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Intelligent Living Application Group Inc.

Intelligent Living Application Group Inc.ILAG财报

Nasdaq · 可选消费 · 隔断、货架、储物柜及办公和商店固定装置

Intelligent Energy is a fuel cell engineering business focused on the development, manufacture and commercialisation of its proton-exchange membrane fuel cell technologies for a range of markets including automotive, stationary power, materials handling equipment and UAVs. Headquartered in the UK with representation in the US, Japan, South Korea, and China.

What changed in Intelligent Living Application Group Inc.'s 20-F — 2023 vs 2024

Top changes in Intelligent Living Application Group Inc.'s 2024 20-F

551 paragraphs added · 519 removed · 204 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Further implementations and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB’s determination of its lack of sufficient access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in mainland China. A potential consequence is that our ordinary shares may be delisted by the exchange.
Further implementations and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB’s determination of its lack of sufficient access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in mainland China. A potential consequence is that our ordinary shares may be delisted by the exchange.
The delisting of our ordinary shares, or the threat of our ordinary shares being delisted, may materially and adversely affect the value of your investment.
The delisting of our ordinary shares, or the threat of our ordinary shares being delisted, may materially and adversely affect the value of your investment.
Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including: ● difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business; ● inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; ● difficulties in retaining, training, motivating and integrating key personnel; ● diversion of management’s time and resources from our normal daily operations; 15 ● difficulties in successfully incorporating licensed or acquired technology and rights into our product offerings; ● difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations; ● difficulties in retaining relationships with customers, employees and suppliers of the acquired business; ● risks of entering markets in which we have limited or no prior experience; ● regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business; ● assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; ● failure to successfully further develop the acquired technology; ● liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; ● potential disruptions to our ongoing businesses; and ● unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.
Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including: ● difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business; ● inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; ● difficulties in retaining, training, motivating and integrating key personnel; ● diversion of management’s time and resources from our normal daily operations; 14 ● difficulties in successfully incorporating licensed or acquired technology and rights into our product offerings; ● difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations; ● difficulties in retaining relationships with customers, employees and suppliers of the acquired business; ● risks of entering markets in which we have limited or no prior experience; ● regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business; ● assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; ● failure to successfully further develop the acquired technology; ● liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; ● potential disruptions to our ongoing businesses; and ● unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.
Factors that may cause fluctuations in our financial results include: ● our ability to attract new customers and retain existing customers; ● changes in our mix of products and introduction of new products; ● the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; ● Increase the cost of raw materials and/or labor; ● our decision to manage order volume growth during the period; ● the impact of competitors or competitive products; ● increases in our costs and expenses that we may incur to grow and expand our operations and to remain competitive; ● changes in the legal or regulatory environment or proceedings, including enforcement by government regulators, fines, orders or consent decrees; ● increase of tariffs, general economic, industry and market conditions, including changes in Chinese, U.S. or global business or macroeconomic conditions; ● the timing of expenses related to the development or acquisition of technologies or businesses; and ● the additional costs related to being a public company. 13 Despite our marketing efforts, we may not be able to promote and maintain our brand in an effective and cost-efficient way and our business and results of operations may be harmed accordingly.
Factors that may cause fluctuations in our financial results include: ● our ability to attract new customers and retain existing customers; ● changes in our mix of products and introduction of new products; ● the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; ● Increase the cost of raw materials and/or labor; ● our decision to manage order volume growth during the period; ● the impact of competitors or competitive products; ● increases in our costs and expenses that we may incur to grow and expand our operations and to remain competitive; ● changes in the legal or regulatory environment or proceedings, including enforcement by government regulators, fines, orders or consent decrees; ● increase of tariffs, general economic, industry and market conditions, including changes in Chinese, U.S. or global business or macroeconomic conditions; ● the timing of expenses related to the development or acquisition of technologies or businesses; and ● the additional costs related to being a public company. 12 Despite our marketing efforts, we may not be able to promote and maintain our brand in an effective and cost-efficient way and our business and results of operations may be harmed accordingly.
In accordance with the HFCA Act, trading in securities of any registrant on a national securities exchange or in the over-the-counter trading market in the United States may be prohibited if the PCAOB determines that it cannot inspect or fully investigate the registrant’s auditor for three consecutive years beginning in 2021, and, as a result, an exchange may determine to delist the securities of such registrant.
In accordance with the HFCA Act, trading in securities of any registrant on a national securities exchange or in the over-the-counter trading market in the United States may be prohibited if the PCAOB determines it cannot inspect or fully investigate the registrant’s auditor for three consecutive years beginning in 2021, and, as a result, an exchange may determine to delist the securities of such registrant.
Any additional restriction, scrutiny or negative publicity of the U.S.-listed Chinese companies could cause the U.S. investors less interested in our ordinary shares, or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline or be worthless. 29 Furthermore, the PRC government authorities may adopt new rules and regulations and impose additional limitations or restrictions on us based on the industry that we operate in, for example, the “dual control of energy consumption” policy to control the total power consumption and efficiency which has caused disruptions to Xingfa’s production schedule in 2021, or more stringent environmental protection requirements for air emissions, wastewater treatment and solid waste management and disposal which could restrict or limit our operations and expose us to liability and penalties for non-compliance.
Any additional restriction, scrutiny or negative publicity of the U.S.-listed Chinese companies could cause the U.S. investors less interested in our ordinary shares, or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline or be worthless. 28 Furthermore, the PRC government authorities may adopt new rules and regulations and impose additional limitations or restrictions on us based on the industry that we operate in, for example, the “dual control of energy consumption” policy to control the total power consumption and efficiency which has caused disruptions to Xingfa’s production schedule in 2021, or more stringent environmental protection requirements for air emissions, wastewater treatment and solid waste management and disposal which could restrict or limit our operations and expose us to liability and penalties for non-compliance.
Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations. ● Uncertainties and quick change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material and negative impact on our business operation, decrease the value of our ordinary shares and limit the legal protections available to us. ● Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. 6 ● Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China. ● The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly.
Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations. ● Uncertainties and quick change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material and negative impact on our business operation, decrease the value of our ordinary shares and limit the legal protections available to us. ● Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. 5 ● Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China. ● The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly.
Our ability to implement this growth strategy depends, among other things, on our ability to: ● enter into distribution and other strategic arrangements with current and new retailers and other potential distributors of our products; ● continue to effectively compete in our distribution channels; ● increase our brand recognition by effectively implementing our marketing strategy and advertising initiatives; ● create and maintain brand loyalty; ● develop new products and product line extensions that appeal to consumers; ● maintain and, to the extent necessary, improve our high standards for product quality, safety and integrity; ● maintain sources for the required supply of quality raw materials and ingredients to meet our growing demand; and ● identify and successfully enter and market our products in new geographic areas and market segments. 9 We may not be able to successfully implement our growth strategy and may need to change our strategy from time to time.
Our ability to implement this growth strategy depends, among other things, on our ability to: ● enter into distribution and other strategic arrangements with current and new retailers and other potential distributors of our products; ● continue to effectively compete in our distribution channels; ● increase our brand recognition by effectively implementing our marketing strategy and advertising initiatives; ● create and maintain brand loyalty; ● develop new products and product line extensions that appeal to consumers; ● maintain and, to the extent necessary, improve our high standards for product quality, safety and integrity; ● maintain sources for the required supply of quality raw materials and ingredients to meet our growing demand; and ● identify and successfully enter and market our products in new geographic areas and market segments. 8 We may not be able to successfully implement our growth strategy and may need to change our strategy from time to time.
Xingfa has been subject to stricter regulatory requirements in terms of entering into labor contracts with its employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of its employees.
Xingfa has been subject to stricter regulatory requirements in entering into labor contracts with its employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of its employees.
In addition, because of the rapid pace of technological change, parts of our business rely on Internet of Things (IoT) technology, the network of physical objects that feature an IP address for internet connectivity, and the communication that occurs between these objects and other Internet-enabled devices and systems which will alert the users under pre-set conditions, developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all. 14 It is often difficult to register, maintain and enforce intellectual property rights in China.
In addition, because of the rapid pace of technological change, parts of our business rely on Internet of Things (IoT) technology, the network of physical objects that feature an IP address for internet connectivity, and the communication that occurs between these objects and other Internet-enabled devices and systems which will alert the users under pre-set conditions, developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all. 13 It is often difficult to register, maintain and enforce intellectual property rights in China.
We believe that our cash on hand and anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months, we cannot assure you this will be the case.
Although we believe that our cash on hand and anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months, we cannot assure you this will be the case.
In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations. There remains significant international pressure on the PRC government to adopt a flexible currency policy.
In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations. There remains international pressure on the PRC government to adopt a flexible currency policy.
On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
The enactment of the HFCA Act and related regulations and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could cause investors uncertainty for affected issuers and the market price of our ordinary shares could be adversely affected, and we could be delisted if our auditor is unable to meet the PCAOB inspection requirement. 26 The lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China and Hong Kong.
The enactment of the HFCA Act and related regulations and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could cause investors uncertainty for affected issuers and the market price of our ordinary shares could be adversely affected, and we could be delisted if our auditor is unable to meet the PCAOB inspection requirement. 25 The lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China and Hong Kong.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from any offering 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. 21 PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from any offering 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 PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. 27 We face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our Company by investors that are non-PRC resident enterprises.
As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. 26 We face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our Company by investors that are non-PRC resident enterprises.
We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.” As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company.
We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.” As a public company, we incur legal, accounting and other expenses that we did not incur as a private company.
As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. 33 As a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. 32 As a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price. 16 We lease our facilities from third parties and there is no assurance that we will be able to renew our leased facilities on favorable terms, or at all.
Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price. 15 We lease our facilities from third parties and there is no assurance that we will be able to renew our leased facilities on favorable terms, or at all.
If Xingfa fails to make adequate payments in the future, it may be required by the social security premium collection agency to make or supplement contributions within a stipulated period, and shall be subject to a late payment fine computed from the due date at the rate of 0.05% per day; where payment is not made within the stipulated period, the relevant administrative authorities shall impose a fine ranging from one to three times the amount of the amount in arrears.
If Xingfa fails to make adequate payments in the future, it may be required by the social security premium collection agency to make or supplement contributions within a stipulated period, and shall be subject to a late payment fine computed from the due date at 0.05% per day; where payment is not made within the stipulated period, the relevant administrative authorities shall impose a fine ranging from one to three times the amount in arrears.
Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations. 19 We rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations. 18 We rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. 34 As an “emerging growth company” under applicable law, we will be subject to reduced disclosure requirements.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. 33 As an “emerging growth company” under applicable law, we will be subject to reduced disclosure requirements.
According to the Opinions, Measures, including promoting the construction of relevant regulatory systems, will be taken to control the risks and manage the incidents from overseas listed Chinese companies. 28 On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (the “New Overseas Listing Rules”) with five interpretive guidelines, which took effect on March 31, 2023.
According to the Opinions, Measures, including promoting the construction of relevant regulatory systems, will be taken to control the risks and manage the incidents from overseas listed Chinese companies. 27 On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (the “New Overseas Listing Rules”) with five interpretive guidelines, which took effect on March 31, 2023.
Damage to our reputation or our brands or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and increased costs and our business, financial condition and results of operations may be materially adversely affected. 10 To the extent our customers purchase products in excess of consumer demand in any period, our sales in a subsequent period may be adversely affected as our customers seek to reduce their inventory levels.
Damage to our reputation or our brands or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and increased costs and our business, financial condition and results of operations may be materially adversely affected. 9 To the extent our customers purchase products in excess of consumer demand in any period, our sales in a subsequent period may be adversely affected as our customers seek to reduce their inventory levels.
Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives. 17 Environmental regulations impose substantial costs and limitations on our operations and violation of environmental regulations might subject us to fines, penalties or suspension of production which could have material negative impact on our financial results.
Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives. 16 Environmental regulations impose substantial costs and limitations on our operations and violation of environmental regulations might subject us to fines, penalties or suspension of production which could have material negative impact on our financial results.
We also attempt to lower consumption of raw materials by lowing waste rate and recycled materials without compromising product quality. 11 Xingfa may experience material disruptions to its manufacturing operations in China that could result in material delays, quality control issues, increased costs and loss of business opportunities, which may negatively impact our sales and financial results.
We also attempt to lower consumption of raw materials by lowing waste rate and recycled materials without compromising product quality. 10 Xingfa may experience material disruptions to its manufacturing operations in China that could result in material delays, quality control issues, increased costs and loss of business opportunities, which may negatively impact our sales and financial results.
However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination.
However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination.
The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by China’s Ministry of Commerce (“MOFCOM”) or its local counterpart and the amount of registered capital of such foreign-invested company. 20 We may also decide to finance our PRC subsidiary by means of capital contributions.
The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by China’s Ministry of Commerce (“MOFCOM”) or its local counterpart and the amount of registered capital of such foreign-invested company. 19 We may also decide to finance our PRC subsidiary by means of capital contributions.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making a subsequent overseas securities offering after having been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for IPO and listing in an overseas market; b) an issuer making a subsequent overseas securities offering after having been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
The new rules provide that the determination as to whether a domestic company is indirectly offering and listing securities on an overseas market shall be made on a substance over form basis, and if the issuer meets the following conditions, the offering and listing shall be determined as an indirect overseas offering and listing by a Chinese domestic company: (i) any of the revenue, profit, total assets or net assets of the Chinese domestic entity is more than 50% of the related financials in the issuer’s audited consolidated financial statements for the most recent fiscal year; and (ii) the senior managers in charge of business operation and management of the issuer are mostly Chinese citizens or with regular domicile in China, the main locations of its business operations are in China or main business activities are conducted in China.
The new rules provide that the determination as to whether a domestic company is indirectly offering and listing securities on an overseas market shall be made on a substance over form basis, and if the issuer meets the following conditions, the offering and listing shall be determined as an indirect overseas offering and listing by a Chinese domestic company: (i) any of the revenue, profit, total assets or net assets of the Chinese domestic entity is more than 50% of the related financials in the issuer’s audited CFS for the most recent fiscal year; and (ii) the senior managers in charge of business operation and management of the issuer are mostly Chinese citizens or with regular domicile in China, the main locations of its business operations are in China or main business activities are conducted in China.
The market price for our ordinary shares may be volatile and subject to wide fluctuations due to factors such as: ● the perception of U.S. investors and regulators of U.S. listed Chinese companies; ● actual or anticipated fluctuations in our operating results; ● changes in financial estimates by securities research analysts; ● negative publicity, studies or reports; ● conditions in the international lockset, hardware and real estate markets; ● our capability to catch up with the technology innovations in the industry; ● changes in the economic performance or market valuations of other lockset and hardware companies; ● announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; ● addition or departure of key personnel; ● fluctuations of exchange rates among RMB, HK dollar and the U.S. dollar; and ● general economic, health or political conditions in Hong Kong, China and worldwide. 32 In addition, the securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.
