income Tax for Indirect Transfer of
Assets by Non-Resident Enterprises (“Circular 7”) issued by The State Administration of Taxation (“SAT”), provide
comprehensive guidelines in relation to, and also heighten the PRC tax authorities scrutiny over, indirect transfers by a non-resident
enterprise of assets (including equity interests) of a PRC resident enterprise (“PRC Taxable Assets”).
Announcement
No. 37 and Circular 7 specify that the PRC tax authorities are entitled to reclassify the nature of an indirect transfer of PRC Taxable
Assets when a non-resident enterprise transfers PRC Taxable Assets indirectly by disposing of equity interests in an overseas holding
company directly or indirectly holding such PRC Taxable Assets by disregarding the existence of such overseas holding company and considering
the transaction to be a direct transfer of PRC Taxable Assets if such transfer is deemed to have been conducted for the purposes of avoiding
PRC enterprise income taxes and without any other reasonable commercial purposes. It is unclear whether any exemptions specified under
Circular 7 will be applicable to the transfer of our Shares on a public market by our non-resident enterprise Shareholders or to any
future acquisition by us outside of the PRC involving PRC Taxable Assets. Therefore, the PRC tax authorities may deem any transfer of
our Shares by our Shareholders that are non-resident enterprises, or any future acquisition by us outside of the PRC involving PRC Taxable
Assets to be subject to the foregoing regulations, which may subject our Shareholders or us to additional PRC tax reporting obligations
or tax liabilities.
We
may be classified as a PRC resident enterprise for PRC enterprise income tax purposes and be subject to PRC taxation on our worldwide
income, which could result in unfavorable tax consequences to us and our shareholders.
Under
the EIT Law, if an enterprise is established outside of the PRC with a “de facto management body” located within the PRC,
such enterprise will be considered a PRC tax resident enterprise for tax purposes. Under the regulation on the Implementation of the
EIT Rules, the term “de facto management body” is defined as a body that exercises full and substantial control over and
overall management of the business, production, personnel, accounts, and properties of an enterprise, so we may be considered a PRC resident
enterprise by the PRC tax authorities and will normally be subject to the enterprise income tax on our worldwide income at the rate of
25%. Please see “Regulatory Environment” in this prospectus for further details.
It
is unclear how the PRC tax authorities will determine whether an offshore entity is a non-PRC resident enterprise. There is no assurance
that PRC tax authorities will not consider us as a “resident enterprise.” If the PRC tax authorities subsequently determine
that we or our offshore holding companies are deemed to be or should be classified as “resident enterprise(s),” such entity
or entities may be subject to enterprise income tax on their worldwide income at a rate of 25%, which could have a material and adverse
impact on our financial condition and results of operations.
The
statement by the SEC regarding proposed rule changes submitted by Nasdaq and an act passed by the U.S. Senate and the U.S. House of Representatives
all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties
to our offering, business operations, share price and reputation.
U.S.
public companies that have substantially all of their operations in China (including in Hong Kong) have been the subject of intense scrutiny,
criticism, and negative publicity by investors, financial commentators, and regulatory agencies, such as the SEC. Much of the scrutiny,
criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls
over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of
fraud.
On
December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their
oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman
Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the
risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating
past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in
China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other
U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On
May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCA”) requiring a foreign company
to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company
uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive
years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives
approved the Holding Foreign Companies Accountable Act.
On
May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in a “Restrictive Market,” (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and
only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing and (iii) apply additional
and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
As
more stringent criteria may be imposed, including the HFCA, which became law in December 2020, our Ordinary Shares may be prohibited
from trading if our auditor cannot be fully inspected. The PCAOB issued a Determination Report on December 16, 2021 (the “Determination
Report”), which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered
in: (1) mainland China of the People’s Republic of China because of a position taken by one or more authorities in mainland China;
and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities
in Hong Kong. In addition, the Determination Report identified the specific registered public accounting firms subject to these determinations
which included our auditor who appears as part of the report and is listed under its Appendix B: Registered Public Accounting Firms Subject
to the Hong Kong Determination.
On
December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms
headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 Determination Report 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.
On
December 23, 2022, the Accelerating HFCA Act (the “Accelerating HFCA Act”) was signed into law, which amended the HFCA
Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not
subject to PCAOB inspections for two consecutive years instead of three. On December 29, 2022, the Consolidated Appropriations Act
was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to
the Accelerating HFCA Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions
under the HFCA Act from three years to two.
