GVH Globavend Holdings Ltd

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F

 

(Mark One)

 

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended September 30, 2023

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of event requiring this shell company report :_____________

 

For the transition period from ________ to _______________

 

Commission file number: 333-274166

 

Globavend Holdings Limited

(Exact name of Registrant as specified in its charter)

 

Not applicable

(Translation of Registrant’s name into English)

 

Cayman Islands

(Jurisdiction of incorporation or organization)

 

Office 1401, Level 14, 197 St Georges Tce,

Perth, WA 6000, Australia

(Address of principal executive offices)

 

Wai Yiu Yau, Chief Executive Officer

Telephone: + 61 08 6141 3263

Email address: project@globavend.com

Office 1401, Level 14, 197 St Georges Tce,

Perth, WA 6000, Australia

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, par value US$0.001 per share		GVH		The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

 

None

(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

 

None

(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

 

As of September 30, 2023, there were 13,125,000 ordinary shares, par value US$0.001 per share.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

☐ Yes ☒ No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

☒ Yes ☐ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 3 of 105 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

	Large accelerated filer ☐	Accelerated filer ☐
	Non-accelerated filer ☒	Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

 

† 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.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report. ☐

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

	U.S. GAAP ☒	International Financial Reporting Standards as issued by the International Accounting Standards Board ☐
	Other ☐

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 

Item 17 ☐ Item 18 ☐

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

☐ Yes ☒ No

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

☐ Yes ☐ No

 

 

 

TABLE OF CONTENTS

 

	Page
INTRODUCTION	3
FORWARD-LOOKING INFORMATION	5
PART I	6
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3. KEY INFORMATION	6
ITEM 4. INFORMATION ON THE COMPANY	51
ITEM 4A. UNRESOLVED STAFF COMMENTS	83
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	83
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	109
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	120
ITEM 8. FINANCIAL INFORMATION	122
ITEM 9. THE OFFER AND LISTING	124
ITEM 10. ADDITIONAL INFORMATION	124
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	151
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	153
PART II	154
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	154
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	154
ITEM 15. CONTROLS AND PROCEDURES	154
ITEM 16. [RESERVED]	156
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	156
ITEM 16B. CODE OF ETHICS	156
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	157
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	157
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	157
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	158
ITEM 16G. CORPORATE GOVERNANCE	158
ITEM 16H. MINE SAFETY DISCLOSURE	158
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	158
PART III	158
ITEM 17. FINANCIAL STATEMENTS	158
ITEM 18. FINANCIAL STATEMENTS	158
ITEM 19. EXHIBITS	159
SIGNATURES	160
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1

 

 

INTRODUCTION

 

Unless otherwise indicated or the context otherwise requires, all information in this annual report reflects the following:

 

	●	“Articles” or “Articles of Association” are to the amended and restated articles of association of our Company (as amended from time to time) adopted on August 18, 2023, which took effect on November 8, 2023, and as amended, supplemented and/or otherwise modified from time to time;
	●	“AUD” or “A$” are to Australian dollar(s), the lawful currency of Australia;
	●	“BVI” are to the British Virgin Islands;
	●	“Companies Act” are to the Companies Act (as revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time;
	●	“Company,” “we,” “us,” and “Globavend Holdings” are to Globavend Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability on May 22, 2023;
	●	“Controlling Shareholder” are to Mr. Wai Yiu Yau, the ultimate beneficial owner of Ordinary Shares representing approximately 78.25% of the issued capital of the Company as of the date of this annual report. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership” and “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders” for more information;
	●	“COVID-19” are to the Coronavirus Disease 2019;
	●	“Exchange Act” are to the US Securities Exchange Act of 1934, as amended;
	●	“Globavend HK” are to Globavend (HK) Limited, a company incorporated under the laws of Hong Kong with limited liability, an indirect wholly owned subsidiary of Globavend Holdings and our sole operating subsidiary in Hong Kong;

 

 

	●	“Globavend BVI” are to Globavend Associates Limited, a BVI business company limited by shares incorporated in the BVI, a direct wholly owned subsidiary of Globavend Holdings;
	●	“HKD” or “HK$” are to Hong Kong dollar(s), the lawful currency of Hong Kong;
	●	“Hong Kong” are to Hong Kong special administrative region of the People’s Republic of China;
	●	“Memorandum” or “Memorandum of Association” are to the amended and restated memorandum of association of our Company (as amended from time to time) adopted on August 18, 2023, which took effect on November 8, 2023 and as amended, supplemented and/or otherwise modified from time to time;
	●	“Nasdaq” are to Nasdaq Stock Market LLC;
	●	“Ordinary Shares” or “Shares” are to our ordinary shares, par value $0.001 per ordinary share;
	●	“PCAOB” are to Public Company Accounting Oversight Board;
	●	“PRC” or “China” are to the People’s Republic of China, and “mainland China”, unless otherwise specified herein, are to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, the Hong Kong Special Administrative Region, and the Macau Administrative Region;
	●	“PRC government” or “PRC authorities”, or variations of such words or similar expressions, are to the central, provincial, and local governments of all levels in mainland China, including regulatory and administrative authorities, agencies and commissions, or any court, tribunal or any other judicial or arbitral body in mainland China, for the purposes of this annual report only;
	●	“PRC laws” are to all applicable laws, statues, rules, regulations, ordinances and other pronouncements having the binding effect of law in mainland China;
	●	“SEC” or “U.S. Securities and Exchange Commission” are to the United States Securities and Exchange Commission;
	●	“Securities Act” are to the US Securities Act of 1933, as amended;
	●	“U.S. dollars” or “US$” or “$” or “USD” or “dollars” are to United States dollar(s), the lawful currency of the United States.

 

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

 

 

FORWARD-LOOKING INFORMATION

 

This annual report contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “goal,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this annual report are based upon information available to us as of the date of this annual report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:

 

	●	the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, consumers, the Company, and our operating subsidiaries on our business, financial condition and results of operations;
	●	timing of the development of future business;
	●	capabilities of our business operations;
	●	expected future economic performance;
	●	competition in our market;
	●	continued market acceptance of our services and products distributed by us;
	●	changes in the laws that affect our operations;
	●	inflation and fluctuations in foreign currency exchange rates;
	●	our ability to obtain and maintain all necessary government certifications, approvals, and/or licenses to conduct our business;
	●	continued development of a public trading market for our securities;
	●	the cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations;
	●	managing our growth effectively;
	●	projections of revenue, earnings, capital structure, and other financial items;
	●	fluctuations in operating results;
	●	dependence on our senior management and key employees; and
	●	other factors set forth under “Item 3. Key Information – D. Risk Factors.”

 

 

You should refer to the section titled “Item 3. Key Information – D. Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this annual report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

A. Selected Financial Data

 

The following table presents the selected consolidated financial information for our Company. Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

 

The summary consolidated statements of operations and cash flow

 

		For the years ended September 30,
		2021				2022				2023
Net cash provided by operating activities		$	875,086			$	783,045			$	2,021,831
Net cash used in investing activities			(1,192	)			(9,247	)			(7,455	)
Net cash used in financing activities			(222,753	)			(1,244,502	)			(2,017,979	)
NET CHANGE IN CASH AND CASH EQUIVALENTS			651,141				(470,704	)			(3,603	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			377,298				1,028,439				557,735
CASH AND CASH EQUIVALENTS AT END OF YEAR		$	1,028,439			$	557,735			$	554,132

 

The summary consolidated balance sheet as at

 

		As of September 30,
		2022				2023
Total Assets		$	2,520,508			$	4,474,778
Total Liabilities		$	(1,621,365	)		$	(3,972,602	)
Total shareholders’ equity		$	899,143			$	502,176

 

Our management believes that the assumptions underlying our financial statements and the above allocations are reasonable. Our financial statements, however, may not necessarily reflect our results of operations, financial position and cash flows as if we had operated as a separate, stand-alone company during the periods presented. You should not view our historical results as an indicator of our future performance.

 

The following table presents our summary consolidated statements of operations and comprehensive income for the fiscal years ended September 30, 2022 and 2023:

 

		Years ended September 30,
		2021				2022				2023
Revenue
Integrated cross-border logistics services		$	11,993,332			$	19,444,182			$	16,872,539
Air freight forwarding services			1,262,748				4,577,014				1,713,989
			13,256,080				24,021,196				18,586,528
Cost of revenue			12,271,114				22,615,318				16,680,941
Gross profit			984,966				1,405,878				1,905,587
General and administrative expenses			421,181				588,732				758,726
Income from operation			563,785				817,146				1,146,861
Other income (expense)
Interest income			21				108				3,481
Interest expense			(78	)			(2,755	)			(1,066	)
Other income			78,622				122,289				120,367
Total other income/(expense), net			78,565				119,642				122,782
Income before income taxes			642,350				936,788				1,269,643
Income tax expenses			77,592				126,561				192,251
Net income			564,758				810,227				1,077,392

 

 

B. Capitalization and indebtedness.

 

Not applicable.

 

C. Reasons for the offer and use of proceeds.

 

Not applicable.

 

D. Risk factors

 

An investment in our Ordinary Shares involves a high degree of risk. You should carefully consider the following information about these risks together with the other information appearing elsewhere in this annual report before deciding to invest in our Ordinary Shares. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations, and future growth prospects. In these circumstances, the market price of our Ordinary Shares could decline, and you may lose all or part of your investment.

 

Risks Related to Our Business and Industry

 

We may be unable to obtain exact amount of cargo space to facilitate our customers’ needs, and the termination or non-renewal of our block space agreements could have adverse effect on our results of operations.

 

In the course of business, our operating subsidiary Globavend HK obtains cargo space from air freight carriers through block space arrangements and direct booking. The block space agreements guarantee us a predetermined allocation of air cargo space at a discounted rate compared to prevailing market rates for a term of nearly 12 months. Shall we wish to obtain more cargo space than the allocated volume under the block space agreements, the additional cargo space will be subject to the latest market price. There is no guarantee that we will be awarded such additional cargo space. Further, if the prevailing market rates of air cargo space we source fall below the predetermined rates under the block space arrangements, we may have to offer cargo space to our customers at rates lower than the predetermined rates; otherwise, our customers may turn to other freight forwarders that are able to offer cargo space at a lower price.

 

Further, save for the cargo space that we procured from air freight carriers that were under the block space agreement, the other cargo spaces offered by our suppliers are on a first-come, first-served basis with no formal agreement for guaranteed supply of cargo space. Hence, there can be no assurance that we will be able to source cargo space within our customers’ expected time frame cost-effectively. We cannot guarantee that it will not happen in the future, and if we cannot obtain sufficient cargo space from our suppliers to meet our customers’ demand, in particular during peak seasons, our reputation within the industry could be adversely affected.

 

 

In addition, these block space agreements are terminable on 60-days’ notice without penalty by either party to the relevant agreement, namely Globavend HK or the relevant air freight carriers. We cannot guarantee that these block space agreements will not be terminated before their expiration or be renewed. The termination or non-renewal of these block space agreements could potentially result in insufficient air cargo space for our integrated cross-border logistics services or freight forwarding services, leading to significantly higher costs in acquiring cargo space. As at the date of this annual report, we have not experienced any early termination or non-renewal of our block space agreements.

 

If we are unable to utilize our cargo space obtained through block space agreements, our business and results of operations may be adversely affected.

 

The demand of customers may differ from the supply of cargo space we obtain through block space agreements from time to time. Although we consolidate cargo to utilize the cargo space we have obtained in order to maximize our profit, we cannot assure you that we are always able to fully utilize all the cargo space we have obtained on every occasion. We cannot assure you that there will not be instances where, for instance, due to (i) departure timetable of the aircraft, (ii) popularity of the route, or (iii) seasonality factors, we are unable to fully consolidate all the cargo we have obtained. If these circumstances arise, we may have to bear the costs of all the excess cargo space we have purchased.

 

We have not entered into long-term sales agreements with our customers and rely on demands from our major customers, and our sales may fluctuate subject to our customers’ demands.

 

Our operating subsidiary Globavend HK does not enter into any long-term agreements with our customers, which mainly comprise businesses that operate e-commerce platforms or e-commerce merchants in Hong Kong and purchases that are made on an order-by-order basis. Our business with our customers has been, and we expect it will continue to be, conducted based on the actual orders received from time to time. Accordingly, the quantity of cargo spaces required from our customers may fluctuate from time to time, which makes it difficult for us to project future demands from our customers. As a result, we cannot guarantee that our current customers will continue to utilize our services or that they will continue at the same levels. Our success depends on receiving continuous orders from our customers.

 

We rely on our customers to make continuous purchases of cargo space from us to maintain a stable source of revenue. If for any reason, our customers no longer require cargo spaces from us at the same level or on similar terms as they have done historically or at all, in the future (for example, in the event of decrease in customers’ end products due to economic downturn), or our customers remove us from their list of nominated logistics services providers, and if we are unable to obtain orders in substitution, or unable to develop new customers, our business may be materially and adversely affected.

 

 

We rely on our business partners, including air freight carriers, customs clearance companies, ground transportation companies, and local delivery service providers to implement certain services to our customers.

 

We maintain business relationships with air freight carriers, customs clearance companies, ground transportation companies, and local delivery service providers to implement services to our customers. Customs clearance companies, ground transportation companies, and local delivery service providers are engaged on an as-needed basis, since it is more cost-effective and offers flexibility in cost management. There is no assurance that our service providers will at all times perform at a satisfactory level. It may happen that the labels noting the destinations of the cargo fall off and that the air freight carriers mistakenly deliver the cargo to other destinations. Similarly, in case there is any error or delay due to various reasons, including, but not limited to, weather conditions, air traffic control, and human negligence, the goods of our customers may not be delivered to the assigned destination within the expected condition and time frame.

 

We cannot assure you that the service quality of air freight carriers or other service providers will always meet our or our customers’ standards or requirements. There may be occasions where, due to various reasons, our service providers are not able to deliver the goods on time or there may be instances where goods are damaged during the transfer. If our service providers are unable to meet our customers’ standards and requirements and we are unable to find suitable alternatives promptly, our reputation within the industry may be adversely affected.

 

Decreased availability or increased costs of key logistics and supply chain services, such as warehousing equipment and materials, could impact our cost of operations and our profitability, as well as our cash flows. In addition, we may also be exposed to legal risks and subject to certain liabilities, including administrative fines, if those third parties fail to obtain all necessary licenses and permits as required.

 

In addition, we are dependent in part on third-party service providers to report certain events to us, such as delivery information and cargo claims. This partial reliance on third parties could cause delays in reporting certain events, impacting our ability to recognize revenue and claims in a timely manner. In addition, we cannot assure you that we will be able to obtain access to preferred third-party service providers at attractive rates or that these providers will have adequate capacity available to meet the needs of our customers.

 

 

Our business is susceptible to disruptions in the business activities of our suppliers of cargo space.

 

We need our suppliers to provide cargo space for our customers. Disruptions in the business activities of our suppliers may have negative impacts on our business. Such disruptions include (i) suspension or cancellation of flight lines due to technical failures or extreme weather conditions, especially when we rely on one airline carrier for a particular destination; (ii) labor strikes due to disagreements between labor and management; (iii) massive occurrence of political or industrial actions at transportations hubs or destination ports; (iv) wars or terrorist attacks; (v) serious financial difficulties faced by our suppliers during their course of business operations; and (vi) significant increases in freight rates and charges charged by service providers. In the event of occurrence of the above, we may have to arrange for alternative suppliers of cargo space from other air freight carriers for our customers within a tight time constraint.

 

If we are unable to source cargo space on alternative routes for our customers, we may have to bear such disruptions and our customers may switch to our competitors. Further, if there is any detrimental change to our business relationship with our major suppliers, our reputation, financial condition, and results of operations could be adversely affected.

 

We face risks associated with the items we deliver and the contents of shipments and inventories handled through our service network as we may fail to identify shipments that carry goods of dangerous or illicit nature.

 

We handle a large volume of shipments across our service network. In accordance with the air cargo security regime in Hong Kong and related statutory requirements of the Hong Kong Civil Aviation Department (CAD), 100% of cargoes arranged by us are required to be screened by the screening equipment (such as x-ray) certified by aviation security authorities, such as the European Civil Aviation Conference (ECAC) of the European Commission, Transportation Security Administration (TSA) of the United States, and Department for Transport (DOT) of Australia (“Screening Equipment”). We are required to ensure that all dangerous goods are properly classified, packed, marked, labeled, and documented before they are offered for air transportation. However, there is no assurance that our Screening Equipment or hand search/physical check by our screeners at piece level can successfully prevent the shipment of any illegal goods or dangerous goods.

 

Should we fail to identify shipments that carry goods of illicit or dangerous nature, these goods may end up being impounded by customs, where we may be subject to investigations and administrative or even criminal penalties, or if any personal injury or property damage is concurrently caused, we may be further liable for civil compensation. In such event, our reputation, business, and results of operations may be materially and adversely affected. Furthermore, we face challenges with respect to the protection and control of these items when handling the shipments and inventories across our service network. Shipments and inventories in our service network may be stolen, damaged, or lost for various reasons, and we, together with our service providers, may be perceived or found to be liable for such incidents. As of the date of this annual report, we have not experienced any failure to detect shipments of illicit or dangerous nature.

 

 

We may fail to identify referral consignments that carry goods of dangerous or illicit nature.

 

Our business partners and customers may refer business opportunities or engage us as their service provider for the provision of logistics and freight forwarding services from Hong Kong to locations where we have a presence. We may also co-load our consignments with other freight forwarders to utilize the cargo space we have. In these circumstances, we may have no control over and no comprehension of the consignor’s nature of the consigned goods other than as declared on the relevant declaration forms. Even if we perform background checks on new customers and file police reports for any unclaimed and/or suspicious parcel, there is no assurance that the implementation of such measures will successfully prevent the transporting of any illegal or dangerous goods. Should consignment carry goods of illicit or dangerous nature and we fail to identify their nature, such goods may end up being impounded by customs or give rise to unexpected accidents, where we may be subject to investigation for breaking local laws and be fined by authorities. In such event, our reputation, business, and results of operations may be materially and adversely affected. As of the date of this annual report, we have not experienced any similar incident where we have failed to identify referral consignments that carry goods of dangerous or illicit nature.

 

Our insurance coverage may be inadequate to protect us from potential losses.

 

We have obtained insurance to cover certain potential risks and liabilities. We provide work-related injury insurance for our employees and property all risks insurance for our office and warehousing facilities. Additionally, we also purchase increased costs of work insurance for business interruption liability insurance and money-in-transit insurance covering warehouses and parcels, as well as other liability insurance as needed. However, we do not maintain product liability insurance or key-man insurance. There are also certain types of losses, such as from war, acts of terrorism, and certain natural disasters, for which we cannot obtain insurance at a reasonable cost or at all. There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition, and results of operations could be materially and adversely affected.