The market price for our ordinary shares may be volatile and subject to wide fluctuations due to factors such as: ● the perception of U.S. investors and regulators of U.S. listed Chinese companies; ● actual or anticipated fluctuations in our operating results; ● changes in financial estimates by securities research analysts; ● negative publicity, studies or reports; ● conditions in the international lockset, hardware and real estate markets; ● our capability to catch up with the technology innovations in the industry; ● changes in the economic performance or market valuations of other lockset and hardware companies; ● announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; ● addition or departure of key personnel; ● fluctuations of exchange rates among RMB, HK dollar and the U.S. dollar; and ● Tariffs, trade war, general economic, health or political conditions in Hong Kong, China and worldwide. 31 In addition, the securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.
These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers. 30 Any social unrest in Hong Kong may affect our business and financial results. Hong Kong is a special administrative region of the PRC with its own government.
These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers. 29 Any social unrest in Hong Kong may affect our business and financial results. Hong Kong is a special administrative region of the PRC with its own government.
See “Regulations— Regulations of People’s Republic of China —Employee Stock Incentive Plan.” 24 If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
See “Regulations— Regulations of People’s Republic of China —Employee Stock Incentive Plan.” 23 If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
If Xingfa is subject to fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. 23 Non-compliance with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.
If Xingfa is subject to fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. 22 Non-compliance with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.
Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. 25 The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly.
Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. 24 The Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly.
For example, in April 2018, Xingfa was ordered by Dongguan Environmental Protection Bureau to pay a fine of RMB100,000 (approximately $15,000) for failure to meet the air emission requirement, which Xingfa has paid and corrected the non-compliance emission.
For example, in April 2018, Xingfa was ordered by Dongguan Environmental Protection Bureau to pay a fine of RMB100,000 (approximately $14,000) for failure to meet the air emission requirement, which Xingfa has paid and corrected the non-compliance emission.
Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition. 18 Risks Related to Doing Business in China.
Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition. 17 Risks Related to Doing Business in China.
Having considered the availability of talents and cost-benefit efficiency, we will incur costs to outsource information technology developer(s) to develop software application and support functions of such new products. In additional, we will incur marketing costs to generate customer interest and sales of such products in enough volume to make it a profitable product.
Having considered the availability of talents and cost-benefit efficiency, we will continue to incur costs to outsource information technology developer(s) to develop software application and support functions of new smart lock products. In additional, we will incur marketing costs to generate customer interest and sales of such products in enough volume to make it a profitable product.
If we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Ordinary Shares to decline, and we may be subject to investigation or sanctions by the SEC.
If we are unable to assert that our ICFR is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Ordinary Shares to decline, and we may be subject to investigation or sanctions by the SEC.
This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the market price of our ordinary shares.
This concentration of voting power may discourage, delay or prevent a change in control of our Company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the market price of our ordinary shares.
Risks Related to Our Ordinary Shares Risks Relating to Our Shares We may fail to meet continued listing requirements on the NASDAQ Capital Market On October 19, 2023, the Company received a letter from the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s ordinary shares listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
Risks Related to Our Ordinary Shares Risks Relating to Our Shares We may fail to meet continued listing requirements on the NASDAQ Capital Market On January 23, 2025, the Company received a letter from the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s ordinary shares listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
In early 2023, we have engaged a Hong Kong based technology company to conduct research and development in a series of smart home products and devices as a part of our smart lock, security and IoT products development strategy.
In early 2023, we engaged a Hong Kong based technology company to conduct research and development (“R&D”) in a series of smart home products and devices as a part of our smart lock, security and IoT products development strategy.
Although we only manufacture lockset products in China and do not engage in CIIO, Online Platform Operator or any education or tutoring related business, our offering and listing on Nasdaq may be negatively affected by these new regulations as they have materially negatively affected stock prices of the U.S listed Chinese companies which are the CIIOs, Online Platform Operators or in the tutoring business.
Although we only manufacture lockset products in China and do not engage in CIIO, Online Platform Operator or any education or tutoring related business, our stock price may be negatively affected by these new regulations as they have materially negatively affected stock prices of the U.S listed Chinese companies which are the CIIOs, Online Platform Operators or in the tutoring business.
If we fail to design and develop appropriate functions for our smart locks to attract enough customers and establish commercial manufacturing capabilities or if our smart lock products can’t meet the regulatory requirements, our financial condition and results of operations may be adversely affected.
If we fail to design and develop appropriate functions for our smart locks to attract enough customers and establish commercial manufacturing capabilities or if our smart lock products can’t meet the local regulatory requirements where we sell such products, our financial condition and results of operations may be adversely affected.
Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the market price of our ordinary shares. 22 Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations.
Conversely, a depreciation of the RMB against the U.S. dollar may reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the market price of our ordinary shares. 21 Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations.
We will continue to invest in the development of the software of smart locks and equipment and machineries to manufacture parts and assembly line to produce smart locks.
We will continue to invest in the smart locks and software, equipment and machineries to manufacture parts and assembly line to produce smart locks.
In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. See Enforceability of Civil Liabilities – China .
In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest.
For example, to the extent that we need to convert U.S. dollars we receive from our initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion.
For example, to the extent that we need to convert U.S. dollars we receive from our IPO into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the year ending December 31, 2023, the first fiscal year beginning after our initial public offering.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting (“ICFR”) for the year ending December 31, 2023, the first year beginning after our IPO.
This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting and, after we cease to be an “emerging growth company,” a statement that our independent registered public accounting firm has issued an opinion on our internal control over financial reporting.
This assessment needs to include disclosure of any material weaknesses identified by our management in our ICFR and, after we cease to be an “emerging growth company,” a statement that our independent registered public accounting firm has issued an opinion on our ICFR.
At such time that our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting, it may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
At such time that our independent registered public accounting firm is required to formally attest to the effectiveness of our ICFR, it may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
Although our operations have resumed to normal, we cautiously prepare for the government authorities may issue new orders of office closure, travel and transportation restrictions in China if there is any new variants or resurgence of the COVID-19, which will have material negative impact to our business and financial conditions.
Although our operations have resumed to normal since March 2023, the government authorities may issue new orders of office closure, travel and transportation restrictions in China if there is any new variants or resurgence of the COVID-19, which will have material negative impact to our business and financial conditions.
We may be affected by the recently effect by the Basic Law Article 23: Safeguarding National Security Ordinance On March 23, 2024, the Basic Law Article 23: Safeguarding National Security Ordinance was effect. We have accessed the content and believe our business operation in Hong Kong will not be adversely affected.
We may be affected by the recently effect by the Basic Law Article 23: Safeguarding National Security Ordinance On March 23, 2024, the Basic Law Article 23: Safeguarding National Security Ordinance took effect. We have accessed the content and believe our business operations in Hong Kong will not be adversely affected by this new law.
During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective.
During the evaluation and testing process, if we identify one or more material weaknesses in our ICFR, we will be unable to assert that our internal controls are effective.
However, there can be no assurance that we will not be subject to more requirements under the ES Law. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations. 36 ITEM 4. INFORMATION ON THE COMPANY A.
However, there can be no assurance that we will not be subject to more requirements under the ES Law. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations. 35
It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers.
It may also be more difficult for us to find qualified persons to serve on our BOD or as executive officers.
See Enforceability of Civil Liabilities – Hong Kong. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments.
China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments.
Maintaining our strong reputation with consumers and our suppliers is critical to our success. Our brands may suffer if our marketing plans or product initiatives are not successful. The importance of our brands may increase if competitors offer products with designs and functions similar to ours.
Our brands may suffer if our marketing plans or product initiatives are not successful. The importance of our brands may increase if competitors offer products with designs and functions similar to ours.
As a result, we may need additional capital, and financing may not be available on terms acceptable to us, or at all. ● Fluctuations in the price, availability or quality of raw materials used in our products could cause manufacturing delays, adversely affecting our ability to provide goods to our customers or increase costs, any of which could decrease our sales or earnings. ● Xingfa may experience material disruptions to its manufacturing operations in China that could result in material delays, quality control issues, increased costs and loss of business opportunities, which may negatively impact our sales and financial results. ● Changes in U.S. trade policies could significantly reduce the volume of export goods into the United States, which may materially reduce our profit margin and our sales in the United States. ● Environmental regulations impose substantial costs and limitations on our operations and violation of environmental regulations might subject us to fines, penalties or suspension of production which could have material negative impact on our financial results. ● We are obligated to develop and maintain proper and effective internal control over financial reporting.
As a result, we may need additional capital, and financing may not be available on terms acceptable to us, or at all. ● Fluctuations in the price, availability or quality of raw materials used in our products could cause manufacturing delays, adversely affecting our ability to provide goods to our customers or increase costs, any of which could decrease our sales or earnings. ● Xingfa may experience material disruptions to its manufacturing operations in China that could result in material delays, quality control issues, increased costs and loss of business opportunities, which may negatively impact our sales and financial results. ● We face risks related to health epidemics and other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to cause business disruptions, resulting in a material adverse impact to our financial condition and results of operations. ● Environmental regulations impose substantial costs and limitations on our operations and violation of environmental regulations might subject us to fines, penalties or suspension of production which could have material negative impact on our financial results. ● We are obligated to develop and maintain proper and effective internal control over financial reporting.
Inability to collect our accounts receivable in a timely and sufficient manner, or the inability to offset our expenses with adequate revenue, may adversely affect our liquidity, financial condition and results of operations. We completed our public offering with net proceeds of approximately $16.86 million in July 2022.
Inability to collect our accounts receivable in a timely and sufficient manner, or the inability to offset our expenses with adequate revenue, may adversely affect our liquidity, financial condition and results of operations.
Although we are not an CIIO or an Online Platform Operator as defined in the Review Measures and do not process personal data for more than one million individuals under Cyber Data Security Measure (Draft), it is not certain whether any future regulations will impose restrictions on the business that we are currently engaging in China, which is manufacturing lockset.
Although we are not an CIIO or an Online Platform Operator as defined in the Review Measures, it is not certain whether any future regulations will impose restrictions on the business that we are currently engaging in China, which is manufacturing lockset.
Errol Hui have, and will continue to have, substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interests of us or our other shareholders.
As a result of their significant shareholding, Mr. Bong Lau, has, substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. He may take actions that are not in the best interests of us or our other shareholders.
There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our products that will be generated by these customers or the future demand for our products by these customers in the end-user marketplace.
It is not possible for us to predict the future level of demand for our products that will be generated by these customers or the future demand for our products by these customers in the end-user marketplace.
Our efforts to promote our sales and to build our brand have caused us to incur selling and marketing expenses in the amount of approximately $60,000, $105,000 and approximately $150,000 for the years ended December 31, 2023, 2022 and 2021, respectively.
Our efforts to promote our sales and to build our brand have caused us to incur selling and marketing expenses of approximately $1,103,000, $60,000 and $105,000 for the years ended December 31, 2024, 2023 and 2022, respectively. Our COO has taken a marketing trip recently to promote our products in the US for new and potential customers.
If at any time during this additional time period the closing bid price of the Company’s security is at least $1.00 per share for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance and this matter will be closed.
If at any time before the expiration of the Compliance Period the bid price of the Company’s ordinary shares closes at least $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation of compliance.
As a result, we have generated negative cash flows from operating activities of approximately $3.2 million, $4.1million and approximately $1.0 million for the years ended December 31, 2023, 2022 and 2021.
We incurred net losses of $3.7 million, $3.5 million and $1.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. As a result, we had negative cash flows from operating activities of approximately $3.0 million, $3.2million and approximately $4.1 million for the years ended December 31, 2024, 2023 and 2022.
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.
It is likely that our future marketing efforts will 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.
If we are unable to achieve or maintain profitability, the market price of our shares may significantly decrease. Any damage to our reputation or our brand may materially adversely affect our business, financial condition and results of operations. We have long business relationships with our customers by maintaining high quality and quick service response.
Any damage to our reputation or our brand may materially adversely affect our business, financial condition and results of operations. We have long business relationships with our customers by maintaining high quality and quick service response. Maintaining our strong reputation with consumers and our suppliers is critical to our success.
These actions may be taken even if they are opposed by our other shareholders. We may become a “controlled company” within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
We are a “controlled company” within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. Because more than 50% of the voting power for the election of our directors are controlled by Mr.
There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States.
Almost all of our assets are located in Hong Kong and China and our officers and directors currently reside outside of the United States and most of them are in Hong Kong. There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States.
For so long as we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including: ● an exemption from the rule that a majority of our board of directors must be independent directors; an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and ● an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
As a “controlled company”, we qualify for, exemptions from several of Nasdaq’s corporate governance requirements, including: ● an exemption from the rule that a majority of our board of directors must be independent directors; an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and ● an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
In addition, please see “Risk Factors” below, and other information included in this report, for a discussion of these and other risks and uncertainties that we face. 7 Risks Related to Our Business We face risks related to health epidemics and other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to cause business disruptions, resulting in a material, adverse impact to our financial condition and results of operations.
We face risks related to health epidemics and other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to cause business disruptions, resulting in a material, adverse impact to our financial condition and results of operations. In recent years, there have been outbreaks of epidemics in various countries.
We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. 35 Four members of our management team will have substantial influence over our Company and their interests may not be aligned with the interests of our other shareholders.
We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. 34 Mr.
We derive a significant portion of our revenues from a few major customers. For the years ended December 31, 2023 and 2022, four customers accounted for 88.2% and 85.7% of our revenues, respectively. In addition, our five largest customers in aggregate accounted for approximately 92% and 91% of our revenues for the years ended December 31, 2023 and 2022, respectively.
We derive a significant portion of our revenues from a few major customers that are located in the United States. For the years ended December 31, 2024 and 2023, three and four customers accounted for 86% and 88% of our revenues, respectively.
In recent years, there have been outbreaks of epidemics in various countries. The recent outbreak of COVID-19 has spread throughout the world, especially in China, the United States and Europe. On March 11, 2020, the World Health Organization declared the outbreak a global pandemic.
The outbreak of COVID-19 spread throughout the world, especially in China, the United States and Europe. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of office buildings and facilities in China and in the U.S.
We cannot assure you that this policy will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase. This would in turn adversely affect the operations and profitability of our business.
Since 1983, Hong Kong dollars have been pegged to the US dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that this policy will not change in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase.
Our ordinary shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Company’s securities will be subject to delisting. 30 Our ordinary shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
It will be difficult to acquire jurisdiction and enforce liabilities against us, our officers, directors and assets based in Hong Kong and China. Almost all of our assets are located in Hong Kong and China and our officers and directors currently reside outside of the United States and most of them are in Hong Kong.
This would in turn adversely affect the operations and profitability of our business. It will be difficult to acquire jurisdiction and enforce liabilities against us, our officers, directors and assets based in Hong Kong and China.
We may not be able to successfully introduce smart lock and security and internet of things (IoT) products that are current in research and development. We have invested our efforts, time and resources in the research and development of smart locks in the past couple years and the outcome is uncertain whether such development will be successful.
We have invested our efforts, time and resources in the research and development of smart locks in the past couple years and the outcome is uncertain whether such development will be successful. We have picked certain smart lock designs for production and launch of our Competitive Smart Lock in March 2025.
We incurred net losses for the year ended December 31, 2023 and the past two years and may not be able to generate sufficient operating cash flows and working capital from operation. Failure to manage our liquidity and cash flows may materially and adversely affect our financial condition and results of operations.
We incurred net losses for the year ended December 31, 202 4 and the past two years and may not be able to generate sufficient operating cash flows and working capital to continue as a going concern over the next 12 months .

