[20-F] Globavend Holdings Ltd Files Annual Report (Foreign Issuer)
Rhea-AI Filing Summary
Globavend Holdings Limited files its Form 20-F annual report for the fiscal year ended
As of
Positive
- None.
Negative
- None.
Insights
Filing outlines concentrated control, operational reliance, and China/Hong Kong regulatory risk.
Globavend describes an asset-light cross-border logistics model built on block-space air cargo contracts and third-party providers. Revenue and purchasing are highly concentrated, with a few customers and suppliers contributing large portions of activity, increasing exposure to any relationship or volume change.
The dual-class share structure gives the founder roughly
The report does not signal a specific new adverse event but codifies key structural risks: customer and supplier concentration in a fragmented, competitive logistics market and dependence on continued access to air cargo capacity. Actual impact for investors will depend on future regulatory developments in China and the United States and on Globavend’s ability to diversify relationships and maintain compliance.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report :_____________
For the transition period from ________ to _______________
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(Translation of Registrant’s name into English)
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(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Nasdaq Stock Market LLC (The |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
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(Title of Class)
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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of September 30, 2025, there were
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes ☒
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Yes ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Emerging growth company |
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange
Act.
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | ||
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Item 17 ☐ Item 18 ☐
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(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
TABLE OF CONTENTS
| Page | |
| INTRODUCTION | ii |
| FORWARD-LOOKING INFORMATION | iv |
| PART I | 1 |
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1 |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE | 1 |
| ITEM 3. KEY INFORMATION | 1 |
| ITEM 4. INFORMATION ON THE COMPANY | 43 |
| ITEM 4A. UNRESOLVED STAFF COMMENTS | 85 |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 85 |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 103 |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 110 |
| ITEM 8. FINANCIAL INFORMATION | 112 |
| ITEM 9. THE OFFER AND LISTING | 113 |
| ITEM 10. ADDITIONAL INFORMATION | 113 |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 135 |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 136 |
| PART II | 137 |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 137 |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 137 |
| ITEM 15. CONTROLS AND PROCEDURES | 137 |
| ITEM 16. [RESERVED] | 139 |
| ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT | 139 |
| ITEM 16B. CODE OF ETHICS | 139 |
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 139 |
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 140 |
| ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 140 |
| ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | 140 |
| ITEM 16G. CORPORATE GOVERNANCE | 140 |
| ITEM 16H. MINE SAFETY DISCLOSURE | 140 |
| ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 140 |
| ITEM 16J. INSIDER TRADING POLICY | 140 |
| ITEM 16K. CYBERSECURITY | 140 |
| PART III | 141 |
| ITEM 17. FINANCIAL STATEMENTS | 141 |
| ITEM 18. FINANCIAL STATEMENTS | 141 |
| ITEM 19. EXHIBITS | 141 |
| SIGNATURES | 142 |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | F-1 |
i
INTRODUCTION
Unless otherwise indicated or the context otherwise requires, all information in this annual report reflects the following:
| ● | “Articles” or “Articles of Association” are to the third amended and restated articles of association of our Company (as amended from time to time) adopted on September 12, 2025 with immediate effect, and as amended, supplemented and/or otherwise modified from time to time; | |
| ● | “AUD” or “A$” are to Australian dollar(s), the lawful currency of Australia; | |
| ● | “BVI” are to the British Virgin Islands; | |
| ● | “Board” is to the board of directors of the Company from time to time; | |
| ● | “Companies Act” are to the Companies Act (as revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time; | |
| ● | “Company,” “we,” “us,” and “Globavend Holdings” are to Globavend Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability on May 22, 2023; | |
| ● | “Controlling Shareholder” is to Mr. Wai Yiu Yau, our founder, chief executive officer, chairman and controlling shareholder who beneficially owns 57,224 Ordinary Shares and 100 Management Shares as of the date of this annual report, representing approximately 2.5% of the total issued and outstanding shares and approximately 97.8% of the voting power of the Company as of the date of this annual report. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership” and “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders” for more information; | |
| ● | “Dormant Subsidiaries” are to Vault BRS and Vault Cayman; | |
| ● | “dual-class structure” or “dual-class share capital structure” is to our existing share capital structure of $100,000,000 divided into 500,000,000 shares of a nominal or par value of $0.20 each, of which 100 shares have been designated as Management Shares and the remaining undesignated shares are the Ordinary Shares; | |
| ● | “Exchange Act” are to the US Securities Exchange Act of 1934, as amended; | |
| ● | “Globavend BVI” are to Globavend Associates Limited, a BVI business company limited by shares incorporated in the BVI, a direct wholly owned subsidiary of Globavend Holdings; | |
| ● | “Globavend HK” are to Globavend (HK) Limited, a company incorporated under the laws of Hong Kong with limited liability, an indirect wholly owned subsidiary of Globavend Holdings and our operating subsidiary in Hong Kong; |
| ● | “Globavend Warehouse” is to Globavend Warehouse Limited, a company incorporated under the laws of Hong Kong with limited liability, an indirect wholly owned subsidiary of Globavend Holdings incorporated for investment holding purposes; | |
| ● | “HK Subsidiaries” are to Globavend HK and Globavend Warehouse; | |
| ● | “HKD” or “HK$” are to Hong Kong dollar(s), the lawful currency of Hong Kong; | |
| ● | “Hong Kong” are to Hong Kong special administrative region of the People’s Republic of China; | |
| ● | “Management Shares” are to our management shares, par value $0.20 per share, having such rights and subject to such restrictions as set out in the Memorandum and Articles of Association; |
ii
| ● | “Memorandum” or “Memorandum of Association” are to the third amended and restated memorandum of association of our Company (as amended from time to time) adopted on September 12, 2025 with immediate effect, and as amended, supplemented and/or otherwise modified from time to time; | |
| ● | “Nasdaq” are to Nasdaq Stock Market LLC; | |
| ● | “Operating Subsidiaries” are to Globavend HK and the PRC Subsidiary; | |
| ● | “Ordinary Shares” are to our undesignated shares, par value $0.20 per share; | |
| ● | “PCAOB” are to Public Company Accounting Oversight Board; | |
| ● | “PRC” or “China” are to the People’s Republic of China, and “mainland China”, unless otherwise specified herein, are to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, the Hong Kong Special Administrative Region, and the Macau Administrative Region; | |
| ● | “PRC government” or “PRC authorities”, or variations of such words or similar expressions, are to the central, provincial, and local governments of all levels in mainland China, including regulatory and administrative authorities, agencies and commissions, or any court, tribunal or any other judicial or arbitral body in mainland China, for the purposes of this annual report only; | |
| ● | “PRC laws” are to all applicable laws, statues, rules, regulations, ordinances and other pronouncements having the binding effect of law in mainland China; | |
| ● | “PRC Subsidiary” is to Zhiyi International Logistics (Shenzhen) Co., Ltd., a company incorporated under the laws of the PRC with limited liability, an indirect wholly owned subsidiary of Globavend Holdings and our operating subsidiary in the mainland China; | |
| ● | “SEC” or “U.S. Securities and Exchange Commission” are to the United States Securities and Exchange Commission; | |
| ● | “Securities Act” are to the US Securities Act of 1933, as amended; | |
| ● | “U.S. dollars” or “US$” or “$” or “USD” or “dollars” are to United States dollar(s), the lawful currency of the United States; and | |
| ● | “Vault BRS LLC” is to Vault BRS LLC, a limited liability company incorporated under the laws of the Delaware of the United States, a direct wholly owned subsidiary of Globavend Holdings, which is currently dormant and does not have operations; and | |
| ● | “Vault Cayman” is to Vault DAT Cayman, an exempted company incorporated under the laws of the Cayman Island, an indirect wholly owned subsidiary of Globavend Holdings, which is currently dormant and does not have operations. |
We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.
iii
FORWARD-LOOKING INFORMATION
This annual report contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “goal,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this annual report are based upon information available to us as of the date of this annual report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include but are not limited to statements about:
| ● | timing of the development of future business; | |
| ● | capabilities of our business operations; | |
| ● | expected future economic performance; | |
| ● | continued market acceptance of our services and products distributed by us; | |
| ● | changes in the laws that affect our operations; | |
| ● | inflation and fluctuations in foreign currency exchange rates; | |
| ● | continued development of a public trading market for our securities; | |
| ● | managing our growth effectively; and | |
| ● | fluctuations in operating results. |
You should refer to the section titled “Item 3. Key Information – D. Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this annual report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
iv
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [RESERVED]
B. Capitalization and indebtedness.
Not applicable.
C. Reasons for the offer and use of proceeds.
Not applicable.
D. Risk factors
An investment in our Ordinary Shares involves a high degree of risk. You should carefully consider the following information about these risks together with the other information appearing elsewhere in this annual report before deciding to invest in our Ordinary Shares. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations, and future growth prospects. In these circumstances, the market price of our Ordinary Shares could decline, and you may lose all or part of your investment.
1
Risks Related to Our Business and Industry
| ● | we may be unable to obtain exact amount of cargo space to facilitate our customers’ needs, and the termination or non-renewal of our block space agreements could have adverse effect on our results of operations; |
| ● | we rely on our business partners, including air freight carriers, customs clearance companies, ground transportation companies, and local delivery service providers to implement certain services to our customers; |
Risks Related to Doing Business in Hong Kong
| ● | uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations, which could change at any time with little advance notice, could limit the legal protections available to us; |
| ● | 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; |
Risks Related to Our Ordinary Shares
| ● | if the price of our Ordinary Shares falls below the minimum bid price requirements required by the Nasdaq Listing Rules, our Ordinary Shares could be delisted from Nasdaq; |
| ● | the trading price of our Ordinary Shares could be subject to rapid and substantial volatility; |
Risks Related to Our Capital Structure
| ● | we have a dual-class share capital structure and Mr. Yau will have the ability to control or significantly influence the outcome of matters requiring approval by shareholders. The disparate voting rights may also have anti-takeover effects preventing a change in control transaction that shareholders might consider in their best interest; |
Risks Related to Doing Business in China
| ● | the approval of and filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing; |
| ● | a severe or prolonged downturn in the global economy could materially and adversely affect our business and financial condition; |
Risks Related to Our Equity Line of Credit
| ● | it is not possible to predict the actual number of ELOC Shares, if any, we will sell under the ELOC Purchase Agreement to the Investor, or the actual gross proceeds resulting from those sales; and |
| ● | the sale of a substantial amount of ELOC Shares in the public market could adversely affect the prevailing market price of our Ordinary Shares. |
2
Risks Related to Our Business and Industry
We may be unable to obtain exact amount of cargo space to facilitate our customers’ needs, and the termination or non-renewal of our block space agreements could have adverse effect on our results of operations.
In the course of business, Globavend HK obtains cargo space from air freight carriers through block space arrangements and direct booking. The block space agreements guarantee us a predetermined allocation of air cargo space at a discounted rate compared to prevailing market rates for a term of nearly 12 months. Shall we wish to obtain more cargo space than the allocated volume under the block space agreements, the additional cargo space will be subject to the latest market price. There is no guarantee that we will be awarded such additional cargo space. Further, if the prevailing market rates of air cargo space we source fall below the predetermined rates under the block space arrangements, we may have to offer cargo space to our customers at rates lower than the predetermined rates; otherwise, our customers may turn to other freight forwarders that are able to offer cargo space at a lower price.
Further, save for the cargo space that we procured from air freight carriers that were under the block space agreement, the other cargo spaces offered by our suppliers are on a first-come, first-served basis with no formal agreement for guaranteed supply of cargo space. Hence, there can be no assurance that we will be able to source cargo space within our customers’ expected time frame cost-effectively. We cannot guarantee that it will not happen in the future, and if we cannot obtain sufficient cargo space from our suppliers to meet our customers’ demand, in particular during peak seasons, our reputation within the industry could be adversely affected.
In addition, these block space agreements are terminable on 60-days’ notice without penalty by either party to the relevant agreement, namely Globavend HK or the relevant air freight carriers. We cannot guarantee that these block space agreements will not be terminated before their expiration or be renewed. The termination or non-renewal of these block space agreements could potentially result in insufficient air cargo space for our integrated cross-border logistics services or freight forwarding services, leading to significantly higher costs in acquiring cargo space. As at the date of this annual report, we have not experienced any early termination or non-renewal of our block space agreements.
If we are unable to utilize our cargo space obtained through block space agreements, our business and results of operations may be adversely affected.
The demand of customers may differ from the supply of cargo space we obtain through block space agreements from time to time. Although we consolidate cargo to utilize the cargo space we have obtained in order to maximize our profit, we cannot assure you that we are always able to fully utilize all the cargo space we have obtained on every occasion. We cannot assure you that there will not be instances where, for instance, due to (i) departure timetable of the aircraft, (ii) popularity of the route, or (iii) seasonality factors, we are unable to fully consolidate all the cargo we have obtained. If these circumstances arise, we may have to bear the costs of all the excess cargo space we have purchased.
We have not entered into long-term sales agreements with our customers and rely on demands from our major customers, and our sales may fluctuate subject to our customers’ demands.
Our operating subsidiaries do not enter into any long-term agreements with our customers, which mainly comprise businesses that operate e-commerce platforms or e-commerce merchants in Hong Kong and China and purchases that are made on an order-by-order basis. Our business with our customers has been, and we expect it will continue to be, conducted based on the actual orders received from time to time. Accordingly, the quantity of cargo spaces required from our customers may fluctuate from time to time, which makes it difficult for us to project future demands from our customers. As a result, we cannot guarantee that our current customers will continue to utilize our services or that they will continue at the same levels. Our success depends on receiving continuous orders from our customers.
We rely on our customers to make continuous purchases of cargo space from us to maintain a stable source of revenue. If for any reason, our customers no longer require cargo spaces from us at the same level or on similar terms as they have done historically or at all, in the future (for example, in the event of decrease in customers’ end products due to economic downturn), or our customers remove us from their list of nominated logistics services providers, and if we are unable to obtain orders in substitution, or unable to develop new customers, our business may be materially and adversely affected.
3
We rely on our business partners, including air freight carriers, customs clearance companies, ground transportation companies, and local delivery service providers to implement certain services to our customers.
We maintain business relationships with air freight carriers, customs clearance companies, ground transportation companies, and local delivery service providers to implement services to our customers. Customs clearance companies, ground transportation companies, and local delivery service providers are engaged on an as-needed basis, since it is more cost-effective and offers flexibility in cost management. There is no assurance that our service providers will at all times perform at a satisfactory level. It may happen that the labels noting the destinations of the cargo fall off and that the air freight carriers mistakenly deliver the cargo to other destinations. Similarly, in case there is any error or delay due to various reasons, including, but not limited to, weather conditions, air traffic control, and human negligence, the goods of our customers may not be delivered to the assigned destination within the expected condition and time frame.
We cannot assure you that the service quality of air freight carriers or other service providers will always meet our or our customers’ standards or requirements. There may be occasions where, due to various reasons, our service providers are not able to deliver the goods on time or there may be instances where goods are damaged during the transfer. If our service providers are unable to meet our customers’ standards and requirements and we are unable to find suitable alternatives promptly, our reputation within the industry may be adversely affected.
Decreased availability or increased costs of key logistics and supply chain services, such as warehousing equipment and materials, could impact our cost of operations and our profitability, as well as our cash flows. In addition, we may also be exposed to legal risks and subject to certain liabilities, including administrative fines, if those third parties fail to obtain all necessary licenses and permits as required.
In addition, we are dependent in part on third-party service providers to report certain events to us, such as delivery information and cargo claims. This partial reliance on third parties could cause delays in reporting certain events, impacting our ability to recognize revenue and claims in a timely manner. In addition, we cannot assure you that we will be able to obtain access to preferred third-party service providers at attractive rates or that these providers will have adequate capacity available to meet the needs of our customers.
Our business is susceptible to disruptions in the business activities of our suppliers of cargo space.
We need our suppliers to provide cargo space for our customers. Disruptions in the business activities of our suppliers may have negative impacts on our business. Such disruptions include (i) suspension or cancellation of flight lines due to technical failures or extreme weather conditions, especially when we rely on one airline carrier for a particular destination; (ii) labor strikes due to disagreements between labor and management; (iii) massive occurrence of political or industrial actions at transportations hubs or destination ports; (iv) wars or terrorist attacks; (v) serious financial difficulties faced by our suppliers during their course of business operations; and (vi) significant increases in freight rates and charges charged by service providers. In the event of occurrence of the above, we may have to arrange for alternative suppliers of cargo space from other air freight carriers for our customers within a tight time constraint.
If we are unable to source cargo space on alternative routes for our customers, we may have to bear such disruptions and our customers may switch to our competitors. Further, if there is any detrimental change to our business relationship with our major suppliers, our reputation, financial condition, and results of operations could be adversely affected.
We face risks associated with the items we deliver and the contents of shipments and inventories handled through our service network as we may fail to identify shipments that carry goods of dangerous or illicit nature.
We handle a large volume of shipments across our service network. In accordance with the air cargo security regime in Hong Kong and related statutory requirements of the Hong Kong Civil Aviation Department (CAD), 100% of cargoes arranged by us are required to be screened by the screening equipment (such as x-ray) certified by aviation security authorities, such as the European Civil Aviation Conference (ECAC) of the European Commission, Transportation Security Administration (TSA) of the United States, and Department for Transport (DOT) of Australia (“Screening Equipment”). We are required to ensure that all dangerous goods are properly classified, packed, marked, labeled, and documented before they are offered for air transportation. However, there is no assurance that our Screening Equipment or hand search/physical check by our screeners at piece level can successfully prevent the shipment of any illegal goods or dangerous goods.
Should we fail to identify shipments that carry goods of illicit or dangerous nature, these goods may end up being impounded by customs, where we may be subject to investigations and administrative or even criminal penalties, or if any personal injury or property damage is concurrently caused, we may be further liable for civil compensation. In such event, our reputation, business, and results of operations may be materially and adversely affected. Furthermore, we face challenges with respect to the protection and control of these items when handling the shipments and inventories across our service network. Shipments and inventories in our service network may be stolen, damaged, or lost for various reasons, and we, together with our service providers, may be perceived or found to be liable for such incidents. As of the date of this annual report, we have not experienced any failure to detect shipments of illicit or dangerous nature.
4
We may fail to identify referral consignments that carry goods of dangerous or illicit nature.
Our business partners and customers may refer business opportunities or engage us as their service provider for the provision of logistics and freight forwarding services from Hong Kong to locations where we have a presence. We may also co-load our consignments with other freight forwarders to utilize the cargo space we have. In these circumstances, we may have no control over and no comprehension of the consignor’s nature of the consigned goods other than as declared on the relevant declaration forms. Even if we perform background checks on new customers and file police reports for any unclaimed and/or suspicious parcel, there is no assurance that the implementation of such measures will successfully prevent the transporting of any illegal or dangerous goods. Should consignment carry goods of illicit or dangerous nature and we fail to identify their nature, such goods may end up being impounded by customs or give rise to unexpected accidents, where we may be subject to investigation for breaking local laws and be fined by authorities. In such event, our reputation, business, and results of operations may be materially and adversely affected. As of the date of this annual report, we have not experienced any similar incident where we have failed to identify referral consignments that carry goods of dangerous or illicit nature.
Our insurance coverage may be inadequate to protect us from potential losses.
We have obtained insurance to cover certain potential risks and liabilities. We provide work-related injury insurance for our employees and property all risks insurance for our office and warehousing facilities. Additionally, we also purchase increased costs of work insurance for business interruption liability insurance and money-in-transit insurance covering warehouses and parcels, as well as other liability insurance as needed. However, we do not maintain product liability insurance or key-man insurance. There are also certain types of losses, such as from war, acts of terrorism, and certain natural disasters, for which we cannot obtain insurance at a reasonable cost or at all. There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition, and results of operations could be materially and adversely affected.
Significant increases in freight rates and charges charged by service providers may affect our business, financial condition, and results of operations.
We entered into block space agreements with air freight carriers for the provision of air cargo spaces. Our pricing strategy takes into account factors such as the type of consignment, freight rates, future business opportunities, volume of cargo space required, and the charges charged by other service providers. If there is an increase in freight rates or the charges charged by other service providers, we will have to transfer such increase in costs to our customers. This may have an adverse effect on our pricing and costs.
These increases in rates charged by air freight carriers and other service providers are influenced by various factors, including fuel prices, exchange rates, import or export taxes, costs of labor, and market conditions, many of which are beyond our control. We may need to set off the significant increase in costs by increasing our prices, which may reduce our competitive advantage, thereby materially and adversely affecting our business.
Our profitability may be materially and adversely impacted if our investment in equipment, warehousing facilities, and information technology infrastructure does not match customer demand for these resources or if there is a decline in the availability of funding sources for these investments.
Although we are an asset-light company, our integrated cross-border logistics services may require certain investments and commitment of capital in equipment, warehousing facilities maintenance and expansion, and warehousing systems such as shelving, racking, and information technology systems. The amount and timing of our capital investments depend on various factors, including anticipated freight volume levels and the price and availability of appropriate property for our warehousing facilities.
These capital expenditures are associated with certain inherent risks. We may not have the resources to fund such investment. Even if we have sufficient funding, assets that best suit our needs may not be available at reasonable prices or at all. In addition, we are likely to incur capital expenditures earlier than all of the anticipated benefits, and the return on these investments may be lower, or may be realized more slowly, than we expected. In addition, the carrying value of the related assets may be subject to impairment, which may adversely affect our financial condition and operating results.
Our business is substantially dependent on our relationship with our major service suppliers. Changes or difficulties in our relationships with our service suppliers may harm our business and financial results.
Our business is substantially dependent on our relationship with our major service suppliers. Our suppliers primarily include air freight carriers, ground transportation companies, and customs clearance companies. We consider major service suppliers in each period to be those suppliers that accounted for more than 10% of overall purchases in such period. For the year ended September 30, 2025, two major suppliers accounted for 59.4% and 12.2% of our total purchases. For the year ended September 30, 2024, two major suppliers accounted for 45.8% and 10.9% of our total purchases. For the year ended September 30, 2023, four major suppliers accounted for 33.1%, 23.1%, 13.4% and 10.9% of our total purchases.
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Apart from the cargo block space agreements, we generally do not enter into any long-term agreements with our service suppliers. Accordingly, there is no assurance that Globavend HK can maintain stable and long-term business relationships with any service supplier. Failure to maintain existing relationships with the service suppliers or to establish new relationships in the future could negatively affect Globavend HK’s ability to obtain their services in a price advantage and timely manner. If Globavend HK is unable to obtain ample supply of services from existing suppliers or alternative sources of supply, Globavend HK may be unable to satisfy the orders from its customers or may only be able to provide its integrated cross-border logistics services or freight forwarding services to its customers at a much higher rate.
In addition, in the event that we are unable to renew our block space agreements with air freight carriers, it may be challenging to secure alternative air freight carriers that meet our customers’ requirements. We cannot guarantee that we will be able to secure comparable services from other air freight carriers on comparable or better commercial terms or at all.
An increase in fuel prices may reduce profitability.
The cost of fuel is a significant factor affecting the logistics industry in its freight forwarding business, as it impacts the operations of companies through the air freight rates. As a result, any increase in fuel price could raise our costs, potentially affecting our profitability if we are unable to pass on the costs to our customers. Fuel costs are subject to substantial fluctuations and influenced by various economic and political factors, most of which are beyond our control, such as political instability in oil-producing regions.
There may be disintermediation in the logistics industry and freight forwarding business in the future.
With the growing trend of digitization, a vast amount of information is now readily available online. The information transparency, coupled with the development of innovative technologies, such as online marketplaces, electronic payments, and algorithmic order-matching, has led manufacturers and retailers to seek ways to reduce the number of intermediaries in the supply chain, which may involve manufacturers and retailers shipping directly to their end customers. The trend of eliminating intermediaries creates disintermediation in our industry and possesses significant risks to our industry, as any significant decrease in demand for our freight forwarding services could negatively impact our business.
Our business is dependent on information technology and is subject to cybersecurity risks. A cyberattack may disrupt our operations and compromise the personal data of our customers.
We rely on information technology to maintain our electronic systems and database in the course of our business operations. Our suppliers’ and customers’ information, flight schedules, and information on our customers’ goods at our warehouses are electronically recorded in our systems. While we take measures to ensure the security of our information technology systems, our systems are susceptible to outages from fire, floods, power loss, telecommunications failures, data leakage, human error, hacking and break-ins, cyber-attacks and similar events. The occurrence of any of these events could disrupt or damage our information technology systems and hamper our internal operations, disable our ability to handle the bookings of customers efficiently or at all, and adversely impact our customer service, volumes, and revenues and result in increased cost.
Furthermore, threats to information technology systems, including as a result of cyberattacks and cyber incidents, continue to grow. Cybersecurity risks could include, but are not limited to, malicious software, attempts to gain unauthorized access to our data, and the unauthorized release, corruption, or loss of our data and personal information, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems or other electronic security, including with our property and equipment.
These cybersecurity risks could:
| ● | Disrupt our operations and damage our information technology systems; | |
| ● | Subject us to various penalties and fees by third parties; | |
| ● | Negatively impact our ability to compete; | |
| ● | Enable the theft or misappropriation of funds; | |
| ● | Cause the loss, corruption, or misappropriation of proprietary or confidential information; | |
| ● | Expose us to litigation; and | |
| ● | Result in injury to our reputation, downtime, loss of revenue, and increased costs to prevent, respond to, or mitigate cybersecurity events. |
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If a cybersecurity event occurs, it could harm our business and reputation and could result in a loss of customers. Likewise, data privacy breaches by employees and others who access our systems may pose a risk that sensitive customer data may be exposed to unauthorized persons or to the public, adversely impacting our customer service, employee relationships, and our reputation.
While we continue to make efforts to evaluate and improve our systems and particularly the effectiveness of our security program, procedures, and systems, it is possible that our business, financial, and other systems could be compromised, which could go unnoticed for a prolonged period of time, and there can be no assurance that the actions and controls that we implement, or which we cause third-party service providers to implement, will be sufficient to protect our systems, information, or other property. Additionally, customers or third parties upon whom we rely face similar threats, which could directly or indirectly impact our business and operations. The occurrence of a cyber incident or attack could have a material adverse effect on our business, financial condition, and results of operations.
There is also no assurance that we will be able to successfully keep up with technological improvements in order to meet our customers’ needs or the technology developed by competitors will not have an adverse impact on the competitiveness or attractiveness of our services. In addition, hardware or software failure relating to information technology systems could significantly disrupt customer workflows and cause economic losses for which we could be held liable and that could damage our reputation. We are also subject to hacking or other attacks on our information technology systems.
We may not be able to meet the delivery schedule of our customers and may experience loss of revenue.
Once we accept orders from our customers, we are committed to delivering our customers’ products to their clients within the agreed schedule. If a possible delay in delivery schedule is anticipated, due to transport and shipping disruptions; delay in the cargo consolidation process; disruptions in our suppliers’ operations such as equipment breakdowns, power failures, severe weather conditions, or epidemic disease; and/or other factors beyond our control, we would take proactive actions such as timely negotiation with our customers for adjusting schedules and making delivery by expedited methods. We may incur additional expenses or have to offer additional discounts to our customers as a result of such remedial measures. When such delays occur, we may also experience a loss of revenue and, in the worst-case scenario, our customers may cancel the order. As of the date of this annual report, we have not experienced any delay that led to material cancellation of orders from our customers.
There is no assurance that we can maintain the qualifications, licenses, and registrations for the operation as an air freight forwarder.
It is essential to our operation as an air freight forwarder for us to maintain certain qualifications, licenses, and registrations. To maintain such qualifications, licenses, or registrations, we must comply with the relevant requirements imposed by the International Air Transport Association (“IATA”).
Further, the standards of compliance required may from time to time be subject to changes without substantial advance notice. We cannot assure you that all of the required qualifications, licenses, and registrations can be maintained or renewed in a timely manner or at all. If we fail to comply with any of the relevant requirements, our qualifications, licenses, or registrations could be temporarily suspended or revoked, or the renewal of our qualifications, licenses, or registrations upon expiry of their original terms may be delayed or refused. In such circumstances, our capability to undertake relevant work may be directly impacted, and our business may be materially and adversely affected.
We have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues during the years ended September 30, 2023, 2024 and 2025.
We derive a significant portion of our revenues from a few major customers. For the year ended September 30, 2023, three customers accounted for 21.9%, 18.1%, and 14.2% of our total revenue. For the year ended September 30, 2024, three customers accounted for 18.1%, 16.0%, and 12.6% of our total revenue. For the year ended September 30, 2025, two customers accounted for 25.1% and 17.5% of our total revenue. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our services from these customers. If any of these customers experience declining or delayed sales due to market, economic, or competitive conditions, their demand for our freight forwarding services may reduce which compels us to lower our prices, which could have an adverse effect on our margins and financial position and could negatively affect our revenues and results of operations.
We may not be able to attract and retain our core management team and other key personnel for our operation.
Our success and growth depend on the knowledge, experience, and expertise of our management team, who is responsible for overseeing financial condition and performance, sales and marketing, product design and development, and business strategy formulation, as well as the ability to identify, hire, train, and retain suitable, skilled, and qualified employees. In particular, Mr. Wai Yiu Yau, our founder, chief executive officer, and chairman of the board, has accumulated over 20 years of experience in the logistics industry. See “Item 6. Directors, Senior Management and Employees.” In particular, Mr. Yau has made significant contribution to our success and has an indispensable value in guiding our future development. There is no assurance that we will be able to continue to retain the services of any or all of our management team and key personnel. If any of these personnel is unable or unwilling to continue to serve in his or her present position, and we are unable to find a suitable replacement in a timely manner, at acceptable cost or at all, the loss of their services may cause disruption to our business and may have an adverse impact on our ability to manage or operate our business effectively. The results of our operations may be adversely affected as a result. Our business operation is generally manual in nature, and any deterioration of labor relations may adversely affect our operational stability and efficiency. We cannot give any assurance that favorable labor relations can be maintained. Any industrial action or strike by our labor force beyond our control may also cause temporary or prolonged disruption to our business operation.