As
a result of this scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply
decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits
and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect
this sector-wide scrutiny, criticism and negative publicity will have on us, our offering, business, and our Ordinary Share price. If
we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend
significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and
distract our management from furthering our growth. If such allegations are not proven to be groundless, we and our business operations
will be severely affected, and you could sustain a significant decline in the value of our Ordinary Shares.
ENFORCEABILITY
OF CIVIL LIABILITIES
Our
Company is an exempted company incorporated with limited liability under the laws of the Cayman Islands. We are incorporated in the Cayman
Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective
judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional
and support services. However, the Cayman Islands has a less developed body of securities laws as compared to the United States and provides
less protection for investors. In addition, Cayman Islands companies may not have standing to sue before the U.S. federal courts.
All
of our Operating Subsidiaries’ current operations are conducted outside of the United States, and all of our current assets are
located outside of the United States, with the majority of our and our Operating Subsidiaries’ operations and current assets being
located in Hong Kong and China. In addition, our auditors are located in Hong Kong, and our senior executive officers are located
either in China or in Hong Kong for a significant portion of the time and are either PRC or Hong Kong nationals. As a result, it may
be difficult for our shareholders to effect service of process upon us or those persons. In addition, neither China nor Hong Kong has
treaties providing for the reciprocal recognition and enforcement of judgments of courts within the Cayman Islands. Therefore, recognition
and enforcement in China or Hong Kong of judgments of a court in non-PRC or Hong Kong jurisdictions in relation to any matter not subject
to a binding arbitration provision may be difficult or impossible.
Shareholder
claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue
as a matter of law or practicality in China or Hong Kong. For example, in China, there are significant legal and other obstacles to obtaining
the information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although
the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another
country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory
authorities in the United States have not been efficient in the absence of a mutual and practical cooperation mechanism. According to
Article 177 of the PRC Securities Law, which took effect in March 2020, no overseas securities regulator is allowed to directly conduct
investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC
or Hong Kong securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating
to securities business activities to overseas parties.
We
have appointed Cogency Global Inc., 122 E. 42nd Street, 18th Floor, New York, New York 10168 as our agent upon
whom process may be served in any action brought against us under the securities laws of the United States.
Cayman
Islands
We
have been advised by Harney Westwood & Riegels that although 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 judgments), the Grand Court of the Cayman Islands will at common law enforce
final and conclusive in personam judgments of state and/or federal courts of the United States of America (the “Foreign Court”)
of a debt or definite sum of money against the Company (other than a sum of money payable in respect of taxes or other charges of a like
nature, or in respect of a fine or other penalty (which may include a multiple damages judgment in an anti-trust action)). The Grand
Court of the Cayman Islands will also at common law enforce final and conclusive in personam judgments of the Foreign Court that are
non-monetary against the Company, for example, declaratory judgments ruling upon the true legal owner of shares in a Cayman Islands company.
The Grand Court of the Cayman Islands will exercise its discretion in the enforcement of non-money judgments by applying the law
of equity and determining whether the principle of comity requires recognition. To be treated as final and conclusive, any relevant judgment
must be regarded as res judicata by the Foreign Court. A debt claim on a foreign judgment must be brought within six years of
the judgment becoming enforceable, and arrears of interest on a judgment debt cannot be recovered after six years from the date on which
the interest was due. The courts of the Cayman Islands are unlikely to enforce a judgment obtained from the Foreign Court under
civil liability provisions of U.S. federal securities law if such a judgment is found by the courts of the Cayman Islands to give rise
to obligations to make payments that are penal or punitive in nature. Such a determination has not yet been made by the Grand Court of
the Cayman Islands, and it is therefore uncertain whether such civil liability judgments from the Foreign Court would be enforceable
in the Cayman Islands. A court of the Cayman Islands may stay enforcement proceedings if concurrent proceedings are being brought
elsewhere. A judgment entered in default of appearance by a defendant who has had notice of the Foreign Court’s intention to proceed
may be final and conclusive notwithstanding that the Foreign Court has power to set aside its own judgment and despite the fact that
it may be subject to an appeal the time-limit for which has not yet expired. The Grand Court of the Cayman Islands may safeguard the defendant’s
rights by granting a stay of execution pending any such appeal and may also grant interim injunctive relief as appropriate for the purpose
of enforcement.