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Item 4.B. Business Overview—Regulations —Regulations on Dividend Distribution. ” Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws.
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ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company For 40 years, we have manufactured and sold high quality mechanical locksets to customers mainly in the United States and Canada, and we continue to diversify and refine our product offerings to meet our customers’ needs.
Removed
Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
Added
The predecessor of Hing Fat commenced our business of selling door locksets in 1981. In 1983, we started a small manufacturing workshop in China to produce door locksets with imported materials to fulfill for our customer orders, which becomes our current manufacturing subsidiary, Xingfa.
Removed
No Significant Changes Except as disclosed elsewhere in this annual report, no other significant changes to our financial condition have occurred since the date of the annual financial statements contained herein.
Added
Our mission was “dedicated to manufacture high quality lockset products at affordable prices.” Since 2000, we have offered our products with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards, which are developed by Builders Hardware Manufacturing Association (BHMA) for ANSI.
Added
Our focus is producing mechanical locksets, including locksets for outdoor uses, such as main entrances and gates, and indoor uses, to promote sustainable growth in our business and competitiveness in the market.
Added
To continue driving growth, we have designed our products to go beyond a basic lockset for security purposes; we offer a wide range of ODM door locksets to various customer segments from “Premium Series” to “Economy-oriented Series” with classic to contemporary looks, functions and colors.
Added
Currently, our products are sold mainly in the USA, and some in Canada, Macau and China. We sell our products mainly to the US and Canada (“North America”) through one of our Hong Kong registered subsidiaries Kambo Locksets.
Added
Another Hong Kong registered subsidiary, Kambo Hardware, targets and distributes locksets and related hardware to countries other than the North America market and serves our customers in the Asian countries including Thailand and Australia.
Added
In 1993, as the laws and regulations for processing with imported materials entity had changed in China, we established our wholly foreign owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited (“Xingfa”) located in Shatian County, Dongguan City, Guangdong Province of PRC.
Added
Xingfa is equipped with various types of machines such as die casting machines, furnace, polishing machines and other machines for metal processing in a 17,560 m 2 manufacturing facility.
Added
In light of excess production capacity due to current economic conditions, Xingfa subleased one plant building of approximately 4,300 m 2 to reduce our operating costs. ● We restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under Hong Kong law (“Hing Fat”), as the holding company of Xingfa to manage the door lockset manufacturing activities of Xingfa and to conduct research and development. ● On March 26, 2014, Kambo Locksets Limited (“Kambo Locksets”) was incorporated under Hong Kong law.
Added
Kambo Locksets is a trading company focusing on marketing and sales of our products in North America market and became our subsidiary as a result of reorganization. ● On February 25, 2015, Kambo Hardware Limited (“Kambo Hardware”) was incorporated under Hong Kong law.
Added
Its primary business is to sell our products to markets outside of the North America. ● Bamberg (HK) Limited (“Bamberg”) was incorporated on June 24, 2016 under Hong Kong law.
Added
Through Bamberg, we started marketing our products under our own brand “Bamberg” to establish and focus on internet sales channels, such as Amazon.com. ● On July 17, 2019, the Company issued 500,000,000 ordinary shares to its shareholders. On August 14, 2019, these shareholders surrendered an aggregate of 499,990,000 ordinary shares to the Company at no consideration.
Added
The transaction is considered as a recapitalization prior to the Company’s initial public offering. ● A reorganization of the Company’s legal entity structure was completed in April 2020.
Added
The reorganization involved the incorporation of ILAG in July 2019 and execution of the Share Exchange Agreement between ILAG and ILA BVI in April 2020 (the “Share Exchange Agreement”) whereby ILAG took control of ILA BVI and its wholly owned subsidiaries by acquiring all the outstanding shares of ILA BVI with ordinary shares of ILAG.
Added
Pursuant to the Share Exchange Agreement, ILAG and ILA BVI exchanged 2,550,000 shares of ILA BVI for 12,990,000 ordinary shares of ILAG.
Added
This transaction was treated as a recapitalization of the Company and the financial statements give retroactive effect to this transaction. 36 ● On July 16, 2021, the BOD and Shareholders of the Company approved the Amended and Restated Memorandum and Articles of Association of the Company and our authorized share capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000 ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value of $0.0001 each. ● On July 17, 2019, Intelligent Living Application Group Inc. was established as a holding company and it is a Cayman Islands exempted company limited by shares and were incorporated as an offshore holding company for listing purposes and for further expansion flexibility.
Added
Intelligent Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application Group Limited, which was incorporated on March 19, 2014 under the laws of British Virgin Islands (“BVI”). ● Through Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of the equity interest in Xingfa.
Added
The Company has subsidiaries in countries and jurisdictions including PRC and Hong Kong. Details of the subsidiaries and VIE of the Company are set out below: Name of Entity Date of Incorporation Place of Incorporation % of Ownership Principal Activities Intelligent Living Application Group Inc.
Added
July 2019 Cayman Islands 100 Holding company Intelligent Living Application Group Limited March 2014 BVI 100 Intermediate holding company Kambo Locksets Limited March 2014 Hong Kong 100 Trading company Kambo Hardware Limited February 2015 Hong Kong 100 Trading company Bamberg (HK) Limited June 2016 Hong Kong 100 Sales of self branded products Hing Fat Industrial Limited March 2009 Hong Kong 100 Holding Company Dongguan Xingfa Hardware Products Co.
Added
Ltd. August 1993 PRC 100 Manufacturing On July 15, 2022, the Company closed its IPO of 5,060,000 ordinary shares, par value $0.0001 per share, at $4.00 per share. The gross proceeds from the IPO were $20.24 million, before deducting underwriting discounts and other related expenses.
Added
The ordinary shares of the Company began trading on The Nasdaq Capital Market on July 13, 2022 under the ticker symbol “ILAG.” On October 12, 2022 (the “Effective Date”), Hing Fat Industrial Limited and Dongguan Xingfa Hardware Products Co., Ltd.
Added
(“Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) with Hu Xiongjie, a citizen of Singapore (the “Seller”), pursuant to which the Seller agreed to sell to the Buyer an electroplating production line, including but not limited to equipment, machinery, tanks, fixtures, flowlines, improvements and mixed property located in Dongguan City, Guangdong, China (the “Asset”) for $4,500,000 in cash.
Added
The Seller’s clientele details, books, accounting records and liabilities are excluded from this transaction.
Added
Pursuant to the Agreement, Buyer shall pay a refundable deposit of $2,000,000 on Effective Date and Buyer shall check operational conditions and access the value of the Asset at current market rate within ten (10) days of the Effective Date, and if Buyer accepts the Purchase Price, an intermediate payment of $1,000,000 shall be then paid.
Added
Upon closing, Buyer shall pay Seller an additional amount of $1,000,000. A residual of $500,000 shall be held by the Buyer for one (1) year from closing date as quality guarantee for possible tax liabilities, defects or required repair(s) of the Asset.
Added
The balance of Purchase Price shall be paid after deduction of costs of repairment related to unidentified defects or problems with the Asset at transfer date. As of the date of this report, the Buyer has paid all $4,500,000 to the Seller.
Added
On February 6, 2025, the Board of Directors (the “Board”) of the Company, pursuant to the Articles of Association of the Company, designated 2,000,000 Preferred Shares of the Company as series A preferred shares of the Company, par value US$0.0001 each (“Series A Preferred Shares” or the “Subject Shares”), with the following terms: I .
Added
Voting Right: At any general meeting, (i) on a show of hands every holder of the Subject Shares present in person (or being a corporation, is present by a duly authorized representative), or by proxy shall have twenty (20) votes for every fully paid Subject Share, and (ii) on a poll every holder of the Subject Shares present in person or by proxy or, in the case of a holder being a corporation, by its duly authorized representative shall have twenty (20) votes for every fully paid Subject Share; and II. each Series A Preferred Share is convertible into one (1) ordinary share of the Company, par value $0.0001 (“Ordinary Share”) at any time at the option of the holder thereof.
Added
The right to convert shall be exercisable by the holder of the Series A Preferred Share delivering a written notice to the Company that such holder elects to convert a specified number of Series A Preferred Share into Ordinary Shares.
Added
In no event shall Ordinary Shares be convertible into Series A Preferred Shares; and III. upon any sale, transfer, assignment or disposition of any Series A Preferred Share by such shareholder of the Company to any person who is not an affiliate of such shareholder, or upon a change of control of any Series A Preferred Share to any person who is not an affiliate of the registered shareholder of such share, as determined by the Board, such Series A Preferred Share shall be automatically and immediately converted into one Ordinary Share (the “Automatic Conversion”).
Added
For the avoidance of doubt, (i) a sale, transfer, assignment or disposition shall be effective upon the Company’s registration of such sale, transfer, assignment or disposition in the register of members of the Company; and (ii) the creation of any pledge, charge, encumbrance or other third party right of whatever description on any Series A Preferred Share to secure a holder’s contractual or legal obligations shall not be deemed as a sale, transfer, assignment or disposition unless and until any such pledge, charge, encumbrance or other third party right is enforced and results in the third party holding legal title to the relevant Series A Preferred Shares, in which case all the relevant Series A Preferred Shares shall be automatically converted into the same number of Ordinary Shares; and IV. other than the Automatic Conversion, any conversion of Series A Preferred Shares into Ordinary Shares by a holder thereof (the “Conversion Shareholder”) shall be effected by means of the repurchase of each relevant Series A Preferred Share for cancellation and allotting and issuance of an Ordinary Share, credited as fully paid (the “Ordinary Conversion”).
Added
Both the Automatic Conversion and the Ordinary Conversion shall become effective forthwith upon the Register of Members being updated; and V . all other rights of the Subject Shares will be the same as the Ordinary Shares and any other Preferred Shares.
Added
On February 19, 2025 (the “Grant Date”), the Compensation Committee (“Committee”) of the Board of Directors (the “Board”) of the Company granted stock awards of ordinary shares of the Company, par value $0.0001 (the “Ordinary Shares”), pursuant to the Company’s 2022 Omnibus Equity Plan, to certain officers and employees of the Company and its subsidiaries (the “Grantees”), including: 400,000 Ordinary Shares to Wynn Hui, Chief Technical Officer and a director of the Company, 400,000 Ordinary Shares to Bun Lau, Chief Operating Officer and a director of the Company, 400,000 Ordinary Shares to Errol Hui, Vice President of Engineering of the Company, 100,000 Ordinary Shares to Frederick Wong, Chief Financial Officer of the Company, 80,000 Ordinary Shares to Wei Zhong, Vice President of Finance of the Company as well as 40,000 Ordinary Shares to each of the independent directors of the Company, namely Monique Ho, Chun Fai (Kenneth) Liu, Carina Chui and Henry Yeung.
Added
On the Grant Date, the Committee and the Board also granted 2,000,000 Series A Preferred Shares, par value US$0.0001 to Mr. Bong Lau, the Chief Executive Officer and Chairman of the Board and each Series A Preferred Share is entitled to twenty (20) votes (collectively, the “Grants”).
Added
The Grants vested immediately on the Grant Date and each of the grantees also entered into an Unrestricted Stock Award Agreement with the Company on February 19, 2025. Our principal executive offices are located at Unit 2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New Territories, Hong Kong.
Added
Our telephone number at this address is +852 2481 7938. Our registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111. Our agent for service of process in the United States is Cogency, located at 122 East 42 nd Street, 18 th Floor, New York, NY 10168, United States.
Added
Investors should contact us for any inquiries through the address and telephone number (852) 2481-7938 of our principal executive offices. The SEC maintains a web site at www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC using its EDGAR system. 37 See “Item 5. Operating and Financial Review and Prospects — B.
Added
Liquidity and Capital Resources — Capital Expenditures” for a discussion of our capital expenditures. B. Business Overview Our mission is to make life safer and smarter by designing and producing affordable, high-quality locksets and smart security systems.
Added
Headquartered in Hong Kong, we manufacture and sell high quality mechanical locksets to customers mainly in the United States (US) and Canada and have continued to diversify and refine our product offerings in the past 40 years to meet our customers’ needs. We believe Xingfa is one of the pioneers of mechanical lockset manufacturing in China.
Added
Since inception, to cope with our development and increase customer satisfaction in quality, we keep investing in self-designed automated product lines, new craftsmanship and developing new products including smart locks. In order to obtain the confidence of our customers, Xingfa has obtained the ISO9001quality assurance certificate.
Added
Starting in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed by the Builders Hardware Manufacturing Association (BHMA) for ANSI.
Added
Our focus in producing mechanical locksets - including locksets for outdoors (such as main entrances and gates) and indoors - has resulted in sustainable growth in our business and raised our competitiveness.
Added
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer (“ODM”) door locksets to various customer segments from “Premium Series” to “Economy-oriented Series” with classic to contemporary looks, functions and colors.
Added
To meet increasing consumer needs for smart locks and smart home products, Hing Fat has been researching and developing smart locks in the past couple years. Most of our research and development on smart locks have been done internally by our technician and engineers, except that Hing Fat hired outside services for approximately $25,000 in 2017.
Added
Because of tariff war and outbreak of COVID-19, we did not further progress on the software for our smart locks until early 2023. Since then, we have reinitiated the process to develop devices and software applications for our smart locks.
Added
On March 6, 2025, the Company announced the launch of its Competitive Smart Lock and the first batch of new smart locks has been shipped to the United States and will be available in its online store at Amazon.com soon.
Added
Currently, approximately 99% of our revenues are from products sold to the US market, and the remaining products are sold to Canadian market. We build our distribution network by working together with our large and small business partners in different geographic areas to sell our products.
Added
More information about geographical penetration of our revenues can be found in “ Segment reporting in Note 3 of Notes to the Consolidated Financial Statements ”. 38 Our Products We produce various ODM indoor and outdoor locksets mainly for importers, builders and the construction market in the USA. Since 2016, we market our self-branded products, Bamberg, in South-east Asia.
Added
In addition, we are selling our self-branded products through reputable online shops. ● Locksets functions Mechanical locksets are mechanical devices which secure an opening by keeping a door closed until a release mechanism is activated. It can be a lever, knob, key, thumb-turn or button. Mechanical locksets are very common on exterior/interior doors in residential and multi-family applications.
Added
There are several types of mechanical locksets, and the most common functions for mechanical locksets are as follows: ● Deadbolts – are used for front doors and doors which may require an additional security from a deadbolt, combined in a lockset with one of the functions above.
Added
It can be locked by a thumb-turn from the inside or by a key from the outside. ● Entry locksets – are used for bedrooms, front doors, and back doors. It can be locked by a thumb-turn from the inside or by a key from the outside. ● Privacy locksets – are used for restrooms or dressing rooms.
Added
It can be locked from the inside with a thumb turn for privacy, and it can be unlocked from the outside using a tool, a screwdriver for example, rather than a key. 39 ● Passage locksets – are used where doors do not need to lock.
Added
There is no key and no lock function. ● Storeroom locks – are used for storerooms. It should always be locked from the outside and a key is used to open the door. When the key is removed, the door is locked from the outside again. There is no lock/unlock the door from the inside.
Added
Our Customized Keying Options One of our value propositions is the ability to customize the keys for our door locksets based on specific customer requests.
Added
Below is a summary of our various professional custom-made keying options applicable to our products: ● Types of Keying Options The term “keying” refers to the way keys will be used to operate the cylinders that are installed in the door locksets. Keys can be assigned to different groups that will and will not open the cylinders.
Added
Keying determines which keys work at each opening. A cylinder will contain a certain number of pins generally ranging from 5 pins or more. The pins vary in height. This variation in height and the cuts on the key can generate different keying combinations.
Added
It can provide access to the cylinder to lock or unlock the locksets. ● Keyed Different (KD) Each cylinder is keyed different. It means that each lock is operated by a unique key. A key used at one door cannot be used to open other doors. ● Keyed Alike (KA) Each cylinder is keyed alike.
Added
It means that every lock can be opened by the same key.
Added
This is useful in an area where a limited number of keys is required, such as a residential unit area with storage closets or common rooms that only need one key combination. ● Master Keyed (MK) Each cylinder has its own individual key which cannot open other locksets in the system and all locksets in the system can be opened by one master key.
Added
A master keyed system is useful where someone requires a higher level of access authority, such as the building owner. 40 ● Construction Keyed (CK) A construction key is needed when contractors need entry to a building during construction. When new homes are under construction, a contractor will provide a general key to carpenters, painters, and other contractors.
Added
This allows easy access to several homes without requiring different keys, and prevents duplication and later entry into the homes once a homeowner moves in. Once construction is complete, the owner’s keys will block further access by the contractors. The following diagram shows how it works.
Added
Smart Lock We launched our Smart Lock in March 2025 and the first batch of new smart locks has been shipped to the United States and will be available in its online store at Amazon.com soon.
Added
The innovative features and benefits of the new smart lock include: ● Advanced Security: Encryption and multiple authentication methods ensure robust protection. ● Convenience: Remote access and seamless integration with smartphones. ● Aesthetic Appeal: Sleek design that complements various home décors. Our Suppliers In past years, our primary raw materials are brass, iron and zinc alloy.
Added
We started to use stainless steel to partially substitute brass from the second half of 2021. And we managed to replace substantial usage of brass with stainless steel since 2023.
Added
Raw materials by weight of our locksets basing on bill of materials and actual weighting, approximately 58% are iron, 30% are zinc alloy, 1% are brass and 11% are stainless steel for the year ended December 31, 2024 while approximately 50% are iron, 38% are zinc alloy, 1% are brass and 11% are stainless steel for for 2023.
Added
We don’t have long term purchase contracts with our suppliers but only purchase via orders. For procurement purpose, management will get master quote from at least two suppliers for every three (3) months. Management will bargain purchase price by taking into account price trends of brass, iron, zinc alloy, and stainless-steel commodity and quantity volume discount.
Added
Xingfa has purchased approximately 5 tonnes brass, 525 tonnes iron, 276 tonnes zinc alloy and 100 tonnes stainless steel for the year ended December 31, 2024, while approximately 11 tonnes brass, 490 tonnes iron, 373 tonnes zinc alloy and 103 tonnes stainless steel for the year ended December 31, 2023.
Added
Xingfa purchased iron from three Chinese suppliers in Guangdong province in year 2024. Xingfa purchased zinc alloy from two suppliers. One supplier ships zinc alloy from Shanghai and Dongguan while one Hong Kong supplier ships them from Shenzhen in 2024. Xingfa purchased brass from various subsidiaries of one supplier in Dongguan and Shanghai in 2024.
Added
Xingfa purchased stainless steel from two suppliers in Guangdong province in 2024. We have business relationships with our iron, zinc alloy and brass suppliers for over 5 years.
Added
Some of them are public companies or subsidiaries of public companies listed on Shanghai, Shenzhen or Hong Kong Stock Exchanges and the supplies and availabilities of our raw materials have never been an issued for us in the past. Also, all of our primary raw materials are general commercial commodities.
Added
For 2024, total global production of: (i) brass is approximately 23 million tonnes; (ii) iron is approximately 2.5 billion tonnes and (iii) zinc alloy is approximately 12.5 million tonnes; (iii) stainless steel is approximately 60 million tonnes. There are numbers of suppliers in China of our raw materials.
Added
Therefore, even our existing suppliers may be temporarily short in inventory, we can place purchase order to other suppliers without difficulty and price premium.
Added
Intellectual Property We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on trademark and trade secret law and confidentiality and invention assignment with our employees and others to protect our proprietary rights. We mostly rely on our know-how for production processes.
Added
Currently, Bamberg (HK) Limited has one registered trademark for Bamberg in the U.S. and one registered trademark for Bamberg in Hong Kong, which are utilized for our self-branded products, and the Company has one trademark of ILAG in Hong Kong as our group holding company logo for our general company image and marketing purpose.
Added
In addition, we and our subsidiaries have three registered domain names in Hong Kong, namely i-l-a-g.com, kambo.com.hk and bamberggroup.com . Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual properties.
Added
Monitoring unauthorized use of our intellectual properties is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our intellectual properties. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

