As
filed with the Securities and Exchange
Commission on September 10, 2024.
Registration
Statement No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
F-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Primega
Group Holdings Limited
(Exact
name of registrant as specified in its charter)
Cayman
Islands |
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1540 |
|
N/A |
(State
or other jurisdiction of
incorporation
or organization) |
|
(Primary
Standard Industrial
Classification
Code Number) |
|
(IRS
Employer
Identification
Number) |
Room
2912, 29/F., New Tech Plaza
34
Tai Yau Street
San
Po Kong
Kowloon,
Hong Kong
+852
3997 3682
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
c/o
Cogency Global Inc.
122
East 42nd Street, 18th Floor
New
York, NY 10168
+212
947-7200
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copy
to:
Sanny
Choi, Esq.
Kyle
Leung, Esq
CFN
Lawyers LLC
418
Broadway #4607
Albany,
NY12207
(646)
386 8218
Approximate
date of commencement of proposed sale to public: As soon as practicable after this registration statement becomes effective.
If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act: Emerging growth company
☒
If
an emerging growth company that prepares its financial statements in accordance with accounting principles generally accepted in the
United States (“U.S. GAAP”), indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the
Securities Act. ☐
† |
The
term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012. |
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the
Commission, acting pursuant to such Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS |
|
SUBJECT
TO COMPLETION, DATED SEPTEMBER 10, 2024 |
2,205,000
Ordinary Shares to be sold by the Selling Shareholders
Primega
Group Holdings Limited
This
prospectus relates to the offer and resale, by the Selling Shareholders identified in this prospectus, of up to 2,205,000 ordinary shares,
par value US$0.00005 per ordinary share (“Ordinary Shares” or “Shares”), of Primega Group Holdings Limited (“PGHL”),
an exempted company incorporated in the Cayman Islands with limited liability. Our Ordinary Shares trade on the Nasdaq Stock Market
under the symbol “PGHL.” On [*], 2024, the closing price of our Ordinary Shares was $[*] per Share.
The
Selling Shareholders are identified in the table commencing on page 62 of this prospectus. The Selling Shareholders may offer,
sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market
prices. No underwriter or other person has been engaged to facilitate the sale of the Ordinary Shares in this offering. The Selling Shareholders
may be deemed underwriters of the Ordinary Shares that it is offering. We will not receive any of the proceeds from such sales of the
Ordinary Shares. We will bear all costs, expenses, and fees in connection with the registration of these securities, including with regard
to compliance with state securities or “blue sky” laws. The Selling Shareholders will bear all commissions and discounts,
if any, attributable to their sale of Ordinary Shares. See “Plan of Distribution” beginning on page 63.
Investors
are cautioned that you are buying shares of a Cayman Islands holding company with operations in Hong Kong by its operating subsidiary.
PGHL
is a holding company incorporated in the Cayman Islands with no material operations of its own, and we conduct our operations primarily
in Hong Kong through our operating subsidiary, Primega Construction Engineering Co. Limited. References to the “Company,”
“we,” “us,” and “our” in the prospectus are to PGHL, the Cayman Islands entity that issued
the Ordinary Shares being offered. References to “Primega Construction” are to Primega Construction Engineering Co. Limited,
the entity operating the business. This is an offering of the Ordinary Shares of PGHL, the holding company in the Cayman Islands, instead
of the shares of the operating subsidiary. Investors in this offering will not directly hold any equity interests in the operating subsidiary.
Investing
in our Ordinary Shares is highly speculative and involves a high degree of risk. Before buying any shares, you should carefully read
the discussion of material risks of investing in our Ordinary Shares in “Risk Factors” beginning on page 20 of this prospectus.
This prospectus incorporates by reference the 2024 20-F, including risk factors under “Item 3. Key Information – D.
Risk Factors.”
We
are a “controlled company” as defined under the Nasdaq Listing Rules, because our Controlling Shareholder owns a total of
17,840,000 of our issued and outstanding Ordinary Shares, representing approximately 74.3% of the total voting power. As a result, our
Controlling Shareholder can control the outcome of matters submitted to the shareholders for approval. Additionally, we may elect to
take advantage of certain exemptions from certain corporate governance requirements that could adversely affect our public shareholders.
Please see “Implications of Being a Controlled Company” beginning on page 17 for more information.
We
are an “Emerging Growth Company” and a “Foreign Private Issuer” under applicable U.S. federal securities laws
and are, therefore, eligible for reduced public company reporting requirements. Please read “Implications of Being an Emerging
Growth Company and a Foreign Private Issuer” beginning on page 17 for more information.
Our
operations are primarily located in Hong Kong, a Special Administrative Region of the People’s Republic of China (“China”
or the “PRC”), and therefore, we may be subject to unique risks due to uncertainty of the interpretation and the application
of PRC laws and regulations. As of the date of this prospectus, we are not subject to the PRC government’s direct influence or
discretion over the manner in which we conduct our business activities outside of the PRC. However, due to long-arm provisions under
the current PRC laws and regulations, there remains regulatory uncertainty with respect to the implementation and interpretation of laws
in China. We are also subject to the risks of uncertainty about any future actions of the PRC government or authorities in Hong Kong
in this regard.
Should
the PRC government choose to exercise significant oversight and discretion over the conduct of our business, they may intervene in or
influence our operations. Such governmental actions:
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could
result in a material change in our operations and/or the value of our securities; |
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could
significantly limit or completely hinder our ability to continue our operations; |
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could
significantly limit or completely hinder our ability to offer or continue to offer our securities to investors; and |
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may
cause the value of our securities to significantly decline or be worthless. |
We
are aware that recently, the PRC government has initiated a series of regulatory actions and new policies to regulate business operations
in certain areas in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing
supervision over China-based companies listed overseas using a variable interest entity (“VIE”) structure, adopting new measures
to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory
actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing
or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It is also highly
uncertain what the potential impact such modified or new laws and regulations will have on Primega Construction’s daily business
operation, its ability to accept foreign investments and the listing of our Ordinary Shares on U.S. or other foreign exchanges. The PRC
government may intervene or influence our operations at any time and may exert more control over offerings conducted overseas and foreign
investment in Hong Kong-based issuers. The PRC government may also intervene or impose restrictions on our ability to move out of Hong
Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Furthermore, PRC regulatory authorities
may in the future promulgate laws, regulations or implementing rules that require our company or any of our subsidiaries to obtain regulatory
approval from PRC authorities before this offering. These actions could result in a material change in our operations and could significantly
limit or completely hinder our ability to complete this offering or cause the value of our Ordinary Shares to significantly decline or
become worthless. See “Prospectus Summary — Recent Regulatory Development in the PRC” beginning on page 13.
As
of the date of this prospectus, our operations in Hong Kong and our registered public offering in the United States are not subject to
the review nor prior approval of the Cyberspace Administration of China (the “CAC”) nor the China Securities Regulatory Commission
(the “CSRC”). Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could
change rapidly in the future. In the event that (i) the PRC government expanded the categories of industries and companies whose foreign
securities offerings are subject to review by the CSRC or the CAC and that we are required to obtain such permissions or approvals, or
(ii) we inadvertently concluded that relevant permissions or approvals were not required or that we did not receive or maintain relevant
permissions or approvals required, any action taken by the PRC government could significantly limit or completely hinder our operations
in Hong Kong and our ability to offer or continue to offer our Ordinary Shares to investors and could cause the value of such securities
to significantly decline or be worthless and even delisting of our Ordinary Shares. The delisting of our Ordinary Shares, or the threat
of their being delisted, may materially and adversely affect the value of your investment in the future.
Furthermore,
as more stringent criteria, including the Holding Foreign Companies Accountable Act (the “HFCA Act”), have been imposed by
the SEC and the Public Company Accounting Oversight Board (“PCAOB”), recently, our Ordinary Shares may be prohibited from
trading if our auditor cannot be fully inspected. Our auditor, ZH CPA, LLC, the independent registered public accounting firm that issues
the audit report included in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered
with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess ZH CPA, LLC’s
compliance with applicable professional standards. ZH CPA, LLC is headquartered in Denver, Colorado, and can be inspected by the PCAOB.
On August 26, 2022, CSRC, the Ministry of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the
“Protocol”), governing inspections and investigations of audit firms based in China and Hong Kong. The Protocol remains unpublished
and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC,
the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability
to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access
to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous
determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in
the future, the PCAOB Board will consider the need to issue a new determination. On December 29, 2022, the Accelerating Holding Foreign
Companies Accountable Act, or the Accelerating HFCA Act, was signed into law, which amended the HFCA Act by requiring the SEC to prohibit
an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive
years instead of three. On December 29, 2022, legislation titled “Consolidated Appropriations Act, 2023” (the “Consolidated
Appropriations Act”), was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things,
an identical provision to Accelerating HFCA Act, which reduces the number of consecutive non-inspection years required for triggering
the prohibitions under the HFCA Act from three years to two. We cannot assure you whether Nasdaq or other regulatory authorities will
apply additional or more stringent criteria to us. Such uncertainty could cause the market price of our Ordinary Shares to be materially
and adversely affected.
Our
management monitors the cash position of our operating subsidiary regularly and prepares budgets on a monthly basis to ensure it has
the necessary funds to fulfill its obligations for the foreseeable future and to ensure adequate liquidity. In the event that there is
a need for cash or a potential liquidity issue, it will be reported to our chief financial officer and subject to approval by our board
of directors.
For
PGHL to transfer cash to its subsidiaries, PGHL is permitted under the laws of the Cayman Islands to provide funding to our subsidiaries
incorporated in the BVI and Hong Kong through loans or capital contributions, provided such funding is in the best interests of PGHL.
PGHL’s subsidiary formed under the laws of the BVI is permitted under the laws of the BVI to provide funding to our Hong Kong
operating subsidiary Primega Construction subject to certain restrictions laid down in the BVI Business Companies Act 2004 (as amended)
and memorandum and articles of association of PGHL’s subsidiary incorporated under the laws of the BVI. As a holding company, PGHL
may rely on dividends and other distributions on equity paid by its subsidiaries for its cash and financing requirements. According to
the BVI Business Companies Act 2004 (as amended), a BVI company may make dividends distribution to the extent that immediately after
the distribution, the value of the company’s assets exceeds its liabilities and that such company is able to pay its debts as they
fall due. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available
for distribution. If any of PGHL’s subsidiaries incur debt on its own behalf in the future, the instruments governing such debt
may restrict their ability to pay dividends to PGHL. During the years ended March 31, 2024 and 2023 and up to the date of this prospectus,
PGHL did not declare or pay any dividends and there was no transfer of assets among PGHL and its subsidiaries. We do not have any current
intentions to distribute further earnings. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding
company, we will be dependent on receipt of funds from our Hong Kong operating subsidiary Primega Construction by way of dividend payments.
See “Dividend Policy,” and “Consolidated Statements of Change in Shareholders’ Equity in the Report of Independent
Registered Public Accounting Firm” for further details.
Neither
the U.S. Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved
of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is , 2024.
TABLE
OF CONTENTS
You
should rely only on the information provided in this prospectus and any applicable prospectus supplement. Neither we nor the Selling
Shareholders have authorized anyone to provide you with different information. Neither we nor the Selling Shareholders are making an
offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus
and any applicable prospectus supplement is accurate as of any date other than the date of the applicable document. Since the respective
dates of this prospectus, our business, financial condition, results of operations, and prospects may have changed.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form F-1 that we file with the SEC using a continuous offering process. Under this
continuous offering process, the Selling Shareholders may, from time to time, offer and sell up to an aggregate of 2,205,000 Ordinary
Share as described in the section titled “Plan of Distribution.”
You
should read this prospectus, exhibits filed as part of the registration statement, and the information and documents incorporated by
reference carefully. Such documents contain important information you should consider when making your investment decision. See “Where
You Can Find Additional Information” in this prospectus.
You
should rely only on the information provided in this prospectus, exhibits filed as part of the registration statement, or documents incorporated
by reference into this prospectus. We have not authorized anyone to provide you with different information. This prospectus covers offers
and sales of our Ordinary Shares only in jurisdictions in which such offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of
our Ordinary Shares. You should not assume that the information contained in this prospectus is accurate as of any date other than the
date on the front cover of this prospectus, or that the information contained in any document incorporated by reference is accurate as
of any date other than the date of the document incorporated by reference, regardless of the time of delivery of this prospectus or any
sale of a security.
This
prospectus may be supplemented from time to time to add, update, or change information in this prospectus. Any statement contained in
this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained
in a prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this
prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus.
CONVENTIONS
THAT APPLY TO THIS PROSPECTUS
Unless
otherwise indicated or the context otherwise requires, all references in this prospectus to:
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“Articles”
or “Articles of Association” are to the amended and restated articles of association of our Company as adopted by
a special resolution of our Company passed on July 18, 2024 and effective on July 24, 2024, and as amended, supplemented and/or
otherwise modified from time to time; |
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“biodiesel”
are to B5 biodiesel, a type of biodiesel blend consisting of 95% pure motor vehicle diesel and 5% motor vehicle biodiesel; |
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“BVI”
are to the British Virgin Islands; |
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“C&D
materials” are to construction and demolition materials, being any substance, matter or thing which is generated as a result
of construction work and abandoned whether or not it has been processed or stockpiled before abandoned. It is a mixture of surplus
materials arising from site clearance, excavation, construction, refurbishment, renovation, demolition and road works; |
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“Celestial
Power” are to CELESTIAL POWER GROUP LIMITED, a BVI business company limited by shares incorporated in the BVI, a direct wholly
owned subsidiary of PGHL; |
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“Companies
Act” are to the Companies Act (Revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time
to time; |
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“Company,”
“we,” “us,” “our” or “PGHL” are to Primega Group Holdings Limited, an exempted company
incorporated in the Cayman Islands with limited liability on April 14, 2022, that issued the Ordinary Shares being offered; |
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“construction
waste” are to any substance, matter or thing that is generated from construction work and abandoned, whether or not it has
been processed or stockpiled before being abandoned; |
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“Controlling
Shareholder” are to the ultimate beneficial owner of the Company, Mr. Man Siu Ming. See “Management” and “Principal
Shareholders” for more information; |
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“COVID-19”
are to the Coronavirus Disease 2019; |
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“ELS”
are to excavation and lateral support; |
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“EPD”
are to the Environmental Protection Department of the government of Hong Kong; |
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“Exchange
Act” are to the U.S. Securities Exchange Act of 1934, as amended; |
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“HKD”
or “HK$” are to Hong Kong dollar(s), the lawful currency of Hong Kong; |
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“Hong
Kong” are to Hong Kong Special Administrative Region of the People’s Republic of China; |
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“Independent
Third Party” are to a person or company who or which is independent of and is not a 5% owner of, does not control and is not
controlled by or under common control with any 5% owner and is not the spouse or descendant (by birth or adoption) of any 5% owner
of the Company; |
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“IPO”
are to an initial public offering of securities; |
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“Macau”
are to the Macau Special Administrative Region of the People’s Republic of China; |
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“Memorandum”
or “Memorandum of Association” are to the amended and restated memorandum of association of our Company as adopted
by a special resolution of our Company passed on July 18, 2024 and effective on July 24, 2024, and as amended, supplemented and/or
otherwise modified from time to time; |
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“Nasdaq”
are to Nasdaq Stock Market LLC; |
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“Ordinary
Shares” are to our ordinary shares, par value $0.00005 per ordinary share; |
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“PCAOB”
are to Public Company Accounting Oversight Board; |
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“PRC”
or “China” are to the People’s Republic of China including Hong Kong and Macau and, excluding, for the purpose
of this prospectus, Taiwan; |
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“pre-IPO
shareholders” are to Dusk Moon International Limited, Moss Mist Investment Limited, Primewin Corporate Development Limited
and Shun Kai Investment Development Limited; |
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“Primega
Construction” are to Primega Construction Engineering Co. Limited, a company incorporated under the laws of Hong Kong with
limited liability, an indirect wholly owned subsidiary of PGHL and our operating subsidiary conducting business operations in Hong
Kong; |
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“public
fill” are to the recyclable or reusable inert materials of C&D materials, comprising rock, concrete, asphalt, bricks, stones,
and soil which can be used as fill materials in reclamation and other earth filling projects; |
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“SEC”
or “Securities and Exchange Commission” are the United States Securities and Exchange Commission; |
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“Securities
Act” are to the U.S. Securities Act of 1933, as amended; |
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“Selling
Shareholders” are to Dusk Moon International Limited and Moss Mist Investment Limited; and |
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“U.S.
dollars” or “$” or “USD” or “dollars” are to United States dollar(s), the lawful currency
of the United States. |
We
have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in
some tables may not be an arithmetic aggregation of the figures that preceded them.
PGHL
is a holding company with operations conducted in Hong Kong through its operating subsidiary in Hong Kong, Primega Construction. Primega
Construction’s reporting currency is Hong Kong dollars. This prospectus contains translations of Hong Kong dollars into U.S. dollars
solely for the convenience of the reader. Unless otherwise noted, all translations from Hong Kong dollars to U.S. dollars and from U.S.
dollars to Hong Kong dollars in this prospectus were calculated at the noon buying rate of US$1 = HK$7.8, representing the noon buying
rate in The City of New York for cable transfers of HK$ as certified for customs purposes by the Federal Reserve Bank of New York. We
make no representation that the HKD or U.S. dollar amounts referred to in this prospectus could have been or could be converted into
U.S. dollars or HKD, as the case may be, at any particular rate or at all. PGHL’s fiscal year ends on March 31.
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should
consider before investing in our Ordinary Shares. You should read the entire prospectus carefully, including “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial
statements and the related notes thereto and other information that we incorporate by reference herein, including but not limited
to, our annual report for the fiscal year ended March 31, 2024 and other SEC reports before making an investment decision. Unless the context otherwise requires, all references to “PGHL,” “we,”
“us,” “our,” the “Company,” and similar designations refer to Primega Group Holdings Limited, an
exempted Cayman Islands company and its wholly owned subsidiaries.
Overview
We
are a holding company incorporated in the Cayman Islands with operations conducted by our Hong Kong subsidiary, Primega Construction.
As
a holding company with no material operations of its own, we conduct our operations in Hong Kong through our operating subsidiary, Primega
Construction. Primega Construction is a provider of transportation services that employs environmentally friendly practices with the
aim of facilitating reuse of C&D materials and reduction of construction waste. Through Primega Construction, we operate in the Hong
Kong construction industry, mainly handling transportation of materials excavated from construction sites. Primega Construction principally
provides the following services in Hong Kong (i) soil and rock transportation services; (ii) diesel oil trading; and (iii) construction
works, which mainly includes ELS works and bored piling. We generally provide our services as a subcontractor to other construction contractors
in Hong Kong.
We
generate the majority of our income from soil and rock transportation services provided by Primega Construction, which contributed 62.7
and 88.5% of our total revenue during the years ended March 31, 2024 and 2023, respectively. Primega Construction works with recyclers
and other private contractors to repurpose and recycle excavated materials, reducing the volume of construction waste ending up in landfills,
while lowering waste disposal fees incurred by its customers.
Competitive
Strengths
We
believe the following competitive strengths differentiate us from our competitors:
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We
have a fleet of 42 tipper trucks and machinery and a strong network of subcontractors |
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Stable
relationships with customers |
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Experienced
and professional management team |
Our
Strategies
We
intend to pursue the following strategies to further expand our business:
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Grow
through selected strategic acquisition of machinery |
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Enhance
our operations as a construction works subcontractor to undertake excavation works |
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Further
enhance our project management capability |
Corporate
History and Structure
We
are a holding company incorporated under the laws of the Cayman Islands on April 14, 2022. Our direct wholly-owned subsidiary is Celestial
Power, a British Virgin Islands holding company incorporated on February 22, 2022. We operate our business through Primega Construction,
our Hong Kong subsidiary incorporated on July 31, 2018, which is wholly owned by Celestial Power. Primega Construction is principally
engaged in soil and rock transportation services in Hong Kong.
As
of the date of this prospectus, our Controlling Shareholder owns 80.4% of our issued share capital.
In
February 2022, Celestial Power was incorporated under the laws of the BVI as the intermediate holding company of PGHL. One (1) share
of Celestial Power, representing its entire issued share capital, was allotted and issued to PGHL on May 4, 2022.
In
April 2022, PGHL was incorporated under the laws of the Cayman Islands as an exempted company with limited liability, as the holding
company of our BVI and Hong Kong subsidiaries.
In
June 2022, as part of a reorganization, PGHL acquired, through Celestial Power, all the shares of Primega Construction from the Controlling
Shareholder and became the ultimate holding company of Celestial Power and Primega Construction. On April 14, 2022, PGHL issued 11,249,999
Ordinary Shares to the Controlling Shareholder. On July 20, 2022, the Controlling Shareholder sold 551,250 Ordinary Shares each to Primewin
Corporate Development Limited and Shun Kai Investment Development Limited, respectively. Primewin Corporate Development Limited and Shun
Kai Investment Development Limited are wholly owned by Mr. Lau Wing Him Perry and Mr. Chan Wan Yiu, respectively. Primewin Corporate
Development Limited was one of our major customers for the years ended March 31, 2021 and 2022, respectively. Mr. Chan Wan Yiu is an
employee of Primega Construction, our Hong Kong operating subsidiary. On December 5, 2023, the Controlling Shareholder sold 551,250 Ordinary
Shares each to Moss Mist Investment Limited and Dusk Moon International Limited, respectively. Moss Mist Investment Limited and Dusk
Moon International Limited are wholly owned by Mr. Mohammad Imran Aslam and Ms. Huang Jinni, respectively.
As
part of the series of reorganization transactions to be completed before the offering, a 2-for-1 share split was conducted by the Company
on February 28, 2024. After the share split, the authorized share capital of the Company consists
of US$50,000 divided into 1,000,000,000 Ordinary Shares, par value US$0.00005 each, and the issued share capital of the Company then
consisted of US$1,125 divided into 22,500,000 Ordinary Shares, par value of US$0.00005 each.
On
July 24, 2024, the Company closed its initial public offering of 1,500,000 Ordinary Shares at a public offering price of US$4.00
per Ordinary Share.
As
of the date of this prospectus, 24,000,000 Ordinary Shares were issued and outstanding.
The
chart below illustrates our corporate structure and subsidiaries as of the date of this prospectus:
The
following table sets forth the breakdown of equity ownership of the Company as of the date of the prospectus:
Shareholders | |
Number of Ordinary Shares Owned | | |
Percentage of Ordinary Shares Owned | |
Man Siu Ming | |
| 17,840,000 | | |
| 74.3 | % |
Dusk Moon International Limited | |
| 1,102,500 | | |
| 4.6 | % |
Moss Mist Investment Limited | |
| 1,102,500 | | |
| 4.6 | % |
Primewin Corporate Development Limited | |
| 1,102,500 | | |
| 4.6 | % |
Shun Kai Investment Development Limited | |
| 1,102,500 | | |
| 4.6 | % |
Others | |
| 1,750,000 | | |
| 7.3 | % |
We
are a “controlled company” as defined under the Nasdaq Stock Market Rules because, immediately after the completion of this
offering, our Controlling Shareholder will own 17,840,000 of our total issued and outstanding Ordinary Shares, representing approximately
74.3% of the total voting power.
Holding
Company Structure
PGHL
is a holding company incorporated in the Cayman Islands with no material operations of its own, and we conduct our operations primarily
in Hong Kong through our operating subsidiary Primega Construction. This is an offering of the Ordinary Shares of PGHL, the holding company
incorporated in the Cayman Islands, instead of the shares of the operating subsidiary. Investors in this offering will not directly hold
any equity interests in the operating subsidiary.
As
a result of our corporate structure, PGHL’s ability to pay dividends may depend upon dividends paid by our operating subsidiary.
If our existing operating subsidiary or any newly formed ones incur debt on their own behalf in the future, the instruments governing
their debt may restrict their ability to pay dividends to us.
Transfers
of Cash To and From Our Subsidiaries
Our
management monitors the cash position of our operating subsidiary, Primega Construction, regularly and prepares budgets on a monthly
basis to ensure it has the necessary funds to fulfill its obligations for the foreseeable future and to ensure adequate liquidity. In
the event that there is a need for cash or a potential liquidity issue, it will be reported to our Chief Financial Officer and subject
to approval by our board of directors.
The
ability of PGHL to transfer cash to its subsidiaries is subject to the following: PGHL is permitted under the laws of the Cayman Islands
to provide funding to our subsidiaries incorporated in the BVI and Hong Kong through loans or capital contributions, provided such
funding is in the best interests of PGHL. PGHL’s subsidiary formed under the laws of the BVI is permitted under the laws of
the BVI to provide funding to our Hong Kong operating subsidiary Primega Construction, subject to certain restrictions laid down in the
BVI Business Companies Act 2004 (as amended) and memorandum and articles of association of PGHL’s subsidiary incorporated under
the laws of the BVI.
The
ability of Celestial Power, the direct subsidiary of PGHL, to transfer cash to PGHL is subject to the BVI Business Companies Act 2004
(as amended), pursuant to which Celestial Power may make dividends distribution only to the extent that immediately after the distribution
the value of the company’s assets exceeds its liabilities and that the company is able to pay its debts as they fall due.
The
ability of Primega Construction to transfer cash to Celestial Power is subject to the Companies Ordinance of Hong Kong, according to
which Primega Construction may only make a distribution out of profits available for distribution.
Other
than the above, we did not adopt or maintain any cash management policies and procedures as of the date of this prospectus.
During
the years ended March 31, 2024 and 2023 and up to the date of this prospectus, PGHL did not declare or pay any dividends and there was
no transfer of assets among PGHL and its subsidiaries.
If
we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds
from our subsidiaries by way of dividend payments. PGHL is permitted under the laws of Cayman Islands and its memorandum and articles
of association (as amended from time to time) to provide funding to its subsidiaries through loans or capital contributions, provided
such funding is in the best interests of PGHL. Primega Construction is permitted under the laws of Hong Kong to provide funding to
PGHL through dividend distributions.
We
currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not
anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will
be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements,
contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions
contained in any future financing instruments.
There
are no statutory prohibitions in the Cayman Islands on the granting of financial assistance by a company to another person for the purchase
of, or subscription for, its own, its holding company’s or a subsidiary’s shares. Therefore, a company may provide financial
assistance provided the directors of the company, when proposing to grant such financial assistance, discharge their duties of care and
act in good faith, for a proper purpose and in the interests of the company. Such assistance should be on an arm’s-length basis.
Subject to the Companies Act and our Memorandum and Articles of Association, our Company in general meeting may declare dividends in
any currency but no dividend shall be declared in excess of the amount recommended by our board of directors. Under Cayman Islands
law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in
no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary
course of business. The Cayman Islands does not impose a withholding tax on payments of dividends to shareholders in the Cayman Islands.