Hong
Kong
There
is uncertainty as to whether the courts of Hong Kong would: (i) 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 (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: (i) 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 (ii) 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 United States 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.
PRC
The
recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedure Law. PRC courts may recognize and enforce
foreign judgments in accordance with the requirements of PRC Civil Procedure 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 forms of reciprocity with
the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition,
according to the PRC Civil Procedure 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.
USE
OF PROCEEDS
We
estimate that the net proceeds from this offering will be approximately $4,289,000 if the entire offering is sold, based upon
an assumed combined public offering price of $8.46 per Ordinary Share and accompanying Warrant (which was the last reported sale
price of our Ordinary Shares on Nasdaq on August 9, 2024), after deducting the Placement Agent fees and estimated offering expenses
payable by us and assuming no exercise of the Warrants or Placement Agent Warrants and no sale of the Pre-Funded Warrants. However, because
this is a reasonable best efforts offering and there is no minimum number of Securities or offering amount required as a condition to
the closing of this offering, the actual offering amount, the Placement Agent’s fees and estimated offering expenses, and net proceeds
to us are not presently determinable and may be substantially less than the maximum amounts set forth on the cover page of this prospectus,
and we may not sell all or any of the Securities we are offering. As a result, we may receive significantly less in net proceeds. Based
on the assumed combined offering price set forth above, we estimate that our net proceeds from the sale of 75%, 50%, and 25% of the Securities
offered in this offering would be approximately $3,139,000, $1,989,000, and $839,000, respectively, after deducting the Placement
Agent fees and estimated offering expenses payable by us and assuming no exercise of the Warrants or Placement Agent Warrants and no
sale of the Pre-Funded Warrants. We will only receive additional proceeds from the exercise of the Warrants, Pre-Funded Warrants, if
any, and the Placement Agent Warrants we are issuing in this offering if the Warrants, Pre-Funded Warrants and Placement Agent Warrants
are exercised for cash. We cannot predict when or if the Warrants, Pre-Funded Warrants or Placement Agent Warrants will be exercised.
It is possible that these warrants may expire and may never be exercised.
These
estimates exclude the proceeds, if any, from the exercise of Placement Agent Warrants to be issued to the Placement Agent, or its designees,
as compensation in connection with this offering. If all of the Placement Agent Warrants were to be exercised in cash at the assumed
exercise price of $10.575 per Ordinary Share, we would receive additional proceeds of approximately $312,491. We cannot
predict when or if these Placement Agent Warrants will be exercised. It is possible that these Placement Agent Warrants may expire and
may never be exercised. Additionally, these Placement Agent Warrants contain a cashless exercise provision that permit exercise of such
Placement Agent Warrants on a cashless basis at any time when there is no effective registration statement under the Securities Act covering
the issuance of the underlying Ordinary Shares.
In
addition, these estimates also exclude the proceeds, if any, from the exercise of the Warrants to be issued in connection with this offering.
If all of the Warrants were to be exercised in cash at the assumed exercise price of $8.46 per Ordinary Share, we would receive
additional proceeds of approximately $5 million. We cannot predict when or if these Warrants will be exercised. It is possible
that these Warrants may expire and may never be exercised. Additionally, these Warrants contain a cashless exercise provision that permit
exercise of such Warrants on a cashless basis at any time when there is no effective registration statement under the Securities Act
covering the issuance of the underlying Ordinary Shares.
We
currently intend to use the net proceeds received from this offering primarily as follows:
|
● |
approximately 20% of the
net proceeds to research and develop new products; |
|
|
|
|
● |
approximately 40% of the
net proceeds to develop our own branded products; |
|
|
|
|
● |
approximately
30% of the net proceeds to form a sales team for marketing our own branded products; and |
|
|
|
|
● |
approximately 10% of the
net proceeds for general working capital. |
The
foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds
of this offering. Management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. To
the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our
net proceeds in short-term, interest-bearing bank deposits or debt instruments.