75 edited+37 added−41 removed42 unchanged
Xingfa is equipped with various types of machines such as die casting machines, furnace, polishing machines and other machines for metal processing in a 17,560 m 2 manufacturing facility.
Xingfa is equipped with various types of machines such as die casting, furnace, polishing and other machines for metal processing in a 17,560 m 2 manufacturing facility.
In light of excess production capacity due to current economic conditions, Xingfa has subleased one plant building of approximately 4,300 m 2 to reduce our operating costs. ● We restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under Hong Kong law (“Hing Fat”), as the holding company of Xingfa to manage the door lockset manufacturing activities of Xingfa and to conduct research and development. ● On March 26, 2014, Kambo Locksets Limited was incorporated under Hong Kong law.
In light of excess production capacity due to current economic conditions, Xingfa subleased one plant building of approximately 4,300 m 2 to reduce our operating costs. ● We restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under Hong Kong law (“Hing Fat”), as the holding company of Xingfa to manage the door lockset manufacturing activities of Xingfa and to conduct research and development. ● On March 26, 2014, Kambo Locksets Limited was incorporated under Hong Kong law.
To cope with the green requirements as well as our mission of ESQ achievement, we decided to enhance our production line. ● Relations Between the US and China . At various times during recent years, the US and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries.
To cope with the green requirements as well as our mission of ESQ achievement, we decided to enhance our production line. ● Relations Between the US and China . At various times during recent years, the US and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries.
In order to obtain the confidence of our customers, Xingfa has obtained the ISO9001quality assurance certificate. Starting in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed by the Builders Hardware Manufacturing Association (BHMA) for ANSI.
In order to obtain the confidence of our customers, Xingfa has the ISO9001quality assurance certificate. Starting in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed by the Builders Hardware Manufacturing Association (BHMA) for ANSI.
In 1993, as the laws and regulations for processing with imported materials entity had changed in China, we established our wholly foreign owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited (“Xingfa”) located in Shatian County, Dongguan City, Guangdong Province of PRC.
In 1993, as the laws and regulations for processing with imported materials entity changed in China, we established our wholly foreign owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited (“Xingfa”) located in Shatian County, Dongguan City, Guangdong Province of PRC.
We deployed alternative pricing strategies to alleviate the negative impact from COVID-19 and higher tariffs as we raised our unit product selling price in July 2021.
We deployed alternative pricing strategies to alleviate the negative impact from COVID-19 and previous higher tariffs as we raised our unit product selling price in July 2021.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our CFS and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
While our business has been negatively impacted by the tariffs, COVID-19 and high interest rate in all 2023, 2022 and 2021, we believe we are able to obtain sufficient operating funds from our existing shareholders, potential investors or extend Hong Kong government guaranteed low interest bank borrowing to operate our business.
While our business has been negatively impacted by the tariffs, COVID-19 and high interest rate in all 2024, 2023 and 2022, we believe we are able to obtain sufficient operating funds from our existing shareholders, potential investors or extend Hong Kong government guaranteed low interest bank borrowing to operate our business.
We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. 5C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview —”Intellectual Property.” D.
We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. 5C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview —” Intellectual Property.” D.
Key Operating Metrics Our management regularly reviews a number of metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The main metrics we consider are the results for the years ended December 31, 2023, 2022 and 2021, as set forth in the table below.
Key Operating Metrics Our management regularly reviews a number of metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The main metrics we consider are the results for the years ended December 31, 2024, 2023 and 2022, as set forth in the table below.
To increase the utilization rate, the management is developing electro-plating business to provide services to third parties with our newly acquired plant and also continued the development of new smart lock products for mainland China, Cambodia and Hong Kong markets which expect to launch by the end of 2024.
To increase the utilization rate, the management is developing electro-plating business to provide services to third parties with our newly acquired plant and also continued the development of new smart lock products for mainland China, Cambodia and Hong Kong markets which expect to launch by the end of 2025.
Net cash used in operating activities was $4,170,876 for the year ended December 31, 2022 and was primarily attributable to (i) the net loss of $1,655,903; (ii) a decrease in accounts payable of $1,631,595; (iii) an increase in accounts receivable of $697,873; (iv) a decrease of the advance from customers of $216,269; (v) an increase in prepayment of $180,974; (vi) a decrease in other payables and accruals of $960,292; (vii) a decrease in cash flow by other elements of $42,771; and being offset by (i) a decrease in other receivables of $268,621; (ii) non-cash item of $408,473 including $303,269 of depreciation and amortization, $105,204 of bad-debt being offset; (iii) decrease in inventory of $535,182; (iv) an increase in cash flow by other elements of $2,525.
Net cash used in operating activities was $4,170,876 for 2022 and was primarily attributable to (i) the net loss of $1,655,903; (ii) a decrease in accounts payable of $1,631,595; (iii) an increase in accounts receivable of $697,873; (iv) a decrease of the advance from customers of $216,269; (v) an increase in prepayment of $180,974; (vi) a decrease in other payables and accruals of $960,292; (vii) a decrease in cash flow by other elements of $42,771; and being offset by (i) a decrease in other receivables of $268,621; (ii) non-cash item of $408,473 including $303,269 of depreciation and amortization, $105,204 of bad-debt being offset; (iii) decrease in inventory of $535,182; (iv) an increase in cash flow by other elements of $2,525.
Otherwise, the lease will be treated as an operating lease. For leases with a term of 12 months or less, the Company is permitted to and did make an accounting policy election by class of underlying assets not to recognize lease assets and lease liabilities.
Otherwise, the lease will be treated as an operating lease. For leases with an initial term of 12 months or less, the Company is permitted to and did make an accounting policy election by class of underlying assets not to recognize lease assets and lease liabilities.
We have not experienced significant shortages of raw materials in the past, and we will continue to monitor the fluctuation of our costs and our relationship with our suppliers. 62 ● More Stringent Environmental and OSH Protection Requirements in the PRC .
We have not experienced significant shortages of raw materials in the past, and we will continue to monitor the fluctuation of our costs and our relationship with our suppliers. 60 ● More Stringent Environmental and OSH Protection Requirements in the PRC .
To mitigate the issues of concentration of customers and geographical markets, we are contacting property developers and hotel/service apartment developers in China and South-east Asia in an attempt to diversify our customer base and reduce our market concentration.
To mitigate the issues of concentration of customers and geographical markets, we are contacting property and hotel/service apartment developers in China and South-east Asia to diversify our customer base and reduce our market concentration.
Our sales orders from our customers in the US have stabilized and recovered since the middle of 2019 as the market digested information about the tariff war. However, our factory was temporarily closed in early 2020 and the supply chain and logistic for raw materials and delivery of finished products were disrupted because of COVID-19.
Our sales orders from our customers in the US stabilized and recovered since the middle of 2019 as the market digested information about the tariff war. However, our factory was temporarily closed in early 2020 and the supply chain and logistics for raw materials and delivery of finished products were disrupted because of COVID-19.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2023 to December 31, 2023 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events from January 1, 2024 to December 31, 2024 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
In 1983, we started processing door locksets to fulfill orders from US customers with imported materials at a small manufacturing workshop in China which becomes our current manufacturing subsidiary, Xingfa.
In 1983, we started processing door locksets to fulfill orders from US customers with imported materials at a small manufacturing workshop in China which became our current manufacturing subsidiary, Xingfa.
Results of Operations The following table summarizes our consolidated statements of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this report.
Results of Operations The following table summarizes our consolidated statements of operations for the periods indicated. This information should be read together with our CFS and related notes included elsewhere in this report.
Then, we will estimate the expected gross profit based on our in-house standard material and cost table in order to determine what our gross profit percentage should be. If there will be a downtrend trend of revenue, we will try to lower our costs such as raw materials and direct labor.
Then, we will estimate the expected gross profit based on our in-house standard material and cost table to determine what our profit margin should be. If there will be a downtrend of revenue, we try to lower our costs such as raw materials and direct labor.
Selling and marketing expenses Major components of selling and marketing expenses are transportation, custom declarations, sales commissions. Selling and marketing expenses decreased by $45,632, or 43.3% to $59,841 for the year ended December 31, 2023 from $105,473 for the year ended December 31, 2022. The decrease was due mainly to reduction in freight and transportation fees.
Selling and marketing expenses Major components of selling and marketing expenses are transportation, custom declarations, sales commissions. Selling and marketing expenses decreased by $45,632, or 43.3% to $59,841 for 2023 from $105,473 for 2022. The decrease was due mainly to reduction in freight and transportation fees.
We build our distribution network by working together with our large and small business partners in different geographic areas to sell our products. More information about geographical penetration of our revenues can be found in “Segment reporting in Note 2 of Notes to the Consolidated Financial Statements”.
We build our distribution network by working with our large and small business partners in different geographic areas to sell our products. More information about geographical distribution of our revenues can be found in “Segment reporting in Note 3 of Notes to the Consolidated Financial Statements”.
The operating results in any period are not necessarily of the results that may be expected for any future period. 64 For the years ended December 31, 2023 and 2022 For the years ended December 31, Change 2023 2022 Change % USD USD USD Selected Consolidated Statements of Operations and Comprehensive Loss Data: Revenues $ 6,443,357 $ 12,158,102 $ (5,714,745 ) (47.0 )% Cost of goods sold (5,464,591 ) (9,961,988 ) 4,497,397 (45.1 )% Cost of goods sold – idle capacity (345,424 ) — — — % Gross profit 633,342 2,196,114 (1,562,772 ) (71.2 )% Selling and marketing expenses (59,841 ) (105,473 ) 45,632 (43.3 )% General and administrative expenses (4,440,314 ) (4,208,197 ) (232,117 ) 5.5 % Finance costs (26,935 ) (147,588 ) 120,653 (81.7 )% Loss from operations (3,893,748 ) (2,265,144 ) (1,628,604 ) 71.9 % Total other income, net 448,467 609,241 (160,774 ) (26.4 )% Loss before provision for income taxes (3,445,281 ) (1,655,903 ) (1,789,378 ) 108.1 % Provision for income taxes (56,237 ) — (56,237 ) — % Net loss $ (3,501,518 ) $ (1,655,903 ) $ (1,845,615 ) 111.5 % Loss per share - basic and diluted $ (0.19 ) $ (0.11 ) $ (0.08 ) 72.7 % Revenues Our revenues from sales of door locksets decreased by $5,714,745, or 47.0% for the year ended December 31, 2023 to $6,443,357 from $12,158,102 for the year ended December 31, 2022.
For the years ended December 31, 2023 and 2022 For the years ended December 31, Change 2023 2022 Change % USD USD USD Selected Consolidated Statements of Operations and Comprehensive Loss Data: Revenues $ 6,443,357 $ 12,158,102 $ (5,714,745 ) (47.0 )% Cost of goods sold (5,464,591 ) (9,961,988 ) 4,497,397 (45.1 )% Cost of goods sold – idle capacity (345,424 ) — — — % Gross profit 633,342 2,196,114 (1,562,772 ) (71.2 )% Selling and marketing (59,841 ) (105,473 ) 45,632 (43.3 )% General and administrative (4,440,314 ) (4,208,197 ) (232,117 ) 5.5 % Finance costs (26,935 ) (147,588 ) 120,653 (81.7 )% Loss from operations (3,893,748 ) (2,265,144 ) (1,628,604 ) 71.9 % Total other income, net 448,467 609,241 (160,774 ) (26.4 )% Loss before provision for income taxes (3,445,281 ) (1,655,903 ) (1,789,378 ) 108.1 % Provision for income taxes (56,237 ) — (56,237 ) — % Net loss $ (3,501,518 ) $ (1,655,903 ) $ (1,845,615 ) 111.5 % Loss per share - basic and diluted $ (0.19 ) $ (0.11 ) $ (0.08 ) 72.7 % Revenues Our revenues from sales of door locksets decreased by $5,714,745, or 47.0% for 2023 to $6,443,357 from $12,158,102 for 2022.
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer (“ODM”) door locksets to various customer segments from “Premium Series” to “Economy-oriented Series” with classic to contemporary looks, functions and colors. 59 Currently, approximately 99% of our revenues are from products sold to the US market, and the remaining products are sold to Canadian market.
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer (“ODM”) door locksets to various customer segments from “Premium Series” to “Economy-oriented Series” with classic to contemporary looks, functions and colors. 57 Currently, approximately 99% of our revenues are from products sold in the US, and the remaining products are sold in Canada.
However, as the combined effect of slow recovery post COVID-19 and the amortization of our electroplating production line, we have incurred a lower gross margin during the fiscal year 2023. We continue to promote higher value products to our customers in 2023 and developing smart lock product series.
However, as the combined effect of slow recovery post COVID-19 and the amortization of our electroplating production line, we have incurred a lower profit margin during the fiscal year 2023. We continue to promote higher value products to our customers and develop smart lock product series in 2024.
In addition, our five largest customers in aggregate accounted for approximately 92% and 91% for the years ended December 31, 2023 and 2022, respectively. Our strategy is to attempt to strengthen our direct relationships with these customers to secure and expand the sales orders from these customers in the future. ● Cost of Goods Sold.
In addition, our five largest customers accounted for approximately 95% and 92% for the years ended December 31, 2024 and 2023, respectively. Our strategy is to attempt to strengthen our direct relationships with these customers to secure and expand the sales orders from these customers in the future. ● Cost of Goods Sold.
On July 15, 2022, we closed our initial public offering, raising net proceeds of approximately $16.86 million after deducting underwriting commission and offering expenses. We believe that our current working capital is sufficient to support our operations for the next twelve months.
On July 15, 2022, we closed our IPO, raising net proceeds of approximately $16.86 million after deducting underwriting commission and offering expenses. We believe that our current working capital is sufficient to support our operations for the next 12 months.
Gross margin was 9.8% for the year ended December 31, 2023, decrease from 18.1% for the same period of 2022 as a result of depreciation expense of new machinery, increase in direct labor cost and weak demand of our major market in the US, during the year ended December 31, 2023. 65 We believe that we can enhance our gross margin as we are researching new processing procedures to use durable but lower cost materials.