According
to the BVI Business Companies Act 2004 (as amended), a BVI company may make dividends distribution to the extent that immediately after
the distribution, the value of the company’s assets exceeds its liabilities and that such company is able to pay its debts as they
fall due.
Under
Hong Kong law, dividends could only be paid out of distributable profits (that is, accumulated realized profits less accumulated realized
losses) or other distributable reserves, as permitted under Hong Kong law. Dividends cannot be paid out of share capital. There are no
restrictions or limitation under the laws of Hong Kong imposed on the conversion of Hong Kong dollar into foreign currencies and the
remittance of currencies out of Hong Kong, nor there is any restriction on foreign exchange to transfer cash between PGHL and its subsidiaries,
across borders and to U.S. investors, nor there is any restrictions and limitations to distribute earnings from our business and subsidiaries,
to PGHL and U.S. investors and amounts owed. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable
in Hong Kong in respect to dividends paid by us.
The
Initial Public Offering
On
July 24, 2024, the Company completed its initial public offering on the National Association of Securities Dealers Automated Quotations
(“Nasdaq”). In this offering, 1,500,000 Ordinary Shares were issued at a price of US$4.00 per share. The gross proceeds received
by the Company from the initial public offering totalled US$6 million. The Initial Public Offering closed on July 24, 2024 and the Ordinary
Shares began trading on July 23, 2024 on The Nasdaq Capital Market under the ticker symbol “PGHL.”
Enforceability
of Civil Liabilities
We
are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. Substantially all of our assets
are located outside the United States. In addition, all of our directors and officers are nationals or residents of jurisdictions other
than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States upon us or these persons or to enforce judgments obtained
in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United
States or any state in the United States. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the
civil liability provisions of the U.S. federal securities laws against us and our officers and directors.
We
have appointed Cogency Global Inc. as our agent upon whom process may be served in any action brought against us under the securities
laws of the United States.
Ogier,
our counsel as to the laws of the Cayman Islands has advised us that there is uncertainty as to whether the courts of the Cayman
Islands would (i) recognize or enforce judgments of U.S. courts obtained against us based on certain civil liability provisions
of the securities laws of the United States, or (ii) entertain original actions brought in the Cayman
Islands against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
There
is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands
will in certain circumstances recognize and enforce a foreign judgment, without any re-examination or re-litigation of matters adjudicated
upon, provided such judgment: (a) is given by a foreign court of competent jurisdiction; (b) imposes on the judgment debtor a liability
to pay a liquidated sum for which the judgment has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty; (e)
was not obtained by fraud; and (f) is not of a kind the enforcement of which is contrary to natural justice or the public policy of the
Cayman Islands. Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman
Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions
Substantially
all of our assets are located outside the United States. In addition, all of our directors and officers are nationals or residents of
jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As
a result, it may be difficult for investors to effect service of process within the United States upon us or these persons.
Name |
|
Position |
|
Nationality |
|
Residence |
Mr.
Man Siu Ming |
|
Director,
Chairman of the board |
|
Chinese |
|
Hong
Kong |
Mr.
Kan Chi Wai |
|
Director,
Chief Executive Officer |
|
Chinese |
|
Hong
Kong |
Mr.
Man Wing Pong |
|
Chief
Financial Officer |
|
Chinese |
|
Hong
Kong |
Mr.
Cheng Hin Fung Alvin |
|
Independent
Director |
|
Chinese |
|
Hong
Kong |
Mr.
Suen To Wai |
|
Independent
Director |
|
Chinese |
|
Hong
Kong |
Mr.
Wu Loong Cheong Paul |
|
Independent
Director |
|
Chinese |
|
Hong
Kong |
CFN
Lawyers, our counsel as to the laws of Hong Kong, has advised us that there is uncertainty as to whether the courts of Hong Kong would
(i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability
provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought
in Hong Kong against us or our directors or officers predicated upon the securities laws of the United States or any state in the United
States.
A
judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common
law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder, and then seeking summary judgment on the
strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money
(not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty), and (2) final and conclusive
on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained
by fraud, (b) the proceedings in which the judgment was obtained were opposed to natural justice, (c) its enforcement or recognition
would be contrary to the public policy of Hong Kong, (d) the court of the United States was not jurisdictionally competent, or (e) the
judgment was in conflict with a prior Hong Kong judgment.
Hong
Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the
enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated
solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States.
Summary
of Key Risks
Our
business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may materially
and adversely affect our business, financial condition, results of operations, cash flows, and prospects that you should consider before
making a decision to invest in our Ordinary Shares. These risks are discussed more fully in “Risk Factors.” These risks include,
but are not limited to, the following:
Risks
Relating to Doing Business in Hong Kong
|
● |
Our
operations are in Hong Kong, a special administrative region of the PRC. According to the long-arm provisions under the current PRC
laws and regulations, the PRC government may exercise significant oversight and discretion over the conduct of our business and may
intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value
of our Ordinary Shares. The PRC government may intervene or impose restrictions on our ability to move money out of Hong Kong to
distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations,
rules, and the enforcement of laws of the PRC government may also be quick with little advance notice and our assertions and beliefs
of the risk imposed by the PRC legal and regulatory system cannot be certain. See “Risk Factors — Risks Relating to
Doing Business in Hong Kong — Our operations are in Hong Kong, a special administrative region of the PRC. According to the
long-arm provisions under the current PRC laws and regulations, the PRC government may exercise significant oversight and discretion
over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change
in our operations and/or the value of our Ordinary Shares. The PRC government may intervene or impose restrictions on our ability
to move money out of Hong Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes
in the policies, regulations, rules, and the enforcement of laws of the PRC government may also be quick with little advance notice
and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system cannot be certain” on page 20
of this prospectus. |
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● |
There
are uncertainties regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations. See “Risk
Factors — Risks Relating to Doing Business in Hong Kong — There are uncertainties regarding the interpretation and enforcement
of PRC and Hong Kong laws, rules, and regulations” on page 21 of this prospectus. |
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● |
If
the PRC government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment
in China-based issuers, such action may significantly limit or completely hinder our ability to offer or continue to offer Ordinary
Shares to investors and cause the value of our Ordinary Shares to significantly decline or be worthless. See “Risk Factors
— Risks Relating to Doing Business in Hong Kong — If the PRC government chooses to exert more oversight and control over
offerings that are conducted overseas and/or foreign investment in China-based issuers, such action may significantly limit or completely
hinder our ability to offer or continue to offer Ordinary Shares to investors and cause the value of our Ordinary Shares to significantly
decline or be worthless” on page 21 of this prospectus. |
|
● |
Adverse
regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory
scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance
requirements for companies like us with Hong Kong-based operations, all of which could increase our compliance costs and subject
us to additional disclosure requirements. See “Risk Factors — Risks Relating to Doing Business in Hong Kong —
Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and
regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional
compliance requirements for companies like us with Hong Kong-based operations, all of which could increase our compliance costs and
subject us to additional disclosure requirements” on page 22 of this prospectus. |
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|
● |
We
may become subject to a variety of PRC laws and other obligations regarding data security offerings that are conducted overseas and/or
foreign investment in China-based issuers, and any failure to comply with applicable laws and obligations could have a material and
adverse effect on our business, financial condition and results of operations and may hinder our ability to offer or continue to
offer Ordinary Shares to investors and cause the value of our Ordinary Shares to significantly decline or be worthless. See “Risk
Factors — Risks Relating to Doing Business in Hong Kong — We may become subject to a variety of PRC laws and other obligations
regarding data security offerings that are conducted overseas and/or foreign investment in China-based issuers, and any failure to
comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results
of operations and may hinder our ability to offer or continue to offer Ordinary Shares to investors and cause the value of our Ordinary
Shares to significantly decline or be worthless” on page 23 of this prospectus. |
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● |
Although
the audit report included in this prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee
that future audit reports will be issued by auditors inspected by the PCAOB, and, as such, in the future, investors may be deprived
of the benefits of such inspection. Furthermore, trading in our Ordinary Shares may be prohibited under the HFCA Act if the SEC subsequently
determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result,
U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities. Furthermore, on December 23, 2022
the Accelerating Holding Foreign Companies Accountable Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit
an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two
consecutive years instead of three, and thus, reduced the time before the securities may be prohibited from trading or delisted.
See “Risk Factors — Risks Relating to Doing Business in Hong Kong — Although the audit report included in this
prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee that future audit reports
will be issued by auditors inspected by the PCAOB, and, as such, in the future, investors may be deprived of the benefits of such
inspection. Furthermore, trading in our Ordinary Shares may be prohibited under the HFCA Act if the SEC subsequently determines our
audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national
securities exchanges, such as the Nasdaq, may determine to delist our securities. Furthermore, on December 23, 2022 the Accelerating
Holding Foreign Companies Accountable Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s
securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years
instead of three, and thus, reduced the time before the securities may be prohibited from trading or delisted” on page
24 of this prospectus. |
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● |
The
recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House
of Representatives all call for additional and more stringent criteria to be applied to emerging market companies. These developments
could add uncertainties to our offering, business operations, share price, and reputation. See “Risk Factors — Risks
Relating to Doing Business in Hong Kong — The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq,
and an act passed by the U.S. Senate and the U.S. House of Representatives all call for additional and more stringent criteria to
be applied to emerging market companies. These developments could add uncertainties to our offering, business operations, share price,
and reputation” on page 26 of this prospectus. |
|
● |
The
enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong
Kong National Security Law”) could impact our Hong Kong. See “Risk Factors — Risks Relating to Doing Business
in Hong Kong — The enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative
Region (the “Hong Kong National Security Law”) could impact our Hong Kong subsidiary” on page 27 of this prospectus. |
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|
● |
If
we become subject to the recent scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies, we may have
to expend significant resources to investigate and/or defend the matter, which could harm our business operations, this offering,
and our reputation and could result in a loss of your investment in our Ordinary Shares, in particular if such matter cannot be addressed
and resolved favorably. See “Risk Factors — Risks Relating to Doing Business in Hong Kong — If we become subject
to the recent scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies, we may have to expend significant
resources to investigate and/or defend the matter, which could harm our business operations, this offering, and our reputation and
could result in a loss of your investment in our Ordinary Shares, in particular if such matter cannot be addressed and resolved favorably”
on page 27 of this prospectus. |
|
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|
● |
A
downturn in the Hong Kong, China, or global economy, or a change in economic and political policies of China, could materially and
adversely affect our business and financial condition. See “Risk Factors — Risks Relating to Doing Business in Hong
Kong — A downturn in the Hong Kong, China, or global economy, or a change in economic and political policies of China, could
materially and adversely affect our business and financial condition” on page 27 of this prospectus. |
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|
● |
Because
our business is conducted in Hong Kong dollars and the price of our Ordinary Shares is quoted in U.S. dollars, changes in currency
conversion rates may affect the value of your investments. See “Risk Factors — Risks Relating to Doing Business in
Hong Kong — Because our business is conducted in Hong Kong dollars and the price of our Ordinary Shares is quoted in U.S. dollars,
changes in currency conversion rates may affect the value of your investments” on page 28 of this prospectus. |
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● |
There
are political risks associated with conducting business in Hong Kong. See “Risk Factors — Risks Relating to Doing
Business in Hong Kong — There are political risks associated with conducting business in Hong Kong” on page 28 of
this prospectus. |
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● |
The
Hong Kong legal system embodies uncertainties that could limit the availability of legal protections. See “Risk Factors
— Risks Relating to Doing Business in Hong Kong — The Hong Kong legal system embodies uncertainties that could limit
the availability of legal protections” on page 28 of this prospectus. |
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● |
Changes
in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in Hong Kong,
where our clients reside. See “Risk Factors — Risks Relating to Doing Business in Hong Kong — Changes in international
trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in Hong Kong, where our clients
reside” on page 29 of this prospectus. |
Risks
Related to Our Corporate Structure
|
● |
We
rely on dividends and other distributions on equity paid by our subsidiaries to fund our 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. See “Risk Factors — Risks Related to Our Corporate Structure — We rely on dividends
and other distributions on equity paid by our subsidiaries to fund our 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”
on page 29 of this prospectus. |
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● |
Our
internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be
able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
See “Risk Factors — Risks Related to Our Corporate Structure — Our internal controls over financial reporting
may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness,
which could have a significant and adverse effect on our business and reputation” on page 30 of this prospectus. |
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● |
Cayman Islands economic substance requirements may have
an effect on our business and operations. See “Risk Factors – Risks Related to our Corporate Structure - Cayman Islands
economic substance requirements may have an effect on our business and operations” on page 30 of this prospectus. |
Risks
Related to Our Business and Industry
|
● |
We
have a concentrated customer base and any decrease in the number of projects with our major customers would adversely affect our
operations and financial results. See “Risk Factors — Risks Related to Our Business and Industry — We have a
concentrated customer base and any decrease in the number of projects with our major customers would adversely affect our operations
and financial results” on page 30 of this prospectus. |
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● |
Our
revenue mainly relies on successful tenders or acceptance of quotations for soil and rock transportation which are non-recurring
in nature and any failure in securing projects from our existing customers and/or new customers in the future would affect our business
operation and financial results. See “Risk Factors — Risks Related to Our Business and Industry — Our revenue
mainly relies on successful tenders or acceptance of quotations for construction projects which are non-recurring in nature and any
failure in securing projects from our existing customers and/or new customers in the future would affect our business operation and
financial results” on page 31 of this prospectus. |
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● |
Our
operating results are difficult to predict. See “Risk Factors — Risks Related to Our Business and Industry —
Our operating results are difficult to predict” on page 31 of this prospectus. |
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● |
Fluctuations
in the price or availability of biodiesel oil may adversely affect our financial results. See “Risk Factors — Risks
Related to Our Business and Industry — Fluctuations in the price or availability of biodiesel oil may adversely affect our
financial results” on page 31 of this prospectus. |
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● |
Primega
Construction’s capacity to provide soil and rock transportation services is limited by availability of machinery and equipment.
See “Risk Factors — Risks Related to Our Business and Industry — Primega Construction’s capacity to provide
soil and rock transportation services is limited by availability of machinery and equipment” on page 31 of this prospectus.
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● |
Primega
Construction depends on third parties for machinery and equipment and supplies essential to operate its business. See “Risk
Factors — Risks Related to Our Business and Industry — Primega Construction depends on third parties for equipment and
supplies essential to operate its business” on page 31 of this prospectus. |
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● |
Any
failure, damage or loss of Primega Construction’s machinery and equipment may adversely affect our operations and financial
performance. See “Risk Factors — Risks Related to Our Business and Industry — Any failure, damage or loss of
Primega Construction’s machinery and equipment may adversely affect our operations and financial performance” on
page 31 of this prospectus. |
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● |
If
leakage of biodiesel oil occurs during the transportation process, Primega Construction may be liable for related accidents and our
reputation and business operation may be affected. See “Risk Factors — Risks Related to Our Business and Industry
— If leakage of biodiesel oil occurs during the transportation process, Primega Construction may be liable for related
accidents and our reputation and business operation may be affected” on page 31 of this prospectus |
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Primega
Construction’s ability to obtain and maintain biodiesel oil at suitable prices is essential for its biodiesel oil trading.
See “Risk Factors — Risks Related to Our Business and Industry — Primega Construction’s ability
to obtain and maintain biodiesel oil at suitable prices is essential for its biodiesel oil trading” on page 32 of this
prospectus |
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● |
The
construction services industry is highly schedule driven, and failure to meet the schedule requirements of contracts could adversely
affect our reputation and/or expose us to financial liability. See “Risk Factors — Risks Related to Our Business and
Industry — The construction services industry is highly schedule driven, and failure to meet the schedule requirements of contracts
could adversely affect our reputation and/or expose us to financial liability” on page 32 of this prospectus. |
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● |
Failure
to maintain safe work sites could result in significant losses, which could materially affect our business and reputation. See “Risk
Factors — Risks Related to Our Business and Industry — Failure to maintain safe work sites could result in significant
losses, which could materially affect our business and reputation” on page 32 of this prospectus. |
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● |
We
may not be able to receive the full amount due from customers for contract work and our revenue may fluctuate due to variation orders.
See “Risk Factors — Risks Related to Our Business and Industry — We may not be able to receive the full amount
due from customers for contract work and our revenue may fluctuate due to variation orders” on page 32 of this prospectus. |
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● |
Primega
Construction relies on its subcontractors and suppliers to help complete our projects and to supply the machinery required. See “Risk
Factors — Risks Related to Our Business and Industry — Primega Construction relies on its subcontractors and suppliers
to help complete our projects and to supply the machinery required” on page 33 of this prospectus. |
|
● |
As
Primega Construction from time to time engage subcontractors in its work, it may bear responsibilities for any non-performance, delayed
performance, sub-standard performance, or non-compliance of our subcontractors. See “Risk Factors — Risks Related
to Our Business and Industry — As Primega Construction from time to time engage subcontractors in its work, it may bear responsibilities
for any non-performance, delayed performance, sub-standard performance, or non-compliance of our subcontractors” on page
33 of this prospectus. |
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There
is no guarantee that safety measures and procedures implemented at construction sites could prevent the occurrence of industrial
accidents of all kinds, which in turn might lead to claims in respect to employees’ compensation, personal injuries, fatal
accidents, and/or property damages against us. See “Risk Factors — Risks Related to Our Business and Industry —
There is no guarantee that safety measures and procedures implemented at construction sites could prevent the occurrence of industrial
accidents of all kinds, which in turn might lead to claims in respect to employees’ compensation, personal injuries, fatal
accidents, and/or property damages against us” on page 34 of this prospectus. |
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Primega
Construction determines the price of its quotation or tender based on the estimated time and costs to be involved in a project and
the actual time and costs incurred may deviate from our estimate due to unexpected circumstances, thereby leading to cost overruns
and adversely affecting our operations and financial results. See “Risk Factors — Risks Related to Our Business and
Industry — Primega Construction determines the price of its quotation or tender based on the estimated time and costs to be
involved in a project and the actual time and costs incurred may deviate from our estimate due to unexpected circumstances, thereby
leading to cost overruns and adversely affecting our operations and financial results” on page 34 of this prospectus. |
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Cash
inflows and outflows in connection with construction projects may be irregular thus may affect our net cash flow position. See “Risk
Factors — Risks Related to Our Business and Industry — Cash inflows and outflows in connection with construction projects
may be irregular thus may affect our net cash flow position” on page 34 of this prospectus. |
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Claims
in connection with employees’ compensation or personal injuries may arise and affect our reputation and operations. See “Risk
Factors — Risks Related to Our Business and Industry — Claims in connection with employees’ compensation or personal
injuries may arise and affect our reputation and operations” on page 35 of this prospectus. |
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Any
deterioration in the prevailing market conditions in the construction industry may adversely affect our performance and financial
condition. See “Risk Factors — Risks Related to Our Business and Industry — Any deterioration in the prevailing
market conditions in the construction industry may adversely affect our performance and financial condition” on page 35
of this prospectus. |
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Primega
Construction is dependent on its key executives, management team and professional staff. See “Risk Factors — Risks
Related to Our Business and Industry — Primega Construction is dependent on its key executives, management team and professional
staff” on page 35 of this prospectus. |
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Primega
Construction may be unable to obtain sufficient funding on terms acceptable, or at all. See “Risk Factors — Risks
Related to Our Business and Industry — Primega Construction may be unable to obtain sufficient funding on terms acceptable,
or at all” on page 36 of this prospectus. |
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The
insurance coverage of Primega Construction may be inadequate to protect it from potential losses. See “Risk Factors —
Risks Related to Our Business and Industry — The insurance coverage of Primega Construction may be inadequate to protect it
from potential losses” on page 36 of this prospectus. |
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We
may be subject to litigation, arbitration, or other legal proceeding risk. See “Risk Factors — Risks Related to Our
Business and Industry — We may be subject to litigation, arbitration, or other legal proceeding risk” on page 36
of this prospectus. |
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Primega
Construction relies on its customers and subcontractors for the provision of machinery and equipment at construction sites. See “Risk
Factors — Risks Related to Our Business and Industry — Primega Construction relies on its customers and subcontractors
for the provision of machinery and equipment at construction sites” on page 36 of this prospectus. |
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Primega
Construction relies on a stable workforce to carry out its construction projects. If Primega Construction or its subcontractors experience
any shortage of labor, industrial actions, strikes, or material increase in labor costs, our operations and financial results would
be adversely affected. See “Risk Factors — Risks Related to Our Business and Industry — Primega Construction
relies on a stable workforce to carry out its construction projects. If Primega Construction or its subcontractors experience any
shortage of labor, industrial actions, strikes, or material increase in labor costs, our operations and financial results would be
adversely affected” on page 37 of this prospectus. |
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We
may be unable to successfully implement our future business plans and objectives. See “Risk Factors — Risks Related
to Our Business and Industry — We may be unable to successfully implement our future business plans and objectives” on
page 37 of this prospectus. |
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A
sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results, and financial
condition. See “Risk Factors — Risks Related to Our Business and Industry — A sustained outbreak of the COVID-19
pandemic could have a material adverse impact on our business, operating results, and financial condition” on page 37 of
this prospectus. |
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A
severe or prolonged downturn in the global economy could materially and adversely affect our business and results of operations.
See “Risk Factors — Risks Related to Our Business and Industry — A severe or prolonged downturn in the global
economy could materially and adversely affect our business and results of operations” on page 38 of this prospectus. |
Risks
Related to Our Ordinary Shares
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An
active trading market for our Shares may not be sustained. See “Risk Factors — Risks Related to Our Ordinary Shares
— An active trading market for our Shares may not be sustained” on page 39 of this prospectus. |
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The
trading price of our Ordinary Shares may be volatile, which could result in substantial losses to you. See “Risk Factors
— Risks Related to Our Ordinary Shares — The trading price of our Ordinary Shares may be volatile, which could result
in substantial losses to you” on page 39 of this prospectus. |
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Our
pre-IPO shareholders will be able to sell their Ordinary Shares subject to restrictions under Rule 144. See “Risk Factors
— Risks Related to Our Ordinary Shares — Our pre-IPO shareholders will be able to sell their Ordinary Shares subject
to restrictions under Rule 144” on page 40 of this prospectus. |
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Our
directors, officers, and principal shareholders have significant voting power and may take actions that may not be in the best interests
of our other shareholders. See “Risk Factors — Risks Related to Our Ordinary Shares — Our directors, officers,
and principal shareholders have significant voting power and may take actions that may not be in the best interests of our other
shareholders” on page 40 of this prospectus. |
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Our
board of directors may decline to register the transfer of Ordinary Shares in certain circumstances. See “Risk Factors —
Risks Related to Our Ordinary Shares — Our board of directors may decline to register the transfer of Ordinary Shares in certain
circumstances” on page 41 of this prospectus. |
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Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud. See “Risk Factors — Risks
Related to Our Ordinary Shares — Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud”
on page 42 of this prospectus. |
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We
do not intend to pay dividends for the foreseeable future. See “Risk Factors — Risks Related to Our Ordinary Shares
— We do not intend to pay dividends for the foreseeable future” on page 42 of this prospectus. |
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Securities
analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause
our Ordinary Share price or trading volume to decline. See “Risk Factors — Risks Related to Our Ordinary Shares —
Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which
could cause our Ordinary Share price or trading volume to decline” on page 42 of this prospectus. |
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Certain
judgments obtained against us by our shareholders may not be enforceable. See “Risk Factors — Risks Related to Our
Ordinary Shares — Certain judgments obtained against us by our shareholders may not be enforceable” on page 42 of
this prospectus. |
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You
may have more difficulty protecting your interests than you would as a shareholder of a U.S. corporation. See “Risk Factors
— Risks Related to Our Ordinary Shares — You may have more difficulty protecting your interests than you would as a shareholder
of a U.S. corporation” on page 42 of this prospectus. |
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We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and, as such, we are exempt from certain provisions
applicable to U.S. domestic public companies. See “Risk Factors — Risks Related to Our Ordinary Shares — We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and, as such, we are exempt from certain provisions
applicable to U.S. domestic public companies” on page 43 of this prospectus. |
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As
a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that
differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders
than they would enjoy if we complied fully with Nasdaq corporate governance listing standards. See “Risk Factors —
Risks Related to Our Ordinary Shares — As a foreign private issuer, we are permitted to adopt certain home country practices
in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices
may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards”
on page 43 of this prospectus. |
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We
may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses. See “Risk
Factors — Risks Related to Our Ordinary Shares — We may lose our foreign private issuer status in the future, which could
result in significant additional costs and expenses” on page 43 of this prospectus. |
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There
can be no assurance that we will not be a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes
for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our Ordinary Shares.
See “Risk Factors — Risks Related to Our Ordinary Shares — There can be no assurance that we will not be a passive
foreign investment company (“PFIC”), for U.S. federal income tax purposes for any taxable year, which could result in
adverse U.S. federal income tax consequences to U.S. holders of our Ordinary Shares” on page 44 of this prospectus. |
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We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
See “Risk Factors — Risks Related to Our Ordinary Shares — We are an emerging growth company within the meaning
of the Securities Act and may take advantage of certain reduced reporting requirements” on page 44 of this prospectus. |
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We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth
company.” See “Risk Factors — Risks Related to Our Ordinary Shares — We will incur increased costs as
a result of being a public company, particularly after we cease to qualify as an “emerging growth company” on page
44 of this prospectus. |
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As
a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt our Company from certain
corporate governance requirements that could have an adverse effect on our public shareholders. See “Risk Factors —
Risks Related to Our Ordinary Shares — As a “controlled company” under the rules of the Nasdaq Capital Market,
we may choose to exempt our Company from certain corporate governance requirements that could have an adverse effect on our public
shareholders” on page 45 of this prospectus. |
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The
trading price of our Ordinary Shares could be subject to rapid and substantial volatility, and such volatility may make it difficult
for prospective investors to assess the rapidly changing value of our Ordinary Shares. See “Risk Factors — Risks Related
to Our Ordinary Shares and This Offering — The trading price of our Ordinary Shares could be subject to rapid and substantial
volatility, and such volatility may make it difficult for prospective investors to assess the rapidly changing value of our Ordinary
Shares” on page 39 of this prospectus. |
Recent
Regulatory Developments in the PRC
The
PRC government recently initiated a series of regulatory actions and statements to regulate business operations in certain areas in China
with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based
companies listed overseas using VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the
efforts in anti-monopoly enforcement. For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee
and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and
promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities
to strengthen cross-border oversight of law enforcement and judicial cooperation, to enhance supervision over China-based companies listed
overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. Also, on July 10, 2021,
the CAC issued a revised draft of the Measures for Cybersecurity Review for public comments (the “Revised Draft”), which
required that, in addition to “operators of critical information infrastructure,” any “data processor” controlling
personal information of no less than one million users that seeks to list in a foreign stock exchange should also be subject to cybersecurity
review, and it further elaborated the factors to be considered when assessing the national security risks of the relevant activities.
