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Erayak Power Solution Group Inc.

Erayak Power Solution Group Inc.RAYA決算レポート

Nasdaq · エネルギー · モーター及び発電機

Erayak Power Solution Group Inc. is a specialized provider of portable power products, including portable power stations, solar generators, car jump starters and related power accessories. It mainly serves consumer and commercial markets in North America, Europe and Asia, offering reliable eco-friendly off-grid power solutions for outdoor, emergency and mobile power demand scenarios.

What changed in Erayak Power Solution Group Inc.'s 20-F — 2023 vs 2024

Top changes in Erayak Power Solution Group Inc.'s 2024 20-F

384 paragraphs added · 307 removed · 220 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

86 edited+129 added−20 removed625 unchanged
If we fail to receive such approvals, our ability to use the proceeds of this offering and to capitalize our Chinese operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
If we fail to receive such approvals, our ability to use the proceeds of this offering and to capitalize our Chinese operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered.
Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered.
In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.
In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.
In the future, we may grow our business by acquiring complementary businesses.
In the future, we may grow our business by acquiring complementary businesses.
Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
We sold a substantial portion of products to one customer (11.99% of total revenues) during the fiscal year ended December 31, 2023, and as of the year-end date, amount due from this customer included in accounts receivable was $28,301, representing 0.45% of total accounts receivable.
During the fiscal year ended December 31, 2023, we sold a substantial portion of products to one customer (11.99% of total revenues), and as of the year-end date, amount due from this customer included in accounts receivable was $28,301, representing 0.45% of total accounts receivable.
As a result, for so long as Erayak International Limited owns a controlling or significant voting interest in our ordinary shares, it generally will be able to control or significantly influence, directly or indirectly and subject to applicable law, all matters affecting us, including: ● the election of directors; ● determinations with respect to our business direction and policies, including the appointment and removal of officers; ● determinations with respect to corporate transactions, such as mergers, business combinations, change in control transactions or the acquisition or the disposition of assets; ● our financing and dividend policy; ● determinations with respect to our tax returns; and ● compensation and benefits programs and other human resources policy decisions. 39 Even if Erayak International Limited were to dispose of certain of its shares of our Class B ordinary shares such that it would control less than a majority of the voting power of our outstanding ordinary shares, it may be able to influence the outcome of corporate actions so long as it retains Class B ordinary shares.
As a result, for so long as Erayak International Limited owns a controlling or significant voting interest in our ordinary shares, it generally will be able to control or significantly influence, directly or indirectly and subject to applicable law, all matters affecting us, including: ● the election of directors; ● determinations with respect to our business direction and policies, including the appointment and removal of officers; ● determinations with respect to corporate transactions, such as mergers, business combinations, change in control transactions or the acquisition or the disposition of assets; ● our financing and dividend policy; ● determinations with respect to our tax returns; and ● compensation and benefits programs and other human resources policy decisions. 53 Even if Erayak International Limited were to dispose of certain of its shares of our Class B ordinary shares such that it would control less than a majority of the voting power of our outstanding ordinary shares, it may be able to influence the outcome of corporate actions so long as it retains Class B ordinary shares.
If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including: ● limited availability for market quotations for our securities; ● reduced liquidity with respect to our securities; ● a determination that our Ordinary Share is a “penny stock,” which will require brokers trading in our Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Share; ● limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future. 42 The market price of our Class A ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price.
If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including: ● limited availability for market quotations for our securities; ● reduced liquidity with respect to our securities; ● a determination that our Ordinary Share is a “penny stock,” which will require brokers trading in our Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Share; ● limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future. 56 The market price of our Class A ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price.
Furthermore, there can be no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China or Hong Kong and adversely affect our business as well as your investment. 8 As of the date of this Annual Report, we are not aware of other material restrictions and limitations on our ability to distribute earnings from our businesses, including our subsidiaries, to the parent company and U.S. investors or our ability to settle amounts owed, or on foreign exchange or our ability to transfer cash between entities within our group, across borders, or to U.S. investors.
Furthermore, there can be no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China or Hong Kong and adversely affect our business as well as your investment. 21 As of the date of this Annual Report, we are not aware of other material restrictions and limitations on our ability to distribute earnings from our businesses, including our subsidiaries, to the parent company and U.S. investors or our ability to settle amounts owed, or on foreign exchange or our ability to transfer cash between entities within our group, across borders, or to U.S. investors.
In that event, current stockholders would likely experience a loss of most of or all of their investment. 28 Further, if we increase to our level of indebtedness, in the future, it could: ● require us to dedicate a portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working capital, capital expenditures and other general corporate purposes; ● limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements and other purposes; ● limit our flexibility in planning for, and reacting to, changes in our industry or business; ● make us more vulnerable to unfavorable economic or business conditions; and ● limit our ability to make acquisitions or take advantage of other business opportunities.
In that event, current stockholders would likely experience a loss of most of or all of their investment. 42 Further, if we increase our level of indebtedness, in the future, it could: ● require us to dedicate a portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working capital, capital expenditures and other general corporate purposes; ● limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements and other purposes; ● limit our flexibility in planning for, and reacting to, changes in our industry or business; ● make us more vulnerable to unfavorable economic or business conditions; and ● limit our ability to make acquisitions or take advantage of other business opportunities.
Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacked a reasonable commercial purpose and was established for the purpose of reducing, avoiding, or deferring PRC tax. 17 According to the “Enterprise Income Tax Law of the People’s Republic of China” (adopted on March 16, 2007, first amended on February 24, 2017, and second amended on December 29, 2018), if the business dealings between an enterprise and its affiliated parties do not conform to the principle of independent transactions and thus reduce the taxable income or income of the enterprise or its affiliated parties, the tax authorities have the right to adjust in accordance with reasonable methods.
Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacked a reasonable commercial purpose and was established for the purpose of reducing, avoiding, or deferring PRC tax. 30 According to the “Enterprise Income Tax Law of the People’s Republic of China” (adopted on March 16, 2007, first amended on February 24, 2017, and second amended on December 29, 2018), if the business dealings between an enterprise and its affiliated parties do not conform to the principle of independent transactions and thus reduce the taxable income or income of the enterprise or its affiliated parties, the tax authorities have the right to adjust in accordance with reasonable methods.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we receive from our offerings to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 7 Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our Class A ordinary shares to investors and cause the value of our Class A ordinary shares to significantly decline or be worthless.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we receive from our offerings to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 20 Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our Class A ordinary shares to investors and cause the value of our Class A ordinary shares to significantly decline or be worthless.
Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations. 6 If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our ordinary shares, especially if such matter cannot be addressed and resolved favorably.
Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations. 19 If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our ordinary shares, especially if such matter cannot be addressed and resolved favorably.
If we relinquish or are required to relinquish these licenses, while we do not expect our business operation to be materially adversely affected, we are uncertain whether or when the relevant procedures will be completed. 10 The development, manufacture and sales of construction materials products and manufacturing equipment are not currently subject to foreign investment restrictions set forth in the Catalogue of Industries for Guiding Foreign Investment (Amended in 2017), or the Catalogue, issued by the National Development and Reform Commission and the Ministry of Commerce on June 28, 2017 and became effective on July 28, 2017.
If we relinquish or are required to relinquish these licenses, while we do not expect our business operation to be materially adversely affected, we are uncertain whether or when the relevant procedures will be completed. 23 The development, manufacture and sales of construction materials products and manufacturing equipment are not currently subject to foreign investment restrictions set forth in the Catalogue of Industries for Guiding Foreign Investment (Amended in 2017), or the Catalogue, issued by the National Development and Reform Commission and the Ministry of Commerce on June 28, 2017 and became effective on July 28, 2017.
This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for overseas investment or financing. 14 In the event that our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us.
This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for overseas investment or financing. 27 In the event that our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us.
We cannot assure that we will remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all. 3 Pursuant to Cybersecurity Review Measures which were issued on December 28, 2021 and became effective on February 15, 2022, network platform operators holding over one million users’ personal information must apply with the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange.
We cannot assure that we will remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all. 16 Pursuant to Cybersecurity Review Measures which were issued on December 28, 2021 and became effective on February 15, 2022, network platform operators holding over one million users’ personal information must apply with the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange.
The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S. 20 On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA.
The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S. 33 On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA.
Those banks may not meet their funding commitments to us if they experience shortages of capital and liquidity or experience excessive volumes of borrowing requests from other borrowers and us within a short period of time. 36 Long-term disruptions in the credit and capital markets could result from uncertainty, changing or increased regulations, reduced alternatives, or failures of financial institutions that could adversely affect our access to the liquidity needed for our business.
Those banks may not meet their funding commitments to us if they experience shortages of capital and liquidity or experience excessive volumes of borrowing requests from other borrowers and us within a short period of time. 50 Long-term disruptions in the credit and capital markets could result from uncertainty, changing or increased regulations, reduced alternatives, or failures of financial institutions that could adversely affect our access to the liquidity needed for our business.
In the event that 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 share. 18 We may lose the ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless if the Chinese government may exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.
In the event that 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 share. 31 We may lose the ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless if the Chinese government may exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.
In addition, wholly foreign-owned enterprises are required to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. 22 Our PRC subsidiaries generate primarily all of their revenue in Renminbi, which is not freely convertible into other currencies.
In addition, wholly foreign-owned enterprises are required to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. 36 Our PRC subsidiaries generate primarily all of their revenue in Renminbi, which is not freely convertible into other currencies.
As a result of the above, to the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in the PRC or Hong Kong, such funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets. 9 PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
As a result of the above, to the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in the PRC or Hong Kong, such funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets. 22 PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
Excess inventory levels may lead to increases in inventory holding costs, risks of inventory obsolescence, and provisions for write-downs, which will materially and adversely affect our business, financial condition, and results of operations. 35 To maintain an appropriate inventory level of finished goods and raw materials to meet market demand, we adjust our procurement amount and production schedule from time to time based on customers’ orders and anticipated demand.
Excess inventory levels may lead to increases in inventory holding costs, risks of inventory obsolescence, and provisions for write-downs, which will materially and adversely affect our business, financial condition, and results of operations. 49 To maintain an appropriate inventory level of finished goods and raw materials to meet market demand, we adjust our procurement amount and production schedule from time to time based on customers’ orders and anticipated demand.
In the event that any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. 29 Our business is substantially dependent upon our key research and development personnel who possess valuable skills in our industry, and we may have to compete for their services actively.
In the event that any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. 43 Our business is substantially dependent upon our key research and development personnel who possess valuable skills in our industry, and we may have to compete for their services actively.
Controlling shareholders and actual controlling persons of us that organize or instruct such violations shall be imposed a fine from RMB1,000,000 and RMB10,000,000. 4 On February 24, 2023, the CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect on March 31, 2023.
Controlling shareholders and actual controlling persons of us that organize or instruct such violations shall be imposed a fine from RMB1,000,000 and RMB10,000,000. 17 On February 24, 2023, the CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect on March 31, 2023.
These reserve funds and staff welfare and bonus funds are not distributable as cash dividends 11 Under existing PRC foreign exchange regulations, payment of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements.
These reserve funds and staff welfare and bonus funds are not distributable as cash dividends 24 Under existing PRC foreign exchange regulations, payment of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements.
Our activities in China create the risk of unauthorized payments. 33 Although we believe, to date, we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption law, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, or distributors may engage in conduct for which we might be held responsible.
Our activities in China create the risk of unauthorized payments. 47 Although we believe, to date, we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption law, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, or distributors may engage in conduct for which we might be held responsible.
The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant. 19 On June 22, 2021, the U.S.
The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant. 32 On June 22, 2021, the U.S.
Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States. 41 Certain judgments obtained against us by our shareholders may not be enforceable.
Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States. 55 Certain judgments obtained against us by our shareholders may not be enforceable.
Any sudden or prolonged market downturn in the United States or elsewhere could adversely affect our business, results of operations and financial condition, including capital and liquidity levels. 37 We may face risks related to the ongoing Russian invasion of Ukraine and any other conflicts that may arise on a global or regional scale which could adversely affect our business and results of operations.
Any sudden or prolonged market downturn in the United States or elsewhere could adversely affect our business, results of operations and financial condition, including capital and liquidity levels. 51 We may face risks related to the ongoing Russian invasion of Ukraine and any other conflicts that may arise on a global or regional scale which could adversely affect our business and results of operations.
As a result, fluctuations in exchange rates may have a material adverse effect on the price of our ordinary shares. 12 PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries and thereby prevent us from funding our business.
As a result, fluctuations in exchange rates may have a material adverse effect on the price of our ordinary shares. 25 PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries and thereby prevent us from funding our business.
In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced products or that any new or enhanced products, if developed, will achieve market acceptance or prove to be profitable. 32 A lack of insurance coverage could expose us to significant costs and business disruption.
In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced products or that any new or enhanced products, if developed, will achieve market acceptance or prove to be profitable. 46 A lack of insurance coverage could expose us to significant costs and business disruption.
Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations. 44
Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations. 58
In that case, our customers may experience a substantial delay in receiving our products, which could have a material adverse effect on our business relationship with them and our financial conditions. 27 We will require substantial additional funding in the future. There is no assurance that additional financing will be available to us.
In that case, our customers may experience a substantial delay in receiving our products, which could have a material adverse effect on our business relationship with them and our financial conditions. 41 We will require substantial additional funding in the future. There is no assurance that additional financing will be available to us.
Third, we will apply for settlement of the foreign exchange. To do so, we must submit to SAFE certain application forms, identity documents, payment order to a designated person, and a tax certificate. 13 The timing of the process is difficult to estimate because the efficiencies of different SAFE branches can vary materially.
Third, we will apply for settlement of the foreign exchange. To do so, we must submit to SAFE certain application forms, identity documents, payment order to a designated person, and a tax certificate. 26 The timing of the process is difficult to estimate because the efficiencies of different SAFE branches can vary materially.
If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. 23 Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. 37 Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
We consider our major vendors in each period to be those vendors that accounted for more than 10% of overall purchases in such period. We had no such major suppliers for the fiscal years ended December 31, 2023, 2022, and 2021. We purchase raw materials on the market at prevailing market prices.
We consider our major vendors in each period to be those vendors that accounted for more than 10% of overall purchases in such period. We had no such major suppliers for the fiscal years ended December 31, 2024, 2023, and 2022. We purchase raw materials on the market at prevailing market prices.
Our patents and patent applications may also be challenged, invalidated, or circumvented. In accordance with Chinese intellectual property laws and regulations, we will have to renew our trademarks once the terms expire. However, patents are not renewable. Our 21 design patents have only 10 years of protection.
Our patents and patent applications may also be challenged, invalidated, or circumvented. In accordance with Chinese intellectual property laws and regulations, we will have to renew our trademarks once the terms expire. However, patents are not renewable. Our 61 design patents have only 10 years of protection.
We have elected to avail our company of this exemption from new or revised accounting standards and, therefore, will be subject to accounting standards that are available to emerging growth companies. 40 We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies.
We have elected to avail our company of this exemption from new or revised accounting standards and, therefore, will be subject to accounting standards that are available to emerging growth companies. 54 We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies.
As of December 31, 2023 and 2022, we did not record any withholding tax on the retained earnings of our subsidiaries in the PRC as we intended to re-invest all earnings generated from our PRC subsidiaries for the operation and expansion of our business in China, and we intend to continue this practice in the foreseeable future.
As of December 31, 2024 and 2023, we did not record any withholding tax on the retained earnings of our subsidiaries in the PRC as we intended to re-invest all earnings generated from our PRC subsidiaries for the operation and expansion of our business in China, and we intend to continue this practice in the foreseeable future.
Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. We recorded a bad debt write-off of $0 during the fiscal years ended December 31, 2023 and 2022.
Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. We recorded a bad debt write-off of $0 during the fiscal years ended December 31, 2024 and 2023.
Accordingly, the results of operations set forth in the audited consolidated financial statements included in this Annual Report are solely those of the China-based subsidiaries. 2 Exchange Rate Information Our financial information is presented in U.S. dollars. Our functional currency is Renminbi (“RMB”), the currency of the PRC.
Accordingly, the results of operations set forth in the audited consolidated financial statements included in this Annual Report are solely those of the China-based subsidiaries. 15 Exchange Rate Information Our financial information is presented in U.S. dollars. Our functional currency is Renminbi (“RMB”), the currency of the PRC.
Any such tax may reduce the returns on the investment in our ordinary shares. 15 There are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.
Any such tax may reduce the returns on the investment in our ordinary shares. 28 There are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 16 As an offshore holding company with PRC subsidiaries, we may transfer funds to our operating entity or finance our operating entity by means of loans or capital contributions.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 29 As an offshore holding company with PRC subsidiaries, we may transfer funds to our operating entity or finance our operating entity by means of loans or capital contributions.
As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. 21 The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies.
As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. 34 The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies.
We may also be required to restate our financial statements from prior periods. 34 Failure to appropriately evaluate the credit profile of our customers and/or delay in settlement of accounts receivable from our customers could materially and adversely impact our operating cash flow.
We may also be required to restate our financial statements from prior periods. 48 Failure to appropriately evaluate the credit profile of our customers and/or delay in settlement of accounts receivable from our customers could materially and adversely impact our operating cash flow.
If there is a decline in economic activity in China and the other markets in which we operate or a protracted slowdown in industries on which we rely for our sales, our products’ demand and revenue will likewise decrease. 25 We operate in a competitive industry.
If there is a decline in economic activity in China and the other markets in which we operate or a protracted slowdown in industries on which we rely for our sales, our products’ demand and revenue will likewise decrease. 39 We operate in a competitive industry.
We consider our major customers in each period to be those customers that accounted for more than 10% of our revenue in such period. We had one, two and two such major customers for the fiscal years ended December 31, 2023, 2022, and 2021, respectively.
We consider our major customers in each period to be those customers that accounted for more than 10% of our revenue in such period. We had one, one and two such major customers for the fiscal years ended December 31, 2024, 2023, and 2022 , respectively.
Any such development could have an adverse effect on our margins and financial position and would negatively affect our revenues and results of operations and/or trading price of our ordinary shares. 26 The loss of any of our key customers could reduce our revenues and our profitability.
Any such development could have an adverse effect on our margins and financial position and would negatively affect our revenues and results of operations and/or trading price of our ordinary shares. 40 The loss of any of our key customers could reduce our revenues and our profitability.
As of the date of this Annual Report, Management has not determined the types of businesses that the Company will target or the terms of any potential acquisition. 43 We do not intend to pay dividends for the foreseeable future.
As of the date of this Annual Report, Management has not determined the types of businesses that the Company will target or the terms of any potential acquisition. 57 We do not intend to pay dividends for the foreseeable future.
PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection. 5 The PRC regulatory requirements regarding cybersecurity are constantly evolving.
PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection. 18 The PRC regulatory requirements regarding cybersecurity are constantly evolving.
As a result, a downturn in the worldwide economy resulting from the Russian invasion of Ukraine and other conflicts with a global impact that may arise from time to time could have a material adverse effect on our business, results of operations, and/or financial condition. 38 Risks Related to our Ordinary Shares The dual class structure of our ordinary shares has the effect of concentrating voting control with Erayak International Limited, which holds in aggregate 83.87% of the voting power of our capital g, preventing you and other stockholders from influencing significant decisions, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring shareholder approval.
As a result, a downturn in the worldwide economy resulting from the Russian invasion of Ukraine and other conflicts with a global impact that may arise from time to time could have a material adverse effect on our business, results of operations, and/or financial condition. 52 Risks Related to our Ordinary Shares The dual class structure of our ordinary shares has the effect of concentrating voting control with Erayak International Limited, which holds in aggregate 40.61% of the voting power of our capital g, preventing you and other stockholders from influencing significant decisions, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring shareholder approval.