 

 

Significant increases in freight rates and charges charged by service providers may affect our business, financial condition, and results of operations.

 

We entered into block space agreements with air freight carriers for the provision of air cargo spaces. Our pricing strategy takes into account factors such as the type of consignment, freight rates, future business opportunities, volume of cargo space required, and the charges charged by other service providers. If there is an increase in freight rates or the charges charged by other service providers, we will have to transfer such increase in costs to our customers. This may have an adverse effect on our pricing and costs.

 

These increases in rates charged by air freight carriers and other service providers are influenced by various factors, including fuel prices, exchange rates, import or export taxes, costs of labor, and market conditions, many of which are beyond our control. We may need to set off the significant increase in costs by increasing our prices, which may reduce our competitive advantage, thereby materially and adversely affecting our business.

 

Our profitability may be materially and adversely impacted if our investment in equipment, warehousing facilities, and information technology infrastructure does not match customer demand for these resources or if there is a decline in the availability of funding sources for these investments.

 

Although we are an asset-light company, our integrated cross-border logistics services may require certain investments and commitment of capital in equipment, warehousing facilities maintenance and expansion, and warehousing systems such as shelving, racking, and information technology systems. The amount and timing of our capital investments depend on various factors, including anticipated freight volume levels and the price and availability of appropriate property for our warehousing facilities.

 

These capital expenditures are associated with certain inherent risks. We may not have the resources to fund such investment. Even if we have sufficient funding, assets that best suit our needs may not be available at reasonable prices or at all. In addition, we are likely to incur capital expenditures earlier than all of the anticipated benefits, and the return on these investments may be lower, or may be realized more slowly, than we expected. In addition, the carrying value of the related assets may be subject to impairment, which may adversely affect our financial condition and operating results.

 

 

Our business is substantially dependent on our relationship with our major service suppliers. Changes or difficulties in our relationships with our service suppliers may harm our business and financial results.

 

Our business is substantially dependent on our relationship with our major service suppliers. Our suppliers primarily include air freight carriers, ground transportation companies, and customs clearance companies. We consider major service suppliers in each period to be those suppliers that accounted for more than 10% of overall purchases in such period. For the year ended September 30, 2023, four major suppliers accounted for 33.1%, 23.1%, and 13.4% and 10.9% of our total purchases. For the year ended September 30, 2022, four major suppliers accounted for 26.2%, 14.7%, 14.6%, and 13.1% of our total purchases. For the year ended September 30, 2021, three major suppliers accounted for 51.2%, 21.1% and 12.8% of our total purchases.

 

Apart from the cargo block space agreements, we generally do not enter into any long-term agreements with our service suppliers. Accordingly, there is no assurance that Globavend HK can maintain stable and long-term business relationships with any service supplier. Failure to maintain existing relationships with the service suppliers or to establish new relationships in the future could negatively affect Globavend HK’s ability to obtain their services in a price advantage and timely manner. If Globavend HK is unable to obtain ample supply of services from existing suppliers or alternative sources of supply, Globavend HK may be unable to satisfy the orders from its customers or may only be able to provide its integrated cross-border logistics services or freight forwarding services to its customers at a much higher rate.

 

In addition, in the event that we are unable to renew our block space agreements with air freight carriers, it may be challenging to secure alternative air freight carriers that meet our customers’ requirements. We cannot guarantee that we will be able to secure comparable services from other air freight carriers on comparable or better commercial terms or at all.

 

An increase in fuel prices may reduce profitability.

 

The cost of fuel is a significant factor affecting the logistics industry in its freight forwarding business, as it impacts the operations of companies through the air freight rates. As a result, any increase in fuel price could raise our costs, potentially affecting our profitability if we are unable to pass on the costs to our customers. Fuel costs are subject to substantial fluctuations and influenced by various economic and political factors, most of which are beyond our control, such as political instability in oil-producing regions.

 

There may be disintermediation in the logistics industry and freight forwarding business in the future.

 

With the growing trend of digitization, a vast amount of information is now readily available online. The information transparency, coupled with the development of innovative technologies, such as online marketplaces, electronic payments, and algorithmic order-matching, has led manufacturers and retailers to seek ways to reduce the number of intermediaries in the supply chain, which may involve manufacturers and retailers shipping directly to their end customers. The trend of eliminating intermediaries creates disintermediation in our industry and possesses significant risks to our industry, as any significant decrease in demand for our freight forwarding services could negatively impact our business.

 

 

Our business is dependent on information technology and is subject to cybersecurity risks. A cyberattack may disrupt our operations and compromise the personal data of our customers.

 

We rely on information technology to maintain our electronic systems and database in the course of our business operations. Our suppliers’ and customers’ information, flight schedules, and information on our customers’ goods at our warehouses are electronically recorded in our systems. While we take measures to ensure the security of our information technology systems, our systems are susceptible to outages from fire, floods, power loss, telecommunications failures, data leakage, human error, hacking and break-ins, cyber-attacks and similar events. The occurrence of any of these events could disrupt or damage our information technology systems and hamper our internal operations, disable our ability to handle the bookings of customers efficiently or at all, and adversely impact our customer service, volumes, and revenues and result in increased cost.

 

Furthermore, threats to information technology systems, including as a result of cyberattacks and cyber incidents, continue to grow. Cybersecurity risks could include, but are not limited to, malicious software, attempts to gain unauthorized access to our data, and the unauthorized release, corruption, or loss of our data and personal information, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems or other electronic security, including with our property and equipment.

 

These cybersecurity risks could:

 

	●	Disrupt our operations and damage our information technology systems;
	●	Subject us to various penalties and fees by third parties;
	●	Negatively impact our ability to compete;
	●	Enable the theft or misappropriation of funds;
	●	Cause the loss, corruption, or misappropriation of proprietary or confidential information;
	●	Expose us to litigation; and
	●	Result in injury to our reputation, downtime, loss of revenue, and increased costs to prevent, respond to, or mitigate cybersecurity events.

 

If a cybersecurity event occurs, it could harm our business and reputation and could result in a loss of customers. Likewise, data privacy breaches by employees and others who access our systems may pose a risk that sensitive customer data may be exposed to unauthorized persons or to the public, adversely impacting our customer service, employee relationships, and our reputation.

 

 

While we continue to make efforts to evaluate and improve our systems and particularly the effectiveness of our security program, procedures, and systems, it is possible that our business, financial, and other systems could be compromised, which could go unnoticed for a prolonged period of time, and there can be no assurance that the actions and controls that we implement, or which we cause third-party service providers to implement, will be sufficient to protect our systems, information, or other property. Additionally, customers or third parties upon whom we rely face similar threats, which could directly or indirectly impact our business and operations. The occurrence of a cyber incident or attack could have a material adverse effect on our business, financial condition, and results of operations.

 

There is also no assurance that we will be able to successfully keep up with technological improvements in order to meet our customers’ needs or the technology developed by competitors will not have an adverse impact on the competitiveness or attractiveness of our services. In addition, hardware or software failure relating to information technology systems could significantly disrupt customer workflows and cause economic losses for which we could be held liable and that could damage our reputation. We are also subject to hacking or other attacks on our information technology systems.

 

We may not be able to meet the delivery schedule of our customers and may experience loss of revenue.

 

Once we accept orders from our customers, we are committed to delivering our customers’ products to their clients within the agreed schedule. If a possible delay in delivery schedule is anticipated, due to transport and shipping disruptions; delay in the cargo consolidation process; disruptions in our suppliers’ operations such as equipment breakdowns, power failures, severe weather conditions, or epidemic disease; and/or other factors beyond our control, we would take proactive actions such as timely negotiation with our customers for adjusting schedules and making delivery by expedited methods. We may incur additional expenses or have to offer additional discounts to our customers as a result of such remedial measures. When such delays occur, we may also experience a loss of revenue and, in the worst-case scenario, our customers may cancel the order. As of the date of this annual report, we have not experienced any delay that led to material cancellation of orders from our customers.

 

There is no assurance that we can maintain the qualifications, licenses, and registrations for the operation as an air freight forwarder.

 

It is essential to our operation as an air freight forwarder for us to maintain certain qualifications, licenses, and registrations. To maintain such qualifications, licenses, or registrations, we must comply with the relevant requirements imposed by the International Air Transport Association (“IATA”).

 

 

Further, the standards of compliance required may from time to time be subject to changes without substantial advance notice. We cannot assure you that all of the required qualifications, licenses, and registrations can be maintained or renewed in a timely manner or at all. If we fail to comply with any of the relevant requirements, our qualifications, licenses, or registrations could be temporarily suspended or revoked, or the renewal of our qualifications, licenses, or registrations upon expiry of their original terms may be delayed or refused. In such circumstances, our capability to undertake relevant work may be directly impacted, and our business may be materially and adversely affected.

 

We have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues during the years ended September 30, 2021, 2022 and 2023.

 

We derive a significant portion of our revenues from a few major customers. For the year ended September 30, 2021, three customers accounted for 32.0%, 23.2%, and 10.3% of our total revenue. For the year ended September 30, 2022, three customers accounted for 19.3%, 16.4%, and 15.7% of our total revenue. For the year ended September 30, 2023, three customers accounted for 21.9%, 18.1%, and 14.2% of our total revenue. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our services from these customers. If any of these customers experience declining or delayed sales due to market, economic, or competitive conditions, their demand for our freight forwarding services may reduce which compels us to lower our prices, which could have an adverse effect on our margins and financial position and could negatively affect our revenues and results of operations.

 

We may not be able to attract and retain our core management team and other key personnel for our operation.

 

Our success and growth depend on our on the knowledge, experience, and expertise of our management team, who is responsible for overseeing financial condition and performance, sales and marketing, product design and development, and business strategy formulation, as well as the ability to identify, hire, train, and retain suitable, skilled, and qualified employees. In particular, Mr. Wai Yiu Yau, our founder, chief executive officer, and chairman of the board, has accumulated over 16 years of experience respectively in the logistics industry. See “Item 6. Directors, Senior Management and Employees.” In particular, Mr. Yau has made significant contribution to our success and has an indispensable value in guiding our future development. There is no assurance that we will be able to continue to retain the services of any or all of our management team and key personnel. If any of these personnel is unable or unwilling to continue to serve in his or her present position, and we are unable to find a suitable replacement in a timely manner, at acceptable cost or at all, the loss of their services may cause disruption to our business and may have an adverse impact on our ability to manage or operate our business effectively. The results of our operations may be adversely affected as a result. Our business operation is generally manual in nature, and any deterioration of labor relations may adversely affect our operational stability and efficiency. We cannot give any assurance that favorable labor relations can be maintained. Any industrial action or strike by our labor force beyond our control may also cause temporary or prolonged disruption to our business operation.

 

 

The logistics industry in which we operate is highly fragmented and competitive, and there can be no assurance that we can compete successfully for customers in the future.

 

There are a number of players in the logistics industry, ranging from air freight carriers, freight forwarders, and other integrated logistics companies. We face intense competition from other players in the logistics industry, with pricing, route networks, and service offerings being the key differentiators. Furthermore, the logistics industry and freight forwarding business is highly fragmented and competitive due to the presence of numerous small to medium-sized players. Also, major air freight carriers have established their own subsidiaries to provide freight forwarding and logistics services, which increase the level of competition. Our customer base and market share may be negatively impacted by the intense competition, and we may not be able to compete effectively with our competitors if we cannot maintain or gain sufficient market presence or differentiate ourselves from them. For instance, our competitors may form alliances with international transportation or logistics service providers, enabling them to leverage extensive distribution networks, resources, and technologies that may not be available to us.

 

As a result, we may not be able to compete successfully with our existing or potential competitors. If we fail to source cargo space from our suppliers at a favorable price, we may have to adopt a more competitive pricing strategy by lowering our profit margin to maintain our customer base and market share. We may also have to adjust our profit margin and adopt a more competitive pricing strategy in order to maintain our position in the market. However, there can be no assurance that we can compete successfully over other industry platers for customers in the future. If we are unable to maintain our customer base, our business could be adversely affected.

 

Uncertainties relating to the growth and profitability of the e-commerce industry could adversely affect our revenues and business prospects.

 

As an e-commerce logistics services provider, we are dependent on customers operating e-commerce platforms or e-commerce merchants. The long-term viability and prospects of various e-commerce business models remain relatively untested. The future results of operations of the e-commerce platforms will depend on numerous factors affecting the development of the e-commerce industry, which may be beyond our control, such as (i) the trust and confidence level of e-commerce consumers, as well as changes in customer demographics and consumer tastes and preferences; (ii) the selection, price, and popularity of products, as well as promotions that the e-commerce platforms offer online; (iii) whether alternative retail channels or business models better address the needs of consumers; and (iv) the development of fulfillment, payment, and other ancillary services associated with online purchases. A decline in the popularity of e-commerce may adversely affect the business prospects of our customers, and ultimately, our revenue and business prospects may be adversely affected.

 

 

We may be unable to successfully implement our future business plans and objectives.

 

Our future business plans may be hindered by factors beyond our control, such as competition within the industry we operate; our ability to cope with high exposure to financial risk, operational risk, market risk, and credit risk as our business and customer base expands; and our ability to provide, maintain, and improve the level of human and other resources in servicing our customers. As such, we cannot assure that our future business plans will materialize, that our objectives will be accomplished fully or partially, or that our business strategies will generate the intended benefits to us as initially contemplated. If we fail to implement our business development strategies successfully, our business performance could be materially and adversely affected.

 

We may in the future pursue acquisitions and joint ventures as part of our growth strategy. Any future acquisition or joint venture may result in exposure to potential liabilities of the acquired companies and significant transaction costs, and it may also present new risks associated with entering additional markets or offering new products or services and integrating the acquired companies or newly established joint ventures. Moreover, we may not have sufficient management, financial, and other resources to integrate companies we acquire or to successfully operate joint ventures, and we may be unable to profitably operate our expanded company structure. Additionally, any new business that we may acquire or joint ventures we may form, once integrated with our existing operations, may not produce expected or intended results.

 

As we lease a number of properties for our business operations, we are exposed to risks in relation to unpredictable and increasing rental and relocation costs.

 

Our office and warehousing facilities are presently located on leased premises. At the end of each lease term, we may not be able to negotiate an extension of the lease and may therefore be forced to move to a different location, or the rent we pay may increase significantly. In the event that our rental expenses for our office located in Tsuen Wan increase, our operating expenses will increase and also affect our operating cash flows and, in turn, materially and adversely affect our business, results of operations, and prospects.

 

 

Furthermore, the leases for the office and warehousing facilities we use could be challenged by third parties or government authorities, which may cause interruptions to our business operations. We cannot assure you that our use of such leased properties will not be challenged. In the event that our use of leased properties is successfully challenged, we may be subject to fines and forced to relocate the affected operations. We can provide no assurance that we will be able to find suitable replacement sites at desirable locations on terms acceptable to accommodate our future growth on a timely basis or at all or that we will not be subject to material liability resulting from third parties’ challenges on our use of such properties.

 

We are exposed to credit risks of our customers.

 

We are exposed to credit risks of our customers. We do not have access to all the information necessary to form a comprehensive view on creditworthiness. The complete financial and operational conditions of customers are not always available to us, and we may not be in any position to obtain such information. As a result, if any of our major customers experience any financial difficulty and fail to settle the outstanding amounts due to us in accordance with the agreed credit terms, our working capital position may be adversely affected.

 

Globavend HK may be exposed to claims by third parties for infringement of intellectual property rights.

 

Some of the services rendered by Globavend HK are subject to intellectual property protection. In the event of disputes over the use of any intellectual property in our services, there is a risk that claims may be made against Globavend HK for intellectual property infringement. In addition, any protracted litigation will result in substantial costs and the diversion of resources and management’s attention.

 

We may be subject to litigation, arbitration, or other legal proceeding risk.

 

We may be subject to arbitration claims and lawsuits in the ordinary course of our business. As of the date of this annual report, the Company, Globavend BVI, and Globavend HK are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition, or operations. Actions brought against us may result in settlements, awards, injunctions, fines, penalties, and other results adverse to us. A substantial judgment, settlement, fine, or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant reputational harm, which could harm our business prospects.

 

 

In addition, even if we prevail in any litigation or enforcement proceedings against us, we could incur significant legal expenses defending against the claims, even those without merit. Moreover, because even claims without merit can damage our reputation or raise concerns among our clients, we may feel compelled to settle claims at significant cost.

 

Increasing labor costs and labor shortages in our industry may affect our business, financial condition, and results of operations.

 

As of September 30, 2023, Globavend HK had seven employees. As at the date of this annual report, we have eight employees. We intend to hire additional staff in Hong Kong and Australia to facilitate our expansion plans.

 

The economy in Hong Kong, Australia and globally has experienced general increases in inflation and labor costs in recent years. As a result, average wages in Hong Kong and certain other regions (such as Australia) are expected to continue to increase. In addition, we are required by Hong Kong laws and regulations to pay various statutory employee benefits, including a mandatory provident fund to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to fines and other penalties.

 

Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits, and employee headcount. We and our service providers compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive salaries and benefits compared to them.

 

Since we operate in a labor-intensive industry, we may face a shortage of labor in the future or experience increasing labor costs. If we fail to recruit sufficient staff or retain our existing employees at an acceptable cost, we may not be able to shift the extra costs to our customers due to their bargaining power or the competitive pricing model adopted by our competitors. Therefore, the increase in labor costs and labor shortage may adversely impact our business, expansion plans, financial condition, and results of operations.

 

To mitigate the inflationary pressure and the risk of increasing labor costs, we have taken measures including (i) minimizing unnecessary and non-value-added costs in our operations, such as cost of excess packaging and sealing materials; and (ii) strengthening our price bargaining power by providing more competitive salaries and benefits to our employees and shifting excess costs to our customers by raising our charges. We would also continue to enhance our information technology infrastructure and develop intelligent delivery and collection solutions to lower labor involvements and, thus, reduce labor costs.

 

 

Natural disasters, acts of war, and other catastrophic events may adversely affect our operations.

 

Natural disasters, acts of God, wars, epidemics, material interruptions in service, or stoppages in transportation, as well as other events that are beyond our control, can have adverse effects on local economies, infrastructures, airports, port facilities, and international trade. Such events can also result in the closure of ports or airports and disruptions to cargo flows. Major earthquakes, weather events, cyberattacks, heightened security measures (actual or threatened), terrorist attacks, strikes, civil unrest, pandemic, or other catastrophic events may also cause a disruption or failure of our systems or operations thereby causing delays in providing services or performing other critical functions. In such an event, our business, financial condition, and results of operations may be adversely affected.