The
Revised Draft remains unclear as to whether a Hong Kong company shall be subject to its provisions. We do not currently expect the Revised
Draft to have an impact on our business, operations, or this offering, as we do not believe that Primega Construction is deemed to be
an “operator of critical information infrastructure” or a “data processor” controlling personal information of
no less than one million users, which are required to file for cybersecurity review before listing in the United States, because (i)
Primega Construction is incorporated and operating in Hong Kong, and the Revised Draft remains unclear whether it shall be applied to
a Hong Kong company; (ii) Primega Construction operates without any subsidiary nor VIE structure in mainland China; (iii) as of date
of this prospectus, Primega Construction has not collected any personal information of PRC individual clients; and (iv) as of the date
of this prospectus, Primega Construction has not been informed by any PRC governmental authority of any requirement that it files for
a cybersecurity review. However, there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity
laws and regulations. If the Revised Draft is adopted into law in the future and if Primega Construction is deemed to be an “operator
of critical information infrastructure” or a “data processor” controlling personal information of no less than one
million users, Primega Construction’s operation and the listing of our Ordinary Shares in the United States could be subject to
CAC’s cybersecurity review in the future.
On
December 28, 2021, the CAC published the revised Cybersecurity Review Measures (“CRM”), which further restates and expands
the applicable scope of the cybersecurity review. The revised CRM took effect on February 15, 2022, and replaced the Revised Draft issued
on July 10, 2021. Pursuant to the revised CRM, if a network platform operator holding personal information of over one million users
seeks for “foreign” listing, it must apply for the cybersecurity review. In addition, operators of critical information infrastructure
purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although
the CRM provides no further explanation on the extent of “network platform operator” and “foreign” listing, we
do not believe we are obligated to apply for a cybersecurity review pursuant to the revised CRM, considering that (i) we are not in possession
of or otherwise holding personal information of over one million users, and it is also very unlikely that we will reach such threshold
in the near future; and (ii) as of the date of this prospectus, we have not received any notice or determination from applicable PRC
governmental authorities identifying it as a critical information infrastructure operator.
On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies,
or the Trial Measures, which came into effect on March 31, 2023. On the same date of the issuance of the Trial Measures, the CSRC circulated
No.1 to No.5 Supporting Guidance Rules, the Notes on the Trial Measures, the Notice on Administration Arrangements for the Filing of
Overseas Listings by Domestic Enterprises and the relevant CSRC Answers to Reporter Questions on the official website of the CSRC, or
collectively, the Guidance Rules and Notice. The Trial Measures, together with the Guidance Rules and Notice, reiterate the basic supervision
principles as reflected in the Draft Overseas Listing Regulations by providing substantially the same requirements for filings of overseas
offering and listing by domestic companies, yet made the following updates compared to the Draft Overseas Listing Regulations: (a) further
clarification of the circumstances prohibiting overseas issuance and listing; (b) further clarification of the standard of indirect overseas
listing under the principle of substance over form, and (c) adding more details of filing procedures and requirements by setting different
filing requirements for different types of overseas offering and listing. Pursuant to the Trial Measures, the Guidance Rules and Notice,
domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure
and report relevant information to the CSRC within three working days following its submission of initial public offerings or listing
application.
As
of the date of this prospectus, our registered public offering in the United States is not subject to the review or prior approval of
the CAC nor the CSRC. We do not intend to seek approval of this offering form the CAC or the CSRC. Uncertainties still exist, however,
due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. It is uncertain whether the
PRC government will adopt additional requirements or extend the existing requirements to apply to our operating subsidiary located in
Hong Kong. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings
are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer
securities to investors and could cause the value of such securities to significantly decline or be worthless.
Since
these statements and regulatory actions by the PRC government are newly published, their interpretation, application and enforcement
to companies located in Hong Kong remains unclear and there also remains significant uncertainty as to the enactment, interpretation
and implementation of other regulatory requirements related to overseas securities offerings and other capital markets activities,; our
ability to offer, or continue to offer, securities to investors would be potentially hindered and the value of our securities might significantly
decline or become worthless, by existing or future laws and regulations relating to its business or industry or by intervene or interruption
by PRC governmental authorities, if (i) we or our subsidiaries do not receive or maintain such filings, permissions or approvals required
by the PRC government, (ii) inadvertently conclude that such filings, permissions or approvals are not required, (iii) applicable laws,
regulations, or interpretations change and we are required to obtain such filings, permissions or approvals in the future, or (iv) any
intervention or interruption is caused by PRC governmental with little or no advance notice.
On
December 27, 2021, the National Development and Reform Commission (“NDRC”) and the Ministry of Commerce jointly issued the
Special Administrative Measures for Entry of Foreign Investment (Negative List) (2021 Version) (“Negative List”), which became
effective and replaced the previous version. Pursuant to the Negative List, if a PRC company, which engages in any business where foreign
investment is prohibited under the Negative List, or prohibited businesses seeks an overseas offering or listing, it must obtain the
approval from competent governmental authorities. Based on a set of Q&A published on the NDRC’s official website, a NDRC official
indicated that after a PRC company submits its application for overseas listing to the CSRC and where matters relating to prohibited
businesses under the Negative List are implicated, the CSRC will consult the regulatory authorities having jurisdiction over the relevant
industries and fields. Because the Draft Overseas Listing Regulations are currently in draft form and given the novelty of the Negative
List, there remain substantial uncertainties as to whether and what requirements, including filing requirements, will be imposed on a
PRC company with respect to its listing and offerings overseas as well as with the interpretation and implementation of existing and
future regulations in this regard.
Our
operating subsidiary may collect and store certain data from our clients in Hong Kong, in connection with our business and operations.
Given that (1) our operating subsidiary is incorporated and located in Hong Kong; (2) we have no subsidiary, VIE structure, nor any direct
operations in mainland China; and (3) pursuant to the Basic Law, which is a national law of the PRC and the constitutional document for
Hong Kong, national laws of the PRC shall not be applied in Hong Kong except for those listed in Annex III of the Basic Law (which is
confined to laws relating to defense and foreign affairs, as well as other matters outside the autonomy of Hong Kong), and we do not
currently expect the Measures for Cybersecurity Review (2021), the PRC Personal Information Protection Law, and the Draft Overseas Listing
Regulations to have an impact on our business, operations, or this offering, as we do not believe that our operating subsidiary is deemed
to be an “Operator” that is required to file for cybersecurity review before listing in the United States because (i) our
operating subsidiary is incorporated in Hong Kong and operates in Hong Kong without any subsidiary or VIE structure in mainland China,
and each of the Measures for Cybersecurity Review (2021), the PRC Personal Information Protection Law, and the Draft Overseas Listing
Regulations remains unclear whether it shall be applied to a company based in Hong Kong; (ii) as of date of this prospectus, our operating
subsidiary has neither collected nor stored any personal information of PRC individuals; (iii) all of the data our operating subsidiary
has collected is stored in servers located in Hong Kong; and (iv) as of the date of this prospectus, our operating subsidiary has not
been informed by any PRC governmental authority of any requirement that it file for a cybersecurity review or a CSRC review.
Since
these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making
bodies will respond or what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,
if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will have on PGHL’s daily
business operations, its ability to accept foreign investments, and the listing of our Ordinary Shares on a U.S. or other foreign exchange.
There remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations. If the
Draft Overseas Listing Regulations are adopted into law in the future and becomes applicable to our operating subsidiary, if any of our
operating subsidiary is deemed to be an “Operator,” or if the Measures for Cybersecurity Review (2021) or the PRC Personal
Information Protection Law becomes applicable to our operating subsidiary, the business operation of our operating subsidiary and the
listing of our Ordinary Shares in the United States could be subject to the CAC’s cybersecurity review or CSRC Overseas Issuance
and Listing review in the future. If the applicable laws, regulations, or interpretations change and our operating subsidiary becomes
subject to the CAC or CSRC review, we cannot assure you that our operating subsidiary will be able to comply with the regulatory requirements
in all respects, and our current practice of collecting and processing personal information may be ordered to be rectified or terminated
by regulatory authorities. If our operating subsidiary fails to receive or maintain such permissions or if the required approvals are
denied, our operating subsidiary may become subject to fines and other penalties that may have a material adverse effect on our business,
operations, and financial condition and may hinder our ability to offer or continue to offer Ordinary Shares to investors and cause the
value of our Ordinary Shares to significantly decline or be worthless.
Additionally,
due to long-arm provisions under the current PRC laws and regulations, there remains regulatory uncertainty with respect to the implementation
and interpretation of laws in China. We are also subject to the risks of uncertainty about any future actions the PRC government or authorities
in Hong Kong may take in this regard.
Should
the PRC government choose to exercise significant oversight and discretion over the conduct of our business, they may intervene in or
influence our operations.
Such
governmental actions:
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result in a material change in our operations; |
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could
hinder our ability to continue to offer securities to investors; and |
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cause the value of our Ordinary Shares to significantly decline or be worthless. |
Permission
Required from Hong Kong and PRC Authorities
As
of the date of this prospectus, Primega Construction has received all requisite licenses and approvals for the operation of its business
in Hong Kong. As of the date
of this prospectus, Primega Construction is not required to obtain any permission or approval from Hong Kong authorities to issue our
Ordinary Shares to foreign investors. We are also not required to obtain permissions or approvals from any PRC authorities before listing
in the United States and to issue our Ordinary Shares to foreign investors, including the CSRC, the CAC, or any other governmental agency
that is required to approve our operations.
However,
in the event that (i) the PRC government expanded the categories of industries and companies whose foreign securities offerings are subject
to review by the CSRC or the CAC and that we are required to obtain such permissions or approvals, (ii) we inadvertently concluded that
relevant permissions or approvals were not required or that we did not receive or maintain relevant permissions or approvals required,
or (iii) applicable laws, regulations, or interpretations change and require us to obtain such permissions or approvals in the future,
we may face sanctions by the CSRC, the CAC, or other PRC regulatory agencies.
Recent
PCAOB Developments
On
May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed
by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in
the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was
signed into law on December 18, 2020. Pursuant to the HFCA act, our securities may be prohibited from trading on the Nasdaq or other
U.S. stock exchanges if our auditor cannot be inspected by the PCAOB for three consecutive years, and this ultimately could result in
our Ordinary Shares being delisted.
On
March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements
of the HFCA Act. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection”
year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA
Act, including the listing and trading prohibition requirements described above.
On
June 22, 2021, the U.S. Senate passed a bill that, if passed by the U.S. House of Representatives and signed into law, would reduce the
number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two years.
On
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act,
which took effect on January 10, 2022. The rules apply to registrants that the SEC identifies as having filed an annual report with an
audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect
or investigate completely because of a position taken by an authority in foreign jurisdictions.
On
December 16, 2021, the PCAOB issued a Determination Report, which found that the PCAOB is unable to inspect or investigate completely
registered public accounting firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region and dependency
of the PRC, because of a position taken by one or more authorities in the PRC or Hong Kong.
Our
auditor, ZH CPA, LLC, the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus,
as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in
the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable
professional standards. ZH CPA, LLC is headquartered in Denver, Colorado, and can be inspected by the PCAOB.
On
August 26, 2022, CSRC, the MOF, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in China
and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet
with respect to the Protocol disclosed by the SEC the PCAOB shall have independent discretion to select any issuer audits for inspection
or investigation and has the an exemption from the rule that a majority of our board of directors must be independent directors; unfettered
ability to transfer information to the SEC.
On
December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered
public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will
consider the need to issue a new determination.
On
December 23, 2022, the Accelerating HFCA Act, was signed into law, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s
securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead
of three. On December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden. The Consolidated Appropriations
Act contained, among other things, an identical provision to Accelerating HFCA Act, which reduces the number of consecutive non-inspection
years required for triggering the prohibitions under the HFCA Act from three years to two.
Implication
of Being a Controlled Company
We
are and will continue, following this offering, to be 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.
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:
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exemption from the rule that a majority of our board of directors must be independent directors; |
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an
exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent
directors; and |
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An
exemption from the rule that our director nominees must be selected or recommended solely by independent directors. |
As
a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance
requirements. Although we do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we
could elect to rely on this exemption after we complete this offering. If we elected to rely on the “controlled company”
exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance
and compensation committees might not consist entirely of independent directors after we complete this offering. See “Risk Factors
— Risks Related to Our Ordinary Shares and This Offering — As a “controlled company” under the rules of the Nasdaq
Capital Market, we may choose to exempt our Company from certain corporate governance requirements that could have an adverse effect
on our public shareholders.”
Implications
of Being an Emerging Growth Company and a Foreign Private Issuer
As
a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), enacted in April 2012, and may take advantage of
reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
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permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and
Analysis of Financial Condition and Results of Operations in our filings with the SEC; |
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being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; |
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reduced
disclosure obligations regarding executive compensation in periodic reports, proxy statements, and registration statements; and |
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved. |
We
may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first
sale of our Ordinary Shares pursuant to this offering. However, if certain events occur before the end of such five-year period, including
if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion, or we issue more than $1 billion
of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.
In
addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We have elected to
take advantage of the extended transition period for complying with new or revised accounting standards and acknowledge such election
is irrevocable pursuant to Section 107 of the JOBS Act.
We
are a foreign private issuer as defined by the SEC. As a result, in accordance with the rules and regulations of The Nasdaq Stock Market
LLC, we may comply with home country governance requirements and certain exemptions thereunder rather than complying with Nasdaq corporate
governance standards. We may choose to take advantage of the following exemptions afforded to foreign private issuers:
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Exemption
from filing quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days
of their occurrence. |
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Exemption
from Section 16 rules regarding sales of Ordinary Shares by insiders, which will provide less data in this regard than shareholders
of U.S. companies that are subject to the Exchange Act. |
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Exemption
from the Nasdaq rules applicable to domestic issuers requiring disclosure within four business days of any determination to grant
a waiver of the code of business conduct and ethics to directors and officers. Although we will require board approval of any such
waiver, we may choose not to disclose the waiver in the manner set forth in the Nasdaq rules, as permitted by the foreign private
issuer exemption. |
Furthermore,
Nasdaq Rule 5615(a)(3) provides that a foreign private issuer, such as us, may rely on our home country corporate governance practices
in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), provided that we nevertheless comply with Nasdaq’s
Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and that we have an audit committee
that satisfies Rule 5605(c)(3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). If
we rely on our home country corporate governance practices in lieu of certain of the rules of Nasdaq, our shareholders may not have the
same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. If
we choose to do so, we may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.
Corporate
Information
Our
principal executive office is located at Room 2912, 29/F., New Tech Plaza, 34 Tai Yau Street, San Po Kong, Kowloon, Hong Kong. Our telephone
number is (+852) 3997 3682. Our registered office in the Cayman Islands is located at the office of Appleby Global Services (Cayman)
Limited, 71 Fort Street, PO Box 500, George Town, Grand Cayman, KY1–1106, Cayman Islands.
Our
agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor,
New York, NY 10168. Information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated
by reference into, this prospectus.
Impact
of COVID-19
Since
late December 2019, the outbreak of COVID-19 spread rapidly throughout China and later to the rest of the world. On January 30, 2020,
the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a “Public Health
Emergency of International Concern” (“PHEIC”), and later on March 11, 2020, a global pandemic. The COVID-19 outbreak
has led governments across the globe to impose a series of measures intended to contain its spread, including border closures, travel
bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. From 2020 to the middle of
2021, COVID-19 vaccination programs had been greatly promoted around the globe, however several types of COVID-19 variants emerged in
different parts of the world.
Supply
chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. These shortages and
supply-chain disruptions are significant and widespread. Lockdowns in several countries across the world, labor shortages, robust demand
for tradable goods, disruptions to logistics networks, and capacity constraints have resulted in increases in freight costs and delivery
times. Primega Construction’s customers are mainly construction contractors which are reliant on the availability of construction
materials and supplies, and as such may suffer from plant closures and supply shortages across the extended supply network. Supply chain
issues may delay or halt the progress or commencement of construction projects.
In
addition, multiple infected cases within a construction site may result in shortage of labor and in more serious cases may cause a temporary
halt in the site’s construction operation for a few days. Hence, our productivity and progress may also be negatively affected.
Furthermore,
our business may be adversely affected if concerns relating to COVID-19 continue to restrict travel, or result in the Company’s
personnel, vendors, and services providers being unavailable to pursue their business objectives free of COVID-19 related restrictions.
The extent to which COVID-19 impacts our business in the future will depend on future developments, which are highly uncertain and cannot
be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat
its impact, among others. If the disruptions posed by COVID-19 or other matters of global concerns continue for an extended period of
time, our ability to pursue our business objectives may be materially adversely affected. In addition, our ability to raise equity and
debt financing, which may be adversely impacted by COVID-19 and other events, including as a result of increased market volatility, decreased
market liquidity and third-party financing became unavailable on terms acceptable to us or at all.
Any
future impact on our results of operations will depend on, to a large extent, future developments and new information that may emerge
regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain
the spread or treat its impact, almost all of which are beyond our control. Given the general slowdown in economic conditions globally
and volatility in the capital markets, as well as the general negative impact of the COVID-19 outbreak on the construction industry,
we cannot assure you that we will be able to maintain the growth rate we have experienced or projected. We will continue to closely monitor
the situation throughout 2024 and beyond.
The
Offering
Securities
that may be offered and sold from time to time by the Selling Shareholders: |
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2,205,000
Ordinary Shares |
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Terms
of the offering: |
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The
Selling Shareholders will determine when and how they will dispose of the Ordinary Shares registered under this prospectus for resale. |
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Number
of Ordinary Shares outstanding before this offering: |
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24,000,000
Ordinary Shares. |
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Number
of Ordinary Shares outstanding after this offering: |
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24,000,000
Ordinary Shares |
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Use
of proceeds: |
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We
will not receive any proceeds from the sale of Ordinary Shares by the Selling Shareholders |
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Listing |
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Our
Ordinary Shares are listed on the Nasdaq Capital Market under the symbol “PGHL.” |
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Risk
factors: |
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Investing
in our Ordinary Shares is highly speculative and involves a high degree of risk. As an investor you should be able to bear a complete
loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning
on page 20. |
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking
statements by the words “may,” “might,” “will,” “could,” “would,” “should,”
“expect,” “intend,” “plan,” “goal,” “objective,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” “continue,” and “ongoing,”
or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve
known and unknown risks, uncertainties, and other important factors that may cause our actual results, levels of activity, performance,
or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking
statements and opinions contained in this prospectus are based upon information available to us as of the date of this prospectus and,
while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our
statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available
relevant information. Forward-looking statements include statements about:
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timing
of the development of future business; |
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capabilities
of our business operations; |
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expected
future economic performance; |
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competition
in our market; |
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continued
market acceptance of our services and products; |
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changes
in the laws that affect our operations; |
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inflation
and fluctuations in foreign currency exchange rates; |
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our
ability to obtain and maintain all necessary government certifications, approvals, and/or licenses to conduct our business; |
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continued
development of a public trading market for our securities; |
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the
cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; |
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managing
our growth effectively; |
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projections
of revenue, earnings, capital structure, and other financial items; |
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fluctuations
in operating results; |
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dependence
on our senior management and key employees; and |
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other
factors set forth under “Risk Factors”. |
You
should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results
to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure
you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements
prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements,
you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives
and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether
as a result of new information, future events, or otherwise, except as required by law.
You
should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement,
of which this prospectus forms a part, completely and with the understanding that our actual future results may be materially different
from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
RISK
FACTORS
An
investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should
consider carefully the risks set forth in our Annual Report on Form 20-F for the year ended March 31, 2024 on file with the SEC, which
is incorporated by reference into this prospectus, as well as the risk factors described below, together with all of the other information
set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business,
financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price
of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The following disclosure is intended to highlight,
update or supplement previously disclosed risk factors facing the Company set forth in the Company’s public filings. These risk
factors should be carefully considered along with any other risk factors identified in the Company’s other filings with the SEC.
Such
risks are not exhaustive. We may face additional risks that are presently unknown to us or that we believe to be immaterial as of the
date of this prospectus. Known and unknown risks and uncertainties may significantly impact and impair our business operations primarily
through our subsidiaries in Hong Kong.
Risks
Relating to Doing Business in Hong Kong
Our
operations are in Hong Kong, a special administrative region of the PRC. According to the long-arm provisions under the current PRC laws
and regulations, the PRC government may exercise significant oversight and discretion over the conduct of our business and may intervene
in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Ordinary
Shares. The PRC government may intervene or impose restrictions on our ability to move money out of Hong Kong to distribute earnings
and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations, rules, and the enforcement
of laws of the PRC government may also be quick with little advance notice and our assertions and beliefs of the risk imposed by the
PRC legal and regulatory system cannot be certain.
PGHL
is a holding company and we conduct our operations in Hong Kong through Primega Construction. Hong Kong is a special administrative region
of the PRC. As of the date of this prospectus, we are not materially affected by recent statements by the PRC government indicating an
intention to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.
However, due to certain long-arm provisions in the current PRC laws and regulations, there remains regulatory uncertainty with respect
to the implementation and interpretation of laws in China as they may affect Hong Kong. The PRC government may choose to exercise additional
oversight and discretion over Hong Kong, and the policies, regulations, rules, and the enforcement of laws of the PRC government to which
we are subject may change rapidly and with little advance notice to us or our shareholders. As a result, the application, interpretation,
and enforcement of new and existing laws and regulations in the PRC and our assertions and beliefs of the risk imposed by the PRC legal
and regulatory system are by their very nature uncertain.
In
addition, these PRC laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, which may
result in inconsistency with our current policies and practices. New laws, regulations, and other government directives in the PRC may
also be costly to comply with, and such compliance, any associated inquiries or investigations, or any other government actions may:
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delay
or impede our development; |
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result
in negative publicity or increase our operating costs; |
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require
significant management time and attention; and |
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subject
us to remedies, administrative penalties, and even criminal liabilities that may harm our business, including fines assessed for
our current or historical operations, or demands or orders that we modify or even cease our business practices. |
We
are aware that recently the PRC government initiated a series of regulatory actions and statements to regulate business operations in
certain areas in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing
supervision over China-based companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly
uncertain how soon the PRC legislative or administrative regulation making bodies will respond or what existing or new laws or regulations
or detailed implementations and interpretations will be modified or promulgated, if any, or what the potential impact that any such modified
or new laws and regulations would have on our daily business operation, the ability to accept foreign investments and list on a U.S.
or other foreign exchange.
The
PRC government may intervene or influence our operations at any time and may exert more control over offerings conducted overseas and
foreign investment in Hong Kong-based issuers, which may result in a material change in our operations and/or the value of our Ordinary
Shares. For example, there is currently no restriction or limitation under the laws of Hong Kong on the conversion of Hong Kong dollar
into foreign currencies and the transfer of currencies out of Hong Kong and the laws and regulations of the PRC on currency conversion
control do not currently have any material impact on the transfer of cash between the ultimate holding company and the operating subsidiary
in Hong Kong. However, the PRC government may, in the future, impose restrictions or limitations on our ability to move money out of
Hong Kong to distribute earnings and pay dividends to and from the other entities within our organization or to reinvest in our business
outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business
to outside of Hong Kong and may affect our ability to receive funds from our operating subsidiary in Hong Kong. The promulgation of new
laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably
impact our ability to conduct our business could require us to change certain aspects of our business to ensure compliance; decrease
demand for our services; reduce revenues; increase costs; require us to obtain more licenses, permits, approvals, or certificates; or
subject us to additional liabilities. To the extent any new or more stringent measures are implemented, our business, financial condition,
and results of operations could be adversely affected and the value of our Ordinary Shares could decrease or become worthless.
There
are uncertainties regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations.
A
substantial majority of our operations are conducted in Hong Kong, and are mainly governed by Hong Kong laws, rules, and regulations.
The legal system in Hong Kong is a common law system, based on a combination of English common law, local cases and local legislation.
However, our Hong Kong operating subsidiary Primega Construction may become subject to laws, rules, and regulations applicable to foreign
investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court
decisions may be cited for reference but have limited precedential value. These laws and regulations are sometimes vague and may be subject
to future changes, and their official interpretation and enforcement could be unpredictable with little advance notice, which could result
in a material change in our operations and/or the value of our Ordinary Shares.
In
1979, the PRC government began to promulgate a comprehensive system of laws, rules, and regulations governing economic matters in general.
The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of
foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules, and
regulations may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation
by PRC regulatory agencies. In particular, because these laws, rules, and regulations are relatively new, and because of the limited
number of published decisions and the non-binding nature of such decisions, and because the laws, rules, and regulations often give the
relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules, and regulations
involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government policies
and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result,
we may not be aware of our violation of these policies and rules until after the occurrence of the violation.
Any
administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and
contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection
we enjoy than in more developed legal systems.
If
the PRC government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in
China based issuers, such action may significantly limit or completely hinder our ability to offer or continue to offer Ordinary Shares
to investors and cause the value of our Ordinary Shares to significantly decline or be worthless.
Recent
statements by the PRC government have indicated an intent to exert more oversight and control over offerings that are conducted overseas
and/or foreign investments in China based issuers. On July 10, 2021, for comments from the public, the CAC issued the Measures for Cybersecurity
Review (the “Revised Draft”), which required that, among others, in addition to “operator of critical information infrastructure”
any “data processor” controlling personal information of no less than one million users which seeks to list in a foreign
stock exchange should also be subject to cybersecurity review. Pursuant to Article 6 of the Revised Draft, companies holding data or
more than one million users must apply for cybersecurity approval when seeking overseas listings because of the risk that such data and
personal information could be “affected, controlled, and maliciously exploited by foreign governments.” On December 28, 2021,
the CAC published the revised Cybersecurity Review Measures (“CRM”), which further restates and expands the applicable scope
of the cybersecurity review. The revised CRM took effect on February 15, 2022, and replaced the Revised Draft issued on July 10, 2021.
Pursuant to the revised CRM, if a network platform operator holding personal information of over one million users seeks for “foreign”
listing, it must apply for the cybersecurity review. Our business belongs to the construction industry, which does not involve the collection
of user data, implicate cybersecurity, or involve any other type of restricted industry. As a result, the likelihood of us being subject
to the review of the CAC is remote.