Profit margin was 9.8% for 2023, decrease from 18.1% for 2022 as a result of depreciation expense of new machinery, increase in direct labor cost and weak demand of our major market in the US, during 2023. 65 We believe that we can enhance our gross margin as we are researching new processing procedures to use durable but lower cost materials.
Its primary business is to sell our products to markets outside of the North America. ● Bamberg (HK) Limited (“Bamberg”) was incorporated on June 24, 2016 under Hong Kong law.
Its primary business is to sell our products to markets outside of the North America, mainly in Asian countries. ● Bamberg (HK) Limited (“Bamberg”) was incorporated on June 24, 2016 under Hong Kong law.
The decrease was mainly due to decrease in units sold in 2023. Our total number of products sold was approximately 1.3 million units (including approximately 0.1 million units of spare parts) for the year ended December 31, 2023 comparing to 2.4 million units (including approximately 0.2 million units of spare parts) for the year ended December 31, 2022.
The decrease was mainly due to decrease in units sold in 2023. Our total number of products sold was approximately 1.3 million units (including approximately 0.1 million units of spare parts) for 2023 comparing to 2.4 million units (including approximately 0.2 million units of spare parts) for 2022.
Financing Activities Net cash used in financing activities was $154,976 for the year ended December 31, 2023 and was primarily attributable to repayments of bank borrowings. 69 Net cash provided by financing activities was $17,397,802 for the year ended December 31, 2022 and was primarily attributable to proceeds from public offering of $18,048,369; offset by (i) payments of finance lease liability of $8,391, and (ii) repayment of bank borrowings of $642,176.
Net cash used in financing activities was $154,976 for 2023 and was primarily attributable to repayments of bank borrowings. 67 Net cash provided by financing activities was $17,397,802 for 2022 and was primarily attributable to proceeds from public offering of $18,048,369; offset by (i) payments of finance lease liability of $8,391, and (ii) repayment of bank borrowings of $642,176.
To mitigate the impact of tariff war, we have launched a series of procurement actions to reduce the costs, and we managed to gradually improve our gross margins, which was 9.8% for 2023, 18.1% for 2022 and 10.5% for 2021.
To mitigate the impact of tariff war, we have launched a series of procurement actions to reduce the costs, and we managed to gradually improve our profit margins, which was 17.5% for 2024, 9.8% for 2023 and 18.1% for 2022.
Cost of Goods Sold Cost of goods sold was $5,464,591 for the year ended December 31, 2023 as compared to $9,961,988 for the same period of 2022. Cost of goods sold was 84.8% and 81.9% of revenues for the year ended December 31, 2023 and 2022, respectively.
Cost of Goods Sold Cost of goods sold was $5,464,591 for 2023 compared to $9,961,988 for 2022. Cost of goods sold was 84.8% and 81.9% of revenues for the years ended December 31, 2023 and 2022, respectively.
To better manage our gross margin in light of rising cost of raw materials, we leverage extensive product quality testing to identify alternative raw materials mix that is designed to lower our production costs. Since the second half of 2021, we have been using stainless steel to substitute brass.
To better manage our profit margin in light of rising cost of raw materials, we leverage extensive product quality testing to identify alternative raw materials mix that are designed to lower our production costs. Since the second half of 2021, we have used stainless steel to substitute brass.
Our recovery from COVID-19 pandemic was negatively impacted high interest rate which has caused a slowdown in real estate market in US, from which we generate most of our revenues. Our revenues were approximately $6.4 million and $12.2 million for the years ended December 31, 2023 and 2022, respectively.
Our recovery after COVID-19 pandemic was negatively impacted by high interest rate which has caused a slowdown in real estate market in US, from which we generate most of our revenues. Our revenues were approximately $7.5 million and $6.4 million for the years ended December 31, 2024 and 2023, respectively.
Normally, when there is no disruption on logistics such as the ones caused by COVID-19. Raw materials and packaging consumables will be kept at a safe level that may sustain potential production needs for about two months. Potential production needs include quantities from purchase orders received and projected sales.
Normally, when there is no disruption on logistics such as the ones caused by COVID-19 or significant increase on tariff of products to the United States, raw materials and packaging consumables will be kept at a safe level that may sustain potential production needs for about two months. Potential production needs include quantities from purchase orders received and projected sales.
As we have to keep our factory operating and utilization of labor, we have stocked up to achieve the expected short delivery time to meet potential new customers demand, therefore, our inventory turnover in days was negatively affected.
As we have to keep our factory running and employees working, we have stocked up to achieve the expected short delivery time to meet potential new customers demand, therefore, our inventory turnover in days was negatively affected.
Key Factors Affecting Our Results We believe the key factors affecting our financial condition and results of operations include the followings: ● Our Relationship with Customers. We rely heavily on customers’ demand to sell our products. Our four largest customers accounted for 88.2% and 85.7% for the years ended December 31, 2023 and 2022, respectively.
Key Factors Affecting Our Results We believe the key factors affecting our financial condition and results of operations include the follows: ● Our Relationship with Customers. We rely heavily on customers’ demand to sell our products. Our three and four largest customers accounted for 86.3% and 88.2% for the years ended December 31, 2024 and 2023, respectively.
Cost of Goods Sold and Gross Profit Our cost of goods sold includes cost of raw materials (such as copper, iron and zinc alloy), direct labor (including wages and social security contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and other taxes.
Cost of goods sold includes raw materials (mainly copper, stainless steel, iron and zinc alloy), direct labor (including wages and social security contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and taxes.
In 2021, a shareholder and director forgave an advance of $717,948 ($153,846 in 2020) to the Company and treated as a shareholder contribution. Our working capital was $10,711,197, $14,201,841 and $2,213,523 as of December 31, 2023, 2022 and 2021. Our cash and cash equivalents were $4,483,730, $9,165,651 and $131,129 as of December 31, 2023, 2022 and 2021, respectively.
In 2021, a shareholder and director forgave an advance of $717,948 ($153,846 in 2020) to the Company and treated as a shareholder contribution. Our working capital was $7,395,318, $10,711,197 and $14,201,841 as of December 31, 2024, 2023 and 2022. Our cash and cash equivalents were $1,280,911, $4,483,730 and $9,165,651 as of December 31, 2024, 2023 and 2022, respectively.
Since then, our mission is to “produce high quality lockset products at affordable prices.” We sell our products mainly to the US and Canada (“North America”) through one of our Hong Kong registered subsidiaries, Kambo Locksets. Another Hong Kong registered subsidiary, Kambo Hardware, targets and distributes locksets and related hardware to countries other than the US and Canada.
Since then, our mission is to “produce high quality lockset products at affordable prices.” We sell our products mainly to the US and Canada (“North America”) through one of our Hong Kong registered subsidiaries, Kambo Locksets.
In addition, once market demands resume to normal along with our continuous efforts in expanding product selections and varieties, better procurement of raw materials, ability to improve production efficiency, attracting new customers and initiatives to reduce our overhead costs, we hope to return to profitability.
In addition, once tariff war is settled and inflation is under control along with our continuous efforts in expanding product selections and varieties, better procurement of raw materials, ability to improve production efficiency, attracting new customers and initiatives to reduce our overhead costs, we hope to return to profitability.
As the permit for electro-plating production is more stringently regulated in China, in 2022, we acquired an electro-plating production line in an industrial park near our Xingfa factory to reduce outsourced electro-plating costs. However, the interest increment cycle and delayed economic recovery have made our customers more cautious in placing more orders.
As the permit for electro-plating production is more stringently regulated in China, we acquired an electro-plating production line in 2022 in an industrial park near our Xingfa factory to reduce outsourced electro-plating costs. However, the high interest rate and tariff war between China and U.S. have made our customers more cautious in placing more orders.
Due to the price increase, slow recovery from COVID-19 and the high interest rate in the US, our revenues decreased by approximately $5.7 million or 47% for the year ended December 31, 2023 comparing to the same period of 2022.
Due to the price increase, slow recovery from COVID-19 and the high interest rate in the US, our revenues decreased by approximately $5.7 million or 47% for the year ended December 31, 2023 compared to 2022. Our profit margin decreased to 9.8% for 2023 from 18.1% for 2022.
Capital Expenditures We had capital expenditures of $1,360,274 and $4,181,724 for the years ended December 31, 2023 and 2022, respectively. Our capital expenditures were mainly used for purchases of production equipment and office equipment. We intend to fund our future capital expenditures with lease financing, if available, proceeds from our offering and other financing alternatives.
Capital Expenditures We had capital expenditures of $115,161 and $1,360,274 for 2024 and 2023, respectively. Our capital expenditures were mainly used for purchases of production equipment and office equipment. We intend to fund our future capital expenditures with lease financing, if available, proceeds from our offering and other financing alternatives.
For the years ended December 31, 2023 2022 2021 Revenues $ 6,443,357 $ 12,158,102 $ 12,543,556 Gross margin 9.8 % 18.1 % 10.5 % Net loss $ (3,501,518 ) $ (1,655,903 ) $ (1,386,515 ) Inventory turnover (in days) 294 174 153 Accounts receivable turnover (in days) 58 41 27 We project our revenue based on purchase orders from our customers, the current principal driver of our business.
For the years ended December 31, 2024 2023 2022 Revenues $ 7,506,551 $ 6,443,357 $ 12,158,102 Profit margin 17.5 % 9.8 % 18.1 % Net loss $ (3,690,287 ) $ (3,501,518 ) $ (1,655,903 ) Inventory turnover (in days) 292 294 174 Accounts receivable turnover (in days) 14 58 41 We project our revenue based on purchase orders from our customers, the current principal driver of our business.
The following table shows revenues from customers that accounted for more than 10% of our total operating revenues: For the years ended December 31, 2023 2022 2021 Customer A $ 1,786,656 27.5 % $ 5,654,248 46.5 % $ 6,833,866 54.5 % Customer B 888,595 13.7 % 1,871,116 15.4 % 1,588,156 12.7 % Customer C 1,723,506 26.5 % 1,586,681 13.1 % 1,310,376 10.5 % Customer D 1,332,746 20.5 % 1,306,755 10.7 % — — % $ 5,731,503 88.2 % $ 10,418,800 85.7 % $ 9,732,398 77.7 % The following table sets forth the Company’s revenues from customers by geographical areas based on the location of the customers: For the years ended December 31, 2023 2022 2021 US $ 6,364,773 $ 11,717,347 $ 12,233,382 Canada 78,584 440,755 310,174 Total $ 6,443,357 $ 12,158,102 $ 12,543,556 Our gross margin was approximately 6.8% due to the tariff war between US and China started in 2018.
The following table shows revenues from customers that accounted for more than 10% of our total operating revenues: For the years ended December 31, 2024 2023 2022 Customer A $ 2,823,568 37.6 % $ 1,786,656 27.5 % $ 5,654,248 46.5 % Customer B 1,442,988 19.2 % 888,595 13.7 % 1,871,116 15.4 % Customer C 2,213,651 29.5 % 1,723,506 26.5 % 1,586,681 13.1 % Customer D — — 1,332,746 20.5 % 1,306,755 10.7 % $ 6,480,207 86.3 % $ 5,731,503 88.2 % $ 10,418,800 85.7 % The following table sets forth the Company’s revenues from customers by geographical areas based on the location of the customers: For the years ended December 31, 2024 2023 2022 US $ 7,393,736 $ 6,364,773 $ 11,717,347 Canada 112,815 78,584 440,755 Total $ 7,506,551 $ 6,443,357 $ 12,158,102 Our profit margin was approximately 6.8% due to the tariff war between US and China started in 2018.
Intelligent Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application Group Limited, which was incorporated on March 19, 2014 under the laws of British Virgin Islands. ● On July 17, 2019, the Company issued 500,000,000 ordinary shares to its shareholders.
Intelligent Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application Group Limited, which was incorporated on March 19, 2014 under the laws of BVI. ● On July 17, 2019, the Company issued 500,000,000 ordinary shares to its shareholders. On August 14, 2019, these shareholders surrendered 499,990,000 ordinary shares to the Company at no consideration.
Our PRC entity in 2023 and 2022 was subject to the statutory PRC enterprise income tax rate of 25.0%. Our subsidiaries in Hong Kong are subject to Hong Kong taxation on income derived from their activities conducted in Hong Kong at a rate of 16.5%.
Our PRC entity in 2023 and 2022 was subject to the statutory PRC enterprise income tax rate of 25.0%. Our subsidiaries in Hong Kong are subject to Hong Kong taxation on income derived from their activities conducted in Hong Kong at a rate of 16.5%. Net loss Net loss increased $1,845,615 to $3,501,518 for 2023 from $1,655,903 for 2022. 5B.
Until 2018, we have maintained a profitable business with steady growth in our revenues and earnings. In 2018, we experienced the sudden impact caused by the tariff war between the US and China that resulted in a decrease in or suspension of orders in late 2018 and first half of 2019.
In 2018, we experienced the sudden impact caused by the tariff war between the US and China that resulted in a decrease in or suspension of orders in late 2018 and first half of 2019.
During the years ended December 31, 2023 and 2022, interest expense related to bank borrowings was $18,859 and $26,836, respectively. Provision for Income Taxes Provision for income tax was $56,237 in the fiscal year of 2023, an increase of $56,237 from $nil for fiscal year of 2022.
The decrease was mainly due reduced interest payment for a short-term loan to a third party during 2023. During the years ended December 31, 2023 and 2022, interest expense for bank borrowings was $18,859 and $26,836, respectively. Provision for Income Taxes Provision for income tax was $56,237 in 2023, an increase of $56,237 from $nil for 2022.
The combination of all above factors, along with decrease in other income and increase of provision for income tax, have resulted in an increase of our net loss of $1,845,615 to $3,501,518 for the year ended December 31, 2023 from $1,655,903 for the year ended December 31, 2022. 61 Currently, our customer and geographical market concentration are high.
The combination of all above factors, along with decrease in other income and increase of provision for income tax, have resulted in an increase of our net loss of $188,769 to $3,690,287 for 2024 from $3,501,518 for 2023. 59 Currently, our customer and geographical market concentration are high.
Units of product shipped during 2023 were approximately 1.3 million units (including approximately 0.1 million units of spare parts) comparing to approximately 2.4 million units (including approximately 0.2 million units of spare parts) in 2022 and approximately 2.8 million units (including approximately 0.2 million units of spare parts) in 2021.
Units of product shipped during 2024 were approximately 1.6 million units (including approximately 0.2 million units of spare parts) compared to approximately 1.3 million units (including approximately 0.1 million units of spare parts) in 2023.
Investing Activities Net cash used in investing activities was $1,360,274 for the year ended December 31, 2023 was primarily attributable to leasehold improvement and purchase of property and equipment for electroplating production. Net cash used in investing activities was $4,181,724 for the year ended December 31, 2022 was primarily attributable to purchase of property and equipment for electroplating production.
Investing Activities Net cash used in investing activities was $115,161 for 2024 was primarily attributable to purchase of property and equipment for electroplating production. Net cash used in investing activities was $1,360,274 for 2023 was primarily attributable to leasehold improvement and purchase of property and equipment for electroplating production.