 

A sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results, and financial condition.

 

Since late December 2019, the outbreak of COVID-19 spread rapidly throughout China and later to the rest of the world. On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a PHEIC, and later, on March 11, 2020, a global pandemic. The COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. From 2020 to the middle of 2021, a COVID-19 vaccination program had been greatly promoted around the globe; however, several types of COVID-19 variants emerged in different parts of the world.

 

Supply-chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. These shortages and supply-chain disruptions are significant and widespread. Mainland China began to modify its zero-COVID-19 policy at the end of 2022, and most of the travel restrictions and quarantine requirements were lifted in December. Companies that are reliant on the transportation of goods and materials, such as us, which principally engaged in the logistics and freight forwarding business, may suffer from logistical disruptions across the extended supply network.

 

Furthermore, our business may be adversely affected if concerns relating to COVID-19 continue to restrict travel or result in the Company’s personnel, vendors, and services providers being unavailable to pursue their business objectives free of COVID-19-related restrictions. The extent to which COVID-19 impacts our business in the future will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, our ability to pursue our business objectives may be materially adversely affected. In addition, our ability to raise equity and debt financing, which may be adversely impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity, and third-party financing, may become unavailable on terms acceptable to us or at all.

 

 

Any future impact on our results of operations will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the spread or treat its impact, almost all of which are beyond our control. Given the general slowdown in economic conditions globally and the volatility in the capital markets, as well as the general negative impact of the COVID-19 outbreak on the logistics and freight forwarding industry, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected. We will continue to closely monitor the situation throughout 2024 and beyond.

 

Risks Related to Doing Business in Hong Kong

 

All of our operations are in Hong Kong, a special administrative region of the PRC. Due to the long-arm provisions under the current PRC laws and regulations, the Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Ordinary Shares. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in Hong Kong or China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. The Chinese government may intervene or impose restrictions on our ability to move money out of Hong Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations, rules, and the enforcement of laws of the Chinese government may also be quick with little advance notice, and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system cannot be certain.

 

Globavend Holdings is a holding company, and we conduct all our operations in Hong Kong through our operating subsidiary Globavend HK. Hong Kong is a special administrative region of the PRC. Due to certain long-arm provisions in the current PRC laws and regulations, there remains regulatory uncertainty with respect to the implementation and interpretation of laws in China as they may affect Hong Kong. The PRC government may choose to exercise additional oversight and discretion over Hong Kong, and the policies, regulations, rules, and the enforcement of laws of the PRC government to which we are subject may change rapidly and with little advance notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system are by their very nature uncertain.

 

 

In addition, these PRC laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, which may result in inconsistency with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance, any associated inquiries or investigations, or any other government actions may:

 

	●	Delay or impede our development;
	●	Result in negative publicity or increase our operating costs;
	●	Require significant management time and attention; and
	●	Subject us to remedies, administrative penalties, and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices.

 

We are aware that the PRC government recently 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. Since these statements and regulatory actions are new, it is highly uncertain how soon the PRC legislative or administrative regulation-making bodies will respond or what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, or what the potential impact that any such modified or new laws and regulations would have on our daily business operations and the ability to accept foreign investments and list on a U.S. or other foreign exchange.

 

All of the legal and operational risks associated with operating in the PRC also apply to our operations in Hong Kong. The PRC government may intervene or influence our operations at any time and may exert more control over offerings conducted overseas and foreign investment in Hong Kong-based issuers, which may result in a material change in our operations and/or the value of our Ordinary Shares. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in Hong Kong or China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

 

 

For example, there is currently no restriction or limitation under the laws of Hong Kong on the conversion of HK dollar into foreign currencies and the transfer of currencies out of Hong Kong and the laws and regulations of the PRC on currency conversion control do not currently have any material impact on the transfer of cash between the ultimate holding company and our Operating Subsidiary in Hong Kong. However, the PRC government may, in the future, impose restrictions or limitations on our ability to move money out of Hong Kong to distribute earnings and pay dividends to and from the other entities within our organization or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our ability to receive funds from our Operating Subsidiary in Hong Kong. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact our ability to conduct our business could require us to change certain aspects of our business to ensure compliance; 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. To the extent 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.

 

The Hong Kong legal system embodies uncertainties that could limit the legal protections available to you and us.

 

All of our operations are conducted in Hong Kong. Hong Kong is a special administration region of the PRC. On July 1, 1997, the PRC assumed sovereignty of Hong Kong under the “one country, two systems” principle which ensures that Hong Kong has its own governmental and legal system that is independent from mainland China and, as a result, has its own distinct rules and regulations. The constitutional document of Hong Kong, the Basic Law, provides that Hong Kong enjoys the freedom to function with a high degree of autonomy for its affairs, including currencies, immigration and customs operations, and its independent judiciary system and parliamentary system. The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law are maintained. Hong Kong continues using the English common law system. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition.

 

In contrast, the PRC legal system is a civil law system based on written statutes unlike the common law system applicable in Hong Kong; prior court decisions may be cited for reference but have limited precedential value. Since 1979, the PRC government has promulgated laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation, and trade. However, China has not developed a fully integrated legal system. As a result, recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new and due to the limited volume of published cases and their non-binding nature, interpretation and enforcement of these newer laws and regulations involve greater uncertainties than those in jurisdictions available to you. In addition, the PRC’s legal system is based in part on government policies and administrative rules and many have retroactive effects. As a result, we cannot predict the effect of future developments in China’s legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.

 

 

Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.

 

Some international observers and human rights organizations have expressed doubts about the future of the relative political freedoms enjoyed in Hong Kong and the PRC’s pledge to allow a high degree of autonomy in Hong Kong. They considered, for example, that the proposals in Article 23 of the Basic Law in 2003 (which was withdrawn due to mass opposition) might have undermined autonomy. On June 10, 2014, Beijing released a new report asserting its authority over the territory. This ignited criticism from many people in Hong Kong, who were of view that the PRC leadership was reneging on its pledge to abide by the “one country, two systems” policy that allows for a democratic, autonomous Hong Kong under Beijing’s rule. On July 14, 2020, the United States signed an executive order to end the special status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed may be compromised, it could potentially impact Hong Kong’s common law legal system and ma, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operations. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers.

 

If the PRC were to, in fact, renege on its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong’s common law legal system and may, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to you.

 

 

Uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations, which could change at any time with little advance notice, could limit the legal protections available to us.

 

The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations, and rules, which could change at any time with little advance notice, are not always uniform, and enforcement of these laws, regulations, and rules involves uncertainties.

 

We may have to resort to administrative and court proceedings to enforce our legal rights from time to time. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based partly on government policies and internal rules (some of which are not published in a timely manner or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property), and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.

 

It may be difficult for overseas regulators to conduct investigations or collect evidence within the territory of China, including Hong Kong.

 

Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the 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 cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of mutual and practicable cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within mainland China. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.

 

 

In the event that U.S. regulators carry out an investigation on us and there is a need to conduct such investigation, or collect evidence in mainland China, U.S. regulators may not be able to carry out such investigation or evidence collection directly in mainland China under the PRC laws. U.S. regulators may, in the future, consider cross-border cooperation with a securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels, or a regulatory cooperation mechanism established with the securities regulatory authority of the PRC.

 

Our principal business operations are conducted in Hong Kong. Hong Kong has a legal system separate from mainland China. Our Hong Kong counsel advised that the Securities and Futures Commission of Hong Kong (“SFC”) is a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding (“MMOU”), which provides for mutual investigatory and other assistance and exchange of information between securities regulators around the world, including the SEC. This is also reflected in section 186 of the Securities and Futures Ordinance (“SFO”), which empowers the SFC to exercise its investigatory powers to obtain information and documents requested by non-Hong Kong regulators, and section 378 of the SFO, which allows the SFC to share confidential information and documents in its possession with such regulators. However, there is no assurance that such cooperation will materialize or, if it does, whether it will adequately address any efforts to investigate or collect evidence to the extent that may be sought by U.S. regulators.

 

Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like us with Hong Kong-based operations, all of which could increase our compliance costs and subject us to additional disclosure requirements.

 

Currently, Hong Kong has a separate legal system from mainland China, and it has its legislative framework and judiciary independent of that of the PRC government. Nonetheless, the recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital-raising activities in the United States. In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of limiting our service offerings, restricting the scope of our operations in Hong Kong, or causing the suspension or termination of our business operations in Hong Kong entirely. We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost efficient, or liability-free manner or at all.

 

 

On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with PRC-based operating companies (including Hong Kong) before their registration statements will be declared effective. On August 1, 2021, the CSRC issued a statement saying that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of such companies and the recent regulatory development in China and that both countries should strengthen communications on regulating China-related issuers. Since we mainly operate in Hong Kong, we cannot guarantee that we will not be subject to tightened regulatory review, and we could be exposed to government interference from China.

 

We may become subject to a variety of PRC laws and other obligations regarding data security offerings that are conducted overseas and/or foreign investment in China-based issuers.

 

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 it stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and a 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 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 August 20, 2021, the 30^th meeting of the Standing Committee of the 13^th National People’s Congress voted and passed the “Personal Information Protection Law of the People’s Republic of China” (“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 mainland 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 Draft Overseas Listing Regulations. The Draft Overseas Listing Regulations require that a PRC domestic enterprise seeking to issue and list its shares overseas (“Overseas Issuance and Listing”) shall complete the filing procedures 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 PRC seeks to issue and list its shares in the name of an overseas enterprise 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 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 replaced the former Measures for Cybersecurity Review (2020) issued on July 10, 2021. 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, and any 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.

 

 

On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, as approved by the State Council, released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies and five interpretive guidelines (collectively, the “CSRC Filing Rules”), which came into effect on March 31, 2023. Under the CSRC Filing Rules, a filing-based regulatory system shall be applied to “indirect overseas offerings and listings” of PRC domestic companies, which refers to securities offerings and listings in an overseas market made under the name of an offshore entity but based on the underlying equity, assets, earnings, or other similar rights of a domestic company that operates its main business domestically. The CSRC Filing Rules state that any post-listing follow-on offering by an issuer in the same overseas market, including issuance of shares, convertible notes, and other similar securities, shall be subject to filing requirement within three business days after the completion of the offering. We believe that we are not subject to the CSRC Filing Rules because we are incorporated in the Cayman Islands and our subsidiaries are incorporated in Hong Kong, the British Virgin Islands, and other regions outside of mainland China and operate in Hong Kong without any subsidiary or VIE structure in mainland China, and we do not have any business operations or maintain any office or personnel in mainland China. However, as the CSRC Filing Rules and the supporting guidelines are newly published, there exists uncertainty with respect to the implementation and interpretation of the principle of “substance over form.” If our offering and listing is later deemed as “indirect overseas offering and listing by companies in mainland China” under the CSRC Filing Rules, we may need to complete the filing procedures for our offering and listing. If we are subject to the filing requirements, we cannot assure you that we will be able to complete such filings in a timely manner or even at all. As of the date of this annual report, our registered public offering in the United States is not subject to the review or prior approval of the CAC nor the CSRC. However, since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation-making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of Globavend HK, their respective abilities to accept foreign investments, and the listing of our Ordinary Shares on U.S. or other foreign exchanges. There remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations and whether the PRC government will adopt additional requirements or extend the existing requirements to apply to our operating subsidiary Globavend HK, located in Hong Kong. If the CSRC Filing Rules become applicable to Globavend HK, or if the Measures for Cybersecurity Review (2021) or the PRC Personal Information Protection Law become applicable to Globavend HK, the business operations of Globavend HK 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 Globavend HK becomes subject to the CAC or CSRC review, we cannot assure you that Globavend HK 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, Globavend HK may become subject to fines and other penalties that may have a material adverse effect on our business, operations, and financial condition; may hinder our ability to offer or continue to offer Ordinary Shares to investors; and may cause the value of our Ordinary Shares to significantly decline or be worthless.

 

Although the audit report included in this annual report is prepared by U.S. auditors who are currently inspectable by the PCAOB, there is no guarantee that future audit reports will be issued by auditors inspectable by the PCAOB, and, as such, in the future, investors may be deprived of the benefits of the PCAOB inspection program. 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, may determine to delist our securities. Furthermore, on December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, 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 and, thus, reduced the time before our Ordinary Shares 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, ZH CPA, LLC 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. ZH CPA, LLC is currently inspectable by the PCAOB, and we have no operations in mainland China. However, if there is significant change to current political arrangements between mainland China and Hong Kong, companies operated in Hong Kong like us may face similar regulatory risks as those operated in mainland China, and we cannot assure you that our current auditor’s work will continue to be able to be inspected by the PCAOB.

 

 

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 that, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges, such as the Nasdaq, of issuers included on the SEC’s list for three consecutive years, thus reducing the time period for triggering the prohibition on trading. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB, or other federal agencies and departments with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year (as defined in the interim final rules) under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above. Under the HFCA Act, our securities may be prohibited from trading on the 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. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On September 22, 2021, the PCAOB adopted a final rule implementing the AHFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations under the Holding Foreign Companies Accountable Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the AHFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the SEC announced that the PCAOB designated mainland China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated under the HFCA Act. On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the PRC MOF in respect to cooperation on the oversight of PCAOB-registered public accounting firms based in mainland China and Hong Kong. Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September 2022 and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. As a result of the announcement, any companies audited by registered public accounting firms headquartered in mainland China and Hong Kong would not face immediate threat of trading prohibitions at this time. However, if any regulatory change or step taken by PRC regulators in the future precludes the PCAOB from accessing auditing papers of registered public accounting firms in mainland China and Hong Kong, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, then the companies audited by those registered public accounting firms may be subject to a trading prohibition on U.S. markets pursuant to the HFCA Act. On December 29, 2022, the Consolidated Appropriations Act, 2023 (the “CAA”) was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.

 

 

Our current auditor is based in the United States and has been inspected by the PCAOB on a regular basis. However, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our current auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in our securities to be prohibited under the HFCA Act and ultimately result in a determination by a securities exchange to delist our securities. 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, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance. The SEC is assessing how to implement other requirements of the AHFCAA, including the listing and trading prohibition requirements described above. Future developments in respect to 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.

 

The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our offering, business operations, share price, and reputation.

 

U.S. public companies with 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 that 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 HFCA Act 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 HFCA Act.

 

 

On May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirements for companies primarily operating in a “Restrictive Market,” (ii) prohibit Restrictive Market companies from directly listing on the 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 a result of this scrutiny, criticism, and negative publicity, the 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 offerings, business, and our 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 developing 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 shares.

 

The enactment of Law of the PRC on Safeguarding the Hong Kong National Security Law could impact Globavend HK.

 

On June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law (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, former U.S. President Donald Trump signed the Hong Kong Autonomy Act (“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 11 individuals, including then-HKSAR chief executive Carrie Lam and John Lee, who later replaced Carrie Lam as chief executive on July 1, 2022. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong.

 

 

The PRC government may intervene or influence our operations at any time or may exert more control over offerings conducted overseas and foreign investment in PRC-based issuers, which may result in a material change in our operations and/or the value of our Ordinary Shares. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

 

If we 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 matter, which could harm our business operations and our reputation and could result in a loss of your investment in our Ordinary Shares, in particular if such matter cannot be addressed and resolved favorably.

 

During the last several years, U.S.-listed 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. As a result of the scrutiny, the stocks of many U.S.-listed Chinese companies that have been the subject of such scrutiny have 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.

 

If we 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 and likely would distract our management from our normal business and could result in our reputation being harmed. Our stock price could decline because of such allegations, even if the allegations are false.

 

 

A downturn in the Hong Kong, mainland China, or global economy, or a change in the economic and political policies of China, could materially and adversely affect our business and financial condition.

 

Our business may be influenced to a significant degree by political, economic, and social conditions in Hong Kong and mainland 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 PRC 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 they may have a negative effect on us.

 

Economic conditions in Hong Kong and mainland China are sensitive to global economic conditions. Although we mainly operate our business in Hong Kong, our customers principally comprise businesses that operate e-commerce platforms in Hong Kong. As such, the demand for e-commerce logistics, air freight forwarding, and related logistics services may be dependent on the global economy. If there is any significant decline in the global economy, our profitability and business prospects will be materially affected. Rising tension between the U.S. and China may an adverse effect on global economic conditions. On August 9, 2023, an executive order was issued by President Biden to direct the Department of Treasury to issue regulations to restrict outbound investment in key technology sectors by U.S. persons to China, with a view to bolster U.S. national security and to curtail investment in sectors that may advance China’s military, intelligence, surveillance or cyber-enabled capabilities. Major market disruptions and adverse changes in market conditions and uncertainty in the regulatory climate worldwide may adversely affect our business and industry or impair our ability to borrow or make any future financial arrangements. The credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. The conflict is expected to have further global economic consequences, including, but not limited to, the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates, and uncertainty about economic and political stability. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but they could be substantial, even though we do not have any direct exposure to Russia or the adjoining geographic regions. 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 the business outlook of our business.

 

 

Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our Ordinary Shares.

 

Our business is conducted in Hong Kong through our operating subsidiary Globavend HK; our books and records are reported in Hong Kong dollars, which is the currency of Hong Kong; and the financial statements that we file with the SEC and provide to our shareholders are presented in U.S. dollars.

 

Since 1983, Hong Kong dollars have been pegged to U.S. dollars at the rate of approximately HK$7.80 to US$1.00. Changes in the exchange rate between the Hong Kong dollar and U.S. dollar affect the value of our assets and the results of our operations in U.S. dollars. The value of the Hong Kong dollar against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in Hong Kong’s political and economic conditions and perceived changes in the economy of Hong Kong and the United States. Any significant revaluation of the Hong Kong dollar may materially and adversely affect our cash flows, revenue, and financial condition.

 

We cannot assure you that the current policy of the pegging of Hong Kong dollars to U.S. dollars will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase. This would, in turn, adversely affect the operations and profitability of our business.

 

Changes in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in Hong Kong, where the majority of our customers reside.

 

Political events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and they could have a material adverse effect on us and our customers, our service providers, and our other partners. International trade disputes could result in tariffs and other protectionist measures that may materially and adversely affect our business.