Our auditors, TPS Thayer and Fortune CPA, the independent registered public accounting firms, as auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess TPS Thayer and Fortune CPA’s compliance with applicable professional standards.
Our former auditor (TPS Thayer) and our current auditor (Fortune CPA), the independent registered public accounting firms, as auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess TPS Thayer and Fortune CPA’s compliance with applicable professional standards.
If we fail to protect our intellectual property rights, it could harm our business and competitive position. We rely on a combination of patent, trademark, and domain name laws and non-disclosure agreements, and other methods to protect our intellectual property rights. Our Chinese subsidiaries and our Chairman, together, own 21 patents and 3 trademarks.
If we fail to protect our intellectual property rights, it could harm our business and competitive position. We rely on a combination of patent, trademark, and domain name laws and non-disclosure agreements, and other methods to protect our intellectual property rights. Our Chinese subsidiaries and our Chairman, together, own 61 patents and 12 trademarks.
For example, the average accounts receivable turnover period was approximately 145 days and 79 days for the fiscal periods ended December 31, 2023 and 2022, respectively. Due to uncertainty of the timing of collection, we established an allowance for doubtful accounts based on individual account analysis and historical collection trends.
For example, the average accounts receivable turnover period was approximately 110 days and 145 days for the fiscal periods ended December 31, 2024 and 2023, respectively. Due to uncertainty of the timing of collection, we established an allowance for doubtful accounts based on individual account analysis and historical collection trends.
ITEM 3. KEY INFORMATION A. Selected Financial Data Summary of Financial Position and Cash Flows Erayak Power Solution Group Inc. and Subsidiaries The consolidated financial statements included in this annual report reflect financial position and cash flows of the registrant, Cayman Islands incorporated parent company, Erayak Power Solution Group Inc., together with those of its subsidiaries, on a consolidated basis.
Selected Financial Data Summary of Financial Position and Cash Flows Erayak Power Solution Group Inc. and Subsidiaries The consolidated financial statements included in this Annual Report reflect financial position and cash flows of the registrant, Cayman Islands incorporated parent company, Erayak Power Solution Group Inc., together with those of its subsidiaries, on a consolidated basis.
As of the date of this annual report, there are currently 8,000,000 Class A ordinary shares and 1,000,000 Class B ordinary shares issued and outstanding. Holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all matters submitted to a vote by the shareholders.
As of the date of this Annual Report, there are currently 44,032,942 Class A ordinary shares and 1,000,000 Class B ordinary shares issued and outstanding. Holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all matters submitted to a vote by the shareholders.
It may result in significant provisions and impairments on our accounts receivable which in turn would have a material adverse impact on our business operations, results of operation, financial condition, and our business pursuits and prospects. We had allowance for doubtful accounts in the amount of $39,280 and $2,478 as of December 31, 2023 and 2022, respectively.
It may result in significant provisions and impairments on our accounts receivable which in turn would have a material adverse impact on our business operations, results of operation, financial condition, and our business pursuits and prospects. We had allowance for doubtful accounts in the amount of $259,555 and $39,280 as of December 31, 2024 and 2023, respectively.
The Company also has bank acceptance notes outstanding with the banks and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. As of December 31, 2023 and 2022, restricted cash was $1,062 and $34,728, respectively. No cash is restricted to assure future credit availability.
The Company also has bank acceptance notes outstanding with the banks and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. As of December 31, 2024 and 2023, restricted cash was $792,204 and $1,062, respectively. No cash is restricted to assure future credit availability.
All 21 patents and 3 trademarks have been registered with regulatory agencies such as the State Intellectual Property Office and Trademark Office of China’s State Administration for Industry and Commerce (“SAIC”).
All 61 patents and 12 trademarks have been registered with regulatory agencies such as the State Intellectual Property Office and Trademark Office of China’s State Administration for Industry and Commerce (“SAIC”).
The currently Class B Ordinary Shares outstanding are beneficially owned by our Chief Executive Officer, Mr. Lingyi Kong through Erayak International Limited, representing 92.9% of the aggregate voting power of our currently outstanding Ordinary Shares as of the date hereof. As of the date of this Annual Report, Mr. Kong holds 83.87% of the aggregate voting power.
The currently Class B Ordinary Shares outstanding are beneficially owned by our Chief Executive Officer, Mr. Lingyi Kong through Erayak International Limited, representing 40.61% of the aggregate voting power of our currently outstanding Ordinary Shares as of the date hereof. As of the date of this Annual Report, Mr. Kong holds 40.61% of the aggregate voting power.
The balance sheet amounts, with the exception of shareholders’ equity at December 31, 2023 and 2022 were translated at RMB7.0999 and RMB6.8972 to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate.
The balance sheet amounts, with the exception of shareholders’ equity at December 31, 2024 and 2023 were translated at RMB7.2993 and RMB7.0999 to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate.
The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Translation adjustments included in accumulated other comprehensive income (loss) amounted to $(360,677) and $(383,942) as of December 31, 2023 and 2022, respectively.
The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Translation adjustments included in accumulated other comprehensive income (loss) amounted to $(500,376) and $(360,677) as of December 31, 2024 and 2023, respectively.
The average translation rates applied to the statement of income accounts for the years ended December 31, 2023 and 2022 were RMB7.0809 and RMB6.7290 to $1.00, respectively.
The average translation rates applied to the statement of income accounts for the years ended December 31, 2024 and 2023 were RMB7.1957 and RMB7.0809 to $1.00, respectively.
For the year ended December 31, 2023, our CEO and CFO received $29,722 and $30,317 respectively as compensation. If, in the future, we need to compensate our CEO and CFO at a competitive market rate, our operating results and available cash flow would be negatively impacted accordingly. We rely on short-term borrowings for our liquidity.
For the year ended December 31, 2024, our CEO and CFO received $34,743 and $21,680 respectively as compensation. If, in the future, we need to compensate our CEO and CFO at a competitive market rate, our operating results and available cash flow would be negatively impacted accordingly. We rely on short-term borrowings for our liquidity.
Any significant growth in the market for our products or our entry into new markets may require additional employees for managerial, operational, financial, and other purposes. As of the date of this Annual Report, we have 120 employees. We would also need to continue to expand, train and manage our employees.
Any significant growth in the market for our products or our entry into new markets may require additional employees for managerial, operational, financial, and other purposes. As of December 31, 2024, we have 360 employees. We would also need to continue to expand, train and manage our employees.
Our top two customers accounted for approximately 27% of revenues for the fiscal year ended December 31, 2021, and the amount due from these customers included in accounts receivable was $46,633, representing 2.65% of total accounts receivable. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers.
Our top two customers accounted for 25.49% of revenues for the fiscal year ended December 31, 2022, and the amount due from these customers included in accounts receivable was $2,814,639, representing 28.25% of total accounts receivable. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers.
The Company’s auditor, TPS Thayer, is based in Sugar Land, Texas, and therefore is not affected by this mandate by the PCAOB. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China.
The Company’s auditor, Fortune CPA, is based in Orange, California, and therefore is not affected by this mandate by the PCAOB. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China.
Our future marketing efforts will likely require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all, and, even if they do, any increases in revenues may not offset the expenses incurred.
Currently, we promote our brand through print media advertising, video advertising, billboard advertising, and internet promotions. Our future marketing efforts will likely require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all, and, even if they do, any increases in revenues may not offset the expenses incurred.
In the event we incur additional indebtedness, the risks described above could increase. We have a high debt to asset ratio, which may put us at high risk of default on our loans. As of December 31, 2023, we had $15,083,178 in total liabilities and $35,285,266 in total assets.
In the event we incur additional indebtedness, the risks described above could increase. We have a high debt to asset ratio, which may put us at high risk of default on our loans. As of December 31, 2024, we had $19,447,468 in total liabilities and $46,033,203 in total assets.
You should not expect that our sales of products would continue to offset the potential increase in the pricing of the metal and semiconductor products due to any increased tariffs. As a result of increasing costs, our potentially increased pricing could harm our operations and financial conditions.
You should not expect that our sales of products would continue to offset the potential increase in the pricing of the metal and semiconductor products due to any increased tariffs.
Beside the significant customer, there were other significant concentrations of accounts receivable, which included four customers who accounted for 25.19%, 20.59%, 11.73% and 10.28%, respectively, of the total accounts receivable for the fiscal year ended December 31, 2023.Our top two customers accounted for 25.49% of revenues for the fiscal year ended December 31, 2022, and the amount due from these customers included in accounts receivable was $2,814,639, representing 28.25% of total accounts receivable.
Beside the significant customer, there were other significant concentrations of accounts receivable, which included four customers who accounted for 25.19%, 20.59%, 11.73% and 10.28%, respectively, of the total accounts receivable for the fiscal year ended December 31, 2023.
Any of these actions by the PRC government may have a material adverse effect on our business and results of operations. Risks Related to Our Business and Industry We are a holding company, and may rely on dividends paid by our subsidiaries for our cash needs.
Risks Related to Our Business and Industry ● We are a holding company, and may rely on dividends paid by our subsidiaries for our cash needs.
(“Parent Company” in the tables below), and its subsidiaries, together with eliminating adjustments: Consolidated Statements of Operations Information As of December 31, 2023 As of December 31, 2022 As of December 31, 2021 Parent Subsidiaries Subtotal Elimination Consolidated Parent Subsidiaries Subtotal Elimination Consolidated Parent Subsidiaries Subtotal Elimination Consolidated Assets Current assets Cash 2,364 5,876,070 5,878,434 - 5,878,434 6,417,339 649,908 7,067,247 - 7,067,247 - 5,174,693 5,174,693 - 5,174,693 A/R, net - 6,253,189 6,253,189 - 6,253,189 - 9,961,343 9,961,343 - 9,961,343 - 1,753,880 1,753,880 - 1,753,880 Inventories - 7,056,459 7,056,459 - 7,056,459 - 6,227,456 6,227,456 - 6,227,456 - 3,902,067 3,902,067 - 3,902,067 Prepaids and other current assets 5,000,000 1,910,108 6,910,108 (4,000,000 ) 2,910,108 4,201,354 779,328 4,980,682 (1,000 ) 4,979,682 - 2,663,417 2,663,417 - 2,663,417 Due from related parties - - - - - - - - - - Due from subsidiaries 1,569,000 - 1,569,000 (1,569,000 ) - - - - - - Due from parent - 21,510 21,510 (21,510 ) - - - - - - - - - - - Total current assets 6,571,364 21,117,336 27,688,700 (5,590,510 ) 22,098,190 10,618,693 17,618,035 28,236,728 (1,000 ) 28,235,728 - 13,494,057 13,494,057 - 13,494,057 PPE, net - 1,924,975 1,924,975 - 1,924,975 - 1,662,155 1,662,155 - 1,662,155 - 1,079,983 1,079,983 - 1,079,983 Intangibles, net - 31,853 31,853 - 31,853 - 8,814 8,814 - 8,814 - 11,093 11,093 - 11,093 ROU, net - 7,338,505 7,338,505 - 7,338,505 - 7,665,013 7,665,013 - 7,665,013 - 8,849,073 8,849,073 - 8,849,073 Deferred tax assets - 32,534 32,534 - 32,534 - 33,490 33,490 - 33,490 - 36,247 36,247 - 36,247 Deffered expenses - - - - - - - - - - Other non-current assets - 3,859,209 3,859,209 - 3,859,209 Investment in subsidiaries 4,090,573 - 4,090,573 (4,090,573 ) - 29,472 - 29,472 (29,472 ) - 1,061,410 - 1,061,410 (1,061,410 ) - Total assets 10,661,938 34,304,412 44,966,350 (9,681,083 ) 35,285,266 10,648,165 26,987,507 37,635,672 (30,472 ) 37,605,200 1,061,410 23,470,453 24,531,863 (1,061,410 ) 23,470,453 Liabilities Current liabilities A/P - 5,689,101 5,689,101 - 5,689,101 - 4,729,174 4,729,174 - 4,729,174 - 4,151,749 4,151,749 - 4,151,749 Accrued exp and other current liabilities - 7,876,981 7,876,981 (4,000,000 ) 3,876,981 1,000 1,501,620 1,502,620 (1,000 ) 1,501,620 - 1,168,464 1,168,464 - 1,168,464 Notes payable - - - - - - - - - - S/T borrowings - 70,424 70,424 - 70,424 - 6,227,165 6,227,165 - 6,227,165 - 5,756,146 5,756,146 - 5,756,146 Tax payables - 1,066,569 1,066,569 - 1,066,569 - 844,925 844,925 - 844,925 - 633,919 633,919 - 633,919 Due to related parties 161,101 2,122,028 2,283,129 - 2,283,129 391,151 391,151 391,151 158,198 158,198 - 158,198 Due to subsidiaries 21,510 - 21,510 (21,510 ) - - - - - - - - - - - Due to parent - 1,569,000 1,569,000 (1,569,000 ) - - - - L/T payable - current - 225,383 225,383 - 225,383 4,349,591 4,349,591 4,349,591 Total current liabilities 182,611 18,619,486 18,802,097 (5,590,510 ) 13,211,587 1,000 18,043,626 18,044,626 (1,000 ) 18,043,626 - 11,868,476 11,868,476 - 11,868,476 Lease liability - - - - - - - - - - - - - - - L/T payable - 1,871,591 1,871,591 - 1,871,591 - 217,523 217,523 - 217,523 - 4,707,655 4,707,655 - 4,707,655 Total liabilities 182,611 20,491,077 20,673,688 (5,590,510 ) 15,083,178 1,000 18,261,149 18,262,149 (1,000 ) 18,261,149 - 16,576,131 16,576,131 - 16,576,131 Shareholders’ equity Ordinary shares, $0.0001 par, 500,000,000 shares authorized, 11,000,000 Class A and 1,000,000 Class B ordinary shares issued and o/s 1,200 4,090,573 4,091,773 (4,090,573 ) 1,200 1,200 29,472 30,672 (29,472 ) 1,200 900 1,061,410 1,062,310 (1,061,410 ) 900 Additional paid in capital 10,645,122 - 10,645,122 - 10,645,122 10,645,122 - 10,645,122 - 10,645,122 1,060,510 0 1,060,510 - 1,060,510 Statutory surplus reserve - 1,113,170 1,113,170 - 1,113,170 - 916,912 916,912 916,912 - 568,418 568,418 - 568,418 R/E (166,989 ) 9,354,204 9,187,215 - 9,187,215 850 8,163,909 8,164,759 8,164,759 - 5,037,292 5,037,292 - 5,037,292 ) AOCI(loss) (7 ) (744,612 ) (744,619 ) - (744,619 ) (7 ) (383,935 ) (383,942 ) (383,942 ) - 227,202 227,202 - 227,202 ) Total shareholders’ equity 10,479,327 13,813,334 24,292,661 (4,090,573 ) 20,202,087 10,647,165 8,726,358 19,373,523 (29,472 ) 19,344,051 1,061,410 6,894,322 7,955,732 (1,061,410 ) 6,894,322 Total liabilities and shareholders’ equity 10,661,938 34,304,411 44,966,349 (9,681,083 ) 35,285,266 10,648,165 26,987,507 37,635,672 (30,472 ) 37,605,200 1,061,410 23,470,453 24,531,863 (1,061,410 ) 23,470,453 1 For the year ended December 31, 2023 For the year ended December 31, 2022 For the year ended December 31, 2021 Parent Subsidiaries Subtotal Elimination Consolidated Parent Subsidiaries Subtotal Elimination Consolidated Parent Subsidiaries Subtotal Elimination Consolidated Cash flows from operating activities Net income (167,839 ) 1,386,552 1,218,714 - 1,218,714 850 3,475,111 3,475,961 - 3,475,961 - 3,394,649 3,394,649 - 3,394,649 Adj for items not affecting cash Depreciation and amortization - 388,002 388,002 - 388,002 - 269,817 269,817 - 269,817 - 215,121 215,121 - 215,121 Deferred tax assets - - - - - - - - - - ) Bad debt expense - 36,972 36,972 - 36,972 - - - - - - 2,649 2,649 - 2,649 Inventory impairment provision - 81,621 81,621 - 81,621 ) - (31,668 ) (31,668 ) - (31,668 ) Deferred expenses - - - - - - - - - - ) Imputed interest expenses - 17,755 17,755 - 17,755 - 27,121 27,121 - 27,121 - 70,195 70,195 - 70,195 Right of use lease asset - 514,691 514,691 - 514,691 - 523,774 523,774 - 523,774 - 546,362 546,362 - 546,362 Changes in peration assets and liabilities: Accounts receivable - 3,395,976 3,395,976 - 3,395,976 ) - (8,549,354 ) (8,549,354 ) - (8,549,354 - 3,380,552 3,380,552 - 3,380,552 ) Inventories - (1,091,117 ) (1,091,117 ) - (1,091,117 ) - (2,656,056 ) (2,656,056 ) - (2,656,056 ) - (2,200,180 ) (2,200,180 ) - (2,200,180 ) Advances to suppliers - (1,250,467 ) (1,250,467 ) - (1,250,467 ) - 1,227,244 1,227,244 - 1,227,244 ) - (1,109,383 ) (1,109,383 ) - (1,109,383 ) Prepaid expenses and Other receivables - (126,386 ) (126,386 ) - (126,386 ) - 428,846 428,846 (1,000 ) 427,846 - (361,983 ) (361,983 ) - (361,983 ) Loan receivable - 163,821 163,821 - 163,821 ) (172,388 ) (172,388 ) - (172,388 ) Accounts payable - 1,085,320 1,085,320 - 1,085,320 - 661,080 661,080 - 661,080 - 803,612 803,612 - 803,612 ) Accrued expenses and other current liabilities - 6,382,631 6,382,631 (4,021,510 ) 2,361,121 (1,000 ) 164,303 163,303 1,000 164,303 - 356,061 356,061 - 356,061 Advances from customers - (334,225 ) (334,225 ) - (334,225 ) - 215,483 215,483 - 215,483 - (276,454 ) (276,454 ) - (276,454 ) Tax payable - 246,425 246,425 - 246,425 - 265,702 265,702 - 265,702 - (195,033 ) (195,033 ) - (195,033 ) Net cash provided by (used in) operating (167,839 ) 10,897,572 10,729,733 (4,000,000 ) 6,729,733 ) (150 ) (4,150,985 ) (4,151,135 ) - (4,151,135 ) - 4,642,893 4,642,893 - 4,642,893 Cash flows from investing activities Purchases of property, plant and equipment - (684,210 ) (684,210 ) - (684,210 ) - (694,813 ) (694,813 ) - (694,813 ) - (244,018 ) (244,018 ) - (244,018 ) Purchases of intangible assets - (25,689 ) (25,689 ) - (25,689 ) - - - - - - (155 ) (155 ) - (155 ) Fixed deposit - (3,869,565 ) (3,869,565 ) - (3,869,565 ) Long-term investment (3,900,000 ) (8,010,035 ) (11,910,035 ) 11,910,035 - Advance payment of potential LT warehouse lease (1,000,000 ) - (1,000,000 ) - (1,000,000 ) Advance payment of potential oversea land purchase 201,354 - 201,354 4,000,000 4,201,354 ) (4,201,354 ) - (4,201,354 ) - (4,201,354 ) Net cash provided by (used in) investing (4,698,646 ) (12,589,499 ) (17,288,145 ) 15,910,035 (1,378,110 ) (4,201,354 ) (694,813 ) (4,896,167 ) - (4,896,167 ) - (244,173 ) (244,173 ) - (244,173 ) Cash flows from financing activities Proceeds from short-term borrowings - 4,653,363 4,653,363 - 4,653,363 - 8,381,681 8,381,681 - 8,381,681 - 4,284,208 4,284,208 - 4,284,208 Repayments on short-term borrowings - (10,231,750 ) (10,231,750 ) - (10,231,750 ) - (7,450,134 ) (7,450,134 ) - (7,450,134 ) - (4,182,881 ) (4,182,881 ) - (4,182,881 ) Proceeds from related parties - 16,968,314 16,968,314 - 16,968,314 - 24,015,431 24,015,431 - 24,015,431 - 15,311,425 15,311,425 - 15,311,425 Repayments to related parties - (15,064,679 ) (15,064,679 ) - (15,064,679 ) - (23,930,302 ) (23,930,302 ) (23,930,302 ) - (16,172,950 ) (16,172,950 ) - (16,172,950 ) Proceeds from parent - 1,570,000 1,570,000 (1,547,490 ) 22,510 Payments to parent - (21,510 ) (21,510 ) 21,510 - Proceeds from subsidiaries 21,510 - 21,510 (21,510 ) - Payments to subsidiaries (1,570,000 ) - (1,570,000 ) 1,547,490 (22,510 ) Proceeds(repayment) of notes payable - - - - - - - (7,285,918 ) (7,285,918 ) - (7,285,918 ) Proceeds from long-term loans - 6,312,856 6,312,856 - 6,312,856 - 1,235,004 1,235,004 - 1,235,004 Repayments on long-term loans - (9,075,497 ) (9,075,497 ) - (9,075,497 ) - (1,012,044 ) (1,012,044 ) - (1,012,044 ) Proceeds from share issuance - - - - - 10,080,231 - 10,080,231 - 10,080,231 APIC received - 11,910,035 11,910,035 (11,910,035 ) - - - - - - - - - - - Net cash provided by (used in) financing (1,548,490 ) 7,021,132 5,472,642 (11,910,035 ) (6,437,393 ) 10,080,231 1,239,636 11,319,867 - 11,319,867 - (3,395,530 ) (3,395,530 ) - (3,395,530 ) Effect of foreign exchange - (103,044 ) (103,044 ) - (103,044 ) 538,612 (918,623 ) (380,011 ) - (380,011 ) - 109,448 109,448 - 109,448 Net increase (decrease) in cash (6,414,975 ) 5,329,205 (1,085,770 ) - (1,085,770 ) 6,417,339 (4,524,785 ) 1,892,554 - 1,892,554 - 1,003,190 1,003,190 - 1,003,190 Cash, beginning 6,417,339 649,908 7,067,247 - 7,067,247 - 5,174,693 5,174,693 - 5,174,693 - 4,062,055 4,062,055 - 4,062,055 Cash, end 2,364 5,876,070 5,878,434 - 5,878,434 6,417,339 649,908 7,067,247 - 7,067,247 - 5,174,693 5,174,693 - 5,174,693 Cash paid during the period for: - 410,922 410,922 - 410,922 Interest - 831,755 831,755 - 831,755 - 99,690 99,690 - 99,690 Income taxes - - - - - - 123,608 123,608 - 123,608 - 365,752 365,752 - 365,752 The parent company, Erayak Power Solution Group Inc, does not conduct operations separately from its China-based subsidiaries.