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The logistics industry in which we operate is highly fragmented and competitive, and there can be no assurance that we can compete successfully for customers in the future.
There are a number of players in the logistics industry, ranging from air freight carriers, freight forwarders, and other integrated logistics companies. We face intense competition from other players in the logistics industry, with pricing, route networks, and service offerings being the key differentiators. Furthermore, the logistics industry and freight forwarding business is highly fragmented and competitive due to the presence of numerous small to medium-sized players. Also, major air freight carriers have established their own subsidiaries to provide freight forwarding and logistics services, which increase the level of competition. Our customer base and market share may be negatively impacted by the intense competition, and we may not be able to compete effectively with our competitors if we cannot maintain or gain sufficient market presence or differentiate ourselves from them. For instance, our competitors may form alliances with international transportation or logistics service providers, enabling them to leverage extensive distribution networks, resources, and technologies that may not be available to us.
As a result, we may not be able to compete successfully with our existing or potential competitors. If we fail to source cargo space from our suppliers at a favorable price, we may have to adopt a more competitive pricing strategy by lowering our profit margin to maintain our customer base and market share. We may also have to adjust our profit margin and adopt a more competitive pricing strategy in order to maintain our position in the market. However, there can be no assurance that we can compete successfully over other industry platers for customers in the future. If we are unable to maintain our customer base, our business could be adversely affected.
Uncertainties relating to the growth and profitability of the e-commerce industry could adversely affect our revenues and business prospects.
As an e-commerce logistics services provider, we are dependent on customers operating e-commerce platforms or e-commerce merchants. The long-term viability and prospects of various e-commerce business models remain relatively untested. The future results of operations of the e-commerce platforms will depend on numerous factors affecting the development of the e-commerce industry, which may be beyond our control, such as (i) the trust and confidence level of e-commerce consumers, as well as changes in customer demographics and consumer tastes and preferences; (ii) the selection, price, and popularity of products, as well as promotions that the e-commerce platforms offer online; (iii) whether alternative retail channels or business models better address the needs of consumers; and (iv) the development of fulfillment, payment, and other ancillary services associated with online purchases. A decline in the popularity of e-commerce may adversely affect the business prospects of our customers, and ultimately, our revenue and business prospects may be adversely affected.
We may be unable to successfully implement our future business plans and objectives.
Our future business plans may be hindered by factors beyond our control, such as competition within the industry we operate; our ability to cope with high exposure to financial risk, operational risk, market risk, and credit risk as our business and customer base expands; and our ability to provide, maintain, and improve the level of human and other resources in servicing our customers. As such, we cannot assure that our future business plans will materialize, that our objectives will be accomplished fully or partially, or that our business strategies will generate the intended benefits to us as initially contemplated. If we fail to implement our business development strategies successfully, our business performance could be materially and adversely affected.
We may in the future pursue acquisitions and joint ventures as part of our growth strategy. Any future acquisition or joint venture may result in exposure to potential liabilities of the acquired companies and significant transaction costs, and it may also present new risks associated with entering additional markets or offering new products or services and integrating the acquired companies or newly established joint ventures. Moreover, we may not have sufficient management, financial, and other resources to integrate companies we acquire or to successfully operate joint ventures, and we may be unable to profitably operate our expanded company structure. Additionally, any new business that we may acquire or joint ventures we may form, once integrated with our existing operations, may not produce expected or intended results.
As we lease a number of properties for our business operations, we are exposed to risks in relation to unpredictable and increasing rental and relocation costs.
Our office and warehousing facilities are presently located on leased premises. At the end of each lease term, we may not be able to negotiate an extension of the lease and may therefore be forced to move to a different location, or the rent we pay may increase significantly. In the event that our rental expenses for our office located in Tsuen Wan increase, our operating expenses will increase and also affect our operating cash flows and, in turn, materially and adversely affect our business, results of operations, and prospects.
Furthermore, the leases for the office and warehousing facilities we use could be challenged by third parties or government authorities, which may cause interruptions to our business operations. We cannot assure you that our use of such leased properties will not be challenged. In the event that our use of leased properties is successfully challenged, we may be subject to fines and forced to relocate the affected operations. We can provide no assurance that we will be able to find suitable replacement sites at desirable locations on terms acceptable to accommodate our future growth on a timely basis or at all or that we will not be subject to material liability resulting from third parties’ challenges on our use of such properties.
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We are exposed to credit risks of our customers.
We are exposed to credit risks of our customers. We do not have access to all the information necessary to form a comprehensive view on creditworthiness. The complete financial and operational conditions of customers are not always available to us, and we may not be in any position to obtain such information. As a result, if any of our major customers experience any financial difficulty and fail to settle the outstanding amounts due to us in accordance with the agreed credit terms, our working capital position may be adversely affected.
Our Operating Subsidiaries may be exposed to claims by third parties for infringement of intellectual property rights.
Some of the services rendered by our Operating Subsidiaries are subject to intellectual property protection. In the event of disputes over the use of any intellectual property in our services, there is a risk that claims may be made against our Operating Subsidiaries for intellectual property infringement. In addition, any protracted litigation will result in substantial costs and the diversion of resources and management’s attention.
We may be subject to litigation, arbitration, or other legal proceeding risk.
We may be subject to arbitration claims and lawsuits in the ordinary course of our business. As of the date of this annual report, we are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition, or operations. Actions brought against us may result in settlements, awards, injunctions, fines, penalties, and other results adverse to us. A substantial judgment, settlement, fine, or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant reputational harm, which could harm our business prospects.
In addition, even if we prevail in any litigation or enforcement proceedings against us, we could incur significant legal expenses defending against the claims, even those without merit. Moreover, because even claims without merit can damage our reputation or raise concerns among our clients, we may feel compelled to settle claims at significant cost.
Increasing labor costs and labor shortages in our industry may affect our business, financial condition, and results of operations.
As of September 30, 2025, we had nine full-time employees, six of whom are based in Hong Kong, one of whom is based in Australia and two of whom are based in the mainland China. We intend to hire additional staff in Hong Kong, China and Australia to facilitate our expansion plans.
The economy in Hong Kong, China and Australia and globally has experienced general increases in inflation and labor costs in recent years. As a result, average wages in Hong Kong, China and certain other regions (such as Australia) are expected to continue to increase. In addition, we are required by the local laws and regulations to pay various statutory employee benefits, including a mandatory provident fund to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to fines and other penalties.
Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits, and employee headcount. We and our service providers compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive salaries and benefits compared to them.
Since we operate in a labor-intensive industry, we may face a shortage of labor in the future or experience increasing labor costs. If we fail to recruit sufficient staff or retain our existing employees at an acceptable cost, we may not be able to shift the extra costs to our customers due to their bargaining power or the competitive pricing model adopted by our competitors. Therefore, the increase in labor costs and labor shortage may adversely impact our business, expansion plans, financial condition, and results of operations.
To mitigate the inflationary pressure and the risk of increasing labor costs, we have taken measures including (i) minimizing unnecessary and non-value-added costs in our operations, such as cost of excess packaging and sealing materials; and (ii) strengthening our price bargaining power by providing more competitive salaries and benefits to our employees and shifting excess costs to our customers by raising our charges. We would also continue to enhance our information technology infrastructure and develop intelligent delivery and collection solutions to lower labor involvements and, thus, reduce labor costs.
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Natural disasters, acts of war, and other catastrophic events may adversely affect our operations.
Natural disasters, acts of God, wars, epidemics, material interruptions in service, or stoppages in transportation, as well as other events that are beyond our control, can have adverse effects on local economies, infrastructures, airports, port facilities, and international trade. Such events can also result in the closure of ports or airports and disruptions to cargo flows. Major earthquakes, weather events, cyberattacks, heightened security measures (actual or threatened), terrorist attacks, strikes, civil unrest, pandemic, or other catastrophic events may also cause a disruption or failure of our systems or operations thereby causing delays in providing services or performing other critical functions. In such an event, our business, financial condition, and results of operations may be adversely affected.
Risks Related to Doing Business in Hong Kong
A substantial part of our operations are in Hong Kong, a special administrative region of the PRC. Due to the long-arm provisions under the current PRC laws and regulations, the Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Ordinary Shares. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in Hong Kong or China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. The Chinese government may intervene or impose restrictions on our ability to move money out of Hong Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations, rules, and the enforcement of laws of the Chinese government may also be quick with little advance notice, and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system cannot be certain.
Globavend Holdings is a holding company, and we conduct a substantial part of our operations in Hong Kong through Globavend HK. Other than Globavend HK, our other subsidiaries in Hong Kong also include Globavend Warehouse. Hong Kong is a special administrative region of the PRC. Due to certain long-arm provisions in the current PRC laws and regulations, there remains regulatory uncertainty with respect to the implementation and interpretation of laws in China as they may affect Hong Kong. The PRC government may choose to exercise additional oversight and discretion over Hong Kong, and the policies, regulations, rules, and the enforcement of laws of the PRC government to which we are subject may change rapidly and with little advance notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system are by their very nature uncertain.
In addition, these PRC laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, which may result in inconsistency with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance, any associated inquiries or investigations, or any other government actions may:
| ● | Delay or impede our development; | |
| ● | Result in negative publicity or increase our operating costs; | |
| ● | Require significant management time and attention; and | |
| ● | Subject us to remedies, administrative penalties, and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices. |
We are aware that the PRC government recently initiated a series of regulatory actions and statements to regulate business operations in certain areas in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is uncertain how soon the PRC legislative or administrative regulation-making bodies will respond or what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, or what the potential impact that any such modified or new laws and regulations would have on our daily business operations and the ability to accept foreign investments and list on a U.S. or other foreign exchange.
All of the legal and operational risks associated with operating in the PRC also apply to our operations in Hong Kong. The PRC government may intervene or influence our operations at any time and may exert more control over offerings conducted overseas and foreign investment in Hong Kong-based issuers, which may result in a material change in our operations and/or the value of our Ordinary Shares. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in Hong Kong or China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
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For example, there is currently no restriction or limitation under the laws of Hong Kong on the conversion of HK dollar into foreign currencies and the transfer of currencies out of Hong Kong and the laws and regulations of the PRC on currency conversion control do not currently have any material impact on the transfer of cash between the ultimate holding company and our Operating Subsidiary in Hong Kong. However, the PRC government may, in the future, impose restrictions or limitations on our ability to move money out of Hong Kong to distribute earnings and pay dividends to and from the other entities within our organization or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our ability to receive funds from our Operating Subsidiary in Hong Kong. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact our ability to conduct our business could require us to change certain aspects of our business to ensure compliance; decrease demand for our services; reduce revenues; increase costs; require us to obtain more licenses, permits, approvals, or certificates; or subject us to additional liabilities. To the extent any new or more stringent measures are implemented, our business, financial condition, and results of operations could be adversely affected and the value of our Ordinary Shares could decrease or become worthless.
The Hong Kong legal system embodies uncertainties that could limit the legal protections available to you and us.
A substantial part of our operations are conducted in Hong Kong. Hong Kong is a special administration region of the PRC. On July 1, 1997, the PRC assumed sovereignty of Hong Kong under the “one country, two systems” principle which ensures that Hong Kong has its own governmental and legal system that is independent from mainland China and, as a result, has its own distinct rules and regulations. The constitutional document of Hong Kong, the Basic Law, provides that Hong Kong enjoys the freedom to function with a high degree of autonomy for its affairs, including currencies, immigration and customs operations, and its independent judiciary system and parliamentary system. The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law are maintained. Hong Kong continues using the English common law system. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition.
In contrast, the PRC legal system is a civil law system based on written statutes unlike the common law system applicable in Hong Kong; prior court decisions may be cited for reference but have limited precedential value. Since 1979, the PRC government has promulgated laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation, and trade. However, China has not developed a fully integrated legal system. As a result, recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new and due to the limited volume of published cases and their non-binding nature, interpretation and enforcement of these newer laws and regulations involve greater uncertainties than those in jurisdictions available to you. In addition, the PRC’s legal system is based in part on government policies and administrative rules and many have retroactive effects. As a result, we cannot predict the effect of future developments in China’s legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.
Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.
Some international observers and human rights organizations have expressed doubts about the future of the relative political freedoms enjoyed in Hong Kong and the PRC’s pledge to allow a high degree of autonomy in Hong Kong. They considered, for example, that the proposals in Article 23 of the Basic Law in 2003 (which was withdrawn due to mass opposition) might have undermined autonomy. On June 10, 2014, Beijing released a new report asserting its authority over the territory. This ignited criticism from many people in Hong Kong, who were of view that the PRC leadership was reneging on its pledge to abide by the “one country, two systems” policy that allows for a democratic, autonomous Hong Kong under Beijing’s rule. On July 14, 2020, the United States signed an executive order to end the special status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed may be compromised, it could potentially impact Hong Kong’s common law legal system and ma, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operations. 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 the PRC were to, in fact, renege on its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong’s common law legal system and may, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to you.
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Uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations, which could change at any time with little advance notice, could limit the legal protections available to us.
The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations, and rules, which could change at any time with little advance notice, are not always uniform, and enforcement of these laws, regulations, and rules involves uncertainties.
We may have to resort to administrative and court proceedings to enforce our legal rights from time to time. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based partly on government policies and internal rules (some of which are not published in a timely manner or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property), and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.
It may be difficult for overseas regulators to conduct investigations or collect evidence within the territory of China, including Hong Kong.
Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of mutual and practicable cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within mainland China. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.
In the event that U.S. regulators carry out an investigation on us and there is a need to conduct such investigation, or collect evidence in mainland China, U.S. regulators may not be able to carry out such investigation or evidence collection directly in mainland China under the PRC laws. U.S. regulators may, in the future, consider cross-border cooperation with a securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels, or a regulatory cooperation mechanism established with the securities regulatory authority of the PRC.
Our principal business operations are conducted in Hong Kong. Hong Kong has a legal system separate from mainland China. Our Hong Kong counsel advised that the Securities and Futures Commission of Hong Kong (“SFC”) is a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding, which provides for mutual investigatory and other assistance and exchange of information between securities regulators around the world, including the SEC. This is also reflected in section 186 of the Securities and Futures Ordinance (“SFO”), which empowers the SFC to exercise its investigatory powers to obtain information and documents requested by non-Hong Kong regulators, and section 378 of the SFO, which allows the SFC to share confidential information and documents in its possession with such regulators. However, there is no assurance that such cooperation will materialize or, if it does, whether it will adequately address any efforts to investigate or collect evidence to the extent that may be sought by U.S. regulators.
Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like us with Hong Kong-based operations, all of which could increase our compliance costs and subject us to additional disclosure requirements.
Currently, Hong Kong has a separate legal system from mainland China, and it has its legislative framework and judiciary independent of that of the PRC government. Nonetheless, the recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital-raising activities in the United States. In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of limiting our service offerings, restricting the scope of our operations in Hong Kong, or causing the suspension or termination of our business operations in Hong Kong entirely. We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost efficient, or liability-free manner or at all.
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On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with PRC-based operating companies (including Hong Kong) before their registration statements will be declared effective. On August 1, 2021, the CSRC issued a statement saying that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of such companies and the recent regulatory development in China and that both countries should strengthen communications on regulating China-related issuers. Since we mainly operate in Hong Kong, we cannot guarantee that we will not be subject to tightened regulatory review, and we could be exposed to government interference from China.
We may become subject to a variety of PRC laws and other obligations regarding data security offerings that are conducted overseas and/or foreign investment in China-based issuers.
On June 10, 2021, the Standing Committee of the National People’s Congress enacted the PRC Data Security Law, which took effect on September 1, 2021. The law requires data collection to be conducted in a legitimate and proper manner, and it stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and a hierarchical protection system for data security.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
On August 20, 2021, the 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 mainland China that is carried out outside of China where (1) such processing is for the purpose of providing products or services for natural persons within China, (2) such processing is to analyze or evaluate the behavior of natural persons within China, or (3) there are any other circumstances stipulated by related laws and administrative regulations.
On December 24, 2021, the CSRC, together with other relevant government authorities in China, issued the Draft Overseas Listing Regulations. The Draft Overseas Listing Regulations require that a PRC domestic enterprise seeking to issue and list its shares overseas (“Overseas Issuance and Listing”) shall complete the filing procedures and submit the relevant information to CSRC. The Overseas Issuance and Listing includes direct and indirect issuance and listing. Where an enterprise whose principal business activities are conducted in PRC seeks to issue and list its shares in the name of an overseas enterprise on the basis of the equity, assets, income, or other similar rights and interests of the relevant PRC domestic enterprise, such activities shall be deemed an indirect overseas issuance and listing under the Draft Overseas Listing Regulations.
On December 28, 2021, the CAC, jointly with the relevant authorities, formally published Measures for Cybersecurity Review (2021), which took effect on February 15, 2022, and replaced the former Measures for Cybersecurity Review (2020) issued on July 10, 2021. Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services, and online platform operators (together with the operators of critical information infrastructure, the “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, and any online platform operator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country.
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On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, as approved by the State Council, released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the “Trial Administrative Measures”) and five interpretive guidelines (collectively, the “CSRC Filing Rules”), which came into effect on March 31, 2023. Under the CSRC Filing Rules, a filing-based regulatory system shall be applied to “indirect overseas offerings and listings” of PRC domestic companies, which refers to securities offerings and listings in an overseas market made under the name of an offshore entity but based on the underlying equity, assets, earnings, or other similar rights of a domestic company that operates its main business domestically. The CSRC Filing Rules state that any post-listing follow-on offering by an issuer in the same overseas market, including issuance of shares, convertible notes, and other similar securities, shall be subject to filing requirement within three business days after the completion of the offering. We believe that we are not subject to the CSRC Filing Rules because we are incorporated in the Cayman Islands and our major subsidiaries are incorporated in Hong Kong, the British Virgin Islands, and other regions outside of mainland China and operate primarily in Hong Kong. Although one of our operating subsidiaries, namely, the PRC Subsidiary, is located in China, given that (i) our PRC Subsidiary does not contribute 50% or more of our operating revenue, total profit, total assets or net assets; and (ii) the main parts of our business activities are conducted outside mainland China, our main place(s) of business are located outside mainland China, and the majority of senior management staff in charge of our business operations and management are not PRC citizens and have their usual place(s) of residence located outside mainland China, we believe that our listing on the Nasdaq is not subject to the CSRC review. However, as the CSRC Filing Rules and the supporting guidelines are newly published, there exists uncertainty with respect to the implementation and interpretation of the principle of “substance over form.” If our offering and listing is later deemed as “indirect overseas offering and listing by companies in mainland China” under the CSRC Filing Rules, we may need to complete the filing procedures for our offering and listing. If we are subject to the filing requirements, we cannot assure you that we will be able to complete such filings in a timely manner or even at all. As of the date of this annual report, our registered public offering in the United States is not subject to the review or prior approval of the CAC nor the CSRC. However, since these statements and regulatory actions are new, it is 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 uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of our subsidiaries in Hong Kong, their respective abilities to accept foreign investments, and the listing of our Ordinary Shares on U.S. or other foreign exchanges. There remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations and whether the PRC government will adopt additional requirements or extend the existing requirements to apply to our subsidiaries in Hong Kong. If the CSRC Filing Rules become applicable to our subsidiaries in Hong Kong, or if the Measures for Cybersecurity Review (2021) or the PRC Personal Information Protection Law become applicable to our subsidiaries in Hong Kong, our business operations 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 any of our subsidiaries in Hong Kong becomes subject to the CAC or CSRC review, we cannot assure you that we 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, we may become subject to fines and other penalties that may have a material adverse effect on our business, operations, and financial condition; may hinder our ability to offer or continue to offer Ordinary Shares to investors; and may cause the value of our Ordinary Shares to significantly decline or be worthless.
Although the audit report included in this annual report is prepared by U.S. auditors who are currently inspectable by the PCAOB, there is no guarantee that future audit reports will be issued by auditors inspectable by the PCAOB, and, as such, in the future, investors may be deprived of the benefits of the PCAOB inspection program. Furthermore, trading in our securities may be prohibited under the HFCA Act if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities. Furthermore, on December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three and, thus, reduced the time before our Ordinary Shares may be prohibited from trading or delisted.
As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, ZH CPA, LLC is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. ZH CPA, LLC is currently inspectable by the PCAOB, and we have no operations in mainland China. However, if there is significant change to current political arrangements between mainland China and Hong Kong, companies operated in Hong Kong like us may face similar regulatory risks as those operated in mainland China, and we cannot assure you that our current auditor’s work will continue to be able to be inspected by the PCAOB.
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As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular mainland China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress that, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges, such as the Nasdaq, of issuers included on the SEC’s list for three consecutive years, thus reducing the time period for triggering the prohibition on trading. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On May 20, 2020, the U.S. Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB, or other federal agencies and departments with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year (as defined in the interim final rules) under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above. Under the HFCA Act, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our Ordinary Shares being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On September 22, 2021, the PCAOB adopted a final rule implementing the AHFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations under the Holding Foreign Companies Accountable Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the AHFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the SEC announced that the PCAOB designated mainland China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated under the HFCA Act. On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the PRC MOF in respect to cooperation on the oversight of PCAOB-registered public accounting firms based in mainland China and Hong Kong. Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September 2022 and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. As a result of the announcement, any companies audited by registered public accounting firms headquartered in mainland China and Hong Kong would not face immediate threat of trading prohibitions at this time. However, if any regulatory change or step taken by PRC regulators in the future precludes the PCAOB from accessing auditing papers of registered public accounting firms in mainland China and Hong Kong, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, then the companies audited by those registered public accounting firms may be subject to a trading prohibition on U.S. markets pursuant to the HFCA Act. On December 29, 2022, the Consolidated Appropriations Act, 2023 (the “CAA”) was signed into law by former President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
Our current auditor is based in the United States and has been inspected by the PCAOB on a regular basis. However, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our current auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in our securities to be prohibited under the HFCA Act and ultimately result in a determination by a securities exchange to delist our securities. Delisting of our Ordinary Shares would force holders of our Ordinary Shares to sell their Ordinary Shares. The market price of our Ordinary Shares could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance. The SEC is assessing how to implement other requirements of the AHFCAA, including the listing and trading prohibition requirements described above. Future developments in respect to increasing U.S. regulatory access to audit information are uncertain, as the legislative developments are subject to the legislative process and the regulatory developments are subject to the rule-making process and other administrative procedures.
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The rule changes submitted by Nasdaq and an act passed by the U.S. Senate and the U.S. House of Representatives call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our offering, business operations, share price, and reputation.
U.S. public companies with substantially all of their operations in China (including in Hong Kong) have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial commentators, and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies, or a lack of adherence thereto and, in many cases, allegations of fraud.
On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or that have substantial operations in emerging markets, including China, reiterating past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice, and other U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act.
On May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirements for companies primarily operating in a “Restrictive Market,” (ii) prohibit Restrictive Market companies from directly listing on the Nasdaq Capital Market and only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors. The SEC approved the proposals on December 18, 2025, and the updates went into effect on January 16, 2026.
As a result of this scrutiny, criticism, and negative publicity, the traded stock of many U.S.-listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity will have on us, our offerings, business, and our share price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time-consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our shares.
The enactment of Law of the PRC on Safeguarding the Hong Kong National Security Law could impact our subsidiaries in Hong Kong.
On June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law (the “Hong Kong National Security Law”). This law defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories of offenses—secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security—and their corresponding penalties. On July 14, 2020, U.S. President Donald Trump (in his former presidency) signed the Hong Kong Autonomy Act (“HKAA”) into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020, the U.S. government imposed HKAA-authorized sanctions on 11 individuals, including then-HKSAR chief executive Carrie Lam and John Lee, who later replaced Carrie Lam as chief executive on July 1, 2022. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong.
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The PRC government may intervene or influence our operations at any time or may exert more control over offerings conducted overseas and foreign investment in PRC-based issuers, which may result in a material change in our operations and/or the value of our Ordinary Shares. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
If we become subject to the recent scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate and/or defend the matter, which could harm our business operations and our reputation and could result in a loss of your investment in our Ordinary Shares, in particular if such matter cannot be addressed and resolved favorably.
During the last several years, U.S.-listed companies that have substantially all of their operations in China have been the subject of intense scrutiny by investors, financial commentators, and regulatory agencies. Much of the scrutiny has centered on financial and accounting irregularities and mistakes, lack of effective internal controls over financial reporting, and, in many cases, allegations of fraud. As a result of the scrutiny, the stocks of many U.S.-listed Chinese companies that have been the subject of such scrutiny have sharply decreased in value. Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations into the allegations.
If we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate such allegations and/or defend the Company. Such investigations or allegations would be costly and time-consuming and likely would distract our management from our normal business and could result in our reputation being harmed. Our stock price could decline because of such allegations, even if the allegations are false.
A downturn in the Hong Kong, mainland China, or global economy, or a change in the economic and political policies of China, could materially and adversely affect our business and financial condition.
Our business may be influenced to a significant degree by political, economic, and social conditions in Hong Kong and mainland China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but they may have a negative effect on us.
Economic conditions in Hong Kong and mainland China are sensitive to global economic conditions. Although we mainly operate our business in Hong Kong, our customers principally comprise businesses that operate e-commerce platforms in Hong Kong. As such, the demand for e-commerce logistics, air freight forwarding, and related logistics services may be dependent on the global economy. If there is any significant decline in the global economy, our profitability and business prospects will be materially affected. Rising tension between the U.S. and China may an adverse effect on global economic conditions. On August 9, 2023, an executive order was issued by former President Biden to direct the Department of Treasury to issue regulations to restrict outbound investment in key technology sectors by U.S. persons to China, with a view to bolster U.S. national security and to curtail investment in sectors that may advance China’s military, intelligence, surveillance or cyber-enabled capabilities. Major market disruptions and adverse changes in market conditions and uncertainty in the regulatory climate worldwide may adversely affect our business and industry or impair our ability to borrow or make any future financial arrangements. The credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. The conflict is expected to have further global economic consequences, including, but not limited to, the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates, and uncertainty about economic and political stability. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but they could be substantial, even though we do not have any direct exposure to Russia or the adjoining geographic regions. Prolonged unrest, intensified military activities, or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could, in turn, have a material adverse effect on the business outlook of our business.
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Compliance with Hong Kong’s Personal Data (Privacy) Ordinance and any other existing or future data privacy related laws, regulations and governmental orders may entail significant expenses and could materially affect our business.
Although we are not subject to cybersecurity review by the CAC nor any other PRC authorities for this Offering or required to obtain regulatory approval regarding the data privacy and personal information requirements from the CAC nor any other PRC authorities for our and our subsidiaries’ operations Hong Kong, because all of our operations take place in Hong Kong, we are subject to a variety of laws and other obligations regarding data privacy and protection in Hong Kong.
In particular, the Personal Data (Privacy) Ordinance (Chapter 486 of the laws of Hong Kong) (the “PDPO” or the “Personal Data (Privacy) Ordinance”) imposes a duty on any data user who, either alone or jointly with other persons, controls the collection, holding, processing or use of any personal data which relates directly or indirectly to a living individual and can be used to identify that individual. Under the PDPO, data users shall take all practicable steps to protect the personal data they hold from any unauthorized or accidental access, processing, erasure, loss, or use. Once collected, such personal data should not be kept longer than necessary for the fulfilment of the purpose for which it is or is to be used and shall be erased if it is no longer required, unless erasure is prohibited by law or is not in the public interest. The PDPO also confers on the Privacy Commissioner for Personal Data (“Privacy Commissioner”) power to conduct investigations and institute prosecutions. The data protection principles (collectively, the “DPP” or the “Data Protection Principles”), which are contained in Schedule 1 to the PDPO, outline how data users should collect, handle, and use personal data, complemented by other provisions imposing further compliance requirements. The collective objective of DPPs is to ensure that personal data is collected on a fully informed basis and in a fair manner, with due consideration towards minimizing the amount of personal data collected. Once collected, the personal data should be processed in a secure manner and should only be kept for as long as necessary for the fulfilment of the purposes of using the data. Use of the data should be limited to or related to the original collection purpose. Data subjects are given certain rights, inter alia: (a) the right to be informed by a data user whether the data user holds personal data of which the individual is the data subject; (b) if the data user holds such data, to be supplied with a copy of such data; and (c) the right to request correction of any data they consider to be inaccurate. The Privacy Commissioner may carry out criminal investigations and institute prosecution for certain offenses. Depending on the severity of the cases, the Privacy Commissioner will decide whether to prosecute or refer cases involving suspected commission to the Department of Justice of Hong Kong. Victims may also seek compensation by civil action from data users for damage caused by a contravention of the PDPO. The Privacy Commissioner may provide legal assistance to the aggrieved data subjects if the Privacy Commissioner deems fit to do so.
We believe that we have been in compliance with the data privacy and personal information requirements of the PDPO and we have not encountered any investigations involving a breach of the PDPO. Moreover, we do not expect to be subject to any cybersecurity review by Hong Kong and PRC government authorities for this offering. However, if we or our operating subsidiary conducting business operations in Hong Kong have violated certain provisions of the PDPO, we could face significant civil penalties and/or criminal prosecution, which could adversely affect our business, financial condition, and results of operations.
Failure to comply with Hong Kong Competition Law may result in material and adverse effect on our business, financial condition and results of operations.
We operate in a competitive industry and a highly competitive market. We may be subject to a variety of laws and other obligations regarding competition law in Hong Kong, 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. We face significant competition in the market due to a large amount of goods and service providers. We may be subject to the Competition Ordinance (Chapter 619 of the Laws of Hong Kong) (“Competition Ordinance”), which came into force on December 14, 2015, which laid down three forms of behavior and imposes three rules which are intended to prevent and discourage anti-competitive conduct: (i) the first conduct rule prohibits agreements between undertakings that have the object or effect of preventing, restricting and distorting competition in Hong Kong; (ii) the second conduct rule prohibits undertakings with a substantial degree of market power in a market from abusing that power by engaging in conduct that has the object or effect of preventing, restricting and distorting competition in Hong Kong; and (iii) the merger rule prohibits mergers that have or are likely to have the effect of substantially lessening competition in Hong Kong. Currently, the merger rule only applies where an undertaking that directly or indirectly holders a “carrier license” within the meaning of the Telecommunications Ordinance (Chapter 106 of the Laws of Hong Kong) is involved in a merger, and is therefore not applicable to our business.