On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies,
or the Trial Measures, which came into effect on March 31, 2023. On the same date of the issuance of the Trial Measures, the CSRC circulated
No.1 to No.5 Supporting Guidance Rules, the Notes on the Trial Measures, the Notice on Administration Arrangements for the Filing of
Overseas Listings by Domestic Enterprises and the relevant CSRC Answers to Reporter Questions on the official website of the CSRC, or
collectively, the Guidance Rules and Notice. The Trial Measures, together with the Guidance Rules and Notice, reiterate the basic supervision
principles as reflected in the Draft Overseas Listing Regulations by providing substantially the same requirements for filings of overseas
offering and listing by domestic companies, yet made the following updates compared to the Draft Overseas Listing Regulations: (a) further
clarification of the circumstances prohibiting overseas issuance and listing; (b) further clarification of the standard of indirect overseas
listing under the principle of substance over form, and (c) adding more details of filing procedures and requirements by setting different
filing requirements for different types of overseas offering and listing. Pursuant to the Trial Measures, the Guidance Rules and Notice,
domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure
and report relevant information to the CSRC within three working days following its submission of initial public offerings or listing
application.
As
of the date of this prospectus, our registered public offering in the United States is not subject to the review or prior approval of
the CAC nor the CSRC. We do not intend to seek approval of this offering from the CAC or the CSRC. Uncertainties still exist, however,
due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. It is uncertain whether the
PRC government will adopt additional requirements or extend the existing requirements to apply to our operating subsidiary located in
Hong Kong. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings
are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer
securities to investors and could cause the value of such securities to significantly decline or be worthless.
In
the event that (i) the PRC government expands the categories of industries and companies whose foreign securities offerings are subject
to review by the CSRC or the CAC such that we are required to obtain such permissions or approvals; or (ii) we inadvertently concluded
that relevant permissions or approvals were not required or that we did not receive or maintain relevant permissions or approvals required,
any action taken by the PRC government could significantly limit or completely hinder our operations, significantly limit or completely
hinder our ability to offer our Ordinary Shares to investors, and cause the value of such Shares to significantly decline or become worthless.
Adverse
regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory
scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance
requirements for companies like us with Hong Kong-based operations, all of which could increase our compliance costs and subject us to
additional disclosure requirements.
Currently,
Hong Kong has a separate legal system from mainland China, and it has its legislative framework and judiciary independent of that of
the PRC government. Nonetheless, the recent regulatory developments in China, in particular with respect to restrictions on China-based
companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital raising activities
in the United States. In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities,
which may have the effect of limiting our service offerings, restricting the scope of our operations in Hong Kong, or causing the suspension
or termination of our business operations in Hong Kong entirely. We may have to adjust, modify, or completely change our business operations
in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can
be completed in a timely, cost efficient, or liability-free manner or at all.
On
July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of
the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating
companies (including Hong Kong) before their registration statements will be declared effective. On August 1, 2021, the CSRC issued a
statement saying that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies
and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related
issuers. Since we operate in Hong Kong, we cannot guarantee that we will not be subject to tightened regulatory review and we could be
exposed to government interference from China.
We
may become subject to a variety of PRC laws and other obligations regarding data security offerings that are conducted overseas and/or
foreign investment in China-based issuers, and any failure to comply with applicable laws and obligations could have a material and adverse
effect on our business, financial condition, and results of operations and may hinder our ability to offer or continue to offer Ordinary
Shares to investors and cause the value of our Ordinary Shares to significantly decline or be worthless.
On
June 10, 2021, the Standing Committee of the National People’s Congress enacted the PRC Data Security Law, which took effect on
September 1, 2021. The law requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose
of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for
data security.
On
July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly
issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital
market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement
and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system
of extraterritorial application of the PRC securities laws.
On
August 20, 2021, the 30th meeting of the Standing Committee of the 13th National People’s Congress voted and passed the “Personal
Information Protection Law of the People’s Republic of China” (“PRC Personal Information Protection Law”), which
became effective on November 1, 2021. The PRC Personal Information Protection Law applies to the processing of personal information of
natural persons within the territory of China that is carried out outside of China where (1) such processing is for the purpose of providing
products or services for natural persons within China, (2) such processing is to analyze or evaluate the behavior of natural persons
within China, or (3) there are any other circumstances stipulated by related laws and administrative regulations.
On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies,
or the Trial Measures, which came into effect on March 31, 2023. On the same date of the issuance of the Trial Measures, the CSRC circulated
No.1 to No.5 Supporting Guidance Rules, the Notes on the Trial Measures, the Notice on Administration Arrangements for the Filing of
Overseas Listings by Domestic Enterprises and the relevant CSRC Answers to Reporter Questions on the official website of the CSRC, or
collectively, the Guidance Rules and Notice. The Trial Measures, together with the Guidance Rules and Notice, reiterate the basic supervision
principles as reflected in the Draft Overseas Listing Regulations by providing substantially the same requirements for filings of overseas
offering and listing by domestic companies, yet made the following updates compared to the Draft Overseas Listing Regulations: (a) further
clarification of the circumstances prohibiting overseas issuance and listing; (b) further clarification of the standard of indirect overseas
listing under the principle of substance over form, and (c) adding more details of filing procedures and requirements by setting different
filing requirements for different types of overseas offering and listing. Pursuant to the Trial Measures, the Guidance Rules and Notice,
domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure
and report relevant information to the CSRC within three working days following its submission of initial public offerings or listing
application.
On
December 28, 2021, the CAC jointly with the relevant authorities formally published Measures for Cybersecurity Review (2021) which took
effect on February 15, 2022, and replaced the former Measures for Cybersecurity Review (2020) issued on July 10, 2021. Measures for Cybersecurity
Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services, and online platform
operators (together with the operators of critical information infrastructure, the “Operators”) carrying out data processing
activities that affect or may affect national security, shall conduct a cybersecurity review, and any online platform operator who controls
more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if
it seeks to be listed in a foreign country.
Given
that (1) our operating subsidiary is incorporated in Hong Kong or the BVI and are located in Hong Kong; (2) we have no subsidiary, VIE
structure, nor any direct operations in mainland China; and (3) pursuant to the Basic Law, which is a national law of the PRC and the
constitutional document for Hong Kong, national laws of the PRC shall not be applied in Hong Kong except for those listed in Annex III
of the Basic Law (which is confined to laws relating to defense and foreign affairs, as well as other matters outside the autonomy of
Hong Kong), we do not currently expect the Measures for Cybersecurity Review (2021), the PRC Personal Information Protection Law, the
Draft Overseas Listing Regulations, the Trial Measures, the Guidance Rules and Notice, have an impact on our business, operations, or
this offering. Our belief is grounded on the following: (1) we do not believe that our operating subsidiary falls within the definition
of an “Operator” that is required to file for cybersecurity review before listing in the United States, because (2) our operating
subsidiary is incorporated in Hong Kong and operates in Hong Kong without any subsidiary or VIE structure in mainland China and each
of the Measures for Cybersecurity Review (2021), the PRC Personal Information Protection Law, and the Draft Overseas Listing Regulations,
the Trial Measures, the Guidance Rules and Notice remains unclear whether it shall be applied to a company based in Hong Kong; (3) as
of the date of this prospectus, our operating subsidiary has neither collected nor stored personal information of any PRC individuals;
(4) all of the data our operating subsidiary has collected is stored in servers located in Hong Kong; and (5) as of the date of this
prospectus, our Operating Subsidiary has not been informed by any PRC governmental authority of any requirement that it file for a cybersecurity
review or a CSRC review.
However,
since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation-making
bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or
promulgated, if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will have on the
daily business operations of our operating subsidiary, their respective abilities to accept foreign investments and the listing of our
Ordinary Shares on a U.S. or other foreign exchanges. There remains significant uncertainty in the interpretation and enforcement of
relevant PRC cybersecurity laws and regulations. If the Draft Overseas Listing Regulations are adopted into law in the future and becomes
applicable to our operating subsidiary, if our operating subsidiary is deemed an “Operator” that is required to file for
cybersecurity review before listing in the United States, or if the Measures for Cybersecurity Review (2021) or the PRC Personal Information
Protection Law becomes applicable to our operating subsidiary, the business operation of our operating subsidiary and the listing of
our Ordinary Shares in the United States could be subject to the CAC’s cybersecurity review or CSRC Overseas Issuance and Listing
review in the future. If our operating subsidiary becomes subject to the CAC or CSRC review, we cannot assure you that our operating
subsidiary will be able to comply with the regulatory requirements in all respects, and the current practice of collecting and processing
personal information may be ordered to be rectified or terminated by regulatory authorities. In the event of a failure to comply, our
operating subsidiary may become subject to fines and other penalties that may have a material adverse effect on our business, operations,
and financial condition and may hinder our ability to offer or continue to offer Ordinary Shares to investors and cause the value of
our Ordinary Shares to significantly decline or be worthless.
Although
the audit report included in this prospectus is prepared by U.S. auditors who are currently inspected by the PCAOB, there is no guarantee
that future audit reports will be issued by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of
the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the HFCA Act if the SEC subsequently
determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S.
national securities exchanges, such as the Nasdaq, may determine to delist our securities. Furthermore, on December 23, 2022 the Accelerating
Holding Foreign Companies Accountable Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s
securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead
of three, and thus, reduced the time before the securities may be prohibited from trading or delisted.
The
audit report included in this prospectus was issued by ZH CPA, LLC, a U.S.-based accounting firm that is registered with the PCAOB and
can be inspected by the PCAOB. We have no intention of dismissing ZH CPA, LLC in the future or of engaging any auditor not based in the
U.S. and not subject to regular inspection by the PCAOB. There is no guarantee, however, that any future auditor engaged by the Company
would remain subject to full PCAOB inspection during the entire term of our engagement. The PCAOB is currently unable to conduct inspections
without the approval of the PRC authorities. Currently, our U.S. auditor’s audit work for us can be inspected by the PCAOB, and
we have no operations in mainland China. However, if there is significant change to current political arrangements between mainland China
and Hong Kong, companies operated in Hong Kong like us may face similar regulatory risks as those operated in PRC, and we cannot assure
you that our auditor’s audit work for us will continue to be able to be inspected by the PCAOB. If it is later determined that
the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any
audit reports not issued by auditors that are completely inspected by the PCAOB could result in a lack of assurance that our financial
statements and disclosures are adequate and accurate.
Inspections
of other auditors conducted by the PCAOB outside mainland China have at times identified deficiencies in those auditors’ audit
procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.
The lack of PCAOB inspections of audit work undertaken in mainland China prevents the PCAOB from regularly evaluating auditors’
audits and their quality control procedures. As a result, if any component of our auditor’s work papers become located in mainland
China in the future, such work papers will not be subject to inspection by the PCAOB. As a result, investors would be deprived of such
PCAOB inspections, which could result in limitations or restrictions to our access of the U.S. capital markets.
As
part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law,
in particular mainland China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress
that, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit
work performed by a foreign public accounting firm for such issuers completely. The proposed Ensuring Quality Information and Transparency
for Abroad-Based Listings on our Exchanges Act prescribes increased disclosure requirements for these issuers and, beginning in 2025,
the delisting from U.S. national securities exchanges such as the Nasdaq of issuers included on the SEC’s list for three consecutive
years. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S.
government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets.
On
May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed
by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in
the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was
signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued
recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with
respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States.
In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated
with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such
risks.
On
March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements
in the HFCA Act. On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements
in the HFCA Act. The rules apply to public companies whose stock is registered with the SEC and are identified by the SEC as having filed
an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and whose
audit work that the PCAOB is unable to inspect or investigate. We will be required to comply with these rules if the SEC identifies us
as having a “non-inspection” year under a process to be subsequently established by the SEC. The final amendments require
any identified registrant to submit documentation to the SEC establishing that the registrant is not owned or controlled by a government
entity in the public accounting firm’s foreign jurisdiction, and they also require, among other things, disclosure in the registrant’s
annual report regarding the audit arrangements of, and government influence on, such registrants. Pursuant to the HFCA act, our securities
may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor cannot be inspected by the PCAOB for three
consecutive years, and this ultimately could result in our Ordinary Shares being delisted.
On
June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the
HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its audit work cannot
be inspected when its auditor is subject to PCAOB inspections for two consecutive years instead of three and, thus, would reduce the
time before our Ordinary Shares may be prohibited from trading or delisted.
On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction in connection with their audit works because of a position taken by one or more authorities in that
jurisdiction.
On
November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the HFCA Act. Rule 6100 provides a framework
for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to inspect or investigate completely
registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On
December 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered
public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.
In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations.
On
August 26, 2022, CSRC, the MOF, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in China
and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet
with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection
or investigation and has the unfettered ability to transfer information to the SEC. There can be no assurance that we will be able to
comply with requirements imposed by U.S. regulators if there is significant change to current political arrangements between mainland
China and Hong Kong or if any component of our auditor’s work papers become located in mainland China in the future. Delisting
of our Ordinary Shares would force holders of our Ordinary Shares to sell their Ordinary Shares. The market price of our Ordinary Shares
could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions, regardless of whether
these executive or legislative actions are implemented and regardless of our actual operating performance. On December 15, 2022, the
PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms
headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities
obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new
determination. On December 23, 2022, the Accelerating HFCA Act, was signed into law, which amended the HFCA Act by requiring the SEC
to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections
for two consecutive years instead of three. On December 29, 2022, the Consolidated Appropriations Act was signed into law by President
Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to Accelerating HFCA Act, which reduces
the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
Our
registered public accounting firm, ZH CPA, LLC, is not headquartered in mainland China or Hong Kong, and was not identified in this report
as a firm subject to the PCAOB’s determination.
The
SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described
above. Future developments in respect to increasing U.S. regulatory access to audit information are uncertain, as the legislative developments
are subject to the legislative process and the regulatory developments are subject to the rule-making process and other administrative
procedures.
The
recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House
of Representatives all call for additional and more stringent criteria to be applied to emerging market companies. These developments
could add uncertainties to our offering, business operations, share price, and reputation.
U.S.
public companies with substantially all of their operations in China (including in Hong Kong) have been the subject of intense scrutiny,
criticism, and negative publicity by investors, financial commentators, and regulatory agencies, such as the SEC. Much of the scrutiny,
criticism, and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal
controls over financial accounting, inadequate corporate governance policies, or a lack of adherence thereto and, in many cases, allegations
of fraud.
On
December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their
oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman
Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the
risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating
past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in
China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other
U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On
May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government
if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the
PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to
trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act.
On
May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in a “Restrictive Market”; (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and
only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing; and (iii) apply additional
and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
As
a result of this scrutiny, criticism, and negative publicity, the traded stock of many U.S.-listed Chinese companies sharply decreased
in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC
enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide
scrutiny, criticism, and negative publicity will have on us, our offerings, business, and our share price. If we become the subject of
any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to
investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management
from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected
and you could sustain a significant decline in the value of our share.
The
enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong
National Security Law”) could impact our Hong Kong operating subsidiary.
On
June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law
defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories
of offenses — secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger
national security — and their corresponding penalties. On July 14, 2020, former U.S. President Donald Trump signed the Hong Kong
Autonomy Act (“HKAA”) into law, authorizing the U.S. administration to impose blocking sanctions against individuals and
entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020, the U.S.
government imposed HKAA-authorized sanctions on 11 individuals, including the then HKSAR chief executive, Carrie Lam, and, John Lee,
who succeeded to HKSAR chief executive on July 1, 2022. On October 14, 2020, the U.S. State Department submitted to relevant committees
of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China
to meet its obligations under the Joint Declaration or the Basic Law.” In July 2021, President Joe Biden warned investors about
the risks of doing business in Hong Kong, issuing an advisory saying China’s push to exert more control over Hong Kong threatens
the rule of law and endangers employees and data. The HKAA further authorizes secondary sanctions, including the imposition of blocking
sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under
this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers
dealing with any foreign financial institution that are targeted. It is difficult to predict the full impact of the Hong Kong National
Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our subsidiaries are determined to be in violation of the Hong
Kong National Security Law or the HKAA by competent authorities, our business operations could be materially and adversely affected.
On
March 23, 2024, the Hong Kong government has enacted the Safeguarding National Security Ordinance (“SNSO”), which is a domestic
security legislation under Article 23 of the Basic Law, to prohibit four types of offenses, including secession, subversion, terrorist
activities and collusion with a foreign country or with external elements to endanger national security, as well as other offences relating
to the endangering of national security, which has been considered as having further significantly undermined the autonomy of Hong Kong.
It is difficult for us to predict the degree of adverse impact of the legislation of the SNSO on Hong Kong or our business in Hong Kong.
However, in any event, since all of our operations are based in Hong Kong, any change of the political arrangements between Hong Kong
and the PRC may pose an adverse impact to the stability of the economy in Hong Kong, thereby directly and adversely affecting our results
of operations and financial positions. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not
be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong
Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or
the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including
our ability to enforce our agreements with our customers.
If
we become subject to the recent scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies, we may have
to expend significant resources to investigate and/or defend the matter, which could harm our business operations, this offering, and
our reputation and could result in a loss of your investment in our Ordinary Shares, in particular if such matter cannot be addressed
and resolved favorably.
During
the last several years, U.S.-listed companies that have substantially all of their operations in China have been the subject of intense
scrutiny by investors, financial commentators, and regulatory agencies. Much of the scrutiny has centered on financial and accounting
irregularities and mistakes, lack of effective internal controls over financial reporting, and, in many cases, allegations of fraud.
As a result of the scrutiny, the publicly traded stock of many U.S.-listed Chinese companies that have been the subject of such scrutiny
has sharply decreased in value. Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are
conducting internal and/or external investigations into the allegations.
If
we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate
such allegations and/or defend the Company. Such investigations or allegations would be costly and time consuming and likely would distract
our management from our normal business and could result in our reputation being harmed. Our stock price could decline because of such
allegations, even if the allegations are false.
A
downturn in the Hong Kong, China, or the global economy, or a change in economic and political policies of China, could materially and
adversely affect our business and financial condition.
Our
business may be influenced to a significant degree by political, economic, and social conditions in Hong Kong and China generally. The
Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement,
level of development, growth rate, control of foreign exchange, and allocation of resources. While the Chinese economy has experienced
significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC
government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures
may benefit the overall Chinese economy, but they may have a negative effect on us.
Economic
conditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy
may affect potential clients’ confidence in financial market as a whole and have a negative impact on our business, results of
operations, and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability
to access the capital markets to meet liquidity needs.
Because
our business is conducted in Hong Kong dollars and the price of our Ordinary Shares is quoted in U.S. dollars, changes in currency conversion
rates may affect the value of your investments.
Our
business is conducted in Hong Kong through our operating subsidiary; our books and records are maintained in Hong Kong dollars, which
is the currency of Hong Kong; and the financial statements that we file with the SEC and provide to our shareholders are presented in
U.S. dollars. Changes in the exchange rate between the Hong Kong dollar and U.S. dollar affect the value of our assets and the results
of our operations in U.S. dollars. The value of the Hong Kong dollar against the U.S. dollar and other currencies may fluctuate and is
affected by, among other things, changes in the Hong Kong’s political and economic conditions and perceived changes in the economy
of Hong Kong and the United States. Any significant revaluation of the Hong Kong dollar may materially and adversely affect our cash
flows, revenue, and financial condition.
Since
1983, Hong Kong dollars have been pegged to the U.S. dollars at the rate of approximately HK$7.80 to US$1.00. 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.
There
are political risks associated with conducting business in Hong Kong.
Any
adverse economic, social, and/or political conditions, material social unrest, strike, riot, civil disturbance, or disobedience, as well
as significant natural disasters, may affect the market and the business operations of the Company. Hong Kong is a special administrative
region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’s constitutional
document, which provides Hong Kong with a high degree of autonomy and executive, legislative, and independent judicial powers, including
that of final adjudication under the principle of “one country, two systems.” However, there is no assurance that there will
not be any changes in the economic, political, and legal environment in Hong Kong in the future. Since our operation is based in Hong
Kong, any change of such political arrangements may pose immediate threat to the stability of the economy in Hong Kong, thereby directly
and adversely affecting our results of operations and financial positions.
Under
the Basic Law, Hong Kong is exclusively in charge of its internal affairs and external relations, while the government of the PRC is
responsible for its foreign affairs and defense. As a separate customs territory, Hong Kong maintains and develops relations with foreign
states and regions. Based on certain recent development, including the Hong Kong National Security Law issued by the Standing Committee
of the PRC National People’s Congress in June 2020, the U.S. State Department has indicated that the United States no longer considers
Hong Kong to have significant autonomy from China and, at the time, President Trump signed an executive order and HKAA to remove Hong
Kong’s preferential trade status and to authorize the U.S. administration to impose blocking sanctions against individuals and
entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. The United States may impose
the same tariffs and other trade restrictions on exports from Hong Kong that it places on goods from mainland China. These and other
recent actions may represent an escalation in political and trade tensions involving the United States, China, and Hong Kong, which could
potentially harm our business.
Given
the relatively small geographical size of Hong Kong, any of such incidents may have a widespread effect on our business operations, which
could in turn adversely and materially affect our business, results of operations, and financial condition. It is difficult to predict
the full impact of the HKAA on Hong Kong and companies with operations in Hong Kong like us. Furthermore, legislative or administrative
actions in respect to China-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price
of our Ordinary Shares could be adversely affected.
The
Hong Kong legal system embodies uncertainties that could limit the availability of legal protections.
Hong
Kong is a Special Administrative Region of the PRC. Following British colonial rule from 1842 to 1997, China assumed sovereignty under
the “one country, two systems” principle. The Hong Kong Special Administrative Region’s constitutional document, the
Basic Law, ensures that the current political situation will remain in effect for 50 years. The laws previously in force in Hong Kong,
that is, the common law, rules of equity, ordinances, subordinate legislation and customary law are maintained. Hong Kong has enjoyed
the freedom to function with a high degree of autonomy for its affairs, including currencies, immigration and customs operations, and
its independent judiciary system and parliamentary system. On July 14, 2020, the United States signed an executive order to end the special
status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed may be compromised, it could potentially impact Hong Kong’s
common law legal system and may, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. This could,
in turn, materially and adversely affect our business and operations. Additionally, intellectual property rights and confidentiality
protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect
of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation
or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections
available to us, including our ability to enforce our agreements with our clients.
Changes
in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in Hong Kong, where
our customers reside.
Political
events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy,
and they could have a material adverse effect on us and our customers, our service providers, and our other partners. International trade
disputes could result in tariffs and other protectionist measures that may materially and adversely affect our business.
Tariffs
could increase the cost of the services and products, which could affect customers’ investment decisions. In addition, political
uncertainty surrounding international trade disputes and the potential of their escalation to trade war and global recession could have
a negative effect on customer confidence, which could materially and adversely affect our business. We also may have access to fewer
business opportunities, and our operations may be negatively impacted as a result. In addition, the current and future actions or escalations
by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact
on our markets, our business, or our results of operations, as well as the financial condition of our clients, and we cannot provide
any assurances as to whether such actions will occur or the form that they may take.
Risks
Related to Our Corporate Structure
We
rely on dividends and other distributions on equity paid by our subsidiaries to fund our cash and financing requirements, 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.
PGHL
is a holding company, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing
requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and to service any debt
we may incur. We do not expect to pay cash dividends in the foreseeable future. We anticipate that we will retain any earnings to support
operations and to finance the growth and development of our business. If any of our subsidiaries incurs debt on its own behalf in the
future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
PGHL
is permitted under the laws of Cayman Islands to provide funding to our subsidiaries through loan or capital contributions without restrictions
on the amount of the funds, provided such funding is in the best interests of PGHL. Our board of directors has complete discretion as
to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary
resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman
Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be
paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our
board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our
future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us
from the operating entities, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
According
to the BVI Business Companies Act 2004 (as amended), a BVI company may make dividends distribution to the extent that immediately after
the distribution, the value of the company’s assets exceeds its liabilities and that such company is able to pay its debts as they
fall due. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available
for distribution. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect
to dividends paid by us. Any limitation on the ability of our Hong Kong subsidiary to pay dividends or make other distributions to us
could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business,
pay dividends, or otherwise fund and conduct our business.
Any
limitation on the ability of our subsidiaries to pay dividends or make other distributions to us could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and
conduct our business.
Our
internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able
to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Prior
to our initial public offering, we were a private company with limited accounting personnel and other resources to address our internal
controls and procedures. Accordingly, we will be in a continuing process of developing, establishing, and maintaining internal controls
and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal
controls over financial reporting if and when required to do so under Section 404 of the Sarbanes-Oxley Act of 2002.
As
a company with less than US$1.235 billion in revenue for the fiscal year of 2023, we qualify as an “emerging growth company”
pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are
otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under
Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial
reporting.
This
prospectus does not include a report of management’s assessment regarding internal control over financial reporting or an attestation
report by our independent registered public accounting firm due to a transition period established by rules of the SEC for newly listed
public companies.
Cayman Islands economic
substance requirements may have an effect on our business and operations.
Pursuant to the International
Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands (“ES Act”) that came into force on 1 January 2019, a
“relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity”
includes an exempted company incorporated in the Cayman Islands as is the Company; however, it does not include an entity that is tax
resident outside the Cayman Islands. Accordingly, for so long as the Company is a tax resident outside the Cayman Islands, including
in Hong Kong, it is not required to satisfy the economic substance test set out in the ES Act.
Risks
Related to Our Business and Industry
We
have a concentrated customer base and any decrease in the number of projects with our major customers would adversely affect our operations
and financial results.
For
the years ended March 31, 2024 and 2023, a significant portion of our revenue was derived from a small number of customers. Our largest
customers, which each contributed more than 10% of our revenue, accounted for approximately 88.88% and 88.26% of our total revenue for
the years ended March 31, 2024 and 2023, respectively. For the same period, our largest customer was Customer C and Customer B, each
an independent third party, which accounted for approximately 34.44% and 42.67% of our revenue, respectively.
Chi
Yip Eng. & (Trans.) Company Limited (“Chi Yip”), a related party, was one of our major customers for the years ended
March 31, 2023. Income from soil and rock transportation services rendered to Chi Yip amounted to approximately US$2,830,435 of our revenue,
accounting for approximately 25.40% of our total revenues for the period. Primega Construction also provided site management services
to Chi Yip, which contributed approximately US$39,184 for the year ended March 31, 2023. Such income from site management services is
recorded under other income. Primega Construction ceased to provide soil and rock transportation and site management services to Chi
Yip during the and recorded no revenue from Chi Yip for the year ended March 31, 2024.
The
soil and rock transportation projects of our operating subsidiary are on a project-by-project basis, and we do not enter into any long-term
service agreements with customers. There is no assurance that Primega Construction will be able to retain its customers upon expiry of
the contract period or that they will maintain their current level of business with us in the future. If there is a significant decrease
in the number of projects or size of projects in terms of contract sums awarded by major customers for whatever reason, and if we are
unable to obtain suitable projects of a comparable size and quantity as replacement, our financial conditions and operating results would
be materially and adversely affected. In addition, if any of the major customers of Primega Construction experiences any liquidity problem,
it may result in delay or default in settling progress payments to us, which in turn will have an adverse impact on our cash flow and
financial condition. We cannot guarantee that Primega Construction will be able to diversify its customer base by obtaining a significant
number of new projects from our existing and potential customers.