As of Dec 31, 2024, 49,588,235 Class A shares issued and o/s; As of Dec 31, 2023 and 2022, 11,000,000 Class A shares issued and o/s. 1,000,000 Class B ordinary shares issued and o/s 5,059 4,090,580 4,093,380 (4,090,580 ) 5,059 1,200 4,090,573 4,091,773 (4,090,573 ) 1,200 1,200 29,472 30,672 (29,472 ) 1,200 Additional paid in capital 18,641,264 - 18,641,264 18,641,264 10,645,122 - 10,645,122 - 10,645,122 10,645,122 - 10,645,122 - 10,645,122 Statutory surplus reserve - 1,123,204 1,123,204 1,123,204 - 1,113,170 1,113,170 - 1,113,170 - 916,912 916,912 916,912 R/E (281,075 ) 8,342,280 8,061,204 8,061,204 (166,989 ) 9,354,204 9,187,215 - 9,187,215 850 8,163,909 8,164,759 8,164,759 ) AOCI(loss) (1,244,996 ) (1,244,996 ) (1,244,996 ) (7 ) (744,612 ) (744,619 ) - (744,619 ) (7 ) (383,935 ) (383,942 ) (383,942 ) Total shareholders’ equity 18,365,247 12,311,068 30,676,315 (4,090,580 ) 26,585,735 10,479,327 13,813,334 24,292,661 (4,090,573 ) 20,202,087 10,647,165 8,726,358 19,373,523 (29,472 ) 19,344,051 Total liabilities and shareholders’ equity 18,977,637 44,965,147 63,942,784 (17,909,580 ) 46,033,203 10,661,938 34,304,411 44,966,349 (9,681,083 ) 35,285,266 10,648,165 26,987,507 37,635,672 (30,472 ) 37,605,200 14 For the year ended December 31, 2024 For the year ended December 31, 2023 For the year ended December 31, 2022 Parent Subsidiaries Subtotal Elimination Consolidated Parent Subsidiaries Subtotal Elimination Consolidated Parent Subsidiaries Subtotal Elimination Consolidated Cash flows from operating activities Net income (114,086 ) (1,001,890 ) (1,115,977 ) - (1,115,977 ) (167,839 ) 1,386,552 1,218,714 - 1,218,714 850 3,475,111 3,475,961 - 3,475,961 Adj for items not affecting cash Depreciation and amortization - 431,921 431,921 - 431,921 - 388,002 388,002 - 388,002 - 269,817 269,817 - 269,817 Deferred tax assets - (70,346 ) (70,346 ) - (70,346 ) - - - - - ) Bad debt expense - 224,534 224,534 - 224,534 - 36,972 36,972 - 36,972 - - - - - Inventory impairment provision - 295,907 295,907 - 295,907 - 81,621 81,621 - 81,621 ) - (31,668 ) (31,668 ) - (31,668 Deferred expenses - - - - - - - - - - ) Imputed interest expenses - - - - - - 17,755 17,755 - 17,755 - 27,121 27,121 - 27,121 Right of use lease asset - 689,922 689,922 - 689,922 - 514,691 514,691 - 514,691 - 523,774 523,774 - 523,774 Changes in operation assets and liabilities: Accounts receivable - (6,261,153 ) (6,261,153 ) - (6,261,153 ) - 3,395,976 3,395,976 - 3,395,976 ) - (8,549,354 ) (8,549,354 ) - (8,549,354 ) Inventories - (2,297,437 ) (2,297,437 ) - (2,297,437 ) - (1,091,117 ) (1,091,117 ) - (1,091,117 ) - (2,656,056 ) (2,656,056 ) - (2,656,056 ) Advances to suppliers - (6,947,539 ) (6,947,539 ) (6,947,539 ) - (1,250,467 ) (1,250,467 ) - (1,250,467 ) - 1,227,244 1,227,244 - 1,227,244 ) Prepaid expenses and Other receivables (21,510 ) 1,949 (19,561 ) - (19,561 ) - (126,386 ) (126,386 ) - (126,386 ) - 428,846 428,846 (1,000 ) 427,846 ) Loan receivable - - - - - - 163,821 163,821 - 163,821 ) (172,388 ) (172,388 ) - (172,388 Accounts payable - 2,644,525 2,644,525 - 2,644,525 - 1,085,320 1,085,320 - 1,085,320 - 661,080 661,080 - 661,080 ) Accrued expenses and other current liabilities - (2,498,165 ) (2,498,165 ) - (2,498,165 ) - 6,382,631 6,382,631 (4,021,510 ) 2,361,121 (1,000 ) 164,303 163,303 1,000 164,303 Advances from customers - 284,372 284,372 - 284,372 - (334,225 ) (334,225 ) - (334,225 ) - 215,483 215,483 - 215,483 ) Tax payable - (16,269 ) (16,269 ) - (16,269 ) - 246,425 246,425 - 246,425 - 265,702 265,702 - 265,702 ) - - - - - Net cash provided by (used in) operating (85,596 ) (15,791,043 ) (15,876,639 ) - (15,876,639 ) (167,839 ) 10,897,572 10,729,733 (4,000,000 ) 6,729,733 ) (150 ) (4,150,985 ) (4,151,135 ) - (4,151,135 Cash flows from investing activities Purchases of property, plant and equipment - (517,813 ) (517,813 ) - (517,813 ) - (684,210 ) (684,210 ) - (684,210 ) - (694,813 ) (694,813 ) - (694,813 ) Purchases of intangible assets - (37,082 ) (37,082 ) - (37,082 ) - (25,689 ) (25,689 ) - (25,689 ) - - - - - ) Fixed deposit - (3,869,565 ) (3,869,565 ) - (3,869,565 ) Long-term investment - (416,916 ) (416,916 ) (416,916 ) (3,900,000 ) (8,010,035 ) (11,910,035 ) 11,910,035 - Advance payment of potential LT warehouse lease - - - - - (1,000,000 ) - (1,000,000 ) - (1,000,000 ) Advance payment of potential oversea land purchase - - - - - 201,354 - 201,354 4,000,000 4,201,354 ) (4,201,354 ) - (4,201,354 ) - (4,201,354 Net cash provided by (used in) investing - (971,811 ) (971,811 ) - (971,811 ) (4,698,646 ) (12,589,499 ) (17,288,145 ) 15,910,035 (1,378,110 ) (4,201,354 ) (694,813 ) (4,896,167 ) - (4,896,167 ) - - - - - Cash flows from financing activities - - - - - Proceeds from short-term borrowings - 1,310,576 1,310,576 - 1,310,576 - 4,653,363 4,653,363 - 4,653,363 - 8,381,681 8,381,681 - 8,381,681 Repayments on short-term borrowings - (309,032 ) (309,032 ) - (309,032 ) - (10,231,750 ) (10,231,750 ) - (10,231,750 ) - (7,450,134 ) (7,450,134 ) - (7,450,134 ) Proceeds from related parties 2,081,165 9,644,699 11,725,864 - 11,725,864 - 16,968,314 16,968,314 - 16,968,314 - 24,015,431 24,015,431 - 24,015,431 Repayments to related parties (1,629,876 ) (8,780,767 ) (10,410,643 ) - (10,410,643 ) - (15,064,679 ) (15,064,679 ) - (15,064,679 ) - (23,930,302 ) (23,930,302 ) (23,930,302 ) Proceeds from parent - 8,250,000 8,250,000 (8,250,000 ) - - 1,570,000 1,570,000 (1,547,490 ) 22,510 Payments to parent - - - - - - (21,510 ) (21,510 ) 21,510 - Proceeds from subsidiaries - - - - - 21,510 - 21,510 (21,510 ) - Payments to subsidiaries (8,250,000 ) - (8,250,000 ) 8,250,000 - (1,570,000 ) - (1,570,000 ) 1,547,490 (22,510 ) Proceeds from long-term loans - 3,846,742 3,846,742 - 3,846,742 - 6,312,856 6,312,856 - 6,312,856 - 1,235,004 1,235,004 - 1,235,004 Repayments on long-term loans - (1,782,400 ) (1,782,400 ) - (1,782,400 ) - (9,075,497 ) (9,075,497 ) - (9,075,497 ) - (1,012,044 ) (1,012,044 ) - (1,012,044 Proceeds from share issuance - - - - - - - - - - 10,080,231 - 10,080,231 - 10,080,231 APIC received 8,000,000 - 8,000,000 8,000,000 - 11,910,035 11,910,035 (11,910,035 ) - - - - - - Net cash provided by (used in) financing 201,289 12,179,818 12,381,107 - 12,381,107 (1,548,490 ) 7,021,132 5,472,642 (11,910,035 ) (6,437,393 ) 10,080,231 1,239,636 11,319,867 - 11,319,867 ) Effect of foreign exchange - (86,282 ) (86,282 ) - (86,282 ) - (103,044 ) (103,044 ) - (103,044 ) 538,612 (918,623 ) (380,011 ) - (380,011 Net increase (decrease) in cash 115,693 (4,583,036 ) (4,467,343 ) - (4,467,343 ) (6,414,975 ) 5,329,205 (1,085,770 ) - (1,085,770 ) 6,417,339 (4,524,785 ) 1,892,554 - 1,892,554 Cash, beginning 2,364 5,876,070 5,878,434 - 5,878,434 6,417,339 649,908 7,067,247 - 7,067,247 - 5,174,693 5,174,693 - 5,174,693 Cash, end 118,057 1,206,752 1,324,809 - 1,324,809 2,364 5,876,070 5,878,434 - 5,878,434 6,417,339 649,908 7,067,247 - 7,067,247 Cash paid during the period for: - 410,922 410,922 - 410,922 Interest - 831,755 831,755 - 831,755 Income taxes - - - - - - 123,608 123,608 - 123,608 The parent company, Erayak Power Solution Group Inc, does not conduct operations separately from its China-based subsidiaries.
Even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such a transaction.
Even if we can identify an appropriate business opportunity, there is no guarantee that we may be able to consummate the transaction successfully. Even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such a transaction.
As of December 31, 2023, we had one outstanding short-term loan totaling RMB 500,000, or approximately $0.07 million, and as of December 31, 2022, we had five outstanding short-term loans provided by two banks, totaling RMB32,950,000, or approximately $4.78 million.
As of December 31, 2024, we had three outstanding short-term loans provided by two banks totaling RMB7,706,808, or approximately $1.06 million, and as of December 31, 2023, we had one outstanding short-term loan totaling RMB500,000, or approximately $0.07 million.
We traditionally have had substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.
We traditionally have had substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues. We sold a substantial portion of products to one customer (21.50% of total revenues) during the fiscal year ended December 31, 2024.
We may evaluate and potentially consummate strategic investments or acquisitions from time to time, which could require significant management attention, disrupt our business, and adversely affect our financial results. We may evaluate and consider strategic investments, combinations, acquisitions, or alliances to further increase the value of our products and better serve our clients.
We may evaluate and consider strategic investments, combinations, acquisitions, or alliances to further increase the value of our products and better serve our clients. These transactions could be material to our financial condition and results of operations if consummated.
Successful promotion of our brand and our ability to attract clients depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our products. Currently, we promote our brand through print media advertising, video advertising, billboard advertising, and internet promotions.
We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing clients. Successful promotion of our brand and our ability to attract clients depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our products.
If we cannot continue to innovate or fail to adapt to changes in our industry, our business, financial condition, and results of operations would be materially and adversely affected. The power solution products industry has trends of developing high-end and high-tech products to fulfill the changing customers’ demands.
As a result, our operational continuity may be adversely and materially affected, which in turn may harm our reputation. 44 If we cannot continue to innovate or fail to adapt to changes in our industry, our business, financial condition, and results of operations would be materially and adversely affected.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. 57 According to the Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT, effective as of April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases.
There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. 70 According to the Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT, effective as of April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases.
The Notice on Comprehensively Promoting the Pilot Plan of the Conversion of Business Tax to Value-Added Tax, which was promulgated on March 23, 2016, became effective on May 1, 2016 and amended on July 11, 2017, sets out that VAT in lieu of business tax be collected in all regions and industries. 69 On March 20, 2019, MOF, SAT and GAC jointly promulgated the Announcement on Relevant Policies for Deepening Value-Added Tax Reform, which became effective on April 1, 2019 and provides that (i) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16% and 10% respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (ii) with respect to purchase of agricultural products originally subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (iii) with respect to purchase of agricultural products for the purpose of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate of 10%; (iv) with respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund rate shall be adjusted to 13%; and (v) with respect to export of goods and cross-border taxable acts originally subject to tax rate of 10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.
The Notice on Comprehensively Promoting the Pilot Plan of the Conversion of Business Tax to Value-Added Tax, which was promulgated on March 23, 2016, became effective on May 1, 2016 and amended on July 11, 2017, sets out that VAT in lieu of business tax be collected in all regions and industries. 82 On March 20, 2019, MOF, SAT and GAC jointly promulgated the Announcement on Relevant Policies for Deepening Value-Added Tax Reform, which became effective on April 1, 2019 and provides that (i) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16% and 10% respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (ii) with respect to purchase of agricultural products originally subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (iii) with respect to purchase of agricultural products for the purpose of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate of 10%; (iv) with respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund rate shall be adjusted to 13%; and (v) with respect to export of goods and cross-border taxable acts originally subject to tax rate of 10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.
In addition, the Foreign Investment Law and the Implementing Rules also specify other protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited, etc. 63 Regulations Relating to Land Use Right and Construction Pursuant to the PRC Land Administration Law promulgated in June 1986 with the latest amendment in August 2019 and the PRC Civil Code, any entity that needs land for the purposes of construction must obtain land use right and must register with local counterparts of Land and Resources Ministry.
In addition, the Foreign Investment Law and the Implementing Rules also specify other protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited, etc. 76 Regulations Relating to Land Use Right and Construction Pursuant to the PRC Land Administration Law promulgated in June 1986 with the latest amendment in August 2019 and the PRC Civil Code, any entity that needs land for the purposes of construction must obtain land use right and must register with local counterparts of Land and Resources Ministry.
Regulations Relating to Offshore Special Purpose Companies Held by PRC Residents SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents on May 10, 2013, which became effective on May 13, 2013 and which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. 66 SAFE promulgated Notice on Issues Relating to Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37, on July 4, 2014, that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
Regulations Relating to Offshore Special Purpose Companies Held by PRC Residents SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents on May 10, 2013, which became effective on May 13, 2013 and which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. 79 SAFE promulgated Notice on Issues Relating to Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37, on July 4, 2014, that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
In addition, according to the Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the State Council on February 3, 2011, and which became effective 30 days thereafter, the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the MOFCOM on August 25, 2011, and which became effective on September 1, 2011, mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the regulations prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement. 70 4.C.
In addition, according to the Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the State Council on February 3, 2011, and which became effective 30 days thereafter, the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the MOFCOM on August 25, 2011, and which became effective on September 1, 2011, mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the regulations prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement. 83 4.C.
We are aware that our PRC resident beneficial owners subject to these registration requirements have registered with the Beijing SAFE branch and/or qualified banks to reflect the recent changes to our corporate structure. 59 Regulations Relating to Dividend Distributions According to the PRC Company Law and Foreign Investment Law, each of our PRC subsidiaries, as a foreign invested enterprise, or FIE, are required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50% of its registered capital.
We are aware that our PRC resident beneficial owners subject to these registration requirements have registered with the Beijing SAFE branch and/or qualified banks to reflect the recent changes to our corporate structure. 72 Regulations Relating to Dividend Distributions According to the PRC Company Law and Foreign Investment Law, each of our PRC subsidiaries, as a foreign invested enterprise, or FIE, are required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50% of its registered capital.
However, according to CSRC Answers, only new initial public offerings and refinancing by existing overseas listed Chinese companies will be required to go through the filing process; other existing overseas listed companies will be allowed a sufficient transition period to complete their filing procedure, which means the Company will certainly go through the filing process in the future, perhaps because of refinancing, or after being given a sufficient transition period to complete the filing procedure as an existing overseas listed Chinese company. 60 In August 2006, six PRC regulatory authorities, including the CSRC, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, amended in June 2009.
However, according to CSRC Answers, only new initial public offerings and refinancing by existing overseas listed Chinese companies will be required to go through the filing process; other existing overseas listed companies will be allowed a sufficient transition period to complete their filing procedure, which means the Company will certainly go through the filing process in the future, perhaps because of refinancing, or after being given a sufficient transition period to complete the filing procedure as an existing overseas listed Chinese company. 73 In August 2006, six PRC regulatory authorities, including the CSRC, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, amended in June 2009.