CAPITALIZATION
The
following table sets forth our capitalization as of December 31, 2023:
|
● |
on
an actual basis; and |
|
|
|
|
● |
on
an as adjusted basis to give effect to (i) the issuance and sale of 62,500 Ordinary Shares at $5 per Ordinary Share resulted from
the exercise of over-allotment option by the IPO underwriter in January 2024 in exchange for net proceeds of approximately $284,000;
and (ii) the issuance and sale of 591,016 Ordinary Shares and accompanying Warrants to purchase up to 591,016
Ordinary Shares by us in this offering (assuming this total offering is sold, no exercise of the Warrants or Placement Agent
Warrants and no sale of Pre-Funded Warrants in this offering) at an assumed combined public offering price of $8.46 per
Ordinary Share and accompanying Warrant, which was the closing price of our Ordinary Shares on
Nasdaq on August 9, 2024, in exchange for gross proceeds of $5,000,000, or net proceeds of approximately
$4,289,000, after deducting Placement Agent fees and other offering expenses paid by us. |
The
as adjusted information below is illustrative only, and our capitalization following the completion of this offering is subject
to adjustment based on the actual net proceeds to us from the offering. You should read this table in conjunction with “Use of
Proceeds,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.
| |
Actual | | |
Pro
Forma
As
Adjusted
(Unaudited)
(1) | |
| |
| US$’000 | | |
| US$’000 | |
Cash and cash equivalents | |
| 5,933 | | |
| 10,506 | |
| |
| | | |
| | |
Indebtedness | |
| 1,408 | | |
| 1,408 | |
| |
| | | |
| | |
Shareholders’ Equity | |
| | | |
| | |
Ordinary Shares, US$0.0001 par value per share, 300,000,000
Ordinary Shares authorized, 11,000,000 Ordinary Shares outstanding on an actual basis, 11,653,516 Ordinary Shares outstanding
on an as adjusted basis (assuming this total offering is sold and assuming no exercise of the Warrants or Placement Agent Warrants
and no sale of any Pre-Funded Warrants) | |
| 1 | | |
| 1 | |
Additional paid-in capital | |
| 3,648 | | |
| 8,221 | |
Statutory reserve | |
| 359 | | |
| 359 | |
Retained earnings | |
| 3,677 | | |
| 3,677 | |
Accumulated other comprehensive loss | |
| (33 | ) | |
| (33 | ) |
Total Shareholder’s Equity | |
| 7,652 | | |
| 12,225 | |
Total Capitalization | |
| 9,060 | | |
| 13,633 | |
(1)
|
The
number of our Ordinary Shares to be outstanding after taking into account of (i) the issuance and sale of 62,500 Ordinary Shares
resulted from the exercise of over-allotment option by the IPO underwriter in January 2024 and (ii) this offering of 591,016
Ordinary Shares, is based on 11,000,000 Ordinary Shares outstanding as of December 31, 2023. |
DIVIDENDS
AND DIVIDEND POLICY
For
the fiscal years ended December 31, 2021 and 2022, a dividend of HK$3,370,000 and HK$10,000,000 was declared, respectively. The dividends
declared were added to the amount due to related parties and there was no cash flow effect resulted. Saved as disclosed above, no other
dividends were declared or paid by us or our Operating Subsidiaries for the fiscal years ended December 31, 2021, 2022 and 2023.
Any
future dividend payments should not be considered as a guarantee or indication that those companies will declare and pay dividends in
such manner in the future or at all. Further, as of the date of this prospectus, our Board does not intend to pay any dividends on our
Ordinary Shares for the foreseeable future. We anticipate that all of our net earnings, if any, will be used for the operation and growth
of our Operating Subsidiaries’ businesses.
We
have adopted a dividend policy, according to which our Board shall take into account, among other things, the following factors when
deciding whether to propose a dividend and in determining the dividend amount: (a) operating and financial results; (b) cash flow situation;
(c) business conditions and strategies; (d) future operations and earnings; (e) taxation considerations; (f) interim dividend paid, if
any; (g) capital requirement and expenditure plans; (h) interests of shareholders; (i) statutory and regulatory restrictions; (j) any
restrictions on payment of dividends; and (k) any other factors that our Board may consider relevant. The payment of dividends, in certain
circumstances, is also subject to the approval of our Shareholders, the Companies Act and our Articles of Association
as well as any other applicable laws. Currently, we do not have any predetermined dividend distribution ratio.