To support our working capital needs, we maintain a credit facility with the Bank of China (Hong Kong) Limited for approximately $897,000 since 2021 compared to approximately $769,000 in 2020, which is guaranteed by our directors and their personal properties.
We need substantial operating funds to pay for raw materials; maintain an appropriate level of work-in-process inventory; and keep the production facility open. To support our working capital needs, we maintain a credit facility with the Bank of China (Hong Kong) Limited for approximately $897,000 since 2021, which is guaranteed by our directors and their personal properties.
General and Administrative Expenses General and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives as well as legal and professional fees, depreciation and amortization of non-production property and equipment.
General and Administrative Expenses General and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives as well as legal and professional fees, depreciation and amortization of non-production property and equipment. General and administrative expenses increased by $232,117, or 5.5%, to $4,440,314 for 2023 from $4,208,197 for 2022.
We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. 68 Cash Flows A summary of the sources and uses of cash and cash equivalents is as follows: For the years end December 31, 2023 2022 2021 USD USD USD Selected Consolidated Statements of Cash Flows Data: Net cash (used in) operating activities $ (3,163,187 ) $ (4,170,876 ) $ (1,038,967 ) Net cash (used in) investing activities (1,360,274 ) (4,181,724 ) (9,758 ) Net cash provided by (used in) financing activities (154,976 ) 17,397,802 876,334 Effect of exchange rate on cash (3,484 ) (10,680 ) 1,080 Net decrease in cash (4,681,921 ) 9,034,522 (171,311 ) Cash and cash equivalents at beginning of year 9,165,651 131,129 302,440 Cash and cash equivalents at end of year $ 4,483,730 $ 9,165,651 $ 131,129 Operating Activities Net cash used in operating activities was $3,163,187 for the year ended December 31, 2023 and was primarily attributable to (i) the net loss of $3,501,518; (ii) an increase in inventory of $586,551; (iii) an increase in deposits of $ 71,188; (iv) an decrease in accounts payable of $67,945; (v) a increase in prepayment of $ 1,412,318; (vi) a decrease in other payables and accruals of $ 50,253; (vii) a decrease in advance from customers of $6,364; and being offset by (i) a decrease in account receivables of $1,119,804; (ii) non-cash item of $693,531 of depreciation and amortization and $667,016 of options issued for equity compensation plan; (iii) increase in taxes payable of $31,972; (iv) an increase in cash flow by other elements of $20,627.
We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. 66 Cash Flows A summary of the sources and uses of cash and cash equivalents is as follows: For the years end December 31, 2024 2023 2022 USD USD USD Selected Consolidated Statements of Cash Flows Data: Net cash (used in) operating activities $ (3,042,081 ) $ (3,163,187 ) $ (4,170,876 ) Net cash (used in) investing activities (115,161 ) (1,360,274 ) (4,181,724 ) Net cash (used in) provided by financing activities (44,557 ) (154,976 ) 17,397,802 Effect of exchange rate on cash (1,020 ) (3,484 ) (10,680 ) Net (decrease) increase in cash (3,202,819 ) (4,681,921 ) 9,034,522 Cash and cash equivalents at beginning of year 4,483,730 9,165,651 131,129 Cash and cash equivalents at end of year $ 1,280,911 $ 4,483,730 $ 9,165,651 Operating Activities Net cash used in operating activities was $3,042,081 for 2024 and was primarily attributable to (i) the net loss of $3,690,287; (ii) an increase in inventory of $7,647; (iii) an increase in deposits of $301; (iv) a decrease in accounts payable of $71,823; (v) an increase in prepayment of $306,050; (vi) a decrease in other payables and accruals of $134,159; (vii) a decrease in taxes payable of $15,081; and being offset by (i) a decrease in account receivables of $ 290,569; (ii) non-cash item of $797,656 of depreciation and amortization; (iii) increase in other receivables of $95,031; (iv) an increase in cash flow by other elements of $11.
Leases The Company follows FASB ASU 2016-02, “Leases” (Topic 842) and measures the lease liability based on the present value of the lease payments discounted by the relevant borrowing rate and reduces the carrying value of the lease liability for lease payments made. The Company accounts for all significant leases as either operating or finance leases.
Our critical accounting policies and practices include the following: (i) leases, and (ii) deferred tax assets. 68 (i) Leases The Company follows FASB ASU 2016-02, “Leases” (Topic 842) and measures the lease liability based on the present value of the lease payments discounted by the relevant borrowing rate and reduces the carrying value of the lease liability for lease payments made.
Such costs relate primarily to depreciation expense related to the Company’s electroplating equipment that cannot be directly attributable to the production process. Idle capacity expenses amounted to $345,424 and nil for the years ended December 31, 2023 and 2022, respectively.
Such costs relate primarily to depreciation expense related to the Company’s electroplating equipment that cannot be directly attributable to the production process. Idle capacity expenses were $362,894 and $345,424 for the years ended December 31, 2024 and 2023, respectively. Gross Profit Gross profit was $1,311,708 for 2024, an increase of $678,366, or 107.1% from $633,342 for 2023.
General and administrative expenses increased by $232,117, or 5.5%, to $4,440,314 for the year ended December 31, 2023 from $4,208,197 for the year ended December 31, 2022. This increase was due mainly to additional amortization on leasehold improvement and stock options granted to officers and employees of the company under the Company’s 2022 Omnibus Equity Plan (the “Equity Plan”).
This increase was due mainly to additional amortization on leasehold improvement and stock options granted to officers and employees of the company under the Company’s 2022 Omnibus Equity Plan (the “Equity Plan”). Finance Costs Finance costs decreased by $120,653, or 81.7%, to $26,935 for 2023 from $147,588 for 2022.
This transaction was treated as a recapitalization of the Company and the financial statements give retroactive effect to this transaction. ● On July 16, 2021, the Board of Directors and Shareholders of the Company approved the Amended and Restated Memorandum and Articles of Association of the Company and our authorized share capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000 ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value of $0.0001 each.
This transaction was treated as a recapitalization of the Company and the financial statements give retroactive effect to this transaction. ● On July 16, 2021, the BOD and Shareholders of the Company approved the Amended and Restated Memorandum and Articles of Association of the Company and our authorized share capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000 ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value of $0.0001 each. ● Through Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of the equity interest in Xingfa. ● On February 6, 2025, the Board of Directors (the “Board”) of the Company, pursuant to the Articles of Association of the Company, designated 2,000,000 Preferred Shares of the Company as series A preferred shares of the Company, par value US$0.0001 each (“Series A Preferred Shares”) which shall have twenty (20) votes for every fully paid Series A Preferred Share at any general meeting.
Taking into account production time, inventory turnover and accounts receivable turnover and our cash position, we then project our working capital needs and also identify potential sales sources. 63 When we see declining trends from purchase orders received, we will start reviewing our material costs and expenses in order to mitigate the impact to our gross margin.
Taking into account production time, inventory turnover and accounts receivable turnover and our cash position, we then project our working capital needs and also identify potential sales sources. 61 The number of purchase orders from our customers for 2024 were higher than those in 2023.
We believe that we can further reduce our cost of raw materials as we negotiate for volume rebates and enhance our gross margin as we optimize our product-mix to focus our marketing efforts on higher margin products and COVID-19 is gradually under control in the U.S. and globally.
We believe we can enhance our profit margin as we (i) negotiate for volume rebates that would reduce our cost of raw materials, and (ii) optimize our product mix to focus our marketing efforts on our higher margin products. Selling and marketing expenses Major components of selling and marketing expenses are research expenses, transportation, custom declarations, sales commissions.
Selling and marketing expenses decreased to $59,841 in 2023 from $105,473 for the same period in 2022, Our general and administrative expenses increased to approximately $4.4 million for the year ended December 31, 2023 from approximately $4.2 million for the same period of 2022 because of increase in compensation to directors and executive officers and professional fees as a public company.
Our general and administrative expenses decreased to approximately $3.4 million for 2024 from approximately $4.4 million for 2023 because of decrease in compensation to directors and executive officers and professional fees as a public company. Finance costs were decreased to $25,834 for 2024 from $26,935 for 2023.
The decrease was due mainly to reduction in business travelling and sales commissions. 67 General and Administrative Expenses General and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives as well as legal and professional fees, depreciation and amortization of non-production property and equipment.
General and Administrative Expenses General and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives as well as legal and professional fees, depreciation and amortization of non-production property and equipment. General and administrative expenses decreased by $1,036,411, or 23.3%, to $3,403,903 for 2024 from $4,440,314 for 2023.
Starting in January 2021, we stopped absorbing tariffs cost for our U.S. customers and U.S. might further increase the tariffs that will affecting our products. ● Competition: In order to continue to compete effectively, we must maintain our reputation for innovation and high-quality products and be flexible and innovative in responding to rapidly changing market demands.
We must develop markets in Asia and other regions to mitigate the natively impact caused by this tariff war. ● Competition: To continue to compete effectively, we must maintain our reputation for innovation and high-quality products and be flexible and innovative in responding to rapidly changing market demands.
Our total number of products sold was approximately 2.4 million units (including approximately 0.2 million units of spare parts) for the year ended December 31, 2022 comparing to 2.8 million units (including approximately 0.2 million units of spare parts) for the year ended December 31, 2021.
The increase was mainly due to increase in units sold in 2024. Our number of products sold was approximately 1.6 million units (including approximately 0.2 million units of spare parts) for 2024, compared to 1.3 million units (including approximately 0.1 million units of spare parts) for 2023.
On August 14, 2019, these shareholders surrendered an aggregate of 499,990,000 ordinary shares to the Company at no consideration. The transaction is considered as a recapitalization prior to the Company’s initial public offering. 60 ● A reorganization of the Company’s legal entity structure was completed in April 2020.
The transaction is considered as a recapitalization prior to the Company’s IPO. 58 ● A reorganization of the Company’s legal entity structure was completed in April 2020.
As a small business with limited resources, we currently don’t have the ability to hedge our raw materials position, and we must monitor raw material price trends closely to manage our production needs. Cost of goods sold was 81.9% and 89.5% of revenues for the years ended December 31, 2022 and 2021 respectively.
As a small business with limited resources, we lack the ability to hedge our raw materials costs and we monitor raw material price trends to manage our production needs. 63 Cost of goods sold – idle capacity Idle capacity consists of direct production costs in excess of charges allocated to the Company’s finished goods in production.
Net cash used in investing activities was $9,758 for the year ended December 31, 2021 was primarily attributable to purchase of property and equipment.
Net cash used in investing activities was $4,181,724 for 2022 was primarily attributable to purchase of property and equipment for electroplating production. Financing Activities Net cash used in financing activities was $44,557 for 2024 and was primarily attributable to repayments of bank borrowings.
Net cash used in operating activities was $1,038,967 for the year ended December 31, 2021 and was primarily attributable to (i) the net loss of $1,386,515; (ii) non-cash item of $259,122 of depreciation and amortization; (iii) an increase in accounts receivable of $199,392; (iv) an increase in inventory of $712,854; (v) an increase in prepayment of $140,151; (vi) an increase in other receivables of $134,161; (vii) an increase in accounts payable of $530,221; (viii) an increase in other payables and accruals of $545,903; (ix) an increase of the advance from customers of $222,633, and (x) a decrease in cash flow by other elements of $23,773.
Net cash used in operating activities was $3,163,187 for 2023 and was primarily attributable to (i) the net loss of $3,501,518; (ii) an increase in inventory of $586,551; (iii) an increase in deposits of $ 71,188; (iv) an decrease in accounts payable of $67,945; (v) a increase in prepayment of $ 1,412,318; (vi) a decrease in other payables and accruals of $ 50,253; (vii) a decrease in advance from customers of $6,364; and being offset by (i) a decrease in account receivables of $1,119,804; (ii) non-cash item of $693,531 of depreciation and amortization and $667,016 of options issued for equity compensation plan; (iii) increase in taxes payable of $31,972; (iv) an increase in cash flow by other elements of $20,627.
Because of product mix shifted and change of combination of metal raw materials, our gross margin was down to 9.8% (if the idle capacity impact was removed, our profit margin decreased to 15.2%) in 2023 from 18.1% in 2022 (10.5% in 2021).
If the idle capacity impact was removed, our profit margin decreased to 15.2% in 2023. The decrease in margin during 2023 was mainly due to the increase of labor costs and raw materials such as zinc alloy and iron.
During the years ended December 31, 2023 and 2022, the Company recognized lease expense for such leases on a straight-line basis over the lease term. Income taxes The Company accounts for income taxes in accordance with FASB ASC Section 740. The Company is subject to the tax laws of the PRC and Hong Kong (a special administrative region of PRC).
During 2024 and 2023, the Company recognized lease expense for such leases on a straight-line basis over the lease term.
Gross Profit Gross profit was $633,342 for the year ended December 31, 2023, a decrease of $1,562,772, or 71.2% from $2,196,114 for the same period of 2022.
Such costs relate primarily to depreciation expense related to the Company’s electroplating equipment that cannot be directly attributable to the production process. Idle capacity expenses were $345,424 and nil for 2023 and 2022, respectively. Gross Profit Gross profit was $633,342 for 2023, a decrease of $1,562,772, or 71.2% from $2,196,114 for 2022.
We renegotiated bank borrowings with lower interest rate to sustain our operation cash needs. Our bank borrowing outstanding as of December 31, 2023 was approximately $0.1 million as compared to approximately $0.6 million as of December 31, 2022.
Our revenues from sales of door locksets increased by $1,063,194, or 16.5% for the year ended December 31, 2024 to $7,506,551 from $6,443,357 for the year ended December 31, 2023. The increase was mainly due to increase in units sold in 2024. We renegotiated bank borrowings with lower interest rate to sustain our operation cash needs.
Removed
And it mainly serves our customers in Asian countries. We will further illustrate our development and group structure in the following paragraphs.
Added
Kambo Hardware, another wholly owned subsidiary of the Company targets and distributes locksets and related hardware to countries other than the US and Canada and it mainly serves our customers in Asian countries.
Removed
The Company originally issued 500,000,000 ordinary shares on July 17, 2019.
Added
The Compensation Committee of the Board and the Board granted the 2,000,000 Preferred Shares to Mr. Bong Lau, the Chairman and CEO of the Company on February 19, 2025. ● On February 25, 2025, Intelligent Living Application Group Inc.
Removed
On August 14, 2019, all of existing shareholders of the Company agreed to surrender an aggregate of 499,990,000 ordinary shares to the Company at no consideration. ● Through Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of the equity interest in Xingfa.