In order to further implement the Regulations on Computer Software Protection, promulgated by the State Council on December 20, 2001 and amended on January 8, 2011 and January 30, 2013, respectively, the National Copyright Administration issued the Measures for the Registration of Computer Software Copyright on February 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights. 65 Trademark According to the Trademark Law of the People’s Republic of China promulgated by the SCNPC on August 23, 1982, and amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, respectively, the Trademark Office of the SAIC is responsible for the registration and administration of trademarks in China.
In order to further implement the Regulations on Computer Software Protection, promulgated by the State Council on December 20, 2001 and amended on January 8, 2011 and January 30, 2013, respectively, the National Copyright Administration issued the Measures for the Registration of Computer Software Copyright on February 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights. 78 Trademark According to the Trademark Law of the People’s Republic of China promulgated by the SCNPC on August 23, 1982, and amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, respectively, the Trademark Office of the SAIC is responsible for the registration and administration of trademarks in China.
Moreover, according to Negative List 2021, PRC entities which engage in any field forbidden by the Negative List 2021 for access of foreign investment shall be approved by competent PRC authorities when they seek listing offshore, and foreign investors shall not participate in operation and management and their shareholding ration shall be in compliance with PRC laws. 62 According to the Implementing Rules, the registration of foreign-invested enterprises shall be handled by the State Administration for Market Regulation (“SAMR”) or its authorized local counterparts.
Moreover, according to Negative List 2021, PRC entities which engage in any field forbidden by the Negative List 2021 for access of foreign investment shall be approved by competent PRC authorities when they seek listing offshore, and foreign investors shall not participate in operation and management and their shareholding ration shall be in compliance with PRC laws. 75 According to the Implementing Rules, the registration of foreign-invested enterprises shall be handled by the State Administration for Market Regulation (“SAMR”) or its authorized local counterparts.
The penalty imposed on the withholding agents may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities in accordance with the SAT Circular 7. 68 Withholding Tax on Dividend Distribution The EIT Law prescribes a standard withholding tax rate of 20% on dividends and other China-sourced income of non-PRC resident enterprises which have no establishment or place of business in the PRC, or if established, the relevant dividends or other China-sourced income are in fact not associated with such establishment or place of business in the PRC.
The penalty imposed on the withholding agents may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities in accordance with the SAT Circular 7. 81 Withholding Tax on Dividend Distribution The EIT Law prescribes a standard withholding tax rate of 20% on dividends and other China-sourced income of non-PRC resident enterprises which have no establishment or place of business in the PRC, or if established, the relevant dividends or other China-sourced income are in fact not associated with such establishment or place of business in the PRC.
We seek to leverage our flexibility and passion for quality to provide a personalized mobile living solution for each customer. 45 Since the founding of Zhejiang Leiya in 2009, it has grown to be a manufacturer that not only designs, develops and mass produces our own brand of premium power solution products, but has also established e-commerce channels in the retail chain.
We seek to leverage our flexibility and passion for quality to provide a personalized mobile living solution for each customer. 59 Since the founding of Zhejiang Leiya in 2009, it has grown to be a manufacturer that not only designs, develops and mass produces our own brand of premium power solution products, but has also established e-commerce channels in the retail chain.
See “ Risk Factors — Risks Related to Doing Business in China — Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. ” 61 Regulations Related to Foreign Investment The establishment, operation, and management of companies in China are mainly governed by the PRC Company Law, as most recently amended in 2018, which applies to both PRC domestic companies and foreign-invested companies.
See “ Risk Factors — Risks Related to Doing Business in China — Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. ” 74 Regulations Related to Foreign Investment The establishment, operation, and management of companies in China are mainly governed by the PRC Company Law, as most recently amended in 2018, which applies to both PRC domestic companies and foreign-invested companies.
Our Suppliers For the fiscal years ended December 31, 2023, 2022 and 2021, there was no significant concentration in suppliers for the Company’s raw material purchase. The Company has numerous suppliers that could be substituted should any of the current suppliers become unavailable or non-competitive. Our Competitive Advantages We are committed to offering our customers product diversity, quality and reliability.
Our Suppliers For the fiscal years ended December 31, 2024, 2023 and 2022, there was no significant concentration in suppliers for the Company’s raw material purchase. The Company has numerous suppliers that could be substituted should any of the current suppliers become unavailable or non-competitive. Our Competitive Advantages We are committed to offering our customers product diversity, quality and reliability.
No assurance can be given that third parties infringing our patents will not dispute the expiration dates of our patents or that we will be successful in defending against such disputes. 55 Trademark The following table sets forth a brief description of the Company’s trademarks, including their respective publication numbers, application filing date, issue date, expiration date and title.
No assurance can be given that third parties infringing our patents will not dispute the expiration dates of our patents or that we will be successful in defending against such disputes. 68 Trademark The following table sets forth a brief description of the Company’s trademarks, including their respective publication numbers, application filing date, issue date, expiration date and title.
Our efforts strive to achieve a powerful and long-lasting product. As for our inverters, to our knowledge, there are not many competitors on Amazon capable of producing inverters that power over 1000 Watts because of production- and technology-related difficulties. 52 ● Experienced Management Team. Our management team has the experience in manufacturing and e-commerce industries.
Our efforts strive to achieve a powerful and long-lasting product. As for our inverters, to our knowledge, there are not many competitors on Amazon capable of producing inverters that power over 1000 Watts because of production- and technology-related difficulties. 64 ● Experienced Management Team. Our management team has the experience in manufacturing and e-commerce industries.
Erayak is permitted under the Cayman Islands laws to provide funding to our subsidiaries in the PRC and Hong Kong through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Below is a chart illustrating our current corporate structure: 71 4.D.
Erayak is permitted under the Cayman Islands laws to provide funding to our subsidiaries in the PRC and Hong Kong through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Below is a chart illustrating our current corporate structure: 84 4.D.
Failure to comply with the above-mentioned regulations may subject an enterprise to fines, suspension of the construction and other administrative liabilities, and even criminal liabilities under severe circumstances. 64 Regulations Relating to Fire Prevention The Fire Prevention Law of the PRC, or the Fire Prevention Law, was adopted on April 29, 1998, and amended on October 28, 2008, April 23, 2019, and April 29, 2021.
Failure to comply with the above-mentioned regulations may subject an enterprise to fines, suspension of the construction and other administrative liabilities, and even criminal liabilities under severe circumstances. 77 Regulations Relating to Fire Prevention The Fire Prevention Law of the PRC, or the Fire Prevention Law, was adopted on April 29, 1998, and amended on October 28, 2008, April 23, 2019, and April 29, 2021.
Non-PRC resident enterprises without any branches in the PRC pay an enterprise income tax in connection with their income originating from the PRC at the tax rate of 10%. 67 On February 3, 2015, the PRC State Administration of Taxation, or the SAT, issued the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or the SAT Circular 7.
Non-PRC resident enterprises without any branches in the PRC pay an enterprise income tax in connection with their income originating from the PRC at the tax rate of 10%. 80 On February 3, 2015, the PRC State Administration of Taxation, or the SAT, issued the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or the SAT Circular 7.
Finally, when the products have been manufactured and introduced to the market, after-sales operations commence, which involve the implantation of daily promotion plans, solving and summarizing after-sales problems, inventory statistics and analysis, and formulation of replenishment plans. 51 Sales and Marketing Our Customer and Sales Our customers include large technology companies.
Finally, when the products have been manufactured and introduced to the market, after-sales operations commence, which involve the implantation of daily promotion plans, solving and summarizing after-sales problems, inventory statistics and analysis, and formulation of replenishment plans. 63 Sales and Marketing Our Customer and Sales Our customers include large technology companies.
Under the supervision of SAFE, the qualified banks may directly review the applications and conduct the registration. 58 On March 30, 2015, SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide.
Under the supervision of SAFE, the qualified banks may directly review the applications and conduct the registration. 71 On March 30, 2015, SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide.
Number Copyright Number Issue Country 1 2018SR916474 China 2 2018SR916512 China 3 2018SR916469 China 4 2018SR916478 China 56 Regulation This section sets forth a summary of the principal PRC laws and regulations relevant to our business and operations in China.
Number Copyright Number Issue Country 1 2018SR916474 China 2 2018SR916512 China 3 2018SR916469 China 4 2018SR916478 China 69 Regulation This section sets forth a summary of the principal PRC laws and regulations relevant to our business and operations in China.
We generated revenue mostly from four types of products: (1) inverters constituted approximately 59%, 52% and 82% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; (2) chargers, which generated approximately 2.68%, 2.16% and 7.52% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; (3) gasoline generators generated approximately 32.36%, 43.82% and 8.28% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; (4) power bank generated approximately 3.96%, 0% and 0% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.
We generated revenue mostly from four types of products: (1) inverters constituted approximately 46%, 59% and 52% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; (2) chargers, which generated approximately 1.82%, 2.68% and 2.16% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; (3) gasoline generators generated approximately 32.94%, 32.36% and 43.82% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; (4) power bank generated approximately 16.39%, 3.96% and 0% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively.
Through cooperation with Amazon, the Company’s new products are expected to receive greater exposure and effectively improve its European presence. 54 Intellectual Property Patent We currently have 21 Chinese patents issued and are to expire at various times from May 2025 through April 2033. We have exclusive rights to utilize the processes issued patent rights within the valid term.
Through cooperation with Amazon, the Company’s new products are expected to receive greater exposure and effectively improve its European presence. 66 Intellectual Property Patent We currently have 61 Chinese patents issued and are to expire at various times from June 2026 through April 2033. We have exclusive rights to utilize the processes issued patent rights within the valid term.
Property, plants and equipment Equipment Our production relies on a wide variety of equipment, including equipment for office use and multiple factory equipment facilitating a complete production cycle. At the end of 2023, our equipment’s total current value is around $1,463,029.
Property, plants and equipment Equipment Our production relies on a wide variety of equipment, including equipment for office use and multiple factory equipment facilitating a complete production cycle. At the end of 2024, our equipment’s total current value is around $2,240,129.
Beside the significant customer, there were other significant concentrations of accounts receivable, which included four customers who accounted for 18.08%, 15.85%, 11.58% and 10.24%, respectively, of the total accounts receivable for the fiscal year ended December 31, 2022. The Company sold a substantial portion of products to two customers (16% and 11% of total revenues) during fiscal year 2021.
Beside the significant customer, there were other significant concentrations of accounts receivable, which included four customers who accounted for 18.08%, 15.85%, 11.58% and 10.24%, respectively, of the total accounts receivable for the fiscal year ended December 31, 2022.
These products have entered the market in 2021. 53 Provide Superior Quality Products and Customer Service Our products play a critical role in various construction, infrastructure, equipment, and safety applications. Our emphasis on manufacturing processes, quality control testing and product development helps us deliver a high-quality product to our customers.
We will assess and pursue opportunities to utilize, optimize and grow production capacity to capitalize on market opportunities. 65 Provide Superior Quality Products and Customer Service Our products play a critical role in various construction, infrastructure, equipment, and safety applications. Our emphasis on manufacturing processes, quality control testing and product development helps us deliver a high-quality product to our customers.
From concept to finished product, we adopt a multi-step process to ensure that the final product presented to the public not only works optimally, but also endures the test of time.
Research and Development We have 30 employees working in the R&D department as of the date of this Annual Report. From concept to finished product, we adopt a multi-step process to ensure that the final product presented to the public not only works optimally, but also endures the test of time.
Patent Number File Date Issue Date Expiration Date* Title Issue Country 2021301396990 2021-03-16 8/10/21 8/9/31 A power converter (DAU-C0) China 2020305621635 2020-09-21 7/9/21 7/8/31 An open frame generator China 2020217629223 2020-08-21 7/9/21 7/8/31 A dual fuel generator with separate control device China 2020305092472 9/1/20 3/2/21 3/1/31 A power converter (DAU-C3) China 2020305092523 2020-09-01 3/2/21 3/1/31 A power converter (DAU-C2) China 2020305098873 2020-09-01 3/2/21 3/1/31 A power converter (DAU-C1) China 2020303354729 2020-06-28 12/22/20 12/21/30 Portable generator (EYG1000) China 2020303354682 2020-06-28 2/12/21 2/11/31 Portable generator (EYG1000i) China 2020202169180 2020-02-27 1/12/21 1/11/31 An interlock control display inverter China 2020202169195 2020-02-27 1/12/21 1/11/31 An integrated low power inverter China 2020202169265 2020-02-27 1/12/21 1/11/31 An integrated low power inverter China 2019306891357 2019-12-10 7/3/20 7/2/30 A power converter (DSU-80B1) China 2019306891380 2019-12-10 7/3/20 7/2/30 A power converter (DSU-3K0XZ) China 2019306891408 2019-12-10 7/3/20 7/2/30 A power converter (DSU-2K0XZ) China 2019306891465 2019-12-10 7/3/20 7/2/30 A converter (1038) China 2019306891484 2019-12-10 7/3/20 7/2/30 A power converter (DSU-300X) China 2019306891516 2019-12-10 7/3/20 7/2/30 A power converter (DSU-2K0XA) China 2019306896308 2019-12-10 7/14/20 7/13/30 A power converter (DSU-1K0X) China 2019306896280 2019-12-10 7/14/20 7/13/30 Inverter remote control (1038) China 2019221950498 2019-12-05 9/29/20 9/28/30 A wireless two-way interconnection and mutual control system China 201930517241.7 9/20/19 6/9/20 6/8/30 A power converter (DAU-Z3) China 201930517254.4 9/20/19 6/9/20 6/8/30 A power converter (DAU-Z2) China 201930517255.9 9/20/19 6/9/20 6/8/30 A power converter (DAU-Z1) China 201930352280.6 7/4/19 3/20/20 3/19/30 A power converter (AEG) China 201810276141.4 3/29/18 3/31/20 3/30/30 An event-driven jet ignition synchronization control method for EFI SI engine China 201630338616.X 7/22/16 1/18/17 1/17/27 A power converter (MSW-1) China 201630029535.1 1/27/16 6/29/16 6/28/26 A inverter China 201630029529.6 1/27/16 9/21/16 9/20/26 A generator China 2019221950498 12/5/19 9/29/20 9/28/30 A wireless two-way interconnection and mutual control system China 201630338482.1 7/22/16 12/7/16 12/6/26 A power converter (PSW-1) China 201930352278.9 7/4/19 3/20/20 3/19/30 A power converter (DSU-Z) China 201930352279.3 7/4/19 3/20/20 3/19/30 A power converter (DSU-Y) China * Patent expiration dates are routinely subject to dispute in patent infringement actions.
Patent Number File Date Issue Date Expiration Date* Title Issue Country 202510013512.X 2025-01-06 4/8/25 4/7/35 A control method and system for emergency generator sets China 202411760250.5 2024-12-03 3/7/25 3/6/35 A photovoltaic energy storage integrated machine China 202411760248.8 2024-12-03 3/7/25 3/6/35 A photovoltaic energy storage integrated machine China 202430513126.3 2024-08-14 3/21/25 3/20/35 Variable frequency generator (3500W) China 202430412760.8 2024-07-03 2/21/25 2/20/35 Portable generator China 2024303918147 2024-06-25 1/28/25 1/27/35 Voltage regulator (2000W) China 2024303917854 2024-06-25 1/21/25 1/20/35 Vehicle-mounted inverter (150W) China 2024303917888 2024-06-25 1/14/25 1/13/35 Energy storage inverter (6KW) China 2024303917337 2024-06-25 1/17/25 1/16/35 Energy storage inverter (5KW with ATS function) China 2024303917356 2024-06-25 1/14/25 1/13/35 Energy storage inverter (5KW) China 202421043198.7 2024-05-14 12/31/24 12/30/34 A display screen system based on UPS China 202430165526.X 2024-03-28 9/13/24 9/12/34 Power Converter Host (SICU) China 202430165539.7 2024-03-28 9/13/24 9/12/34 Power converter external line remote control (SICU) China 202430165539.7 2024-03-28 9/13/24 9/12/34 Inverter (DAU-150YB1) China 202410289279.3 2024-03-14 1/24/25 1/23/35 A dual-fuel generator with an automatic oil-gas switching system China 202420490677.7 2024-03-14 10/22/24 10/21/34 Dual-fuel automatic switching system and dual-fuel generator China 202311266113.1 2023-09-27 3/15/24 3/14/34 A photovoltaic inverter chassis and a photovoltaic inverter China 202311218891.3 2023-09-20 4/5/24 4/4/34 An outdoor inverter China 202330421621.7 2023-07-06 12/19/23 12/18/33 Power terminal (PW) China 202330421623.6 2023-07-06 12/19/23 12/18/33 Inverter (PIC-2000N) China 202330421624.0 2023-07-06 1/23/24 1/22/34 Inverter (PW ） China 202321058183.3 2023-05-06 4/23/24 4/22/34 Solar charging and energy storage power supply China 202321058165.5 2023-05-06 2/27/24 2/26/34 Battery pack inverter China 202222041238.1 2022-08-04 2/14/23 2/13/33 Battery charging system China 202230393396.6 2022-06-24 12/30/22 12/29/32 Mobile Energy Storage Power Supply (BDS-A) China 202130717007.6 2021-11-02 4/8/22 4/7/32 Mobile Energy Storage Power Supply (BDS-A) China 67 Patent Number File Date Issue Date Expiration Date* Title Issue Country 202130664806.1 2021-10-11 6/7/22 6/6/32 Cigarette lighter China 202130543441.7 2021-08-20 1/18/22 1/17/32 Inverter (8089Y China 202311266113.1 2019-12-05 12/27/24 12/26/34 A wireless two-way interconnection and mutual control control system China 201610606712.7 2016-07-29 9/28/28 9/27/38 Self-cooling multi-functional vehicle inverter China 2021301396990 2021-03-16 8/10/21 8/9/31 A power converter (DAU-C0) China 2020305621635 2020-09-21 7/9/21 7/8/31 An open frame generator China 2020217629223 2020-08-21 7/9/21 7/8/31 A dual fuel generator with separate control device China 2020305092472 9/1/20 3/2/21 3/1/31 A power converter (DAU-C3) China 2020305092523 2020-09-01 3/2/21 3/1/31 A power converter (DAU-C2) China 2020305098873 2020-09-01 3/2/21 3/1/31 A power converter (DAU-C1) China 2020303354729 2020-06-28 12/22/20 12/21/30 Portable generator (EYG1000) China 2020303354682 2020-06-28 2/12/21 2/11/31 Portable generator (EYG1000i) China 2020202169180 2020-02-27 1/12/21 1/11/31 An interlock control display inverter China 2020202169195 2020-02-27 1/12/21 1/11/31 An integrated low power inverter China 2020202169265 2020-02-27 1/12/21 1/11/31 An integrated low power inverter China 2019306891357 2019-12-10 7/3/20 7/2/30 A power converter (DSU-80B1) China 2019306891380 2019-12-10 7/3/20 7/2/30 A power converter (DSU-3K0XZ) China 2019306891408 2019-12-10 7/3/20 7/2/30 A power converter (DSU-2K0XZ) China 2019306891465 2019-12-10 7/3/20 7/2/30 A converter (1038) China 2019306891484 2019-12-10 7/3/20 7/2/30 A power converter (DSU-300X) China 2019306891516 2019-12-10 7/3/20 7/2/30 A power converter (DSU-2K0XA) China 2019306896308 2019-12-10 7/14/20 7/13/30 A power converter (DSU-1K0X) China 2019306896280 2019-12-10 7/14/20 7/13/30 Inverter remote control (1038) China 2019221950498 2019-12-05 9/29/20 9/28/30 A wireless two-way interconnection and mutual control system China 201930517241.7 9/20/19 6/9/20 6/8/30 A power converter (DAU-Z3) China 201930517254.4 9/20/19 6/9/20 6/8/30 A power converter (DAU-Z2) China 201930517255.9 9/20/19 6/9/20 6/8/30 A power converter (DAU-Z1) China 201930352280.6 7/4/19 3/20/20 3/19/30 A power converter (AEG) China 201810276141.4 3/29/18 3/31/20 3/30/30 An event-driven jet ignition synchronization control method for EFI SI engine China 201630338616.X 7/22/16 1/18/17 1/17/27 A power converter (MSW-1) China 201630029535.1 1/27/16 6/29/16 6/28/26 An inverter China 201630029529.6 1/27/16 9/21/16 9/20/26 A generator China 201630338482.1 7/22/16 12/7/16 12/6/26 A power converter (PSW-1) China 201930352278.9 7/4/19 3/20/20 3/19/30 A power converter (DSU-Z) China 201930352279.3 7/4/19 3/20/20 3/19/30 A power converter (DSU-Y) China * Patent expiration dates are routinely subject to dispute in patent infringement actions.