Even
if our Board of Directors decides to pay dividends, the form, frequency, and amount will depend upon our future operations and
earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors that the
Board of Directors may deem relevant. In addition, we are a holding company and depend on the receipt of dividends and other distributions
from our subsidiaries to pay dividends on our Ordinary Shares.
DILUTION
If
you invest in our Ordinary Shares, your interest will be immediately diluted $7.45 per Ordinary Share, representing the difference
between the effective public offering price per Ordinary Share and our as adjusted net tangible book value per Ordinary Share of $1.01
as of December 31, 2023, after giving effect to this offering at an assumed combined public offering price of $8.46 per Ordinary
Share and accompanying Warrant, assuming that no Pre-Funded Warrants are sold in this offering and no Warrants are exercised. Dilution
results from the fact that the effective public offering price per Ordinary Share is substantially in excess of the as adjusted book
value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.
Our
net tangible book value as of December 31, 2023 was $7,165,000, or $0.65 per Ordinary Share. Net tangible book value represents the amount
of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting
as adjusted net tangible book value per Ordinary Share, after giving effect to the net proceeds we will receive from this offering, from
the assumed combined public offering price of $8.46 per Ordinary Share and accompanying Warrant, the closing price of our Ordinary
Shares on Nasdaq on August 9, 2024, and after deducting Placement Agent fees and
estimated offering expenses payable by us.
After giving effect to
the issuance and sale of 62,500 Ordinary Shares resulted from the exercise of over-allotment option by the IPO underwriter in January
2024, our as adjusted net tangible book value as of December 31, 2023 would have been approximately $7,449,000, or $0.67 per Ordinary
Share, representing an increase in net tangible book value of $0.02 per Ordinary Share to the existing shareholders.
After
giving further effect to the sale of the Ordinary Shares and accompanying Warrants offered in this offering at an assumed combined
public offering price of $8.46 per Ordinary Share and accompanying Warrant, which is based on the assumed combined public offering
price set forth on the cover page of this prospectus and after deduction of Placement Agent fees and estimated offering expenses payable
by us, our as adjusted net tangible book value as of December 31, 2023 would have been approximately $11,738,000, or $1.01
per Ordinary Share. This represents an immediate increase in net tangible book value of $0.34 per Ordinary Share to the existing
shareholders and an immediate dilution of $7.45 per Ordinary Share to investors purchasing our Securities in this offering.
The
following table illustrates this dilution:
Assumed combined public offering price per Ordinary Share and accompanying Warrant | |
| | | |
$ | 8.46 | |
Historical net tangible book value per Ordinary Share as
of December 31, 2023 | |
$ | 0.65 | | |
| | |
Increase in net tangible book
value per Ordinary Share after the over-allotment issuance in January 2024 | |
$ | 0.02 | | |
| | |
As adjusted net tangible book value per Ordinary Share
as of December 31, 2023, after the over-allotment issuance | |
$ | 0.67 | | |
| | |
Increase in net tangible book value per Ordinary Share after giving
effect to the offering | |
$ | 0.34 | | |
| | |
As adjusted net tangible book value per
Ordinary Share as of December 31, 2023, after the over-allotment issuance and the offering | |
$ | 1.01 | | |
| | |
Dilution per Ordinary Share to investors in this offering | |
| | | |
$ | 7.45 | |
A
$1.00 increase (decrease) in the assumed combined public offering price of $8.46 per Ordinary Share and accompanying Warrant,
would increase (decrease) the as adjusted net tangible book value per Ordinary Share by $0.38, and increase (decrease)
dilution to new investors by $0.96 per Ordinary Share, in each case assuming that the number of Ordinary Shares offered by
us, as set forth on the cover page of this prospectus, remains the same and after deducting Placement Agent fees and estimated offering
expenses payable by us (assuming no sale of Pre-Funded Warrants in this offering).