 

Tariffs could increase the cost of the services and products, which could affect customers’ investment decisions. In addition, political uncertainty surrounding international trade disputes and the potential of their escalation to a trade war and global recession could have a negative effect on customer confidence, which could materially and adversely affect our business. We also may have access to fewer business opportunities, and our operations may be negatively impacted as a result. In addition, the current and future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results of operations, as well as the financial condition of our clients, and we cannot provide any assurances as to whether such actions will occur or the form that they may take.

 

 

The future of Hong Kong’s position as a major air cargo hub in Asia is uncertain.

 

Our operations are solely located in Hong Kong, which serves as a critical hub for air cargo transportation in Asia. The high demand for cargo space on outbound routes from Hong Kong to other destinations is a significant advantage to our business. However, there can be no assurance that Hong Kong will continue to maintain its position as a transportation hub in the future. Hong Kong faces strong competition from other rival air cargo hubs. Shanghai shares the same cargo catchment area in the Pearl River Delta region, while Singapore shares the same positioning as a regional hub for intra-Asia trade and as a logistics center. In the event that Hong Kong loses its position as a transportation hub in Asia, the demand for freight forwarding services and ancillary logistics services and the overall business activities of the industries and, thus, our business may be adversely affected.

 

Risks Related to Our Ordinary Shares

 

If an active trading market does not develop, you may not be able to resell our Ordinary Shares at any reasonable price.

 

An active trading market may not develop or, if developed, may not be sustained for the trading of our Ordinary Shares. The lack of an active market may impair your ability to sell your Ordinary Shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling Ordinary Shares and may impair our ability to acquire other companies by using our Ordinary Shares as consideration.

 

The trading price of our Ordinary Shares could be subject to rapid and substantial volatility.

 

There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-up, may be unrelated 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 Ordinary Shares.

 

 

The trading prices of volatility and wide fluctuations could be due to factors beyond our control. This may happen due to broad market and industry factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed companies based in Hong Kong and China. For example, if the trading volumes of our Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Ordinary Shares. This low volume of trades could also cause the price of our Ordinary Shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low-volume trading. The trading performances of other Hong Kong and Chinese companies’ securities after their offerings may affect the attitudes of investors toward Hong Kong-based, U.S.-listed companies, which consequently may affect the trading performance of our Ordinary Shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure, or matters of other Hong Kong and Chinese companies may also negatively affect the attitudes of investors toward Hong Kong and Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are unrelated to our operating performance, which may have a material and adverse effect on the trading price of our Ordinary Shares.

 

In addition to the above factors, the price and trading volume of our Ordinary Shares may be highly volatile due to multiple factors, including the following:

 

	●	Regulatory developments affecting us or our industry;
	●	Variations in our revenues, profit, and cash flow;
	●	Changes in the economic performance or market valuations of other financial services firms;
	●	Actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;
	●	Changes in financial estimates by securities research analysts;
	●	Detrimental negative publicity about us, our services, our officers, our directors, our Controlling Shareholder, our business partners, or our industry;
	●	Announcements by us or our competitors of new service offerings, acquisitions, strategic relationships, joint ventures, capital raisings, or capital commitments;
	●	Additions to or departures of our senior management;
	●	Litigation or regulatory proceedings involving us, our officers, our directors, or our Controlling Shareholder;
	●	Release or expiry of lock-up or other transfer restrictions on our outstanding Ordinary Shares;
	●	Sales or perceived potential sales of additional Ordinary Shares.

 

 

Any of these factors may result in large and sudden changes in the volume and price at which our Ordinary Shares will trade. As a result of this volatility, investors may experience losses on their investment in our Ordinary Shares. A decline in the market price of our Ordinary Shares also could adversely affect our ability to issue additional shares of Ordinary Shares and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Ordinary Shares will develop or be sustained. If an active market does not develop, holders of our Ordinary Shares may be unable to readily sell the shares they hold or may not be able to sell their shares at all. 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.

 

Our management team lacks experience in managing a U.S. public company and complying with laws applicable to such company.

 

Our current management team lacks experience in managing a U.S. publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to U.S. public companies. Prior to the completion of our initial public offering in November 2023, we were a private company mainly operating our businesses in Hong Kong. As a result of our initial public offering, our company will become subject to significant regulatory oversight and reporting obligations under the federal securities laws and the scrutiny of securities analysts and investors, and our management currently has no experience in complying with such laws, regulations, and obligations. Our management team may not successfully or efficiently manage our transition to becoming a U.S. public company. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business.

 

We will incur increased costs as a result of being a public company.

 

Once we become a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company prior to our initial public offering. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and Nasdaq, have required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting, and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we incur ongoing additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

 

 

We rely on dividends and other distributions on equity paid by our subsidiary to fund any cash and financing requirements we may have. In the future, funds may not be available to fund operations or for other uses outside of Hong Kong, due to interventions in, or the imposition of restrictions and limitations on, our ability or our subsidiary by the PRC government to transfer cash. Any limitation on the ability of our subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business and might materially decrease the value of Ordinary Shares or cause them to be worthless.

 

Globavend Holdings is a holding company, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and to service any debt we may incur. We do not expect to pay cash dividends in the foreseeable future. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

 

According to the BVI Business Companies Act (as amended), a BVI company may make dividends distribution to the extent that immediately after the distribution, the value of the company’s assets exceeds its liabilities and that such company is able to pay its debts as they fall due. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect to dividends paid by us. The PRC laws and regulations do not currently have any material impact on transfers of cash from Globavend Holdings to Globavend HK or from Globavend HK to Globavend Holdings, our shareholders, and U.S. investors. However, the PRC government may, in the future, impose restrictions or limitations on our ability to transfer money out of Hong Kong, to distribute earnings and pay dividends to and from the other entities within our organization, or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our ability to receive funds from our operating subsidiary in Hong Kong. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact the ability or way we conduct our business, could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our services; reduce revenues; increase costs; require us to obtain more licenses, permits, approvals, or certificates; or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition, and results of operations could be adversely affected, and such measures could materially decrease the value of our Ordinary Shares, potentially rendering them worthless. Further, any limitation on the ability of our subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

 

 

Any lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud, which may affect the market for and price of our Ordinary Shares.

 

We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. 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, our reporting obligations as a public company may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting or an audit of our internal control over financial reporting. In the course of management’s preparation and our independent registered public accounting firm’s auditing our consolidated financial statements for the year ended September 30, 2023, we have identified certain material weakness in our internal control over financial reporting. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

The material weakness identified relates to the lack of sufficient competent financial reporting and accounting personnel with appropriate understanding of U.S. GAAP and SEC rules and regulations to address complex technical accounting issues and SEC reporting requirements. To remedy the identified material weaknesses, we have implemented and will continue to implement several measures to improve our internal control over financial reporting, including: (i) recruiting additional employees and external consultants with extensive knowledge of U.S. GAAP and SEC financial reporting requirements within our finance and accounting department; (ii) setting up a comprehensive accounting policy, checklists, and procedure manual in accordance with U.S. GAAP and SEC financial reporting requirements; (iii) implementing new closing and reporting procedures to ensure the accuracy and adequacy of financial data for the preparation of financial statements; (iv) conducting regular and continuous U.S. GAAP training programs and webinars for our financial reporting and accounting personnel; (v) improving financial oversight function for handling complex accounting issues under U.S. GAAP; and (vi) continuously developing and enhancing our internal audit function for the financial reporting matters. However, we cannot assure you that these measures may fully address the material weakness in our internal control over financial reporting or that we may not identify additional material weaknesses or significant deficiencies in the future.

 

 

Section 404 of the Sarbanes-Oxley Act, or Section 404, will require us to include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending September 30, 2024. In addition, once 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. 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 an adverse report if it is not satisfied with our internal control or the level at which our control is documented, designed, operated, or reviewed, or if it interprets relevant requirements differently from us.

 

In addition, our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

 

If we fail to meet applicable listing requirements, Nasdaq may delist our Ordinary Shares from trading, in which case the liquidity and market price of our Ordinary Shares could decline.

 

Assuming our Ordinary Shares are listed on Nasdaq, we cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. If we fail to comply with the applicable listing standards and Nasdaq delists our Ordinary Shares, we and our shareholders could face significant material adverse consequences, including:

 

	●	A limited availability of market quotations for our Ordinary Shares;
	●	Reduced liquidity for our Ordinary Shares;
	●	A determination that our Ordinary Shares are “penny stock,” which would require brokers trading in our Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares;
	●	A limited amount of news about us and analyst coverage of us; and
	●	A decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.

 

 

The U.S. National Securities Markets Improvement Act of 1996 prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our Ordinary Shares will be listed on Nasdaq, such securities will be covered securities. Although the states are preempted from regulating the sale of our securities, this statute does allow the states to investigate companies if there is a suspicion of fraud and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulations in each state in which we offer our securities.

 

Because the amount, timing, and whether or not we distribute dividends at all is entirely at the discretion of our board of directors, you must rely on price appreciation of our Ordinary Shares for return on your investment.

 

Our board of directors has complete discretion as to whether to distribute dividends under our Memorandum and Articles. The declaration and payment of 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. 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; and our financial condition, contractual restrictions, and other factors deemed relevant 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. We cannot assure you that our Ordinary Shares will appreciate in value or even maintain the price at which you purchased the Ordinary Shares. You may not realize a return on your investment in our Ordinary Shares, and you may even lose your entire investment in our Ordinary Shares.

 

 

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

 

We are subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

 

Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our Ordinary Share price or trading volume to decline.

 

If a trading market for our shares develops, the trading market will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a new public company, we may be slow to attract research coverage, and the analysts who publish information about our Ordinary Shares will have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our share price, our share price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which, in turn, could cause our share price or trading volume to decline and result in the loss of all or a part of your investment in us.

 

 

You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing original actions in the Cayman Islands or Hong Kong based on U.S. or other foreign laws, and the ability of U.S. authorities to bring actions in the Cayman Islands or Hong Kong may also be limited.

 

We are a company incorporated under the laws of the Cayman Islands. We conduct substantially all our operations in Hong Kong and substantially all of our assets are located in Hong Kong. In addition, a majority of our directors and executive officers and the experts named in this annual report reside outside the United States, and most of their assets are located outside the United States. As a result, it may be difficult or impossible for you to effect service of process within the United States upon us or these individuals or to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, Hong Kong, or other relevant jurisdictions may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

 

Our counsel as to the laws of the Cayman Islands has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

 

Our counsel as to the laws of the Cayman Islands has also informed us that the courts of the Cayman Islands would recognize as a valid judgment a final and conclusive judgment in personam obtained in the foreign courts against our Company under which a sum of money is payable (other than a sum of money payable in respect to multiple damages, taxes, or other charges of a like nature or in respect to a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment, (ii) such courts did not contravene the rules of natural justice of the Cayman Islands, (iii) such judgment was not obtained by fraud, (iv) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands, (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands, and (vi) there is due compliance with the correct procedures under the laws of the Cayman Islands.

 

Our counsel as to the laws of Hong Kong has advised us that there is uncertainty as to whether the courts of Hong Kong would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. A judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty), and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained by fraud, (b) the proceedings in which the judgment was obtained were opposed to natural justice, (c) its enforcement or recognition would be contrary to the public policy of Hong Kong, (d) the court of the United States was not jurisdictionally competent, and (e) the judgment was in conflict with a prior Hong Kong judgment. Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States.

 

 

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. Our corporate affairs are governed by the provisions of our Memorandum and Articles of Association and by the provisions of the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, 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 the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands.

 

The rights of shareholders and the fiduciary duties of our directors and officers under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

 

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 our Company’s Articles. 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 members, 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 motion 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, differ significantly from requirements for companies incorporated in other jurisdictions, such as the United States. To the extent we choose to follow home country practices with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

 

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors, or our Controlling Shareholder than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders.

 

Cayman Islands economic substance requirements may have an effect on our business and operations.

 

Pursuant to the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands (“ES Act”) that came into force on January 1, 2019, a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is the Company; however, it does not include an entity that is tax resident outside the Cayman Islands. Accordingly, currently, for so long as the Company is a tax resident outside the Cayman Islands, including in Hong Kong, it is not required to satisfy the economic substance test set out in the ES Act. As it is a new regime, it is anticipated that the ES Act will continue to evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and we may have to make changes to our operations in order to comply with all requirements under the ES Act.

 

 

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and, as such, we are exempt from certain provisions applicable to U.S. domestic public companies.

 

Because we qualify as 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:

 

	●	The rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
	●	The sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect to a security registered under the Exchange Act;
	●	The sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
	●	The selective disclosure rules by issuers of material non-public information under Regulation FD.

 

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. 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 were you investing in a U.S. domestic issuer.

 

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.

 

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate governance listing standards. Currently, we do not intend to rely on home country practices with respect to our corporate governance. However, if we choose to follow home country practices in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

 

 

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

 

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. We would lose our foreign private issuer status if, for example, more than 50% of our Ordinary Shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq rules. As a U.S.-listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting, and other expenses that we will not incur as a foreign private issuer in order to maintain a listing on a U.S. securities exchange.

 

There can be no assurance that we will not be a PFIC for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our Ordinary Shares.

 

A non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income, or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). Based on our current and expected income and assets, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service (“IRS”) will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our Ordinary Shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our Ordinary Shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in our initial public offering in November 2023. If we were to be or become a PFIC for any taxable year during which a U.S. holder holds our Ordinary Shares, certain adverse U.S. federal income tax consequences could apply to such U.S. holder.

 

 

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

 

As a company with less than US$1.235 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. Therefore, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result, if we elect not to comply with such reporting and other requirements, in particular the 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. We do not plan to opt out of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective data.

 

In addition to our status as an emerging growth company, we also report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) 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 from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specific information, or current reports on Form 8-K, upon the occurrence of specified significant events.

 

Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, as long as we remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.

 

 

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

 

Upon consummation of our initial public offering in November 2023, we have incurred significant legal, accounting, and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering in November 2023, (b) in which we have total annual gross revenue of at least US$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds US$700 million as of the end of any second fiscal quarter before that time; and (2) the date on which we have issued more than US$1 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.

 

Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” or until five years following the completion of our IPO, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of Sarbanes-Oxley and the other rules and regulations of the SEC. For example, as a public company, we will be required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We will incur additional costs in obtaining director and officer liability insurance. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

 

As a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt our Company from certain corporate governance requirements, which could have an adverse effect on our public shareholders.

 

As of the date of this annual report, our directors, officers, and principal shareholders hold in aggregate 11,444,790 of our Ordinary Shares, representing approximately 78.25% of the total voting power. We are therefore a “controlled company” as defined under the Nasdaq Stock Market Rules.

 

 

Under Rule 4350(c) of Nasdaq Capital Market Rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that a majority of our directors be independent, as defined in the Nasdaq Capital Market Rules, and the requirement that our compensation and nominating and corporate governance committees consist entirely of independent directors. Although we do not intend to rely on the “controlled company” exemption under the Nasdaq Listing Rules, we could elect to rely on this exemption in the future. If we elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Accordingly, during any time while we remain a controlled company relying on the exemption and during any transition period following a time when we are no longer a controlled company, you would not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq Capital Market corporate governance requirements. Our status as a controlled company could cause our Ordinary Shares to be less attractive to certain investors or otherwise harm our trading price.

 

In addition, the interests of these shareholders may not be the same as or may even conflict with your interests. For example, these shareholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could deprive our shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of us or our assets and might affect the prevailing market price of our Ordinary Shares due to investors’ perceptions that conflicts of interest may exist or arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.

 

ITEM 4. INFORMATION ON THE COMPANY

 

A.	History and Development of the Company

 

We commenced operation in June 2016 with the establishment of Globavend HK, a company incorporated under the laws of Hong Kong on June 27, 2016 Immediately before the reorganization in contemplation of our initial public offering, Globavend HK was wholly-owned by Mr. Wai Yiu Yau, our Controlling Shareholder.

 

On May 22, 2023, our ultimate holding company, Globavend Holdings was incorporated under the laws of the Cayman Islands as an exempted company with limited liability, with an authorized share capital of US$50,000 divided into 50,000,000 ordinary shares, par value US$0.001, with 13,125,000 Ordinary Shares issued and allotted to Globavend Investments Limited (“Globavend Investments”), a company incorporated under the laws of the BVI, and wholly-owned by our Controlling Shareholder.

 

 

On May 24, 2023, Globavend Associates Limited (“Globavend BVI”) was incorporated under the laws of the British Virgin Islands. Globavend BVI is a wholly owned subsidiary of the Company, which was incorporated for the purposes of acting as intermediary holding companies of the Company’s operating entity, Globavend HK.

 

On May 29, 2023, as part of the reorganization in contemplation of our initial public offering, we completed a share swap transaction, pursuant to which Globavend BVI acquired all the issued shares of Globavend HK from our Controlling Shareholder in consideration of Globavend BVI allotting and issuing another one ordinary share to Globavend Holdings. Following such share swap, Globavend HK became the Company’s indirectly owned subsidiary through Globavend BVI.

 

In November 2023, we completed our initial public offering and listed our Ordinary Shares on the Nasdaq Capital Market under the symbol “GVH.” We raised approximately US$3.0 million in net proceeds from the issuance of new shares from the initial public offering after deducting underwriting discounts, commissions and expenses.

 

Our principal office is located at Office 1401, Level 14, 197 St Georges Tce, Perth, WA 6000, Australia. Our telephone number is (+61) 08 6141 3263. Our registered office in the Cayman Islands is located at the office of Ogier Global (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands.

 

Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42^nd Street, 18^th Floor New York, NY 10168.

 

SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website http://www.globavend.com/. The information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this annual report.

 

 

B.	Business Overview

 

Our Mission

 

We are an emerging e-commerce logistics provider providing end-to-end logistics solution in Hong Kong, Australia, and New Zealand. Our mission is to combine our experience, knowledge, and network with flexibility and agility to provide a one-stop logistics solution to customers and enterprises.

 

Overview

 

We are a holding company incorporated in the Cayman Islands with operations conducted by our operating subsidiary in Hong Kong, Globavend HK. Since June 2023, we have established our principal executive office in Perth, Australia.

 

Founded in 2016, we are emerging e-commerce logistics provider providing end-to-end logistics solution in Hong Kong, Australia, and New Zealand. Our business spans Hong Kong and four cities in Australia and in New Zealand through our own business presence and the presence of our service providers. Our customers are primarily enterprise customers, being e-commerce merchants or operators of e-commerce platforms, providing business-to-consumer (B2C) transactions.