They are light-weighted and has large battery capacity and long battery life. Their Pure Sine Wave AC outlets deliver stable and safe power. They recharge quickly with AC adaptor at home or through the car outlet. They are also compatible with Erayak solar panel. They are ideal portable power kits for tent camping, overland journey and etc.
This series can recharge itself and charge up to six devices at the same time for outdoor needs. They are light-weighted and has large battery capacity and long battery life. Their Pure Sine Wave AC outlets deliver stable and safe power. They recharge quickly with AC adaptor at home or through the car outlet.
After confirmation by the customer, our procurement department will purchase the raw materials, and the production department will fulfill the order. Finally, our inspection department will inspect and issue a report affirming the quality before the production department pack and deliver the final product to the customer.
After confirmation by the customer, our procurement department will purchase the raw materials, and the production department will fulfill the order.
According to the maximum current, chargers can be divided into different phases from 1A to 12A. Original charging technology, using a high-grade eight-stage charging cycle, can repair lower-voltage batteries. DBS Portable Power Station Erayak’s DBS portable power station series can recharge itself and charge up to six devices at the same time for outdoor needs.
Smart Battery Chargers Erayak’s smart battery chargers are available in 6V and 12V configurations with adjustable output from 1A to 12A.The original charging technology, using a high-grade eight-stage charging cycle, can repair lower-voltage batteries.
After the power is connected, it will be automatically selected as the main power source while the RV battery will be recharged with electricity. 48 Our inverter’s frequency conversion technology it is not only highly efficient, it will also automatically adjust the output power while saving fuel, being environment friendly and noise-free.
DC to AC Inverters Our inverters convert 12V DC power into 110V/230V AC, covering a range from 100W to 3,000W. Our inverter’s frequency conversion technology not only shows highly efficiency, but also automatically adjusts the output power while saving fuel, being environment friendly and noise-free.
As of December 31, 2021, amount due from these customers included in accounts receivable was $46,633, representing 2.65% of total accounts receivable. There was another significant concentration of accounts receivable from one customer for the year ended December 31, 2021, which represented 49.60% of total accounts receivable.
The Company sold a substantial portion of products to one customers (21.50% of total revenues) during fiscal year ended December 31, 2024. As of December 31, 2024, amount due from this customer included in accounts receivable were $2,109,572, representing 17.16%, respectively, of total accounts receivable.
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Our Products We are mainly engaged in the manufacturing, R&D, wholesale, and retail of power solution products. According to our total revenue in the past three fiscal years, inverters, chargers, and gasoline generators are our top three categories, encompassing more than 95% of our total sales.
Added
Finally, our inspection department will inspect and issue a report affirming the quality before the production department pack and deliver the final product to the customer. 60 Recent Developments Initial Public Offering On December 19, 2022, the Company completed its initial public offering.
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Our sine wave inverters require high technical expertise and come with a high profit margin. Our inverter product selection includes off-grid inverters, 12v inverters, and 24v inverters, which all use either pure sine or modified sine wave inverters ranging from 75 watts to 3000 watts and are all compatible with solar energy powering.
Added
In the initial public offering, the Company issued 3,000,000 Ordinary Shares at a price of US$4.00 per share. The Company received gross proceeds in the amount of US$12 million before deducting any underwriting discounts or expenses.
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We also manufacture gasoline generators, such as Alternating Current (“AC”) generators and Direct Current (“DC”) generators, and battery chargers. Finally, we produce various inverter generators, including AC inverter generators and DC inverter generators. 46 Our major products include the following types: Off-grid Inverters The off-grid inverter is an electronic device that converts DC power into AC power.
Added
The Ordinary Shares began trading on December 14, 2022 on the Nasdaq Capital Market under the ticker symbol “RAYA.” Change of Independent Public Accountant On October 12, 2023, the Company notified its independent registered public accounting firm, TPS Thayer, its decision to dismiss TPS Thayer as the Company’s auditor.
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Off-grid inverters are mainly classified according to input current characteristics and output current characteristics. According to the input DC voltage, the inverters can be divided into 12v, 24v, 48v, and 72v inverters. According to the output current waveform, the inverters are divided into modified wave inverters and pure sine wave inverters.
Added
On the same day, the Audit Committee and the Board of Directors of the Company appointed Fortune CPA Inc as its new independent registered public accounting firm to audit the Company’s financial statements. Change of Director On November 30, 2023, Ms. Peiling Cheng tendered her resignation as independent director of the Conpany, effective November 30, 2023.
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According to the output current-voltage, the inverters are divided into low-voltage inverters (100v~120v) and high-voltage inverters (220v~240v). The inverters are also made into different power, such as 1000 watts and 2000 watts. The current converted by the pure sine wave inverters has higher quality and is more suitable for precision instruments, such as forklifts, radios or GPS.
Added
On November 30, 2023, approved by the Board of Directors, the Nominating Committee and the Compensation Committee, Mr. Tsang Sheung was appointed as independent director and chair of compensation committee of the Company, effective November 30, 2023.
Removed
In many systems with 12v batteries, 12v inverters can convert the 12v DC power into usable electricity for users. It is widely used in small vehicles, RVs, solar systems, and other fields. Under this category, inverters will be divided further according to the output waveform and output power.
Added
Regulatory Compliance On November 15, 2023, the Company received a letter from the Nasdaq Listing Qualifications, indicating that the Company is not in compliance with the minimum bid price requirement for continued listing set forth in Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share.
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In 12v Pure Sine Wave Inverters (75wattss~3000watts), the output current of the sine wave power inverter is the same as the common city grid. Because it does not have electromagnetic pollution in the grid, the inverters can provide high-quality AC power and drive any load.
Added
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has been granted a 180-calendar day compliance period, or until May 13, 2024, to regain compliance with the minimum bid price requirement.
Removed
Pure sine wave power inverters can also meet most of our daily electricity needs, with high efficiency and low noise. Therefore, certain precision electronic equipment and motor-based appliances, such as fans, vacuum cleaners, dishwashers and refrigerators, must use sine wave power inverters.
Added
On May 14, 2023, the Company received a written notice from Nasdaq granting the Company an additional 180 calendar day period, or until November 11, 2024, to regain compliance with Nasdaq Listing Rule 5550(a)(2).
Removed
Otherwise, the use of non-sine wave power inverters may cause abnormal function or shorter expected service life of the electronic equipment. The Company mainly focuses on manufacturing pure sine wave inverters ranging from 75 watts to 3000 watts.
Added
On November 4, 2024, the Company received a letter from Nasdaq confirming that the Company regained compliance with the minimum bid price requirement set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules.
Removed
In 12v Modified Wave Inverters (75wattss~3000watts), although the output current quality of the modified sine wave inverter is not as good as those produced by a pure sine wave, they are more economical. It can be applied to mobile phones, laptops, TVs, cameras, CD players, various chargers, car refrigerators, game consoles, DVD players, and power tools.
Added
For ten consecutive business days, beginning from October 21, 2024 to November 1, 2024, the closing bid price of the Company’s Class A ordinary shares has been at $1.00 per share or greater, and therefore the Company has regained compliance with the minimum bid price requirement.
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It can satisfy the needs of most electrical appliances. The Company mainly focuses on manufacturing modified sine wave inverters ranging from 75 watts to 3000 watts.
Added
Our Products Erayak specializes in the design, manufacturing, and global distribution of power solution products. Our core portfolio covers five strategic categories: Generators, DC-to-AC Inverters, Hybrid Inverter and Energy Storage Systems, Portable Power Stations, and Smart Battery Chargers. These product lines support a wide range of applications including residential backup, outdoor power, mobile energy, and solar integration systems.
Removed
Except for a difference in the input voltage, 24v inverters have features similar to those of 12v inverters. 24v inverters are used in a system with a 24v battery and can convert 24v direct current into alternating current. It is currently widely used in large vehicles.
Added
Our major products include the following types: Gasoline Generators Gasoline generators remain our flagship product line, reflecting the core strength and market leadership of the company. Our gasoline generators, using gasoline as fuel, are smaller and lighter and are easy to use. They are widely used in household applications.
Removed
The Company mainly focuses on manufacturing pure sine and modified sine wave inverters ranging from 75 watts to 3000 watts. Vehicle inverters are mostly low-power modified sine wave inverters. According to the output waveform, the inverter can be categorized into a modified wave inverter and a pure sine wave inverter.
Added
Gasoline generators are divided into conventional generators and inverter generators, and dual-fuel & multi-fuel generators. - Conventional Gasoline Generators: Output range from 1,000W to 10,000W, suitable for home backup, job sites, and emergency use. 61 - Inverter Generators: Compact, quiet, and clean power output (1,000W to 7,000W), optimized for sensitive electronics, camping, and RV applications. - Dual Fuel & Multi-Fuel Generators: Designed to run on gasoline, LPG, and natural gas, offering energy security and operational flexibility.
Removed
Car inverters (≤1000W) used in the car power port to supply power to small devices, such as mobile phones, computers, tablets, car refrigerators, and other car appliances, have very high demand in the world. (1) Erayak Car Inverter (Pioneer Series) The development of Pioneer Series has been completed and we plan to launch various lines of the series in 2021-2025.
Added
The unique frequency conversion technology is also the core of quality consistency, ensuring continuous long-term operation and better performance than regular generators of the same power. - Car Inverters (100W–500W): Ideal for mobile devices and small appliances on the go. - Portable/Home Inverters (600W–3000W): Power solution for outdoor tools, home use, and solar setups. - Pure Sine Wave Models: Deliver stable output compatible with high-end or inductive equipment.
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The first line of the series, “Boozer” has entered the mass production phase, and will be premiered on amazon.com and Walmart.com in December 2021. The products, in a metal cup shape, will have intelligent temperature control fan and powerful intelligent management circuit, which give them extraordinary performance and bring convenient power to car owners.
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Hybrid Inverters & Energy Storage As part of our strategic expansion into the energy storage sector, Erayak has developed a new product line of hybrid inverter systems. This is the latest generation of home energy storage solutions, equipped with the latest pure sine wave inverter technology, BMS management technology and high-performance lithium batteries.
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Each model will be in cup-shape and decorated with a variety of paintings to offer a plenty of options to users.
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The system integrates the inverter, MPPT, intelligent charge and discharge system, and extendable lithium battery storage system. Through the intelligent management system automatic from the solar power, battery, or mains energy, users can set mains or solar power priority according to demand in order to achieve clean, efficient, stable, independent home power supply.
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The Pioneer Series will bring cultural experience and diverse values to the automobile industry. 47 (2) Erayak Car Inverter (Flat Panel Series) In addition to car inverters, Erayak high-power modified sine wave inverters have been updated and evolving for many years, entitling them with technical and cost-effective advantages.
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In addition to home power supply, the energy storage system can be utilized for RVs, yachts, small solar power stations, and gardens. These systems are intended for solar + storage applications, off-grid home use, and light commercial backup.
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Compared with the industry level, Erayak modified wave inverter has a unique and strong 130% power ductility and has gained wide acceptance from the market. (3) Erayak Modified Sine Wave Inverter (Classic Series) The Classic Series Inverter is our earliest modified sine wave inverter series.
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Some key features: Voltage platforms of 48V / 72V; output range from 3,000W to10,000W; functions including MPPT solar charging, AC bypass, lithium battery compatibility, integrated display. Portable Power Stations Erayak’s DBS series portable power stations are lithium-powered, all-in-one AC/DC/USB units built for lightweight mobility.
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We have been upgrading the technology since the 2000s, but we have always retained the original design. The Classic Series has been widely distributed in the European, American, and Middle Eastern markets, with a total of about 5 million users and a steady increase in the recent years of 1.2 million users a year.
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They are also compatible with Erayak solar panel. They are ideal portable power kits for tent camping, overland journey and etc. Some key features: Pure sine wave output with multi-port connectivity; recharge via wall AC, car outlet, or solar input; ideal for outdoor recreation, remote work, and emergencies.
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It is one of the landmarks Erayak products in the view of our users. (4) Modified Wave Inverter (Tank Series) The Tank Series was launched in 2017. It has the technological functions of the Classic Series and has a more modern design.
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The products have intelligent multi-stage charging with voltage and temperature protection and reverse polarity and overcharge protection 62 Technology Strategy & Future Outlook Erayak is evolving into a full-spectrum energy solutions provider.
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(5) Erayak Modified Sine Wave Inverter (Genius Series) The Genius Series is our latest inverter series, which launched in 2021. It incorporates a few concepts: digital display, compact design, scientific and technological appearance, compatibility with various electronic products, and a remote-control system.
Added
Our future roadmap includes: smart functions such as WiFi control, auto-start, on/off-grid switching; high-power hybrid systems including 3,000W and above for home and light commercial use; EV-related development including V2L/V2G compatibility and mobile energy systems; global integration including localized assembly and aftersales network for major regions.
Removed
(6) Erayak Pure Sine Wave Inverter (Classic Series) Pure sine wave inverters can output high-quality current (the same as mains electricity or utility power) to better support capacitive load appliances such as water pumps, air conditioners, fans, air compressors, electric saws, electric hammers, refrigerators, refrigerators, and etc.
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Other significant concentration of accounts receivable included another customer, who accounted for 14.51% of total accounts receivable for the fiscal year ended December 31, 2024.
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The manufacture of pure sine wave inverters is different from modified waves in that it has higher manufacturing and technical requirements. To our knowledge, only a few manufacturers on Amazon.de can mass produce pure sine wave inverters.
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In 2015, we successfully developed and mass-produced pure sine wave inverters with Bluetooth control function, which allows the product to monitor working conditions at any time, and solves the problem of ordinary inverters that require close operation.
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Pure sine wave inverters are used as components of many high-end products, such as mobile power supply, inverter generator, RV power supply system, DC power supply system (power equipment based on DC battery). In addition, due to the Erayak Inverter technology, the performance has reached an optimal level.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

63 edited+8 added−8 removed47 unchanged
The decrease of interest expense was mainly due to less bank borrowings in the fiscal 2023 as compared to the fiscal 2022. Provision for income taxes Our provision for income taxes was approximately $0.19 million for the year ended December 31, 2023, a decrease of approximately $0.24 million from approximately $0.44 million for the year ended December 31, 2022.
The decrease of interest expense was mainly due to less bank borrowings in fiscal 2023 as compared to fiscal 2022. Provision for income taxes Our provision for income taxes was approximately $0.19 million for the year ended December 31, 2023, a decrease of approximately $0.24 million from approximately $0.44 million for the year ended December 31, 2022.
The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due.
The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect due amounts.
The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis.
The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on an aging analysis basis.
In the principal versus agent consideration, since no other party is involved in transactions, the Company is a principal. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.
In the principal versus agent consideration, since no other party is involved in transactions, the Company is a principal. In determining the transaction price, the Company evaluates whether the price is subject to a refund or adjustment to determine the net consideration to which the Company expects to be entitled.
The historical performance and outlook for our business is influenced by numerous factors, including the following: ● Economic Cycles - In addition to fluctuations in steel prices, demand for the products we manufacture is dependent on general economic cycles and infrastructure and non-residential construction end markets. 73 ● General Competition - Several of our products have historically faced significant competition both in China and some foreign markets, and we have successfully competed against our competitors with excellent customer service, high quality products and rapid fulfillment of customer orders.
The historical performance and outlook for our business is influenced by numerous factors, including the following: ● Economic Cycles - In addition to fluctuations in steel prices, demand for the products we manufacture is dependent on general economic cycles and infrastructure and non-residential construction end markets. ● General Competition - Several of our products have historically faced significant competition both in China and some foreign markets, and we have successfully competed against our competitors with excellent customer service, high quality products and rapid fulfillment of customer orders.
General and administrative expenses as of December 31, 2023 and 2022 consisted of following: 2023 2022 Employee compensation and benefits $ 526,895 $ 312,479 Travel and communication expenses 49,451 34,267 Rent and utilities 83,079 58,466 Consulting fees 1,032,197 310,039 Insurance 13,386 13,165 Depreciation and amortization expenses 116,451 60,698 Sales tax 76,654 80,595 Entertainment 23,748 17,193 Office and miscellaneous 96,007 42,598 Total $ 2,017,868 $ 929,500 75 Selling and marketing expenses Selling and marketing expenses increased by approximately $0.24 million, or 33.66% to approximately $0.96 million for the year ended December 31, 2023 as compared to approximately $0.72 million for the year ended December 31, 2022.
General and administrative expenses as of December 31, 2023 and 2022 consisted of the following: 2023 2022 Employee compensation and benefits $ 526,895 $ 312,479 Travel and communication expenses 49,451 34,267 Rent and utilities 83,079 58,466 Consulting fees 1,032,197 310,039 Insurance 13,386 13,165 Depreciation and amortization expenses 116,451 60,698 Sales tax 76,654 80,595 Entertainment 23,748 17,193 Office and miscellaneous 96,007 42,598 Total $ 2,017,868 $ 929,500 90 Selling and marketing expenses Selling and marketing expenses increased by approximately $0.24 million, or 33.66% to approximately $0.96 million for the year ended December 31, 2023 as compared to approximately $0.72 million for the year ended December 31, 2022.
Our costs are also exposed to fluctuations in prices for the purchase, processing and production of microchips and other raw material inputs. Historically, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We do not engage in commodity price hedging activities.
Our costs are also exposed to fluctuations in prices for the purchase, processing and production of microchips and other raw material inputs. Historically, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We do not engage in commodity price hedging activities. 98
The amendments in this update are related to the following two issues: - Issue 1: Troubled Debt Restructurings (“TDRs”) by Creditors The amendments in this Update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, 83 Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.
The amendments to this update are related to the following two issues: - Issue 1: Troubled Debt Restructurings (“TDRs”) by Creditors The amendments in this Update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.
Our primary office is located in Zhejiang province, where we serve a large customer base throughout PRC and expand our reach to international clients. Our goal is to be the premier power solutions brand and a solution for mobile life and outdoor living.
Our primary office is in Zhejiang province, where we serve a large customer base throughout PRC and expand our reach to international clients. Our goal is to be the premier power solutions brand and a solution for mobile life and outdoor living.
Although we do not have any amounts committed to be provided by our related parties, due to their relatively small amounts, we do not believe our working capital needs will be negatively impacted without such funds provided by related parties.
Although we do not have any amounts committed to being provided by our related parties, due to their relatively small amounts, we do not believe our working capital needs will be negatively impacted without such funds provided by related parties.
We seek to leverage our flexibility and passion for quality to provide a personalized mobile living solution for each customer. 72 Since the founding of Zhejiang Leiya Electronics Co. Ltd. in 2009, we have grown to be one of the very few manufacturers in the world to design, develop and mass produce premium power solution products in the retail chain.