The
following table summarizes, on a as adjusted basis as of December 31, 2023, the differences between existing shareholders
and the new investors with respect to the number of Ordinary Shares purchased from us in this offering, the total consideration paid
and the average price per Ordinary Share paid before deducting Placement Agent fees and estimated offering expenses (assuming no sale
of Pre-Funded Warrants and no exercise of the Warrants in this offering).
| |
Ordinary Shares Purchased | | |
Total Consideration | | |
Average Price Per Ordinary | |
| |
Number | | |
Percent | | |
Amount | | |
Percent | | |
Share | |
Shareholders as of December 31, 2023 | |
| 11,000,000 | | |
| 94.4 | % | |
$ | 7,652,000 | | |
| 59.0 | % | |
$ | 0.70 | |
The over-allotment issuance | |
| 62,500 | | |
| 0.5 | % | |
$ | 312,500 | | |
| 2.4 | % | |
$ | 5.00 | |
New investors | |
| 591,016 | | |
| 5.1 | % | |
$ | 5,000,000 | | |
| 38.6 | % | |
$ | 8.46 | |
Total | |
| 11,653,516 | | |
| 100.0 | % | |
$ | 12,964,500 | | |
| 100.0 | % | |
| | |
The
as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this
offering is subject to adjustment based on the actual combined public offering price of our Ordinary Shares and accompanying
Warrants and other terms of this offering determined at pricing.
The
number of Ordinary Shares outstanding as of December 31, 2023, as shown above, is based on 11,000,000 Ordinary Shares issued
to shareholders as of that date.
To
the extent that additional options or other securities are issued under any equity incentive plans, or we issue additional Ordinary Shares
in the future or securities exercisable or convertible into Ordinary Shares, there may be further dilution to investors
participating in this offering. In addition, we may choose to raise additional capital through the sale of equity or convertible debt
securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future
operating plans. To the extent we issue additional Ordinary Shares or other equity or convertible debt securities in the future as
a result of such financings, there may be further dilution to investors participating in this offering.
SELECTED
CONSOLIDATED FINANCIAL AND OTHER DATA
The
following summarizes the consolidated statements of income and comprehensive income for the years ended December 31, 2023, 2022, and
2021, and the consolidated balance sheets as of December 31, 2023, 2022 and 2021 and have been derived from our consolidated
financial statements included elsewhere in this prospectus. The selected financial data set forth below should be read in conjunction
with and are qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and our consolidated financial statements and notes thereto included elsewhere in this prospectus. Our consolidated financial statements
are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any
future period.
Consolidated
Statements of Income and Comprehensive Income
| |
For the year ended December 31, 2021 | | |
For the year ended December 31, 2022 | | |
For the year ended
December 31, 2023 | | |
For the year ended December 31,
2023 | |
| |
HK$’000 | | |
HK$’000 | | |
HK$’000 | | |
US$’000 | |
| |
| | |
| | |
| | |
| |
Revenues | |
| 140,685 | | |
| 119,728 | | |
| 119,110 | | |
| 15,249 | |
Cost of sales | |
| (117,474 | ) | |
| (100,892 | ) | |
| (97,004 | ) | |
| (12,419 | ) |
Gross profit | |
| 23,211 | | |
| 18,836 | | |
| 22,106 | | |
| 2,830 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling and marketing expenses | |
| (3,011 | ) | |
| (2,057 | ) | |
| (1,961 | ) | |
| (251 | ) |
General and administrative expenses | |
| (16,883 | ) | |
| (19,239 | ) | |
| (20,535 | ) | |
| (2,629 | ) |
Total operating expenses | |
| (19,894 | ) | |
| (21,296 | ) | |
| (22,496 | ) | |
| (2,880 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| 3,317 | | |
| (2,460 | ) | |
| (390 | ) | |
| (50 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Exchange gain, net | |
| 459 | | |
| - | | |
| 213 | | |
| 27 | |
Gain on disposal of property, plant, and equipment | |