Our
business is subject to the risk of non-payment or delayed payment by our customers, including related parties, which could adversely
affect our financial condition and results of operations.
We
have significant accounts receivable due from major customers, which includes our related party. As of March 31, 2024 and 2023, our largest
customers, each having contributed more than 10% of our revenue, accounted for an aggregate of approximately 79.47% and 91.29% of our
accounts receivables, respectively. Accounts receivables due from our related party, Chi Yip, accounted for 7.4% and 32.82% of our consolidated
accounts receivables for the same periods, respectively.
The
ability of these parties, including our related parties, to pay their obligations may be adversely affected by changes in their financial
condition or other factors. We may experience difficulty collecting accounts receivable due to disputes or financial difficulties of
these customers, which could result in write-offs or bad debt expense, which may have a material adverse effect on our financial condition,
and results of operations.
Our
revenue mainly relies on successful tenders or acceptance of quotations for soil and rock transportation projects that are non-recurring
in nature, and any failure in securing projects from our existing customers and/or new customers in the future would affect our business
operation and financial results.
Primega
Construction secures its soil and rock transportation projects mainly through a competitive tender or quotation process and was awarded
each contract on a non-recurring basis. Primega Construction does not have any long-term commitment with its customers, and the customers
have no obligation to award any new projects to us. As such, we cannot assure that existing customers or potential customers will invite
Primega Construction to participate in their tendering processes or submit quotations, or that Primega Construction will be able to secure
projects from them in the future. Upon completion of our contracts on hand, in the event that we are unable to receive new tender or
quotation invitations or be awarded new contracts, our business in general and our results of operations and financial performance may
be adversely and materially affected.
Our
operating results are difficult to predict.
Revenue
from our operating segments have varied significantly in the past and may continue to do so in the future. Factors that cause our operating
results to be unpredictable include other factors described under the heading “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Key Factors that Affect Results of Operations” of this prospectus. Any
of the foregoing factors, or any other factors discussed elsewhere herein, could have a material adverse effect on our business, financial
condition and results of operations that could adversely affect our share price.
Fluctuations
in the price or availability of biodiesel oil may adversely affect our financial results.
Biodiesel
oil represents a significant portion of our operational costs. An increase in fuel prices would directly increase the cost of operating
our sizeable fleet of tipper trucks, as well as the cost of engaging other subcontractors to provide transportation. If Primega Construction
is unable to increase the tender prices for its soil and rock transportation projects to cover the increased fuel costs, our profitability
may be adversely affected. Fuel costs can fluctuate significantly and is subject to many economic and political factors that are beyond
our control, including political instability in oil-producing regions and the global geopolitical landscape. In the event of a significant
rise in fuel prices, our related costs may increase and our gross profit may decrease if we are unable to adopt any effective cost control
measures or pass on the rising costs to our customers.
Primega
Construction’s capacity to provide soil and rock transportation services is limited by availability of machinery and equipment.
Primega
Construction requires tipper trucks and drivers to carry out its soil and rock transportation services. As of the date of this prospectus,
Primega Construction has 42 tipper trucks available for our projects. Our directors estimate the average utilization rates for tipper
trucks for the years ended March 31, 2024 and 2023 was approximately 95%. Excluding down time for repair and maintenance, the utilization
rate is estimated to be close to 100%. The high utilization rate required Primega Construction to rent trucks from third parties and
engage subcontractors to provide transportation from time to time, and re-schedule the delivery requests made by its project teams for
the use of the trucks.
There
is no certainty that we will be able to successfully rent trucks from third parties or engage subcontractors to provide transportation,
to do so at a competitive rate, or successfully re-schedule requests from our project sites without affecting the fulfillment of our
projects. Furthermore, Primega Construction’s expansion and growth in the earthworks sector is limited by the number of its tipper
trucks and excavation machines. The inability of Primega Construction to increase our fleet of tipper trucks and machinery would expose
us to associated risks in areas of our business expansion, our contract fulfillment and impact our costs and profitability.
Primega
Construction depends on third parties for machinery and equipment and supplies essential to operate its business.
Primega
Construction relies on suppliers and subcontractors to lease machinery and equipment to us and provide transportation services for its
customers to support its operations. We cannot assure you that our favorable working relationships with our suppliers and subcontractors
will continue in the future. As Primega Construction does not sign any long term contracts with its suppliers and subcontractors, there
is no assurance that they will be able to continue to provide equipment and services at acceptable prices or that it can maintain our
relationship with them in the future. In the event that any of the major suppliers and subcontractors are unable to provide the required
equipment and services and we are unable to engage alternative providers on similar terms, or the costs for such equipment and services
increase substantially, our business and profitability could be materially and adversely affected.
Any
failure, damage or loss of Primega Construction’s machinery and equipment may adversely affect our operations and financial performance.
Primega
Construction’s soil and rock transportation services rely on machinery and equipment. If Primega Construction fails to remain attentive
to and invest in suitable site equipment to cope with any latest development in such market trends or demands and to cater to different
needs and requirements of different customers, overall competitiveness of our operating subsidiary and thus our financial performance
and operation results may be adversely affected.
In
addition, there is no assurance that Primega Construction’s machinery and equipment will not be damaged or lost as a result of,
among others, improper operation, accidents, fire, adverse weather conditions, theft or robbery. Machinery and equipment may also break
down or fail to function normally due to wear and tear or mechanical or other issues. If any failed, damaged or lost site equipment cannot
be repaired and/or replaced in a timely manner, our operations and financial performance could be adversely affected.
If
leakage of biodiesel oil occurs during the transportation process, Primega Construction may be liable for related accidents and our reputation
and business operation may be affected.
Primega
Construction delivers biodiesel oil to its customers using diesel tank wagons. Primega Construction’s diesel tang wagon picks up
the required quantity of biodiesel oil from the oil depots designated by its suppliers for delivery to its customers. Biodiesel oil is
pumped from our diesel tank wagon directly to the drums or containers designated by customers. Oil leakage may occur during the transportation
process. Leakage of biodiesel oil or other hazardous substances can cause health and environmental risks, including pollution, and can
cause fire and explosions. If an accident occurs, Primega Construction will be liable and subject to potential claims, penalty and criminal
prosecution. In such event, our reputation and business operations may be adversely affected.
Primega
Construction’s ability to obtain and maintain biodiesel oil at suitable prices is essential for our biodiesel oil trading.
Primega
Construction’s ability to obtain and maintain suitable pricing for its services is essential. The price Primega Construction charges
customers for its biodiesel oil is determined based on a cost-plus approach with mark-up determined based on two main factors, namely
(i) the purchase cost of biodiesel oil from wholesalers, and (ii) the delivery location of the customer. If the cost of biodiesel oil
increases significantly, Primega Construction may not be able to pass the increase in cost fully to its customers, which will put significant
pressure on the demand for our biodiesel oil and our profit margins from sale of biodiesel oil.
The
construction services industry is highly schedule driven, and failure to meet the schedule requirements of contracts could adversely
affect our reputation and/or expose us to financial liability.
In
some instances, including in the case of many of fixed unit price contracts, of Primega Construction, it guarantees that it will complete
a project by a certain date. Any failure to meet contractual schedule or completion requirements set forth in the contracts could subject
us to responsibility for costs resulting from the delay, generally in the form of contractually agreed-upon liquidated damages, liability
for Primega Construction’s customer’s actual costs arising out of its delay, reduced profits or a loss on that project, damage
to our reputation, and a material adverse impact to our financial position.
Failure
to maintain safe work sites could result in significant losses, which could materially affect our business and reputation.
Because
employees of Primega Construction and other parties on site are often in close proximity with mechanized equipment, moving vehicles,
chemical substances, and dangerous manufacturing processes, our construction and maintenance sites are potentially dangerous workplaces.
Therefore, safety is a primary focus of our business and is critical to our reputation and performance. Many of the clients require that
Primega Construction meet certain safety criteria to be eligible to bid on contracts, and some of the contract fees or profits are subject
to satisfying safety criteria. Unsafe work conditions also can increase employee turnover, which increases project costs and, therefore,
our overall operating costs. If Primega Construction fails to implement safety procedures or implement ineffective safety procedures,
employees could be injured, and we or Primega Construction could be exposed to investigations and possible litigation. Primega Construction
and our failure to maintain adequate safety standards through safety programs could also result in reduced profitability or the loss
of projects or clients.
We
may not be able to receive the full amount due from customers for contract work, and our revenue may fluctuate due to variation orders.
Our
revenue from construction contracts is recognized when our construction work is performed. Should any of our customers delay or fail
to release our progress payments according to the agreed payment terms, our cash flow and working capital positions may be materially
and adversely affected. If it is unable to do so, our results of operation, liquidity, and financial position may be adversely affected.
Furthermore,
the aggregate amount of revenue that Primega Construction is able to derive from a project may deviate from the original contract sum
specified in the relevant contract for the project due to variations (including addition, modification, or cancellation of certain contract
work) instructed by its customers from time to time during the course of project execution. As such, there is no assurance that the amount
of revenue derived from the projects will not be substantially different from the original contract sum as specified in the relevant
contracts, and our financial condition may be adversely affected by any decrease in our revenue as a result of variation orders.
Primega
Construction relies on its subcontractors and suppliers to help complete our projects and to supply the machinery required.
In
line with the usual practice of the construction industry in Hong Kong, Primega Construction engages third-party subcontractors to perform
a portion of the work instead of retaining a large pool of labor with different skill sets to maximize our cost efficiency and flexibility.
As is customary in the industry, subcontractors are informally engaged, with services rendered invoiced and settled periodically. Primega
Construction also relies on its subcontractors for supply of machinery required for carrying out its operations. Our total subcontracting
charges accounted for a significant portion of our cost of sales for the years ended March 31, 2024 and 2023.
Apart
from the effect of any significant increase in the subcontracting costs that may impact our profitability, we or our operating subsidiary
may also be exposed to other legal liabilities if we are not able to monitor the performance of our subcontractors, or if our subcontractors
violate any laws, rules, or regulations in relation to health and safety matters. We are further exposed to risks associated with any
non-performance, delayed performance, or sub-standard performance by our subcontractors or their respective employees and may incur additional
costs or be subject to liability due to delay in schedule or defect in the work of the subcontractors or if there is any accident-causing
personal injuries or death to the subcontractors’ employees. These events may adversely impact our profitability, financial performance,
and reputation, as well as result in litigation or damages claims.
In
addition, Primega Construction’s subcontractors may not always be readily available when its needs for subcontracting arise, and
there is no assurance that we would be able to maintain good working relationships with our subcontractors in the future. Since we have
not entered into any long-term service agreement with the subcontractors, they are not obliged to work for us in future projects on similar
terms and conditions. There is no assurance that we would be able to find suitable alternative subcontractors that meet our project needs
and requirements to complete the projects, which would in turn adversely affect our performance capacity and financial results.
Further,
pursuant to the Employment Ordinance under Hong Kong law, a main contractor, or a main contractor and every superior subcontractor, is
jointly and severally liable to pay any wages that become due to an employee who is employed by a subcontractor on any work that the
subcontractor has contracted to perform, if such wages are not paid within the period specified in the Employment Ordinance. Our operations
and, hence, our financial position may be adversely affected if any of our subcontractors violates its obligations to pay its employees.
As
Primega Construction from time to time engage subcontractors in its work, it may bear responsibilities for any non-performance, delayed
performance, sub-standard performance, or non-compliance of our subcontractors.
Primega
Construction subcontracts certain portions of its projects, such as piling construction, reinforcement fixing, concreting work, to its
subcontractors who are independent third parties. Subcontracting may expose us to risks associated with non-performance, delayed performance,
or sub-standard performance by our subcontractors. As a result, Primega Construction may experience deterioration in the quality or delivery
of its work, incur additional costs due to the delays, suffer a higher price in sourcing the services, equipment or supplies in default,
or be subject to liability under the relevant projects. Such events could impact upon our profitability, financial performance, and reputation,
or result in litigation or damage claims.
There
is no assurance that Primega Construction would be able to monitor the performance of its subcontractors as directly and efficiently
as with our own staff. If the subcontractors fail to meet requirements, Primega Construction may experience delay in project completion,
quality issues concerning the work done, or non-performance by subcontractors. Consequently, significant time and costs may be incurred
to carry out remedial actions, which would in turn adversely affect the profitability and reputation of our business and result in litigation
or damage claims against us or our operating subsidiary. If the subcontractors violate any laws, rules, or regulations, Primega Construction
may also be held liable for their violations and be subject to claims for losses and damages if such violations result in any personal
injuries and/or property damages.
In
addition, subcontractors of Primega Construction may not always be readily available whenever needed, and there is no assurance that
Primega Construction would be able to maintain good working relationships with its sub-contractors in the future. As of the date of this
prospectus, Primega Construction has not entered into any long-term service agreement with its subcontractors. Further, there is no assurance
that Primega Construction would be able to find suitable alternative subcontractors that meet its project needs and requirements to complete
the projects, which would in turn adversely affect our operations and financial results.
An
increase in waste disposal fees may lead to changes in the industry and intensified competition.
Effective
from April 1, 2024, the waste disposal charges applicable to disposal of construction waste at public fill reception facilities, sorting
facilities and landfills will substantially increase. For details, please refer to the section titled “Regulations - Regulations
Related to Environmental Protection - Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong)”. Although our customers
are directly responsible for the waste disposal charges, the implementation of increasingly higher disposal fees may indirectly affect
the industry in which we operate. Customers that engage directly in foundation and site formation works that possess the relevant expertise
may seek to control costs by handling waste disposal in-house. Those customers continuing to outsource waste disposal services may actively
seek more cost-effective options to mitigate the impact of the increased fees. This may include exploring and evaluating additional service
providers or negotiating for lower rates. Other subcontractors offering competing services may undercut our tenders and quotations to
secure more projects, which could affect the success rate of our tenders as well as our project margins. The increase in such fees may
also lead to customers seeking alternative waste management solutions to mitigate the impact of the increased government charges. The
adoption of alternative waste management solutions may divert customers away from utilizing our services, leading to a decrease in Primega
Construction’s customer base and results of operations.
There
is no guarantee that safety measures and procedures implemented at construction sites could prevent the occurrence of industrial accidents
of all kinds, which in turn might lead to claims in respect to employees’ compensation, personal injuries, fatal accidents, and/or
property damages against us.
Primega
Construction has adopted certain work safety measures and procedures for its staff and the subcontractors’ staff. Primega Construction
relies on its staff to oversee the implementation of safety measures and procedures, and we cannot guarantee that all of the safety measures
and procedures are strictly adhered to at any time, nor can we assure you that the safety measures and procedures are sufficient to prevent
the occurrence of industrial accidents of all kinds. If the safety measures and procedures implemented at the construction sites are
insufficient or not strictly adhered to, it may result in industrial accidents that would in turn lead to claims in respect to employees’
compensation, personal injuries, fatal accidents, and/or property damage against us.
Primega
Construction determines the price of its quotation or tender based on the estimated time and costs to be involved in a project and the
actual time and costs incurred may deviate from our estimate due to unexpected circumstances, thereby leading to cost overruns and adversely
affecting our operations and financial results.
Primega
Construction determines the price of its quotation or tender based on estimated cost plus a certain mark-up margin. The actual time and
costs incurred, however, may be adversely affected by various factors, including (i) the specifications, underground conditions, and
difficulties of the project; (ii) the duration of the project; (iii) the site locations and the conditions and risk of adjacent building
structures; (iv) unfavorable weather conditions; and (v) the resources availability. Significant changes in any of these or other relevant
factors may lead to delay in completion or costs overrun by us, and there is no assurance that the actual time and costs incurred would
match our initial estimate. As the contracts between Primega Construction and its customers were generally fixed-price contracts or re-measurement
contracts for which our unit prices stated in the bill of quantities are fixed and without any price adjustment clause, once it agrees
on the quotation or tender price with the customer, it will generally have to bear any additional costs incurred. Such delays, cost overruns,
or mismatch of actual time and costs with the estimates may cause our profitability to be lower than what we expected or may expose Primega
Construction to litigation or claims from customers in case of delays, thereby adversely affecting our operations and financial results.
Furthermore,
the contracts Primega Construction entered into normally contain specific completion schedule requirements and liquidated damages provisions
(i.e., Primega Construction may have to pay its customers liquidated damages if Primega Construction or its subcontractors do not meet
the schedules). Liquidated damages are typically levied at an agreed rate for each day of delay that is owing to the default. Primega
Construction may need to pay liquidated damages resulting from any failure to meet the completion schedule requirements of its contracts,
to the extent that its customers do not grant it a time extension. This may reduce or diminish our expected profit and cash inflow from
the relevant contracts.
Cash
inflows and outflows in connection with construction projects may be irregular and, thus, may affect our net cash flow position.
In
a construction project, cash outflows for payment of certain operating expenditures may not align with progress payments to be received
during the relevant periods. In general, Primega Construction does not receive any prepayment from its customers. Nevertheless, during
the commencement of a project, Primega Construction may incur various costs, including: (i) purchase costs of construction materials
and supplies, (ii) rental costs for machinery, and (iii) settlement of our workers’ salaries and our subcontractors’ fees,
while progress payments will be paid after our construction work commences and is certified by the customers and/or architects or consultants
engaged by the customers. Accordingly, the cash inflows and outflows for a particular project may fluctuate as the construction work
progresses. If, during any particular period of time, there exists too many projects that require substantial cash outflow while we have
significantly less cash inflows during that period, our cash flow position may be adversely affected.
Further,
Primega Construction is subject to credit risks of its customers and its liquidity is dependent on its customers making prompt progress
payments due to Primega Construction. Primega Construction relies on cash inflow from customers to meet its payment obligation to its
suppliers and subcontractors, which is dependent on prompt settlement of progress payment by its customers. As such, we may record a
significant cash outflow in the event that Primega Construction takes up too many capital-intensive projects during a particular period
of time.
We
cannot assure you that Primega Construction will be able to recover all or any part of the amounts due from its customers or Primega
Construction will be able to collect all or any part of the trade receivables from its customers within the agreed credit terms or at
all. Further, in the event that disputes arise between Primega Construction and the main contractor or customer in relation to variation
orders, there is a possibility that it may take a longer time than the credit period offered to collect payments. Any failure by the
customers to make payments on time and in full may lead to mismatch in cash flows, which will negatively affect our cash flow position
and affect (i) the ability to repay suppliers and subcontractors; and (ii) tendering decisions, as Primega Construction may not be in
a position to take up any more new projects with a high upfront costs. This will negatively affect our business operation and financial
performance.
Claims
in connection with employees’ compensation or personal injuries may arise and affect its reputation and operations.
Injuries
to workers and casualties at construction sites are a common inherent risk in the construction industry. Claims of such nature expose
Primega Construction to the risk of bearing higher insurance premiums in the future and may damage our operating subsidiary’s reputation
as a main contractor if they turn into high-profile cases and become widely reported in the media or within the industry. Such incidents
may negatively affect our business prospects, reputation, and results of operations.
Any
deterioration in the prevailing market conditions in the construction industry may adversely affect our performance and financial condition.
All
our business operations are located in Hong Kong via Primega Construction. The direct customers of Primega Construction are primarily
property developers and main contractors of various types of property development and civil engineering projects in Hong Kong. The number
of projects awarded to Primega Construction depend highly on the prevailing market conditions in the construction industry, including
shortage of skilled labor, economic fluctuations in Hong Kong, availability of new projects in the private sector; and general conditions
and development of Hong Kong economy. If there is any significant deterioration in any of these factors, our operating results and financial
conditions could be adversely affected.
Primega
Construction is dependent on its key executives, management team, and professional staff.
Primega
Construction’s success and growth depend on the knowledge, experience, and expertise of its management team who is responsible
for overseeing the financial condition and performance, construction projects, and formulating business strategies. For example, Mr.
Man Siu Ming, our director, has over 10 years of experience in the construction industry.
As
Primega Construction’s work focuses on various work scopes, including the overall management of the projects, planning, and devising
of detailed work programs, design, and technical submissions, it is important for Primega Construction to retain our management staff
and technical personnel with appropriate and necessary industry expertise. Primega Construction has entered into a service agreement
with each of the directors and employment contracts with our senior management and technical personnel. These service agreements and
employment contracts can be terminated by either Primega Construction, the directors or the employees. There could be an adverse impact
on our operations should a significant number of the directors, senior management, or other key personnel with relevant expertise terminate
his or her employment with Primega Construction and appropriate persons could not be found to replace them in a timely manner. There
is no assurance that Primega Construction will be able to attract and retain capable staff members or that they will not resign in the
future.
Primega
Construction may be unable to obtain sufficient funding on terms acceptable, or at all.
The
future expansion of Primega Construction’s business may require it to incur additional borrowings and diversify sources of funding.
Whether we are able to raise additional capital at costs acceptable depends on the financial success of the current business of our operating
subsidiary and the successful implementation of key strategic initiatives. This may be affected by various financial, economic, and market
conditions and other factors, some of which are beyond our or our operating subsidiary’s control. If we or Primega Construction
is unable to obtain sufficient banking facilities on acceptable terms to meet its operational and expansion demands, this may put strains
on our cash flow and our ability to successfully implement our expansion plans.
The
insurance coverage of Primega Construction may be inadequate to protect it from potential losses.
Primega
Construction maintains insurance coverage against, among others, (i) liability for third party bodily injury at our office premises,
(ii) employees’ compensation insurance for our employees, (iii) third-party liability in relation to the use of our machinery such
as tipper trucks, excavators, diesel tank wagon, and other plant and machinery and vehicles.
Nonetheless,
there is no assurance that all potential losses and expenses incurred from damages or liabilities in relation to business can be fully
covered by the insurance taken out by Primega Construction. Certain types of risks, such as the risks are not covered by insurance because
they are either uninsurable or it is not cost justifiable to insure against such risks. To the extent that the insurance does not cover
such losses, damage, or liabilities, or held liable for insured losses exceeding insurance coverage, the resulting payment to cover such
losses, damage, or liabilities may have a material adversely effect on Primega Construction’s business.
We
may be subject to litigation, arbitration, or other legal proceeding risks.
We
may be subject to arbitration claims and lawsuits in the ordinary course of our business. As of the date of this prospectus, the Company,
Celestial Power, and Primega Construction are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion
of our management, is likely to have a material adverse effect on our business, financial condition, or operations. Actions brought against
us may result in settlements, awards, injunctions, fines, penalties, and other results adverse to us. A substantial judgment, settlement,
fine, or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that
period, or could cause us significant reputational harm, which could harm our business prospects.
Primega
Construction relies on its customers and subcontractors for the provision of machinery and equipment at construction sites.
The
construction projects of Primega Construction are generally machinery-intensive work. As such, its ability to handle existing projects
or compete for new projects highly depends on the number of machinery and equipment available for deployment at construction sites. As
of the date of this prospectus, the number of machinery and equipment owned by Primega Construction are limited, and it relies on its
subcontractors to procure the machinery. For example, the excavators of Primega Construction are small sized excavators. While these
excavators provide maneuverability, and are generally suitable for small-scale construction works, they are unable to be used for excavation
works, which require larger excavators. As such, Primega Construction may be unable to procure and/or handle further projects should
Primega Construction fail to identify suitable machinery and equipment.
Nevertheless,
there can be no assurance that Primega Construction would be able to rent a sufficient number of machinery or equipment at reasonable
costs and in a timely manner, nor we can guarantee that they would function properly at all material times and they would not become
obsolete as a result of technological developments in the construction industry. We can also not guarantee that the customers and subcontractors
can arrange immediate repair and/or replacement for impaired machinery and equipment for our projects in a timely and cost-effective
manner.
As
a result, Primega Construction may not be able to expand its capacity cater the increasing demands expected from future projects. If
Primega Construction fails to do so, our ability to handle existing projects or compete for new projects may be significantly impaired.
Primega
Construction relies on a stable workforce to carry out its construction projects. If Primega Construction or its subcontractors experience
any shortage of labor, industrial actions, strikes, or material increase in labor costs, our operations and financial results would be
adversely affected.
Primega
Construction relies on a stable workforce, either directly employed by Primega Construction or its subcontractors, to carry out its construction
projects. In particular, a large number of construction workers and machinery operators with various skills and expertise are required
for each construction project.
In
view of the current situation in the labor market, there is no assurance that the supply of labor and average labor costs will be stable.
All labor-intensive projects are more susceptible to labor shortage, and our subcontracting costs include the labor costs of our subcontractors.
If there is a significant increase in the costs of labor and Primega Construction has to retain more labor (or subcontractors retaining
their labor) by increasing their wages, the staff cost and/or subcontracting cost will increase and thus lower our profitability. On
the other hand, if Primega Construction or its subcontractors fail to retain our existing labor and/or recruit sufficient labor in a
timely manner to cope with our existing or future projects, Primega Construction may not be able to complete its projects on schedule
and may be subject to liquidated damages and/or incur a loss.
We
may be unable to successfully implement our future business plans and objectives.
Our
future business plans may be hindered by factors beyond our control, such as competition within the industry we operate; our ability
to cope with high exposure to financial risk, operational risk, market risk, and credit risk as our business and customer base expands;
and our ability to provide, maintain, and improve the level of human and other resources in servicing customers. As such, we cannot assure
that our future business plans will materialize, that our objectives will be accomplished fully or partially, or that our business strategies
will generate the intended benefits to us as initially contemplated. If we fail to implement our business development strategies successfully,
our business performance could be materially and adversely affected.
We
may in the future pursue acquisitions and joint ventures as part of our growth strategy. Any future acquisition or joint venture may
result in exposure to potential liabilities of the acquired companies and significant transaction costs, and it may also present new
risks associated with entering additional markets or offering new products or services and integrating the acquired companies or newly
established joint ventures. Moreover, we may not have sufficient management, financial, and other resources to integrate companies we
acquire or to successfully operate joint ventures, and we may be unable to profitably operate our expanded company structure. Additionally,
any new business that we may acquire or joint ventures we may form, once integrated with our existing operations, may not produce expected
or intended results.
A
sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results, and financial condition.
Since
late December 2019, the outbreak of COVID-19 spread rapidly throughout China and later to the rest of the world. On January 30, 2020,
the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a PHEIC, and later, on
March 11, 2020, a global pandemic. The COVID-19 outbreak has led governments across the globe to impose a series of measures intended
to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations
and large gatherings. From 2020 to the middle of 2021, a COVID-19 vaccination program had been greatly promoted around the globe; however,
several types of COVID-19 variants emerged in different parts of the world.
Supply
chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. For instance, China’s
extended COVID-19 lockdown of Shanghai, a major port and business center, has led to logistical disruptions that have almost cause the
transport of goods to be ground to a halt. These shortages and supply-chain disruptions are significant and widespread. Lockdowns in
several countries across the world, labor shortages, robust demand for tradable goods, disruptions to logistics networks, and capacity
constraints have resulted in increases in freight costs and delivery times. Primega Construction’s customers are mainly construction
contractors which are reliant on the availability of construction materials and supplies, and as such may suffer from plant closures
and supply shortages across the extended supply network. Supply chain issues may delay or halt the progress or commencement of construction
projects.