We seek to leverage our flexibility and passion for quality to provide a personalized mobile living solution for each customer. 85 Since the founding of Zhejiang Leiya Electronics Co. Ltd. in 2009, we have grown to be one of the very few manufacturers in the world to design, develop and mass produce premium power solution products in the retail chain.
To the extent the Chinese RMB start to appreciate, our products could become more expensive and, as a result, less attractive to potential customers in other countries. Results of Operations The following table summarizes the results of our operations for the years ended December 31, 2023, 2022 and 2021, respectively.
To the extent the Chinese RMB start to appreciate, our products could become more expensive and, as a result, less attractive to potential customers in other countries. Results of Operations The following table summarizes the results of our operations for the years ended December 31, 2024, 2023 and 2022, respectively.
For the year ended December 31, 2023, our sales to domestic customers increased by approximately $7.03 million, which represents 38.97% reduction compared to the previous fiscal year. 74 The following table presents our top 5 international markets by net revenues for the years ended December 31, 2023 and 2022.
For the year ended December 31, 2023, our sales to domestic customers increased by approximately $7.03 million, which represents 38.97% reduction compared to the previous fiscal year. 89 The following table presents our top 5 international markets by net revenues for the years ended December 31, 2023 and 2022.
Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. - Issue 2: Vintage Disclosures—Gross Writeoffs For public business entities, the amendments in this Update require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.
Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. - Issue 2: Vintage Disclosures—Gross Write-off’s For public business entities, the amendments in this Update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.
Our technical department will evaluate the request’s feasibility and coordinate with the customer to make adjustments. The production department will create samples that will undergo inspection by the quality inspection department for quality and material warranty. The sales department will submit the prototype, inspection report, quality assurance, and quote to the customer for verification.
Our technical department will evaluate the request’s feasibility and coordinate with the customer to make modifications. The production department will create samples that will undergo inspection by the quality inspection department for quality and material warranty. The sales department will submit the prototype, inspection report, quality assurance, and quote to the customer for verification.
In addition, our subsidiaries are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
In addition, our subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
For entities that have adopted the amendments in Update 2016-13, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
For entities that have adopted the amendments in Update 2016-13, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation of the companies.
Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses more than the retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation of the companies.
Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASU”). Management periodically reviews new accounting standards that are issued. Recently Issued Accounting Standards In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326).
Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASU”). Management periodically reviews new accounting standards that are issued. 96 Recently Issued Accounting Standards In March 2023, the FASB issued ASU 2023-02, Financial Instruments – Credit Losses (Topic 326).
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors.” All amounts included herein with respect to the fiscal years ended December 31, 2023, 2022 and 2021 are derived from our audited consolidated financial statements included elsewhere in this Annual Report.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors.” All amounts included herein with respect to the fiscal years ending December 31, 2024, 2023 and 2022 are derived from our audited consolidated financial statements included elsewhere in this Annual Report.
Off-balance Sheet Commitments and Arrangements There were no off-balance sheet arrangements for the years ended December 31, 2023, 2022 and 2021, that have or that in the opinion of management are likely to have, a current or future material effect on our consolidated financial condition or results of operations.
Off-balance Sheet Commitments and Arrangements There was no off-balance sheet arrangements for the years ended December 31, 2024, 2023 and 2022, that in the opinion of management are likely to have a current or future material effect on our consolidated financial condition or results of operations.
Net cash provided by financing activities was approximately $11.32 million for the year ended December 31, 2022. It was primarily attributable to the net proceeds received from share issuance in the amount of approximately $10.08 million. Net cash used in financing activities was approximately $3.40 million for the year ended December 31, 2021.
Net cash provided by financing activities was approximately $11.32 million for the year ended December 31, 2022. It was primarily attributable to the net proceeds received from share issuance in the amount of approximately $10.08 million.
However, our business could be adversely affected by competitors who reduce prices, improve on-time delivery and take other competitive actions, which may reduce our customers’ purchases of products from us. ● Fluctuations in Foreign Currency Exchange - We sell a significant portion of our products in countries outside of China (approximately 45.85% based on 2023 revenues).
However, our business could be adversely affected by competitors who reduce prices, improve on-time delivery and take other competitive actions, which may reduce our customers’ purchases of products from us. ● Fluctuations in Foreign Currency Exchange - We sell a significant portion of our products in countries outside of China (approximately 35.39% based on 2024 revenues).
In the last three fiscal years, we generated revenue mostly from four types of products: (1) inverters constituted approximately 59%, 52% and 82% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; (2) chargers, which generated approximately 2.68%, 2.16% and 7.52% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; (3) gasoline generators generated approximately 32.36%, 43.82% and 8.28% of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; and (4) power banks generated approximately 39.58%, nil and nil of our total revenue for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.
In the last three fiscal years, we generated revenue mostly from four types of products: (1) inverters constituted approximately 46%, 59%, and 52% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; (2) chargers, which generated approximately 1.82%, 2.68%, and 2.16% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; (3) gasoline generators generated approximately 32.94%, 32.36%, and 43.82% of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; and (4) power banks generated approximately 16.39%, 3.96%, and nil of our total revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively.
Impact of Inflation We do not believe the impact of inflation on our Company is material. Our operations are in China and China’s inflation rates have been relatively stable in the last three years: 0.2% for 2023, 3.7% for 2022, and 0.85% for 2021. Holding Company Structure We are a holding company with no material operations of our own.
Impact of Inflation We do not believe the impact of inflation on our Company is material. Our operations are in China and China’s inflation rates have been relatively stable in the last three years: 0.2% for 2024, 0.23% for 2023, 1.97% for 2022. Holding Company Structure We are a holding company with no material operations of our own.
Our capital expenditures amounted to approximately $0.70 million, $0.93 million and $0.29 million for the years ended December 31, 2023, 2022 and 2021, respectively. Contractual Obligations There were no significant contractual obligations and commercial commitments, other than our bank borrowings as disclosed in Credit Facility section, as of December 31, 2023, 2022 and 2021.
Our capital expenditure amounted to approximately $0.55 million, $0.70 million, and $0.93 million for the years ending December 31, 2024, 2023 and 2022, respectively. Contractual Obligations There were no significant contractual obligations and commercial commitments, other than our bank borrowings as disclosed in Credit Facility section, as of December 31, 2024, 2023 and 2022.
We plan to repay outstanding principal and interest of each loan either by our working capital or the funds from the renewal of a loan from the same bank or loans from other banks. Capital Expenditures Our capital expenditures consist primarily of expenditures for the purchase of fixed and intangible assets because of our business growth.
We plan to repay the outstanding principal and interest of each loan either by our working capital or the funds from the renewal of a loan from the same bank or loans from other banks. Capital Expenditures Our capital expenditure consists primarily of expenditure on the purchase of fixed and intangible assets in support of our business growth.
Our ability to generate sufficient cash flows from our operating activities is primarily dependent on our sales of converters and power generating products to our customers at margins sufficient to cover fixed and variable expenses. As of December 31, 2023, and 2022, we had cash and cash equivalents of $5,878,434 and $7,067,247, respectively.
Our ability to generate sufficient cash flow from our operating activities is primarily dependent on our sales of converters and power generating products to our customers at margins sufficient to cover fixed and variable expenses. As of December 31, 2024, and 2023, we had cash and cash equivalents of $1,324,09 and $5,878,434, respectively.
Net cash used in investing activities was approximately $4.90 million for the year ended December 31, 2022. It was primarily attributable to addition of fixed assets for production needs during the fiscal year, and an advance payment on potential oversea land purchase for the purpose of business expansion in North America.
It was primarily attributable to addition of fixed assets for production needs during the fiscal year, and an advance payment on potential oversea land purchase for the purpose of business expansion in North America. 93 Financing Activities: Net cash provided by financing activities was approximately $12.38 million for the year ended December 31, 2024.
The adjustments for changes in working capital mainly included: (i) decrease in accounts receivable of approximately $3.4 million – the decrease was in line with the decrease in sales; (ii) increase in inventory of approximately $1.09 million – to avoid supply issues, we stocked up certain raw materials in order to prepare the massive production of our new products; (iii) increase in advances to suppliers of approximately $1.25 million – we prepaid for raw material and equipment purchase for our new production line; (iv) increase in accounts payable of approximately $1.09 million – the increase was in line with the increase of inventory; and (v) the increase in other payables of approximately $2.36 million – the increase was mainly due to a portion of a potential foreign investment received, which was temporarily included in other payables.
The adjustments for changes in working capital mainly included: (i) decrease in accounts receivable of approximately $3.4 million – the decrease was in line with the decrease in sales; (ii) increase in inventory of approximately $1.09 million – to avoid supply issues, we stocked up certain raw materials in order to prepare the massive production of our new products; (iii) increase in advances to suppliers of approximately $1.25 million – we prepaid for raw material and equipment purchase for our new production line; (iv) increase in accounts payable of approximately $1.09 million – the increase was in line with the increase of inventory; and (v) the increase in other payables of approximately $2.36 million – the increase was mainly due to a portion of a potential foreign investment received, which was temporarily included in other payables. 92 Net cash used in operating activities for the fiscal year ended December 31, 2022 was approximately $4.15 million, which was primarily attributable to a net profit approximately $3.48 million, adjusted for non-cash items for approximately $0.79 million and adjustments for changes in working capital approximately $8.42 million.
No cash is restricted to assure future credit availability. 82 Revenue Recognition The Company generates its revenues mainly from sales of electrical products, such as electrical converter and inverter, to third-party customers, who are mainly distributors and retailers. The Company follows Financial Accounting Standards Board (FASB) ASC 606 and accounting standards updates (“ASU”) 2014-09 for revenue recognition.
Revenue Recognition The Company generates its revenues mainly from sales of electrical products, such as electrical converters and inverters, to third-party customers, who are mainly distributors and retailers. The Company follows Financial Accounting Standards Board (FASB) ASC 606 and accounting standards updates (“ASU”) 2014-09 for revenue recognition.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this Annual Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this Annual Report.
Ailefu provided the leased assets as guarantee for the Company to apply for a bank loan for the lease payment. Investing Activities: Net cash used in investing activities was approximately $1.38 million for the year ended December 31, 2023.
Majority of the net cash provided by operating activities is used for the lease payment. Ailefu provided the leased assets as a guarantee for the Company to apply for a bank loan for the lease payment. Investing Activities: Net cash used in investing activities was approximately $0.97 million for the year ended December 31, 2024.
The Company adopted the new standard effective January 1, 2018, using the retrospective transition method. As of December 31, 2023, 2022, and 2021, restricted cash was $1,062, $34,728, and $0, respectively.
The Company adopted the new standard effective January 1, 2018, using the retrospective transition method. As of December 31, 2024, 2023, and 2022, restricted cash was $792,204, $1,062, and $34,728, respectively. No cash is restricted to assure future credit availability.
The increase is in line with the increase in revenues. 78 Cash Flow Summary Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Net cash provided by (used in) operating activities $ 6,729,734 $ (4,151,135 ) $ 4,689,518 Net cash (used in) investing activities (1,378,110 ) (4,896,167 ) (290,798 ) Net cash (used in) provided by financing activities (6,437,393 ) 11,319,867 (3,395,530 ) Effect of exchange rate changes on cash and cash equivalents (103,044 ) (380,011 ) 109,448 Net (decrease) increase in cash and cash equivalents $ (1,188,813 ) $ 1,892,554 $ 1,112,638 Cash, cash equivalents and restricted cash, beginning of period 7,067,247 5,174,693 4,062,055 Cash, cash equivalents and restricted cash, end of period 5,878,434 7,067,247 5,174,693 Operating Activities: Net cash provided by operating activities for the fiscal year ended December 31, 2023 was approximately $6.7 million, which was primarily attributable to a net profit of approximately $1.22 million, adjusted for non-cash items for approximately $1.04 million and adjustments for changes in working capital approximately $4.47 million.
The decrease in income taxes was in line with the decrease in revenues. 91 Cash Flow Summary Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022 Net cash (used in) provided by operating activities $ (15,876,639 ) $ 6,729,734 ) $ (4,151,135 ) Net cash (used in) investing activities (971,811 ) (1,378,110 ) (4,896,167 ) Net cash provided by (used in) financing activities 12,381,107 (6,437,393 ) 11,319,867 Effect of exchange rate changes on cash and cash equivalents (86,282 ) (103,044 ) (380,011 ) Net (decrease) increase in cash and cash equivalents $ (4,553,625 ) $ (1,188,813 ) $ 1,892,554 Cash, cash equivalents and restricted cash, beginning of period 5,878,434 7,067,247 5,174,693 Cash, cash equivalents and restricted cash, end of period 1,324,809 5,878,434 7,067,247 Operating Activities: Net cash used in operating activities for the fiscal year ended December 31, 2024 was approximately $15.88 million, which was primarily attributable to a net loss approximately $1.12 million, adjusted for non-cash items for approximately $1.68 million and adjustments for changes in working capital approximately $16.44 million.
Between July 2008 and June 2010, the RMB and the U.S. dollar exchange rate had been stable and traded within a narrow band. Since June 2010, the PRC government has allowed the RMB to appreciate slowly against the U.S. dollar, though there have been periods when the RMB has depreciated against the U.S. dollar.
The PRC government allowed the RMB to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010, the RMB and the U.S. dollar exchange rate had been stable and traded within a narrow band.
The lease is for 20 years, effective from January 1, 2018 to December 31, 2037. The property is 36,134.78 square meters and total rent is RMB 70,489,500, or approximately $10,900,720, which has been paid upfront, through the lease term ending December 31, 2037. Majority of the net cash provided by operating activities are used for the lease payment.
The factory is located at Wenzhou Economic Technological Development Zone, Binghai Fourth Blvd. No. 528. The lease is for 20 years, effective from January 1, 2018, to December 31, 2037. The property is 36,134.78 square meters and total rent is RMB 70,489,500, or approximately $10,900,720, which has been paid upfront, through the lease term ending December 31, 2037.
In particular, on August 11, 2015, the PBOC allowed the RMB to depreciate by approximately 2% against the U.S. dollar. It is difficult to predict how long the current situation may last and when and how the RMB and the U.S. dollar relationship may change again.
It is difficult to predict how long the current situation may last and when and how the RMB and the U.S. dollar relationship may change again.
As of December 31, 2023, we had 12 outstanding long-term loans provided by three banks, totaling RMB 14,888,312 in the aggregate, or approximately $2,096,974 million. These loans either have a fixed interest rate or a variable rate.
These borrowings have a term of one year and can be renewed. As of December 31, 2024, we had 12 outstanding long-term loans provided by three banks, totaling RMB 29,742,698 in the aggregate, or approximately $4.07 million. These loans either have a fixed or variable interest rate.
The reserved amounts as determined pursuant to PRC statutory laws totaled $1,113,170 as of December 31, 2023. 84 Quantitative and Qualitative Disclosures about Market Risk Foreign Exchange Risk All of our revenues and substantially all of our expenses are denominated in RMB.
The reserved amounts as determined pursuant to PRC statutory laws totaled $1,123,204 as of December 31, 2024. 97 Quantitative and Qualitative Disclosures about Market Risk Foreign Exchange Risk All our revenues and substantially all our expenses are denominated in RMB. Our financial information uses RMB as the functional currency has been translated into U.S. dollars in our consolidated financial statements.
Restricted Cash The Company had bank acceptance notes outstanding with the bank and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. Those notes are generally short term in nature due to their short maturity period of six to nine months; thus, restricted cash is classified as a current asset.
Those notes are generally short term in nature due to their short maturity period of six to nine months; thus, restricted cash is classified as a current asset.
For the Year Ended December 31, 2023 2022 2021 Sales $ 20,322,498 $ 26,909,025 $ 18,628,886 Cost of sales (15,299,849 ) (20,290,231 ) (12,909,462 ) Gross profit 5,022,649 6,618,794 5,719,424 Operating expenses: General and administrative (2,017,868 ) (929,500 ) (690,619 ) Selling and marketing (962,479 ) (720,120 ) (506,305 ) Research and development (1,176,943 ) (932,268 ) (986,885 ) Bad debt expense (36,972 ) - ) (2,649 ) Inventory impairment (provision)/reversal (81,622 ) 31,668 (47,358 ) Total operating expenses (4,275,884 ) (2,550,220 ) (2,233,816 ) Operating income 4,068,574 3,485,608 Other income (expenses): Interest expenses, net (402,671 ) (473,088 ) (417,648 ) Rental income, net 195,347 98,716 116,193 Other income, net 872,519 219,530 512,412 Total other income (expenses), net 665,195 (154,842 210,957 Income before income taxes 1,411,960 3,913,732 3,696,565 Income tax provision (193,246 ) (437,771 ) (301,916 ) Net income $ 1,218,714 3,475,961 $ 3,394,649 Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues Revenues decreased by approximately $6.59 million, or 24.48%, to approximately $20.32 million for the year ended December 31, 2023 from approximately $26.91 million for the year ended December 31, 2022.
For the Year Ended December 31, 2024 2023 2022 Sales $ 30,300,360 $ 20,322,498 $ 26,909,025 Cost of sales (26,307,998 ) (15,299,849 ) (20,290,231 ) Gross profit 3,992,362 5,022,649 6,618,794 Operating expenses: General and administrative (2,308,149 ) (2,017,868 ) (929,500 ) Selling and marketing (946,269 ) (962,479 ) (720,120 ) Research and development (1,670,669 ) (1,176,943 ) (932,268 ) Bad debt expense (224,534 ) (36,972 ) - Inventory reserve (provision) / reversal (295,907 ) (81,622 ) 31,668 Advance to suppliers impairment provision (111,882 ) - - Total operating expenses (5,557,410 ) (4,275,884 ) (2,550,220 ) Operating (loss) income (1,565,048 ) 746,766 4,068,574 Other income (expenses): Interest expenses, net (139,441 ) (402,671 ) (473,088 ) Rental income, net 154,471 195,347 98,716 Other income, net 367,704 872,519 219,530 Total other income (expenses), net 382,733 665,195 (154,842 ) (Loss) income before income taxes (1,182,315 ) 1,411,960 3,913,732 Income tax provision 66,338 (193,246 ) (437,771 ) Net (loss) income $ (1,115,977 ) 1,218,714 $ 3,475,961 87 Year ended December 31, 2024 compared to year ended December 31, 2023 Revenues Revenues increased by approximately $9.98 million, or 49.10%, to approximately $30.30 million for the year ending December 31, 2024 from approximately $20.32 million for the year ended December 31, 2023.
The adjustments for changes in working capital mainly included: (i) increase in accounts receivable of approximately $8.55 million – our accounts receivable increased due to the increase in sales revenue and the corresponding increased payback cycle on domestic sales during the 2022 fiscal year; (ii) decrease in advance to suppliers of approximately $1.23 million was primarily due to increased cash payments for purchase of raw materials; (iii) decrease in prepaid expenses of approximately $0.47 million primarily due to the deferred IPO expenses were fully amortized during the year; (iv) increase in inventory of approximately $2.66 million due to our increased raw material inventory for the corresponding increased sales in generators; (v) increase in accounts payable of approximately $0.66 million due to increased purchase of raw materials because of the increased sales during the fiscal year of 2022; 79 (vi) increase in advance from customers of approximately $0.22 million primarily due to increased sales during the fiscal year of 2022; Net cash provided by operating activities for the fiscal year ended December 31, 2021 was approximately $4.69 million, which was primarily attributable to a net profit approximately $3.39 million, adjusted for non-cash items for approximately $0.85 million and adjustments for changes in working capital approximately $0.44 million.