| 45 | | |
| 12,458 | | |
| (1 | ) | |
| - | |
Interest income | |
| 17 | | |
| 20 | | |
| 84 | | |
| 11 | |
Interest expense | |
| (1,577 | ) | |
| (1,581 | ) | |
| (1,708 | ) | |
| (219 | ) |
Government grant | |
| - | | |
| - | | |
| 205 | | |
| 26 | |
Other income, net | |
| 1,385 | | |
| 528 | | |
| 266 | | |
| 34 | |
Total other income (loss), net | |
| 329 | | |
| 11,425 | | |
| (941 | ) | |
| (121 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income before tax expense | |
| 3,646 | | |
| 8,965 | | |
| (1,331 | ) | |
| (171 | ) |
Income tax expense | |
| (2,822 | ) | |
| (312 | ) | |
| (131 | ) | |
| (17 | ) |
Net income | |
| 824 | | |
| 8,653 | | |
| (1,462 | ) | |
| (188 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation gain (loss), net of taxes | |
| 1,001 | | |
| (2,575 | ) | |
| (809 | ) | |
| (104 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total comprehensive income (loss) | |
| 1,825 | | |
| 6,078 | | |
| (2,271 | ) | |
| (292 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) per share attributable to ordinary shareholders | |
| | | |
| | | |
| | | |
| | |
Basic and diluted (cents) | |
| 8.24 | | |
| 86.53 | | |
| (14.50 | ) | |
| (1.86 | ) |
Weighted average number of ordinary shares used in computing net income per share | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
| 10,000,000 | | |
| 10,000,000 | | |
| 10,084,932 | | |
| 10,084,932 | |
Consolidated
Balance Sheets
| |
As of
December 31, 2021 | | |
As of
December 31, 2022 | | |
As
of
December
31, 2023 | | |
As
of
December
31, 2023 | |
| |
HK$’000 | | |
HK$’000 | | |
HK$’000 | | |
US$’000 | |
| |
| | |
| | |
| | |
| |
Assets | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| | | |
| | | |
| | | |
| | |
Cash | |
| 3,996 | | |
| 13,853 | | |
| 46,342 | | |
| 5,933 | |
Accounts receivable, net | |
| 46,395 | | |
| 32,938 | | |
| 31,486 | | |
| 4,031 | |
Inventories | |
| 21,508 | | |
| 15,860 | | |
| 14,088 | | |
| 1,804 | |
Amount due from a related party | |
| 20 | | |
| - | | |
| - | | |
| - | |
Prepaid expenses and other current assets | |
| 5,979 | | |
| 6,767 | | |
| 6,017 | | |
| 770 | |
Deferred offering cost | |
| - | | |
| 1,903 | | |
| - | | |
| - | |
Total current assets | |
| 77,898 | | |
| 71,321 | | |
| 97,933 | | |
| 12,538 | |
| |
| | | |
| | | |
| | | |
| | |
Property, plant and equipment, net | |
| 3,222 | | |
| 1,498 | | |
| 1,244 | | |
| 159 | |
Right-of-use assets | |
| 13,016 | | |
| 7,117 | | |
| 3,801 | | |
| 487 | |
Total non-current assets | |
| 16,238 | | |
| 8,615 | | |
| 5,045 | | |
| 646 | |
TOTAL ASSETS | |
| 94,136 | | |
| 79,936 | | |
| 102,978 | | |
| 13,184 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| | | |
| | | |
| | | |
| | |
Bank loans – current | |
| 11,000 | | |
| 11,000 | | |
| 11,000 | | |
| 1,408 | |
Accounts payable | |
| 19,133 | | |
| 13,798 | | |
| 18,482 | | |
| 2,366 | |
Other payables and accrued liabilities | |
| 5,682 | | |
| 5,799 | | |
| 7,049 | | |
| 904 | |
Lease liabilities – current | |
| 5,521 | | |
| 5,626 | | |
| 4,060 | | |
| 520 | |
Amounts due to related parties | |
| 6,475 | | |
| 5,117 | | |
| 2,413 | | |
| 309 | |
Total current liabilities | |
| 47,811 | | |
| 41,340 | | |
| 43,004 | | |
| 5,507 | |
| |
| | | |
| | | |
| | | |
| | |
Non-current liabilities | |
| | | |
| | | |
| | | |
| | |
Lease liabilities – non-current | |
| 8,851 | | |
| 2,552 | | |
| 198 | | |
| 25 | |
TOTAL LIABILITIES | |
| 56,662 | | |
| 43,892 | | |
| 43,202 | | |
| 5,532 | |
| |
| | | |
| | | |
| | | |
| | |
Commitments and contingencies | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Shareholders’ equity | |
| | | |
| | | |
| | | |
| | |
Preference shares US$0.0001 par value per share; 3,000,000 authorized capital; nil shares issued and outstanding | |
| - | | |
| - | | |
| - | | |
| - | |
Ordinary shares US$0.0001 par value per share; 300,000,000 authorized capital; 10,000,000 shares issued and outstanding | |
| 8 | | |
| 8 | | |
| 9 | | |
| 1 | |
Share premium | |
| - | | |
| 2,492 | |