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The Competition Commission is a statutory body in Hong Kong established to investigate any contravention against and enforce on the provisions of the Competition Ordinance, and the Competition Tribunal is a tribunal set up under the Competition Ordinance, as part of Hong Kong judiciary, to hear and decide cases connected with competition law in Hong Kong. Under the guidelines and policies published by the Competition Commission, possible outcomes of investigation of contravention of the Competition Ordinance may include the acceptance of commitment given by infringer, the issuing of warning notice or infringement notice, commencement of proceedings in the Competition Tribunal, applying for consent order, referral of complaint to a government agency and the conduct of a market study. The Competition Tribunal may order remedies including pecuniary penalty, disqualification or other order under the Competition Ordinance. The guidelines and policies published by the Competition Commission in Hong Kong did not mention any remedies which may impact on the Company’s ability to accept foreign investment or list on a U.S./foreign exchange as a result of the non-compliance of the Competition Ordinance.
We confirm that we have not adopted any anti-competitive conduct described in the Competition Ordinance and will continue to act in compliance with the Competition Ordinance. However, there may be uncertainties on the full effect of the rules in respect of compliance, infringement, and its effect on our business in particular when tendering is involved in securing contracts. We may face difficulties and may need to incur legal costs in ensuring our compliance with the rules. If we face any complaints of infringement of the Competition Ordinance, we may incur substantial legal costs and may result in business disruption and/or negative media coverage, which could adversely affect our business, results of operations and reputation.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our Ordinary Shares.
Our business is conducted in Hong Kong through our operating subsidiary in Hong Kong; our books and records are reported in Hong Kong dollars, which is the currency of Hong Kong; and the financial statements that we file with the SEC and provide to our shareholders are presented in U.S. dollars.
Since 1983, Hong Kong dollars have been pegged to U.S. dollars at the rate of approximately HK$7.80 to US$1.00. Changes in the exchange rate between the Hong Kong dollar and U.S. dollar affect the value of our assets and the results of our operations in U.S. dollars. The value of the Hong Kong dollar against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in Hong Kong’s political and economic conditions and perceived changes in the economy of Hong Kong and the United States. Any significant revaluation of the Hong Kong dollar may materially and adversely affect our cash flows, revenue, and financial condition.
We cannot assure you that the current policy of the pegging of Hong Kong dollars to U.S. dollars will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase. This would, in turn, adversely affect the operations and profitability of our business.
Changes in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in Hong Kong, where the majority of our customers reside.
Political events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and they could have a material adverse effect on us and our customers, our service providers, and our other partners. International trade disputes could result in tariffs and other protectionist measures that may materially and adversely affect our business.
Tariffs could increase the cost of the services and products, which could affect customers’ investment decisions. In addition, political uncertainty surrounding international trade disputes and the potential of their escalation to a trade war and global recession could have a negative effect on customer confidence, which could materially and adversely affect our business. We also may have access to fewer business opportunities, and our operations may be negatively impacted as a result. In addition, the current and future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results of operations, as well as the financial condition of our clients, and we cannot provide any assurances as to whether such actions will occur or the form that they may take.
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The future of Hong Kong’s position as a major air cargo hub in Asia is uncertain.
Our operations are solely located in Hong Kong, which serves as a critical hub for air cargo transportation in Asia. The high demand for cargo space on outbound routes from Hong Kong to other destinations is a significant advantage to our business. However, there can be no assurance that Hong Kong will continue to maintain its position as a transportation hub in the future. Hong Kong faces strong competition from other rival air cargo hubs. Shanghai shares the same cargo catchment area in the Pearl River Delta region, while Singapore shares the same positioning as a regional hub for intra-Asia trade and as a logistics center. In the event that Hong Kong loses its position as a transportation hub in Asia, the demand for freight forwarding services and ancillary logistics services and the overall business activities of the industries and, thus, our business may be adversely affected.
Risks Related to Our Ordinary Shares
If the price of our Ordinary Shares falls below the minimum bid price requirements required by the Nasdaq Listing Rules, our Ordinary Shares could be delisted from Nasdaq.
Nasdaq Listing Rule 5550(a)(2) requires our Ordinary Shares to have a minimum bid price of at least $1.00 per share (the “Minimum Bid Price Requirement”). If we receive a letter from Nasdaq indicating that we are not compliant with the Minimum Bid Price Requirement for 30 consecutive business days, our Ordinary Shares may be delisted from Nasdaq if we are not then eligible for a grace period of 180 calendar days from such notification to achieve compliance. The closing price of our Ordinary Shares on Nasdaq on February 12, 2026 was $0.9028 per share, and we have been unable to fulfil the Minimum Bid Price Requirement since February 5, 2026. If we cannot maintain compliance with the Minimum Bid Price Requirement, our Ordinary Shares could be delisted from Nasdaq.
Furthermore, Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the “Low Priced Stock Rule”) provides that if a company’s security has a closing bid price of $0.10 or less for ten consecutive trading days during any bid price compliance period, Nasdaq must issue a delisting determination with respect to that security, at which time the security will be immediately suspended from trading. A sale of substantial number of Ordinary Shares could depress the trading price of our Ordinary Shares and result in non-compliance of the Low Priced Stock Rule. If we receive a letter from Nasdaq indicating that we are not compliant with the Low Priced Stock Rule, we may timely request a hearing before Nasdaq’s hearings panel (the “Hearings Panel”) to appeal the delisting determination, but such request would not reverse the suspension of our Ordinary Shares until a favorable determination, if any, by the Hearings Panel is made. No assurances may be made as to whether our effectuation of a reverse stock would cure any future deficiencies regarding the price of our Ordinary Shares for purposes of the Low Priced Stock Rule.
We intend to actively monitor the closing bid price for its Ordinary Shares and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. However, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement.
If an active trading market does not develop, you may not be able to resell our Ordinary Shares at any reasonable price.
An active trading market may not develop or, if developed, may not be sustained for the trading of our Ordinary Shares. The lack of an active market may impair your ability to sell your Ordinary Shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling Ordinary Shares and may impair our ability to acquire other companies by using our Ordinary Shares as consideration.
The trading price of our Ordinary Shares could be subject to rapid and substantial volatility.
There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares.
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The trading prices of volatility and wide fluctuations could be due to factors beyond our control. This may happen due to broad market and industry factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed companies based in Hong Kong and China. For example, if the trading volumes of our Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Ordinary Shares. This low volume of trades could also cause the price of our Ordinary Shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low-volume trading. The trading performances of other Hong Kong and Chinese companies’ securities after their offerings may affect the attitudes of investors toward Hong Kong-based, U.S.-listed companies, which consequently may affect the trading performance of our Ordinary Shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure, or matters of other Hong Kong and Chinese companies may also negatively affect the attitudes of investors toward Hong Kong and Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are unrelated to our operating performance, which may have a material and adverse effect on the trading price of our Ordinary Shares.
In addition to the above factors, the price and trading volume of our Ordinary Shares may be highly volatile due to multiple factors, including the following:
| ● | Regulatory developments affecting us or our industry; | |
| ● | Variations in our revenues, profit, and cash flow; | |
| ● | Changes in the economic performance or market valuations of other financial services firms; | |
| ● | Actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; | |
| ● | Changes in financial estimates by securities research analysts; | |
| ● | Detrimental negative publicity about us, our services, our officers, our directors, our Controlling Shareholder, our business partners, or our industry; | |
| ● | Announcements by us or our competitors of new service offerings, acquisitions, strategic relationships, joint ventures, capital raisings, or capital commitments; | |
| ● | Additions to or departures of our senior management; | |
| ● | Litigation or regulatory proceedings involving us, our officers, our directors, or our Controlling Shareholder; | |
| ● | Release or expiry of lock-up or other transfer restrictions on our outstanding Ordinary Shares; | |
| ● | Sales or perceived potential sales of additional Ordinary Shares. |
Any of these factors may result in large and sudden changes in the volume and price at which our Ordinary Shares will trade. As a result of this volatility, investors may experience losses on their investment in our Ordinary Shares. A decline in the market price of our Ordinary Shares also could adversely affect our ability to issue additional shares of Ordinary Shares and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Ordinary Shares will develop or be sustained. If an active market does not develop, holders of our Ordinary Shares may be unable to readily sell the shares they hold or may not be able to sell their shares at all. In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition.
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The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2022 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations. The Exchange Act requires, among other things, that we file annual and current reports with the SEC with respect to our business and operating results. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming, or costly, and increases demand on our systems and resources.
As a result of disclosure of information in our annual report on Form 20-F and in filings required of a public company, our business and financial condition is more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert resources of our management and harm our business and operating results.
We rely on dividends and other distributions on equity paid by our subsidiary to fund any cash and financing requirements we may have. In the future, funds may not be available to fund operations or for other uses outside of Hong Kong, due to interventions in, or the imposition of restrictions and limitations on, our ability or our subsidiary by the PRC government to transfer cash. Any limitation on the ability of our subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business and might materially decrease the value of Ordinary Shares or cause them to be worthless.
Globavend Holdings is a holding company, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and to service any debt we may incur. We do not expect to pay cash dividends in the foreseeable future. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
According to the BVI Business Companies Act (as amended), a BVI company may make dividends distribution to the extent that immediately after the distribution, the value of the company’s assets exceeds its liabilities and that such company is able to pay its debts as they fall due. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect to dividends paid by us. The PRC laws and regulations do not currently have any material impact on transfers of cash from Globavend Holdings to our subsidiaries in Hong Kong or from such subsidiaries to Globavend Holdings, our shareholders, and U.S. investors. However, the PRC government may, in the future, impose restrictions or limitations on our ability to transfer money out of Hong Kong, to distribute earnings and pay dividends to and from the other entities within our organization, or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our ability to receive funds from our subsidiaries in Hong Kong. Also, current PRC regulations permit our PRC Subsidiary to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC Subsidiary is required to set aside at least 10% of their after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their registered capital. These reserves are not distributable as cash dividends.
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The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact the ability or way we conduct our business, could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our services; reduce revenues; increase costs; require us to obtain more licenses, permits, approvals, or certificates; or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition, and results of operations could be adversely affected, and such measures could materially decrease the value of our Ordinary Shares, potentially rendering them worthless. Further, any limitation on the ability of our subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
Any lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud, which may affect the market for and price of our Ordinary Shares.
We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, when required, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations as a public company may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of management’s preparation and our independent registered public accounting firm’s auditing our consolidated financial statements for the year ended September 30, 2025, we have identified certain material weakness in our internal control over financial reporting. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness identified relates to the lack of sufficient competent financial reporting and accounting personnel with appropriate understanding of U.S. generally accepted accounting principles (“U.S. GAAP”) and SEC rules and regulations to address complex technical accounting issues and SEC reporting requirements. To remedy the identified material weaknesses, we have implemented and will continue to implement several measures to improve our internal control over financial reporting, including: (i) recruiting additional employees and external consultants with extensive knowledge of U.S. GAAP and SEC financial reporting requirements within our finance and accounting department; (ii) setting up a comprehensive accounting policy, checklists, and procedure manual in accordance with U.S. GAAP and SEC financial reporting requirements; (iii) implementing new closing and reporting procedures to ensure the accuracy and adequacy of financial data for the preparation of financial statements; (iv) conducting regular and continuous U.S. GAAP training programs and webinars for our financial reporting and accounting personnel; (v) improving financial oversight function for handling complex accounting issues under U.S. GAAP; and (vi) continuously developing and enhancing our internal audit function for the financial reporting matters. To date, we have engaged external consultants with knowledge and expertise of U.S. GAAP and SEC financial reporting requirements to assist our finance and accounting department, and we have also conducted various trainings with our accounting personnel to enhance our financial reporting capabilities. However, we cannot assure you that these measures may fully address the material weakness in our internal control over financial reporting or that we may not identify additional material weaknesses or significant deficiencies in the future.
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The recent proposed rule change by Nasdaq, if approved, will impose additional continued listing requirements on our Ordinary Shares.
On January 13, 2026, Nasdaq filed a proposed rule change with the SEC (File No. SR-NASDAQ-2026-004) pursuant to Rule 19b-4 under the Exchange Act. If approved, a company’s securities will be subject to immediate suspension and delisting if it is non-compliant with the Minimum Bid Price Requirement or the Low Priced Stock Rule and the company has failed to maintain a value of at least $5 million in Market Value of Listed Securities (as defined in the Nasdaq rules) of its securities for a period of 30 consecutive business days, which is an additional ground for immediate suspension and delisting. The proposed rule change is currently under review by the SEC, with a final decision expected on or before February 19, 2026. In the event that the proposed rule change is approved and becomes effective, if the market value of our Ordinary Shares falls below $5 million for a period of 30 consecutive business days, the trading in our Ordinary Shares may be immediately suspended and our Ordinary Shares may be delisted.
Because the amount, timing, and whether or not we distribute dividends at all is entirely at the discretion of our board of directors, you must rely on price appreciation of our Ordinary Shares for return on your investment.
Our board of directors has complete discretion as to whether to distribute dividends under our Memorandum and Articles. The declaration and payment of all dividends are subject to certain restrictions under Cayman Islands law, namely that the Company may only pay dividends out of profits or share premium and provided that under no circumstances may a dividend be paid if this would result in the Company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount, and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow; our capital requirements and surplus; the amount of distributions, if any, received by us from our subsidiaries; and our financial condition, contractual restrictions, and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our Ordinary Shares will likely depend entirely upon any future price appreciation of our Ordinary Shares. We cannot assure you that our Ordinary Shares will appreciate in value or even maintain the price at which you purchased the Ordinary Shares. You may not realize a return on your investment in our Ordinary Shares, and you may even lose your entire investment in our Ordinary Shares.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our Ordinary Share price or trading volume to decline.
The trading market may be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a new public company, we may be slow to attract research coverage, and the analysts who publish information about our Ordinary Shares will have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our share price, our share price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which, in turn, could cause our share price or trading volume to decline and result in the loss of all or a part of your investment in us.
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You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing original actions in the Cayman Islands or Hong Kong based on U.S. or other foreign laws, and the ability of U.S. authorities to bring actions in the Cayman Islands or Hong Kong may also be limited.
We are a company incorporated under the laws of the Cayman Islands. We conduct substantially all our operations in Hong Kong and substantially all of our assets are located in Hong Kong. In addition, a majority of our directors and executive officers and the experts named in this annual report reside outside the United States, and most of their assets are located outside the United States. As a result, it may be difficult or impossible for you to effect service of process within the United States upon us or these individuals or to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, Hong Kong, or other relevant jurisdictions may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
Our counsel as to the laws of the Cayman Islands has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
Our counsel as to the laws of the Cayman Islands has also informed us that the courts of the Cayman Islands would recognize as a valid judgment a final and conclusive judgment in personam obtained in the foreign courts against our Company under which a sum of money is payable (other than a sum of money payable in respect to multiple damages, taxes, or other charges of a like nature or in respect to a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment, (ii) such courts did not contravene the rules of natural justice of the Cayman Islands, (iii) such judgment was not obtained by fraud, (iv) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands, (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands, and (vi) there is due compliance with the correct procedures under the laws of the Cayman Islands.
Our counsel as to the laws of Hong Kong has advised us that there is uncertainty as to whether the courts of Hong Kong would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. A judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty), and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained by fraud, (b) the proceedings in which the judgment was obtained were opposed to natural justice, (c) its enforcement or recognition would be contrary to the public policy of Hong Kong, (d) the court of the United States was not jurisdictionally competent, and (e) the judgment was in conflict with a prior Hong Kong judgment. Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States.
In addition, China does not have treaties providing for reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.
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You may have more difficulties protecting your interests than you would as a shareholder of a U.S. corporation.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by the provisions of our Memorandum and Articles of Association and by the provisions of the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands, as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands.
The rights of shareholders and the fiduciary duties of our directors and officers under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands-exempted companies like us have no general rights under Cayman Islands law to obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in our Company’s Articles. A Cayman Islands-exempted company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. There is no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of members, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Act (2021 Revision) of the Cayman Islands. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions, such as the United States. To the extent we choose to follow home country practices with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors, or our Controlling Shareholder than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders.
Cayman Islands economic substance requirements may have an effect on our business and operations.
Pursuant to the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands (“ES Act”) that came into force on January 1, 2019, a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is the Company; however, it does not include an entity that is tax resident outside the Cayman Islands. Accordingly, currently, for so long as the Company is a tax resident outside the Cayman Islands, including in Hong Kong, it is not required to satisfy the economic substance test set out in the ES Act. As it is a new regime, it is anticipated that the ES Act will continue to evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and we may have to make changes to our operations in order to comply with all requirements under the ES Act.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and, as such, we are exempt from certain provisions applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
| ● | The rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; | |
| ● | The sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect to a security registered under the Exchange Act; |
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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 | |
| ● | The selective disclosure rules by issuers of material non-public information under Regulation FD. |
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.
As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate governance listing standards.
On April 16, 2025, we notified Nasdaq that we intend to follow its home country practice in lieu of the following Nasdaq Listing Rules:
| ● | Rule 5620, which requires the holding of an annual meeting of shareholders no later than one year after each fiscal year-end; | |
| ● | Rule 5635(a) and (d), which require shareholder approval prior to an issuance of securities in connection with the acquisition of the stock or assets of another company, and with any transactions other than public offerings; and | |
| ● | Rule 5250(b)(3), which requires disclosure of third party director and nominee compensation. |
We submitted to Nasdaq a written statement by counsel of the Cayman Islands certifying that the above non-compliant practices are not prohibited under the laws of the Cayman Islands, the Company’s home jurisdiction. In future, we may also rely on home country practices with respect to our other corporate governance. As a result of which, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
We are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Ordinary Shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq rules. As a U.S.-listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting, and other expenses that we will not incur as a foreign private issuer in order to maintain a listing on a U.S. securities exchange.
There can be no assurance that we will not be a PFIC for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our Ordinary Shares.
A non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income, or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). Based on our current and expected income and assets, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service (“IRS”) will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our Ordinary Shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our Ordinary Shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in our initial public offering in November 2023. If we were to be or become a PFIC for any taxable year during which a U.S. holder holds our Ordinary Shares, certain adverse U.S. federal income tax consequences could apply to such U.S. holder.
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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.
As a company with less than US$1.235 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. Therefore, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result, if we elect not to comply with such reporting and other requirements, in particular the auditor attestation requirements, our investors may not have access to certain information they may deem important. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We do not plan to opt out of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective data.
In addition to our status as an emerging growth company, we also report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specific information, or current reports on Form 8-K, upon the occurrence of specified significant events.
Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, as long as we remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.
We have incurred increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”
As a U.S. public company, we have incurred significant legal, accounting, and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering in November 2023, (b) in which we have total annual gross revenue of at least US$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds US$700 million as of the end of any second fiscal quarter before that time; and (2) the date on which we have issued more than US$1 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.
Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” or until five years following the completion of our IPO, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of Sarbanes-Oxley and the other rules and regulations of the SEC. For example, as a public company, we will be required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We will incur additional costs in obtaining director and officer liability insurance. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
As a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt our Company from certain corporate governance requirements, which could have an adverse effect on our public shareholders.
As of the date of this annual report, our directors, officers, and principal shareholders hold in aggregate 57,324 Shares, comprising 57,224 Ordinary Shares and 100 Management Shares, representing approximately 2.5% of the total issued and outstanding Shares and approximately 97.8% of the total voting power. We are therefore a “controlled company” as defined under the Nasdaq Stock Market Rules.
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Under Rule 4350(c) of Nasdaq Capital Market Rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that a majority of our directors be independent, as defined in the Nasdaq Capital Market Rules, and the requirement that our compensation and nominating and corporate governance committees consist entirely of independent directors. Although we do not intend to rely on the “controlled company” exemption under the Nasdaq Listing Rules, we could elect to rely on this exemption in the future. If we elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Accordingly, during any time while we remain a controlled company relying on the exemption and during any transition period following a time when we are no longer a controlled company, you would not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq Capital Market corporate governance requirements. Our status as a controlled company could cause our Ordinary Shares to be less attractive to certain investors or otherwise harm our trading price.
In addition, the interests of these shareholders may not be the same as or may even conflict with your interests. For example, these shareholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could deprive our shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of us or our assets and might affect the prevailing market price of our Ordinary Shares due to investors’ perceptions that conflicts of interest may exist or arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.
Risks Related to our Capital Structure
We have a dual-class share capital structure and Mr. Yau will have the ability to control or significantly influence the outcome of matters requiring approval by shareholders. The disparate voting rights may also have anti-takeover effects preventing a change in control transaction that shareholders might consider in their best interest.
Our authorized and issued Shares comprised of Ordinary Shares and Management Shares.
As of the date of this annual report, there are currently 2,286,819 Shares issued and outstanding, comprising 2,286,719 Ordinary Shares and 100 Management Shares. Unless otherwise provided in the Memorandum and Articles of the Company and/or the terms of issue of the Management Shares, holders of Ordinary Shares and Management Shares shall at all times vote together as one class on all matters submitted to a vote by the shareholders. Each Ordinary Share has one (1) vote and each Management Share has one million (1,000,000) votes. The Management Shares do not carry any dividend or distribution rights nor are they convertible into Ordinary Shares at any time.
The Management Shares outstanding are beneficially owned by Mr. Yau, representing approximately 97.8% of the aggregate voting power of our currently outstanding Shares as of the date hereof. Together with the Ordinary Shares that Mr. Yau beneficially owns, Mr. Yau owns approximately 97.8% of our voting rights. Because of the one-million-to-one voting ratio between our Management Shares and Ordinary Shares, Mr. Yau will continue to control a majority of the combined voting power of our Ordinary Shares and Management Shares and therefore be able to control all matters submitted to our shareholders for approval. Mr. Yau will be able to retain such control as long as the number of Management Shares that he holds is not less than approximately 0.06% of our total issued and outstanding Shares, assuming that he does not hold any of our Ordinary Shares. This concentrated control will limit the ability of holders of Ordinary Shares to influence corporate matters for the foreseeable future. Furthermore, should the Company decide to issue additional Management Shares in the future, the one-million-to-one voting ratio between the two classes of our Ordinary Shares will result in a further dilutive effect on the holders of Ordinary Shares.
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As a result, for so long as Mr. Yau owns a controlling or significant voting interest in our Shares, he generally may be able to control or significantly influence, directly or indirectly and subject to applicable law, all matters affecting us, including without limitation:
| ● | the election of directors; |
| ● | approving liquidation plan; |
| ● | amendment of the memorandum and articles of association of our Company; and |
| ● | other matters that would require a resolution of shareholders of the Company under the laws of the Cayman Islands, such as change of company name, re-domicile of our Company to another jurisdiction and reduction of share capital. |
Furthermore, the disparate voting rights may also have anti-takeover effects preventing a change in control transaction that shareholders might consider in their best interest.
Even if Mr. Yau were to dispose of certain Shares such that he would control less than a majority of the voting power of our issued and outstanding Shares, he may be able to influence the outcome of certain corporate actions so long as he retains Management Shares. During the period of Mr. Yau’s controlling or significant ownership of our Shares, investors may not be able to affect the outcome of such corporate actions.
Mr. Yau may have interests that differ from yours and may vote in a way with which you disagree, and which may be adverse to your interests. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control or other liquidity event of our Company, could deprive our shareholders of an opportunity to receive a premium for their shares of Ordinary Shares as part of a sale or other liquidity event, and might ultimately affect the market price of our Ordinary Shares.
Furthermore, we cannot predict whether our dual-class structure will result in a lower or more volatile market price of our Ordinary Shares or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. In July 2017, FTSE Russell and S&P Dow Jones announced that they would cease to allow most newly public companies utilizing dual-class capital structures to be included in their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of dual-class structures and temporarily barred new dual-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under the announced policies, our dual-class capital structure makes us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices are not expected to invest in our stock. These policies are still fairly new, and it is as of yet unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress these valuations compared to those of other similar companies that are included. Because of our multi-class structure, we will likely be excluded from certain of these indexes and we cannot assure you that other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Ordinary Shares less attractive to other investors. As a result, the market price of our Ordinary Shares could be adversely affected.
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Risks Related to Doing Business in China
Failure to meet the PRC government’s complex regulatory requirements on our business operation could have a material adverse effect on our operations and the value of our Ordinary Shares.
Part of our operation is in China through our PRC Subsidiary. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight over the conduct of our business according to the laws and regulations of mainland China. However, since the PRC legal system continues to rapidly evolve and many laws and regulations are relatively new, the interpretation and enforcement of these laws, regulations and rules involve uncertainties. The PRC government has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, which could result in a material adverse change in our operation and/or the value of our Ordinary Shares.
The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
On July 6, 2021, the relevant PRC government authorities issued Opinions on Lawfully and Severely Combating Illegal Securities Activities. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
On December 28, 2021, twelve regulatory authorities jointly released the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures also provides that a platform operator with more than one million users’ personal information aiming to list abroad must apply for cybersecurity review. New York Stock Exchange fall within the definition of “abroad” in the provision, however, we are already listed on the New York Stock Exchange, therefore, there can be no assurance if we are required to follow the Cybersecurity review or the security assessment procedures, and if so, whether we would be able to complete the applicable cybersecurity review or the security assessment procedures in a timely manner.
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On February 17, 2023, the CSRC issued the Trial Administrative Measures and five supporting guidelines, which became effective on March 31, 2023. According to the Trial Administrative Measures, the overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC. And subsequent securities offerings of a public company in the same overseas market where it has previously offered and listed securities shall be filed with the CSRC within 3 working days after the offering is completed. Subsequent securities offerings and listings of a public company in other overseas markets than where it has offered and listed shall be filed pursuant to provisions in the first paragraph of this Article of the Trial Administrative Measures.
On February 24, 2023, CSRC and the other relevant PRC government authorities issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality and Archives Administration Provisions”), which became effective on March 31, 2023, according to which a domestic company, including a joint-stock company incorporated domestically that conducts direct overseas offering and listing, and a domestic operating entity of a company that conducts indirect overseas offering and listing, its securities in an overseas market shall strictly abide by applicable PRC laws and regulations, enhance legal awareness of keeping state secrets and strengthening archives administration, institute a sound confidentiality and archives administration system, and take necessary measures to fulfill confidentiality and archives administration obligations.
In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the Cybersecurity review under the Cybersecurity Review Measures and the National Security Review under the Regulations on the Network Data Security Management, are required for our offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.
A severe or prolonged downturn in the global economy could materially and adversely affect our business and financial condition.
The global macroeconomic environment was, and may continue to be facing numerous challenges. The growth rate of the Chinese economy had already been slowing since 2010. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies which had been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. In the event of a re-occurrence or outbreak of any health pandemics, and if we cannot effectively mitigate the risks posed by such health pandemics, our operations will be negatively impacted. The conflicts in Ukraine and the imposition of broad economic sanctions on Russia could raise energy prices and disrupt global markets. Unrest, terrorist threats and brutal wars in the Middle East and elsewhere may increase market volatility across the globe. There have also been concerns about the relationship between China and other countries, including the surrounding Asian countries, which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs. Any severe or prolonged slowdown in the global economy may materially and adversely affect our business, results of operations and financial condition.
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New tariffs and retaliatory measures may adversely affect the global economy, which could negatively impact our results of operations.
The latest changes in trade policies, such as the introduction of new tariffs and other trade restrictions by the U.S. government, could substantially affect both the domestic and global economies. In April 2025, the U.S. government and China had introduced additional tariff regime, and may further implement, measures in response to new trade policies, treaties and tariffs. Governments might impose tariffs on imported goods, thereby increasing costs for businesses and consumers. In addition, governments could retaliate with their own tariffs and trade barriers, further disrupting global supply chains, raising costs, and generating economic uncertainty.
These trade policies could lead to slower economic growth, higher inflation, and greater market volatility, which in turn might negatively affect government revenues and budgetary allocations. Should economic conditions worsen due to new tariffs or retaliatory measures, government spending could be cut. Any such reduction in government expenditures could significantly and adversely impact our financial condition, results of operations, and future prospects.
Moreover, tariffs imposed in the U.S. or other regions could potentially affect our all-in-one logistics services and flight forwarding business, which may influence our pricing strategies and gross margins. Such price adjustments might also affect our competitive positioning in certain markets, particularly compared to competitors with different supply chain structures and distribution channels.
In addition, uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending. This, in turn, may affect the e-commerce business of our customers which may affect the demand for our services and adversely affect our expansion plans.
We cannot foresee the nature, timing, or scope of future trade policies, nor the extent of their economic impact. However, any significant decrease in government spending resulting from economic downturns related to trade tensions could reduce demand for our products and services, disrupt our supply chain, and negatively affect our overall business operations.
It may be difficult for overseas regulators to conduct investigation, collect evidence, or obtain materials or data within China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
According to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Without the consent of the securities authorities and the relevant competent authorities of the State Council, no entity or individual may provide documents or materials relating to securities business activities to overseas. Also, according to Article 36 of the Data Security Law, which became effective in September 2021, the competent authority of the People’s Republic of China shall, in accordance with the relevant laws or the international treaties and agreements concluded or acceded to by the People’s Republic of China, or on the principle of equality and reciprocity, handle the requests for provision of data from foreign judicial or law enforcement organizations. Without the approval of the competent authorities of the People’s Republic of China, no organization or individual shall provide the data stored within the territory of the People’s Republic of China to foreign judicial or law enforcement organizations.