The adjustments for changes in working capital mainly included: (i) increase in accounts receivable of approximately $8.55 million – our accounts receivable increased due to the increase in sales revenue and the corresponding increased payback cycle on domestic sales during the 2022 fiscal year; (ii) decrease in advance to suppliers of approximately $1.23 million was primarily due to increased cash payments for purchase of raw materials; (iii) decrease in prepaid expenses of approximately $0.47 million primarily due to the deferred IPO expenses were fully amortized during the year; (iv) increase in inventory of approximately $2.66 million due to our increased raw material inventory for the corresponding increased sales in generators; (v) increase in accounts payable of approximately $0.66 million due to increased purchase of raw materials because of the increased sales during the fiscal year of 2022; (vi) increase in advance from customers of approximately $0.22 million primarily due to increased sales during the fiscal year of 2022; Zhejiang Leiya entered into a factory workshop leasing agreement with Wenzhou Ailefu Furniture Tech Limited Company (“Ailefu”), an entity indirectly 100% owned by Lingyi Kong, our Chief Executive Officer and Chairman, effective January 1, 2018.
General and administrative (“G&A”) expenses General and administrative expenses increased by approximately $0.24 million, or 34.59% to approximately $0.93 million for the year ended December 31, 2022 as compared to approximately $0.69 million for the year ended December 31, 2021.
General and administrative (“G&A”) expenses General and administrative expenses increased by approximately $0.29 million, or 14.39% to approximately $2.31 million for the year ending December 31, 2024 as compared to approximately $2.02 million for the year ended December 31, 2023.
Net cash used in operating activities for the fiscal year ended December 31, 2022 was approximately $4.15 million, which was primarily attributable to a net profit approximately $3.48 million, adjusted for non-cash items for approximately $0.79 million and adjustments for changes in working capital approximately $8.42 million.
Net cash provided by operating activities for the fiscal year ending December 31, 2023 was approximately $6.73 million, which was primarily attributable to a net profit of approximately $1.22 million, adjusted for non-cash items for approximately $1.04 million and adjustments for changes in working capital approximately $4.47 million.
The Company does not believe it has a material collection risk under its business model, nor does it believe that macroeconomic issues will have a negative impact on its collectability. The Company expects the business will continue to grow due to innovation and the urbanization process in China.
The Company expects the business will continue to grow due to innovation and the urbanization process in China. Thus, the Company does not believe the collection issues will impact its liquidity adversely.
Cash and Cash Equivalents Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.
Cash and Cash Equivalents Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use.
Net cash used in investing activities was approximately $0.29 million for the year ended December 31, 2021. It was primarily attributable to the addition of fixed and intangible assets for production needs during the fiscal year. 80 Financing Activities: Net cash used in financing activities was approximately $6.44 million for the year ended December 31, 2023.
It was primarily attributable to: (1) acquisition of manufacturing equipment for production needs during the period; (2) acquisition of intangible assets; and (3) long-term investment in a trading company. Net cash used in investing activities was approximately $1.38 million for the year ended December 31, 2023.
The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income.
After confirmation by the customers, our procurement department will purchase the raw materials, and the production department will fulfill the order. Finally, our inspection department will inspect and issue a report affirming the quality before the production department pack and deliver the final product to the customer.
After confirmation by the customers, our procurement department will purchase the raw materials, and the production department will fulfill the order.
The adjustments for changes in working capital mainly included: (i) decrease in accounts receivable of approximately $3.38 million – our accounts receivable decreased due to collection of substantial amount of outstanding accounts receivable of 2020 fiscal year, and increase of cash sales; (ii) increase in advance to suppliers of approximately $1.11 million primarily due to the increased purchase of raw materials to support our growing orders generated from both domestic and international markets; (iii) increase in prepaid expenses of approximately $0.50 million primarily due to increased deferred IPO expenses; (iv) increase in inventory of approximately $2.20 million due to expanded business and increased production to reduce delivery cycle; (v) increase in accounts payable of approximately $0.85 million due to increased purchase of raw materials because of the increased sales during the fiscal year of 2021; (vi) decrease in advance from customers of approximately $0.28 million primarily due to the order delivery which offsets the advance balance; (vii) increase in other payables and accruals of approximately $0.36 million primarily due to the increased accrued payroll and welfare.
The adjustments for changes in working capital mainly included: (i) increase in accounts receivable of approximately $6.26 million – our accounts receivable increased due to the increase in sales revenue and the corresponding increased payback cycle in domestic market; (ii) increase in inventory of approximately $2.30 million due to our increased raw material inventory for the corresponding increased sales in generators; (iii) increase in advance to suppliers of approximately $6.95 million primarily due to the increased purchase of raw materials to support our growing orders generated from both domestic and international markets; (iv) increase in accounts payable of approximately $2.64 million due to increased purchase of raw materials because of the increased sales during the fiscal year of 2024; (v) decrease in other payables and accruals of approximately $2.50 million primarily due to a repayment of funds received from a potential investor.
Thus, the Company does not believe the collection issues will impact its liquidity adversely. 81 Credit Facility We mainly finance our operations through short-term revolving loans and long-term loans provided by a syndicate of banks, as listed in Note 10 under our Consolidated Financial Statements.
Credit Facility We mainly finance our operations through short-term revolving loans and long-term loans provided by a syndicate of banks, as listed in Note 10 and Note 11 under our Consolidated Financial Statements. As of December 31, 2024, we had three outstanding short-term loans totaling RMB 7,706,808, or approximately $1.06 million.
Our actual results could differ materially from those discussed in the forward-looking statements.
In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Our financial information uses RMB as the functional currency has been translated into U.S. dollars in our consolidated financial statements. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.
We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions.
Key Factors Affecting Our Results Our results are primarily derived from the sale of power generators and inverters to various wholesalers and retailers in China and some other foreign countries. Our business is therefore dependent upon construction activity in these sectors of the economy.
Finally, our inspection department will inspect and issue a report affirming the quality before the production department packs and delivers the final product to the customer. 86 Key Factors Affecting Our Results Our results are primarily derived from the sale of power generators and inverters to various wholesalers and retailers in China and some other foreign countries.
Gross profit margin was 24.60% for the year ended December 31, 2022, as compared to 30.70% for the year ended December 31, 2021. The decrease in gross margin was primarily due to our small profit but quick turnover sales policy on generators, which accounted for about 43.82% of our total sales.
Gross profit margin was 13.18% for the year ended December 31, 2024, as compared to 24.71% for the year ended December 31, 2023. The decrease in gross profit was mainly due to the increase in sales of our low-margin product – gasoline generators.
It was primarily attributable to the repayment of bank note payable with an approximate amount of $7.29 million and repayment of related party loans with an approximate amount of $0.86 million, offset by the proceeds from long-term bank loans with approximate amount of $4.65 million and net proceeds from short-term loans with an approximate amount of $0.10 million.
It was primarily attributable to (1) proceeds received from share issuance in the amount of $8 million; (2) net proceeds on short-term borrowings in the amount of approximately $1 million; (3) net proceeds received from related parties with an approximate amount of $1.32 million; and (4) net proceeds on long-term borrowings in the amount of approximately $2.06 million.
The increase in selling and marketing expenses was mainly due to the increase in cost of testing and certification on our exported products.
The increase in R&D expenses was mainly due to increased R&D activities on new products.
The decrease of income taxes was in line with the decrease in revenues. Year ended December 31, 2022 compared to year ended December 31, 2021 Revenues Revenues increased by approximately $8.28 million, or 44.45%, to approximately $26.91 million for the year ended December 31, 2022 from approximately $18.63 million for the year ended December 31, 2021.
Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues Revenues decreased by approximately $6.59 million, or 24.48%, to approximately $20.32 million for the year ended December 31, 2023 from approximately $26.91 million for the year ended December 31, 2022.
Research and development expenses as of December 31, 2022 and 2021 consisted of the following: 2022 2021 Salaries $ 427,525 $ 347,434 Contract services and supplies 409,149 541,055 Utility 2,025 1,777 Design cost 46,651 - Depreciation 22,499 39,365 Other 24,419 57,254 Total $ 932,268 $ 986,885 Interest expenses, net Our interest expense (net) increased by approximately $0.05 million, to approximately $0.47 million for the year ended December 31, 2022, from approximately $0.42 million for the year ended December 31, 2021.
Research and development expenses as of December 31, 2024 and 2023 consisted of the following: 2024 2023 Salaries $ 701,402 $ 525,782 Direct input 859,540 554,892 Utility 2,542 2,680 Design cost 6,254 31,115 Contract services 55,720 Depreciation 22,286 25,614 Other 22,925 36,859 Total $ 1,670,669 $ 1,176,943 Interest expenses, net Our interest expense (net) decreased by approximately $0.26 million, to approximately $0.14 million for the year ended December 31, 2024, from approximately $0.40 million for the year ended December 31, 2023.
The increase in G&A expenses was mainly due to increased expenses in consulting services for lean manufacturing and management improvement in factory operation.
The increase in G&A expenses was mainly due to the increased employee compensation and benefits of our current administrative team and new professional manager.
December 31, 2022 Top Five International Markets: Sales Amount (In USD) As % of Sales China $ 18,033,220 67.02 % Poland 1,607,394 5.97 % Germany 1,217,732 4.53 % Canada 971,909 3.61 % U.K. 879,733 3.27 % December 31, 2021 Top Five International Markets: Sales Amount (In USD) As % of Sales China $ 10,638,503 57.11 % France 1,202,988 6.46 % Poland 1,129,165 6.06 % Mexico 1,071,869 5.75 % U.K. 790,326 4.24 % Gross profit Our gross profit increased by approximately $0.90 million, or 15.72%, to approximately $6.62 million for the year ended December 31, 2022 from approximately $5.72 million for the year ended December 31, 2021.
December 31, 2024 Top Five International Markets: Sales Amount (In USD) As % of Sales China $ 19,575,794 64.61 % France 1,516,466 5.00 % Israel 909,207 3.00 % Nigeria 827,955 2.73 % U.K. 781,562 2.58 % December 31, 2023 Top Five Markets: Sales Amount (In USD) As % of Sales China $ 11,005,500 54.15 % Australia 1,558,935 7.67 % Poland 1,318,926 6.49 % U.K. 1,053,668 5.18 % Germany 1,016,250 5.00 % Gross profit Our gross profit decreased by approximately $1.03 million, or 20.51%, to approximately $3.00 million for the year ending December 31, 2024 from approximately $5.02 million for the year ended December 31, 2023.
The increase of interest expense was mainly due to increased short-term borrowings in the fiscal 2022 as compared to the fiscal 2021. Provision for income taxes Our provision for income taxes was approximately $0.44 million for the year ended December 31, 2022, an increase of approximately $0.14 million from approximately $0.30 million for the year ended December 31, 2021.
The Company repaid short-term borrowings of RMB50,000,000 in December 2023, and therefore the decrease in interest expense was mainly due to less bank borrowings during the 2024 fiscal year as compared to the 2023 fiscal year.
Removed
The increase in revenues was primarily driven by the continuous impact of the energy crisis that has significantly increased demand for our generators, especially in Europe. Our domestic customers also sell our products to international end users.
Added
Our business is therefore dependent upon construction activity in these sectors of the economy.
Removed
For the year ended December 31, 2022, our sales to domestic customers increased by approximately $7.39 million, which represents 9.91% growth compared to the previous fiscal year. 76 The following tables present our top 5 international markets by net revenues for the years ended December 31, 2022 and 2021, respectively.
Added
The increase in revenues was primarily driven by the increase in demand for our gasoline generators in Europe. The following table presents our top 5 international markets by net revenues for the years ended December 31, 2024 and 2023.
Removed
General and administrative expenses as of December 31, 2022 and 2021 consisted of following: 2022 2021 Employee compensation and benefits $ 312,479 323,325 Travel and communication expenses 34,267 33,068 Rent and utilities 58,466 70,178 Consulting fees 310,039 53,169 Insurance 13,165 16,699 Depreciation and amortization expenses 60,698 55,042 Sales tax 80,595 82,052 Entertainment 17,193 5,193 Office and miscellaneous 42,598 51,893 Total $ 929,500 690,619 77 Selling and marketing expenses Selling and marketing expenses increased by approximately $0.21 million, or 42.23% to approximately $0.72 million for the year ended December 31, 2022 as compared to approximately $0.51 million for the year ended December 31, 2021.
Added
General and administrative expenses as of December 31, 2024 and 2023 consisted of the following: 2024 2023 Employee compensation and benefits $ 927,913 $ 526,895 Travel and communication expenses 59,108 49,451 Rent and utilities 287,755 83,079 Consulting fees 677,556 1,032,197 Insurance 29,511 13,386 Depreciation and amortization expenses 125,395 116,451 Sales tax 17,657 76,654 Entertainment 27,314 23,748 Office and miscellaneous 155,940 96,007 Total $ 2,308,149 $ 2,017,868 88 Research and development (“R&D”) expenses Research and development expenses increased by approximately $0.49 million, or 41.95% to approximately $1.67 million for the year ending December 31, 2024 as compared to approximately $1.18 million for the year ended December 31, 2023.
Removed
Selling and marketing expenses as of December 31, 2022 and 2021 consisted of the following: 2022 2021 Employee compensation and benefits $ 141,600 $ 99,797 Travel and promotion 36,768 45,083 Transportation 181,556 78,281 Insurance - 2,813 Consulting fee 6,917 6,203 Inspection and certification fees 196,732 77,352 Entertainment 140,292 166,295 Office and miscellaneous 16,255 30,481 Total $ 720,120 $ 506,305 Research and development (“R&D”) expenses Research and development expenses decreased by approximately $0.06 million, or 5.53% to approximately $0.93 million for the year ended December 31, 2022 as compared to approximately $0.99 million for the year ended December 31, 2021.
Added
Net cash used in investing activities was approximately $4.90 million for the year ended December 31, 2022.
Removed
The decrease in R&D expenses was mainly due to decreased contract services and supplies, depreciation and other expenses related to R&D activities.
Added
Net cash used in financing activities was approximately $6.44 million for the year ended December 31, 2023.
Removed
Zhejiang Leiya entered into a factory workshop leasing agreement with Wenzhou Ailefu Furniture Tech Limited Company (“Ailefu”), an entity indirectly 100% owned by Lingyi Kong, our Chief Executive Officer and Chairman, effective January 1, 2018. The factory is located at Wenzhou Economic Technological Development Zone, Binghai Fourth Blvd. No. 528.
Added
Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. 94 The Company does not believe it has a material collection risk under its business model, nor does it believe that macroeconomic issues will have a negative impact on its collectability.
Removed
As of December 31, 2023, we had one outstanding short-term loan totaling RMB 500,000, or approximately $0.07 million. This borrowing has a term of one year and, as per our agreement with the bank, it can be renewed.
Added
Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased. 95 Restricted Cash The Company had bank acceptance notes outstanding with the bank and is required to keep certain amounts on deposits that are subject to withdrawal restrictions.
Removed
The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. The PRC government allowed the RMB to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008.
Added
Since June 2010, the PRC government has allowed the RMB to appreciate slowly against the U.S. dollar, though there have been periods when the RMB has depreciated against the U.S. dollar. On August 11, 2015, the PBOC allowed the RMB to depreciate by approximately 2% against the U.S. dollar.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

28 edited+5 added−8 removed52 unchanged
One of these rules, Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, provides an exemption to the insider trading rules in the form of an affirmative defense.
One of these rules, Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, provides an exemption to the insider trading rules in the form of an affirmative defense.
Rule 10b5-1 recognizes the creation of formal programs under which executives and other insiders may sell the securities of publicly traded companies on a regular basis pursuant to written plans that are entered into at a time when the plan participants are not aware of material non-public information and that otherwise comply with the requirements of Rule 10b5-1.
Rule 10b5-1 recognizes the creation of formal programs under which executives and other insiders may sell the securities of publicly traded companies on a regular basis pursuant to written plans that are entered into at a time when the plan participants are not aware of material non-public information and that otherwise comply with the requirements of Rule 10b5-1.
The nominating committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. 90 Duties of Directors Under Cayman Islands law, all of our directors owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties.
The nominating committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. 103 Duties of Directors Under Cayman Islands law, all of our directors owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties.
Summary Compensation Table The following table sets forth certain information with respect to compensation for the years ended December 31, 2023 and 2022, earned by or paid to our chief executive officer and principal executive officer, our principal financial officer, and our other most highly compensated executive officers whose total compensation exceeded US$100,000 (the “named executive officers”).
Summary Compensation Table The following table sets forth certain information with respect to compensation for the years ended December 31, 2024 and 2023, earned by or paid to our chief executive officer and principal executive officer, our principal financial officer, and our other most highly compensated executive officers whose total compensation exceeded US$100,000 (the “named executive officers”).
They are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person. 93 Our company is authorized to issue 450,000,000 Class A ordinary shares of $0.0001 par value per share and 50,000,000 Class B ordinary shares of $0.0001 par value per share.
They are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person. 106 Our company is authorized to issue 450,000,000 Class A ordinary shares of $0.0001 par value per share and 50,000,000 Class B ordinary shares of $0.0001 par value per share.
Sheung has extensive experience in financial services, human resources, and corporate communications. 87 Family Relationships There are no family relationships among any of our directors, director nominees or executive officers as defined in Item 401 of Regulation S-K. 6.B.
Sheung has extensive experience in financial services, human resources, and corporate communications. 100 Family Relationships There are no family relationships among any of our directors, director nominees or executive officers as defined in Item 401 of Regulation S-K. 6.B.
Mak graduated with Honor from The Chinese University of Hong Kong with a Bachelor’s degree in Philosophy in 1995. 86 Jizhou Hou, Independent Director and Chair of Nominating Committee Mr. Hou is experienced in IoT and artificial intelligence with 20 years of experience.
Mak graduated with Honor from The Chinese University of Hong Kong with a Bachelor’s degree in Philosophy in 1995. 99 Jizhou Hou, Independent Director and Chair of Nominating Committee Mr. Hou is experienced in IoT and artificial intelligence with 20 years of experience.
Copies of our committee charters has been posted on our corporate investor relations website. 89 Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Jizhou Hou, Jing Chen and Tsang Sheung. Jing Chen is the chair of our audit committee.
Copies of our committee charters has been posted on our corporate investor relations website. 102 Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Jizhou Hou, Jing Chen and Tsang Sheung. Jing Chen is the chair of our audit committee.
Except as set forth in our discussion below in “Related Party Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Except as set forth in our discussion below in “Related Party Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC. 105 6.D.
Name and Principal Position Year Salary (US$) Bonus (US$) Stock Awards (US$) Option Awards (US$) Non-Equity Incentive Plan Compensation Deferred Compensation Earnings Other Total (US$) Lingyi Kong, 2023 $ 29,303 - - - - - - $ 29,303 CEO 2022 $ 29,303 - - - - - - $ 29,303 Lanling Gu, 2023 $ 17,238 - - - - - - $ 17,238 CFO 2022 $ 17,238 - - - - - - $ 17,238 88 Employment Agreements Our employment agreements with our officers generally provide for employment for a specific term and pay annual salary, health insurance, pension insurance, and paid vacation and family leave time.
Name and Principal Position Year Salary (US$) Bonus (US$) Stock Awards (US$) Option Awards (US$) Non-Equity Incentive Plan Compensation Deferred Compensation Earnings Other Total (US$) Lingyi Kong, 2024 $ 34,743 - - - - - - $ 34,743 CEO 2023 $ 29,303 - - - - - - $ 29,303 Lanling Gu, 2024 $ 21,680 - - - - - - $ 21,680 CFO 2023 $ 17,238 - - - - - - $ 17,238 101 Employment Agreements Our employment agreements with our officers generally provide for employment for a specific term and pay annual salary, health insurance, pension insurance, and paid vacation and family leave time.
A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction.
A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction. 104 Remuneration and Borrowing The directors may receive such remuneration as our board of directors may determine from time to time.
The calculations in the table below are based on 11,450,000 Class A ordinary shares and 1,000,000 Class B ordinary shares issued and outstanding as of the date hereof.