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Item 6. [Reserved]

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

39 edited+7 added−4 removed55 unchanged
The Compensation Committee is responsible for, among other things: ● To approve compensation principles that apply generally to Company employees; ● To make recommendations to the board of directors with respect to incentive compensation plans and equity-based plans and to oversee the application of the Company’s compensation recoupment/clawback policy; ● To administer and otherwise exercise the various authorities prescribed for the Compensation Committee by the Company’s incentive compensation plans and equity-based plans; ● To select a peer group of companies against which to benchmark/compare the Company’s compensation systems for principal officers elected by the board of directors; ● To annually review the Company’s compensation policies and practices and assess whether such policies and practices are reasonably likely to have a material adverse effect on the Company; ● To determine and oversee stock ownership guidelines and stock option holding requirements, including periodic review of compliance by principal officers and members of the board of directors; Nominating and Corporate Governance Committee Ms.
The Compensation Committee is responsible for, among other things: ● To approve compensation principles that apply generally to Company employees; ● To make recommendations to the BOD with respect to incentive compensation plans and equity-based plans and to oversee the application of the Company’s compensation recoupment/clawback policy; ● To administer and otherwise exercise the various authorities prescribed for the Compensation Committee by the Company’s incentive compensation plans and equity-based plans; ● To select a peer group of companies against which to benchmark/compare the Company’s compensation systems for principal officers elected by the BOD; ● To annually review the Company’s compensation policies and practices and assess whether such policies and practices are reasonably likely to have a material adverse effect on the Company; ● To determine and oversee stock ownership guidelines and stock option holding requirements, including periodic review of compliance by principal officers and members of the board of directors; Nominating and Corporate Governance Committee Ms.
In accordance with our Audit Committee Charter, our Audit Committee shall perform several functions, including: ● evaluate the independence and performance of, and assess the qualifications of, our independent auditor, and engage such independent auditor; ● approve the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approve in advance any non-audit service to be provided by the independent auditor; ● monitor the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law; ● review the financial statements to be included in our Annual Report on Form 20-F and Current Reports on Form 6-K and review with management and the independent auditors the results of the annual audit and reviews of our quarterly financial statements; ● oversee all aspects our systems of internal accounting control and corporate governance functions on behalf of the board; 77 ● review and approve in advance any proposed related-party transactions and report to the full Board on any approved transactions; and ● provide oversight assistance in connection with legal, ethical and risk management compliance programs established by management and the Board, including Sarbanes-Oxley Act implementation, and make recommendations to the Board regarding corporate governance issues and policy decisions.
In accordance with our Audit Committee Charter, our Audit Committee shall perform several functions, including: ● evaluate the independence and performance of, and assess the qualifications of, our independent auditor, and engage such independent auditor; ● approve the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approve in advance any non-audit service to be provided by the independent auditor; ● monitor the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law; ● review the financial statements to be included in our Annual Report on Form 20-F and Current Reports on Form 6-K and review with management and the independent auditors the results of the annual audit and reviews of our quarterly financial statements; ● oversee all aspects our systems of internal accounting control and corporate governance functions on behalf of the board; 75 ● review and approve in advance any proposed related-party transactions and report to the full Board on any approved transactions; and ● provide oversight assistance in connection with legal, ethical and risk management compliance programs established by management and the Board, including Sarbanes-Oxley Act implementation, and make recommendations to the Board regarding corporate governance issues and policy decisions.
Each of our executive officers has agreed not to use for his/her personal purposes nor divulge, furnish, or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret information or knowledge of the Company, whether developed by him/herself or by others.
Each of our executive officers agreed not to use for his/her personal purposes nor divulge, furnish, or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret information or knowledge of the Company, whether developed by him/herself or by others.
We have entered into director agreements with each of our independent directors which agreements set forth the terms and provisions of their engagement. In addition, we have entered into indemnification agreements with each of our directors and executive officers that provide such persons with additional indemnification beyond that provided in our current memorandum and articles of association.
We entered into director agreements with each of our independent directors which agreements set forth the terms and provisions of their engagement. In addition, we entered into indemnification agreements with each of our directors and executive officers that provide such persons with additional indemnification beyond that provided in our current memorandum and articles of association.
Bun Lau was appointed as the Chief Operating Officer of the Company on June 1, 2020. Mr. Bun Lau was a director of the Board from July 17, 2019 to May 24, 2022, and he was appointed as a director of the Board on January 15, 2024. Mr.
Bun Lau was appointed as the Chief Operating Officer of the Company on June 1, 2020. Mr. Bun Lau was a director of the Board from July 17, 2019 to May 24, 2022, and he was re-appointed as a director of the Board on January 15, 2024. Mr.
In addition, each executive officer has agreed to be bound by non-competition restrictions during the term of his or her employment and for six months following the last date of employment.
In addition, each executive officer agreed to be bound by non-competition restrictions during the term of his or her employment and for six months following the last date of employment.
The Nominating and Corporate Governance Committee is responsible for, among other things: ● Identify and screen individuals qualified to become Board members consistent with the criteria approved by the board of directors, and recommend to the board of directors nominees for election at the next annual or special meeting of shareholders at which directors are to be elected or to fill any vacancies or newly created directorships that may occur between such meetings; ● Recommend directors for appointment to Board committees; 78 ● Make recommendations to the board of directors as to determinations of director independence; ● Oversee the evaluation of the board of directors; ● Make recommendations to the board of directors as to compensation for the Company’s directors; and ● Review and recommend to the board of directors the Corporate Governance Guidelines and Code of Business Conduct and Ethics for the Company.
The Nominating and Corporate Governance Committee is responsible for, among other things: ● Identify and screen individuals qualified to become Board members consistent with the criteria approved by the BOD, and recommend to the BOD nominees for election at the next annual or special meeting of shareholders at which directors are to be elected or to fill any vacancies or newly created directorships that may occur between such meetings; ● Recommend directors for appointment to Board committees; 76 ● Make recommendations to the BOD as to determinations of director independence; ● Oversee the evaluation of the BOD; ● Make recommendations to the BOD as to compensation for the Company’s directors; and ● Review and recommend to the BOD the Corporate Governance Guidelines and Code of Business Conduct and Ethics for the Company.
Board Practices Terms of Directors and Officers Our officers are elected by and serve at the discretion of the Board and may be removed by the Board.
Board Practices Terms of Directors and Officers Our officers are elected by and serve at the discretion of the BOD and may be removed by the BOD.
Kenneth Liu, Independent Director Mr. Liu Chun Fai (“Mr. Liu”), was appointed as a director of the Company on June 30, 2023. Mr. Liu has served as Chairman and Executive Director of China Eco-Farming Limited (HK Stock Exchange Code: 8166) since February 2022. Mr.
Kenneth Liu, Independent Director Mr. Chun Fai (Kenneth) Liu , was appointed as a director of the Company on June 30, 2023. Mr. Liu has served as Chairman and Executive Director of China Eco-Farming Limited (HK Stock Exchange Code: 8166) since February 2022. Mr.
During the outbreak of COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees and have followed local government orders to prevent the spread of COVID-19. 79 6.E.
During the outbreak of COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees and have followed local government orders to prevent the spread of COVID-19. 77 6.E.
Our PRC subsidiary is required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. 74 Employment Agreements, Director Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
Our PRC subsidiary is required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. 72 Employment Agreements, Director Agreements and Indemnification Agreements We entered into employment agreements with each of our executive officers.
Our Board of Directors may amend, suspend or terminate the Equity Plan, without consent of stockholders or participants, provided, however, that amendments must be submitted to the stockholders for approval if shareholder approval is required by applicable law, and any amendment or termination that may adversely affect the rights of participants with outstanding awards requires the consent of such participants.
Our BOD may amend, suspend or terminate the Equity Plan, without consent of stockholders or participants, provided, however, that amendments must be submitted to the stockholders for approval if shareholder approval is required by applicable law, and any amendment or termination that may adversely affect the rights of participants with outstanding awards requires the consent of such participants.
Unless prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate its authority and administrative duties under the Equity Plan. 75 Shares Subject to the Equity Plan .
Unless prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate its authority and administrative duties under the Equity Plan. 73 Shares Subject to the Equity Plan .
The shares issuable under the Equity Plan are our ordinary shares that are authorized but unissued or reacquired ordinary shares, including shares repurchased by the Company as treasury shares. The total aggregate ordinary shares of the Company authorized for issuance during the term of the Equity Plan is limited to 2,500,000 shares.
The shares issuable under the Equity Plan are our ordinary shares that are authorized but unissued or reacquired ordinary shares, including shares repurchased by the Company as treasury shares. The total ordinary shares of the Company authorized for issuance during the term of the Equity Plan is 2,500,000 shares.
Board Diversity Matrix (As of April 29, 2024) Country of Principal Executive Offices: Hong Kong, China Foreign Private Issuer: Yes Disclosure Prohibited Under Home Country Law: No Total Number of Directors 7 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 2 5 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 Audit Committee Ms.
Board Diversity Matrix (As of April 28, 2025) Country of Principal Executive Offices: Hong Kong, China Foreign Private Issuer: Yes Disclosure Prohibited Under Home Country Law: No Total Number of Directors 7 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 2 5 — — Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction — — — — LGBTQ+ — — — — Did Not Disclose Demographic Background — — — — Audit Committee Ms.
(2) including 140,000 stock options exercisable since February 22, 2023. (3) including 200,000 stock options exercisable since February 22, 2023. (4) including 60,000 stock options exercisable since February 22, 2023. (5) including 140,000 stock options exercisable since February 22, 2023. (6) including 40,000 stock options exercisable since February 22, 2023.
(2) including 140,000 stock options exercisable since February 22, 2023. (3) including 200,000 stock options exercisable since February 22, 2023. (4) including 60,000 stock options exercisable since February 22, 2023. (5) including 100,000 stock options exercisable since February 22, 2023. (6) including 40,000 stock options exercisable since February 22, 2023. (7) including 5,000 stock options exercisable since February 22, 2023.
As of December 31, 2023, 17 employees are based in Hong Kong, where our principal executive offices are located, one vice president of finance was based in Beijing, and the remaining employees were located in Dongguan, China.
As of December 31, 2024, 18 employees are based in Hong Kong, where our principal executive offices are located, one vice president of finance was based in Beijing, and the remaining employees were located in Dongguan, China.
In accordance with its charter, the Nominating and Corporate Governance Committee is responsible for identifying and proposing new potential director nominees to the board of directors for consideration and reviewing our corporate governance policies.
In accordance with its charter, the Nominating and Corporate Governance Committee is responsible for identifying and proposing new potential director nominees to the BOD for consideration and reviewing our corporate governance policies.
On February 22, 2023, (the “Grant Date”), the Compensation Committee of the Board of Directors (the “Board”) of the Company granted stock options to purchase 820,000 ordinary shares of the Company (the “Shares”) at an exercise price of $1.23 per share, pursuant to the Company’s 2022 Omnibus Equity Plan, to sixteen officers, directors and employees of the Company and its subsidiaries (the “Grantees”) The Grants vested immediately on the Grant Date and each of the Grantees also entered into a Stock Option Agreement with the Company on February 22, 2023.
On February 22, 2023, the Compensation Committee of the Board of Directors (the “Board”) of the Company granted stock options to purchase 820,000 ordinary shares of the Company (the “Shares”) at $1.23 per share, pursuant to the Company’s 2022 Omnibus Equity Plan, to 16 officers, directors and employees of the Company and its subsidiaries (the “Grantees”) The Grants vested immediately on February 22, 2023 and each of the Grantees also entered into a Stock Option Agreement with the Company on February 22, 2023.
Directors and Executive Officers Age Position/Title Bong Lau (Yu Bong Lau) 46 Chief Executive Officer, Chairman of the Board and Director Frederick Wong (Ching Wan Wong) 56 Chief Financial Officer Bun Lau (Yu Bun Lau) 44 Chief Operations Officer and Director Wynn Hui (Po Wang Hui) 73 Chief Technical Officer and Director Errol Hui (Shun Hong Hui) 35 Vice President of Engineering Tony Zhong (Wei Zhong) 41 Vice President of Finance Monique Ho(1)(2)(3) (Ting Mei Ho) 49 Independent Director Chun Fai (Kenneth) Liu (1)(2)(3)(4) 35 Independent Director Carina Chui(1)(2)(3) (Wan Yee Carina Chui) 45 Independent Director Henry Yeung (Wing Hang Yeung)(5) 40 Independent Director (1) Member of audit committee.