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According to Article 4 of the Measures for the Security Assessment of Outbound Data Transfers, which became effective in September 2022, for an outbound data transfer by a data processor that falls under specific circumstances, the data processor shall apply to the national cyberspace administration authority for the security assessment via the local provincial-level cyberspace administration authority. While detailed interpretation of or implementation rules have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation, evidence collection, or data acquisition activities within China may further increase difficulties faced by you in protecting your interests. Also, on February 24, 2023, CSRC and other three PRC regulatory authorities jointly issued the Confidentiality and Archives Administration Provisions, which will take effect on March 31, 2023, according to which, overseas securities regulators and competent overseas authorities may request to inspect, investigate or collect evidence from a domestic company concerning its overseas offering and listing or from the domestic securities companies and securities service providers that undertake relevant businesses for such domestic companies, such inspection, investigation and evidence collection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC or other competent Chinese authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. The domestic company, securities companies and securities service providers shall first obtain approval from the CSRC or other competent Chinese authorities before cooperating with the inspection and investigation by the overseas securities regulator or competent overseas authority, or providing documents and materials requested in such inspection and investigation. As the Confidentiality and Archives Administration Provisions are relatively new and there has been a lack of further clarifications or detailed rules and regulations, there are uncertainties as to how the aforementioned rules will be interpreted or implemented and whether PRC governmental agencies may adopt new laws, regulations, rules, or detailed implementation and interpretation, and there is no assurance that such agencies would take the same view as we do. See also “—Risks Relating to our Ordinary Shares— You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing original actions in the Cayman Islands or Hong Kong based on U.S. or other foreign laws, and the ability of U.S. authorities to bring actions in the Cayman Islands or Hong Kong may also be limited.”
Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.
Under the PRC EIT Law and its implementation rules, enterprises established outside the PRC with “de facto management bodies” within the PRC may be considered PRC tax resident enterprise for tax purpose and may be subject to the PRC enterprise income tax at the rate of 25% on their global income. On April 22, 2009, the SAT issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies, or SAT Circular 82, which was most recently amended on December 29, 2017. SAT Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered as a PRC tax resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC. SAT Bulletin 45 specifies that, when provided with a copy of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated enterprise.
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Although SAT Circular 82 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.
If the PRC tax authorities determine that we or any of our non-PRC subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, then we or any such non-PRC subsidiary could be subject to PRC tax at a rate of 25% on its worldwide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.
In that case, although dividends paid by one PRC tax resident to another PRC tax resident should qualify as “tax-exempt income” under the EIT Law, we cannot assure you that dividends by our PRC subsidiaries to our non-PRC holding companies will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.
If the PRC tax authorities determine that our company is a PRC resident enterprise for PRC enterprise income tax purposes, dividends paid by us to non-PRC holders may be subject to PRC withholding tax, and gains realized on the sale or other disposition of ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such dividends or gains are deemed to be from PRC sources. Any such tax may reduce the returns on your investment in the ADSs.
We face uncertainties with respect to indirect transfer of assets or equity interest in PRC resident enterprises by their non-PRC holding companies.
We face uncertainties regarding the reporting on and consequences of private equity financing transactions, share exchange or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident companies or other taxable assets by us. On February 3, 2015, SAT issued a new guidance (Bulletin [2015] No. 7), or SAT Bulletin 7, on the PRC tax treatment of an indirect transfer of assets by a non-resident enterprise. Further, on October 17, 2017, SAT issued the Matters Regarding Withholding Corporate Income Tax at Source from Non-resident Enterprises (Bulletin [2017] No. 37), or SAT Bulletin 37. According to SAT Bulletin 7 and SAT Bulletin 37, when a non-resident enterprise engages in an indirect transfer of Chinese Taxable Assets, or Indirect Transfer, through an arrangement that does not have a bona fide commercial purpose in order to avoid paying enterprise income tax, the transaction should be re-characterized as a direct transfer of the Chinese assets and becomes taxable in China under the EIT Law, and gains derived from such indirect transfer may be subject to the PRC withholding tax at a rate of up to 10%, and the party who is obligated to make the transfer payments has the withholding obligation.
There is uncertainty as to the application of SAT Bulletin 7 and 37. SAT Bulletin 7 and 37 may be determined by the tax authorities to be applicable to the transfer of shares of our company by non-PRC resident investors, or the sale or purchase of shares in other non-PRC resident companies or other taxable assets by us, if any of such transactions were determined by the tax authorities to lack any reasonable commercial purpose. As a result, depending on whether we are the transferor or transferee in such transactions, we or the non-resident investors may become at risk of being taxed under SAT Bulletin 7 and 37, and we may have to incur expenses to comply with SAT Bulletin 7 and 37, including the withholding and reporting obligations thereunder, or to establish that we should not be taxed under the general anti-avoidance rule of the EIT Law, which may have a material adverse effect on our financial condition and results of operations or such non-resident investors’ investments in us.
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If our preferential tax treatments are revoked, become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions, and our results of operations could be materially and adversely affected.
The Chinese government has provided various tax incentives to our subsidiaries and VIEs in China. These incentives include reduced enterprise income tax rates. For example, under the EIT Law and its implementation rules, the statutory enterprise income tax rate is 25%. However, an enterprise holding a valid certificate of new software enterprise or animation enterprise is entitled to an exemption of enterprise income tax for the first two years and a 50% reduction of enterprise income tax for the subsequent three years, commencing from the first profit-making year, while an enterprise qualified as key software enterprise can enjoy a preferential EIT rate of 10%. In addition, enterprises that are granted the high and new technology enterprises status, as well as those that located in Guangdong-Macao Deep Cooperation Zone which also qualify as encouraged industrial enterprises and meet the substantive operational requirements, shall enjoy a favorable income tax rate of 15%. Our PRC Subsidiary, as a separate legal entity qualifying under PRC law, was eligible for certain preferential tax treatments. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Income Tax Expenses.” Any increase in the enterprise income tax rate applicable to our PRC entities in China, or any discontinuation or retroactive or future reduction of any of the preferential tax treatments currently enjoyed by our PRC entities in China, could adversely affect our business, financial condition and results of operations. In addition, in the ordinary course of our business, we are subject to complex income tax and other tax regulations and significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our financial condition and results of operations would be materially and adversely affected.
China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and other recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. For example, the M&A Rules require that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.
The M&A Rules requires that mergers and acquisitions of domestic enterprises by foreign investors shall be subject to the approval of the MOFCOM or its delegates at provincial level. In the event that any domestic company, enterprise or natural person merges or acquires a domestic company that has affiliated relationship with it through an overseas company legally established or controlled by such domestic company, enterprise or natural person (the “Affiliated M&A”), the merger and acquisition applications shall be submitted to the MOFCOM for approval. Any circumvention on the requirement including domestic re-investment of a foreign invested enterprise is not allowed.
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In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, on August 25, 2011, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Regulations, which became effective on September 1, 2011, to implement the Circular 6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under the MOFCOM Security Review Regulations, the MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If the MOFCOM decides that a specific merger or acquisition is subject to security review, it will submit it to the Inter-Ministerial Panel, an authority established under the Circular 6 led by the NDRC and the MOFCOM under the leadership of the State Council, to carry out security review. Prior the promulgation of the Foreign Investment Law or the FIL, only principal provisions are scattered and mentioned in few articles of regulations. In this context, FIL officially established safety review system for foreign investment at the level of law for the first time. Article 35 of the FIL stipulates that the State establishes a foreign investment security review system to conduct security review on foreign investments which have or may have an impact on national security. The safety review decision made in accordance with the law is final.
The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in online marketing or mobile games business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review.
On December 19, 2020, the NDRC and the MOFCOM promulgated Measures for Security Review of Foreign Investment, or the Security Review Measures, being effective from January 18, 2021. According to the Security Review Measures, the state shall establish a working mechanism for the security review of foreign investment in charge of organization, coordination, and guidance of foreign investment security review. A working mechanism office shall be established under the NDRC and led by the NDRC and the MOFCOM to undertake routine work on the security review of foreign investment. According to the Security Review Measures, in terms of foreign investments falling in the scope such as important cultural products and services, important information technologies and Internet products and services, important financial services, key technologies and other important fields that concern state security while obtaining the actual control over the enterprises invested in, a foreign investor or a party concerned in the PRC shall take the initiative to make a declaration to the working mechanism office prior to making the investment.
We have grown and may continue to grow our business by setting up entities in the PRC, or may pursue mergers and acquisitions with companies in the PRC. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.
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PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.
The SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Round-trip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014. SAFE Circular 37 requires PRC residents that directly establish or indirectly control offshore special purpose vehicles, or SPVs, for the purpose of seeking offshore investment and financing and conducting round trip investment in China, to register with the SAFE or its local branch in connection with their ownership in the SPVs, and to amend the SAFE registrations to reflect any subsequent changes thereof.
To our knowledge, our substantial shareholders are not PRC shareholders and are not subject to SAFE Circular 37. However, we may not be fully informed of the identities of all our beneficial owners who are PRC citizens or residents, and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC citizens or residents have complied with and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. If our shareholders or beneficial owners who are PRC citizens or residents fail to complete their SAFE registration, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries.
Moreover, failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
On February 15, 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with the SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. If we adopt any stock incentive plans, we or our PRC employees who are granted stock options may be subject to these regulations. Failure of our PRC stock option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to us, or otherwise materially adversely affect our business. In addition, this Notice issued by the SAFE only covers two categories of equity incentive plans, i.e., employee stock ownership plans and stock option plans. As a result, we also face regulatory uncertainties that could restrict our ability to adopt additional equity incentive plans for our directors and employees under PRC laws and regulations if we adopt other employee equity incentive plans in the future.
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PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from loans to our PRC entities or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting part of our operations in China through our PRC Subsidiary. We may make loans to our PRC Subsidiary, or we may make additional capital contributions to our PRC Subsidiary, or we may establish new subsidiaries in the mainland China and make capital contributions to these new PRC subsidiaries, or we may acquire offshore entities with business operations in China in an offshore transaction.
Most of these financing means are subject to PRC regulations and approvals. For example, loans by us to our wholly-owned PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of the SAFE.
On March 30, 2015, the SAFE promulgated the Circular on the Reform of the Administrative Method of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or Circular 19, which became effective as of June 1, 2015. Among other things, under Circular 19, foreign-invested enterprises may either continue to follow the payment-based foreign currency settlement system or elect to follow the so-called “conversion-at-will” of foreign currency settlement system. On October 23, 2019, the SAFE promulgated the Notice of Foreign Exchange of Further Facilitating Cross-border Trade and Investment, or SAFE Circular 28, and the Notice of the State Administration of Foreign Exchange on Reducing Foreign Exchange Accounts, or SAFE Circular 29, clearly cancelling the restrictions on domestic equity investment of capital funds by ordinary foreign-invested enterprises. On December 4, 2023, the SAFE promulgated Circular of the State Administration of Foreign Exchange on Further Deepening Reforms to Facilitate Cross-Border Trade and Investment, which took effect on December 4, 2023, providing that an enterprise meeting certain conditions may participate in the cross-border financing facilitation business in accordance with the relevant provisions, and borrow foreign debts at its discretion within a certain amount. For detailed information, please see “Item 4. Regulations — Regulations Related to our Business Operations in China – Regulation on Foreign Exchange Control” and “Item 4. Regulations — Regulations Related to our Business Operations in China – Regulation on Dividend Distributions.”
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies as discussed above, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, or at all, with respect to future loans by us to our PRC entities or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We may rely on dividends paid by our subsidiaries, including the PRC Subsidiary, to fund any cash and financing requirements we may have. Any limitation on the ability of our subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of our Ordinary Shares.
We are a holding company, and we rely on a significant amount of dividends from our subsidiaries, including our PRC Subsidiary, for our cash requirements, including the funds necessary to pay dividends and other cash distributions to the holders of our Ordinary Shares and service any debt we may incur. If our subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.
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With respect to our PRC Subsidiary, under PRC laws and regulations, wholly foreign-owned enterprises in the PRC, such as our PRC Subsidiary, may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. At the discretion of the board of directors of the wholly foreign-owned enterprise, it may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. On March 15, 2019, the National People’s Congress adopted the Foreign Investment Law of the People’s Republic of China, or FIL, which became effective on January 1, 2020. The FIL sets out that the business forms, structures, and rules of activities of foreign-funded enterprises shall be governed by the Company Law of the People’s Republic of China, the Partnership Law of the People’s Republic of China, and other laws. Foreign-funded enterprises formed under the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Wholly Foreign Owned Enterprises before the implementation of FIL Law may maintain their original business forms, among others, for five years after FIL Law comes into force.
According to the Company Law, if the aggregate balance of our statutory common reserve is not enough to make up for the losses of the previous year, the current year’s profits shall first be used for making up the losses before the statutory common reserve is drawn according to the provisions of the preceding paragraph. After we have drawn statutory common reserve, which is 10% of the after-tax profit, from the after-tax profits, it may, upon a resolution made by the shareholders’ meeting, draw a discretionary common reserve from the after-tax profits. After the losses have been made up and common reserves have been drawn, the remaining profits shall be distributed to shareholders in proportion to the actual capital contribution actually paid by them, unless otherwise agreed upon by all the shareholders. We may stop drawing the profits if the aggregate balance of the statutory common reserve has already accounted for over 50% of our registered capital. See “Item 4. Regulations — Regulations Related to our Business Operations in China – Regulation on Foreign Exchange Control” and “Item 4. Regulations — Regulations Related to our Business Operations in China – Regulation on Dividend Distributions” for further details.
Any limitation on the ability of our wholly-owned PRC 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.
In addition, the EIT Law and its implementation rules provide that withholding tax rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.
Governmental control of currency conversion may limit our ability to utilize our cash balance effectively and affect the value of your investment.
The PRC government imposes control on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive part of our revenues in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements. Therefore, our PRC Subsidiary is able to pay dividends in foreign currencies to us without prior approval from the SAFE. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access to foreign currencies for current account transactions in the future. Although currently there are not equivalent or similar restrictions or limitations in Hong Kong on cash transfers in, or out of, our Hong Kong entities (including currency conversion), if certain restrictions or limitations in mainland China were to become applicable to cash transfers in and out of Hong Kong entities (including currency conversion) in the future, the funds in our Hong Kong entities, likewise, may not be available to meet our currency demand. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our Ordinary Shares.
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Increases in labor costs in the PRC may adversely affect our business and our profitability.
China has experienced increases in labor costs in recent years. The average wage level for our employees has also increased in recent years.
In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including pensions, housing allowance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract Law, which became effective in January 2008 and its implementation rules effective as of September 2008, both of which were amended on July 1, 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations. On October 28, 2010, the Standing Committee of the National People’s Congress promulgated the PRC Social Insurance Law, or the Social Insurance Law, which became effective on July 1, 2011, and was respectively amended on December 29, 2018. According to the Social Insurance Law, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance and maternity insurance and the employers must, together with their employees or separately, pay the social insurance premiums for such employees.
As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practices do not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees, and our business, financial condition and results of operations could be materially and adversely affected.
Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
Companies operating in mainland China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in mainland China given the different levels of economic development in different locations. We may not have made adequate employee benefit payments. We may be required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.
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Risks Related to Equity Line of Credit
It is not possible to predict the actual number of ELOC Shares, if any, we will sell under the ELOC Purchase Agreement to the Investor, or the actual gross proceeds resulting from those sales.
On March 15, 2024, we entered into an equity purchase agreement (the “ELOC Purchase Agreement”) with Square Gate Capital Master Fund, LLC – Series 1, a Delaware limited liability company (the “Investor”), pursuant to which the Investor has committed to purchase up to $20 million of our Ordinary Shares (the “ELOC Shares”), subject to certain limitations and conditions set forth in the ELOC Purchase Agreement. We have registered for resale of the ELOC Shares, together with 306,123 Ordinary Shares (1,531 shares of which were retrospectively restated to reflect the effect of the reverse stock split on July 21, 2025) (the “Commitment Shares”) that we have issued to the Investor as commitment shares under and pursuant to the ELOC Purchase Agreement.
We generally have the right to control the timing and amount of any sales of the ELOC Shares to the Investor under the ELOC Purchase Agreement. Sales of the ELOC Shares, if any, to the Investor under the ELOC Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to the Investor all, some or none of the ELOC Shares that may be available for us to sell to the Investor pursuant to the ELOC Purchase Agreement.
Because the purchase price per Ordinary Share to be paid by the Investor for the ELOC Shares that we may elect to sell to the Investor under the ELOC Purchase Agreement, if any, will fluctuate based on the market prices of our Ordinary Shares at the time we elect to sell the ELOC Shares to the Investor pursuant to the ELOC Purchase Agreement, if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number of ELOC Shares that we will sell to the Investor under the ELOC Purchase Agreement, the purchase price per share that the Investor will pay for ELOC Shares purchased from us under the ELOC Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by the Investor under the ELOC Purchase Agreement.
The ELOC Purchase Agreement provides that we may, in our discretion, from time to time after the date of this prospectus and during the term of the ELOC Purchase Agreement, direct the Investor to purchase the ELOC Shares from us in one or more purchases under the ELOC Purchase Agreement, for a maximum aggregate gross purchase price of up to $20 million of the ELOC Shares. A maximum aggregate offering amount of $20 million in ELOC Shares have been registered for resale, which represent approximately 23,389,077 Ordinary Shares (116,945 shares of which were retrospectively restated to reflect the effect of the reverse stock split on July 21, 2025) based on the closing price of our shares on Nasdaq on June 27, 2024 of $0.8551 per share, in addition to the Commitment Shares. However, because the market prices of the ELOC Shares may fluctuate from time to time after the date of this prospectus, the actual purchase prices to be paid by the Investor for the ELOC Shares that we direct it to purchase under the ELOC Purchase Agreement, if any, also may fluctuate significantly based on the market price of the ELOC Shares.
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Any issuance and sale by us under the ELOC Purchase Agreement of a substantial amount of ELOC Shares could cause substantial dilution to our shareholders. The number of ELOC Shares ultimately offered for sale by the Investor is dependent upon the number of ELOC Shares, if any, we ultimately elect to sell to the Investor under the ELOC Purchase Agreement. However, even if we elect to sell ELOC Shares to the Investor pursuant to the ELOC Purchase Agreement, the Investor may resell all, some or none of such shares at any time or from time to time in its sole discretion and at different prices.
It is not possible to predict the actual number of ELOC Shares, if any, we will sell under the ELOC Purchase Agreement to the Investor, or the actual gross proceeds resulting from those sales.
Pursuant to the ELOC Purchase Agreement, we will have discretion, to vary the timing, price and number of shares sold to the Investor. If and when we elect to sell the ELOC Shares to the Investor pursuant to the ELOC Purchase Agreement, after the Investor has acquired such ELOC Shares, the Investor may resell all, some or none of such shares at any time or from time to time in its sole discretion and at different prices. As a result, investors who purchase shares from the Investor in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from the Investor in this offering as a result of future sales made by us to Investor at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of shares to the Investor under the ELOC Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with the Investor may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.
The sale of a substantial amount of ELOC Shares in the public market could adversely affect the prevailing market price of our Ordinary Shares.
We have registered for resale an aggregate of up to $20 million of ELOC Shares, together with the Commitment Shares. Sales of substantial amounts of our Ordinary Shares in the public market, or the perception that such sales might occur, could adversely affect the market price of our Ordinary Shares. We cannot predict if and when the Investor may sell such shares in the public markets. Furthermore, in the future, we may issue additional Ordinary Shares or other equity or debt securities convertible into Ordinary Shares. Any such issuance could result in substantial dilution to our existing shareholders and could cause our share price to decline.
We may use proceeds from sales of the ELOC Shares made pursuant to the ELOC Purchase Agreement in ways with which you may not agree or in ways which may not yield a significant return.
We will have broad discretion over the use of proceeds from sales of the ELOC Shares made pursuant to the ELOC Purchase Agreement, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. However, we have not determined the specific allocation of any net proceeds among these potential uses, and the ultimate use of the net proceeds may vary from the currently intended uses. The net proceeds may be used for corporate purposes that do not enhance our operating results or the value of our Ordinary Shares.
ITEM 4. INFORMATION ON THE COMPANY
| A. | History and Development of the Company |
We commenced operation in June 2016 with the establishment of Globavend HK, a company incorporated under the laws of Hong Kong on June 27, 2016. Immediately before the reorganization in contemplation of our initial public offering, Globavend HK was wholly-owned by our Controlling Shareholder.
On May 22, 2023, our ultimate holding company, Globavend Holdings was incorporated. Globavend BVI was subsequently incorporated as a direct wholly owned subsidiary of Globavend Holdings, which then acquired all the issued shares of Globavend HK from our Controlling Shareholder as part of the reorganization in contemplation our initial public offering. Following such reorganization, Globavend HK became the Company’s indirectly owned subsidiary through Globavend BVI.
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Initial Public Offering
On November 10, 2023, the Company completed its IPO and listed its Ordinary Shares on the Nasdaq Capital Market under the symbol “GVH”. With the above IPO, the Company received total gross proceeds of US$5.3 million from the issuance of 1,500,000 new ordinary shares from the initial public offering after deducting underwriting discounts, commissions and expenses.
Establishment the Subsidiaries
On September 24, 2024, Globavend Warehouse was incorporated under the laws of Hong Kong. Globavend Warehouse is a wholly owned subsidiary of Globavend BVI, our intermediary holding company. Globavend Warehouse was incorporated as an investment holding company.
On May 15, 2025, the PRC Subsidiary was incorporated under the laws of the PRC. The PRC Subsidiary is a wholly owned subsidiary of Globavend HK, our operating subsidiary in Hong Kong. The PRC Subsidiary provides integrated cross-border logistics services with business spans the PRC, Australia and New Zealand.
On November 12, 2025 and November 21, 2025, Vault BRS and Vault Cayman was incorporated under the laws of the Delaware, United States and the Cayman Islands, respectively. Vault BRS is a direct wholly owned subsidiary of Globavend Holdings, which in turn wholly owns Vault Cayman. The Dormant Subsidiaries were established for further development of our business, and are currently dormant.
The list of subsidiaries of the Company as at the date of this annual report is filed with this annual report as exhibit 8.1.
Change of Share Structure
On April 30, 2025, pursuant to a special resolution of shareholders passed at our extraordinary ordinary general meeting held on April 28, 2025 (the “April EGM”), the authorized share capital of the Company increased from $50,000 divided into 50,000,000 shares of US$0.001 par value each to $2,000,000 divided into 2,000,000,000 shares of $0.001 par value each. The designation of existing issued shares of $0.001 par value each of the Company as Ordinary Shares remained unchanged. At the April EGM, the shareholders of the Company have adopted the second amended and restated memorandum and articles of association, which came into effect on April 30, 2025.
On July 2, 2025, pursuant to the power conferred to the Board at the EGM, the Board approved a reverse stock split that consolidated every 200 issued and unissued shares of the Company, par value $0.001 each in the share capital of the Company into one share of the Company, par value $0.20 par value each (the “Reverse Stock Split”), with an effective date of July 21, 2025.
On August 27, 2025, we entered into a share subscription agreement with our Controlling Shareholder, pursuant to which we have agreed to issue and allot, and the Controlling Shareholder has agreed to subscribe for, 100 Management Shares. Each Management Share carries 1,000,000 votes per share with no economic right. The Management Shares were issued and allotted to our Controlling Shareholder at the same day. The creation of the Management Shares translated our share capital structure into a dual class structure.
On September 12, 2025, pursuant to a special resolution of shareholders passed at our extraordinary ordinary general meeting held on the same day (the “September EGM”), the authorized share capital of the Company increased from $2,000,000 divided into 10,000,000 shares, par value $0.20 each to $100,000,000 divided into 500,000,000 shares, par value $0.20 each. At the September EGM, the shareholders of the Company have adopted the Articles and the Memorandum, which came into effect immediately. Copies of the Articles and the Memorandum are filed as an exhibit to this annual report as exhibit 1.1.
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Public Offering
On June 26, 2025, the Company priced a public offering for an aggregate gross proceed of $15 million, before deducting placement agent fees and other estimated expenses payable by the Company (the “Offering”). The Offering was comprised of: (i) 5,645,997 units (the “Ordinary Units”), each consisting of one Ordinary Share , one series A warrant to purchase one Ordinary Share (each a “Series A Warrant”) and one series B warrant initially to purchase one Ordinary Share (each a “Series B Warrant”), and (ii) 16,093,133 pre-funded units, each consisting of one pre-funded warrant (the “Pre-Funded Unit”) to purchase one Ordinary Share, one Series A Warrant and one Series B Warrant.
The Series A Warrants were immediately exercisable and will expire on June 30, 2026, and the Series B Warrants have all been exercised. Each Series A Warrant had an initial exercise price per share equal to 100% of the price per Ordinary Unit sold in the Offering, or $0.69. The exercise price of each Series A Warrant reset immediately following the thirtieth (30th) calendar day (the “Reset Date”) following the issuance date of the Series A Warrants to a price equal to 105% of the arithmetic average of the sum of the three lowest per share VWAPs (as defined in the Series A Warrant) of the Ordinary Shares on Nasdaq for the twenty (20) trading days immediately prior to the Reset Date, provided that such price was not to be lower than $0.1395 (the “Floor Price”).
Each Series B Warrant had an exercise price per share equal to 170% of the price per Ordinary Unit sold in this Offering, or $1.173. A holder of Series B Warrants was permitted to, at any time and in its sole discretion, exercise its Series B Warrants in whole or in part by means of a “zero price exercise” option in which the holder was entitled to receive a number of Ordinary Shares equal to the product of (a) the number of Ordinary Shares that would be issuable upon exercise of the Series B Warrant in accordance with the terms of such Series B Warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (b) the quotient obtained by dividing (i) the exercise price minus the lowest VWAP (as defined in the Series B Warrant) of the Ordinary Shares during the five (5) trading days immediately prior to the applicable exercise date (such VWAP, the “Low Price”) by (ii) 50% of the Low Price. This “zero price exercise” option was only available at a time when the applicable Low Price was lower than the then applicable exercise price. At no time was the Low Price able to be lower than the Floor Price.
The Offering closed on June 27, 2025. The Pre-Funded Warrants were fully exercised on June 26, 2025. As of September 30, 2025, all Series A Warrants were outstanding and all Series B Warrants had been fully exercised, for a total of 1,342,522 Ordinary Shares after giving effect to the Reverse Stock Split.
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Our principal office is located at Office 1401, Level 14, 197 St Georges Tce, Perth, WA 6000, Australia. Our telephone number is (+61) 08 6141 3263. Our registered office in the Cayman Islands is located at the office of Ogier Global (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands.
Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor New York, NY 10168.
SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website http://www.globavend.com/. The information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this annual report.
| B. | Business Overview |
Our Mission
We are an emerging e-commerce logistics provider providing end-to-end logistics solution in Hong Kong, Australia, and New Zealand. Our mission is to combine our experience, knowledge, and network with flexibility and agility to provide a one-stop logistics solution to customers and enterprises.
Overview
We are a holding company incorporated in the Cayman Islands with operations primarily conducted by our operating subsidiary in Hong Kong, Globavend HK and in the mainland China, the PRC Subsidiary. Since June 2023, we have established our principal executive office in Perth, Australia.
Founded in 2016, we are emerging e-commerce logistics provider providing end-to-end logistics solution in Hong Kong, Australia, and New Zealand. Our business spans Hong Kong and four cities in Australia and in New Zealand through our own business presence and the presence of our service providers. Our customers are primarily enterprise customers, being e-commerce merchants or operators of e-commerce platforms, providing business-to-consumer (B2C) transactions.
As an e-commerce logistics provider, we provide integrated cross-border logistics services from Hong Kong to Australia and New Zealand, where we provide customers with a one-stop solution, from parcel consolidation to air freight forwarding, customs clearance, on-carriage parcel transportation, and delivery. We rely on our own proprietary all-in-one shipping solution, which has been or can be connected to the customer’s own IT systems (such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, booking management systems, or point-of-sale (POS) systems) on one end and the transportation management systems (TMS) of our ground transportation service providers on the other end, to facilitate effective logistics management.
Other than integrated cross-border logistics services, we also provide fragmented logistics services, which typically include freight forwarding services, to customers and enterprises at their own choice.
Our Services and Business Model
As an e-commerce logistics provider, we formulate and implement integrated, end-to-end, cross-border logistics solutions for our customers with the provision of air freight forwarding services and related logistics services as our principal business.
Our business model principally involves the provision of (i) integrated cross-border logistics services, which include air freight forwarding services offered as an integral part thereof; and (ii) air freight forwarding services, offered as a modularized logistics service segmented from our integrated cross-border logistics services.
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Our logistics network covers Hong Kong and four cities in Australia, namely Sydney, Melbourne, Brisbane, and Perth, as well as New Zealand.
The chart below shows the coverage of our logistics network.
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Integrated Cross-Border Logistics Services
Our integrated cross-border logistics services is our dominant business segment, which involve order processing, parcel consolidation, cross-border transportation (primarily by way of air freight), and air freight forwarding, followed by ground transportation and delivery at destination cities, together with other value-added services. While traditional logistics services providers typically provide fragmented logistics services and require customers to coordinate with various service providers, we, as an integrated cross-border logistics services provider, carry out the coordination with different players in the logistics value chain, including warehousing, customs clearance, and air freight or ground transportation services. This has effectively reduced the lead time and hassle and greatly improved the efficiency in fulfilling service orders.
As an integral part of our integrated cross-border logistic services, we have also developed our own proprietary all-in-one shipping solution, which was modified by us internally on a shipping software purchased by us in 2019. Our proprietary all-in-one shipping solution has been or can be connected to the internal sales or booking systems of customers, as well as the carrier management systems of the ground transportation carriers, to facilitate effective logistics management, the details of which are explained. Our services are provided primarily on a contract logistics basis, under which we provide our enterprise customers with customized integrated logistics services covering the entire delivery process. Our services start by enterprise customers making booking instructions in their own internal sales or booking systems, which integrate into our own proprietary all-in-one shipping solution. Upon receipt of booking instructions, our services start and cover from order origination to the final point of sale or delivery without further efforts or coordination from customers. This service is a customized one so as to fit a customer’s own business model, representing a seamless combination of order processing, parcel consolidation, transportation, and delivery.
For customers engaging our services with agreed price quotations, we can provide one-off or on-demand integrated cross-border logistics services. Alternatively, customers can also request for our logistics services on a modularized or one-off basis, i.e., they can request for any segment of our logistics services within the integrated cross-border logistics solution on a stand-alone basis.
As part of our integrated cross-border logistics services, we also provide related logistics services, which include the provision of supporting transportation for freight forwarding purpose, storage of consignment, labelling of consignments, other related logistic services for freight forwarding purpose, freight management services via our proprietary all-in-one shipping solution, and delivery at destination.