The calculations in the table below are based on 44,032,942 Class A ordinary shares and 1,000,000 Class B ordinary shares issued and outstanding as of the date hereof.
Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party. 91 Terms of Directors and Officers Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders.
Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
Name Age Position(s) Lingyi Kong 29 Chief Executive Officer, Chairman of the Board and Director Lanling Gu 35 Chief Financial Officer Wang-Ngai Mak* 57 Director Nominee Jizhou Hou (1)(2)(3)* 48 Independent Director Nominee, Chair of Nominating Committee Jing Chen (1)(2)(3)* 58 Independent Director Nominee, Chair of Audit Committee Tsang Sheung (1)(2)(3)* 64 Independent Director Nominee, Chair of Compensation Committee (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating Committee * The individual shall be appointed and consents to be in such position upon Company’s listing on the Nasdaq Capital Market. 85 Lingyi Kong , Chief Executive Officer, Chairman of the Board and Director In 2018, Mr.
Name Age Position(s) Lingyi Kong 30 Chief Executive Officer, Chairman of the Board and Director Lanling Gu 36 Chief Financial Officer Wang-Ngai Mak* 59 Director Jizhou Hou (1)(2)(3)* 49 Independent Director, Chair of Nominating Committee Jing Chen (1)(2)(3)* 59 Independent Director, Chair of Audit Committee Tsang Sheung (1)(2)(3)* 65 Independent Director, Chair of Compensation Committee (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating Committee * The individual shall be appointed and consents to be in such position upon Company’s listing on the Nasdaq Capital Market.
Hou also worked at BYD Automation as Chief architect of AI application in electric vehicles from 2005 to 2009. He earned a Master’s degree in Artificial Intelligence from University of Science and Technology of China. Jing Chen, Independent Director and Chair of Audit Committee Ms. Jing Chen is currently serving as Vice President of Future FinTech Group Inc.
Hou also worked at BYD Automation as Chief architect of AI application in electric vehicles from 2005 to 2009. He earned a Master’s degree in Artificial Intelligence from University of Science and Technology of China. Jing Chen, Independent Director and Chair of Audit Committee Since November 2024, Ms.
Kong has been serving as the Chairman of the Board of Erayak International since inception in July 2018. Lanling Gu , Chief Financial Officer Ms. Gu has years of experience in international accounting (IFRS) and USA GAAP reporting and is familiar with preparation of consolidated financial statement. Prior to serving as our CFO in March 2021, Ms.
Lanling Gu , Chief Financial Officer Ms. Gu has years of experience in international accounting (IFRS) and USA GAAP reporting and is familiar with preparation of consolidated financial statement. Prior to serving as our CFO in March 2021, Ms. Gu was the director of the Company’s accounting department since 2018. Ms.
Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.
Terms of Directors and Officers Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.
Employees As of December 31, 2023, we have a total of 290 employees in the following departments: As of December 31, 2023 Administration 40 Research and Development 50 Manufacture 179 Business Operations 21 Total 290 Our employees are not represented by a labor organization or covered by a collective bargaining agreement.
Employees As of December 31, 2024, we have a total of 360 employees in the following departments: As of December 31, 2024 Administration 28 Research and Development 39 Manufacture 281 Business Operations 12 Total 360 Our employees are not represented by a labor organization or covered by a collective bargaining agreement.
Named Executive Officers and Directors Amount of Beneficial Ownership (Class A) Percentage Ownership (Class A) Amount of Beneficial Ownership (Class B) Percentage Ownership (Class B) Combined Voting Power of Class A and Class B Combined Voting Power of Class A and Class B Ordinary Shares as a Percentage (3) Directors and Named Executive Officers: Lingyi Kong, Chief Executive Officer and Chairman 1 6,000,000 52.40 % 1,000,000 100 % 26,000,000 83.87 % Lanling Gu, Chief Financial Officer Wang-Ngai Mak, Director 2 2,000,000 17.47 % - 0 % 1,400,000 4.52 % Jing Chen, Independent Director and Chairwoman of Audit Committee - 0 % - 0 % - 0 % Tsang Sheung, Independent Director and Chairman of Compensation Committee - 0 % - 0 % - 0 % Jizhou Hou, Independent Director and Chairman of Nominating Committee - 0 % - 0 % - 0 % All directors and executive officers as a group (6 persons) 8,000,000 69.87 % 1,000,000 100 % 28,000,000 89.03 % 5% Beneficial Owners: Erayak International Limited 1 6,000,000 52.40 % 1,000,000 100 % 26,000,000 83.87 % CEC Science and Innovation Co., Ltd. 2 1,400,000 12.22 % - 0 % 1,400,000 4.45 % (1) Through Erayak International Limited.
Named Executive Officers and Directors Amount of Beneficial Ownership (Class A) Percentage Ownership (Class A) Amount of Beneficial Ownership (Class B) Percentage Ownership (Class B) Combined Voting Power of Class A and Class B Combined Voting Power of Class A and Class B Ordinary Shares as a Percentage (3) Directors and Named Executive Officers: Lingyi Kong, Chief Executive Officer and Chairman 1 6,000,000 13.63 % 1,000,000 100 % 26,000,000 40.61 % Lanling Gu, Chief Financial Officer Wang-Ngai Mak, Director 2 2,000,000 4.54 % - 0 % 2,000,000 3.12 % Jing Chen, Independent Director and Chairwoman of Audit Committee - 0 % - 0 % - 0 % Tsang Sheung, Independent Director and Chairman of Compensation Committee - 0 % - 0 % - 0 % Jizhou Hou, Independent Director and Chairman of Nominating Committee - 0 % - 0 % - 0 % All directors and executive officers as a group (6 persons) 8,000,000 18.17 % 1,000,000 100 % 28,000,000 43.73 % 5% Beneficial Owners: Erayak International Limited 1 6,000,000 13.63 % 1,000,000 100 % 26,000,000 40.61 % Yili Shoemaking Automation Technology Co., Limited 2,223,529 5.05 % - 0 % 2,223,529 3.47 % (1) Through Erayak International Limited.
At the same time, Mr. Kong visited Germany, France, Belgium, the Netherlands, and Australia on behalf of the company for business interviews, and successfully obtained OEM contracts with well-known European companies such as AEG, Projecta, Greencell, Einhell, and Duracell, among other well-known North American companies. Mr.
Kong visited Germany, France, Belgium, the Netherlands, and Australia on behalf of the company for business interviews, and successfully obtained OEM contracts with well-known European companies such as AEG, Projecta, Greencell, Einhell, and Duracell, among other well-known North American companies. Mr. Kong has been serving as the Chairman of the Board of Erayak International since inception in July 2018.
Gu participated in the company’s IPO due diligence in 2017, conducted audits for the company and independently led a team to complete audit work of accounting subjects, including inspection of accounts and verification of accuracy of financial statements and check of operational procedures. Thanks to years of experience in electronics manufacturing plants, Ms.
Gu served as an auditor at Zhejiang Oulong Electric Co., Ltd., Ms. Gu participated in the company’s IPO due diligence in 2017, conducted audits for the company and independently led a team to complete audit work of accounting subjects, including inspection of accounts and verification of accuracy of financial statements and check of operational procedures.
Gu has a deep understanding of cost control and accounting. Ms. Gu obtained an associate’s degree in accounting from Anhui Wuhu Vocational and Technical College in 2011, and a certificate for Intermediate Accountant in 2020 from the China Accounting Online School. Wang-Ngai Mak, Director Mr. Mak is currently the Executive Vice President of Barakah Capital Holdings (M) Sdn.
Thanks to years of experience in electronics manufacturing plants, Ms. Gu has a deep understanding of cost control and accounting. Ms. Gu obtained an associate’s degree in accounting from Anhui Wuhu Vocational and Technical College in 2011, and a certificate for Intermediate Accountant in 2020 from the China Accounting Online School. Wang-Ngai Mak, Director Mr.
Kong graduated from Ningbo University with a Bachelor’s degree in Engineering Management. From 2018 to 2019, Mr. Kong served as an international business representative of Zhejiang Real Electronics Company, leading the company’s business team to participate in the Dusseldorf Motor Show in Germany, the Berlin Electronics Show in Germany, and the Guangzhou Trade Fair in China.
Kong served as an international business representative of Zhejiang Real Electronics Company, leading the company’s business team to participate in the Dusseldorf Motor Show in Germany, the Berlin Electronics Show in Germany, and the Guangzhou Trade Fair in China. At the same time, Mr.
Chen is a Member of the Chartered Institute of Management Accountants (CIMA), a Senior Member of the International Financial Management (SIFM) accredited by the Ministry of Human Resources and Social Security of PRC and a Certified Internal Control Professional, as granted by Internal Control Institute (ICI). Tsang Sheung, Independent Director and Chair of Compensation Committee Mr.
She is also a Senior Member of the International Financial Management (SIFM) accredited by the Ministry of Human Resources and Social Security of the PRC. Tsang Sheung, Independent Director and Chair of Compensation Committee Mr.
Chen served as CFO of Beijing Logis Technology Development Co., Ltd., a company listed on The National Equities Exchange and Quotations Co., Ltd. of China which is a Chinese over-the-counter stock trading system. From June 2016 to July 2017, Ms. Chen served as Group Chief Financial Officer of Beijing AnWuYou Food Co., Ltd. Ms.
Chen has also served as an independent director of Hello iPayNow (Beijing) Company Ltd. since April 2019 to March 2021. From August 2017 to July 2018, she served as CFO of Beijing Logis Technology Development Co., Ltd., a company listed on The National Equities Exchange and Quotations Co., Ltd. of China, which is a Chinese over-the-counter stock trading system.
Bhd. since 2011, where he is responsible for projects evaluation and business development. Mr. Mak has extensive experience in business strategy, corporate development and management consulting. He served as Vice President, e-Banking, in CITIC Ka Wah Bank (Hong Kong) from January 2000 to July 2003, in charge of the development of the Internet banking and stock trading system.
He served as Vice President, e-Banking, in CITIC Ka Wah Bank (Hong Kong) from January 2000 to July 2003, in charge of the development of the Internet banking and stock trading system. From February 2004 to February August 2009, Mr. Mak was employed at the ITG Systems Sdn.
(Nasdaq: FTFT) since December 2020, and served as the Chief Financial Officer from May 2019 to November 2020. Ms. Chen served as the CFO of AnZhiXinCheng (Beijing) Technology Co., Ltd. from August 2018 to May 2019. Ms. Chen has served as Independent Director of Hello iPayNow (Beijing) Company Ltd. since April 2019. From August, 2017 to July, 2018, Ms.
(Nasdaq: FTFT), a FinTech company, where she was responsible for the company’s internal control and merger and acquisition from December 2020 to April 2023. From May 2019 to November 2020, Ms. Chen served as the CFO of Future Fintech Group Inc. She served as the CFO of AnZhiXinCheng (Beijing) Technology Co., Ltd. from August 2018 to May 2019. Ms.
Chen served as Chief Financial Officer Beijing DKI Investment Management Co., Ltd. from August 2012 to May 2016. Ms. Chen received a degree of Doctor of Business Administration from Victoria University, Neuchatel, Switzerland in March 2008 and an MBA degree from City University of Seattle, Washington, U.S. in April, 2000. Ms.
Chen received a Doctorate of Business Administration from Victoria University, Neuchatel, Switzerland and an MBA degree from City University of Seattle in Washington, U.S. Ms. Chen holds Fellow Membership of CPA Australia (FCPA) and is a Member of the Chartered Institute of Management Accountants (CIMA).
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Gu was the director of the Company’s accounting department since 2018. Ms. Gu served as an auditor at Zhejiang Oulong Electric Co., Ltd., Ms.
Added
Lingyi Kong , Chief Executive Officer, Chairman of the Board and Director In 2018, Mr. Kong graduated from Ningbo University with a Bachelor’s degree in Engineering Management. From 2018 to 2019, Mr.
Removed
From February 2004 to February August 2009, Mr. Mak was employed at the ITG Systems Sdn.
Added
Mak is currently the Executive Vice President of Barakah Capital Holdings (M) Sdn. Bhd. since 2011, where he is responsible for projects evaluation and business development. Mr. Mak has extensive experience in business strategy, corporate development and management consulting.
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Chen holds Fellow Membership of CPA Australia (FCPA), Fellow Membership of the Association of International Accountants U.K. (FAIA). Ms.
Added
Chen has served as the Chief Financial Officer of Shanxi Yansen New New Energy Co., Ltd. She also has served as an independent director and the chairman of the audit committee on the board of directors of Xinxu Copper Industry Technology Ltd. (Ticker: XXC) since March 2024, Erayak Power Solution Group Inc.
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Remuneration and Borrowing The directors may receive such remuneration as our board of directors may determine from time to time.
Added
(Nasdaq: RAYA) since November 2021, Bon Natural Lift Limited. (Nasdaq: BON) since October 2023, Jin Medical International Ltd. (Nasdaq: ZJYL) from August 2021 to December 2023. She also served as the Vice President of Future Fintech Group Inc.
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Board Diversity The Board of Directors does not have a formal policy with respect to Board nominee diversity. In recommending proposed nominees to the Board of Directors, the Nominating Committee is charged with building and maintaining a board that has an ideal mix of talent and experience to achieve our business objectives in the current environment.
Added
From June 2016 to July 2017, Ms. Chen served as Group Chief Financial Officer of Beijing AnWuYou Food Co., Ltd. Ms. Chen also served as Chief Financial Officer of Beijing DKI Investment Management Co., Ltd. from August 2012 to May 2016. Ms.
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In particular, the Nominating Committee is focused on relevant subject matter expertise, depth of knowledge in key areas that are important to us, and diversity of thought, background, perspective and experience so as to facilitate robust debate and broad thinking on strategies and tactics pursued by us.
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The following table provides certain information regarding the diversity of our Board of Directors as of the date of this annual report.
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Board Diversity Matrix (As of the date of this annual report) Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 4 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction — LGBTQ+ — 92 6.D.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

10 edited+0 added−0 removed3 unchanged
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7.A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees — 6.E. Share Ownership.” The company’s major shareholders do have different voting rights than the other shareholders. 94 7.B.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7.A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees — 6.E. Share Ownership.” The company’s major shareholders do have different voting rights than the other shareholders. 107 7.B.
As of December 31, 2023, 2022 and 2021, the Company had no outstanding balance from this individual. 3) Related party balances Net outstanding balances with related parties consisted of the following as of December 31, 2023, 2022 and 2021: Accounts Name of related parties 2023 2022 2021 Due to related party Lingyi Kong 1,877,489 344,528 158,198 Shengling Xiang - 46,623 - Wenzhou Ailefu Technology Co.
As of December 31, 2024, 2023 and 2022, the Company had no outstanding balance from this individual. 3) Related party balances Net outstanding balances with related parties consisted of the following as of December 31, 2024, 2023 and 2022: Accounts Name of related parties 2024 2023 2022 Due to related party Lingyi Kong 3,176,325 1,877,489 344,528 Shengling Xiang 333,840 - 46,623 Wenzhou Ailefu Technology Co.
The nature of the lease is disclosed in Note 8 - Lease. There were no transactions between the Company and Xiangze, the Company and Weidi, the Company and Fushishenye, and the Company and Xiaobai during the years ended December 31, 2023, 2022 and 2021.
The nature of the lease is disclosed in Note 8 - Lease. There were no transactions between the Company and Xiangze, the Company and Fushishenye, the Company and Xiaobai, the Company and Chuanlong Lin during the years ended December 31, 2024, 2023 and 2022.
As of December 31, 2023, 2022 and 2021, the Company had outstanding payable due to Lingyi Kong with an amount of $1,877,489, $344,528, and $158,198, respectively. This represented unsecured, due on demand and interest free borrowings between the Company and Lingyi Kong.
As of December 31, 2024, 2023 and 2022, the Company had outstanding payable due to Lingyi Kong with an amount of $3,510,165, $1,877,489, and $344,528, respectively. This represented unsecured, due on demand and interest free borrowings between the Company and Lingyi Kong.
As of December 31, 2023, 2022 and 2021, the Company had outstanding balance from this individual of $0, $46,623 and $0, respectively. Lingyi Kong periodically provides working capital to support the Company’s operations when needed. During the years ended December 31, 2023, 2022 and 2021, Lingyi Kong provided working capital of $16,559,369, $22,696,628, and $14,344,678, respectively.
As of December 31, 2024, 2023 and 2022, the Company had an outstanding balance from this individual of $0, $0 and $46,623 respectively. Lingyi Kong periodically provides working capital to support the Company’s operations when needed. During the years ended December 31, 2024, 2023 and 2022, Lingyi Kong provided working capital of $11,374,390, $16,559,369, and $22,696,628, respectively.
During the years ended December 31, 2023, 2022 and 2021, Chunhua Xiang provided working capital of $9,886, $780,131, and $928,439, respectively.
During the years ended December 31, 2024, 2023 and 2022, Chunhua Xiang provided working capital of $0, $9,886, and $780,131, respectively.
For the years ended December 31, 2023, 2022 and 2021, there were notes receivables endorsed by Lingyi Kong with recourse to the Company’s suppliers to settle accounts payable in the amount of $6,797,772, $2,844,019, and $5,043,783 respectively. Chuanlong Lin periodically provides working capitals to support the Company’s operations when needed.
For the years ended December 31, 2024, 2023 and 2022, there were notes receivables endorsed by Lingyi Kong with recourse to the Company’s suppliers to settle accounts payable in the amount of $7,255,413, $6,797,772, and $2,844,019, respectively. Chunhua Xiang periodically provides working capital to support the Company’s operations when needed.
Ltd. 405,640 - - Net due to related parties $ 2,283,129 $ 391,151 $ 158,198 95 3) Related party balances Net outstanding balances with related parties consisted of the following as of December 31, 2023, 2022 and 2021: Accounts Name of related parties 2022 2021 Due to related party Lingyi Kong (182,528 ) (158,198 ) Shengling Xiang (46,623 ) - Net due to related parties $ (229,151 ) $ (158,198 ) Other Related Party Transactions During the year ended December 31, 2022, other than disclosed in elsewhere (including the financial statements for the fiscal years ended 2021 and accompanying footnotes), we did not have any other related party transactions.
Ltd. - 405,640 - Net due to related parties $ 3,510,165 $ 2,283,129 $ 391,151 108 Other Related Party Transactions During the year ended December 31, 2024, other than disclosed in elsewhere (including the financial statements for the fiscal years ended 2024 and accompanying footnotes), we did not have any other related party transactions.
As of December 31, 2023, 2022 and 2021, the Company had no outstanding balances from these entities. Shengling Xiang periodically provides working capital to support the Company’s operations when needed. During the years ended December 31, 2023, 2022 and 2021, Shengling Xiang provided working capital of $2,217, $46,623 and $27,177, respectively.
As of December 31, 2024, 2023 and 2022, the Company has accounts receivable from Weidi of $1,314,332, $0 and $0, respectively. Shengling Xiang periodically provides working capital to support the Company’s operations when needed. During the years ended December 31, 2024, 20223 and 2022, Shengling Xiang provided working capital of $349,737, $2,217and $46,623, respectively.
During fiscal years 2023, 2022 and 2021, Chuanlong Lin provided working capital of $0, $0 and $11,130, respectively. As of December 31, 2023, 2022 and 2021, the Company had no outstanding balance from this individual. Chunhua Xiang periodically provides working capital to support the Company’s operations when needed.
As of December 31, 2024, 2023 and 2022, the Company had no outstanding balances from these entities. Weidi purchases products from the Company. During the fiscal years ended December 31, 2024, 2023 and 2022, the transactions between the Company and Weidi amounted to $1,179,872, $0 and $0, respectively.

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