Directors and Executive Officers Age Position/Title Bong Lau (Yu Bong Lau) 47 Chief Executive Officer, Chairman of the Board and Director Frederick Wong (Ching Wan Wong) 57 Chief Financial Officer Bun Lau (Yu Bun Lau) 45 Chief Operations Officer and Director(6) Wynn Hui (Po Wang Hui) 74 Chief Technical Officer and Director Errol Hui (Shun Hong Hui) 36 Vice President of Engineering Tony Zhong (Wei Zhong) 41 Vice President of Finance Monique Ho(1)(2)(3) (Ting Mei Ho) 50 Independent Director Chun Fai (Kenneth) Liu (1)(2)(3)(4) 36 Independent Director Carina Chui(1)(2)(3) (Wan Yee Carina Chui) 46 Independent Director Henry Yeung (Wing Hang Yeung)(5) 41 Independent Director (1) Member of audit committee.
Director Independence Our Board reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly, and the Company has determined that Ms. Monique Ho, Ms. Carina Chui, Mr. Kenneth Liu and Mr. Henry Yeung are “independent directors” as defined by NASDAQ. 6.D.
Director Independence Our Board reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly, and the Company determined that Ms. Monique Ho, Ms. Carina Chui, Mr. Kenneth Liu and Mr. Henry Yeung are “independent directors” as defined by NASDAQ. Family Relationships Mr. Bong Lau and Mr. Bun Lau are brothers and Mr.
The Equity Plan requires that a committee of non-employee directors to administer the Equity Plan. Currently, our Compensation Committee, which we refer here as the Committee, administers the Equity Plan. Among other powers and duties, the Committee determines the employees who will be eligible to receive awards and establishes the terms and conditions of all awards.
Currently, our Compensation Committee, which we refer here as the Committee, administers the Equity Plan. Among other powers and duties, the Committee determines the employees who will be eligible to receive awards and establishes the terms and conditions of all awards.
Zhong is a Chartered Global Management Accountant, and was also admitted as a Fellow of the chartered institute of Management Accountants on December 21, 2018. Mr. Zhong was also admitted as a Fellow of the institute Public Accountant (Australia) and a Fellow of the Institute of Financial Accountants (UK) on October 22, 2020. 73 Monique Ho, Independent Director Ms.
Zhong is a Chartered Global Management Accountant, and was also admitted as a Fellow of the chartered institute of Management Accountants on December 21, 2018. Mr. Zhong was also admitted as a Fellow of the institute Public Accountant (Australia) and a Fellow of the Institute of Financial Accountants (UK) on October 22, 2020. In October 2024, Mr.
Except as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.
These shares, however, are not included in the computation of the percentage ownership of any other person. Except as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws.
A director will be removed from office automatically if, among other things, the director becomes bankrupt or makes any arrangement or composition with his creditors generally or is found to be or becomes of unsound mind. Our board of directors currently consists of 7 directors.
A director will be removed from office automatically if, among other things, the director becomes bankrupt or makes any arrangement or composition with his creditors generally or is found to be or becomes of unsound mind. Our BOD currently consists of 7 directors. We established an audit committee, a compensation committee and a corporate governance and nominating committee.
The following table sets forth the breakdown of our employees as of December 31, 2023 by function: Hong Kong Department Headcount Headquarter PRC Production Management 10 7 3 Finance and accounting 7 4 3 Sales and Marketing 3 3 — Purchasing 2 — 2 Warehouse 11 — 11 Production 199 — 199 Quality Control 3 — 3 Administration 15 4 11 Technical 5 — 5 Total 255 18* 237 *One vice president of finance based in Beijing.
The following table sets forth the breakdown of our employees as of December 31, 2024 by function: Hong Kong PRC Department Headcount Headquarters Production Management 10 7 3 Finance and accounting 8 5 3 Sales and Marketing 4 4 — Purchasing 2 — 2 Warehouse 11 — 11 Production 181 — 181 Quality Control 3 — 3 Administration 14 3 11 Technical 5 — 5 Total 238 19 * 219 *including one employee, our vice president of finance based in Beijing.
(2) Member of compensation committee. (3) Member of nominating and corporate governance committee. (4) Mr. Kenneth Liu was appointed as a director on July 4 , 2023 to fill the vacancy created by the resignation of Mr. Jochen Koehler. (5). Mr. Yeung was appointed on January 15, 2024.
(2) Member of compensation committee. (3) Member of nominating and corporate governance committee. (4) Mr. Kenneth Liu was appointed as a director on July 4, 2023. (5) Mr. Yeung was appointed on January 15, 2024. (6) Mr.
Ho was appointed as a director of the Company on June 1, 2020. Ms. Ho is a marketing savvy director who has over 20 years of experience in media.
Zhong was admitted as a Fellow Certified Practising Accountant (Australia). 71 Monique Ho, Independent Director Ms. Ho was appointed as a director of the Company on June 1, 2020. Ms. Ho is a marketing savvy director who has over 20 years of experience in media.
The options will expire five (5) years from the Grant Date and may be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement. As of April 29, 2024, none has been exercised. 76 6.C.
The options will expire five (5) years from February 22, 2023and may be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement. As of April 28, 202 5 , none of the options has been exercised.
For share incentive grants to our officers and directors, see “—Share Incentive Plans.” We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Compensation For 2024 and 2023, we paid an aggregate of $971,000 and $950,000 in cash to our directors and executive officers, respectively. For share incentive grants to our officers and directors, see “—Share Incentive Plans.” We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Ordinary Shares Beneficially Owned Number of Shares Percentage of (including Share Options) Shares Directors and Executive Officers: Bong Lau 2,540,000 (1) 13.9 % Bun Lau 2,480,000 (2) 13.6 % Wynn Hui 2,540,000 (3) 13.9 % Frederick Wong 60,000 (4) * Errol Hui 2,480,000 (5) 13.6 % Tony Zhong 40,000 (6) * Monique Ho 5,000 (7) * Kenneth Liu - - Carina Chui 5,000 (7) * Henry Yeung - - 5% or Greater Shareholders: Bong Lau 2,340,000 (1) 13.9 % Bun Lau 2,340,000 (2) 13.6 % Wynn Hui 2,340,000 (3) 13.9 % Errol Hui 2,340,000 (5) 13.6 % All directors and executive officers as a group (10 individuals) 10,150,000 56.2 % (1) including 200,000 stock options exercisable since February 22, 2023.
Ordinary Shares Beneficially Owned Preferred Shares Beneficially Owned Aggregated Voting Power Number of Shares Number of Shares (including Share Options) Percentage of Shares (including Share Options) Percentage of Shares Number Percentage Directors and Executive Officers: Bong Lau 2,540,000 (1) 12.1 % 2,000,000 (8) 100.0 % 42,540,000 69.8 % Bun Lau 2,880,000 (2) 13.8 % — — 2,880,000 4.7 % Wynn Hui 2,940,000 (3) 14.0 % — — 2,940,000 4.8 % Frederick Wong 160,000 (4) * — — 160,000 * Errol Hui 2,840,000 (5) 13.6 % — — 2,840,000 4.7 % Tony Zhong 120,000 (6) * — — 120,000 * Monique Ho 45,000 (7) * — — 45,000 * Kenneth Liu 40,000 * — — 40,000 * Carina Chui 45,000 (7) * — — 45,000 * Henry Yeung 40,000 * — — 40,000 * All directors and executive officers as a group (10 individuals) 11,650,000 53.5 % 2,000,000 (8) 100.0 % 51,650,000 84.0 % 5% or Greater Shareholders: Bong Lau 2,540,000 (1) 12.1 % 2,000,000 (8) 100.0 % 42,540,000 69.8 % Bun Lau 2,880,000 (2) 13.8 % — — 2,880,000 4.7 % Wynn Hui 2,940,000 (3) 14.0 % — — 2,940,000 4.8 % Errol Hui 2,840,000 (5) 13.6 % — — 2,840,000 4.7 % (1) including 200,000 stock options exercisable since February 22, 2023.
Share Incentive Plans The Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the “Equity Plan”) on October 20, 2022, which was approved at the stockholders’ meeting on December 16, 2022.
Share Incentive Plans The BOD of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the “Equity Plan”) on October 20, 2022, which was approved at the stockholders’ meeting on December 16, 2022. The total ordinary shares of the Company authorized for issuance during the term of the Equity Plan are 2,500,000 shares.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of April 29, 2024 for: ● each beneficial owner of 5% or more of our issued and outstanding ordinary shares; ● each of our directors and executive officers; and ● all of our directors and executive officers as a group.
Share Ownership The following table sets forth information with respect to the beneficial ownership of each class of the Company’s voting securities as of April 25, 2025 for: ● each 5% or more beneficial owners of each class of the Company’s voting securities; ● each of our directors and executive officers; and ● all of our directors and executive officers as a group.
Bong Lau, Chief Executive Office and Chairman of the Board of the Directors of the Company (the “Board”) Mr. Bong Lau was appointed as a director of the Board on July 17, 2019 and Chairman of the Board on June 1, 2020. Mr.
Bun Lau was a director of the Board from July 17, 2019 to May 24, 2022 and was re-appointed as a director of the Board on January 15, 2024. Bong Lau, Chief Executive Office and Chairman of the Board of the Directors of the Company (the “Board”) Mr.
We have established an audit committee, a compensation committee and a corporate governance and nominating committee. Each of the committees of the board of directors has the composition and responsibilities described below. Board Diversity Matrix The following table sets forth Board level diversity statistics based on self-identification of members of our Board as of April 29, 2024.
Each of the committees of the BOD has the composition and responsibilities described below. Board Diversity Matrix The following table sets forth Board level diversity statistics based on self-identification of members of our Board as of April 28, 2025.
He has almost 30 years of experience in accounting, internal control, financial control and capital markets. Mr. Wong has served as an independent director of Network CN Inc. (OTC PINK: NWCN) since January 1, 2022. He has served as compliance offer for China Finance Investment Holdings Limited (Stock Code: 0875.HK) from November 1, 2018 to May 31, 2020. Mr.
(OTC PINK: NWCN) since January 1, 2022. He has served as compliance offer for China Finance Investment Holdings Limited (Stock Code: 0875.HK) from November 1, 2018 to May 31, 2020. Mr.
Lau joined the Company in 1999 and has over 20 years of extensive experience in managing door security hardware businesses. Mr. Lau also works well together with our large and small partners geographically to build solid distribution networks, implements marketing and business expansion strategies.
Lau also works well together with our large and small partners geographically to build solid distribution networks, implements marketing and business expansion strategies. He is primarily responsible for the overall sales strategy, distribution management and corporate strategies of the Company. In 1996, Mr.
He is primarily responsible for the overall sales strategy, distribution management and corporate strategies of the Company. In 1996, Mr. Lau studied in Civil Engineering at the University of Alberta for 2 years. 72 Frederick Wong, Chief Financial Officer Mr. Wong was appointed as our Chief Financial Officer on June 1, 2020.
Lau studied in Civil Engineering at the University of Alberta for 2 years. 70 Frederick Wong, Chief Financial Officer Mr. Wong was appointed as our Chief Financial Officer on June 1, 2020. He has almost 30 years of experience in accounting, internal control, financial control and capital markets. Mr. Wong has served as an independent director of Network CN Inc.
The total aggregate ordinary shares of the Company authorized for issuance during the term of the Equity Plan is limited to 2,500,000 shares. As of April 29, 2024, stock options to purchase 820,000 ordinary shares have been granted and outstanding under the Equity Plan. The following paragraphs summarize the terms of the Equity Plan: Administration .
As of April, 28, 202 5 , stock options to purchase 820,000 ordinary shares and 1,675,000 ordinary shares have been granted and outstanding under the Equity Plan. The following paragraphs summarize the terms of the Equity Plan: Administration . The Equity Plan requires that a committee of non-employee directors to administer the Equity Plan.
Removed
Compensation For the fiscal years ended December 31, 2023 and 2022, we paid an aggregate of approximately $950,000 and $972,000 in cash to our directors and executive officers, respectively.
Added
Bong Lau was appointed as a director of the Board on July 17, 2019 and Chairman of the Board on June 1, 2020. Mr. Lau joined the Company in 1999 and has over 20 years of extensive experience in managing door security hardware businesses. Mr.
Removed
Employees As of December 31, 2023, we had a total of 255 employees. We had a total of 374 employees as of December 31, 2022.
Added
On February 19, 2025 (the “Grant Date”), the Compensation Committee (“Committee”) of the Board granted stock awards of ordinary shares of the Company, par value $0.0001 (the “Ordinary Shares”), pursuant to the Company’s 2022 Omnibus Equity Plan, to certain officers and employees of the Company and its subsidiaries (the “Grantees”), including: 400,000 Ordinary Shares to Wynn Hui, Chief Technical Officer and a director of the Company, 400,000 Ordinary Shares to Bun Lau, Chief Operating Officer and a director of the Company, 400,000 Ordinary Shares to Errol Hui, Vice President of Engineering of the Company, 100,000 Ordinary Shares to Frederick Wong, Chief Financial Officer of the Company, 80,000 Ordinary Shares to Wei Zhong, Vice President of Finance of the Company as well as 40,000 Ordinary Shares to each of the independent directors of the Company, namely Monique Ho, Chun Fai (Kenneth) Liu, Carina Chui and Henry Yeung.
Removed
The calculations in the table below are based on 18,060,000 ordinary shares issued and outstanding as of the date of April 29, 2024.
Added
On the Grant Date, the Committee and the Board also granted 2,000,000 Series A Preferred Shares, par value US$0.0001 to Mr. Bong Lau, the Chief Executive Officer and Chairman of the Board and each Series A Preferred Share is entitled to twenty (20) votes. 74 6.C.
Removed
(7) including 50,000 stock options exercisable since February 22, 2023. * less than 1% 80
Added
Wynn Hui is the father of Mr. Errol Hui. Except for the foregoing family relationship, there are no family relationships among our other directors or executive officers. 6.D. Employees As of December 31, 2024, we had 238 employees. We had 255 employees as of December 31, 2023.
Added
The information is not necessarily indicative of beneficial ownership for any other purpose. The calculations in the table below are based on 20,769,483 ordinary shares issued and outstanding as of April 25, 2025. We have adopted a dual-class share structure such that our shares consist of Ordinary Shares and Preferred Shares.
Added
In respect of matters requiring the votes of shareholders, each Ordinary Share is entitled to one (1) vote and each Series A Preferred Share is entitled to twenty (20) votes.
Added
(8) Mr. Bong Lau, the Chief Executive Officer and Chairman of the Board, owns 2,000,000 of the Company’s Series A Preferred Shares, par value US$0.0001, since February 19, 2025, and each Series A Preferred Share is entitled to twenty (20) votes. * less than 1% 78

Item 7. Management's Discussion & Analysis

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

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Kambo Security Products Limited is owned by Mr. Bong Lau, Mr. Wynn Hui, and Mr. Bun Lau, major shareholders and directors of the Company. Rent expense for the years ended December 31, 2023, 2022 and 2021 was approximately $74,000, $54,100 and $54,100, respectively. 7.C. Interests of Experts and Counsel Not applicable.
Kambo Security Products Limited is owned by Mr. Bong Lau, Mr. Wynn Hui, and Mr. Bun Lau, major shareholders and directors of the Company. Rent expense for the years ended December 31, 2024, 2023 and 2022 was $74,000, $74,000 and $54,000, respectively. 7.C. Interests of Experts and Counsel Not applicable.

Other ILAG 10-K year-over-year comparisons