We engage (i) air freight carriers for the provision of cargo spaces, (ii) supporting ground transportation companies for the ground transportation services in Australia and New Zealand, (iii) customs clearance companies in Australia and New Zealand for the preparation of freight documentation and arrangement for customs clearance, and (iv) local delivery service providers for dispatching and distributing our customers’ goods to their designated destination in Australia and New Zealand.
Our integrated cross-border logistics services, together with our proprietary all-in-one shipping solution, enable us to provide efficient and customer-oriented services. This has resulted in our customers continuously engaging us for one-stop air freight forwarding services and comprehensive logistic services, allowing us to gradually build our customer base.
Air Freight Forwarding Services
In addition to our integrated cross-border logistics services, we also offer air freight forwarding services to customers as segregated and modularized logistics services to utilize the cargo spaces we have and widen our revenue stream.
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Business Operation Flow
Set out below is a flow chart summarizing the usual workflow of our integrated cross-border logistics services business.
Booking Instructions
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Parcel Drop-Off at Our Warehouse
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Parcel Consolidation and Export Customs Clearance at Warehouse
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| Business Customers | Business Customers | Internal Staff | ||
 | ||||
On-Carriage to Final Destination
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Import Customs Clearance and Parcel Deconsolidation at Warehouse
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Air Freight Forwarding
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| Ground
Transportation Service Providers |
Customs Clearance
Companies
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Air Freight
Carriers
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Destination |
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| Customers |
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Customers
Our customers mainly consist of direct customers, who primarily are businesses that operate e-commerce platforms or e-commerce merchants in Hong Kong.
For the years ended September 30, 2023, 2024 and 2025, our five largest customers accounted for approximately 69.6%, 63.3% and 66.2% of our revenue, respectively.
We do not enter into long-term agreements with our customers, which is in line with industry practice. For customers using our integrated cross-border logistics services, we will provide our rate lists setting out our charges from time to time. As such, it is not necessary for us to provide any quotations to customers prior to the acceptance of booking instructions. For customers using our air freight forwarding on a segmented basis, we will provide our quotation to the customers prior to or when a booking instruction is made with us.
We generally do not have any specific agreement with our customers on liability for damage of goods during transit, but we maintain insurance policies to cover such losses.
Suppliers
Our suppliers include (i) air freight carriers for the provision of cargo spaces, (ii) cargo screening service providers in Hong Kong, (iii) customs clearance companies in both Australia and New Zealand for the preparation of freight documentation and arrangement for customs clearance, and (iv) local delivery service providers for dispatching and distributing our customers’ goods to their designated destinations in Australia and New Zealand.
For the year ended September 30, 2025, two major suppliers accounted for 59.4% and 12.2% of the total cost of revenue, respectively. For the year ended September 30, 2024, two major suppliers accounted for approximately 45.8% and 10.9% of the total cost of revenue, respectively. For the year ended September 30, 2023, four major suppliers accounted for approximately 33.1%, 23.1%, 13.4% and 10.9% of the total cost of revenue, respectively.
For the years ended September 30, 2023, 2024 and 2025, we transacted with 5, 12 and 8 air freight suppliers, respectively, comprising air freight carriers and freight forwarders, for the provision of cargo spaces, as well as over 43, 29 and 27 suppliers, respectively, for transport and local delivery-related services.
In particular, we procure cargo spaces directly from air freight carriers under different arrangements, including (i) direct booking, and (ii) block space arrangements. We are an IATA-accredited cargo agent and entitled to make direct bookings with air freight carriers without any third-party agent. We generally procure cargo spaces through the block space agreements we entered into with air freight carriers for a period of time at pre-agreed costs, and we occasionally procure additional cargo spaces from air freight carriers through direct bookings.
As part of the services we provide, we also arrange third-party service providers to provide the necessary supporting and ancillary logistics services, such as customs clearance companies for customs clearance in Australia and New Zealand, cargo screening service providers to carry out the necessary aviation security measures, and local delivery service providers in destination cities to carry out the last-mile delivery. Ground transportation companies will also be engaged if customers request for parcel pick-up.
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We purchase cargo space from our suppliers either through (i) direct booking from air freight carriers, or (ii) block space arrangements.
| (i) | Direct booking |
We purchase air cargo spaces through direct booking with air freight carriers or other freight forwarders on a demand basis, without entering into any fixed-term agreements. For the years ended September 30, 2023, 2024 and 2025, the value of direct bookings for cargo spaces made with air freight carriers and other freight forwarders amounted to approximately US$7.1 million, US$4.8 million and US$5.6 million, respectively.
For direct bookings with air freight carriers, we negotiate with air freight carriers for a fair price to secure the required cargo space for the consignment. This involves determining the necessary type of aircraft, the volume of cargo space required, and the destination. With our established relationships with various air freight carriers, we are able to secure satisfactory rates for our consignments.
Furthermore, we will co-load with other freight forwarders to secure air cargo spaces. This arrangement allows multiple freight forwarders to share a single air cargo space and split transportation costs. To ensure a cost-effective arrangement is attained, we consider various factors, such as price terms, schedule of flights, availability of cargo spaces, and the destination, when booking directly with other freight forwarders.
| (ii) | Block Space Arrangements |
We have established a block space agreement with an air freight carrier to secure a committed amount of air cargo spaces for a predetermined period, typically one year, at pre-agreed costs. The agreement is terminable by either party upon 60-days’ notice without any penalty. We are fully committed to obtaining the agreed volume of air cargo space as specified under the block space agreements. Such block space agreements typically contain clauses requiring us to make payments to air freight carriers for the agreed volume of cargo spaces, irrespective of whether the air cargo spaces have been fully utilized, except when the volume of air cargo spaces available for use on the particular aircraft is less than the agreed volume of cargo space.
During the years ended September 30, 2023, 2024 and 2025, we paid an aggregate cost of approximately US$1,219,343, US$1,286,457 and US$1,250,122, respectively, under our block space agreements.
The following sets forth the salient terms of the block space agreement we enter into with an air freight carrier for procurement of cargo spaces:
| Parties: | (1) Qantas Airways Limited and (2) Globavend HK | |
| Term: | Typically one year. | |
| Committed volume of cargo space and rates | Generally an agreed level of cargo space (in terms of space allocation) for each week for certain flight schedules at predetermined prices. | |
| Termination |
Either party to the block space agreement may terminate the block space agreement by giving 60 days’ notice in writing to the other party.
Either Party may immediately terminate the block space agreement by giving notice if:
(a) the other party breaches any provision of the block space agreement and fails to rectify the breach within 30 days of receiving written notice requiring it to do so; or
(b) the other party breaches a material provision of the block space agreement and the breach is not capable of bring remedies. | |
| Credit term | Generally within 14 days after the issuance of the invoice. |
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Information Technology Infrastructure
As an essential part of our integrated cross-border logistics services, we have developed our own proprietary all-in-one shipping solution, which was modified by us internally on a shipping software purchased by us in 2019. Our proprietary all-in-one shipping solution has been or can be connected to the customer’s own IT systems (such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, booking management systems, or point-of-sale (POS) systems) on one end and the transportation management systems (TMS) of our ground transportation service providers on the other end, to facilitate effective logistics management.
Our all-in-one shipping solution performs two major functions: (i) a booking management function (BMS), and (ii) a transportation management function. The booking management function allows a high degree of customization and can be integrated into the customer’s own IT systems (such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, booking management systems, or point-of-sale (POS) systems) by way of an Application Programming Interface (API). The booking management function enables booking instructions to be given, whether automatically by retrieving information from customers’ own IT systems or manually by users inputting the relevant booking management information.
The booking instruction typically includes the name of the consignee, the delivery address, the product type of the parcel, and its declared weight.
Our all-in-one shipping solution system is connected to the transportation management systems (TMS) of two of our major local delivery service providers. For delivery service provider A, a unique prefix identifying our company and a range of tracking numbers will be allocated to us from time to time. Once a booking instruction has been received, our system will generate a unique tracking number to the parcel, comprising of the unique prefix and a unique tracking number selected from the pre-assigned range of tracking numbers. Customers can then generate a thermal label from our all-in-one shipping solution and adhere it to the parcel. For delivery service provider B, once a booking instruction has been received, our all-in-one shipping solution system will give such instruction to the transportation management systems (TMS) through the application programming interface (API). An instant response, being a unique tracking number generated by its transportation management systems (TMS), will be given to our system. Customers can then generate a thermal label from our system and adhere it to the parcel. Our all-in-one shipping solution is also connected to the broker’s portal of our customs clearance companies through the application programming interface (API) opened to us. As such, the shipping instructions will be transmitted to our customs clearance companies through its broker’s portal for customs clearance and onward processing.
Our all-one-one shipping solution is also connected to cross-carrier shipping tracking platforms such that shippers and customers can monitor the status of their parcels in real time.
As our all-in-one shipping solution operates automatically it significantly reduces shipment errors and enhances logistics efficiency.
In addition, our all-in-one shipping solution will also generate a shipping label for each and every package with a unique tracking number imprinted on it. Enterprise customers can handily print out the thermal labels so generated and adhere them to packages.
Our all-in-one shipping solution can be integrated into customer’s IT systems, typically by way of application programming interface (API), with minimal costs. This also saves significant investment costs on part of the enterprise customers in developing their own shipment management systems.
The reliability of our all-in-one shipping solution as an e-commerce logistics provider has been recognized internationally. We are one of the carriers recognized by AfterShip, an established post-purchase platform providing cross-platform and cross-carrier e-commerce shipping tracking services, where shipments made with us can be tracked on the AfterShip tracking system.
With the integration of our all-in-one shipping solution into the customer’s own IT systems, we have been able to build a loyal customer base.
For the years ended September 30, 2023, 2024 and 2025, we did not experience any failure in our all-in-one shipping solution that caused material disruptions to our operations. We are, however, susceptible to risks relating to failure of our information technology system. For details regarding such risks, refer to “Item 3. Key Information—D. Risk Factors — Risks Related to Our Business and Industry —Our business is dependent on information technology and is subject to cybersecurity risks. A cyberattack may disrupt our operations and compromise the personal data of our customers.”
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Sales and Marketing
We have been able to maintain a stable and harmonious business relationship with our existing customers, who are mainly e-commerce merchants, or businesses operating e-commerce platforms in Hong Kong. As a one-stop service provider, we offer door-to-door international delivery services in one package, which eliminates the need for our customers to coordinate with multiple service providers. Our directors are capable of providing relevant market information and advice on our capability to offer international logistics solutions. Our directors believe that our track record of providing efficient ways of delivering and handling our customers’ goods has helped us to build a loyal customer base. Our proprietary all-in-one shipping solution, which has been or can be incorporated into customers own IT systems, also helps us to create a close bond with our customers. We believe that customer loyalty is essential to our success, and we strive to provide high-quality services to maintain our customers’ loyalty. Through our high-quality and efficient services and commitment to our customers, we have been able to maintain a close relationship with our them, who, in turn, make referrals for our freight forwarding and related logistics services.
In addition to serving our existing customers, we also conduct outreach to potential customers who have no prior business relationship with us, as we seek to diversify and expand our customer base. Through our sales and marketing efforts, we target to diversify and expand our customer base, thereby boosting sales performance and fostering a more diversified customer network. We believe that our experience in serving e-commerce businesses, combined with our commitment to customer satisfaction, positions us for long-term success in the e-commerce logistics industry.
Pricing Strategy
Our directors are responsible for determining the price for our integrated cross-border logistics services and freight forwarding services. We adopt a cost-plus approach for our pricing for both lines of businesses. We take into account the following factors in determining the fees we charge our customers:
| (i) | Type and value of consignment; |
| (ii) | Freight rates charged by our competitors; |
| (iii) | Future business opportunities; |
| (iv) | Reputation of the customer; |
| (v) | Costs of services, including freight charge, fuel charge, security charge, and charges of our service providers; |
| (vi) | Level of acceptance of the current market rates for similar services; and |
| (vii) | Weight of consignment and volume of cargo space required. |
Competition
We operate in the logistics and freight forwarding industry, which involves the provision of services such as freight transport, freight forwarding, warehouse management, and distribution. The market we operate in is highly fragmented and can be segmented based on major industry groups, such as air cargo forwarding services, freight transportation, courier activities, warehousing and storage, and other logistics services. We understand that the core value of logistics solutions providers lies in their ability to move freight from the point of origin to the point of consumption within a stipulated time at the most competitive price. The key success factors in the industry include maintaining reputation, developing a strong and extensive network, having strong capital support, and possessing operational experience and management capability.
We face keen competition from numerous competitors operating on different scales in Hong Kong. Management believes that we compete favorably with our competitors through our competitive strengths, such as well-established partnerships with customers and our service suppliers, our all-in-one shipping solution system, and a strong capability to provide integrated logistics solutions.
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Seasonality
For the years ended September 30, 2023, 2024 and 2025, there were no specific and obvious seasonality that affected the demand for our services. With regard to the global impact of the COVID-19 pandemic, our directors are of view that it indicates no positive correlation between the COVID-19 pandemic and our business. Instead, it is widely understood that demand for certain products are influenced by a number of factors, such as weather patterns, national holidays, economic conditions, major product launches, brand promotions, and many other market factors. Accordingly, comparison of sales and operating results from different periods in any given financial year may not be relied upon as indicators of our performances, since many of the market factors are unpredictable, and we provide no assurances that any market trends will continue. Due to these potential fluctuations, we place great importance on maintaining close contact with our customers to monitor trends and capture market needs effectively.
Insurance
We believe our insurance coverage is adequate to insure against the risks relating to our operations, given the size and nature of our business. Our insurance coverage includes, among others, work-related injury insurance for our employees and property all risks insurance for our office and warehousing facilities. Additionally, we also purchase increased costs of work insurance for business interruption, marine liability insurance, and money-in-transit insurance covering warehouses and parcels, as well as other liability insurance as needed. We review our insurance policies from time to time for adequacy in the breadth of coverage.
We are not liable for any damage or loss to our customers’ goods unless such damage or loss is caused by our negligence. Where we are liable for the damage or loss to our customers’ goods, claims against us from our customers are covered by the insurance policies we maintain as described above. Our business is, however, susceptible to risks arising from losses we sustain during the course of our business operations, and we cannot assure you that the insurance policies we have taken out are always able to cover all losses we sustain. In the case of an uninsured loss or a loss in excess of insured limits, including those caused by natural disasters and other events beyond our control, we may be required to pay for losses, damages, and liabilities out of our own funds. For details regarding such risks, refer to “Item 3. Key Information—D. Risk Factors — Risks Related to Our Business and Industry —Our insurance coverage may be inadequate to protect us from potential losses.”
Intellectual Property
As of the date of this annual report, we have registered one trademark in Hong Kong, which we consider to be material to our business:
| Trademark |
Place of registration |
Trademark number |
Owner | Class | Expiry date | |||||
|
|
Hong Kong | 306075667 | Globavend HK | 16, 35, 36, 38, 39, 42 | October 5, 2032 |
Licenses and Regulatory Approvals
A summary of the laws and regulations applicable to our business and industry is set out in the section headed “Regulation” in this annual report. We have obtained all the necessary licenses, permits, and approvals that are material to our business during the years ended September 30, 2023, 2024 and 2025, with details set forth below:
| License/Permit/Approval | Holding Entity | Issuing Authority | Date of Grant | Date of Expiry | ||||
| Accredited Cargo Agent | Globavend HK | International Air Transport Association | September 18, 2022 | — | ||||
| Regulated Agents | Globavend HK | Civil Aviation Department, HKSAR | August 18, 2020 | — |
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Regulations
Regulations Related to Our Business Operations in Hong Kong
Regulations Related to Our Freight Forwarding Business
Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong)
The Business Registration Ordinance requires every person carrying on any business to make an application to the Commissioner of Inland Revenue in the prescribed manner for the registration of that business. The Commissioner of Inland Revenue must register each business for which a business registration application is made and, as soon as practicable after the prescribed business registration fee and levy are paid, issue a business registration certificate or branch registration certificate for the relevant business or the relevant branch, as the case may be.
Aviation Security Ordinance (Chapter 494 of the Laws of Hong Kong)
The Aviation Security Ordinance is an ordinance that makes provision for the prevention and suppression of acts of violence against civil air transport and connected purposes, and constitute the comprehensive legislation for implementation of the conventions and agreements on aviation security promulgated by the International Civil Aviation Organization (the “ICAO”). To safeguard aircraft against acts of unlawful interference, the ICAO has laid own standards and recommend practice in Annex 17 to the Convention on International Civil Aviation (the “CICA”) on the security measures required to be implemented by contracting states. For the security of air cargo to be in line with Annex 17 to the CICA, the Hong Kong Aviation Security Programme, which is enforceable under the Aviation Security Ordinance, has incorporated the Regulated Agent Regime (the “RAR”) since March 2000. A cargo handling agent, a freight forwarder or a consignor of air cargo may apply for registration as a regulated agent (“RA”), who is required to comply with the requirements in respect of an RA in the Hong Kong Aviation Security Programme, in order to prevent the unauthorized carriage of explosives and incendiary devices in the consignments of cargo intended for carriage by air.
Under the RAR, an RA is obliged, among other obligations, to ensure that the appropriate security controls acceptable by the Civil Aviation Department (“CAD”) are properly implemented upon the acceptable of cargo for carriage by air unless the consignment of cargo is safeguarded against unauthorized interference after its reception and to make best endeavours to protect it from unauthorized interference until the consignment is accepted by another RA or an airline.
An RA shall also ensure that a consignment of cargo accepted from a known consignor or another RA is:
| (a) | accompanied by a full description of the contents in the shipping documents (e.g. airway bills, cargo manifests), that the RA’s registration code or the known consignor’s code on the shipping documents of the consignment is checked; | |
| (b) | checked against the description in the shipping documents in respect of the quantity of the cargo tendered and any sign of the package having been tampered with; | |
| (c) | declared as known cargo by checking the annotation of the tendering RA’s registration code or otherwise stated as unknown cargo on shipping documents in the inter-RA’s handling; and | |
| (d) | safeguarded from unauthorized interference after it has been received until accepted by the next RA or an airline, or until loaded on to an aircraft. |
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RAs shall also maintain an orderly documentation and record system. Documents such as airway bills, cargo manifests and relevant instructions from consignors should be kept for at least 31 days after the consignment is flown.
On September 1, 2016, the ICAO has introduced a new policy direction to progressively increase the required screening percentage of known cargoes consigned by existing consignors which have not been approved by the CAD, from 1% to 100% before the deadline imposed by ICAO (June 30, 2021). From June 2021 onwards, prior to the air cargo being loaded onboard, all registered agents will be required to screen 100% of their cargo tendered by consignors not approved by the CAD. In anticipation of an upsurge in screening demand, a regulated air cargo screening facilities scheme which enables and regulates air cargo screening at off-airport locations has been formulated. Any entity which intends to conduct air cargo security screening operations in their premises may apply for acceptance by the CAD to become a regulated air cargo screening facility (“RACSF”). Each RACSF must have at least two nominated persons for cargo security who have attended and completed the RACSF training program acceptable to the CAD. The relevant training certificates are valid for a period of three years, hence, the relevant RACSF should arrange for revalidation of the same by their expiry.
Dangerous Goods (Consignment by Air) (Safety) Ordinance (Chapter 384 of the Laws of Hong Kong) and Dangerous Goods (Consignment by Air) (Safety) Regulations (Chapter 384A of the Laws of Hong Kong)
The Dangerous Goods (Consignment by Air) (Safety) Ordinance (“DGO”) is to control, in the interests of safety, the preparation, packing, marking, labelling and offering of dangerous goods for carriage by air. Under the DGO, dangerous goods (“Dangerous Goods”) is defined as any article or substance which is listed in the Technical Instructions for the Safe Transport of Dangerous Goods by Air (“Technical Instructions”) published by the ICAO and any article or substance not so listed by name but having properties corresponding to those of one of the general classifications of articles and substances in the Technical Instructions. When offering or handling Dangerous Goods for air carriage, consignors are required under the DGR to ensure all Dangerous Goods are properly classified, packed, marked, labelled and documented.
Any person who consigns Dangerous Goods in contravention of the Dangerous Goods (Consignment By Air) (Safety) Regulations (“DGR”) commits an offence and on conviction on indictment is liable to a fine of HK$250,000 and imprisonment for two years or on summary conviction to a fine of HK$50,000 and to imprisonment for one year. Furthermore, where a company commits an offence, every director and every officer concerned in the management of the company may be convicted of the like offence as specified under the DGO. Those Dangerous Goods and any packaging for Dangerous Goods may be forfeited.
Additionally, as required under the DGR, staff of a freight forwarder shall not perform the function of processing Dangerous Goods, processing cargo (not containing Dangerous Goods) or handling, loading and storage of cargo unless he/she has completed training programmes which fulfill the requirement under the DGR. Staff who process Dangerous Goods without completing the necessary training programmes commits an offence and the freight forwarder and such staff each commits an offence and is liable to a fine of HK$25,000 and to imprisonment for six months. Also, a freight forwarder commits an offence where it did not ensure its staff who process cargo (not containing Dangerous Goods) or handle, load and store cargo to complete the necessary training programmes and it is liable to a fine of HK$25,000 and to imprisonment for six months.
International Conventions - Carriage of Goods by Air
In relation to carriage of goods by air, the relevant international conventions are the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929 (the “Warsaw Convention”) and the Montreal Convention for the Unification of Certain Rules for International Carriage by Air 1999 (the “Montreal Convention”).
The Warsaw Convention
The Warsaw Convention was an international convention which regulates liability for international carriage of persons, luggage or goods performed by aircraft for reward. It was originally signed in 1929 in Warsaw and was amended in 1955 by the Hague Protocol (the “Amended Warsaw Convention”). Hong Kong still applies the Amended Warsaw Convention to international air carriages with countries that have adopted the Amended Warsaw Convention but not the Montreal Convention.
The Montreal Convention and the Carriage by Air Ordinance
The Montreal Convention was designed to establish worldwide uniformity in liability rules governing air carriage of person, baggage and cargo for compensation between two countries which are parties to it. Hong Kong ratified the Montreal Convention on 15 December 2006. The Montreal Convention was put into force in Hong Kong under the Carriage by Air Ordinance (Chapter 500 of the Laws of Hong Kong) (the “CAO”).
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The provisions of the Montreal Convention, as set out in Schedule 1A of the CAO, so far as they relate to the rights and liabilities of carriers, carriers’ servants and agents, passengers, consignors, consignees and other persons, and subject to the CAO, have the force of law in relation to any carriage by air to which the Montreal Convention applies, irrespective of the nationality of the aircraft performing that carriage.
Article 18 of the Montreal Convention determines the extent of the carriers’ liability during carriage of cargoes. Article 18(1) states that the carrier is liable for damage sustained in the vent of the destruction or loss of, or damage to, cargo upon condition only that the event which caused the damage so sustained took place during the carriage by air. Article 18(2) provides the following four defenses to the carrier:
| (a) | inherent defect, quality or vice of that cargo; | |
| (b) | defective packing of that cargo performed by a person other than the carrier or its servants or agents; | |
| (c) | an act of war or an armed conflict; and/or | |
| (d) | an act of public authority carried out in connection with the entry, exit or transit of the cargo. |
Regulations Related to Employment and Labor Protection
Employment Ordinance (Chapter 57 of the Laws of Hong Kong)
The Employment Ordinance is an ordinance enacted for, among other things, the protection of the wages of employees and the regulation of the general conditions of employment and employment agencies. Under the Employment Ordinance, an employee is generally entitled to, among other things, notice of termination of his or her employment contract; payment in lieu of notice; maternity protection in the case of a pregnant employee; not less than one rest day in every period of seven days; severance payments or long service payments; sickness allowance; statutory holidays or alternative holidays; and paid annual leave of up to 14 days depending on the period of employment.
Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)
The Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), or the ECO, is an ordinance enacted for the purpose of providing for the payment of compensation to employees injured in the course of employment. As stipulated by the ECO, no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an amount not less than the applicable amount specified in the Fourth Schedule of the ECO in respect of the liability of the employer. According to the Fourth Schedule of the ECO, the insured amount shall be not less than HKD100,000,000 per event if a company has no more than 200 employees. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction to a fine and imprisonment. An employer who has taken out an insurance policy under the ECO is required to display a prescribed notice of insurance in a conspicuous place on each of its premises where any employee is employed.
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Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong)
The Minimum Wage Ordinance provides for a prescribed minimum hourly wage rate (currently at HK$40 per hour) during the wage period for every employee engaged under a contract of employment under the Employment Ordinance.
Any provision of the employment contract that purports to extinguish or reduce the right, benefit, or protection conferred on the employee by the Minimum Wage Ordinance is void.
Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong)
The Mandatory Provident Fund Schemes Ordinance (“MPFSO”) is an ordinance enacted for the purposes of providing for the establishment of non-governmental mandatory provident fund schemes (each, a “MPF Scheme”). The MPFSO requires every employer of an employee of 18 years of age or above but under 65 years of age to take all practical steps to ensure the employee becomes a member of a registered MPF Scheme. Subject to the minimum and maximum relevant income levels, it is mandatory for both employers and their employees to contribute 5% of the employee’s relevant income to the MPF Scheme. Any employer who contravenes this requirement commits a criminal offense and is liable on conviction to a fine and imprisonment. As of the date of this annual report, the Company believes it has made all contributions required under the MPFSO.
Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong)
The Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong) regulates the obligations of a person occupying or having control of premises on injury resulting to persons or damage caused to goods or other property lawfully on the land. The Occupiers Liability Ordinance imposes a common duty of care on an occupier of premises to take such care as in all the circumstances of the case is reasonable to see that the visitors will be reasonably safe in using the premises for the purposes for which he is invited or permitted by the occupier to be there.
Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong)
The Occupational Safety and Health Ordinance provides for protection to employees with respect to their safety and health in workplaces. It applies not only to industrial workplaces but also non-industrial.
Under the Occupational Safety and Health Ordinance, every employer must, as far as reasonably practicable, ensure the safety and health at work for all employees by: (a) providing and maintaining plant and systems of work that are safe and without risks to health; (b) making arrangements for ensuring safety and absence of risks to health in connection with the use, handling, storage or transport of plant or substances; (c) providing such information, instruction, training and supervision as may be necessary to ensure the safety and health at work of the employees; (d) as regards any workplace under the employer’s control, (i) maintaining the workplace in a condition that is safe and without risks to health; and (ii) providing or maintaining means of access to and egress from the workplace that are safe and without any such risks; and (e) providing and maintaining a working environment for the employees that is safe and without risks to health. An employer who fails to comply with the above provisions commits an offence and is liable, on summary conviction, to a fine of HK$3,000,000 and on conviction on indictment, to a fine of HK$10,000,000. Further, an employer who intentionally, knowingly or recklessly fails to comply with these provisions commits an offence and is liable, on summary conviction, to a fine of HK$3,000,000 and to imprisonment for six months, and on conviction on indictment, to a fine of HK$10,000,000 and to imprisonment for two years.
The Commissioner for Labour may serve improvement notices on an employer or an occupier of the workplace against contravention of this ordinance or the Factories and Industrial Undertakings Ordinance (Cap 59 of the Laws of Hong Kong), or suspension notices against an activity or condition or use of workplace where there is an imminent risk of death or serious bodily injury. An employer or occupier who fails to comply with such improvement notices without reasonable excuse commits an offence and is liable on conviction to a fine of HK$400,000 and imprisonment of up to twelve months. An employer or occupier who fails to comply with such suspension notices without reasonable excuse commits an offence and is liable on conviction to a fine of HK$1,000,000, to imprisonment for twelve months, and to a further fine of HK$100,000 for each day or part of a day during which such employer or occupier knowingly and intentionally continues the contravention.
Factories and Industrial Undertakings Ordinance (Chapter 59 of the Laws of Hong Kong)
The Factories and Industrial Undertaking Ordinance (the “FIUO”) imposes general duties on proprietors of and persons employed at industrial undertakings, including without limitation to cargo and container handling undertakings, factories and other industrial workplaces, to ensure health and safety at work in such undertakings. Proprietor includes any person, body corporate, a firm, an occupier and the agent of such an occupier having the management or control of the business carried on in an industrial undertaking for the time being.
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Section 6A(1) of the FIUO provides that “it shall be the duty of every proprietor of an industrial undertaking to ensure, so far as is reasonably practicable, the health and safety at work of all persons employed by him at the industrial undertaking.” Contravention of such duty is an offence and is liable to a fine of HK$3,000,000 on summary conviction, and HK$10,000,000 on conviction on indictment. A proprietor willfully contravene with the duty imposed by section 6A(1) without reasonable excuse commits an offence and is liable to a fine of HK$3,000,000 and to imprisonment for six months on summary conviction, and on conviction on indictment, to a fine of HK$10,000,000 and to imprisonment for two years.
There are 30 sets of subsidiary regulations under the FIUO, covering various aspects of hazardous work activities in various workplaces, containing detailed health and safety standards on work situations, plant and machinery, processes and substances.
Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations (Chapter 59J of the Laws of Hong Kong)
The Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations lay down the legal requirements for safe use, construction, testing and examination of lifting gear and lifting appliance used for lowering or raising or as a means of suspension in any industrial undertaking (the “Lifting Equipment”). Every employer providing Lifting Equipment for use at work, and every person having control of such use, should observe and ensure compliance with the regulation. In particular, the Lifting Equipment must be sufficiently strong, properly maintained, and thoroughly examined by a competent examiner at least once every twelve months and certified by the competence examiner in an approved form as being in a safe working order; the Lifting Equipment should not be loaded beyond the maximum safe working load; and that no load is left suspended from a lifting appliance unless a competent person is in charge of the lifting appliance during the period of suspension.
Depending on the offence, different levels of penalty are imposed for contraventions of these regulations. The penalties for committing an offence under the Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations range from a fine at HK$100,000 to HK$400,000, and imprisonment of up to twelve months.
Factories and Industrial Undertakings (Loadshifting Machinery) Regulations (Chapter 59AG of the Laws of Hong Kong)
These regulations regulate the use and operation of loadshifting machine. Loadshifting machine used in industrial undertaking as defined in the regulations includes fork-lift truck.