 

As an e-commerce logistics provider, we provide integrated cross-border logistics services from Hong Kong to Australia and New Zealand, where we provide customers with a one-stop solution, from parcel consolidation to air freight forwarding, customs clearance, on-carriage parcel transportation, and delivery. We rely on our own proprietary all-in-one shipping solution, which has been or can be connected to the customer’s own IT systems (such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, booking management systems, or point-of-sale (POS) systems) on one end and the transportation management systems (TMS) of our ground transportation service providers on the other end, to facilitate effective logistics management.

 

Other than integrated cross-border logistics services, we also provide fragmented logistics services, which typically include freight forwarding services, to customers and enterprises at their own choice.

 

Our Services and Business Model

 

As an e-commerce logistics provider, we formulate and implement integrated, end-to-end, cross-border logistics solutions for our customers with the provision of air freight forwarding services and related logistics services as our principal business.

 

Our business model principally involves the provision of (i) integrated cross-border logistics services, which include air freight forwarding services offered as an integral part thereof; and (ii) air freight forwarding services, offered as a modularized logistics service segmented from our integrated cross-border logistics services.

 

 

Our logistics network covers Hong Kong and four cities in Australia, namely Sydney, Melbourne, Brisbane, and Perth, as well as New Zealand.

 

The chart below shows the coverage of our logistics network.

 

 

 

Integrated Cross-Border Logistics Services

 

Our integrated cross-border logistics services is our dominant business segment, which involve order processing, parcel consolidation, cross-border transportation (primarily by way of air freight), and air freight forwarding, followed by ground transportation and delivery at destination cities, together with other value-added services. While traditional logistics services providers typically provide fragmented logistics services and require customers to coordinate with various service providers, we, as an integrated cross-border logistics services provider, carry out the coordination with different players in the logistics value chain, including warehousing, customs clearance, and air freight or ground transportation services. This has effectively reduced the lead time and hassle and greatly improved the efficiency in fulfilling service orders.

 

As an integral part of our integrated cross-border logistic services, we have also developed our own proprietary all-in-one shipping solution, which was modified by us internally on a shipping software purchased by us in 2019. Our proprietary all-in-one shipping solution has been or can be connected to the internal sales or booking systems of customers, as well as the carrier management systems of the ground transportation carriers, to facilitate effective logistics management, the details of which are explained. Our services are provided primarily on a contract logistics basis, under which we provide our enterprise customers with customized integrated logistics services covering the entire delivery process. Our services start by enterprise customers making booking instructions in their own internal sales or booking systems, which integrate into our own proprietary all-in-one shipping solution. Upon receipt of booking instructions, our services start and cover from order origination to the final point of sale or delivery without further efforts or coordination from customers. This service is a customized one so as to fit a customer’s own business model, representing a seamless combination of order processing, parcel consolidation, transportation, and delivery.

 

For customers engaging our services with agreed price quotations, we can provide one-off or on-demand integrated cross-border logistics services. Alternatively, customers can also request for our logistics services on a modularized or one-off basis, i.e., they can request for any segment of our logistics services within the integrated cross-border logistics solution on a stand-alone basis.

 

As part of our integrated cross-border logistics services, we also provide related logistics services, which include the provision of supporting transportation for freight forwarding purpose, storage of consignment, labelling of consignments, other related logistic services for freight forwarding purpose, freight management services via our proprietary all-in-one shipping solution, and delivery at destination.

 

We engage (i) air freight carriers for the provision of cargo spaces, (ii) supporting ground transportation companies for the ground transportation services in Australia and New Zealand, (iii) customs clearance companies in Australia and New Zealand for the preparation of freight documentation and arrangement for customs clearance, and (iv) local delivery service providers for dispatching and distributing our customers’ goods to their designated destination in Australia and New Zealand.

 

 

Our integrated cross-border logistics services, together with our proprietary all-in-one shipping solution, enable us to provide efficient and customer-oriented services. This has resulted in our customers continuously engaging us for one-stop air freight forwarding services and comprehensive logistic services, allowing us to gradually build our customer base.

 

Air Freight Forwarding Services

 

In additional to our integrated cross-border logistics services, we also offer air freight forwarding services to customers as segregated and modularized logistics services to utilize the cargo spaces we have and widen our revenue stream.

 

Business Operation Flow

 

Set out below is a flow chart summarizing the usual workflow of our integrated cross-border logistics services business.

 

Booking Instructions		Parcel Drop-Off at Our Warehouse		Parcel Consolidation and Export Customs Clearance at Warehouse
Business Customers		Business Customers		Internal Staff
On-Carriage to Final Destination		Import Customs Clearance and Parcel Deconsolidation at Warehouse		Air Freight Forwarding
Ground Transportation Service Providers		Customs Clearance Companies		Air Freight Carriers
Destination
Customers

 

Customers

 

Our customers mainly consist of direct customers, who primarily are businesses that operate e-commerce platforms or e-commerce merchants in Hong Kong.

 

For the years ended September 30, 2021, 2022 and 2023, our five largest customers accounted for approximately 79.7%, 67.0%, and 69.6% of our revenue, respectively.

 

 

We do not enter into long-term agreements with our customers, which is in line with industry practice. For customers using our integrated cross-border logistics services, we will provide our rate lists setting out our charges from time to time. As such, it is not necessary for us to provide any quotations to customers prior to the acceptance of booking instructions. For customers using our air freight forwarding on a segmented basis, we will provide our quotation to the customers prior to or when a booking instruction is made with us.

 

We generally do not have any specific agreement with our customers on liability for damage of goods during transit, but we maintain insurance policies to cover such losses.

 

Suppliers

 

Our suppliers include (i) air freight carriers for the provision of cargo spaces, (ii) cargo screening service providers in Hong Kong, (iii) customs clearance companies in both Australia and New Zealand for the preparation of freight documentation and arrangement for customs clearance, and (iv) local delivery service providers for dispatching and distributing our customers’ goods to their designated destinations in Australia and New Zealand.

 

For the year ended September 30, 2023, four major suppliers accounted for approximately 33.1%, 23.1%, 13.4% and 10.9% of the total cost of revenue, respectively. For the year ended September 30, 2022, four major suppliers accounted for approximately 26.2%, 14.7%, 14.6%, and 13.1% of the total cost of revenue, respectively. For the year ended September 30, 2021, three major suppliers accounted for approximately 51.2%, 21.1% and 12.8% of the total cost of revenue, respectively.

 

For the years ended September 30, 2021, 2022 and 2023, we transacted with 9, 10 and 5 air freight suppliers, respectively, comprising air freight carriers and freight forwarders, for the provision of cargo spaces, as well as over 36, 55 and 43 suppliers, respectively, for transport and local delivery-related services.

 

In particular, we procure cargo spaces directly from air freight carriers under different arrangements, including (i) direct booking, and (ii) block space arrangements. We are an IATA-accredited cargo agent and entitled to make direct bookings with air freight carriers without any third-party agent. We generally procure cargo spaces through the block space agreements we entered into with air freight carriers for a period of time at pre-agreed costs, and we occasionally procure additional cargo spaces from air freight carriers through direct bookings.

 

As part of the services we provide, we also arrange third-party service providers to provide the necessary supporting and ancillary logistics services, such as customs clearance companies for customs clearance in Australia and New Zealand, cargo screening service providers to carry out the necessary aviation security measures, and local delivery service providers in destination cities to carry out the last-mile delivery. Ground transportation companies will also be engaged if customers request for parcel pick-up.

 

 

We purchase cargo space from our suppliers either through (i) direct booking from air freight carriers, or (ii) block space arrangements.

 

(i)	Direct booking

 

We purchase air cargo spaces through direct booking with air freight carriers or other freight forwarders on a demand basis, without entering into any fixed-term agreements. For the years ended September 30, 2021, 2022 and 2023, the value of direct bookings for cargo spaces made with air freight carriers and other freight forwarders amounted to approximately US$5.3 million, US$12.3 million and US$7.1 million, respectively.

 

For direct bookings with air freight carriers, we negotiate with air freight carriers for a fair price to secure the required cargo space for the consignment. This involves determining the necessary type of aircraft, the volume of cargo space required, and the destination. With our established relationships with various air freight carriers, we are able to secure satisfactory rates for our consignments.

 

Furthermore, we will co-load with other freight forwarders to secure air cargo spaces. This arrangement allows multiple freight forwarders to share a single air cargo space and split transportation costs. To ensure a cost-effective arrangement is attained, we consider various factors, such as price terms, schedule of flights, availability of cargo spaces, and the destination, when booking directly with other freight forwarders.

 

To maintain our status as an IATA-accredited cargo agent so as to entitle us to make direct bookings with air freight carriers. As of September 30, 2021, 2022 and 2023, we maintain bank guarantee of $5,128, $232,051 and nil, respectively, with IATA.

 

(ii)	Block Space Arrangements

 

We have established a block space agreement with an air freight carrier to secure a committed amount of air cargo spaces for a predetermined period, typically one year, at pre-agreed costs. The agreement is terminable by either party upon 60-days’ notice without any penalty. We are fully committed to obtaining the agreed volume of air cargo space as specified under the block space agreements. Such block space agreements typically contain clauses requiring us to make payments to air freight carriers for the agreed volume of cargo spaces, irrespective of whether the air cargo spaces have been fully utilized, except when the volume of air cargo spaces available for use on the particular aircraft is less than the agreed volume of cargo space.

 

 

During the years ended September 30, 2021, 2022 and 2023, we paid an aggregate cost of approximately US$986,858, US$1,340,658 and US$1,219,343, respectively, under our block space agreements.

 

The following sets forth the salient terms of the block space agreement we enter into with an air freight carrier for procurement of cargo spaces:

 

Parties:		(1) Qantas Airways Limited and (2) Globavend HK
Term:		Typically one year.
Committed volume of cargo space and rates		Generally an agreed level of cargo space (in terms of space allocation) for each week for certain flight schedules at predetermined prices.
Termination		Either party to the block space agreement may terminate the block space agreement by giving 60 days’ notice in writing to the other party.   Either Party may immediately terminate the block space agreement by giving notice if:   (a) the other party breaches any provision of the block space agreement and fails to rectify the breach within 30 days of receiving written notice requiring it to do so; or   (b) the other party breaches a material provision of the block space agreement and the breach is not capable of bring remedies.
Credit term		Generally within 14 days after the issuance of the invoice.

 

Information Technology Infrastructure

 

As an essential part of our integrated cross-border logistics services, we have developed our own proprietary all-in-one shipping solution, which was modified by us internally on a shipping software purchased by us in 2019. Our proprietary all-in-one shipping solution has been or can be connected to the customer’s own IT systems (such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, booking management systems, or point-of-sale (POS) systems) on one end and the transportation management systems (TMS) of our ground transportation service providers on the other end, to facilitate effective logistics management.

 

 

Our all-in-one shipping solution performs two major functions: (i) a booking management function (BMS), and (ii) a transportation management function. The booking management function allows a high degree of customization and can be integrated into the customer’s own IT systems (such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, booking management systems, or point-of-sale (POS) systems) by way of an Application Programming Interface (API). The booking management function enables booking instructions to be given, whether automatically by retrieving information from customers’ own IT systems or manually by users inputting the relevant booking management information.

 

The booking instruction typically includes the name of the consignee, the delivery address, the product type of the parcel, and its declared weight.

 

Our all-in-one shipping solution system is connected to the transportation management systems (TMS) of two of our major local delivery service providers. For delivery service provider A, an unique prefix identifying our company and a range of tracking numbers will be allocated to us from time to time. Once a booking instruction has been received, our system will generate an unique tracking number to the parcel, comprising of the unique prefix and an unique tracking number selected from the pre-assigned range of tracking numbers. Customers can then generate a thermal label from our all-in-one shipping solution and adhere it to the parcel. For delivery service provider B, once a booking instruction has been received, our all-in-one shipping solution system will give such instruction to the transportation management systems (TMS) through the application programming interface (API). An instant response, being an unique tracking number generated by its transportation management systems (TMS), will be given to our system. Customers can then generate a thermal label from our system and adhere it to the parcel. Our all-in-one shipping solution is also connected to the broker’s portal of our customs clearance companies through the application programming interface (API) opened to us. As such, the shipping instructions will be transmitted to our customs clearance companies through its broker’s portal for customs clearance and onward processing.

 

Our all-one-one shipping solution is also connected to cross-carrier shipping tracking platforms such that shippers and customers can monitor the status of their parcels in real time.

 

As our all-in-one shipping solution operates automatically it significantly reduces shipment errors and enhances logistics efficiency.

 

In addition, our all-in-one shipping solution will also generate a shipping label for each and every package with an unique tracking number imprinted on it. Enterprise customers can handily print out the thermal labels so generated and adhere it to packages.

 

 

Our all-in-one shipping solution can be integrated into customer’s IT systems, typically by way of application programming interface (API), with minimal costs. This also saves significant investment costs on part of the enterprise customers in developing their own shipment management systems.

 

The reliability of our all-in-one shipping solution as an e-commerce logistics provider has been recognized internationally. We are one of the carriers recognized by AfterShip, an established post-purchase platform providing cross-platform and cross-carrier e-commerce shipping tracking services, where shipments made with us can be tracked on the AfterShip tracking system.

 

With the integration of our all-in-one shipping solution into the customer’s own IT systems, we have been able to build a loyal customer base.

 

For the years ended September 30, 2021, 2022 and 2023, we did not experience any failure in our all-in-one shipping solution that caused material disruptions to our operations. We are, however, susceptible to risks relating to failure of our information technology system. For details regarding such risks, refer to “Item 3. Key Information—D. Risk Factors — Risks Related to Our Business and Industry —Our business is dependent on information technology” and “Item 3. Key Information—D. Risk Factors — Risks Related to Our Business and Industry —Our business is subject to cybersecurity risks. A cyberattack may disrupt our operations and compromise the personal data of our customers.”

 

Sales and Marketing

 

We have been able to maintain a stable and harmonious business relationship with our existing customers, who are mainly e-commerce merchants, or businesses operating e-commerce platforms in Hong Kong. As a one-stop service provider, we offer door-to-door international delivery services in one package, which eliminates the need for our customers to coordinate with multiple service providers. Our directors are capable of providing relevant market information and advice on our capability to offer international logistics solutions. Our directors believe that our track record of providing efficient ways of delivering and handling our customers’ goods has helped us to build a loyal customer base. Our proprietary all-in-one shipping solution, which has been or can be incorporated into customers own IT systems, also helps us to create a close bond with our customers. We believe that customer loyalty is essential to our success, and we strive to provide high-quality services to maintain our customers’ loyalty. Through our high-quality and efficient services and commitment to our customers, we have been able to maintain a close relationship with our them, who, in turn, make referrals for our freight forwarding and related logistics services.

 

 

In addition to serving our existing customers, we also conduct outreach to potential customers who have no prior business relationship with us, as we seek to diversify and expand our customer base. Through our sales and marketing efforts, we target to diversify and expand our customer base, thereby boosting sales performance and fostering a more diversified customer network. We believe that our experience in serving e-commerce businesses, combined with our commitment to customer satisfaction, positions us for long-term success in the e-commerce logistics industry.

 

Pricing Strategy

 

Our directors are responsible for determining the price for our integrated cross-border logistics services and freight forwarding services. We adopt a cost-plus approach for our pricing for both lines of businesses. We take into account the following factors in determining the fees we charge our customers:

 

	(i)	Type and value of consignment;
	(ii)	Freight rates charged by our competitors;
	(iii)	Future business opportunities;
	(iv)	Reputation of the customer;
	(v)	Costs of services, including freight charge, fuel charge, security charge, and charges of our service providers;
	(vi)	Level of acceptance of the current market rates for similar services; and
	(vii)	Weight of consignment and volume of cargo space required.

 

Competition

 

We operate in the logistics and freight forwarding industry, which involves the provision of services such as freight transport, freight forwarding, warehouse management, and distribution. The market we operate in is highly fragmented and can be segmented based on major industry groups, such as air cargo forwarding services, freight transportation, courier activities, warehousing and storage, and other logistics services. We understand that the core value of logistics solutions providers lies in their ability to move freight from the point of origin to the point of consumption within a stipulated time at the most competitive price. The key success factors in the industry include maintaining reputation, developing a strong and extensive network, having strong capital support, and possessing operational experience and management capability.

 

We face keen competition from numerous competitors operating on different scales in Hong Kong. Management believes that we compete favorably with our competitors through our competitive strengths, such as well-established partnerships with customers and our service suppliers, our all-in-one shipping solution system, and a strong capability to provide integrated logistics solutions.

 

 

Seasonality

 

For the years ended September 30, 2021, 2022 and 2023, there were no specific and obvious seasonality that affected the demand for our services. With regard to the global impact of the COVID-19 pandemic, our directors are of view that it indicates no positive correlation between the COVID-19 pandemic and our business. Instead, it is widely understood that demand for certain products are influenced by a number of factors, such as weather patterns, national holidays, economic conditions, major product launches, brand promotions, and many other market factors. Accordingly, comparison of sales and operating results from different periods in any given financial year may not be relied upon as indicators of our performances, since many of the market factors are unpredictable, and we provide no assurances that any market trends will continue. Due to these potential fluctuations, we place great importance on maintaining close contact with our customers to monitor trends and capture market needs effectively.

 

Insurance

 

We believe our insurance coverage is adequate to insure against the risks relating to our operations, given the size and nature of our business. Our insurance coverage includes, among others, work-related injury insurance for our employees and property all risks insurance for our office and warehousing facilities. Additionally, we also purchase increased costs of work insurance for business interruption, marine liability insurance, and money-in-transit insurance covering warehouses and parcels, as well as other liability insurance as needed. We review our insurance policies from time to time for adequacy in the breadth of coverage.

 

We are not liable for any damage or loss to our customers’ goods unless such damage or loss is caused by our negligence. Where we are liable for the damage or loss to our customers’ goods, claims against us from our customers are covered by the insurance policies we maintain as described above. Our business is, however, susceptible to risks arising from losses we sustain during the course of our business operations, and we cannot assure you that the insurance policies we have taken out are always able to cover all losses we sustain. In the case of an uninsured loss or a loss in excess of insured limits, including those caused by natural disasters and other events beyond our control, we may be required to pay for losses, damages, and liabilities out of our own funds. For details regarding such risks, refer to “Item 3. Key Information—D. Risk Factors — Risks Related to Our Business and Industry —Our insurance coverage may be inadequate to protect us from potential losses.”