In
addition, multiple infected cases within a construction site may result in shortage of labor and, in more serious cases, may cause a
temporary halt in the site’s construction operation for a few days. Hence, our productivity and progress may also be negatively
affected.
Any
future impact on our results of operations will depend on, to a large extent, future developments and new information that may emerge
regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain
the spread or treat its impact, almost all of which are beyond our control. Given the general slowdown in economic conditions globally
and volatility in the capital markets, as well as the general negative impact of the COVID-19 outbreak on the construction industry,
we cannot assure you that we will be able to maintain the growth rate we have experienced or projected. We will continue to closely monitor
the situation throughout 2024 and beyond.
A
severe or prolonged downturn in the global economy, whether caused by economic or political instability, could materially and adversely
affect our business and results of operations.
The
recent global market and economic crisis stemming from COVID-19 resulted in recessions occurring in most major economies. According to
World Economic Outlook report published by the International Monetary Fund (“IMF”) in October 2023, the IMF forecasts global
gross domestic product to fall from an estimated 3.5% in 2022 to 3.0% in 2023 and further decline to 2.9% in 2024. The rise in central
bank interest rates to combat inflation and Russia’s war in Ukraine have contributed to the diminished expectations for economic
growth around the world. While, growth in emerging markets and developing economies in Asia is projected to moderately grow, from 4.5%
in 2022 to 5.2% and 4.8% in 2023 and 2024, China’s growth in terms of real GDP is forecasted to be lower than the rest of the region
at 5.0% and 4.2% in 2023 and 2024, mainly due to lower investment as a result of the real estate crisis and weakening confidence of investors.
Any prolonged slowdown in the global, Chinese and/or the Hong Kong economy may have a negative impact on our business, results of operations,
and financial condition, and continued turbulence in the international markets may adversely affect our ability to access the capital
markets to meet liquidity needs.
Our
business is conducted solely in Hong Kong through our operating subsidiary and is therefore heavily dependent on the economy of Hong
Kong. Economic conditions in Hong Kong are highly sensitive to global cycle and money flows. If there is any significant decline in the
Hong Kong economy and we are unable to generate business in other geographic locations, our profitability and business prospects will
be materially affected. Also, major market disruptions and adverse changes in market conditions and uncertainty in the regulatory climate
worldwide may adversely affect our business and industry or impair our ability to borrow or make any future financial arrangements.
Russia’s
invasion of Ukraine has destabilized the global economy. Russia’s military interventions in Ukraine have led to, and may lead to,
additional sanctions being levied by the United States, European Union, and other countries against Russia. This has led to a severe
energy crisis in Europe with widespread effect, including increasing cost of living in the region, bringing with it tightening monetary
conditions and appreciation of the US dollar against most other currencies. Although we do not have any direct exposure to Russia or
the adjoining geographic regions the knockdown effects on the global economy and the ramifications from the war could affect our business.
Any such disruptions caused by Russian military action or resulting sanctions may also magnify the impact of other risks described in
this section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly
developing and beyond their control. Prolonged unrest, intensified military activities, or more extensive sanctions impacting the region
could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on the business
outlook of our business.
Risks
Related to Our Ordinary Shares
An
active trading market for our Shares may not be sustained.
An active public market for
our Shares, however, may not develop or be sustained after this Offering, in which case the market price and liquidity of our
Shares will be materially and adversely affected. In recent years, the stock markets generally have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating performance of certain publicly traded companies. Broad
market and industry factors may significantly affect the market price of our Ordinary Shares, regardless of our actual operating performance.
In
addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods
of volatility in market price. Securities litigation brought against us following any volatility in the price of our Shares, regardless
of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and
operating results and divert management’s attention and resources from our business.
The
trading price of our Ordinary Shares could be subject to rapid and substantial volatility, which could make it difficult for prospective
investors to assess the rapidly changing value of our Ordinary Shares and result in substantial losses to the investors.
There
have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial
public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively
small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity
than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low
volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual
or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly
changing value of our Ordinary Shares.
The
trading prices volatility and wide fluctuations could be due to factors beyond our control. This may happen due to broad market and industry
factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed
companies based in Hong Kong and China. For example, if the trading volumes of our Ordinary Shares are low, persons buying or selling
in relatively small quantities may easily influence prices of our Ordinary Shares. This low volume of trades could also cause the price
of our Ordinary Shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of
our Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low
volume trading. The trading performances of other Hong Kong and Chinese companies’ securities after their offerings may affect
the attitudes of investors toward Hong Kong-based, U.S.-listed companies, which consequently may affect the trading performance of our
Ordinary Shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate
governance practices or fraudulent accounting, corporate structure, or matters of other Hong Kong and Chinese companies may also negatively
affect the attitudes of investors toward Hong Kong and Chinese companies in general, including us, regardless of whether we have conducted
any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations
that are unrelated to our operating performance, which may have a material and adverse effect on the trading price of our Ordinary Shares.
In
addition to the above factors, the price and trading volume of our Ordinary Shares may be highly volatile due to multiple factors, including
the following:
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regulatory
developments affecting us or our industry; |
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variations
in our revenues, profit, and cash flow; |
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changes
in the economic performance or market valuations of other financial services firms; |
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actual
or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; |
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in financial estimates by securities research analysts; |
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detrimental
negative publicity about us, our services, our officers, directors, Controlling Shareholder, our business partners, or our industry; |
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announcements
by us or our competitors of new service offerings, acquisitions, strategic relationships, joint ventures, capital raisings, or capital
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additions
to or departures of our senior management; |
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litigation
or regulatory proceedings involving us, our officers, directors, or Controlling Shareholder; |
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release
or expiry of lock-up or other transfer restrictions on our outstanding Ordinary Shares; and |
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sales
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Any
of these factors may result in large and sudden changes in the volume and price at which our Ordinary Shares will trade. As a result
of this volatility, investors may experience losses on their investment in our Ordinary Shares. A decline in the market price of our
Ordinary Shares also could adversely affect our ability to issue additional Ordinary Shares and our ability to obtain additional financing
in the future. No assurance can be given that an active market in our Ordinary Shares will develop or be sustained. If an active market
does not develop, holders of our Ordinary Shares may be unable to readily sell the shares they hold or may not be able to sell their
shares at all. In the past, shareholders of public companies have often brought securities class action suits against those companies
following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert
a significant amount of our management’s attention and other resources from our business and operations and require us to incur
significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful,
could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against
us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition.
Our
pre-IPO shareholders will be able to sell their shares subject to restrictions under Rule 144.
Our
pre-IPO shareholders may be able to sell their Ordinary Shares pursuant to Rule 144 under the Securities Act. Because these shareholders
have paid a lower price per Ordinary Share than participants in this offering, when they are able to sell their pre-IPO shares under
Rule 144, they may be more willing to accept a lower sales price than the IPO price. This fact could impact the trading price of the
stock following completion of the offering, to the detriment of participants in this offering. Under Rule 144, before our pre-IPO shareholders
can sell their shares, in addition to meeting other requirements, they must meet the required holding period.
Our
directors, officers, and principal shareholders have significant voting power and may take actions that may not be in the best interests
of our other shareholders.
We
are a “controlled company” as defined under the Nasdaq Stock Market Rules as our Controlling Shareholder owns a total of
17,840,000 of our issued and outstanding Ordinary Shares, representing approximately 74.3% of the total voting power.
The
interests of these shareholders may not be the same as or may even conflict with your interests. For example, these shareholders could
attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could
deprive our shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of us or our assets and might
affect the prevailing market price of our Ordinary Shares due to investors’ perceptions that conflicts of interest may exist or
arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.
Our
board of directors may decline to register the transfer of Ordinary Shares in certain circumstances.
Our
board of directors may under certain circumstances decline to register a transfer including any Ordinary Share which is not fully paid
up or on which we have a lien. Further, our board of directors may generally require any shareholder or any person proposing to acquire
our shares to provide information to show the right to make the transfer. If any such shareholder or proposed acquirer does not provide
such information, or if our board of directors has reason to believe that any certification or other information provided pursuant to
any such request is inaccurate or incomplete, our board of directors may decline to register any transfer or to effect any issuance
or purchase of shares to which such request is related.
Our
directors may also decline to register any transfer of any Ordinary Share unless (i) a fee of such maximum as Nasdaq may from time to
time determine to be payable (or such lesser sum as our board of directors may from time to time require) has been paid to our Company;
(ii) the instrument of transfer is lodged at the registered office or, as the case may be, the transfer office accompanied by the certificate
of the Shares to which it relates, and such other evidence as our board of directors may reasonably require to show the right of the
transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of
that person so to do); (iii) the instrument of transfer is in respect of only one class of Share; (iv) the Shares concerned are free
of any lien in favor of the Company; and (v) if applicable, the instrument of transfer is properly stamped.
If
our directors refuse to register a transfer, they shall, within two months after the date on which the instrument of transfer
was lodged with the Company, send to each of the transferor was lodged and the transferee notice of such refusal. The registration
of transfers of shares or of any class of shares may, after compliance with any notice requirement of Nasdaq, be suspended and
the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however,
that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.
This,
however, is unlikely to affect market transactions of the Ordinary Shares purchased by investors in the public offering. Once the Ordinary
Shares have been listed, the legal title to such Ordinary Shares and the registration details of those Ordinary Shares in the Company’s
register of members will remain with the Depository Trust Company. All market transactions with respect to those Ordinary Shares will
then be carried out without the need for any kind of registration by the directors, as the market transactions will all be conducted
through the Depository Trust Company systems.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
After
our initial public offering, we have become subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure
controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange
Act is accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified
in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple
errors or mistakes. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people
or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements
due to error or fraud may occur and not be detected.
We
do not intend to pay dividends for the foreseeable future.
We
currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare
or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares
if the market price of our Ordinary Shares increases. Our board of directors has complete discretion as to whether to distribute dividends,
subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but
no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend
out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company
being unable to pay its debts as they fall due in the ordinary course of business.
Securities
analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our
Ordinary Share price or trading volume to decline.
The
trading market for our Ordinary Shares will be influenced to some extent by the research and reports that industry or financial analysts
publish about us and our business. We do not control these analysts. As a new public company, we may be slow to attract research coverage
and the analysts who publish information about our Ordinary Shares will have had relatively little experience with us or our industry,
which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
If any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our share price,
our share price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly,
we could lose visibility in the market, which in turn could cause our share price or trading volume to decline and result in the loss
of all or a part of your investment in us.
Certain
judgments obtained against us by our shareholders may not be enforceable.
We
are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all
of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the
assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service of
process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including
judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment
against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands,
see “Enforcement of Civil Liabilities.” As a result of the foregoing, our shareholders may have more difficulties in protecting
their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation
incorporated in a jurisdiction in the United States.
You
may have more difficulty protecting your interests than you would as a shareholder of a U.S. corporation.
We
are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by the provisions of our
Memorandum and Articles of Association, and by the provisions of the Companies Act and the common law of the Cayman Islands. The rights
of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary duties of our directors to
us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands
is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the
decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands.
The
rights of shareholders and the fiduciary responsibilities of our directors and officers under Cayman Islands law are not as clearly established
as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as Delaware)
have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies
may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders
of Cayman Islands-exempted companies have no general rights under Cayman Islands law to inspect corporate records (other than the
memorandum and articles of association and any special resolutions passed by such companies, and the register of mortgages and charges
of such companies) or to obtain copies of lists of shareholders of these companies. This may make it more difficult for you to obtain
the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection
with a proxy contest.
Certain
corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies
incorporated in other jurisdictions such as the United States. To the extent we choose to follow home country practices with respect
to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations
applicable to U.S. domestic issuers.
As
a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken
by management, members of the board of directors, or our Controlling Shareholder than they would as public shareholders of a company
incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws
applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences
in Corporate Law.”
We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and, as such, we are exempt from certain provisions
applicable to U.S. domestic public companies.
Because
we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to U.S. domestic issuers, including:
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the
rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; |
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the
sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect to a security registered
under the Exchange Act; |
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the
sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability
for insiders who profit from trades made in a short period of time; and |
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the
selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
We
will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish
our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq Capital Market. Press
releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we
are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the
SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to
you were you investing in a U.S. domestic issuer.
As
a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ
significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they
would enjoy if we complied fully with Nasdaq corporate governance listing standards.
As
a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home
country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ
significantly from corporate governance listing standards. Currently, we plan to rely on some home country practices with respect to
our corporate governance. However, if we choose to follow home country practices in the future, our shareholders may be afforded less
protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.
We
may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
We
are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting
requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an
issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than
50% of our Ordinary Shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements
necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required
to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive
than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and
our officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions
of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements
under the Nasdaq rules. As a U.S.-listed public company that is not a foreign private issuer, we will incur significant additional legal,
accounting, and other expenses that we will not incur as a foreign private issuer in order to maintain a listing on a U.S. securities
exchange.
There
can be no assurance that we will not be a PFIC for U.S. federal income tax purposes for any taxable year, which could result in adverse
U.S. federal income tax consequences to U.S. holders of our Ordinary Shares.
A
non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain
types of “passive” income, or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of
the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the
“asset test”). Based on our current and expected income and assets (taking into account the cash proceeds and our market
capitalization following our initial public offering), we do not presently expect to be a PFIC for the current taxable year or the foreseeable
future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive
inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance
that the Internal Revenue Service (“IRS”) will agree with our conclusion or that the IRS would not successfully challenge
our position. Fluctuations in the market price of our Ordinary Shares may cause us to become a PFIC for the current or subsequent taxable
years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our Ordinary
Shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash
raised in this offering. If we were to be or become a PFIC for any taxable year during which a U.S. holder holds our Ordinary Shares,
certain adverse U.S. federal income tax consequences could apply to such U.S. holder. See “Material Tax Income Consideration —
Material U.S. Federal Income Tax Considerations for U.S. Holders — PFIC Consequences.”
We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We
are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable
to other public companies that are not emerging growth companies, including, most significantly, not being required to comply with the
auditor attestation requirements of Section 404 of Sarbanes-Oxley for so long as we remain an emerging growth company. As a result, if
we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may
deem important.
The
JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards. We do not plan
to opt out of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements may not
be comparable to companies that comply with public company effective data.
We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth
company.”
We
will incur significant legal, accounting, and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley
Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently implemented by the SEC, impose various requirements on the
corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will
remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the
completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed
to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million
as of the prior June 30; and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year
period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable
generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment
of the emerging growth company’s internal control over financial reporting and permission to delay the adoption of new or revised
accounting standards until such time as those standards apply to private companies.
Compliance
with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time consuming
and costly. After we are no longer an “emerging growth company,” or until five years following the completion of our IPO,
whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with
the requirements of Section 404 of Sarbanes-Oxley and the other rules and regulations of the SEC. For example, as a public company, we
will be required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls
and procedures. We will incur additional costs in obtaining director and officer liability insurance. In addition, we will incur additional
costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve
on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules
and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing
of such costs.
As
a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt our Company from certain corporate
governance requirements that could have an adverse effect on our public shareholders.
Our
directors and officers beneficially own a majority of the voting power of our issued and outstanding Ordinary Shares. Under Rule 4350(c)
of the Nasdaq Capital Market, a company of which more than 50% of the voting power is held by an individual, group, or another company
is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement
that a majority of our directors be independent, as defined in the Nasdaq Capital Market Rules, and the requirement that our compensation
and nominating and corporate governance committees consist entirely of independent directors. Although we do not intend to rely on the
“controlled company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If
we elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be
independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent
directors. Accordingly, during any time while we remain a controlled company relying on the exemption and during any transition period
following a time when we are no longer a controlled company, you would not have the same protections afforded to shareholders of companies
that are subject to all of the Nasdaq Capital Market corporate governance requirements. Our status as a controlled company could cause
our Ordinary Shares to be less attractive to certain investors or otherwise harm our trading price.
ENFORCEMENT
OF CIVIL LIABILITIES
We
are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman
Islands because of certain benefits associated with being a Cayman Islands exempted company, such as political and economic stability,
an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions, and the availability
of professional and support services. However, the Cayman Islands has a less developed body of securities laws as compared to the United
States and provides less protection for investors. In addition, Cayman Islands companies do not have standing to sue before the federal
courts of the United States.
Substantially
all of our assets are located outside the United States. In addition, all our directors and executive officers are nationals or residents
of jurisdictions other than the United States and substantially all of their assets are located outside the United States. As a result,
it may be difficult or impossible for you to effect service of process within the United States upon us or these persons, or to enforce
judgments obtained in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities
laws of the United States, or any state in the United States. It may also be difficult for you to enforce judgments obtained in U.S.
courts based on the civil liability provisions of the U.S. federal securities laws against us and our executive officers and directors.
We
have appointed Cogency Global Inc. as our agent to receive service of process with respect to any action brought against us in the United
States in connection with this offering under the federal securities laws of the United States or of any state in the United States.
Cayman
Islands
Enforceability
Ogier,
our counsel as to the laws of the Cayman Islands
has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S.
courts obtained against us based on certain civil liability provisions of the securities laws of the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers predicated
upon the securities laws of the United States or any state in the United States.
There
is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands
will in certain circumstances recognize and enforce a foreign judgment, without any re-examination or re-litigation of matters adjudicated
upon, provided such judgment: (a) is given by a foreign court of competent jurisdiction; (b) imposes on the judgment debtor a liability
to pay a liquidated sum for which the judgment has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty; (e)
was not obtained by fraud; and (f) is not of a kind the enforcement of which is contrary to natural justice or the public policy of the
Cayman Islands. Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman
Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions.
Substantially
all of our assets are located outside the United States. In addition, all of our directors and officers are nationals or residents of
jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As
a result, it may be difficult for investors to effect service of process within the United States upon us or these persons.
Name |
|
Position |
|
Nationality |
|
Residence |
|
|
|
|
|
|
|
Mr.
Man Siu Ming |
|
Director,
Chairman of the board |
|
Chinese |
|
Hong
Kong |
|
|
|
|
|
|
|
Mr.
Kan Chi Wai |
|
Director,
Chief Executive Officer |
|
Chinese |
|
Hong
Kong |
|
|
|
|
|
|
|
Mr.
Man Wing Pong |
|
Chief
Financial Officer |
|
Chinese |
|
Hong
Kong |
|
|
|
|
|
|
|
Mr.
Cheng Hin Fung Alvin |
|
Independent
Director |
|
Chinese |
|
Hong
Kong |
|
|
|
|
|
|
|
Mr.
Suen To Wai |
|
Independent
Director |
|
Chinese |
|
Hong
Kong |
|
|
|
|
|
|
|
Mr.
Wu Loong Cheong Paul |
|
Independent
Director |
|
Chinese |
|
Hong
Kong |
Hong
Kong
Our
counsel as to the laws of Hong Kong, has advised us that there is uncertainty as to whether the courts of Hong Kong would (i) recognize
or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of
the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in Hong Kong against
us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
A
judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common
law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder and then seeking summary judgment on the
strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money
(not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty), and (2) final and conclusive
on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained
by fraud, (b) the proceedings in which the judgment was obtained were opposed to natural justice, (c) its enforcement or recognition
would be contrary to the public policy of Hong Kong, (d) the court of the United States was not jurisdictionally competent, or (e) the
judgment was in conflict with a prior Hong Kong judgment.
Hong
Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the
enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated
solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States.
USE
OF PROCEEDS
All
of the Ordinary Shares offered by the Selling Shareholders pursuant to this prospectus will be sold by the Selling Shareholders for their
respective accounts. We are not selling any securities under this prospectus. We will not receive any of the proceeds from these sales.
DIVIDEND
POLICY
We
currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business, and we do
not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will
be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements,
contractual requirements, business prospects, other factors the board of directors deems relevant, and subject to the restrictions contained
in any future financing instruments.
During
the years ended March 31, 2024 and 2023, PGHL did not declare or pay any dividends and there was no transfer of assets among PGHL and
its subsidiaries.
The
declaration, amount, and payment of any future dividends will be at the sole discretion of our board of directors, subject to compliance
with applicable Cayman Islands laws regarding solvency. Our board of directors will take into account general economic and business conditions;
our financial condition and results of operations; our available cash and current and anticipated cash needs; capital requirements; contractual,
legal, tax, and regulatory restrictions; and other implications on the payment of dividends by us to our shareholders or by our subsidiaries
to us, and such other factors as our board of directors may deem relevant.
Under
Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances
may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.
In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our
directors.
As
we are a holding company with no substantial business operations, we will rely on dividends paid to us by our subsidiaries for our cash
requirements, including funds to pay any dividends and other cash distributions to our shareholders, service any debt we may incur, and
pay our operating expenses. Our ability to pay dividends to our shareholders will depend on, among other things, the availability of
dividends from our subsidiaries. According to the BVI Business Companies Act 2004 (as amended), a British Virgin Islands company may
make dividends distribution to the extent that immediately after the distribution, the value of the company’s assets exceeds its
liabilities and that such company is able to pay its debts as they fall due. According to the Companies Ordinance of Hong Kong, a Hong
Kong company may only make a distribution out of profits available for distribution. Under the current practice of the Inland Revenue
Department of Hong Kong, no tax is payable in Hong Kong in respect to dividends paid by us.
Cash
dividends, if any, on our Ordinary Shares will be paid in U.S. dollars.
CORPORATE
HISTORY AND STRUCTURE
Corporate
History and Structure
We
are a holding company incorporated under the laws of the Cayman Islands on April 14, 2022. Our wholly-owned direct subsidiary is Celestial
Power, a British Virgin Islands holding company incorporated on February 22, 2022. We operate our business through Primega Construction,
our Hong Kong subsidiary incorporated on July 31, 2018, which is wholly owned by Celestial Power. Primega Construction is principally
engaged in soil and rock transportation services in Hong Kong.
The
chart below illustrates our corporate structure and identifies our subsidiaries as of the date of this prospectus:
As
of the date of this prospectus, our Controlling Shareholder owns 74.3% of our issued share capital.
In
February 2022, Celestial Power was incorporated under the laws of the BVI as the intermediate holding company of PGHL. One (1) share
of Celestial Power, representing its entire issued share capital, was allotted and issued to PGHL on May 4, 2022.
In
April 2022, PGHL was incorporated under the laws of the Cayman Islands as an exempted company with limited liability, as the holding
company of our BVI and Hong Kong subsidiary.
In
June 2022, as part of a reorganization, PGHL acquired, through Celestial Power, all the shares of Primega Construction from the Controlling
Shareholder and became the ultimate holding company of Celestial Power and Primega Construction. On April 14, 2022, PGHL issued 11,249,999
Ordinary Shares to the Controlling Shareholder.
On
July 20, 2022, the Controlling Shareholder sold 551,250 Ordinary Shares each to Primewin Corporate Development Limited and Shun Kai Investment
Development Limited. Primewin Corporate Development Limited and Shun Kai Investment Development Limited are wholly owned by Mr. Lau Wing
Him Perry and Mr. Chan Wan Yiu, respectively. Primewin Corporate Development Limited was one of our major customers for the year ended
March 31, 2021. Mr. Chan Wan Yiu is an employee of Primega Construction, our Hong Kong operating subsidiary.
On
December 5, 2023, the Controlling Shareholder entered into individual sale and purchase agreements with each of Dusk Moon International
Limited and Moss Mist Investment Limited. Pursuant to these agreements, the Controlling Shareholder agreed to sell, and each of Dusk
Moon International Limited and Moss Mist Investment Limited agreed to purchase, 551,250 Ordinary Shares.
As
part of the series of reorganization transactions to be completed before the offering, a 2-for-1 share split was conducted by the Company
on February 28, 2024. After the share split, the authorized share capital of the Company consists of US$50,000 divided into 1,000,000,000
Ordinary Shares, par value US$0.00005 each, and the issued share capital of the Company then consisted of US$1,125 divided
into 22,500,000 Ordinary Shares, par value of US$0.00005 each.
The
following table sets forth the breakdown of the foregoing transactions among the Controlling Shareholder and the pre-IPO shareholders:
Name of the pre-IPO shareholders | |
Number of Ordinary Shares purchased
from the Controlling Shareholder(1) | | |
Consideration | |
Primewin Corporate Development Limited | |
| 1,102,500 | | |
$ | 103,000 | |
Shun Kai Investment Development Limited | |
| 1,102,500 | | |
$ | 103,000 | |
Dusk Moon International Limited | |
| 1,102,500 | | |
$ | 206,000 | |
Moss Mist Investment Limited | |
| 1,102,500 | | |
$ | 206,000 | |
(1) |
Retroactively
adjusted to reflect the share split of our Ordinary Shares at a ratio of 2-for-1, which occurred on February 28, 2024. |
On
July 24, 2024, the Company closed its initial public offering of 1,500,000 Ordinary Shares at a public offering price of US$4.00
per Ordinary Share.
As
of the date of this prospectus, 24,000,000 Ordinary Shares were issued and outstanding.
The
following table sets forth the breakdown of equity ownership of the Company as of the date of this prospectus:
Shareholders | |
Number of Ordinary Shares Owned | | |
Percentage of Ordinary Shares Owned | |
Man Siu Ming | |
| 17,840,000 | | |
| 74.3 | % |
Primewin Corporate Development Limited | |
| 1,102,500 | | |
| 4.6 | % |
Shun Kai Investment Development Limited | |
| 1,102,500 | | |
| 4.6 | % |
Dusk Moon International Limited | |
| 1,102,500 | | |
| 4.6 | % |
Moss Mist Investment Limited | |
| 1,102,500 | | |
| 4.6 | % |
Others | |
| 1,750,000 | | |
| 7.3 | % |
Our
principal office is located at Room 2912, 29/F., New Tech Plaza, 34 Tai Yau Street, San Po Kong, Kowloon, Hong Kong. Our telephone number
is (+852) 3997 3682. Our registered office in the Cayman Islands is located at the office of Appleby Global Services (Cayman) Limited,
71 Fort Street, PO Box 500, George Town, Grand Cayman, Kyl-1106, Cayman Islands.
Our
agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor New York, NY 10168.
Information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into,
this prospectus.
Name |
|
Background |
|
Ownership |
CELESTIAL
POWER GROUP LIMITED |
|
-
A BVI company
-
Incorporated in February 2022
-
Issued 100 shares of US$1.00 each
–
Intermediate holding company |
|
100%
owned by PGHL |
|
|
|
|
|
Primega
Construction Engineering Co., Limited |
|
-
A Hong Kong company
-
Incorporated in July 2018
-
Issued 10,000 ordinary shares of HK$1.00 each
-
Provision of soil and rock transportation services |
|
100%
owned by Celestial Power |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus
contain forward-looking statements based upon current beliefs, plans, and expectations that involve risks, uncertainties, and assumptions.
Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements
as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should
carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could
cause actual results to differ materially from our forward-looking statements.
Overview
We
are a provider of transportation services that employs environmentally friendly practices with the aim of facilitating reuse of C&D
materials and reduction of construction waste. Through our operating subsidiary in Hong Kong, we operate in the construction industry,
mainly handling transportation of materials excavated from construction sites. Our services principally comprise of (i) soil and rock
transportation services; (ii) diesel oil trading; and (iii) construction works, which mainly include ELS works and bored piling. We generally
provide our services as a subcontractor to other construction contractors in Hong Kong.
Key
Factors that Affect Results of Operations
Our
results of operations have been and will continue to be affected by various factors, including those set out below:
Market
demand
The
demand for our services as well as our diesel oil products is driven by the development of the construction industry which includes development
of residential, commercial, industrial and infrastructure projects. The timing, size and nature of these projects will, on the other
hand, be determined by a number of factors such as the Hong Kong government’s spending budget on construction projects, the investment
of property developers and the general conditions and prospects of the local economy.
Political
condition and laws and regulations in Hong Kong
Our
key operations are in Hong Kong. However, due to the long-arm provisions under the current PRC laws and regulations, the PRC government
may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at
any time, which could result in a material change in our operations and/or the value of our Ordinary Shares. Accordingly, our business,
prospects, financial condition, and results of operations may be influenced to a significant degree by the political, economic, and social
conditions in the PRC generally and by the continued economic growth in China as a whole. Accordingly, our results of operations and
prospects are, to a significant degree, subject to economic, political, and legal developments in the PRC.
Hong
Kong is a Special Administrative Region of the PRC, and the basic policies of the PRC regarding Hong Kong are reflected in the Basic
Law, namely the Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative,
and independent judicial powers, including that of final adjudication under the principle of “one country, two systems.”
However, there is no assurance that there will not be any changes in the economic, political, and legal environment in Hong Kong in the
future. Since our operations are based in Hong Kong, any change of such political arrangements may pose immediate threat to the stability
of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financial positions.
Competition
from other players in the market
We
generally secure our projects after undergoing a tendering process. We submit quotation or tender price for a project that is based on
our project cost estimate and a mark-up margin. The construction industry in Hong Kong is highly competitive, and it is often the case
that multiple of our competitors bid for the same project that we do. We thus generally scale down our mark-up margin to be submitted
to the project owner when competition for a project is perceived to be intense, and hence, the operating profit margin and our results
of operation may be adversely affected.
Our
ability to attract new customers and secure new projects
Our
success depends in large part upon widespread adoption of our quality, safety, and timeliness by our customers. In order to attract new
customers and continue to expand our customer base, we must appeal to and attract customers who identify with our project management
expertise. In addition, our projects are non-recurrent in nature, and our future success depends in part on our ability to increase our
project backlog over time. If we are unable to timely secure sufficient new projects when existing projects are completed, our turnover
and, hence, results of operations may have a material setback and we may also suffer from higher staff turnover.
Cost
control and management
Our
cost of sales mainly comprised subcontracting charges, fuel costs, depreciation of machinery and direct labor costs. Although we determine
our project prices based on a cost-plus method with reference to the time, costs and potential income estimated to be involved in a project,
the actual time and costs involved in completing our foundation and related projects may be adversely escalated in materials and labor,
adverse weather conditions, and changes in rules, regulations, and policies in Hong Kong. Therefore, any failure to control and manage
the cost and time involved in a project or failure to identify buys for reusable excavated materials may give rise to delays in completion
of work and/or cost overruns, which in turn may materially and adversely affect our financial condition, profitability, and liquidity.
Income
taxes
Cayman
Islands
The
Company is incorporated in the Cayman Islands. The Cayman Islands currently levy no taxes on individuals or corporations based upon profits,
income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely
to be material to our Company levied by the government of the Cayman Islands except for stamp duties which may be applicable on
instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is a party to
a double tax treaty entered with the United Kingdom in 2010 but is otherwise not party to any double tax treaties that are applicable
to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and
capital in respect of our ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on
the payment of a dividend or capital to any holder of our ordinary shares, as the case may be, nor will gains derived from the disposal
of our ordinary shares be subject to Cayman Islands income or corporation tax.
The Cayman Islands enacted
the International Tax Co-operation (Economic Substance) Act (Revised) together with the Guidance Notes published by the Cayman Islands
Tax Information Authority from time to time. The Company is required to comply with the economic substance requirements from July 1,
2019 and make an annual report in the Cayman Islands as to whether or not it is carrying on any relevant activities and if it is, it
must satisfy an economic substance test.
BVI
We
own Celestial Power, which is incorporated in the BVI and is not subject to tax on income or capital gains under current BVI law. In
addition, upon payments of dividends by these entities to their shareholders, no BVI withholding tax will be imposed.
Hong
Kong
We
own Primega Construction, our operating subsidiary, through Celestial Power. Primega Construction is incorporated in Hong Kong and is
subject to Hong Kong profits tax at a rate of 8.25% for the assessable profits of first HK$2 million and 16.5% for the remaining assessable
profits. Under Hong Kong tax law, Primega Construction is exempted from income tax on its foreign-derived income, and there is no withholding
tax in Hong Kong on remittance of dividends.
Recent
accounting pronouncements
See
the discussion of the recent accounting pronouncements contained in Note 2 to the consolidated financial statements, “Recent accounting
pronouncements”.
Results
of Operations
Year
ended March 31, 2023, compared to year ended March 31, 2024
The
following table sets forth a summary of the consolidated results of operations of us for the periods indicated, both in absolute amount
and as a percentage of our total revenues.
| |
For the year ended March 31, | |
| |
2023 | | |
2024 | | |
% of change | |
| |
US$ | | |
US$ | | |
| |
Revenues – third parties | |
| 8,312,663 | | |
| 13,464,430 | | |
| 62.0 | % |
Revenues – related parties | |
| 2,830,475 | | |
| - | | |
| (100.0 | )% |
| |
| 11,143,138 | | |
| 13,464,430 | | |
| 20.8 | % |
Cost of sales – third parties | |
| (7,802,451 | ) | |
| (9,672,689 | ) | |
| 24.0 | % |
Cost of sales – related parties | |
| (1,162,640 | ) | |
| (1,023,137 | ) | |
| (12.0 | )% |
| |
| (8,965,091 | ) | |
| (10,695,826 | ) | |
| 19.3 | % |
Gross profit | |
| 2,178,047 | | |
| 2,768,604 | | |
| 27.1 | % |
Operating expenses: | |
| | | |
| | | |
| | |
General and administrative expenses | |
| (1,188,713 | ) | |
| (1,336,394 | ) | |
| 12.4 | % |
Income from operations | |
| 989,334 | | |
| 1,432,210 | | |
| 44.8 | % |
Other income, net | |
| 588,131 | | |
| 116,397 | | |
| (80.2 | )% |
Profit from operations | |
| 1,577,465 | | |
| 1,548,607 | | |
| (1.8 | )% |
Interest expense | |
| (190,561 | ) | |
| (210,713 | ) | |
| 10.6 | % |
Income before tax expense | |
| 1,386,904 | | |
| 1,337,894 | | |
| (3.5 | )% |
Income tax expense | |
| (219,644 | ) | |
| (246,609 | ) | |
| 12.3 | % |
Net income | |
| 1,167,260 | | |
| 1,091,285 | | |
| (6.5 | )% |
Revenues
Our
revenues increased by 20.8% to US$13,464,430 for the year ended March 31, 2024, from US$11,143,138 (of which US$2,830,475 were generated
from related parties) for the year ended March 31, 2023. The revenues increase was principally a result of the significant increase in
our undertaking of construction works.
The
following table sets out revenues generated from different services during the two years ended March 31, 2024:
| |
For the year ended March 31, | |
| |
2023 | | |
2024 | |
| |
US$ | | |
% | | |
US$ | | |
% | |
Revenues | |
| | | |
| | | |
| | | |
| | |
Soil and rock transportation services | |
| 9,858,453 | | |
| 88.5 | % | |
| 8,436,223 | | |
| 62.7 | % |
Diesel oil trading | |
| 729,930 | | |
| 6.6 | % | |
| - | | |
| 0.0 | % |
Miscellaneous construction works | |
| 554,755 | | |
| 5.0 | % | |
| 5,028,207 | | |
| 37.3 | % |
Total | |
| 11,143,138 | | |
| 100.0 | % | |
| 13,464,430 | | |
| 100.0 | % |
For
the year ended March 31, 2024, as compared to 2023, revenues from soil and rock transportation services decreased as we had fewer number
of projects on hand for these services and the high revenue base of fiscal year 2023 as we had completed significant number of projects.
No revenues were derived from the trading of diesel oil. We had a focus of expanding construction works because our management considered
that this segment had a better growth potential in Hong Kong and by undertaking construction works of higher complexity, we could have
a chance to increase profitability. As such, revenues from miscellaneous construction works grew by 806.4% in 2024 year-on-year.
Cost
of sales
Our
total cost of sales increased by 19.3% to US$10,695,826 for the year ended March 31, 2024, from US$8,965,091 for the year ended March
31, 2023. The increase was mainly due to the increase in the cost of the carrying out of the miscellaneous construction works, as we
recognized significantly growth in the segment revenues. Cost of sales charged by third parties increased by 24.0% to US$9,672,689 for
the year ended March 31, 2024, from US$7,802,451 for 2023. Cost of sales charged by related parties decreased by 12.0% to US$1,023,137
for the year ended March 31, 2024, from US$1,162,640 for 2023. Our cost of sales mainly comprised subcontracting charges, cost of construction
materials, fuel costs, depreciation of machinery and direct labor costs. During the year ended March 31, 2024, as we did not generate
income from the trading of diesel oil, there was no cost incurred in this segment. We had less cost in soil and rock transportation but
higher cost from miscellaneous construction works in 2024 as compared to 2023 due to the respective change in segment revenue.
Gross
profit and gross profit margin
Our
gross profit increased by 27.1% to US$2,768,604 for the year ended March 31, 2024, from US$2,178,047 for the year ended March 31, 2023.
Our gross profit margin increased slightly to 20.6% for the year ended March 31, 2024, from 19.5% for the year ended March 31, 2023.
The increase in gross profit margin could be attributed to the temporary stop of diesel oil trading, which by nature had a low gross
profit margin and the undertaking of more miscellaneous construction works, which on average had a higher gross profit margin during
the year ended March 31, 2024. The following table summarizes the gross profit and gross profit margin of different segments for the
periods indicated:
| |
For the year ended March 31, | |
| |
2023 | | |
2024 | |
| |
Gross profit | | |
Gross margin | | |
Gross profit | | |
Gross margin | |
| |
US$ | | |
% | | |
US$ | | |
% | |
Soil and rock transportation services | |
| 2,064,302 | | |
| 20.9 | % | |
| 1,548,076 | | |
| 18.4 | % |
Diesel oil trading | |
| 37,392 | | |
| 5.1 | % | |
| - | | |
| N/A | |
Miscellaneous construction works | |
| 76,353 | | |
| 13.8 | % | |
| 1,220,528 | | |
| 24.3 | % |
Overall | |
| 2,178,047 | | |
| 19 .5 | % | |
| 2,768,604 | | |
| 20.6 | % |
General
and administrative expenses
For
the years ended March 31, 2023 and 2024, our general and administrative expenses consisted mainly of staff costs, transportation costs,
amortization of right-of-use assets for both operating lease and finance lease (motor vehicles for administrative purpose and temporarily
idle machineries due to construction design problems), provision of credit loss, legal and professional fees, insurance expenses, office
and rental expenses and other miscellaneous expenses. The following table sets forth a breakdown of our general and administrative expenses
for the years ended March 31, 2023 and 2024:
| |
For the year ended March 31, | |
| |
2023 | | |
2024 | | |
% of change | |
| |
US$ | | |
US$ | | |
| |
Legal and professional fees | |
| 41,017 | | |
| 313,190 | | |
| 663.6 | % |
Office expenses | |
| 64,320 | | |
| 23,838 | | |
| (62.9 | )% |
Depreciation | |
| 291,334 | | |
| 151,059 | | |
| (48.1 | )% |
Others | |
| 53,344 | | |
| 80,687 | | |
| 51.3 | % |
Staff costs | |
| 438,871 | | |
| 504,763 | | |
| 15.0 | % |
Insurance | |
| 31,228 | | |
| 47,557 | | |
| 52.3 | % |
Transportation | |
| 66,848 | | |
| 237,822 | | |
| 255.8 | % |
(Reversal) Provision of credit loss | |
| 201,751 | | |
| (22,522 | ) | |
| (111.2 | )% |
Total | |
| 1,188,713 | | |
| 1,336,394 | | |
| 12.4 | % |
Our
general and administrative expenses increased by 12.4% to US$1,336,394 for the year ended March 31, 2024, from US$1,188,713 for the year
ended March 31, 2023, principally due to the increase of legal and professional fees and transportation expenses. A significant portion
of the legal and professional fees were related to the Company’s IPO and thus one-off. We made reversal to previously provisioned
credit loss as we recovered the accounts receivable from customers, which offset some increase of the general and administrative expenses.
Interest
expense
Our
interest expense is mainly related to our interest expenses incurred by finance leases of motor vehicles and machinery, and bank borrowings.
Our interest expense increased by 10.6% to US$210,713 for the year ended March 31, 2024, from US$190,561 for the year ended March 31,
2023. The interest expenses increased because the bank loans were taken out half-way during fiscal year 2023 and incurred 6-month interest
as compared to full year interest being incurred in fiscal year 2024.
Other
income
Other
income comprised mainly income from machinery rental, site management income, sublease income, sale of rocks, and miscellaneous income.
The following table sets for the breakdown of our other income for the years ended March 31, 2023 and 2024:
| |
For the year ended March 31, | |
| |
2023 | | |
2024 | |
| |
US$ | | |
US$ | |
Sale of scrap materials | |
| 411,636 | | |
| 182,397 | |
Sublease income | |
| 143,590 | | |
| - | |
Site management income | |
| 39,184 | | |
| - | |
Parking fines | |
| (51,538 | ) | |
| (69,051 | ) |
Government grant | |
| 18,462 | | |
| - | |
Miscellaneous income | |
| 26,797 | | |
| 3,051 | |
Total other income, net | |
| 588,131 | | |
| 116,397 | |
Income
tax expense
We
are not subject to any income tax in the Cayman Islands and the BVI pursuant to the rules and regulations in those jurisdictions, but
our subsidiary, Primega Construction, is subject to Hong Kong profits tax. Our income tax expense was US$246,609 for the year ended March
31, 2024, increased by 12.3% from US$219,644 for the year ended March 31, 2023. Effective tax rate for the two years ended March 31,
2023 and 2024 was 15.8% and 18.4%.
Net
income
Our
net income decreased by 6.5% to US$1,091,285 for the year ended March 31, 2024, as compared to US$1,167,260 for the year ended March
31, 2023. Net profit margin was 8.1% and 10.5% for the year ended March 31, 2024 and 2023, respectively. The decrease in net income was
mainly due to the increase in general and administrative expenses as we incurred higher staff costs, transportation fee and professional
fees and expenses for the IPO.
LIQUIDITY
AND CAPITAL RESOURCES
Cash
Flows
Years
ended March 31, 2024 and 2023
Our
use of cash was primarily related to operating activities and purchase of property, plant and equipment and entering into finance leases.
We have historically financed our operations primarily through our cash flow generated from our operations and bank borrowings.
We
believe we have sufficient cash generated from operations to meet our regular working capital requirements based on the contracts on
hand and cashflow projection for the next 12 months from the end of fiscal year 2024, which is also based on our management’s experience
and the financial data available.
We
have strategic plans to expand our business by undertaking more construction projects and strengthening our project management team,
as well as acquiring additional machinery and equipment including tipper trucks and excavation machines. We plan to utilize the proceeds
raised from the Company’s IPO to achieve this. Additionally, in the event of insufficient liquidity to meet our current obligations,
the Company may consider plans to raise capital through offering additional shares or tapping into an appropriate capital market.
The
following table sets forth a summary of our cash flows information for the years indicated:
| |
For the year ended March 31, | |
| |
2023 | | |
2024 | |
| |
US$ | | |
US$ | |
Cash and cash equivalents at the beginning of the year | |
| 111,062 | | |
| 240,219 | |
Net cash provided by operating activities | |
| 839,954 | | |
| 2,394,212 | |
Net cash used in investing activities | |
| (46,398 | ) | |
| - | |
Net cash used in financing activities | |
| (664,399 | ) | |
| (2,144,996 | ) |
Cash and cash equivalents at the end of the year | |
| 240,219 | | |
| 489,435 | |
Operating
activities
Our
cash inflow from operating activities was principally receipt of payments from customers. Our cash outflows from operating activities
were principally due to payments for purchase of diesel oils, subcontracting fees, staff costs, and administrative and other operating
expenses. Net cash provided by operating activities reflects our net income adjusted for non-cash items, including non-cash operating
lease expense, depreciation, deferred tax expenses, loss on disposal of right-of-use assets – finance lease, and credit loss, and changes in working capital items including accounts receivable, prepaid
expense, deposits and other receivable, accounts payable, retention receivable, accruals and other current liabilities, contract liabilities,
income taxes payable and lease liabilities – operating leases.
Net
cash provided by operating activities for the year ended March 31, 2024 was US$2,394,212 represented an increase of 185.0% as compared
to fiscal year 2023 of US$839,945. The increase was mainly attributable to the decrease in accounts receivable for the year ended March
31, 2024 as compared to increase in accounts receivable for the year ended March 31, 2023 and the increases in contract liabilities,
accounts payable, accruals and other liabilities in 2024. The changes were attributable to the decrease of net income from US$1,167,260
for fiscal year 2023 to US$1,091,285 for fiscal year 2024, and the following non-cash adjustments and changes of working capital items:
(i) non-cash operating lease expense of US$43,500; (ii) depreciation of US$1,456,721; (iii) deferred tax expenses of US$68,580; (iv)
loss of disposal of right-of-use assets – finance lease of US$197; (v) reversal of credit loss of US$22,522; (vi) decrease in accounts
receivable of US$532,844; (vii) increase in retention receivable of US$405,094; (viii) increase in prepayment, deposits and other receivable
of US$787,948; (ix) decrease in accounts payable, accruals and other current liabilities of US$479,398; (x) increase in contract liabilities
of US$734,348; (xi) increase in income taxes payable of US$148,079; and (xii) decrease in lease liabilities – operating lease of
US$29,449.
Investing
activities
For
the years ended March 31, 2024 and 2023, cash used in investing activities was nil and US$46,398. Cash used in investment activities
was for vastly for the acquisition of property, plant and equipment to support our business needs, which are highly dependent on the
use of heavy machinery and vehicles.
Financing
activities
For
the year ended March 31, 2024, net cash used in financing activities was US$2,144,996. The cash used in financing activities was the
repayment to a director of US$348,157, net proceeds from a related company of US$156,248, repayment of bank loans of US$34,822, initial
payment of finance lease of US$295,843, principal payment of finance lease liabilities of US$1,258,111, payment of offering costs of
US$385,587, which was slightly offset by the proceeds from disposal of ROU-finance lease of US$21,276.
For
the year ended March 31, 2023, net cash used in financing activities was US$664,399. We obtained cash from financing from proceeds from
a director and bank borrowings of US$110,389 and US$1,078,941. We used cash in financing due to initial payment of finance leases of
US$24,823, principal payment of finance leases of US$1,350,065 and payment of offering costs of US$478,841.
Current
assets and current liabilities
The
following table sets forth a breakdown of our current assets and liabilities as of the dates indicated.
| |
As of March 31, | |
| |
2023 | | |
2024 | |
| |
US$ | | |
US$ | |
CURRENT ASSETS | |
| | | |
| | |
Cash and cash equivalents | |
| 240,219 | | |
| 489,435 | |
Accounts receivable, net | |
| 3,898,895 | | |
| 4,911,202 | |
Accounts receivable, net - related parties | |
| 1,903,672 | | |
| 392,686 | |
Prepayment, deposits and other receivable | |
| 85,871 | | |
| 873,819 | |
Deferred cost | |
| 716,806 | | |
| 1,102,393 | |
Total current assets | |
| 6,845,463 | | |
| 7,769,535 | |
| |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Borrowings - current | |
| 35,827 | | |
| 94,435 | |
Finance lease liabilities – current | |
| 846,154 | | |
| 775,042 | |
Finance lease liabilities – current - related parties | |
| 477,237 | | |
| 437,982 | |
Operating lease liabilities – current | |
| 33,219 | | |
| 79,958 | |
Contract liabilities | |
| 102,563 | | |
| 836,911 | |
Accounts payable, accruals, and other current liabilities | |
| 2,771,506 | | |
| 2,292,108 | |
Accounts payable - related parties | |
| 236,429 | | |
| 279,498 | |
Amount due to a related company | |
| - | | |
| 156,248 | |
Amount due to a director | |
| 545,063 | | |
| 196,906 | |
Income taxes payable | |
| 221,588 | | |
| 369,667 | |
Total current liabilities | |
| 5,269,586 | | |
| 5,518,755 | |
| |
| | | |
| | |
Net current assets | |
| 1,575,877 | | |
| 2,250,780 | |
Accounts
receivable, net
Accounts receivable represented
receivables from our customers arising from our contract work. We generally grant our customers a credit period typically ranging from
30 to 150 days, but can be offered longer depending on their reputation, transaction history and relationship with us. Our accounts
receivable increased by 26.0% to US$4,911,202 as of March 31, 2024, from US$3,898,895 as of March 31, 2023. The increase was mainly attributable
to one of the largest customers (Customer C), for which we carried out soil and rock transportation services. We are the subcontractor
of Customer C and have a working relationship of 4 years with Customer C. We consider the relationship with Customer C being good
and we offered relatively long credit term to Customer C. We tightly monitor the outstanding balance of accounts receivable due
from Customer C, the management is not aware of any financial deterioration of Customer C and is optimistic about the collection of the
outstanding accounts receivable in full.
Accounts
receivable, net – related parties
Accounts
receivable, net – related parties are receivables from Chi Yip Eng. & (Trans.) Company Limited (“Chi Yip”), a company
owned as to 50% each by Ms. Wong Lai Ching and Mr. Man Chi Kwan, who are the parents of Mr. Man Siu Ming, our controlling shareholder.
For the years ended March 31, 2023 and 2024, we were a subcontractor of Chi Yip, undertaking soil and rock transportation services. The
accounts receivable, net due from Chi Yip amounted to US$1,903,672 as of March 31, 2023 and decreased to US$392,686 as of March
31, 2024. As the remaining project work with Chi Yip had been completed, the revenues generated and accounts receivable due from Chi
Yip decreased. We expect Chi Yip will settle the outstanding accounts receivable within 12 months from March 31, 2024.
Prepayment,
deposits and other receivable
Prepayment,
deposits and other receivable consisted mainly of prepayments for subcontracting fees and insurance expenses, rental deposits and electronic toll payment services. Prepayment, deposits and other receivable increased by 917.6% to US$873,819
as of March 31, 2024, from US$85,871 as of March 31, 2023. The increase was mainly due to a deposit paid under the purchase order of
construction materials for a new construction project undertaken by us. The deposit paid amounted to approximately US$830,000.
Deferred
offering cost
Deferred
offering cost represented amounts paid to professional parties involved in the offering of our Ordinary Shares. Deferred cost was recorded
at US$716,806 as of March 31, 2023 and US$1,102,393 as of March 31, 2024. As the IPO for the Company was completed in July 2024, the
deferred offering cost is expected to net off the IPO proceeds and include in the additional paid-in capital account prior to
the end of fiscal year 2025.
Contract
liabilities
Our
contract liabilities represent payments received or receivable (contracts receivable) in excess of revenue recognized on uncompleted
contract excluding retainage. Contract liabilities were US$102,536 as of March 31, 2023, which were recognized as revenue during the
year ended March 31, 2024. As of March 31, 2024, contract liabilities were US$836,911.
Accounts
payable, accruals, and other current liabilities
The
following table sets forth a breakdown of our accounts payable, accruals, and other current liabilities as of the dates indicated:
| |
As of March 31, | |
| |
2023 | | |
2024 | |
| |
US$ | | |
US$ | |
Trade payables | |
| 2,629,069 | | |
| 2,044,729 | |
Retention payable | |
| - | | |
| 6,074 | |
Accrued expenses and other payables | |
| 142,437 | | |
| 241,305 | |
| |
| 2,771,506 | | |
| 2,292,108 | |
Trade payables – related parties | |
| 236,429 | | |
| 279,498 | |
| |
| 3,007,935 | | |
| 2,571,606 | |
Our
accounts payable comprises trade payables mainly related to our subcontractors for the soil and rock transportation and construction
works and the purchases of diesel oil for the diesel trading business and construction services. Our subcontractors and suppliers
usually granted us a credit period between 30 and 90 days.
Our
accounts payable, accruals, and other current liabilities decreased by 14.5% to US$2,571,606 as of March 31, 2024, from US$3,007,935
as of March 31, 2023. The decrease is attributable to the settlement of large amount of accounts payable due to a subcontractor as of
March 31, 2023 for our soil and rock transportation services during the year ended March 31, 2024.
Amount
due to a director
Our
director, Mr. Man Siu Ming, supported the growth of our business by providing funds. Amount due to Mr. Man Siu Ming amounted to US$545,063
and US$196,906 as of March 31, 2023 and March 31, 2024. The balance due to Mr. Man Siu Ming was unsecured, interest-free and repayable
on demand.
Amount
due to a related company
The
amount due to a related company as of March 31, 2024 related to the amount due to Chi Yip. The amounts, US$ 156,248 due to Chi Yip related
to initial payment of finance lease paid by Chi Yip.
Income
taxes payable
We
had income taxes payable of US$221,588 and US$369,667 as of March 31, 2023 and 2024.