Regulations 3 and 4 impose duties on the responsible person to (i) ensure that the loadshifting machine shall be operated by a person aged 18 or above and holding a valid certificate applicable to the type of loadshifting machine that that person is instructed to operate, (ii) provide every employee instructed to operate the loadshifting machine a training course conducted for the relevant type of loadshifting machine, and (iii) if the employee fails to obtain a certificate following the training course, the employer is responsible to provide an additional training course. The meaning of responsible person, in these regulations and the context of industrial undertaking, is a person having the management or in charge of the machine, but excluding the person operating the machine.
A responsible person without reasonable excuse contravenes the duty imposed by Regulation 3 or 4 is liable to a fine of HK$100,000.
Regulations Related to Intellectual Property
Copyright Ordinance (Chapter 528 of the Laws of Hong Kong)
The Copyright Ordinance protects recognized categories of literary, dramatic, musical and artistic work, as well as sound recordings, films, broadcasts and cable programs, and typographical arrangement of published editions. Certain acts such as copying and/or issuing or making available copies to the public of a copyright work without the authorization from the copyright owner would constitute “primary infringement” of copyright which does not require knowledge of infringement.
In addition, a person may incur civil liability for “secondary infringement” under the Copyright Ordinance if that person possess, sells, lets for hire, distributes or deals with a copy of a work which is, and which he knows or has reason to believe to be, an infringing copy of the work for the purposes of or in the course of any trade or business without the consent of the copyright owner. However, the person will only be liable if, at the time he committed the act, he knew or had reason to believe that he was dealing with infringing copies.
Under section 118 of the Copyright Ordinance, a person commits a criminal offence if he, without the consent of the copyright owner of a copyright work, makes for sale or hire an infringing copy of the work or possess an infringing copy of the work with a view to its being, among others, sold or let for hire by any person for the purpose of or in the course of that trade or business.
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Under section 119A of the Copyright Ordinance, there is a provision concerning copying service businesses which imposes criminal liability when a person, for the purpose of or in the course of a copying service business, possesses a reprographic copy of a copyrighted work as published in a book, magazine or periodical, and such copy is an infringing copy of the copyrighted work. It is a defense for the person charged to prove that he did not know and had no reason to believe that a copy of the copyrighted work in question was an infringing copy under the copyright law.
Trade Marks Ordinance (Chapter 559 of the Laws of Hong Kong)
The Trade Marks Ordinance provides for the registration, use and protection of trademarks. Under section 18 of the Trade Marks Ordinance, it is provided that a person infringes a registered trademark if the person uses in the course of trade or business a sign which is:
| (a) | identical to the trademark in relation to goods or services which are identical to those for which it is registered; | |
| (b) | identical to the trademark in relation to goods or services which are similar to those for which it is registered; and the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public; | |
| (c) | similar to the trademark in relation to goods or services which are identical or similar to those for which it is registered; and the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public; or | |
| (d) | identical or similar mark in relation to goods or services which are not identical or similar to those for which the trademark is registered; the trademark is entitled to protection under the Paris Convention as a well-known trademark; and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of a trademark. |
A person shall be treated as a party to any use of the material which infringes the registered trademark if he:
| (a) | applies or causes to be applied a registered trademark or a sign similar to a registered trademark to material which is intended to be used for labelling or packaging goods; as a business paper; or for advertising goods or services; and |
| (b) | at the time the trademark or sign was applied to the material, he knew or had reason to believe that its application to the material was not authorized by the owner of the registered trademark or by a licensee. |
Trademarks registered in other countries or regions are not automatically entitled to protection in Hong Kong unless they are also registered under the Trade Marks Ordinance. Nevertheless, trademarks which are not registered under the Trade Marks Ordinance may still obtain protection by the common law action of passing off, which requires proof of the owner’s reputation in the unregistered trademark and that use of the trademark by third parties will cause damages to the owner.
Regulations Related to Import and Export of Goods
Import and Export Ordinance (Chapter 60 of the Laws of Hong Kong)
The Import and Export Ordinance provides for the regulation and control of the import of articles into Hong Kong, the export of articles from Hong Kong, the handling and carriage of articles within Hong Kong which have been imported into Hong Kong or which may be export from Hong Kong, and any matter incidental to or connected with the foregoing.
The import and export of certain articles are prohibited unless with the relevant licenses under sections 6C and 6D which are issued under section 3 of the Import and Export Ordinance. Pursuant to section 6C of the Import and Export Ordinance, no person shall import any article specified in Schedule 1 to the Import and Export (General) Regulations (Cap 60A of the Laws of Hong Kong) except under and in accordance with an import license issued by the Director-General of Trade and Industry under section 3 of the Import and Export Ordinance. Section 6D of the Import and Export Ordinance provides that no person shall export any article specified in the second column of Schedule 2 to the Import and Export (General) Regulations to the place specified opposite thereto in the third column of the schedule except under and in accordance with an export license issued by the Director-General of Trade and Industry under section 3 of the Import and Export Ordinance.
Any person who contravenes section 6C or 6D of the Import and Export Ordinance in respect of any article specified in Part 1 of Schedule 1 or Part 1 of Schedule 2 to the Import and Export (General) Regulations (Chapter 60A of the Laws of Hong Kong) shall be liable on conviction to a fine of HK$500,000 and to imprisonment to two years. Any person who contravenes section 6C or 6D of the Import and Export Ordinance in respect of any article specified in Part 2 of Schedule 1 or Part 2 of Schedule to the Import and Export (General) Regulations (Chapter 60A of the Laws of Hong Kong) shall be liable to a fine of $500,000 and to imprisonment for two years on summary conviction, or a fine of $2,000,000 and to imprisonment for seven years on conviction on indictment.
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Import and Export (Registration) Regulations (Chapter 60E of the Laws of Hong Kong)
Regulation 3 of the Import and Export (Registration) Regulations (“Import and Export Regulations”) sets out exemptions in respect of regulations 4 and 5.
Pursuant to regulation 4 of the Import and Export Regulations, every person, including company, who imports any article other than an exempted article shall lodge with the Commissioner of Customs and Excise an accurate and complete import declaration relating to such article using services provided by a specified body, in accordance with the requirements that the Commissioner of Customs and Excise may specify. Every declaration required to be lodged shall be lodged within 14 days after the importation of the article to which it relates.
Regulation 5 of the Import and Export Regulations requires that every person who exports or re-exports any article other than an exempted article shall lodge with the Commissioner of Customs and Excise an accurate and complete export declaration relating to such article using services provided by a specified body, in accordance with the requirements that the Commissioner of Customs and Excise may specify. Every declaration required to be lodged shall be lodged within 14 days after the exportation of the article to which it relates.
Any person fails or neglects to do such declaration as required under regulations 4 and 5 of the Import and Export Regulations within 14 days after the importation or exportation (as the case may be) of the article to which it relates without any reasonable excuse, or, where he or she has such excuse, fails or neglects to lodge such declaration in such manner as soon as is practicable after the cessation of such excuse, shall be liable to (1) a fine of HK$2,000 upon summary conviction; and (2) commencing from the date of conviction, a fine of HK$100 in respect of everyday during which his failure or neglect to lodge such declaration in that manners continues. Further, any person who knowingly or recklessly lodges any declaration with the Commissioner of Customs and Excise that is inaccurate in any material particular shall be liable on summary conviction to a fine of HK$10,000. Any person who, in contravention to the provisions of regulations 4 and 5 of the Import and Export Regulations knowingly or recklessly lodges any declaration with the Commissioner of Customs and Excise that is inaccurate in any material particular shall be liable on summary conviction to a fine of HK$10,000.
Regulations and Notices Related to Hong Kong Taxation
Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)
Under the Inland Revenue Ordinance, where an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than three months after the date of commencement of such employment. Where an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than one month before such individual ceases to be employed in Hong Kong.
Tax on dividends
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect to dividends paid by the Company.
Capital gains and profit tax
No tax is imposed in Hong Kong in respect to capital gains from the sale of shares. However, trading gains from the sale of shares by persons carrying on a trade, profession, or business in Hong Kong, where such gains are derived from or arise in Hong Kong, will be subject to Hong Kong profits tax, which is imposed at the rates of 8.25% on assessable profits up to HKD2,000,000 and 16.5% on any part of assessable profits over HKD2,000,000 on corporations from the year of assessment commencing on or after April 1, 2018. Certain categories of taxpayers (for example, financial institutions, insurance companies, and securities dealers) are likely to be regarded as deriving trading gains rather than capital gains unless these taxpayers can prove that the investment securities are held for long-term investment purposes.
Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong)
Under the Stamp Duty Ordinance, the Hong Kong stamp duty currently charged at the ad valorem rate of 0.13% on the higher of the consideration for or the market value of the shares will be payable by the purchaser on every purchase and by the seller on every sale of Hong Kong shares (in other words, a total of 0.26% is currently payable on a typical sale and purchase transaction of Hong Kong shares). In addition, a fixed duty of HKD5 is currently payable on any instrument of transfer of Hong Kong shares. Where one of the parties is a resident outside Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If no stamp duty is paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.
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Regulations Related to Personal Data
Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong)
The Personal Data (Privacy) Ordinance (“PDPO”) imposes a statutory duty on data users to comply with the requirements of the six data protection principles (the “Data Protection Principles”) contained in Schedule 1 to the PDPO. The PDPO provides that a data user shall not do an act, or engage in a practice, that contravenes a Data Protection Principle unless the act or practice, as the case may be, is required or permitted under the PDPO. The six Data Protection Principles are:
| ● | Principle 1 — purpose and manner of collection of personal data; |
| ● | Principle 2 — accuracy and duration of retention of personal data; |
| ● | Principle 3 — use of personal data; |
| ● | Principle 4 — security of personal data; |
| ● | Principle 5 — information to be generally available; and |
| ● | Principle 6 — access to personal data. |
Non-compliance with a Data Protection Principle may lead to a complaint to the Privacy Commissioner for Personal Data (the “Privacy Commissioner”). The Privacy Commissioner may serve an enforcement notice to direct the data user to remedy the contravention and/or instigate prosecution actions. A data user who contravenes an enforcement notice commits an offense that may lead to a fine and imprisonment.
The PDPO also gives data subjects certain rights, inter alia:
| ● | the right to be informed by a data user whether the data user holds personal data of which the individual is the data subject; |
| ● | if the data user holds such data, to be supplied with a copy of such data; and |
| ● | the right to request correction of any data the individual considers to be inaccurate. |
The PDPO criminalizes, including, but not limited to, the misuse or inappropriate use of personal data in direct marketing activities, non-compliance with a data access request, and the unauthorized disclosure of personal data obtained without the relevant data user’s consent. An individual who suffers damage, including injured feelings, by reason of a contravention of the PDPO in relation to his or her personal data may seek compensation from the data user concerned.
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Data Protection Act (As Revised) of the Cayman Islands
Cayman Islands Data Protection Laws
We have certain duties under the Data Protection Act (as revised) of the Cayman Islands (the “DPA”), based on internationally accepted principles of data privacy.
Privacy Notice
This privacy notice puts our shareholders on notice that through your investment into us you will provide us with certain personal information which constitutes personal data within the meaning of the DPA, or personal data.
Investor Data
We will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the extent legitimately required to conduct our activities of on an ongoing basis or to comply with legal and regulatory obligations to which we are subject. We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.
In our use of this personal data, we will be characterized as a “data controller” for the purposes of the DPA, while our affiliates and service providers who may receive this personal data from us in the conduct of our activities may either act as our “data processors” for the purposes of the DPA or may process personal information for their own lawful purposes in connection with services provided to us.
We may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence records, passport number, bank account details, source of funds details and details relating to the shareholder’s investment activity.
Who this Affects
If you are a natural person, this will affect you directly. If you are a corporate shareholder (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation your investment in us, this will be relevant for those individuals and you should transit the content of this privacy notice to such individuals or otherwise advise them of its content.
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How We May Use a Shareholder’s Personal Data
We may, as the data controller, collect, store and use personal data for lawful purposes, including, in particular: (i) where this is necessary for the performance of our rights and obligations under any agreements; (ii) where this is necessary for compliance with a legal and regulatory obligation to which we are or may be subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or (iii) where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental rights or freedoms.
Should we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will contact you.
Why We May Transfer Your Personal Data
In certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange this information with foreign authorities, including tax authorities.
We anticipate disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain entities located outside the US, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.
The Data Protection Measures We Take
Any transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance with the requirements of the DPA.
We and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data.
We shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms or those data subjects to whom the relevant personal data relates.
Contacting the Company
For further information on the collection, use, disclosure, transfer or processing of your personal data or the exercise of any of the rights listed above, please contact us through our website at https://www.globavend.com/ or through phone number (+61) 08 6141 3263.
Regulations Related to Our Business Operations in China
Regulations Relating to Foreign Investment in China
Investment activities in mainland China by foreign investors are principally governed by the Catalog of Industries for Encouraging Foreign Investment (2022 Edition), or the Catalog, as promulgated by the Ministry of Commerce of the People’s Republic of China (“MOFCOM”), and the National Development and Reform Commission (“NDRC”) on October 26, 2022, and the Special Administrative Measures for Access of Foreign Investment (2024 Edition), or the Negative List (2024), as promulgated on September 8, 2021. According to the Negative List (2024), our businesses operated in the PRC do not fall into the restricted or prohibited categories.
In addition, a foreign-invested enterprise in the PRC is required to comply with other regulations on its incorporation, operation and changes. On March 15, 2019, the National People’s Congress (“NPC”) adopted the Foreign Investment Law (the “FIL”), which became effective on January 1, 2020. Pursuant to the FIL, PRC will grant national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries that fall within “restricted” or “prohibited” categories as prescribed in the Negative List (2024) to be released or approved by the State Council.
On December 26, 2019, the State Council promulgated the Implementation Rules to the Foreign Investment Law, which became effective on January 1, 2020. The implementation rules further clarify that the state encourages and promotes foreign investment, protects the lawful rights and interests of foreign investors, regulates foreign investment administration, continues to optimize a foreign investment environment, and advances a higher-level opening. On December 30, 2019, the MOFCOM and SAMR jointly promulgated the Measures for Information Reporting on Foreign Investment, which became effective on January 1, 2020. Pursuant to the Measures for Information Reporting on Foreign Investment, where a foreign investor carries out investment activities in mainland China, directly or indirectly, the foreign investor or the foreign-invested enterprise shall submit the investment information to the competent commerce department.
On July 6, 2021, the relevant PRC government authorities issued Opinions on Lawfully and Severely Combating Illegal Securities Activities. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
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On February 17, 2023, the CSRC issued the CSRC Filing Rules, which came into force on March 31, 2023. The CSRC Filing Rules refine the regulatory system for domestic company’s overseas offering and listing by subjecting both direct and indirect overseas offering and listing activities to the filing-based administration, and clearly defines the circumstances where provisions for direct and indirect overseas offering and listing apply and relevant regulatory requirements.
According to the CSRC Filing Rules, among other things, a domestic company in the PRC that seeks to offer and list securities on overseas markets shall fulfill the filing procedures with the CSRC as per requirement of the Trial Administrative Measures. Where a domestic company seeks to directly offer and list securities on overseas markets, the issuer shall file with the CSRC. If an issuer offers securities on the same overseas market where it has previously offered and listed securities subsequently, filings shall be made with the CSRC within 3 working days after the offering is completed. Upon occurrence of any material event, such as change of control, investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities, change of listing status or transfer of listing segment, or voluntary or mandatory delisting, after an issuer has offered and listed securities on an overseas market, the issuer shall submit a report thereof to CSRC within three working days after the occurrence and public disclosure of such event. Further, an overseas securities company that serves as a sponsor or lead underwriter for overseas securities offering and listing by domestic companies shall file with the CSRC within 10 working days after signing its first engagement agreement for such business, and submit to the CSRC, no later than January 31 each year, an annual report of its business activities in the previous year associated with overseas securities offering and listing by domestic companies. If an overseas securities company has entered into engagement agreements before the effectuation of the Trial Administrative Measures and is serving in practice as a sponsor or lead underwriter for overseas securities offering and listing by domestic companies, it shall file with the CSRC within 30 working days after the Trial Administrative Measures take effect.
Under the CSRC Filing Rules, a domestic company is prohibited from overseas offering and listing if any of the following circumstances is involved: (1) where such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) where the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with laws; (3) where the domestic company intending to make the securities offering and listing, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) where the domestic company intending to make the securities offering and listing is suspected of committing crimes or major violations of laws and regulations, and is under investigation according to law, and no conclusion has yet been made thereof; and (5) where there are material ownership disputes over equity held by the domestic company’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. Moreover, a domestic company that seeks to offer and list securities on overseas markets shall abide by certain other regulatory requirements as set out in the CSRC Filing Rules, including, without limitation to, compliance with laws of national secrecy, foreign investment, cybersecurity, data security, cross-border investment and financing, foreign exchange, and other laws and relevant provisions.
The Trial Administrative Measures also provides that if the issuer both meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three working days after such application is submitted. The Trial Administrative Measures also require subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.
Pursuant to the CSRC Filing Rules, the CSRC will conclude the filing procedures and publish the filing results on the CSRC website within 20 working days after receiving the filing documents if the filing documents are complete and in compliance with stipulated requirements. However, during the filing process, the CSRC may request the Company to supply additional documents or may consult with competent authorities, the time for which will not be counted in the 20 working days. We are required to file with the CSRC within three working days after any subsequent securities offering is completed, pursuant to the CSRC Filing Rules.
We believe that we are not subject to the CSRC Filing Rules because we are incorporated in the Cayman Islands and our major subsidiaries are incorporated in Hong Kong, the British Virgin Islands, and other regions outside of mainland China and operate primarily in Hong Kong. Although one of our operating subsidiaries, namely, the PRC Subsidiary, is located in China, given that (i) our PRC Subsidiary does not contribute 50% or more of our operating revenue, total profit, total assets or net assets; and (ii) the main parts of the our business activities are conducted outside mainland China, our main place(s) of business are located outside mainland China, and the majority of senior management staff in charge of our business operations and management are not PRC citizens and have their usual place(s) of residence located outside mainland China, we believe that our listing on the Nasdaq is not subject to the CSRC review. However, as the CSRC Filing Rules and the supporting guidelines are newly published, there exists uncertainty with respect to the implementation and interpretation of the principle of “substance over form.” If our offering and listing is later deemed as “indirect overseas offering and listing by companies in mainland China” under the CSRC Filing Rules, we may need to complete the filing procedures for our offering and listing.
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According to the Trial Administrative Measures, if a domestic company fails to fulfill filing procedures, or offers and lists securities on an overseas market in violation of the measures, the CSRC shall order rectification, issue warnings to such domestic company, and impose a fine of between RMB1 million and RMB10 million. Directly liable persons-in-charge and other directly liable persons shall be warned and each imposed a fine of between RMB0.5 million and RMB5 million. Controlling shareholders and actual controllers of the domestic company that organize or instruct the aforementioned violations shall be imposed a fine of between RMB1 million and RMB10 million.
On February 24, 2023, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality and Archives Administration Provisions”), which also became effective on March 31, 2023. According to the Confidentiality and Archives Administration Provisions, domestic companies that seek overseas offering and listing (either in direct or indirect means) and the securities companies and securities service (either incorporated domestically or overseas) providers that undertake relevant businesses shall institute a sound confidentiality and archives administration system, and take necessary measures to fulfill confidentiality and archives administration obligations. They shall not leak any state secret or working secret of government agencies, or harm national security and public interests. Therefore, a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to laws, and file with the secrecy administrative department at the same level. The above-mentioned documents and materials that, if leaked, will be detrimental to national security or public interest, therefore, the domestic company shall strictly fulfill relevant procedures stipulated by applicable regulations.
Furthermore, the Confidentiality and Archives Administration Provisions stipulates that a domestic company that provides accounting archives or copies of accounting archives to any entities, including securities companies, securities service providers and overseas regulators and individuals, shall fulfill due procedures in compliance with applicable regulations. Working papers produced in mainland China by securities companies and securities service providers in the process of undertaking businesses related to overseas offering and listing by domestic companies shall be retained in mainland China. Where such documents need to be transferred or transmitted to areas outside of mainland China, relevant approval procedures stipulated by regulations shall be followed.
As (i) our PRC Subsidiary does not contribute 50% or more of any of the our operating revenue, total profit, total assets or net assets; and (ii) the main parts of the our business activities are conducted outside mainland China, our main place(s) of business are located outside mainland China, and the majority of senior management staff in charge of its business operations and management are not PRC citizens and having their usual place(s) of residence located outside mainland China, we believe that our listing on the Nasdaq is not subject to the CSRC review. Since these statements and regulatory actions by the PRC government are newly published and the relevant provisions in this regulatory regime are evolving, their interpretation, application and enforcement are subject to the relevant laws and regulations then in effect, and we cannot assure that the CSRC would not take a view that is contrary to ours.
However, if any of our subsidiaries in Hong Kong or the PRC Subsidiary becomes subject to the CSRC review, we cannot assure you that we 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, we may become subject to fines and other penalties that may have a material adverse effect on our business, operations, and financial condition; may hinder our ability to offer or continue to offer Ordinary Shares to investors; and may cause the value of our Ordinary Shares to significantly decline or be worthless.
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Regulation on Foreign Exchange Control
In 1996, China published The Foreign Currency Administration Regulations, and late on amended on January 14, 1997 and August 5, 2008. This Regulation has been the major one governing the foreign exchange activities in China. Under this Regulation, the Renminbi is convertible for foreign currency account items, including the distribution of dividends, interest payments and trade and service-related foreign exchange transactions. Conversion of Renminbi into foreign currency for capital account items, such as, loans, investment in securities and repatriation of investments, however, is subject to the registration of the State Administration of Foreign Exchange (“SAFE”) or its local counterparts.
Under the Regulation and relevant rules, foreign-invested enterprises may buy, sell and remit foreign currencies at banks authorized to conduct foreign exchange transactions for settlement of currency account transactions after providing valid commercial documents and, in the case of capital account item transactions, only after registration with the SAFE and, as the case may be, other relevant PRC government authorities as required by law.
According to the Overseas Investment Regulation which was issued in 2014, capital investments directed outside of mainland China by domestic or foreign-invested enterprises are also subject to restrictions, which include registration filing with Ministry of Commerce, even though the Notice on Further Improving and Adjusting the Foreign Exchange Management Policy for Capital Account passed in February of 2014 by SAFE has made domestic enterprises much easier releasing foreign currency overseas to foreign companies, including connected companies.
The conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi will be permitted to fluctuate within a band against a basket of certain foreign currencies. The PRC subsidiaries receive a significant portion of their revenue in Renminbi, which is not a freely convertible currency. Under the current structure, our income will be primarily derived from dividend payments from our subsidiaries in China. Even though the PRC subsidiaries may remit the income from China to anywhere deemed desirable, the fluctuation of exchange rate may be a disadvantage to us if Renminbi depreciates.
On January 26, 2017, the SAFE promulgated the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control (the “SAFE Circular 3”), which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to the SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
On October 23, 2019, the SAFE promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting Cross-border Trade and Investment Facilitation (the “SAFE Circular 28”), which expressly allows foreign-invested enterprises that do not have equity investments in their approved business scope to use their capital obtained from foreign exchange settlement to make domestic equity investments as long as there is a truthful investment and such investment is in compliance with the foreign investment-related laws and regulations.
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On December 4, 2023, SAFE issued the Circular of the State Administration of Foreign Exchange on Further Deepening Reforms to Facilitate Cross-Border Trade and Investment, which stipulated that domestic equity transferors (including institutions and individuals) can directly remit to the capital project settlement account the equity transfer consideration funds paid in foreign currency by domestic entities, as well as the foreign exchange funds raised by domestic enterprises listed overseas. The funds in the capital project settlement account can be independently settled and utilized.
Regulation on Dividend Distributions
Our PRC Subsidiary is wholly foreign-owned enterprises (WOFE) under the PRC law. The principal regulations governing the distribution of dividends paid by WFOE include Corporate Law (1993) as lastly amended in December 2023 and became effective on July 1, 2024, the Foreign Investment Law and its Implementing Regulations, and the Enterprise Income Tax Law (2007) as lastly amended in 2018 and its Implementation Regulations (2007) as lastly amended in 2019.
Under these requirements, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. A PRC company is required to allocate at least 10% of their respective accumulated after-tax profits each year, if any, to fund certain capital reserve funds until the aggregate amount of these reserve funds have reached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.
On March 16, 2007, the NPC enacted the Enterprise Income Tax Law, and on December 6, 2007, the State Council issued the Implementation Regulations on the Enterprise Income Tax Law, both of which became effective on January 1, 2008. The Enterprise Income Tax Law was lately amended on December 29, 2018 and the Implementation Regulations on the Enterprise Income Tax Law was lately amended on April 23, 2019. Under this law and its implementation regulations, dividends payable by a foreign-invested enterprise in the PRC to its foreign investor who is a non-resident enterprise will be subject to a 10% (5% for Hong Kong residents) withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a lower withholding tax rate.
Restriction on Foreign Ownership
The principal regulation governing foreign ownership of businesses in the PRC is Guidance Catalogue for Industrial Structure Adjustments (2024 edition), effective as of February 1, 2024 (the “Catalogue”). The Catalogue classifies the various industries into three categories: encouraged, restricted and prohibited. Risks and uncertainties relating to PRC regulation in relation to freight forwarding, e-commerce and import and export businesses include new laws, regulations or policies that may be promulgated or announced that will regulate such businesses. If these new laws, regulations or policies are promulgated, additional licenses may be required for the operations of the PRC Subsidiary. If the operations of the PRC Subsidiary do not comply with these new regulations after they become effective, or if the PRC Subsidiary fails to obtain any licenses required under these new laws and regulations, the PRC Subsidiary could be subject to penalties and its business operations could be disrupted.
Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to their PRC Subsidiaries
China has been open to foreign direct and indirect investments. An offshore company may invest in a PRC company. Such investment is subject to the FIL. Under the FIL, foreign investments no longer need to be approved by Chinese government, but only need to register the investment with Chinese regulatory agency.
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However, Chinese government still has foreign exchange control policy. The money transfer in or out of China is still under tight control. So, shareholder loans made by offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts for regulatory purposes, which debts are subject to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, Administration Rules on the Settlement, Sale and Payment of Foreign Exchange, the Statistical Monitoring of Foreign Debt Tentative Provisions, and the Provisional Measures on Administration of Foreign Debt.
Pursuant to the Provisional Measures on Administration of Foreign Debt (the “Foreign Debt Measures”) issued by the State Development Planning Commission (revised), Ministry of Finance and SAFE in January 2003 and became effective on March 1, 2003, which was amended on July 26, 2022 and became effective on September 1, 2022, any loans provided by us to the subsidiary in mainland China in foreign currencies shall be classified as foreign debt under the Foreign Debt Measures. According to the Foreign Debt Measures, the sum of cumulative accrued amounts of medium-term to long-term foreign loans and balance amounts of short-term foreign loans taken by a foreign investment enterprise shall be limited to the difference between the total project investment amount approved by the government and the amount of registered capital. Foreign investment enterprises may take foreign loans freely within the scope of difference.
On January 12, 2017, the PBOC issued the Notice of People’s Bank of China on Matters Concerning Macro-prudential Management on All-round Cross-border Financing (the “No. 9 Notice”), which improved the policy framework of the cross-border financing. The No. 9 Notice clarifies the new calculation methods of the upper limit of the risk-weighted balance for all types of cross-border financing, in particular, the upper limit for risk-weighted balance for cross-border financing equals to the capital or the net assets multiplied by the leverage rate of cross-border financing and the macro-prudential adjustment parameters. In the case of the subsidiary in mainland China, the capital or the net assets is calculated at the net assets of each subsidiary, the leverage rate for cross-border financing for an enterprise is 2, and the macro-prudential adjustment parameter is 1 (the “All-Round Mode”). On March 11, 2020, the PBOC and SAFE promulgated the Circular of the People’s Bank of China and the State Administration of Foreign Exchange on Adjusting the Macro-prudential Regulation Parameter for Full-covered Cross-border Financing, which provides that based on the current macro economy and international balance of payments, the macro-prudential regulation parameter as set forth in the Notice 9 is updated from 1 to 1.25. On January 7, 2021, the PBOC and SAFE promulgated the Notice of PBC and SAFE on Adjusting the Macro-prudential Adjustment Parameter for Cross-border Financing of Companies, which provides that the macro-prudential regulation parameter of companies is updated from 1.25 to 1. Currently, the implementation of the foregoing methodologies in cross-border financing have not been formally determined by the PBOC and the SAFE. In the practice, according to the Q&A on Macro-prudential Regulation Parameter for Full-Covered Cross-border Financing (Phase I) (the “Q&A”) issued by the SAFE on May 27, 2017, FIEs shall submit a written filing report to the local foreign exchange bureau when they handle the foreign debt signing filing (registration) for the first time after the issuance of the Q&A, so as to clarify the cross-border financing management mode they choose during the transition period. If the All-Round Mode is selected, the latest audited net assets data shall be reported at the same time. Once the cross-border financing management mode is determined, it shall not be changed. Alternatively, if we choose to use the All-Round Mode, the amount of loans we can make to the subsidiary in mainland China as calculated according to the No. 9 Notice and the Notice of PBC and SAFE on Adjusting the Macro-prudential Adjustment Parameter for Cross-border Financing of Companies will not be more than 2 times of the net assets of such entities.
Moreover, as the debtors of cross-border financing, the subsidiary in mainland China is also required to comply with certain registration formalities for execution of foreign debt contracts with the foreign exchange bureau at the locality within fifteen working days after signing the contracts according to the Notice of State Administration of Foreign Exchange on Promulgation of the Administrative Measures on Registration of Foreign Debt which was promulgated by the SAFE in April 2013 and revised in May 2015.