 

 

 

Intellectual Property

 

As of the date of this annual report, we have registered one trademark in Hong Kong, which we consider to be material to our business:

 

Trademark		Place of registration		Trademark number		Owner		Class		Expiry date
		Hong Kong		306075667		Globavend HK		16, 35, 36, 38, 39, 42		October 5, 2032

 

Licenses and Regulatory Approvals

 

A summary of the laws and regulations applicable to our business and industry is set out in the section headed “Regulation” in this annual report. We have obtained all the necessary licenses, permits, and approvals that are material to our business during the years ended September 30, 2021, 2022 and 2023, with details set forth below:

 

License/Permit/Approval		Holding Entity		Issuing Authority		Date of Grant		Date of Expiry
Accredited Cargo Agent		Globavend HK		International Air Transport Association		September 18, 2022		—
Regulated Agents		Globavend HK		Civil Aviation Department, HKSAR		August 18, 2020		—

 

 

Regulations

 

Regulations Related to Our Business Operations in Hong Kong

 

Regulations Related to Our Freight Forwarding Business

 

Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong)

 

The Business Registration Ordinance requires every person carrying on any business to make an application to the Commissioner of Inland Revenue in the prescribed manner for the registration of that business. The Commissioner of Inland Revenue must register each business for which a business registration application is made and, as soon as practicable after the prescribed business registration fee and levy are paid, issue a business registration certificate or branch registration certificate for the relevant business or the relevant branch, as the case may be.

 

 

Aviation Security Ordinance (Chapter 494 of the Laws of Hong Kong)

 

The Aviation Security Ordinance is an ordinance that makes provision for the prevention and suppression of acts of violence against civil air transport and connected purposes, and constitute the comprehensive legislation for implementation of the conventions and agreements on aviation security promulgated by the International Civil Aviation Organization (the “ICAO”). To safeguard aircraft against acts of unlawful interference, the ICAO has laid own standards and recommend practice in Annex 17 to the Convention on International Civil Aviation (the “CICA”) on the security measures required to be implemented by contracting states. For the security of air cargo to be in line with Annex 17 to the CICA, the Hong Kong Aviation Security Programme, which is enforceable under the Aviation Security Ordinance, has incorporated the Regulated Agent Regime (the “RAR”) since March 2000. A cargo handling agent, a freight forwarder or a consignor of air cargo may apply for registration as a regulated agent (“RA”), who is required to comply with the requirements in respect of an RA in the Hong Kong Aviation Security Programme, in order to prevent the unauthorized carriage of explosives and incendiary devices in the consignments of cargo intended for carriage by air.

 

Under the RAR, an RA is obliged, among other obligations, to ensure that the appropriate security controls acceptable by the Civil Aviation Department (“CAD”) are properly implemented upon the acceptable of cargo for carriage by air unless the consignment of cargo is safeguarded against unauthorized interference after its reception and to make best endeavours to protect it from unauthorized interference until the consignment is accepted by another RA or an airline.

 

An RA shall also ensure that a consignment of cargo accepted from a known consignor or another RA is:

 

	(a)	accompanied by a full description of the contents in the shipping documents (e.g. airway bills, cargo manifests), that the RA’s registration code or the known consignor’s code on the shipping documents of the consignment is checked;
	(b)	checked against the description in the shipping documents in respect of the quantity of the cargo tendered and any sign of the package having been tampered with;
	(c)	declared as known cargo by checking the annotation of the tendering RA’s registration code or otherwise stated as unknown cargo on shipping documents in the inter-RA’s handling; and
	(d)	safeguarded from unauthorized interference after it has been received until accepted by the next RA or an airline, or until loaded on to an aircraft.

 

 

RAs shall also maintain an orderly documentation and record system. Documents such as airway bills, cargo manifests and relevant instructions from consignors should be kept for at least 31 days after the consignment is flown.

 

On September 1, 2016, the ICAO has introduced a new policy direction to progressively increase the required screening percentage of known cargoes consigned by existing consignors which have not been approved by the CAD, from 1% to 100% before the deadline imposed by ICAO (June 30, 2021). From June 2021 onwards, prior to the air cargo being loaded onboard, all registered agents will be required to screen 100% of their cargo tendered by consignors not approved by the CAD. In anticipation of an upsurge in screening demand, a regulated air cargo screening facilities scheme which enables and regulates air cargo screening at off-airport locations has been formulated. Any entity which intends to conduct air cargo security screening operations in their premises may apply for acceptance by the CAD to become a regulated air cargo screening facility (“RACSF”). Each RACSF must have at least two nominated persons for cargo security who have attended and completed the RACSF training program acceptable to the CAD. The relevant training certificates are valid for a period of three years, hence, the relevant RACSF should arrange for revalidation of the same by their expiry.

 

Dangerous Goods (Consignment by Air) (Safety) Ordinance (Chapter 384 of the Laws of Hong Kong)) and Dangerous Goods (Consignment by Air) (Safety) Regulations (Chapter 384A of the Laws of Hong Kong)

 

The Dangerous Goods (Consignment by Air) (Safety) Ordinance (“DGO”) is to control, in the interests of safety, the preparation, packing, marking, labelling and offering of dangerous goods for carriage by air. Under the DGO, dangerous goods (“Dangerous Goods”) is defined as any article or substance which is listed in the Technical Instructions for the Safe Transport of Dangerous Goods by Air (“Technical Instructions”) published by the ICAO and any article or substance not so listed by name but having properties corresponding to those of one of the general classifications of articles and substances in the Technical Instructions. When offering or handling Dangerous Goods for air carriage, consignors are required under the DGR to ensure all Dangerous Goods are properly classified, packed, marked, labelled and documented.

 

Any person who consigns Dangerous Goods in contravention of the Dangerous Goods (Consignment By Air) (Safety) Regulations (“DGR”) commits an offence and on conviction on indictment is liable to a fine of HK$250,000 and imprisonment for two years or on summary conviction to a fine of HK$50,000 and to imprisonment for one year. Furthermore, where a company commits an offence, every director and every officer concerned in the management of the company may be convicted of the like offence as specified under the DGO. Those Dangerous Goods and any packaging for Dangerous Goods may be forfeited.

 

 

Additionally, as required under the DGR, staff of a freight forwarder shall not perform the function of processing Dangerous Goods, processing cargo (not containing Dangerous Goods) or handling, loading and storage of cargo unless he/she has completed training programmes which fulfill the requirement under the DGR. Staff who process Dangerous Goods without completing the necessary training programmes commits an offence and the freight forwarder and such staff each commits an offence and is liable to a fine of HK$25,000 and to imprisonment for six months. Also, a freight forwarder commits an offence where it did not ensure its staff who process cargo (not containing Dangerous Goods) or handle, load and store cargo to complete the necessary training programmes and it is liable to a fine of HK$25,000 and to imprisonment for six months.

 

International Conventions - Carriage of Goods by Air

 

In relation to carriage of goods by air, the relevant international conventions are the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929 (the “Warsaw Convention”) and the Montreal Convention for the Unification of Certain Rules for International Carriage by Air 1999 (the “Montreal Convention”).

 

The Warsaw Convention

 

The Warsaw Convention was an international convention which regulates liability for international carriage of persons, luggage or goods performed by aircraft for reward. It was originally signed in 1929 in Warsaw and was amended in 1955 by the Hague Protocol (the “Amended Warsaw Convention”). Hong Kong still applies the Amended Warsaw Convention to international air carriages with countries that have adopted the Amended Warsaw Convention but not the Montreal Convention.

 

The Montreal Convention and the Carriage by Air Ordinance

 

The Montreal Convention was designed to establish worldwide uniformity in liability rules governing air carriage of person, baggage and cargo for compensation between two countries which are parties to it. Hong Kong ratified the Montreal Convention on 15 December 2006. The Montreal Convention was put into force in Hong Kong under the Carriage by Air Ordinance (Chapter 500 of the Laws of Hong Kong) (the “CAO”).

 

 

The provisions of the Montreal Convention, as set out in Schedule 1A of the CAO, so far as they relate to the rights and liabilities of carriers, carriers’ servants and agents, passengers, consignors, consignees and other persons, and subject to the CAO, have the force of law in relation to any carriage by air to which the Montreal Convention applies, irrespective of the nationality of the aircraft performing that carriage.

 

Article 18 of the Montreal Convention determines the extent of the carriers’ liability during carriage of cargoes. Article 18(1) states that the carrier is liable for damage sustained in the vent of the destruction or loss of, or damage to, cargo upon condition only that the event which caused the damage so sustained took place during the carriage by air. Article 18(2) provides the following four defences to the carrier:

 

	(a)	inherent defect, quality or vice of that cargo;
	(b)	defective packing of that cargo performed by a person other than the carrier or its servants or agents;
	(c)	an act of war or an armed conflict; and/or
	(d)	an act of public authority carried out in connection with the entry, exit or transit of the cargo.

 

Regulations Related to Employment and Labor Protection

 

Employment Ordinance (Chapter 57 of the Laws of Hong Kong)

 

The Employment Ordinance is an ordinance enacted for, among other things, the protection of the wages of employees and the regulation of the general conditions of employment and employment agencies. Under the Employment Ordinance, an employee is generally entitled to, among other things, notice of termination of his or her employment contract; payment in lieu of notice; maternity protection in the case of a pregnant employee; not less than one rest day in every period of seven days; severance payments or long service payments; sickness allowance; statutory holidays or alternative holidays; and paid annual leave of up to 14 days depending on the period of employment.

 

Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)

 

The Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), or the ECO, is an ordinance enacted for the purpose of providing for the payment of compensation to employees injured in the course of employment. As stipulated by the ECO, no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an amount not less than the applicable amount specified in the Fourth Schedule of the ECO in respect of the liability of the employer. According to the Fourth Schedule of the ECO, the insured amount shall be not less than HKD100,000,000 per event if a company has no more than 200 employees. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction to a fine and imprisonment. An employer who has taken out an insurance policy under the ECO is required to display a prescribed notice of insurance in a conspicuous place on each of its premises where any employee is employed.

 

 

Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong)

 

The Minimum Wage Ordinance provides for a prescribed minimum hourly wage rate (currently at HK$40 per hour) during the wage period for every employee engaged under a contract of employment under the Employment Ordinance.

 

Any provision of the employment contract that purports to extinguish or reduce the right, benefit, or protection conferred on the employee by the Minimum Wage Ordinance is void.

 

Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong)

 

The Mandatory Provident Fund Schemes Ordinance (“MPFSO”) is an ordinance enacted for the purposes of providing for the establishment of non-governmental mandatory provident fund schemes (each, a “MPF Scheme”). The MPFSO requires every employer of an employee of 18 years of age or above but under 65 years of age to take all practical steps to ensure the employee becomes a member of a registered MPF Scheme. Subject to the minimum and maximum relevant income levels, it is mandatory for both employers and their employees to contribute 5% of the employee’s relevant income to the MPF Scheme. Any employer who contravenes this requirement commits a criminal offense and is liable on conviction to a fine and imprisonment. As of the date of this annual report, the Company believes it has made all contributions required under the MPFSO.

 

Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong)

 

The Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong) regulates the obligations of a person occupying or having control of premises on injury resulting to persons or damage caused to goods or other property lawfully on the land. The Occupiers Liability Ordinance imposes a common duty of care on an occupier of premises to take such care as in all the circumstances of the case is reasonable to see that the visitors will be reasonably safe in using the premises for the purposes for which he is invited or permitted by the occupier to be there.

 

 

Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong)

 

The Occupational Safety and Health Ordinance provides for protection to employees with respect to their safety and health in workplaces. It applies not only to industrial workplaces but also non-industrial.

 

Under the Occupational Safety and Health Ordinance, every employer must, as far as reasonably practicable, ensure the safety and health at work for all employees by: (a) providing and maintaining plant and systems of work that are safe and without risks to health; (b) making arrangements for ensuring safety and absence of risks to health in connection with the use, handling, storage or transport of plant or substances; (c) providing such information, instruction, training and supervision as may be necessary to ensure the safety and health at work of the employees; (d) as regards any workplace under the employer’s control, (i) maintaining the workplace in a condition that is safe and without risks to health; and (ii) providing or maintaining means of access to and egress from the workplace that are safe and without any such risks; and (e) providing and maintaining a working environment for the employees that is safe and without risks to health. An employer who fails to comply with the above provisions commits an offence and is liable, on summary conviction, to a fine of HK$3,000,000 and on conviction on indictment, to a fine of HK$10,000,000. Further, an employer who intentionally, knowingly or recklessly fails to comply with these provisions commits an offence and is liable, on summary conviction, to a fine of HK$3,000,000 and to imprisonment for six months, and on conviction on indictment, to a fine of HK$10,000,000 and to imprisonment for two years.

 

The Commissioner for Labour may serve improvement notices on an employer or an occupier of the workplace against contravention of this ordinance or the Factories and Industrial Undertakings Ordinance (Cap 59 of the Laws of Hong Kong), or suspension notices against an activity or condition or use of workplace where there is an imminent risk of death or serious bodily injury. An employer or occupier who fails to comply with such improvement notices without reasonable excuse commits an offence and is liable on conviction to a fine of HK$400,000 and imprisonment of up to twelve months. An employer or occupier who fails to comply with such suspension notices without reasonable excuse commits an offence and is liable on conviction to a fine of HK$1,000,000, to imprisonment for twelve months, and to a further fine of HK$100,000 for each day or part of a day during which such employer or occupier knowingly and intentionally continues the contravention.

 

Factories and Industrial Undertakings Ordinance (Chapter 59 of the Laws of Hong Kong)

 

The Factories and Industrial Undertaking Ordinance (the “FIUO”) imposes general duties on proprietors of and persons employed at industrial undertakings, including without limitation to cargo and container handling undertakings, factories and other industrial workplaces, to ensure health and safety at work in such undertakings. Proprietor includes any person, body corporate, a firm, an occupier and the agent of such an occupier having the management or control of the business carried on in an industrial undertaking for the time being.

 

 

Section 6A(1) of the FIUO provides that “it shall be the duty of every proprietor of an industrial undertaking to ensure, so far as is reasonably practicable, the health and safety at work of all persons employed by him at the industrial undertaking.” Contravention of such duty is an offence and is liable to a fine of HK$3,000,000 on summary conviction, and HK$10,000,000 on conviction on indictment. A proprietor willfully contravene with the duty imposed by section 6A(1) without reasonable excuse commits an offence and is liable to a fine of HK$3,000,000 and to imprisonment for six months on summary conviction, and on conviction on indictment, to a fine of HK$10,000,000 and to imprisonment for two years.

 

There are 30 sets of subsidiary regulations under the FIUO, covering various aspects of hazardous work activities in various workplaces, containing detailed health and safety standards on work situations, plant and machinery, processes and substances.

 

Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations (Chapter 59J of the Laws of Hong Kong)

 

The Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations lay down the legal requirements for safe use, construction, testing and examination of lifting gear and lifting appliance used for lowering or raising or as a means of suspension in any industrial undertaking (the “Lifting Equipment”). Every employer providing lifting equipment for use at work, and every person having control of such use, should observe and ensure compliance with the regulation. In particular, the lifting equipment must be sufficiently strong, properly maintained, and thoroughly examined by a competent examiner at least once every twelve months and certified by the competence examiner in an approved form as being in a safe working order; the lifting equipment should not be loaded beyond the maximum safe working load; and that no load is left suspended from a lifting appliance unless a competent person is in charge of the lifting appliance during the period of suspension.

 

Depending on the offence, different levels of penalty are imposed for contraventions of these regulations. The penalties for committing an offence under the Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations range from a fine at HK$100,000 to HK$400,000, and imprisonment of up to twelve months.

 

 

Factories and Industrial Undertakings (Loadshifting Machinery) Regulations (Chapter 59AG of the Laws of Hong Kong)

 

These regulations regulate the use and operation of loadshifting machine. Loadshifting machine used in industrial undertaking as defined in the regulations includes fork-lift truck.

 

Regulations 3 and 4 impose duties on the responsible person to (i) ensure that the loadshifting machine shall be operated by a person aged 18 or above and holding a valid certificate applicable to the type of loadshifting machine that that person is instructed to operate, (ii) provide every employee instructed to operate the loadshifting machine a training course conducted for the relevant type of loadshifting machine, and (iii) if the employee fails to obtain a certificate following the training course, the employer is responsible to provide an additional training course. The meaning of responsible person, in these regulations and the context of industrial undertaking, is a person having the management or in charge of the machine, but excluding the person operating the machine.

 

A responsible person without reasonable excuse contravenes the duty imposed by Regulation 3 or 4 is liable to a fine of HK$100,000.

 

Regulations Related to Intellectual Property

 

Copyright Ordinance (Chapter 528 of the Laws of Hong Kong)

 

The Copyright Ordinance protects recognized categories of literary, dramatic, musical and artistic work, as well as sound recordings, films, broadcasts and cable programs, and typographical arrangement of published editions. Certain acts such as copying and/or issuing or making available copies to the public of a copyright work without the authorization from the copyright owner would constitute “primary infringement” of copyright which does not require knowledge of infringement.

 

In addition, a person may incur civil liability for “secondary infringement” under the Copyright Ordinance if that person possess, sells, lets for hire, distributes or deals with a copy of a work which is, and which he knows or has reason to believe to be, an infringing copy of the work for the purposes of or in the course of any trade or business without the consent of the copyright owner. However, the person will only be liable if, at the time he committed the act, he knew or had reason to believe that he was dealing with infringing copies.

 

Under section 118 of the Copyright Ordinance, a person commits a criminal offence if he, without the consent of the copyright owner of a copyright work, makes for sale or hire an infringing copy of the work or possess an infringing copy of the work with a view to its being, among others, sold or let for hire by any person for the purpose of or in the course of that trade or business.

 

 

Under section 119A of the Copyright Ordinance, there is a provision against copying service business which imposes criminal liability when a person, for the purpose of or in the course of a copying service business, possess a reprographic copy of a copyright work as published in a book, magazine or periodical, being a copy that is an infringing copy of the copyright work. It is a defense for the person charged to prove that he did not know and had no reason to believe that the copy of a copyright work in question was an infringing copy of the copyright law.

 

Trade Marks Ordinance (Chapter 559 of the Laws of Hong Kong)

 

The Trade Marks Ordinance provides for the registration, use and protection of trademarks. Under section 18 of the Trade Marks Ordinance, it is provided that a person infringes a registered trademark if the person uses in the course of trade or business a sign which is:

 

	(a)	identical to the trademark in relation to goods or services which are identical to those for which it is registered;
	(b)	identical to the trademark in relation to goods or services which are similar to those for which it is registered; and the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public;
	(c)	similar to the trademark in relation to goods or services which are identical or similar to those for which it is registered; and the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public; or
	(d)	identical or similar mark in relation to goods or services which are not identical or similar to those for which the trademark is registered; the trademark is entitled to protection under the Paris Convention as a well-known trademark; and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of a trademark.