Contractual
Obligations
The
following table summarized our contractual obligations, which include principal in the cases of bank borrowings and finance leases, as
of March 31, 2024:
| |
Payment due by period | |
| |
Less than 1 year | | |
1 to 3 years | | |
3 to 5 years | | |
More than 5 years | | |
Total | |
| |
US$ | | |
US$ | | |
US$ | | |
US$ | | |
US$ | |
Contractual Obligations: | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating leases | |
| 83,553 | | |
| 27,462 | | |
| - | | |
| - | | |
| 111,015 | |
Financial leases | |
| 1,387,011 | | |
| 1,925,882 | | |
| 432,376 | | |
| - | | |
| 3,745,269 | |
Bank borrowings | |
| 94,435 | | |
| 198,037 | | |
| 210,926 | | |
| 540,721 | | |
| 1,044,119 | |
Total contractual obligations | |
| 1,564,999 | | |
| 2,151,381 | | |
| 643,302 | | |
| 540,721 | | |
| 4,900,403 | |
Finance
lease obligations
We
purchased certain plant and equipment under finance leases. All of our finance leases were denominated in Hong Kong dollars and the interest
rates of our obligations under finance leases are fixed at the contract date in the range of 0% to 8.44% per annum. The obligations
under finance leases were secured by the lessor’s charge over the relevant machinery, equipment or motor vehicles and guaranteed
by the personal guarantee provided by Mr. Man Siu Ming. As of March 31, 2024, there were 48 finance leases for vehicles and 4
finance leases for machinery effective where the lessors were mainly financial institutions or Chi Yip. The finance leases
provided for the period of hire, monthly instalment amount and the option fee for purchasing the vehicles upon expiry of the leases.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements, including arrangements that would affect its liquidity, capital resources, market risk support,
credit risk support, or other benefits.
Quantitative
and Qualitative Disclosure About Market Risk
Credit
risk
Assets
that potentially subject us to a significant concentration of credit risk primarily consist of cash, accounts receivable, retention receivable
and other current assets. We believe that there is no significant credit risk associated with cash, which was held by reputable financial
institutions in the jurisdictions where the Company and its subsidiaries are located. The Hong Kong Deposit Protection Board pays compensation
up to a limit of HK$500,000 (approximately US$64,130) if the bank with which an individual/company holds its eligible deposit fails.
As of March 31, 2024, cash balance of US$489,435 was maintained at financial institutions in Hong Kong and approximately HK$500,000
were insured by the Hong Kong Deposit Protection Board.
We
have designed our credit policies with an objective to minimize exposure to credit risk. Other than retention receivable which may be
held by our customers for more than a year, our “receivables” are very short term, generally granted by us at 30 to 150
days, which may be longer depending on our customer’s reputation and the transaction history with us, in nature and
the associated risk is minimal. We conduct credit evaluations on our customers and generally do not require collateral or other security
from such customers. We periodically evaluate the creditworthiness of the existing customers to ascertain receivables value at credit
risk. In particular, we estimate allowance for credit loss the details of which are discussed in Note 2 to the financial statements.
Foreign
currency risk
We
are exposed to foreign currency risk primarily through service income or expenses that are denominated in a currency other than the functional
currency of the operations to which they relate. The currencies giving rise to this risk are primarily US$. As HK$ is currently pegged
to US$, our exposure to foreign exchange fluctuations is minimal.
Interest
rate risk
We
have finance leases in place which have fixed interest rates throughout the lease period. Interest rates of the finance leases are fixed
at inception of the leases, which in turn relates to the prevailing market interest rate. We do not have an interest rate hedging policy
to hedge against the risk of fluctuating interest rates. However, our management closely monitors interest rate exposures, assesses our
Group’s position to take out new bank loans or finance leases.
During
the year ended March 31, 2024, we had maintained floating rate facility letter withs a bank in Hong Kong which were entered into in September
2022 and December 2022. The facilities carry an annual interest rate of prime rate – 2.5%.
The
following table presents the potential effects on net interest income or expenses of a hypothetical change of +/- 100 bps in year-end
interest rates, applied to the Company’s bank borrowings and cash and cash equivalents.
For the year ended March 31, 2023 |
|
For the year ended March 31, 2024 | |
Notional principal amounts of the floating loan (US$) |
|
Impact on net interest (expenses)/ income +100 bps (US$) | |
|
Impact on net interest (expenses)/ income -100 bps (US$) | |
|
Notional principal amounts of the floating loan (US$) | |
|
Impact on net interest (expenses)/ income +100 bps (US$) | |
|
Impact on net interest (expenses)/ income -100 bps (US$) | |
1,078,941 |
|
| (5,356 | ) |
|
| 5,356 | |
|
| 1,078,941 | |
|
| (10,779 | ) |
|
| 10,779 | |
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and contingencies at the date of the financial statements as well as the reported amounts of
revenues and expenses during the reporting period. As a result, management is required to routinely make judgments and estimates about
the effects of matters that are inherently uncertain. Actual results may differ from these estimates under different conditions or assumptions.
Critical
accounting policy is both material to the presentation of financial statements and requires management to make difficult, subjective
or complex judgments that could have a material effect on financial condition or results of operations. Accounting estimates and assumptions
may become critical when they are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters
or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.
Critical
accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting
estimate were made and if different estimates that we reasonably could have used in the current period, or changes in the accounting
estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition,
changes in financial condition or results of operations. Due to the level of activity and lack of complex transactions, we believe there
are currently no critical accounting policies and estimates that affect the preparation of our financial statements.
SELLING
SHAREHOLDERS
The
Selling Shareholders may from time to time offer and sell any or all of the Ordinary Shares pursuant to this prospectus. However, we
cannot advise you as to whether the Selling Shareholders will, in fact, sell any or all of such Ordinary Shares. In addition, the Selling
Shareholders identified below may have sold, transferred or otherwise disposed of some or all of their Ordinary Shares since the date
on which the information in the following table is presented in transactions exempt from or not subject to the registration requirements
of the Securities Act. See the section titled “Plan of Distribution.”
This
prospectus relates to the possible resale by the Selling Shareholders of up to 2,205,000 Ordinary Shares. The Selling Shareholders may
offer and sell, from time to time, any or all of the Ordinary Shares being offered for resale by this prospectus. When we refer to “Selling
Shareholders” in this prospectus, we refer to the persons listed in the tables below, and the pledgees, donees, transferees, assignees,
successors, and others who later come to hold any of the Selling Shareholders’ interest in our securities after the date of this
prospectus.
None
of the Selling Shareholders has had any position, office or other material relationship within the past three years with the Company.
None of the Selling Shareholders is a broker dealer or an affiliate of a broker dealer. None of the Selling Shareholders has an agreement
or understanding to distribute any of the Ordinary Shares being registered. Unless otherwise indicated, the address for each Selling
Shareholder is Aegis Chambers, 1st Floor, Ellen Skelton Building, 3076 Sir Francis Drake’s Highway, Road Town, Tortola, VG1110,
British Virgin Islands.
The Ordinary Shares were
acquired by the Selling Shareholders on December 5, 2023 pursuant to a sale by our Controlling Shareholder, Mr. Man Siu Ming of 551,250
Ordinary Shares each of the Selling Shareholders at a total consideration of US$206,000 each. Upon a share split of our Ordinary Shares
on February 28, 2024 and as of the date of this prospectus, each of the Selling Shareholders beneficially owns 1,102,500 Ordinary Shares.
The
table below provides, as of the date of this prospectus, information regarding the beneficial ownership of the Ordinary Shares of the
Selling Shareholders, the number of Ordinary Shares that may be sold by the Selling Shareholders under this prospectus and that the Selling
Shareholders will beneficially own after this offering. We have based percentage ownership on 24,000,000 Ordinary Shares outstanding
as of the date of this prospectus.
The
Ordinary Shares being registered for resale in connection with this offering will constitute a considerable percentage of our “public
float” (defined as the number of our outstanding Ordinary Shares held by non-affiliates). The Selling Shareholders named herein
beneficially owns 2,205,000 Ordinary Shares which is equal to approximately 9.19% of our outstanding Ordinary Shares, as of the date
of the prospectus. The Selling Shareholders will be able to sell its Ordinary shares for so long as the registration statement of which
this prospectus forms a part is available for use.
Because
the Selling Shareholders may dispose of all, none or some portion of his Ordinary Shares, we cannot advise you as to whether the Selling
Shareholders will in fact sell any or all of such Ordinary Shares. No estimate can be given as to the number of securities that will
be beneficially owned by the Selling Shareholders upon termination of this offering. For purposes of the table below, however, we have
assumed that after termination of this offering none of the Ordinary Shares covered by this prospectus will be beneficially owned by
the Selling Shareholders and further assumed that the Selling Shareholders will not acquire beneficial ownership of any additional securities
during the offering. In addition, the Selling Shareholders may have sold, transferred or otherwise disposed of, or may sell, transfer
or otherwise dispose of, at any time and from time to time, our securities in transactions exempt from the registration requirements
of the Securities Act after the date on which the information in the table is presented.
| |
Ordinary Shares | |
Name | |
Number Beneficially Owned Prior to Offering | | |
Number Registered for Sale Hereby | | |
Number Beneficially Owned After Offering | | |
Percent Owned After Offering | |
Dusk Moon International Limited(1)(3) | |
| 1,102,500 | | |
| 1,102,500 | | |
| 0 | | |
| 0 | |
Moss Mist Investment Limited(2)(3) | |
| 1,102,500 | | |
| 1,102,500 | | |
| 0 | | |
| 0 | |
Total | |
| 2,205,000 | | |
| 2,205,000 | | |
| 0 | | |
| 0 | |
| (1) | Dusk
Moon International Limited is a BVI company, of which Ms. Huang Jinni (“Ms. Huang”)
is the sole owner. Ms. Huang has the voting, dispositive or investment powers over such Ordinary
Shares. |
| (2) | Moss
Mist Investment Limited is a BVI company, of which Mohammad Imran Aslam (“Mr. Mohammad”)
is the sole owner. Mr. Mohammad has the voting, dispositive or investment powers over such
Ordinary Shares. |
We
are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company.
PLAN
OF DISTRIBUTION
The
Ordinary Shares offered by this prospectus are being offered by the Selling Shareholders. We are not selling any securities under this
prospectus. We will not receive any of the proceeds from the sale by the Selling Shareholders of the shares of Ordinary Shares, although
we would receive the proceeds from any cash exercise of such warrants. We will bear all fees and expenses incident to our obligation
to register the Ordinary Shares.
The
Selling Shareholders may sell all or a portion of the Ordinary Shares held by it and offered hereby from time to time directly or through
one or more underwriters, broker-dealers or agents. If the Ordinary Shares are sold through underwriters or broker-dealers, the Selling
Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The Ordinary Shares may be sold
in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the
time of sale. These sales may be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of
the following methods:
|
● |
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
● |
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; |
|
● |
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
● |
an
exchange distribution in accordance with the rules of the applicable exchange; |
|
● |
privately
negotiated transactions; |
|
● |
short
sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC; |
|
● |
through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
|
● |
broker-dealers
may agree with a selling security holder to sell a specified number of such shares at a stipulated price per share; and |
|
● |
a
combination of any such methods of sale. |
The
Selling Shareholders may, from time to time, pledge or grant a security interest in some or all of the Ordinary Shares owned by them
and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Ordinary
Shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of Selling Shareholders to include the pledgee, transferee or other successors in interest as
Selling Shareholders under this prospectus. The Selling Shareholders also may transfer the securities in other circumstances, in which
case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In
connection with the sale of our Ordinary Shares or interests therein, the Selling Shareholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in short sales of the Ordinary Shares in the course of hedging
the positions they assume. The Selling Shareholders may also sell our Ordinary Shares short and deliver these securities to close out
it short positions, or loan or pledge the Ordinary Shares to broker-dealers that in turn may sell these securities. The Selling Shareholders
may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative
securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which
shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
The
aggregate proceeds to the Selling Shareholders from the sale of the Ordinary Shares offered by them will be the purchase price of the
Ordinary Shares less discounts or commissions, if any. The Selling Shareholders reserve the right to accept and, together with their
agents from time to time, to reject, in whole or in part, any proposed purchase of Ordinary Shares to be made directly or through agents.
We will not receive any of the proceeds from this offering.Broker-dealers engaged by the Selling Shareholders may arrange for other broker-dealers
to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer
acts as agent for the purchase of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to
this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule
2440, and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440. The Selling Shareholders do not
expect these commissions and discounts to exceed what is customary in the types of transactions involved, and in no case will the maximum
compensation received by any broker-dealer exceed seven percent (7%). The Selling Shareholders also may resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 or any other exemption from registration under the Securities Act, provided
that they meet the criteria and conform to the requirements of that rule.
The
Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Any
underwriters, agents, or broker-dealers, and any Selling Shareholders who are affiliates of broker-dealers, that participate in the sale
of the Ordinary Shares or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act.
Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions
under the Securities Act. Selling Shareholders who are “underwriters” within the meaning of Section 2(11) of the Securities
Act will be subject to the prospectus delivery requirements of the Securities Act. Each Selling Shareholders has informed us that it
does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
We
agreed to use commercially reasonable efforts to keep the registration statement of which this prospectus forms a part effective until
the earlier of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without regard
to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for our Company to be in compliance with the
current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities
have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities
will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition,
in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification requirement is available and is complied with. Under applicable
rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the Ordinary Shares for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the
Ordinary Shares by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders
and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act).
To
the extent required, the shares of our Ordinary Shares to be sold, the name of the Selling Shareholders, the respective purchase prices
and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration
statement that includes this prospectus.
In
order to comply with the securities laws of some states, if applicable, the Ordinary Shares may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the Ordinary Shares may not be sold unless it has been registered
or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
We
are required to pay certain fees and expenses incurred by us incident to the registration of the securities. We have agreed to indemnify
the Selling Shareholders against certain losses, claims, damages, and liabilities, including liabilities under the Securities Act.
The
Selling Shareholders will pay any underwriting discounts and commissions and expenses incurred by the Selling Shareholders for brokerage,
accounting, tax, or legal services or any other expenses incurred by the Selling Shareholders in disposing of the Ordinary Shares. We
will bear all other costs, fees, and expenses in effecting the registration of the securities covered by this prospectus, including,
without limitation, all registration and filing fees and fees and expenses of our counsel and our independent registered public accountants.
DESCRIPTION
OF SHARE CAPITAL
We
are an exempted company incorporated with limited liability in the Cayman Islands and our corporate affairs are governed by our Memorandum
and Articles of Association, the Companies Act and the common law of the Cayman Islands.
As
of the date of this prospectus, our authorized share capital is US$50,000 divided into 1,000,000,000 Ordinary Shares, par value US$0.00005
each. On July 24, 2024, the Company closed its initial public offering of 1,500,000 Ordinary Shares at a public offering price
of US$4.00 per Ordinary Share.
As
of the date of this prospectus, 24,000,000 Ordinary Shares were issued and outstanding.
Ordinary
Shares
General
All
of our outstanding Ordinary Shares are fully paid and non-assessable. Certificates representing the Ordinary Shares are issued in registered
form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their Ordinary Shares. We may not issue shares
to bearer.
Dividends
Subject
to the Companies Act and our Articles of Association, our Company in general meeting may declare dividends in any currency to be paid
to the members but no dividend shall be declared in excess of the amount recommended by our board of directors.
Except
in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide:
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(i) |
all
dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, although
no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share; |
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(ii) |
all
dividends shall be apportioned and paid pro rata in accordance with the amount paid up on the shares during any portion(s) of the
period in respect of which the dividend is paid; and |
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(iii) |
our
board of directors may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable
by him to our Company on account of calls, instalments or otherwise. |
Where
our board of directors or our Company in general meeting has resolved that a dividend should be paid or declared, our board of directors
may resolve:
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(aa) |
that
such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the members
entitled to such dividend will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment;
or |
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(bb) |
that
the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu
of the whole or such part of the dividend as our board of directors may think fit. |
Upon
the recommendation of our board of directors, our Company may by ordinary resolution in respect of any one particular dividend of our
Company determine that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any
right to members to elect to receive such dividend in cash in lieu of such allotment.
Any
dividend, bonus or other sum payable in cash to the holder of shares may be paid by cheque or warrant or certificate or other documents
or evidence of title sent through the post. Every such cheque, warrant, certificate or other document or evidence of title
shall be made payable to the order of the person to whom it is sent and shall be sent at the holder’s or joint holders’
risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to our Company. Any one
of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect
of the shares held by such joint holders.
Whenever
our board of directors or our Company in general meeting has resolved that a dividend be paid or declared, our board of directors may
further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.
Our
board of directors may, if it thinks fit, receive from any member willing to advance the same, and either in money or money’s worth,
all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of
the monies so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as our board of directors may decide, but
a payment in advance of a call shall not entitle the member to receive any dividend or to exercise any other rights or privileges as
a member in respect of the share or the due portion of the shares upon which payment has been advanced by such member before it is called
up.
All
dividends, bonuses or other distributions unclaimed for one year after having been declared may be invested or otherwise used by our
board of directors for the benefit of our Company until claimed and our Company shall not be constituted a trustee in respect thereof.
All dividends, bonuses or other distributions unclaimed for six years after having been declared may be forfeited by our board of directors
and, upon such forfeiture, shall revert to our Company.
No
dividend or other monies payable by our Company on or in respect of any share shall bear interest against our Company.
Our
Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants
remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered.
Voting
Rights
Subject
to any special rights, restrictions or privileges as to voting for the time being attached to any class or classes of shares at any general
meeting: (a) on a poll every member present in person or by proxy or, in the case of a member being a corporation, by our duly authorized
representative shall have one vote for every share which is fully paid or credited as fully paid registered in his name in the register
of members of our Company but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated
for this purpose as paid up on the share; and (b) on a show of hands every member who is present in person (or, in the case of a member
being a corporation, by our duly authorized representative) or by proxy shall have one vote. Where more than one proxy is appointed by
a member which is a Clearing House (as defined in the Articles) (or its nominee(s)) or a central depository house (or its nominee(s)),
each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes
or cast all the votes he does use in the same way.
Transfer
of Ordinary Shares
Subject
to the Companies Act and our Articles of Association, all transfers of shares shall be effected by an instrument of transfer in the usual
or common form or in such other form as our board of directors may approve and may be under hand or, if the transferor or transferee
is a Clearing House (as defined in the Articles) (or its nominee(s)) or a central depository house (or its nominee(s)), under hand or
by machine imprinted signature, or by such other manner of execution as our board of directors may approve from time to time.
Execution
of the instrument of transfer shall be by or on behalf of the transferor and the transferee, provided that our board of directors may
dispense with the execution of the instrument of transfer by the transferor or transferee or accept mechanically executed transfers.
The transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register of members
of our Company in respect of that share.
Our
board of directors may, in our absolute discretion, at any time and from time to time remove any share on the principal register to any
branch register or any share on any branch register to the principal register or any other branch register. Unless our board of directors
otherwise agrees, no shares on the principal register shall be removed to any branch register nor shall shares on any branch register
be removed to the principal register or any other branch register. All removals and other documents of title shall be lodged for registration
and registered, in the case of shares on any branch register, at the registered office and, in the case of shares on the principal register,
at the place at which the principal register is located.
Our
board of directors may, in our absolute discretion, decline to register a transfer of any share (not being a fully paid up share) to
a person of whom it does not approve or on which our Company has a lien. It may also decline to register a transfer of any share issued
under any share option scheme upon which a restriction on transfer subsists or a transfer of any share to more than four joint holders.
Our
board of directors may decline to recognize any instrument of transfer unless a certain fee, up to such maximum sum as Nasdaq may determine
to be payable, is paid to our Company, the instrument of transfer is properly stamped (if applicable), is in respect of only one class
of share and is lodged at our registered office or the place at which the principal register is located accompanied by the relevant share
certificate(s) and such other evidence as our board of directors may reasonably require is provided to show the right of the transferor
to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person
so to do).
The
registration of transfers of shares or of any class of shares may, after compliance with any notice requirement of Nasdaq, be suspended
at such times and for such periods (not exceeding in the whole thirty days in any year) as our board of directors may determine.
Fully
paid shares shall be free from any restriction on transfer (except when permitted by Nasdaq) and shall also be free from all liens.
Procedures
on liquidation
A
resolution that our Company be wound up by the court or be wound up voluntarily shall be a special resolution of our shareholders.
Subject
to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being
attached to any class or classes of shares:
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(i) |
if
our Company is wound up, the surplus assets remaining after payment to all creditors shall be divided among the members in proportion
to the capital paid up on the shares held by them respectively; and |
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if
our Company is wound up and the surplus assets available for distribution among the members are insufficient to repay the whole of
the paid-up capital, such assets shall be distributed, subject to the rights of any shares which may be issued on special terms and
conditions, so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on the shares
held by them, respectively. |
If
our Company is wound up (whether the liquidation is voluntary or compelled by the court), the liquidator may, with the sanction of a
special resolution and any other sanction required by the Companies Act, divide among the members in specie or kind the whole or any
part of the assets of our Company, whether the assets consist of property of one kind or different kinds, and the liquidator may, for
such purpose, set such value as he deems fair upon any one or more class or classes of property to be so divided and may determine how
such division shall be carried out as between the members or different classes of members and the members within each class. The liquidator
may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator thinks
fit, but so that no member shall be compelled to accept any shares or other property upon which there is a liability.
Calls
on Ordinary Shares and Forfeiture of Ordinary Shares
Subject
to these Articles and to the terms of allotment, our board of directors may, from time to time, make such calls as it thinks fit upon
the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares
or by way of premium) and not by the conditions of allotment of such shares made payable at fixed times. A call may be made payable either
in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for
payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum
as our board of directors shall fix from the day appointed for payment to the time of actual payment, but our board of directors may
waive payment of such interest wholly or in part. Our board of directors may, if it thinks fit, receive from any member willing to advance
the same, either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares
held by him, and in respect of all or any of the monies so advanced our Company may pay interest at such rate (if any) not exceeding
20% per annum as our board of directors may decide.
If
a member fails to pay any call or instalment of a call on the day appointed for payment, our board of directors may, for so long as any
part of the call or instalment remains unpaid, serve not less than 14 clear days’ notice on the member requiring payment
of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to
the date of actual payment. The notice shall name a further day (not earlier than the expiration of 14 days from the date of the notice)
on or before which the payment required by the notice is to be made, and shall also name the place where payment is to be made. The notice
shall also state that, in the event of non-payment at or before the appointed time, the shares in respect of which the call was made
will be liable to be forfeited.
If
the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter,
before the payment required by the notice has been made, be forfeited by a resolution of our board of directors to that effect. Such
forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.
A
person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain
liable to pay to our Company all monies which, at the date of forfeiture, were payable by him to our Company in respect of the shares
together with (if our board of directors shall in our discretion so require) interest thereon from the date of forfeiture until payment
at such rate not exceeding 20% per annum as our board of directors may prescribe.
Redemption
of Ordinary Shares
Subject
to the Companies Act, our Articles of Association, and, where applicable, the Nasdaq listing rules or any other law or so far as not
prohibited by any law and subject to any rights conferred on the holders of any class of Shares, any power of our Company to purchase
or otherwise acquire all or any of its own Shares (which expression as used in this Article includes redeemable Shares) be exercisable
by our board of directors in such manner, upon such terms and subject to such conditions as it thinks fit.
Subject
to the Companies Act, our Articles of Association, and to any special rights conferred on the holders of any Shares or attaching to any
class of Shares, Shares may be issued on the terms that they may, at the option of our Company or the holders thereof, be liable to be
redeemed on such terms and in such manner, including out of capital, as our board of directors may deem fit.
Variations
of Rights of Shares
Subject
to the Companies Act and without prejudice to our Articles of Association, if at any time the share capital of our Company is divided
into different classes of shares, all or any of the special rights attached to any class of shares may (unless otherwise provided for
by the terms of issue of the shares of that class) be varied, modified or abrogated with the sanction of a special resolution passed
at a separate general meeting of the holders of the shares of that class. The provisions of the Articles relating to general meetings
shall mutatis mutandis apply to every such separate general meeting, but so that the necessary quorum (whether at a separate general
meeting or at its adjourned meeting) shall be not less than a person or persons together holding (or, in the case of a member being a
corporation, by our duly authorized representative) or representing by proxy not less than one-third in nominal value of the issued shares
of that class. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any
holder of shares of the class present in person or by proxy may demand a poll.
Any
special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights
attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu
therewith.
General
Meetings of Shareholders
Our
Company must hold an annual general meeting each fiscal year other than the fiscal year of our Company’s adoption of our Articles
of Association.
Extraordinary
general meetings may be convened on the requisition of one or more members holding, at the date of deposit of the requisition, not less
than one tenth of the paid up capital of our Company having the right of voting at general meetings. Such requisition shall be made in
writing to our board of directors or the secretary of our Company for the purpose of requiring an extraordinary general meeting to be
called by our board of directors for the transaction of any business specified in such requisition. Such meeting shall be held within
two months after the deposit of such requisition. If within 21 days of such deposit, our board of directors fails to proceed to convene
such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s)
as a result of the failure of our board of directors shall be reimbursed to the requisitionist(s) by our Company.
Every
general meeting of our Company shall be called by at least 10 clear days’ notice in writing. The notice shall be exclusive of the
day on which it is served or deemed to be served and of the day for which it is given, and must specify the time, place and agenda of
the meeting and particulars of the resolution(s) to be considered at that meeting and the general nature of that business.
Although
a meeting of our Company may be called by shorter notice than as specified above, such meeting may be deemed to have been duly called
if it is so agreed:
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(i) |
in
the case of an annual general meeting, by all members of our Company entitled to attend and vote thereat; and |
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in
the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting holding not
less than 95% of the total voting rights at the meetings of all our shareholders. |
All
business transacted at an extraordinary general meeting shall be deemed special business. All business shall also be deemed special business
where it is transacted at an annual general meeting, with the exception of the election of Directors which shall be deemed ordinary business.
No
business other than the appointment of a chairman of a meeting shall be transacted at any general meeting unless a quorum is present
when the meeting proceeds to business, and continues to be present until the conclusion of the meeting.
The
quorum for a general meeting shall be two members entitled to vote and present in person (or in the case of a member being a corporation,
by our duly authorized representative) or by proxy representing not less than one-third (1/3) in nominal value of the total issued voting
shares in our Company throughout the meeting.
Inspection
of Books and Records
Our
shareholders have no general right to inspect or obtain copies of the register of members or corporate records of our company (except
for the memorandum and articles of association of our company, any special resolutions passed by our company and the register of mortgages
and charges of our company). They will, however, have such rights as may be set out in our Articles of Association.
Changes
in Capital
Subject
to the Companies Act, our shareholders may, by ordinary resolution:
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(a) |
increase
our share capital by new shares of the amount fixed by that ordinary resolution and with the attached rights, priorities and privileges
set out in that ordinary resolution; |
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consolidate
and divide all or any of our share capital into shares of larger amount than our existing shares; |
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(c) |
sub-divide
our shares or any of them into our shares of smaller amount than is fixed by our Company’s Memorandum of Association, so, however,
that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced our shares shall be
the same as it was in case of the share from which the reduced our shares is derived; |
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cancel
any shares which, at the date of the passing of that ordinary resolution, have not been taken or agreed to be taken by any person
and diminish the amount of our share capital by the amount of the shares so cancelled; and |
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(e) |
convert
all or any of our paid-up shares into stock, and reconvert that stock into paid up shares of any denomination. |