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Pursuant to the Circular of the National Development and Reform Commission on Promoting the Administrative Reform of the Record-filing and Registration System for the Issuance of Foreign Debt by Enterprises promulgated on September 14, 2015 (“Circular 2044”), before the issuance of foreign loans, enterprises shall first apply to the NDRC for record-filing and registration procedures and shall report the information on the issuance to NDRC within 10 business days after completion of each issuance. The term “foreign loan” shall mean RMB-denominated or foreign currency-denominated debt instruments with a maturity of one year or more which are issued overseas by domestic enterprises and their controlled overseas enterprises or branches and for which the principal and interest are repaid as agreed, including bonds issued overseas and long and medium-term international commercial loans, and so forth. On January 5, 2023, the NDRC issued the Administrative Measures for Review and Registration of Medium- and Long-term Foreign Debt of Enterprises, or Foreign Debt Registration Measures, which came into effect on February 10, 2023, and Circular 2044 is, therefore invalid. The Foreign Debt Registration Measures not only further clarifies the scope of debt instruments, including senior debt, perpetual debt, capital debt, medium-term note, convertible bond, exchangeable bond, financial leasing, and commercial loan, but also changes the record-filing and registration system to the review and registration system. According to the Foreign Debt Registration Measures, before incurring foreign debt, an enterprise shall obtain the Certificate of Review and Registration of Enterprise Incurrence of Foreign Debt, or the Certificate of Review and Registration, and complete the review and registration formalities. Without review and registration, no foreign debt may be incurred. An enterprise shall, within ten working days after incurring each foreign debt, report the information of incurring foreign debt to the review and registration authority via the network system, including the main operating indicators of the enterprise and the information about the foreign debt incurred, among others, and report the corresponding information about the foreign debt incurred within ten working days after the expiration of Certificate of Review and Registration. The above provisions shall apply to indirect overseas incurrence of foreign debt by domestic enterprises, which means that enterprises whose main business activities are in China, issuing bonds or borrowing commercial loans overseas in the name of enterprises registered overseas, based on the equity, assets, earnings or other similar rights and interests of the domestic enterprises, are subject to these provisions. However, the NDRC has not issued any other further explanation for the implementation of the Foreign Debt Registration Measures. In practice, the NDRC’s attitude on whether foreign-invested enterprises with foreign loans with a term of more than one year need to register is still not completely unified, and it is generally determined on a case-by-case basis.
M&A Regulations
On August 8, 2006, six PRC governmental agencies jointly promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the 2006 M&A Rules, which became effective on September 8, 2006 and was amended on June 22, 2009. “Mergers and acquisitions of domestic enterprises by foreign investors” refers to: (a) a foreign investor converts a non-foreign invested enterprise (domestic company) to a foreign invested enterprise by purchasing the equity interest from the shareholder of such domestic company or the increased capital of the domestic company, or the Equity Merger and Acquisition; or (b) a foreign investor establishes a foreign invested enterprise to purchase the assets from a domestic enterprise by agreement and operates the assets therefrom; or (c) a foreign investor purchases the assets from a domestic enterprise by agreement and uses these assets to establish a foreign invested enterprise for the purpose of operation of such assets, or the Assets Merger and Acquisition.
The M&A Rules provides that mergers and acquisitions of domestic enterprises by foreign investors shall be subject to the approval of the MOFCOM or its delegates at provincial level. In the event of an Affiliated M&A, the merger and acquisition applications shall be submitted to the MOFCOM for approval. Any circumvention on the requirement including domestic re-investment of a foreign invested enterprise is not allowed.
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After the implementation of the FI Information Report Measures on January 1, 2020, where a foreign investor acquires a domestic non-foreign-invested enterprise by equity, it shall submit an initial report through the enterprise registration system when handling the change registration for the acquired enterprise instead of obtaining the approval of the MOFCOM or its delegates at provincial level. However, regarding the affiliated M&A, according to the Negative List (2024 Version), an M&A of affiliated domestic companies by domestic companies, enterprises or natural persons via the companies legally established or controlled overseas, it shall still apply to the foreign investment, overseas investment, foreign exchange administration and other relevant regulations.
The M&A Rules also require offshore special purpose vehicles formed to pursue overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals to obtain the approval of the Chinese Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on any stock exchange overseas.
In addition, pursuant to the Circular of the General Office of State Council on Establishing the Security Review System for Merger and Acquisition of Domestic Enterprises by Foreign Investors, which was issued by the General Office of the State Council on February 3, 2011 and took effect on March 3, 2011, and the Provisions of the Ministry of Commerce on the Implementation of the Safety Review System for Merger and Acquisition of Domestic Enterprises by Foreign Investors, which was issued by MOFCOM and became effective in September 2011, mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including structuring the transaction through a proxy or contractual control arrangement.
The application of the M&A Rules remains unclear. Based on the understanding on the current PRC laws, rules and regulations and the M&A Rules of our PRC legal counsel, Global Law Office, prior approval from the CSRC is not required under the M&A Rules for the listing and trading of the ADSs on NYSE because the CSRC approval requirement applies to SPVs that acquired equity interests of any PRC company that are held by PRC companies or individuals controlling such SPV and seek overseas listing, and our PRC subsidiaries were incorporated as wholly foreign-owned enterprises by means of direct investment rather than by merger or acquisition by our company of the equity interest or assets of any “domestic company” as defined under the M&A Rules, and no provision in the M&A Rules classifies the contractual arrangements between our company, our PRC subsidiaries and any of the VIEs, either by each agreement itself or taken as a whole, as a type of acquisition transaction falling under the M&A Rules. However, as there has been no official interpretation or clarification of the M&A Rules, there is uncertainty as to how this regulation will be interpreted or implemented.
Considering the uncertainties that exist with respect to the issuance of new laws, regulations or interpretation and implementing rules, the opinion of Global Law Office, summarized above, is subject to change. If the CSRC or another PRC regulatory agency subsequently determines that prior CSRC approval was required, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies.
Regulations of securities
The Securities Law of the PRC, or the PRC Securities Law, took effect on July 1, 1999, and was revised as of August 28, 2004, October 27, 2005, June 29,2013, August 31, 2014 and December 28, 2019, respectively. It was the first national securities law in the PRC, and is divided into 14 chapters and 226 articles comprehensively regulating activities in the PRC securities market, including the issue and trading of securities, takeovers by listed companies, securities exchanges, securities companies and the duties and responsibilities of the State Council’s securities regulatory authorities. Article 177 of the PRC Securities Law provides that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC, and without the consent of the securities authorities and the relevant competent authorities of the State Council, no entity or individual may provide documents or materials relating to securities business activities to overseas. Article 224 of the PRC Securities Law provides that domestic enterprises which, directly or indirectly, issue securities or list and trade their securities outside the PRC shall comply with the relevant regulations of the State Council. Currently, the issue and trading of foreign issued securities (including shares) are principally governed by the regulations and rules promulgated by the State Council and CSRC.
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The CSRC issued the CSRC Filing Rules on February 17, 2023, which are effective from March 31, 2023. According to the Trial Administrative Measures, domestic companies seeking to issue and list securities in overseas markets directly or indirectly should fulfil the filing procedures and report relevant information to the CSRC.
In addition, according to the Provisions on Strengthening the Confidentiality and Archives Administration Concerning the Overseas Securities Offering and Listing by Domestic companies jointly promulgated by the CSRC, the Ministry of Finance, the National Administration of State Secrets Protection and the National Archives Administration on February 24, 2023 and came into effect on March 31, 2023, where a domestic company provides or publicly discloses any files or materials involving state secrets or work secrets of state agencies to the relevant securities companies, securities service agencies, overseas regulatory agencies and other entities and individuals, or provides or publicly discloses any files or materials involving state secrets or work secrets of state agencies through their overseas listing entities, it shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level. Where a domestic company provides securities companies, securities service agencies, overseas regulatory authorities and other entities and individuals with accounting files or copies of accounting files, it shall perform corresponding procedures in accordance with relevant regulations of the State. The working papers formed in the Chinese mainland by securities companies and securities service agencies that provide corresponding services for the overseas issuance and listing of domestic companies shall be retained in the Chinese mainland. Where such documents need to be transferred or transmitted to outside the Chinese mainland, the approval procedure shall be carried out in accordance with the relevant regulations of the State.
Regulations Relating to Employment and Social Welfare
Regulations on Employment
The major PRC laws and regulations that govern employment relationship are the PRC Labor Law, or the Labor Law, issued by the SCNPC on July 5, 1994, effective on January 1, 1995 and revised on August 27, 2009 and December 29, 2018, the PRC Labor Contract Law, or the Labor Contract Law, promulgated by the SCNPC on June 29, 2007 and effective on January 1, 2008, and then amended on December 28, 2012 and effective on July 1, 2013, and the Implementation Rules of the Labor Contract Law of the PRC, or the Implementation Rules of the Labor Contract Law, issued by the State Council on September 18, 2008 and effective on the same day. According to the aforementioned laws and regulations, labor relationships between employers and employees must be executed in written form. The laws and regulations above impose stringent requirements on the employers in relation to entering into fixed-term employment contracts, hiring of temporary employees and dismissal of employees. As prescribed under the laws and regulations, employers shall ensure its employees have the right to rest and the right to receive wages no lower than the local minimum wages. Employers must establish a system for labor safety and sanitation that strictly abide by state standards and provide relevant education to its employees. Violations of the Labor Contract Law and the Labor Law may result in the imposition of fines and other administrative liabilities and/or incur criminal liabilities in the case of serious violations.
Regulations on Social Insurance and Housing Provident Fund
According to the Social Insurance Law of PRC, which issued by the SCNPC on October 28, 2010 and came into effect on July 1, 2011 and was latest revised on December 29, 2018, enterprises and institutions in mainland China shall provide their employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance and other welfare plans. The employer shall apply to the local social insurance agency for social insurance registration within 30 days from the date of its formation. And it shall, within 30 days from the date of employment, apply to the social insurance agency for social insurance registration for the employee. Any employer who violates the regulations above shall be ordered to make correction within a prescribed time limit; if the employer fails to rectify within the time limit, the employer and its directly liable person will be fined. Meanwhile, the Interim Regulation on the Collection and Payment of Social Insurance Premiums, issued by the State Council on January 22, 1999 and came into effect on the same day and was recently revised on March 24, 2019, prescribes the details concerning the social securities.
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Apart from the general provisions about social insurance, specific provisions on various types of insurance are set out in the Regulation on Work-Related Injury Insurance, issued by the State Council on April 27, 2003, came into effect on January 1, 2004 and revised on December 20, 2010, the Regulations on Unemployment Insurance, issued by the State Council on January 22, 1999 and came into effect on the same day, the Trial Measures on Employee Maternity Insurance of Enterprises, issued by the Ministry of Labor on December 14, 1994 and came into effect on January 1, 1995. Enterprises subject to these regulations shall provide their employees with the corresponding insurance.
According to the Regulation Concerning the Administration of Housing Provident Fund, implemented since April 3, 1999 and latest amended on March 24, 2019, any newly established entity shall make deposit registration at the housing accumulation fund management center within 30 days as of its establishment. After that, the entity shall open a housing accumulation fund account for its employees in an entrusted bank. Within 30 days as of the date an employee is recruited, the entity shall make deposit registration at the housing accumulation fund management center and seal up the employee’s housing accumulation fund account in the bank mentioned above within 30 days from termination of the employment relationship.
Any entity that fails to make deposit registration of the housing accumulation fund or fails to open a housing accumulation fund account for its employees shall be ordered to complete the relevant procedures within a prescribed time limit. Any entity failing to complete the relevant procedures within the time limit will be fined RMB10,000 to RMB50,000. Any entity that fails to make deposits to the housing provident fund within the time limit or has any shortfall in payment of housing provident fund will be ordered to make the payment or make up the shortfall within the prescribed time limit, otherwise, the housing provident management center is entitled to apply for compulsory enforcement with the People’s Court.
Regulations Related to Import and Export Trade
Customs Law
Pursuant to the PRC Customs Law, which was promulgated by the Standing Committee of the National People’s Congress on January 22, 1987, amended on July 8, 2000, June 29, 2013, December 28, 2013, November 7, 2016, November 4, 2017, and April 29, 2021 and effective on April 29, 2021, unless otherwise stipulated, the consignee or consignor of import and export goods may take import and export goods through Customs declaration procedures and pay duties themselves, and Customs clearing enterprises which are authorized by the consignee or consignor of import and export goods and have been granted registration by Customs may also take import and export goods through Customs declaration procedures and pay duties. Where a consignee or consignor of import or export goods or a Customs clearing enterprise handles Customs declaration procedures, they shall be subject to registration by Customs in accordance with law. Customs clearing personnel shall obtain the occupational qualifications for Customs clearances in accordance with law. Where an enterprise has not been registered by Customs in accordance with law, and where personnel have not obtained their professional qualifications for Customs clearances in accordance with law, they must not engage in Customs declarations.
Import and Export Commodity Inspection Law
Pursuant to the PRC Import and Export Commodity Inspection Law, which was promulgated by the Standing Committee of the National People’s Congress on February 21, 1989, amended on April 28, 2002, June 29, 2013, April 27, 2018, December 29, 2018 and April 29, 2021 and effective on April 29, 2021, and the Implementing Regulation for the PRC Import and Export Commodity Inspection Law, which was promulgated by the State Council on August 31, 2005, amended on February 6, 2016, March 1, 2017, March 2, 2019 and March 29, 2022 and effective on May 1, 2022, the General Administration of Customs of China is in charge of the inspection of import and export commodities nationwide, the formulation and adjustment of the catalogue of import and export commodities that must be inspected, and the announcement and implementation of the catalogue. The import and export commodities listed in the catalogue must be inspected, otherwise the related bodies may be confiscated of their illegal income and subjected to a fine ranging from 5% to 20% of the value of the goods, where the case constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.
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Regulations Related to Product Liability
Pursuant to the PRC Product Quality Law, which was promulgated on February 22, 1993 and amended on July 8, 2000, August 27, 2009, and December 29, 2018, a manufacturer is prohibited from producing or selling products that do not meet applicable standards and requirements for safeguarding human health and ensuring human and property safety. Products must be free from unreasonable dangers threatening human and property safety. Where a defective product causes personal injury or property damage, the aggrieved party may make a claim for compensation from the manufacturer or the seller of the product. Manufacturers and sellers of non-compliant products may be ordered to cease the production or sale of the products and could be subject to confiscation of the products and fines. Earnings from sales in violation of such standards or requirements may also be confiscated, and in severe cases, an offender’s business license may be revoked.
Regulations Related to Environmental Protection and Work Safety
Environmental Protection
Pursuant to the PRC Environmental Protection Law promulgated by the Standing Committee of the National People’s Congress on December 26, 1989, amended on April 24, 2014, and effective on January 1, 2015, any entity which discharges or will discharge pollutants during the course of operations or other activities must implement effective environmental protection safeguards and procedures to control and properly treat waste gas, waste water, waste residue, dust, malodorous gases, radioactive substances, noise, vibrations, electromagnetic radiation, and other hazards produced during such activities.
Environmental protection authorities impose various administrative penalties on persons or enterprises in violation of the Environmental Protection Law. Such penalties include warnings, fines, orders to rectify within a prescribed period, orders to cease construction, orders to restrict or suspend production, orders to make recovery, orders to disclose relevant information or make an announcement, imposition of administrative action against relevant responsible persons, and orders to shut down enterprises. Any person or entity that pollutes the environment resulting in damage could also be held liable under the PRC Tort Law. In addition, environmental organizations may also bring lawsuits against any entity that discharges pollutants detrimental to the public welfare.
Work Safety
Under relevant construction safety laws and regulations, including the PRC Work Safety Law, which was promulgated by the Standing Committee of the National People’s Congress on June 29, 2002, amended on August 31, 2014 and June 10, 2021, and effective on September 1, 2021, production and operating business entities must establish objectives and measures for work safety and improve the working environment and conditions for workers in a planned and systematic way. A work safety protection scheme must also be set up to implement the work safety job responsibility system. In addition, production and operating business entities must arrange work safety training and provide their employees with protective equipment that meets the national or industrial standards.
Regulations Relating to Taxation
Enterprise income tax
According to the EIT Law, which was promulgated by the SCNPC on March 16, 2007 and last amended and effective on December 29, 2018, and the Enterprise Income Tax Implementation Regulations of the PRC (the “EITIR”), which was promulgated by the State Council on December 6, 2007 and last amended and effective on April 23, 2019, the enterprise income tax of both domestic and foreign-invested enterprises is unified at 25% with certain exceptions. According to the EIT Law, enterprises are classified as “resident enterprises” and “non-resident enterprises.” Pursuant to the EIT Law and the EITIR, PRC resident enterprises typically pay an enterprise income tax at the rate of 25%, while non-PRC resident enterprises without any branches in the PRC should pay an enterprise income tax in connection with their income from the PRC at the tax rate of 10%. Enterprises established under the laws of foreign countries or regions whose “de facto management bodies” (i.e., establishments that carry out substantial and overall management and control over production and operations, personnel, accounting and properties) are located in the PRC are considered as PRC tax resident enterprises, and will generally be subject to enterprise income tax at the rate of 25% of their global income.
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Pursuant to the EIT Law, enterprises qualified as “High and New Technology Enterprises” are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory tax rate. The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status, which certificate is valid for a period of three years and renewable.
Value-added tax
The Value-Added Tax Law of the People’s Republic of China was adopted by the 13th meeting of the 14th National People’s Congress Standing Committee on December 2024, came into effect on January 1, 2026, and simultaneously repealed the Provisional Regulations (the “Value-Added Tax Law”). On December 25, 2025, the State Council promulgated the Implementation Regulations of the Value-Added Tax Law of the People’s Republic of China, which came into effect on January 1, 2026 (the “Implementation Regulations”). In accordance with the Value-Added Tax Law and the Implementation Regulations, entities and individuals selling goods, services , intangible assets, real estate and imported goods in the PRC are VAT taxpayers and are required to pay VAT. Taxpayers selling services and intangible assets are subject to a tax rate of 6%, with exceptions for particular circumstances. Taxpayers selling goods, offering processing and repair services or services for leasing of tangible movable property, or importing goods are subject to a tax rate of 13%, with exceptions for particular circumstances. Taxpayers selling transportation, postal, basic telecommunications, construction, and real estate leasing services, selling real estate, transferring land use rights or selling or importing goods such as agricultural products, tap water, books, and feed, are subject to a tax rate of 9%, with exceptions for particular circumstances.
Dividend Withholding tax
According to the EIT Law and the EITIR, dividends paid by foreign-invested companies to their foreign investors that are non-resident enterprises as defined under the law are subject to withholding tax at a rate of 10%, unless otherwise provided in the relevant tax agreements entered into with the central government of the PRC. Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income (the “Double Tax Avoidance Arrangement”) promulgated on August 21, 2006, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement, the withholding tax rate on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% from 10% applicable under the EIT Law and the EITIR. However, based on the Notice of the State Taxation Administration on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties promulgated and took into effect on February 20, 2009 by the State Taxation Administration (the “STA”), if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. Based on the Notice of the State Taxation Administration on the Recognition of Beneficial Owners in Tax Treaties, which was promulgated by STA on February 3, 2018 and came into effect on April 1, 2018, a comprehensive analysis will be used to determine beneficial ownership based on the actual situation of a specific case combined with certain principles, and if an applicant was obliged to pay more than 50% of its income to a third country (region) resident within 12 months of the receipt of the income, or the business activities undertaken by an applicant did not constitute substantive business activities including substantive manufacturing, distribution, management and other activities, the applicant was unlikely to be recognized as a beneficial owner to enjoy tax treaty benefits.
Regulations on Intellectual Property
Trademarks
Trademarks are protected by the PRC Trademark Law adopted in 1982 and lastly amended in 2019, as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council in 2002 and amended in 2014. The Trademark Office of China National Intellectual Property Administration handles trademark registrations. Trademarks can be registered for a term of ten years and can be repeatedly extended for another ten-year term at the time of expiry. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. As of the date of this annual report, the PRC subsidiaries have registered 16 trademarks, all of which are fully owned and in use by us. According to Chinese Trademark Law, if anyone has a dispute over the officially registered trademarks, he can file a petition to the review board of the Trademark Office, requesting a comprehensive review that may result in revoking the registered trademarks. As of the date of this annual report, the PRC subsidiaries have not received any such kind of petition.
Patents
According to the PRC Patent Law promulgated by the SCNPC on March 12, 1984 and last amended on October 17, 2020 with effect from June 1, 2021, and its latest Implementation Rules promulgated by the State Council on December 11, 2023 and took into effect on January 20, 2024, the National Intellectual Property Administration is responsible for administering patents in the PRC. Inventions, utility models, and designs with the features of novelty, inventiveness and practical applicability, are three kinds of patent defined and protected under China’s Patent Law. The State Intellectual Property Office is responsible for examining and approving patent applications. Once the application is approved, the applicants can have their patent under Chinese legal protection for a long term since its application date, which is 20 years for invention and ten years for utility models and designs.
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Domain Names
Internet domain name registration and related matters are primarily regulated by the Measures on Administration of Internet Domain Names, which were promulgated by the MIIT on August 24, 2017 and took effect on November 1, 2017, and the Detailed Rules for the Implementation of National Top-level Domain Name Registration, which were promulgated by China Internet Network Information Center and took effect on June 18, 2019. Domain name owners are required to register their domain names and the MIIT is in charge of the administration of PRC internet domain names. The domain name services follow a “first come, first file” principle. The applicants will become the holders of such domain names upon the completion of the registration procedures.
Copyrights
Pursuant to the PRC Copyright Law promulgated by the SCNPC on September 7, 1990 and last amended on November 11, 2020 (the latest revision became effective from June 1, 2021) and the Implementing Regulations of the PRC Copyright Law promulgated by the State Council on August 2, 2002, last amended on January 30, 2013 (the latest revision became effective from March 1, 2013), PRC nationals, legal persons, and other organizations may copyright their works, whether published or not, which works include, among others, works of literature, art, natural science, social science, engineering technology and computer software. Pursuant to the Regulations on the Protection of Computer Software promulgated by the State Council in December 2001, and most recently amended in January 2013, and the Rules for the Registration of Computer Software Copyright, which was promulgated by the China Copyright Office and came into effect in February 2002, anyone who publishes, revises or translates computer software without obtaining the prior approval of the computer software copyright holders shall bear civil liability to the copyright owner as a consequence of harming the copyright. The corporate computer software copyright is valid for a term of 50 years, i.e., until December 31st of the 50th year, starting from the date as of first publication. Computer software copyright owners shall register at the registration institution authorized by the PRC Copyright Office to obtain the computer software copyright registration certificates as primary evidence of the computer software copyright being registered.
Regulations Relating to Anti-Monopoly, Anti-Corruption and Anti-Bribery
On August 30, 2007, the Anti-Monopoly Law, which was promulgated by the SCNPC, and amended on June 24, 2022 which amendment became effective on August 1, 2022, stipulates the regulation of market monopoly. The Anti-Monopoly Law prohibits the conclusion of a monopoly agreement between business operators, the abuse of a dominant market position by a business operator and concentration of undertakings which has or may have an effect of excluding or limiting market competition. The newly revised Anti-Monopoly Law proposes to increase the fines on business operators liable for illegal concentration to “no more than ten percent of the preceding year’s sales revenue of the business operators if the concentration of business operators has or may have an effect of excluding or limiting competition; or a fine of up to RMB5 million if the concentration of business operators does not have an effect of excluding or limiting competition.” Furthermore, the relevant authority may require business operators to declare where there is evidence that the resulting concentration has or may have the effect of eliminating or restricting competition, even if the level of such concentration does not reach the filing threshold. If the business operators fail to make a declaration, the relevant authority will conduct an investigation according to law.
Pursuant to the Anti-Unfair Competition Law of the PRC promulgated by the SCNPC on September 1, 1993 and last amended on April 23, 2019, a business operator shall not resort to bribery to seek a transaction opportunity or competitive advantage by offering money or goods or by any other means, to (i) any employee of the counterparty in a transaction, (ii) any entity or individual entrusted by the counterparty in a transaction to handle relevant affairs, or (iii) any other entity or individual that takes advantage of powers or influence to influence a transaction. A business operator may expressly offer a discount to the counterparty or pay commissions to the intermediaries of a transaction in the course of transaction activities, which shall be properly recorded at both parties’ accounting books. Any commercial bribery committed by an employee of a given business operator will be deemed as conduct of such business operator unless evidence shows that such act is not related to such business operator’s efforts in seeking a transaction opportunity or competitive advantage.
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Regulations on E-commerce
The E-Commerce Law of the PRC, which was promulgated on August 31, 2018 and became effective on January 1, 2019, set out detailed obligations for operators of e-commerce businesses and e-commerce platforms and guidelines in terms of contract performance and dispute resolutions in relation to e-commerce. Pursuant to this law, e-commerce operators shall, for example: (i) present unbiased search results and general product recommendations that are not based on a potential customer’s particular purchase history and personal profile in addition to tailored product recommendations and services; and (ii) not cite any provision of a form contract or any other means to invalidate an agreement with a customer after it has received payment from that customer. In addition, e-commerce platform operators shall: (i) report information such as identity and tax information of third-party vendors to relevant authorities; (ii) make platform service agreement or web-links thereto prominently displayed and accessible on its homepage; (iii) be jointly liable in the event that the platform operator fails to take necessary measures when it has or should have the knowledge that any vendor using its platform has infringed consumers’ rights; and (iv) be jointly liable for any damage or threat to a customer’s personal health and wellbeing caused by the products sold on its platform if a platform operator fails to examine the qualifications of its vendor using its platform or fails to protect its customers’ safety in respect of goods or services that may affect a customer’s health. We are subject to this new law as both an e-commerce business operator and e-commerce platform operator. Failure to comply with this law could subject us to civil liabilities or administrative penalties.
The PRC Consumer Protection Law, as amended on October 25, 2013, sets out the obligations of business operators and the rights and interests of consumers. Pursuant to this law, business operators must guarantee that the commodities they sell satisfy the requirements for personal or property safety, provide consumers with authentic information about the commodities, and guarantee the quality, function, usage and term of the validity of commodities. The amendment in 2013 further strengthens the protection of consumers and imposes more stringent requirements and obligations on business operators, especially on the businesses operating through the internet. For example, consumers are entitled to return the goods (except for certain specified goods) within seven days upon receipt without any reasons when they purchase the goods from business operators via the internet. When a consumer purchases products (including cosmetics and food) or accepts services via an online trading platform and his/her interests are prejudiced, if the online trading platform provider fails to provide the name, address and valid contact information of the seller, the manufacturer or the service provider, the consumer is entitled to demand compensation from the online trading platform provider. Failure to comply with this law may subject business operators to civil liabilities such as refunding purchase prices, replacement of commodities, repairing or ceasing damages, compensation, and restoring the reputation, and could subject business operators or the responsible individuals to criminal penalties when personal damages are involved or if the circumstances are severe.
On January 26, 2014, SAIC issued the Administrative Measures for Online Trading, or the Online Trading Measures, which replaced its previous Interim Measures for the Administration of Online Commodities Transaction and Relevant Services. The Online Trading Measures aim to regulate online commodity trading and relevant services, setting standards for online commodity trading operators and relevant services providers. In order to further regulate online transaction activities, on March 15, 2021, SAMR issued the Online Trading Supervision and Management Measures, or the Online Trading Supervision Measures, which became effective on May 1, 2021 and replace the Online Trading Measures. The Online Trading Supervision Measures shall apply to the business activities of selling commodities or providing services in social networking, internet live streaming or other information network activities and it further regulates the operations of online trading.
On April 14, 2022, the SAMR issued the Provisions on Clearly Marking Prices and Prohibiting Price Fraud to regulate the clear marking of prices (referring to such activities of business operators as publicly marking prices and other information in accordance with the law in the process of selling or purchasing goods or providing services), prevent and stop price fraud (referring to such activities of business operators as luring consumers or other business operators into trading with them by false or misleading pricing means), which became effective on July 1, 2022.
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On January 6, 2017, SAIC issued the Interim Measures for Return of Online Purchases within seven Days without Reason, or the Online Return Measures, which was amended on October 23, 2020 and became effective on the same date. According to these measures, any consumer goods purchased online could be returned without any reason, if in good condition and are returned within seven days of receipt with signature from the consumers, except for customized products, fresh or live products, perishable goods, digital products, newspapers, periodicals and the goods confirmed to be exempted from the Online Return Measures by consumers at the time of purchase. On November 21, 2019, the SAMR issued the Interim Provisions on Administration of Consumer Product Recalls, which became effective on January 1, 2020. The provisions clarify the recall obligations and responsibilities of both the producers of consumer goods and the operators selling, leasing, or repairing consumer goods. On March 1, 2022, the Supreme People’s Court released the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Cases of Disputes over Online Consumption (I), effective on March 15, 2022, which stipulated, among other things, the validity of relevant standard clauses provided by e-commerce business operators, recognition of parties to assume liabilities and civil liabilities in live streaming marketing.
The Food Safety Law of the PRC, promulgated on February 28, 2009 and effective on June 1, 2009, was amended on April 29, 2021 with effect from the same date. This amendment provides that the sale of pre-packaged food only is not subject to a permit but needs to file a record with the competent authority. On October 11, 2019, the State Council revised and adopted the Implementing Regulation for the Food Safety Law of the PRC, which became effective on December 1, 2019. The regulation underscores tougher supervision, requiring governments above county levels to establish a uniform and authoritative supervision mechanism to enhance supervisory capabilities. The regulation clarifies the primary responsibilities of producers and business operators in food safety, specifies the duties of major corporate leaders, regulates the storage and transportation of food products, bans false promotion of food products, and improves the management of special foods.
On March 31, 2023, the National Medical Products Administration promulgated the Measures for Supervision and Administration of Online Operation of Cosmetics, which became effective on September 1, 2023, to regulate the online operation of cosmetics. These measures impose compliance requirements for E-commerce platform operators of cosmetics, including, among other things, (i) requiring the cosmetics operators who apply for entering the platform to submit the identity and other true information for verification and registration, (ii) setting up a management body for the quality and safety of cosmetics or being staffed with full-time or part-time quality and safety management personnel, (iii) establishing a routine examination system for the cosmetics operators on the platform, (iv) conducting an examination when a cosmetics operator on the platform enter the platform to release the information of cosmetics, and (v) regularly organizing an examination of the daily operation activities of a cosmetics operator on the platform in light of the conditions of product risks.