 

A person shall be treated as a party to any use of the material which infringes the registered trademark if he:

 

	(a)	applies or causes to be applied a registered trademark or a sign similar to a registered trademark to material which is intended to be used for labelling or packaging goods; as a business paper; or for advertising goods or services; and
	(b)	at the time the trademark or sign was applied to the material, he knew or had reason to believe that its application to the material was not authorized by the owner of the registered trademark or by a licensee.

 

 

Trademarks registered in other countries or regions are not automatically entitled to protection in Hong Kong unless they are also registered under the Trade Marks Ordinance. Nevertheless, trademarks which are not registered under the Trade Marks Ordinance may still obtain protection by the common law action of passing off, which requires proof of the owner’s reputation in the unregistered trademark and that use of the trademark by third parties will cause damages to the owner.

 

Regulations Related to Import and Export of Goods

 

Import and Export Ordinance (Chapter 60 of the Laws of Hong Kong)

 

The Import and Export Ordinance provides for the regulation and control of the import of articles into Hong Kong, the export of articles from Hong Kong, the handling and carriage of articles within Hong Kong which have been imported into Hong Kong or which may be export from Hong Kong, and any matter incidental to or connected with the foregoing.

 

The import and export of certain articles are prohibited unless with the relevant licenses under sections 6C and 6D which are issued under section 3 of the Import and Export Ordinance. Pursuant to section 6C of the Import and Export Ordinance, no person shall import any article specified in Schedule 1 to the Import and Export (General) Regulations (Cap 60A of the Laws of Hong Kong) except under and in accordance with an import license issued by the Director-General of Trade and Industry under section 3 of the Import and Export Ordinance. Section 6D of the Import and Export Ordinance provides that no person shall export any article specified in the second column of Schedule 2 to the Import and Export (General) Regulations to the place specified opposite thereto in the third column of the schedule except under and in accordance with an export license issued by the Director-General of Trade and Industry under section 3 of the Import and Export Ordinance.

 

Any person who contravenes section 6C or 6D of the Import and Export Ordinance in respect of any article specified in Part 1 of Schedule 1 or Part 1 of Schedule 2 to the Import and Export (General) Regulations (Chapter 60A of the Laws of Hong Kong) shall be liable on conviction to a fine of HK$500,000 and to imprisonment to two years. Any person who contravenes section 6C or 6D of the Import and Export Ordinance in respect of any article specified in Part 2 of Schedule 1 or Part 2 of Schedule to the Import and Export (General) Regulations (Chapter 60A of the Laws of Hong Kong) shall be liable to a fine of $500,000 and to imprisonment for two years on summary conviction, or a fine of $2,000,000 and to imprisonment for seven years on conviction on indictment.

 

 

Import and Export (Registration) Regulations (Chapter 60E of the Laws of Hong Kong)

 

Regulation 3 of the Import and Export (Registration) Regulations (“Import and Export Regulations”) sets out exemptions in respect of regulations 4 and 5.

 

Pursuant to regulation 4 of the Import and Export Regulations, every person, including company, who imports any article other than an exempted article shall lodge with the Commissioner of Customs and Excise an accurate and complete import declaration relating to such article using services provided by a specified body, in accordance with the requirements that the Commissioner of Customs and Excise may specify. Every declaration required to be lodged shall be lodged within 14 days after the importation of the article to which it relates.

 

Regulation 5 of the Import and Export Regulations requires that every person who exports or re-exports any article other than an exempted article shall lodge with the Commissioner of Customs and Excise an accurate and complete export declaration relating to such article using services provided by a specified body, in accordance with the requirements that the Commissioner of Customs and Excise may specify. Every declaration required to be lodged shall be lodged within 14 days after the exportation of the article to which it relates.

 

Any person fails or neglects to do such declaration as required under regulations 4 and 5 of the Import and Export Regulations within 14 days after the importation or exportation (as the case may be) of the article to which it relates without any reasonable excuse, or, where he or she has such excuse, fails or neglects to lodge such declaration in such manner as soon as is practicable after the cessation of such excuse, shall be liable to (1) a fine of HK$2,000 upon summary conviction; and (2) commencing from the date of conviction, a fine of HK$100 in respect of everyday during which his failure or neglect to lodge such declaration in that manners continues. Further, any person who knowingly or recklessly lodges any declaration with the Commissioner of Customs and Excise that is inaccurate in any material particular shall be liable on summary conviction to a fine of HK$10,000. Any person who, in contravention to the provisions of regulations 4 and 5 of the Import and Export Regulations knowingly or recklessly lodges any declaration with the Commissioner of Customs and Excise that is inaccurate in any material particular shall be liable on summary conviction to a fine of HK$10,000.

 

 

Regulations and Notices Related to Hong Kong Taxation

 

Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)

 

Under the Inland Revenue Ordinance, where an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than three months after the date of commencement of such employment. Where an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than one month before such individual ceases to be employed in Hong Kong.

 

Tax on dividends

 

Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect to dividends paid by the Company.

 

Capital gains and profit tax

 

No tax is imposed in Hong Kong in respect to capital gains from the sale of shares. However, trading gains from the sale of shares by persons carrying on a trade, profession, or business in Hong Kong, where such gains are derived from or arise in Hong Kong, will be subject to Hong Kong profits tax, which is imposed at the rates of 8.25% on assessable profits up to HKD2,000,000 and 16.5% on any part of assessable profits over HKD2,000,000 on corporations from the year of assessment commencing on or after April 1, 2018. Certain categories of taxpayers (for example, financial institutions, insurance companies, and securities dealers) are likely to be regarded as deriving trading gains rather than capital gains unless these taxpayers can prove that the investment securities are held for long-term investment purposes.

 

Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong)

 

Under the Stamp Duty Ordinance, the Hong Kong stamp duty currently charged at the ad valorem rate of 0.13% on the higher of the consideration for or the market value of the shares will be payable by the purchaser on every purchase and by the seller on every sale of Hong Kong shares (in other words, a total of 0.26% is currently payable on a typical sale and purchase transaction of Hong Kong shares). In addition, a fixed duty of HKD5 is currently payable on any instrument of transfer of Hong Kong shares. Where one of the parties is a resident outside Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If no stamp duty is paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.

 

 

Regulations Related to Personal Data

 

Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong)

 

The Personal Data (Privacy) Ordinance (“PDPO”) imposes a statutory duty on data users to comply with the requirements of the six data protection principles (the “Data Protection Principles”) contained in Schedule 1 to the PDPO. The PDPO provides that a data user shall not do an act, or engage in a practice, that contravenes a Data Protection Principle unless the act or practice, as the case may be, is required or permitted under the PDPO. The six Data Protection Principles are:

 

	●	Principle 1 — purpose and manner of collection of personal data;
	●	Principle 2 — accuracy and duration of retention of personal data;
	●	Principle 3 — use of personal data;
	●	Principle 4 — security of personal data;
	●	Principle 5 — information to be generally available; and
	●	Principle 6 — access to personal data.

 

Non-compliance with a Data Protection Principle may lead to a complaint to the Privacy Commissioner for Personal Data (the “Privacy Commissioner”). The Privacy Commissioner may serve an enforcement notice to direct the data user to remedy the contravention and/or instigate prosecution actions. A data user who contravenes an enforcement notice commits an offense that may lead to a fine and imprisonment.

 

The PDPO also gives data subjects certain rights, inter alia:

 

	●	the right to be informed by a data user whether the data user holds personal data of which the individual is the data subject;
	●	if the data user holds such data, to be supplied with a copy of such data; and
	●	the right to request correction of any data the individual considers to be inaccurate.

 

The PDPO criminalizes, including, but not limited to, the misuse or inappropriate use of personal data in direct marketing activities, non-compliance with a data access request, and the unauthorized disclosure of personal data obtained without the relevant data user’s consent. An individual who suffers damage, including injured feelings, by reason of a contravention of the PDPO in relation to his or her personal data may seek compensation from the data user concerned.

 

 

Data Protection Act (As Revised) of the Cayman Islands

 

Cayman Islands Data Protection Laws

 

We have certain duties under the Data Protection Act (as revised) of the Cayman Islands (the “DPA”), based on internationally accepted principles of data privacy.

 

Privacy Notice

 

This privacy notice puts our shareholders on notice that through your investment into us you will provide us with certain personal information which constitutes personal data within the meaning of the DPA, or personal data.

 

Investor Data

 

We will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the extent legitimately required to conduct our activities of on an ongoing basis or to comply with legal and regulatory obligations to which we are subject. We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.

 

In our use of this personal data, we will be characterized as a “data controller” for the purposes of the DPA, while our affiliates and service providers who may receive this personal data from us in the conduct of our activities may either act as our “data processors” for the purposes of the DPA or may process personal information for their own lawful purposes in connection with services provided to us.

 

We may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence records, passport number, bank account details, source of funds details and details relating to the shareholder’s investment activity.

 

Who this Affects

 

If you are a natural person, this will affect you directly. If you are a corporate shareholder (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation your investment in us, this will be relevant for those individuals and you should transit the content of this privacy notice to such individuals or otherwise advise them of its content.

 

 

How We May Use a Shareholder’s Personal Data

 

We may, as the data controller, collect, store and use personal data for lawful purposes, including, in particular: (i) where this is necessary for the performance of our rights and obligations under any agreements; (ii) where this is necessary for compliance with a legal and regulatory obligation to which we are or may be subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or (iii) where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental rights or freedoms.

 

Should we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will contact you.

 

Why We May Transfer Your Personal Data

 

In certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange this information with foreign authorities, including tax authorities.

 

We anticipate disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain entities located outside the US, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.

 

The Data Protection Measures We Take

 

Any transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance with the requirements of the DPA.

 

We and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data.

 

We shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms or those data subjects to whom the relevant personal data relates.

 

 

Contacting the Company

 

For further information on the collection, use, disclosure, transfer or processing of your personal data or the exercise of any of the rights listed above, please contact us through our website at https://www.globavend.com/ or through phone number (+61) 08 6141 3263.

 

Regulations Related to Our Business Operations in Australia and New Zealand

 

Our business operation is also subject to many laws and regulation in Australia and New Zealand, including those related to privacy, data protection, import and export of goods, aviation security, intellectual property, consumer protection, health and safety, employment and labor, competition, and taxation. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could harm our business.

 

Aviation Security Law in Australia

 

Apart from Hong Kong, Australia is also a signatory state of CICA. The Australian Government regulates the security of the Australian aviation environment through the Aviation Transport Security Act 2004 (ATSA) and the Aviation Transport Security Regulations 2005 (ATSR). The purpose of the ATSA is to establish a regulatory framework to safeguard against unlawful interference with civil aviation and maintain and improve aviation security. This is done in accordance with international standards and practices set out in Annex 17 of the CICA.

 

The Cyber and Infrastructure Security Centre is responsible for administering the ATSA and ATSR, while aviation industry participants, such as airport and aircraft operators, are responsible for delivering security on a day-to-day basis.

 

Aviation Security Law in New Zealand

 

New Zealand is also a signatory state of the CICA. The Civil Aviation Act 1990 governs New Zealand’s civil aviation system and sets the overall framework for aviation safety, security and economic regulation. The Airport Authorities Act 1966 gives airport authorities a range of functions and powers to establish and operate airports. On April 5, 2023, the Civil Aviation Bill received Royal assent and became the Civil Aviation Act 2023. The new Act will be in force from April 5, 2025.

 

 

C.	Organizational Structure

 

The following diagram illustrates our corporate structure, including our principal subsidiaries, consolidated affiliated entities and subsidiaries of consolidated affiliated entities as of the date of this annual report:

 

The charts below illustrate our corporate structure and identifies our subsidiaries as of the date of this annual report:

 

 

Name		Background			Ownership
Globavend BVI		-	A BVI company		100% owned by Globavend Holdings
		-	Incorporated on May 24, 2023
		-	Issued share capital of US$2.00
		-	Intermediate holding company
Globavend HK		-	A Hong Kong company		100% owned by Globavend BVI
		-	Incorporated on June 27, 2016
		-	Issued share capital of HK$1,000,000
		-	Engaged in the provision of cross-border logistics and air-freight forwarding services

 

 

D.	Property, Plant and Equipment

 

We do not own any real property.

 

During the years ended September 30, 2021, 2022 and 2023, we leased the following properties to support our business activities and operations:

 

No.		Location		Gross floor area (sq.m)		Rent
1.		Room 13, 18/F, Tsuen Wan Industrial Centre, 220-248 Texaco Road, Tsuen Wan, New Territories, Hong Kong(1)		236.16 (approximate)		HK$28,000 per month
2.		Room 02A, 24/F, Tsuen Wan Industrial Centre, 220-248 Texaco Road, Tsuen Wan, New Territories, Hong Kong(2)		167.22 (approximate)		HK$19,000 per month
3.		Workshop C1, 15/F, Block C, Tsing Yi Industrial Centre Phase 2, No. 1 – 33 Cheung Tat Road, Tsing Yi, New Territories, Hong Kong(3)		179.21 (approximate)		HK$17,000 per month(3)

 

(1)	Globavend HK entered into a lease agreement with an independent third party, pursuant to which Globavend HK leased the premises with a lease term from September 10, 2021 to September 9, 2023, and extended by another lease agreement for a further lease term from September 10, 2023 to September 9, 2026.
(2)	Globavend HK entered into a lease agreement with an independent third party, pursuant to which Globavend HK leased the premises with a lease term from December 10, 2021 to December 9, 2022. The lease was terminated upon expiry on December 9, 2022.

 

 

(3)

Globavend HK entered into a lease agreement with an independent third party, pursuant to which Globavend HK leased the premises with a lease term from February 10, 2019 to February 9, 2021. Globavend HK entered into a new lease agreement with an independent third party in respect to the same premises, pursuant to which Globavend HK leased the premises with a lease term from February 10, 2021 to February 9, 2022, at a monthly rent of HK$16,000. The lease was terminated on September 10, 2021.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

Not applicable

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The following management discussion and analysis of financial condition and results of operations contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Item 3. Key Information – D. Risk Factors.” and elsewhere in this annual report. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report.

 

A.	Operating Results

 

OVERVIEW

 

We are a holding company incorporated in the Cayman Islands with operations conducted by our Hong Kong subsidiary Globavend HK.

 

We are an established emerging e-commerce logistics provider providing end-to-end supply chain solution in Hong Kong, Australia and New Zealand. We provide integrated cross-border logistics services between Hong Kong, Australia and New Zealand, where we provide customers with a one-stop solution, from parcel consolidation to air-freight forwarding, customs clearance, on-carriage parcel transportation and delivery. Our customers are primarily enterprise customers, being e-commerce merchants, or operators of e-commerce platforms, in providing business-to-consumer (B2C) transactions.

 

 

MAJOR FACTORS AFFECTING OUR FINANCIAL RESULTS

 

The directors believe that the following major factors may affect our revenues and results of operations:

 

Economic conditions in Hong Kong

 

During the years ended September 30, 2021, 2022 and 2023, a large portion of our revenues was generated in Hong Kong. Accordingly, if Hong Kong experiences any adverse economic, political or regulatory conditions due to events beyond our control, such as local economic downturn, natural disasters, contagious disease outbreaks, terrorist attacks, or if the government adopts regulations that place restrictions or burdens on us or on our industry in general, our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

Fluctuations in foreign exchange rates

 

We are a global provider of integrated cross-border logistics services and air freight forwarding services and our functional currency is the Hong Kong dollars. Most of our transactions during the periods presented in this annual report are denominated in Hong Kong dollars, Australian dollars and New Zealand dollars. Historically, our principal exposure to foreign currency fluctuations is mainly with respect to our expenses incurred denominated in Australian dollars and New Zealand dollars. For the years ended September 30, 2021, 2022 and 2023, we incurred approximately 52.8%, 47.7% and 54.3% of our cost of revenue, respectively, denominated in foreign currencies for customs clearance fees and local courier expenses. We do not use currency exchange contract to reduce the risk of adverse foreign currency movements, but we believe that our exposure from foreign currency fluctuations is unlikely to be material. Foreign currency fluctuations had a slightly positive impact on net income for the years ended September 30, 2021, 2022 and 2023. For the year ended September 30, 2021, 2022 and 2023, the foreign exchange gains were $30,173, $72,974 and $118,508, respectively.

 

Impact of COVID-19

 

Since late December 2019, the outbreak of COVID-19 spread rapidly throughout China and later to the rest of the world. On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a PHEIC, and later on March 11, 2020, a global pandemic. The COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. From 2020 to the middle of 2021, COVID-19 vaccination programs had been greatly promoted around the globe, however several types of COVID-19 variants emerged in different parts of the world.

 

 

Supply chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. These shortages and supply-chain disruptions are significant and widespread. Lockdowns in several countries across the world, labor shortages, robust demand for tradable goods, disruptions to logistics networks, and capacity constraints have resulted in increases in freight costs and delivery times. Companies that are reliant on the transportation of goods and materials, such as our Company, which relies on transportation services from our suppliers, may suffer from plant closures and supply shortages across the extended supply network.

 

Furthermore, our business may be adversely affected if concerns relating to COVID-19 continue to restrict travel, or result in the Company’s personnel, vendors, and services providers being unavailable to pursue their business objectives free of COVID-19 related restrictions. The extent to which COVID-19 impacts our business in the future will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concerns continue for an extended period of time, our ability to pursue our business objectives may be materially adversely affected. In addition, our ability to raise equity and debt financing, which may be adversely impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity and third-party financing became unavailable on terms acceptable to us or at all.

 

Any future impact on our results of operations will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the spread or treat its impact, almost all of which are beyond our control. Given the general slowdown in economic conditions globally and volatility in the capital markets, as well as the general negative impact of the COVID-19 outbreak on the logistics and freight forwarding industry, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected. However, we note that the government authorities have gradually uplifted the preventive measures in relation to the COVID-19. For instance, on January 30, 2023, the Hong Kong government has ceased to issue any isolation orders to COVID-19 infectants. On May 5, 2023, the World Health Organization (WHO) announced that COVID-19 no longer constitutes a public health emergency of international concern (PHEIC). On May 30, 2023, the Hong Kong government has lowered the response level of COVID-19 from emergency level to alert level. We expect that the adverse effects of COVID-19 will start to diminish in 2023. We will continue to closely monitor the situation throughout 2023 and beyond.

 

 

RESULTS OF OPERATIONS

 

The following table summarizes our consolidated statements of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

 

Comparison of Year Ended September 30, 2022 and 2023

 

		Years ended September 30,
		2022				2023				Changes
			$				$				$
Revenue
Integrated cross-border logistics services			19,444,182				16,872,539				(2,571,643	)
Air freight forwarding services			4,577,014				1,713,989				(2,863,025	)
			24,021,196				18,586,528				(5,434,668	)
Cost of revenue			22,615,318				16,680,941				(5,934,377	)
Gross profit			1,405,878				1,905,587				499,709
General and administrative expenses			588,732				758,726				169,994
Income from operation			817,146				1,146,861				329,715
Other income (expense)
Interest income			108				3,481				3,373
Interest expense			(2,755	)			(1,066	)			1,689
Other income			122,289				120,367				(1,922	)
Total other income/(expense), net			119,642				122,782				3,140
Income before income taxes			936,788				1,269,643				332,855
Income tax expenses			126,561				192,251				65,690
Net income			810,227				1,077,392				267,165

 

 

Year Ended September 30, 2023 Compared to Year Ended September, 2022

 

Revenues

 

Our revenue decreased by $5,434,668, or 22.6%, from $24,021,196 for the year ended September 30, 2022 to $18,586,528 for the year ended September 30, 2023, primarily due to the decrease in the integrated cross-border logistics services and air freight forwarding services in 2023.

 

Our revenue from integrated cross-border logistics services decreased by $2,571,643, or 13.2%, from $19,444,182 for the year ended September 30, 2022 to $16,872,539 for the year ended September 30, 2023. The revenue was derived from the integrated cross-border logistics services for delivering goods from Hong Kong to Australia and New Zealand. Logistics income is recognized over the logistics time. The decrease of revenue from the integrated cross-border logistics services is due to the higher average sales price per freight weight which driven down sales demand and volume from customers.

 

The following table set forth the breakdown of our revenue analysis for integrated cross-border logistics services for the periods indicated:

 

		Years ended September 30,
		2022				2023
Average daily number of packages		$	5,890			$	5,654
Average daily freight weight (kilogram)			2,765				1,896
Average daily number of shipments			3.09				2.81
Average daily revenue per freight weight			19.27				24.38

 

Our revenue from air freight forwarding services decreased by $2,863,025, or 62.6%, from $4,577,014 for the year ended September 30, 2022 to $1,713,989 for the year ended September 30, 2023. The Company sells air freight spaces to other freight forwarders to earn income through the price differences. Air freight forwarding revenue is recognized upon the completion of the transaction. The decrease of such revenue is mainly because the Company was focus on selling the air freight spaces with high unit prices in 2023, which lowered the sales volume. The number of air freight spaces sold decreased from 219 for the year ended September 30, 2022 to 146 for the year ended September 30, 2023.

 

 

Cost of Revenue

 

The following table set forth the breakdown of our cost of revenue for the periods indicated:

 

		Years ended September 30,
		2022				2023
Air freight charges		$	12,261,846			$	7,113,911
Last mile carriage and alliance costs			10,230,017				9,415,448
Warehouse labor costs			79,496				133,437
Packing costs			43,959				18,145
		$	22,615,318			$	16,680,941

 

Our cost of revenue mainly represented air freight charges, last mile carriage and alliance costs, packaging costs and labor costs. Our cost of revenue decreased by $5,934,377, or 26.2%, from $22,615,318 for the year ended September 30, 2022 to $16,680,941 for the year ended September 30, 2023, mainly due to decrease in air freight and courier expenses to fulfill the decreased sales transactions.

 

Our air freight charges mainly represented costs of air freight services. Our air freight charges decreased by $5,147,935, or 42.0%, from $12,261,846 for the year ended September 30, 2022 to $7,113,911 for the year ended September 30, 2023, mainly due to the decreased sales from both air freight forwarding services and integrated cross-border logistics services and lower air freight rates offered by suppliers during the year ended September 30, 2023.

 

Our last mile carriage and alliance costs mainly represented courier service charges, customs clearance fees and other alliance service charges. Our last mile carriage and alliance costs decreased by $814,569, or 8.0%, from $10,230,017 for the year ended September 30, 2022 to $9,415,448 for the year ended September 30, 2023, mainly due to less delivery orders from integrated cross-border logistics services.

 

Our warehouse labor costs mainly represented salaries and wages of warehouse staff. Our warehouse labor costs increased by $53,941, or 67.9%, from $79,496 for the year ended September 30, 2022 to $133,437 for the year ended September 30, 2023, mainly due to more part-time workers hired to improve the work efficiency. For the year ended September 30, 2022, some warehouse works were contributed by several full-time employees which salaries were incurred in general and administrative expenses.

 

 

Our packing costs mainly represented packing materials, including boxes and labels, for repacking customers’ products. Our packing costs decreased by $25,814, or 58.7%, from $43,959 for the year ended September 30, 2022 to $18,145 for the year ended September 30, 2023, mainly due to less packing materials used for declined sales from integrated cross-border logistics services.

 

Gross Profit

 

Our gross profit increased by 35.5% to $1,905,587 for the year ended September 30, 2023, from $1,405,878 for the year ended September 30, 2022. Our gross profit margin increased to 10.3% for the year ended September 30, 2023, from 5.9% for the year ended September 30, 2022. The increase in gross profit margin could be attributed to the lower freight costs and higher sales unit prices.

 

General and Administrative Expenses

 

The following table set forth the breakdown of our general and administrative expenses for the periods indicated:

 

		Years ended September 30,
		2022				2023
Staff costs		$	383,959			$	370,826
Audit fees			1,667				171,667
Travel expenses			69,383				45,056
Depreciation Charge and Amortization of right-of-use assets			61,484				50,834
Allowance for expected credit loss			335				44,765
Others			71,904				75,578
		$	588,732			$	758,726

 

 

Our general and administrative expenses mainly represented staff costs, audit fees, traveling expenses, depreciation charge, amortization of right-of-use assets, allowance for expected credit loss and other administrative expenses. Our general and administrative expenses increased by $169,994, or 28.9%, from $588,732 for the year ended September 30, 2022 to $758,726 for the year ended September 30, 2023, mainly due to audit fees expensed off and increase in allowance for expected credit loss.

 

Our audit fees mainly represent annual audit fees incurred by the Company and its subsidiary. Audit fees increased by $170,000, or 10,198.0%, from $1,667 for the year ended September 30, 2022 to $171,667 for the year ended September 30, 2023. This was mainly due to the professional services fees on the annual audit for the consolidated financial statement of the Company for the year ended September 30, 2023, as the audit fees were recorded as deferred offering costs for the year ended September 30, 2022.

 

Our staff costs mainly represent staff salaries, contribution to staff retirement benefits and staff welfare for office staff and director. Staff costs decreased by $13,133, or 3.4%, from $383,959 for the year ended September 30, 2022 to $370,826 for the year ended September 30, 2023. This was mainly due to the staff turnover and the Company lowered the staff salaries for the new staff replacement.

 

Our travel expenses decreased by $24,327, or 35.1%, from $69,383 for the year ended September 30, 2022 to $45,056 for the year ended September 30, 2023 mainly due to decrease in travelling activities in 2023 comparing to the prior year.

 

Our amortization of right-of-use assets mainly represented our operating lease of our Hong Kong office and warehouse on 18^th and 24^th floors of Tsuen Wan Industrial Centre. There was a decrease of 21.8% mainly due to the early termination of operating lease of 24^th of Tsuen Wan Industrial Centre during the year ended September 30, 2023, in order to centralize the warehouse operation for better management. Our depreciation charge mainly represented depreciation of our fixture, furniture and office equipment. Our depreciation charge increased by 180.1% for the year ended September 30, 2023, which was mainly due to the additional computer equipment.

 

Other Income/Expenses

 

Our other income mainly consists of interest income, interest expenses, foreign exchange gain/loss, government grants and insurance claim income. Our net other income was $119,642 for the year ended September 30, 2022, as compared to net other income of $122,782 for the year ended September 30, 2023, primarily due to decrease in government grants from Employment Support Scheme under the Anti-epidemic Fund, and also, there was no insurance compensation claim from the insurance company for the year ended September 30, 2023, as the Company decided to compensate the loss of its customers directly instead of covering by an insurance policy.

 

 

The foreign exchange gains of $72,974 and $118,508 for the years ended September 30, 2022 and 2023, respectively, primarily as a result of net variances of the exchange rate between the Australian dollars and Hong Kong dollars on Australian dollar-denominated transactions. During the years ended September 30, 2022 and 2023, the foreign currency fluctuations on the Company are not hedged by any currency borrowings or other hedging instruments.

 

Income Tax Expense

 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

 

Cayman Islands and British Virgin Islands (“BVI”)

 

The Company is incorporated in the Cayman Islands and its wholly-owned subsidiary is incorporated in BVI. Under the current laws of the Cayman Islands and the BVI, these entities are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands and the BVI.

 

Hong Kong

 

The Company generated substantially all of its taxable income in the Hong Kong for the years ended September 30, 2022 and 2023. Accordingly, tax expenses records in the Company’s result of operations are almost entirely attributable to income earned in the Hong Kong.

 

The Hong Kong profits tax is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.

 

The effective tax rates on income before income taxes for the years ended September 30, 2022 and 2023 were approximately 13.5% and 15.1%, respectively.

 

Australia

 

Australian companies are subject to a corporate income tax rate of 30% on their taxable income, other than those classified as a “base rate company”, which are businesses with revenue of less than A$50 million (US$78 million) that are subject to a reduced corporate income tax rate of 25%. For the years ended September 30, 2022 and 2023, the Company was not considered a taxable Australian company.

 

New Zealand

 

New Zealand companies are subject to a corporate income tax rate of 28% on their taxable income. For the years ended September 30, 2022 and 2023, the Company was not considered a taxable New Zealand company.

 

Net Income

 

Our net income increased by 33.0% to $1,077,392 for the year ended September 30, 2023, as compared to $810,227 for the year ended September 30, 2022. The increase in net income was predominantly due to increased gross profit.

 

Year Ended September 30, 2022 Compared to Year Ended September, 2021

 

Comparison of Year Ended September 30, 2021 and 2022

 

		Years ended September 30,
		2021				2022				Changes
		$				$				$
Revenue
Integrated cross-border logistics services			11,993,332				19,444,182				7,450,850
Air freight forwarding services			1,262,748				4,577,014				3,314,266
			13,256,080				24,021,196				10,765,116
Cost of revenue			12,271,114				22,615,318				10,344,204
Gross profit			984,966				1,405,878				420,912
General and administrative expenses			421,181				588,732				167,551
Income from operation			563,785				817,146				253,361
Other income (expense)
Interest income			21				108				87
Interest expense			(78	)			(2,755	)			(2,677	)
Other income			78,622				122,289				43,667
Total other income/(expense), net			78,565				119,642				41,077
Income before income taxes			642,350				936,788				294,438
Income tax expenses			77,592				126,561				48,969
Net income			564,758				810,227				245,469

 

 

Revenues

 

Our revenue increased by $10,765,116, or 81.2%, from $13,256,080 for the year ended September 30, 2021 to $24,021,196 for the year ended September 30, 2022, primarily due to the increase in the integrated cross-border logistics services and air freight forwarding services in 2022.

 

Our revenue from integrated cross-border logistics services increased by $7,450,850, or 62.1%, from $11,993,332, of which $15,121 was derived from a related party for the year ended September 30, 2021, to $19,444,182 for the year ended September 30, 2022. The revenue was derived from the integrated cross-border logistics services for delivering goods from Hong Kong to Australia and New Zealand. Logistics income is recognized over the logistics time. The increase of revenue in this revenue stream is due to the increase in logistics demand, which drove up both the delivery volume and the average sales price per freight weight, caused by the upward trend of online shopping and increased demand of home delivery.

 

The following table set forth the breakdown of our revenue analysis for integrated cross-border logistics services for the periods indicated:

 

		Years ended September 30,
		2021				2022
Average daily number of packages			3,473				5,890
Average daily freight weight (kilogram)			1,732				2,765
Average daily number of shipments			1.87				3.09
Average daily revenue per freight weight		$	18.97			$	19.27

 

Our revenue from air freight forwarding services increased by $3,314,266, or 262.5%, from $1,262,748 for the year ended September 30, 2021 to $4,577,014 for the year ended September 30, 2022. The Company sells air freight spaces to other freight forwarders to earn income through the price differences. Air freight forwarding income is recognized upon the completion of the transaction. The increase of such income is mainly because the Company could get more air freight spaces with better prices in 2022. The number of air freight spaces sold increased from 90 for the year ended September 30, 2021 to 219 for the year ended September 30, 2022.

 

Cost of Revenue

 

The following table set forth the breakdown of our cost of revenue for the periods indicated:

 

		Years ended September 30,
		2021				2022
Air freight charges		$	5,344,254			$	12,261,846
Last mile carriage and alliance costs			6,867,420				10,230,017
Warehouse labor costs			44,581				79,496
Packing costs			14,859				43,959
		$	12,271,114			$	22,615,318

 

Our cost of revenue mainly represented air freight charges, last mile carriage and alliance costs, packaging costs and labor costs. Our cost of revenue increased by $10,344,204, or 84.3%, from $12,271,114 for the year ended September 30, 2021 to $22,615,318 for the year ended September 30, 2022, mainly due to increase in air freight and courier expenses to fulfill the increased sales transactions.

 

 

Our air freight charges mainly represented costs of air freight services. Our air freight charges increased by $6,917,592, or 129.4%, from $5,344,254 for the year ended September 30, 2021 to $12,261,846 for the year ended September 30, 2022, mainly due to the increased sales from both air freight forwarding services and integrated cross-border logistics services during the year ended September 30, 2022.

 

Our last mile carriage and alliance costs mainly represented courier service charges, customs clearance fees and other alliance service charges. Our last mile carriage and alliance costs increased by $3,362,597, or 49.0%, from $6,867,420 for the year ended September 30, 2021 to $10,230,017 for the year ended September 30, 2022, mainly due to more sales orders from integrated cross-border logistics services.

 

Our warehouse labor costs mainly represented salaries and wages of warehouse staff. Our warehouse labor costs increased by $34,915, or 78.3%, from $44,581 for the year ended September 30, 2021 to $79,496 for the year ended September 30, 2022, mainly due to more part-time workers hired to keep up with the demand.

 

Our packing costs mainly represented packing materials, including boxes and labels, for repacking customers’ products. Our packing costs increased by $29,100, or 195.8%, from $14,859 for the year ended September 30, 2021 to $43,959 for the year ended September 30, 2022, mainly due to increasing trend of e-commerce and online shopping under pandemic which led to higher costs of packing materials.

 

Gross Profit

 

Our gross profit increased by 42.7% to $1,405,878 for the year ended September 30, 2022, from $984,966 for the year ended September 30, 2021. Our gross profit margin decreased to 5.9% for the year ended September 30, 2022, from 7.4% for the year ended September 30, 2021. The decrease in gross profit margin could be attributed to the increased market competition which led to higher freight costs and lower sales prices.

 

 

General and Administrative Expenses

 

The following table set forth the breakdown of our general and administrative expenses for the periods indicated:

 

		Years ended September 30,
		2021				2022
Staff costs		$	294,539			$	383,959
Travel expenses			52,185				69,383
Insurance			24,257				1,559
Depreciation Charge and Amortization of right-of-use assets			11,350				61,484
Allowance for (reversal of) expected credit loss			(33,351	)			335
Others			72,201				72,012
		$	421,181			$	588,732

 

Our general and administrative expenses mainly represented staff costs, traveling expenses, depreciation charge, amortization of right-of-use assets, allowance for expected credit loss and other administrative expenses. Our general and administrative expenses increased by $167,551, or 39.8%, from $421,181 for the year ended September 30, 2021 to $588,732 for the year ended September 30, 2022, mainly due to increase in staff costs and amortization of right-of-use assets.

 

Our staff costs mainly represent staff salaries, contribution to staff retirement benefits and staff welfare for office staff and director. Staff costs increased by $89,420, or 30.4%, from $294,539 for the year ended September 30, 2021 to $383,959 for the year ended September 30, 2022. This was mainly due to the increment in staff salaries and hiring of additional administrative staff to cope with the expanding business scale.

 

Our travel expenses increased by $17,198, or 33.0%, from $52,185 for the year ended September 30, 2021 to $69,383 for the year ended September 30, 2022 mainly due to increase in travelling activities in 2022 comparing to the impact from the COVID-19 and social distancing measures in the prior year.

 

Our insurance expenses decreased by $22,698, or 93.6%, from $24,257 for the year ended September 30, 2021 to $1,559 for the year ended September 30, 2022 mainly due to the decrease in transportation insurance. After considering the benefits of claiming compensation from insurance companies and weighing their costs, the management of the Company decided to lower the insurance premium and handle the compensation claims on their own.

 

Our amortization of right-of-use assets mainly represented our operating lease of our Hong Kong office and warehouse on 18^th and 24^th floors of Tsuen Wan Industrial Centre. There was a significant increase of 468.2% mainly due to the new operating lease of our Hong Kong warehouse entered during the year ended September 30, 2022, while the operating lease of previous warehouse was short-term lease during September 30, 2021. Our depreciation charge mainly represented depreciation of our fixture, furniture and office equipment. Our depreciation charge increased by 78.4% for the year ended September 30, 2022, which was mainly due to the additional computer equipment.

 

 

Other Income/Expenses

 

Our other income mainly consists of interest income, interest expenses, foreign exchange gain/loss, government grants and insurance claim income. Our net other income was $78,565 for the year ended September 30, 2021, as compared to net other income of $119,642 for the year ended September 30, 2022, primarily due to increase in government grants from Employment Support Scheme under the Anti-epidemic Fund and the foreign exchange gain.

 

The foreign exchange gains of $30,173 and $72,974 for the years ended September 30, 2021 and 2022, respectively, primarily as a result of net variances of the exchange rate between the Australian dollars and Hong Kong dollars on Australian dollar-denominated transactions. During the years ended September 30, 2021 and 2022, the foreign currency fluctuations on the Company are not hedged by any currency borrowings or other hedging instruments.

 

Income Tax Expense

 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

 

Cayman Islands and British Virgin Islands (“BVI”)

 

The Company is incorporated in the Cayman Islands and its wholly-owned subsidiary is incorporated in BVI. Under the current laws of the Cayman Islands and the BVI, these entities are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands and the BVI.

 

Hong Kong

 

The Company generated substantially all of its taxable income in the Hong Kong for the years ended September 30, 2021 and 2022. Accordingly, tax expenses records in the Company’s result of operations are almost entirely attributable to income earned in the Hong Kong.

 

The Hong Kong profits tax is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.

 

The effective tax rates on income before income taxes for the years ended September 30, 2021 and 2022 were approximately 12.1% and 13.5%, respectively.