Regulations on Privacy Protection
The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these rights. In recent years, PRC government authorities have enacted legislation on internet use to protect personal information from any unauthorized disclosure.
On July 16, 2013, MIIT promulgated the Provisions on Protection of Personal Information of Telecommunication and Internet Users, which became effective in September 2013. According to which, telecommunication business operators and ICP operators are responsible for the security of the personal information of users they collect or use in the course of their provision of services. Without obtaining the consent from the users, telecommunication business operators and ICP operators may not collect or use the users’ personal information. The personal information collected or used in the course of provision of services by the telecommunication business operators or ICP operators must be kept in strict confidence, and may not be divulged, tampered with or damaged, and may not be sold or illegally provided to others. The ICP operators are required to take certain measures to prevent any divulgence of, damage to, tampering with or loss of users’ personal information.
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On January 23, 2019, four relevant government authorities jointly issued the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, pursuant to which, app operators should collect and use personal information in compliance with the Cyber Security Law and should be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of Apps Infringing upon User’s Personal Rights and Interests, which was issued by MIIT on October 31, 2019.
On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods of Identifying Illegal Acts of Apps to Collect and Use Personal Information. This regulation further illustrates certain commonly-seen illegal practices of apps operators in terms of personal information protection, including “failure to publicize rules for collecting and using personal information”, “failure to expressly state the purpose, manner and scope of collecting and using personal information”, “collection and use of personal information without consent of users of such App”, “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity”, “provision of personal information to others without users’ consent”, “failure to provide the function of deleting or correcting personal information as required by laws” and “failure to publish information such as methods for complaints and reporting”.
On May 28, 2020, the National People’s Congress issued the Civil Code of the People’s Republic of China (Civil Code), which came into effect in on January 1, 2021, the Civil Code provides a natural person shall have the right of privacy and the personal information of a natural person shall be protected in accordance with law. Information processors shall not divulge or tamper with the personal information collected or stored by them and shall not illegally provide any natural person’s personal information to others without the consent of such natural person.
On March 12, 2021, the CAC and three other authorities jointly issued the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet Applications. The Rules specifies the scope of necessary personal information to be collected each for a variety of common mobile internet applications, such as maps and navigation apps, online ride-hailing apps, instant messaging apps, online community apps. Operators of such apps shall not refuse to provide basic services to users on the ground of users’ refusal to provide their personal non-essential information.
On August 20, 2021, the Standing Committee of the National People’s Congress adopted the Personal Information Protection Law which took effect on November 1, 2021. The Personal Information Protection Law requires, among others, that (i) the processing of personal information should have a clear and reasonable purpose which should be directly related to the processing purpose, in a method that has the least impact on personal rights and interests, and (ii) the collection of personal information should be limited to the minimum scope necessary to achieve the processing purpose to avoid the excessive collection of personal information. Different types of personal information and personal information processing will be subject to various rules on consent, transfer, and security. Entities handling personal information shall bear responsibilities for their personal information handling activities, and adopt necessary measures to safeguard the security of the personal information they handle. The entities failing to comply could be ordered to correct, or suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties.
On December 31, 2021, the CAC together with other regulatory authorities published Administrative Provisions on Algorithm Recommendation for Internet Information Services, effective on March 1, 2022 which provides, among others, that algorithm recommendation service providers shall (i) establish and improve the management systems and technical measures for algorithm mechanism and principle review, scientific and technological ethics review, user registration, information release review, data security and personal information protection, anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident emergency response, formulate and disclose the relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service; (ii) regularly review, evaluate and verify the principle, models, data and application results of algorithm mechanisms, (iii) strengthen information security management, establish and improve a feature database for identifying illegal and bad information, and improve entry standards, rules and procedures; (iv) strengthen the management of user models and user labels, and improve the rules on points of interest recorded into user models and user label management, and shall not record illegal and harmful information keywords into the points of interest of users or use them as user labels to push information.
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Regulations on Information Security
The National People’s Congress has enacted legislation that prohibits use of the internet that breaches the public security, disseminates socially destabilizing content or leaks state secrets. Breach of public security includes breach of national security and infringement on legal rights and interests of the state, society or citizens. Socially destabilizing content includes any content that incites defiance or violations of PRC laws or regulations or subversion of the PRC government or its political system, spreads socially disruptive rumors or involves cult activities, superstition, obscenities, pornography, gambling or violence. State secrets are defined broadly to include information concerning PRC national defense, state affairs and other matters as determined by the PRC authorities.
On November 23, 2005, the Ministry of Public Security promulgated The Provisions on Technological Measures for Internet Security Protection, which became effective in March 2006, require all ICP operators to keep records of certain information about its users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days and submit the above information as required by laws and regulations. On December 18, 2012, the PRC National People’s Congress promulgated The Decision on Strengthening Network Information Protection, or the Network Information Protection Decision, which states that ICP operators must request identity information from users when ICP operators provide information publication services to the users. If ICP operators come across prohibited information, they must immediately cease the transmission of such information, delete the information, keep relevant records, and report to relevant government authorities.
For the purpose to strengthen the safety management of Internet information services capable of creating public opinions or social mobilization and the relevant new technologies and new applications, regulate Internet information service activities, and safeguard national security, social order and public interests, on November 15, 2018, the CAC promulgated the Provisions on the Safety Assessment for Internet Information Services Capable of Creating Public Opinions or Social Mobilization, which took effect on November 30, 2018.
For the further purposes of regulating data processing activities, safeguarding data security, promoting data development and utilization, protecting the lawful rights and interests of individuals and organizations, and maintaining national sovereignty, security, and development interests, on June 10, 2021, the Standing Committee of the PRC National People’s Congress promulgated the Data Security Law of the People’s Republic of China, or the Data Security Law, which took effect on September 1, 2021. The Data Security Law requires data processing, which includes the collection, storage, use, processing, transmission, provision, publication of data, to be conducted in a legitimate and proper manner. The Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it may cause to national security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with, destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data is required to designate the personnel and the management body responsible for data security, carry out risk assessments of its data processing activities and file the risk assessment reports with the competent authorities. State core data, i.e. data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall be subject to stricter management system. Moreover, the Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. In addition, the Data Security Law also provides that any organization or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement body with any data without the approval of the competent PRC governmental authorities. As the Data Security Law has taken into effect on September 1, 2021, we may be required to make further adjustments to our business practices to comply with this law, as well as any adjustments that may be required by the ultimate Personal Information Protection Law.
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On July 30, 2021, the State Council issued the Regulations on Protection of Critical Information Infrastructure, or the Regulations. Pursuant to the Regulations, critical information infrastructure shall mean the important network facilities or information systems of key industries or fields such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, and important network facilities or information systems which may endanger national security, people’s livelihood and public interest once there occur damage, malfunctioning or data leakage to them. The Regulations provide that no individual or organization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures, or endanger the security of any critical information infrastructures. The Regulations also require that critical information infrastructure operators shall establish a cybersecurity protection system and accountability system, and that the main responsible person of a critical information infrastructure operator shall take full responsibility for the security protection of the critical information infrastructures operated by it. In addition, relevant administration departments of each important industry and sector shall be responsible for formulating the rule of critical information infrastructure determination applicable to their respective industry or sector, and determine the critical information infrastructure operators in their industry or sector.
On July 7, 2022, the CAC issued the Measures for Security Assessment of Cross-border Data Transfer. According to these measures, for certain outbound data transfer circumstances, the data processor shall apply to the national cyberspace administration authority for the security assessment via the local provincial-level cyberspace administration authority. The security assessment requirement also applies to any transfer of important data outside of China.
On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-Border Data Flows (the “Cross-Border Data Flows Measures”), effective on the date of promulgation. The Cross-Border Data Flows Measures provide several exemptions from undergoing data security assessment, obtaining personal information protection certification or entering into standard contract for outbound transfer of personal information for businesses. These exemptions include, among others, the scenario where a data processor, other than a critical information infrastructure operator, has cumulatively transferred overseas personal information, excluding sensitive personal information, of fewer than 100,000 individuals since January 1, 2024. A data processor, other than a critical information infrastructure operator, shall enter into a standard contract with overseas recipients for the cross-border transfer of personal information or obtain certification for personal information protection if since January 1, 2024, the data processor has cumulatively transferred to overseas recipients (1) personal information of more than 100,000 but less than 1,000,000 individuals, excluding sensitive personal information, or (2) sensitive personal information of less than 10,000 individuals. The Cross-Border Data Flows Measures also explicitly state that data processors are not required to conduct data security assessment for cross-border transfer of important data if the data has not been notified or published as important data by relevant departments or regions.
In addition, the State Secrecy Bureau has issued provisions authorizing the blocking of access to any website it deems to be leaking state secrets or failing to comply with the relevant legislation regarding the protection of state secrets during online information distribution. Specifically, internet companies in the PRC with bulletin boards, chat rooms or similar services must apply for specific approval prior to operating such services.
On December 8, 2022, the MIIT published the Data Security Administration Measures in Industry and Information Technology (Interim), or the Industry and Information Technology Measures, which became effect on January 1,2023. The Industry and Information Technology Measures requires that industrial and telecom data processors shall manage the industrial and telecom data by three levels according to relevant regulations and shall apply certain administrative rules corresponding to its level during collecting, storing, using, processing, transferring, providing and publicizing such data.
On April 15, 2024, the Ministry of Finance and CAC promulgated Circular on Issuing the Interim Measures for Data Security Management of Accounting Firms, effective on October 1,2024. The relevant provisions are made for data security in the work of domestic accounting firms that provide audit services to domestic enterprises for overseas listings and other specific business scopes, including requiring accounting firms to assume the primary responsibility for data security of their firms and fulfill the obligation of safeguarding data security; accounting firms shall set up and activate the access log recording functions for the information system, database, network equipment and network security equipment related to its audit services; accounting firms shall specify the operating procedures for data transmission. During the transmission of core data and important data, encryption technology shall be employed to protect the security of transmission; Audit working papers shall be stored within the territory of China pursuant to laws, administrative regulations, and relevant provisions of the State; accounting firms shall establish a data backup system accounting firms shall not incorporate clauses in the engagement letter or similar contracts that involve its provision of domestic project information and data to overseas regulatory bodies.
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On September 24, 2024, the Regulations on Network Data Security Management was promulgated by the State Council and came into effect on January 1, 2025. The Cyber Data Security Regulations reiterate the general regulations for data processing activities and rules of personal information protection, important data security protection, network data cross-border transfer management, and internet platform service providers’ obligations. The Cyber Data Security Regulations do not include the content related to cybersecurity review standards for listing abroad and in Hong Kong in the Administration Governing the Cyber Data Security (Draft for Comments), published on November 14, 2021.
Regulations on Network Security
On November 7, 2016, the Standing Committee of the National People’s Congress of China promulgated the Network Security Law of the People’s Republic of China, or the Network Security Law or the Cybersecurity Law, which became effective on June 1, 2017 and was subsequently amended, with the revised version adopted on October 28, 2025 and effective on January 1, 2026. The Network Security Law governs the construction, operation, maintenance and use of networks as well as the supervision and administration of network security within China. As a network operator and a provider of network products and services, we are required to take measures to assure the security of network operations. For example, we are required to (a) protect our networks from disturbance, damage or unauthorized access, and to prevent our network data from being divulged, stolen or tampered with; (b) refrain from setting up malicious programs and, in the event of identifying security defects, loopholes or other risks in our network products or services, to promptly take remedial measures, notify users and report to competent authorities; (c) formulate emergency plans for network security incidents and combat any system loopholes, computer virus, network attack, network intrusion and any other security risks in a timely manner; and (d) refrain from engaging in activities that endanger network security. In addition, we are required to take measures to ensure network security. For example, we are required to (a) keep user information strictly confidential and establish and improve user information protection system; (b) collect and use user information only if it is legal, necessary and just to do so, and only with relevant users’ consents; and (c) refrain from divulging, tampering with or damaging the user personal information that we have collected, or providing such personal information to third parties without the relevant users’ consents. Failure to comply with the Network Security Law may result in penalties, including warnings, order compelling modification of existing operations or imposition of fines, or even criminal liabilities.
On August 9, 2017, the MIIT issued the Measures for Monitoring and Handling Threat to Network Security of the Public Internet, or the Monitoring Measures which became effective from January 1, 2018. Under the Monitoring Measures, the threat to network security of the public internet refers to any network resource, malicious program, hidden security danger or security accident that exists or is spread on the public internet and is likely to do or has done harm to the public, including the Trojan virus, worm, bot process and malicious mobile code. The Monitoring Measures requires the basic telecommunications enterprises, internet-based enterprises, domain name registries and registrars, etc. to provide technical support and assistance to competent telecommunications authorities when they are inquiring into owners of IP addresses, domain name registration information, etc. Failure to comply with such requirements may result in penalties, including warnings and imposition of fines.
On December 28, 2018, the SAMR and National Information Security Standardization Technical Committee jointly promulgated the Information Security Technology—Testing and Evaluation Process Guide for Classified Protection of Cybersecurity (GB/T 28449-2018), being effective from July 1, 2019. GB/T 28449-2018 set out the testing and evaluation process for three types of risks, which are risks affecting the normal operation of the system, risks of sensitive information disclosure and risks of trojans implants.
On December 28, 2021, twelve regulatory authorities jointly released the Cybersecurity Review Measures. The Cybersecurity Review Measures provides that: (i) network platform operators that are engaged in data processing activities which have or may have an implication on national security shall undergo a cybersecurity review; (ii) the CSRC is one of the regulatory authorities for purposes of jointly establishing the state cybersecurity review mechanism; (iii) network platform operators that master personal information of more than one million users and seek to list abroad shall file for a cybersecurity review with the Cybersecurity Review Office; and (iv) the risks of core data, material data or large amounts of personal information being stolen, leaked, destroyed, damaged, illegally used or transmitted to overseas parties, and the risks of critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or used maliciously shall be collectively taken into consideration during the Cybersecurity review process. The Cybersecurity Review Measures are relatively new and remain unclear on how it will be interpreted and implemented by the relevant PRC governmental authorities, it remains uncertain how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals for our offshore offerings. However, as of the date of this annual report, we have not received any formal notice from any cybersecurity regulator that we should apply for a cybersecurity review.
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On October 25, 2022, the MIIT issued the Measures for the Administration of Recordation of Network Product Security Vulnerability Collection Platforms, or the Provisions. The provision prescribed that the recordation of vulnerability collection platforms shall be conducted through the NVDB of the MIIT by online recordation. The organizations or individuals that are to establish vulnerability collection platforms shall faithfully enter the recordation and registration information on the network product security vulnerability collection platforms through the NVDB of the MIIT. Such information shall mainly include: (i) names of vulnerability collection platforms, homepage URL, and Internet content provider (ICP) licenses or recordation numbers, and relevant URLs, official accounts on social networking software and other Internet channels for the release of vulnerability information; (ii) names and certificate numbers of sponsoring entities or individuals, and names and contact information of the principal persons in charge and contact persons of vulnerability collection platforms; (iii) scope and methods of vulnerability collection, rules for vulnerability verification and assessment, rules for instructing relevant responsible parties to fix vulnerabilities, rules for publishing vulnerabilities, rules for verifying registered users’ identities, and rules for classified and hierarchical management, among others; (iv) relevant materials on the recordation of hierarchical cybersecurity protection obtained through the Communication Cybersecurity Protection Management System of the MIIT; (v) information on implementation of platform management, among others, in accordance with relevant national standards and industrial standards; and (vi) other information required to be explained, which is required to be submitted by the competent authorities.
Regulations Related to Our Business Operations in Australia and New Zealand
Our business operation is also subject to many laws and regulation in Australia and New Zealand, including those related to privacy, data protection, import and export of goods, aviation security, intellectual property, consumer protection, health and safety, employment and labor, competition, and taxation. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could harm our business.
Aviation Security Law in Australia
Apart from Hong Kong, Australia is also a signatory state of CICA. The Australian Government regulates the security of the Australian aviation environment through the Aviation Transport Security Act 2004 (ATSA) and the Aviation Transport Security Regulations 2005 (ATSR). The purpose of the ATSA is to establish a regulatory framework to safeguard against unlawful interference with civil aviation and maintain and improve aviation security. This is done in accordance with international standards and practices set out in Annex 17 of the CICA.
The Cyber and Infrastructure Security Centre is responsible for administering the ATSA and ATSR, while aviation industry participants, such as airport and aircraft operators, are responsible for delivering security on a day-to-day basis.
Aviation Security Law in New Zealand
New Zealand is also a signatory state of the CICA. The Civil Aviation Act 1990 governs New Zealand’s civil aviation system and sets the overall framework for aviation safety, security and economic regulation. The Airport Authorities Act 1966 gives airport authorities a range of functions and powers to establish and operate airports. On April 5, 2023, the Civil Aviation Bill received Royal assent and became the Civil Aviation Act 2023. The new Act will be in force from April 5, 2025.
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| C. | Organizational Structure |
The following diagram illustrates our corporate structure, including our principal subsidiaries, consolidated affiliated entities and subsidiaries of consolidated affiliated entities as of the date of this annual report:
The charts below illustrate our corporate structure and identifies our subsidiaries as of the date of this annual report:
| Name | Background | Ownership | |||
| Globavend BVI | - | A BVI company | 100% owned by Globavend Holdings | ||
| - | Incorporated on May 24, 2023 | ||||
| - | Issued share capital of US$2.00 | ||||
| - | Intermediate holding company | ||||
| Globavend HK | - | A Hong Kong company | 100% owned by Globavend BVI | ||
| - | Incorporated on June 27, 2016 | ||||
| - | Issued share capital of HK$1,000,000 | ||||
| - | Engaged in the provision of cross-border logistics and air-freight forwarding services | ||||
| Globavend Warehouse | - | A Hong Kong company | 100% owned by Globavend BVI | ||
| - | Incorporated on September 24, 2024 | ||||
| - | Issued share capital of HK$1 | ||||
| - | Investment holding company | ||||
| PRC Subsidiary | - | A PRC company | 100% owned by Globavend HK | ||
| - | Incorporated on May 15, 2025 | ||||
| - | Authorized share capital of RMB3,000,000 | ||||
| - | Engaged in the provision of cross-border logistics and air-freight forwarding services | ||||
| Vault BRS | - | A Delaware company | 100% owned by Globavend Holdings | ||
| - | Incorporated on November 12, 2025 | ||||
| - | Issued share capital of $1 | ||||
| - | Dormant company | ||||
| Vault Cayman | - | A Cayman Islands company | 100% owned by Vault BRS | ||
| - | Incorporated on November 21, 2025 | ||||
| - | Issued share capital of $1 | ||||
| - | Dormant company | ||||
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| D. | Property, Plant and Equipment |
We do not own any real property.
During the years ended September 30, 2023, 2024 and 2025, we leased the following properties to support our business activities and operations:
| No. | Location | Gross floor area (sq.m) |
Rent | ||||||
| 1. | Room 13, 18/F, Tsuen Wan Industrial Centre, 220-248 Texaco Road, Tsuen Wan, New Territories, Hong Kong(1) | 236.16 (approximate) | HK$28,000 per month | ||||||
| 2. | Factory Unit No.914, 9/F, Tsuen Wan Industrial Centre, 220-248 Texaco Road, Tsuen Wan, New Territories, Hong Kong(3) | 275.74 (approximate) | HK$27,000 per month |
| (1) | Globavend HK entered into a lease agreement with an independent third party, pursuant to which Globavend HK leased the premises with a lease term from September 10, 2021 to September 9, 2023, and extended by another lease agreement for a further lease term from September 10, 2023 to September 9, 2026. The lease was terminated on September 10, 2024. |
| (2) | The premises is owned by our Controlling Shareholder and was occupied by the Company with free rental from July 1, 2024 to September 30, 2024 and with a monthly rental fee of $3,462 from October 1, 2024 to September 30, 2025, and extended on a monthly basis. |
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following management discussion and analysis of financial condition and results of operations contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Item 3. Key Information – D. Risk Factors.” and elsewhere in this annual report. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report.
| A. | Operating Results |
OVERVIEW
We are a holding company incorporated in the Cayman Islands with operations conducted by our Hong Kong subsidiary Globavend HK and our PRC Subsidiary.
We are an established emerging e-commerce logistics provider providing end-to-end supply chain solution in Hong Kong, Australia and New Zealand. We provide integrated cross-border logistics services between Hong Kong, Australia and New Zealand, where we provide customers with a one-stop solution, from parcel consolidation to air-freight forwarding, customs clearance, on-carriage parcel transportation and delivery. Our customers are primarily enterprise customers, being e-commerce merchants, or operators of e-commerce platforms, in providing business-to-consumer (B2C) transactions.
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MAJOR FACTORS AFFECTING OUR FINANCIAL RESULTS
The directors believe that the following major factors may affect our revenues and results of operations:
Economic conditions in Hong Kong
During the years ended September 30, 2023, 2024 and 2025, a large portion of our revenues was generated in Hong Kong. Accordingly, if Hong Kong experiences any adverse economic, political or regulatory conditions due to events beyond our control, such as local economic downturn, natural disasters, contagious disease outbreaks, terrorist attacks, or if the government adopts regulations that place restrictions or burdens on us or on our industry in general, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Fluctuations in foreign exchange rates
We are a global provider of integrated cross-border logistics services and air freight forwarding services and our functional currency is the Hong Kong dollars. Most of our transactions during the periods presented in this annual report are denominated in Hong Kong dollars, Australian dollars and New Zealand dollars. Historically, our principal exposure to foreign currency fluctuations is mainly with respect to our expenses incurred denominated in Australian dollars and New Zealand dollars. For the years ended September 30, 2023, 2024 and 2025, we incurred approximately 54.3%, 62.0% and 70.7% of our cost of revenue, respectively, denominated in foreign currencies for customs clearance fees and local courier expenses. We do not use currency exchange contract to reduce the risk of adverse foreign currency movements, but we would closely monitor our exposure from foreign currency fluctuations. Foreign currency fluctuations had a positive impact on net income for the years ended September 30, 2023, 2024 and a negative impact on net income for the years ended September 30, 2025. For the years ended September 30, 2023 and 2024, the foreign exchange gains were $118,508 and $156,937, respectively. For the years ended September 30, 2025, the foreign exchange loss was $138,223.
Impact of COVID-19
Since late December 2019, the outbreak of COVID-19 spread rapidly throughout China and later to the rest of the world. On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a PHEIC, and later on March 11, 2020, a global pandemic. The COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. From 2020 to the middle of 2021, COVID-19 vaccination programs had been greatly promoted around the globe, however several types of COVID-19 variants emerged in different parts of the world.
Supply chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. These shortages and supply-chain disruptions are significant and widespread. Lockdowns in several countries across the world, labor shortages, robust demand for tradable goods, disruptions to logistics networks, and capacity constraints have resulted in increases in freight costs and delivery times. Companies that are reliant on the transportation of goods and materials, such as our Company, which relies on transportation services from our suppliers, may suffer from plant closures and supply shortages across the extended supply network.
Furthermore, our business may be adversely affected if concerns relating to COVID-19 continue to restrict travel, or result in the Company’s personnel, vendors, and services providers being unavailable to pursue their business objectives free of COVID-19 related restrictions. The extent to which COVID-19 impacts our business in the future will depend on future developments, which are uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concerns continue for an extended period of time, our ability to pursue our business objectives may be materially adversely affected. In addition, our ability to raise equity and debt financing, which may be adversely impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity and third-party financing became unavailable on terms acceptable to us or at all.
Any future impact on our results of operations will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the spread or treat its impact, almost all of which are beyond our control. Given the general slowdown in economic conditions globally and volatility in the capital markets, as well as the general negative impact of the COVID-19 outbreak on the logistics and freight forwarding industry, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected. However, we note that the government authorities have gradually uplifted the preventive measures in relation to the COVID-19. For instance, on January 30, 2023, the Hong Kong government has ceased to issue any isolation orders to COVID-19 infectants. On May 5, 2023, the World Health Organization (WHO) announced that COVID-19 no longer constitutes a public health emergency of international concern (PHEIC). On May 30, 2023, the Hong Kong government has lowered the response level of COVID-19 from emergency level to alert level. The adverse effects of COVID-19 started to diminish in 2023. There was no significant impact on the Company’s business for the year ended September 30, 2024 and 2025.
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RESULTS OF OPERATIONS
The following table summarizes our consolidated statements of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
Comparison of Year Ended September 30, 2024 and 2025
| Years ended September 30, | ||||||||||||
| 2024 | 2025 | Changes | ||||||||||
| $ | $ | $ | ||||||||||
| Revenue | ||||||||||||
| Integrated cross-border logistics services | 15,116,783 | 21,744,217 | 6,627,434 | |||||||||
| Air freight forwarding services | 1,423,396 | 1,819,740 | 396,344 | |||||||||
| 16,540,179 | 23,563,957 | 7,023,778 | ||||||||||
| Cost of revenue | ||||||||||||
| Cost of revenue – third party | 7,223,445 | 8,130,006 | 906,561 | |||||||||
| Cost of revenue – related party | 6,897,332 | 13,058,854 | 6,161,522 | |||||||||
| 14,120,777 | 21,188,860 | 7,068,083 | ||||||||||
| Gross profit | 2,419,402 | 2,375,097 | (44,305 | ) | ||||||||
| General and administrative expenses | 1,079,349 | 1,417,094 | 337,745 | |||||||||
| Income from operation | 1,340,053 | 958,003 | (382,050 | ) | ||||||||
| Other income | ||||||||||||
| Interest income | 68,205 | 64,346 | (3,859 | ) | ||||||||
| Interest expense | (2,393 | ) | (995 | ) | 1,398 | |||||||
| Other income (expenses) | 156,953 | (138,223 | ) | (295,176 | ) | |||||||
| Total other income (expenses), net | 222,765 | (74,872 | ) | (297,637 | ) | |||||||
| Income before income taxes | 1,562,818 | 883,131 | (679,687 | ) | ||||||||
| Income tax expenses | 223,810 | 200,149 | (23,661 | ) | ||||||||
| Net income | 1,339,008 | 682,982 | (656,026 | ) | ||||||||
Year Ended September 30, 2025 Compared to Year Ended September, 2024
Revenues
Our revenue increased by $7,023,778, or 42.5%, from $16,540,179 for the year ended September 30, 2024 to $23,563,957 for the year ended September 30, 2025, primarily due to the increase in the integrated cross-border logistics services and air freight forwarding services in 2025.
Our revenue from integrated cross-border logistics services increased by $6,627,434, or 43.8% from $15,116,783 for the year ended September 30, 2024 to $21,744,217 for the year ended September 30, 2025. The revenue was mainly derived from the integrated cross-border logistics services for delivering goods from Hong Kong to Australia and New Zealand. Logistics revenue is recognized over the logistics time. The increase of revenue from the integrated cross-border logistics services is due to the higher market demand from customers which driven up the average sales price per freight weight and sales volume.
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The following table set forth the breakdown of our revenue analysis for integrated cross-border logistics services for the periods indicated:
| Years ended September 30, | ||||||||
| 2024 | 2025 | |||||||
| Average daily number of packages | 6,135 | 10,394 | ||||||
| Average daily freight weight (kilogram) | 1,937 | 2,479 | ||||||
| Average daily number of shipments | 3.24 | 3.95 | ||||||
| Average daily revenue per freight weight | $ | 21.32 | $ | 24.03 | ||||
Our revenue from air freight forwarding services increased by $396,344 or 27.8%, from $1,423,396 for the year ended September 30, 2024 to $1,819,740 for the year ended September 30, 2025, The Company sells air freight spaces to other freight forwarders to earn income through the price differences. Air freight forwarding revenue is recognized upon the completion of the transaction. Driven by the growth in e-commerce market demand, the Company expanded its air freight revenue by securing increased cargo capacity at more competitive prices, leading to a rise in total income.
Cost of Revenue
The following table set forth the breakdown of our cost of revenue for the periods indicated:
| Years ended September 30, | ||||||||
| 2024 | 2025 | |||||||
| Air freight charges | $ | 3,520,270 | $ | 4,357,260 | ||||
| Last mile carriage and alliance costs | 10,399,786 | 16,560,879 | ||||||
| Warehouse labor costs | 167,341 | 244,663 | ||||||
| Packing costs | 33,380 | 26,058 | ||||||
| $ | 14,120,777 | $ | 21,188,860 | |||||
Our cost of revenue mainly represented air freight charges, last mile carriage and alliance costs, warehouse labor costs and packaging costs. Our cost of revenue increased by $7,068,083, or 50.1%, from $14,120,777 for the year ended September 30, 2024 to $21,188,860 for the year ended September 30, 2025, mainly due to increase in air freight and courier expenses to fulfil the increased sales transactions.
Our air freight charges mainly represented direct costs of securing air freight capacity from commercial airlines and air freight forwarders. Our air freight charges increased by $836,990, or 23.8%, from $3,520,270 for the year ended September 30, 2024 to $4,357,260 for the year ended September 30, 2025, mainly due to the increased air freight capacity utilization to support the expansion of both air freight forwarding and integrated cross-border logistics business.
Our last mile carriage and alliance costs mainly represented courier service charges, customs clearance fees and other alliance service charges. Our last mile carriage and alliance costs increased by $6,161,093, or 59.2%, from $10,399,786 for the year ended September 30, 2024 to $16,560,879 for the year ended September 30, 2025, mainly due to increase in volume and unit price for last mile carriage and alliance costs.
Our warehouse labor costs mainly represented salaries and wages of warehouse staff. Our warehouse labor costs increased by $77,322, or 46.2%, from $167,341 for the year ended September 30, 2024 to $244,663 for the year ended September 30, 2025, which was largely attributed to the hiring of additional part-time workers aimed at enhancing overall work efficiency and productivity within warehouse operations. Driven by the surge in logistics volumes and demand for faster transit times, the Company recruited more part-time staff to manage peak times and ensure smoother operations.
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Our packing costs mainly represented packing materials, including boxes and labels, for repacking customers’ products. Our packing costs decreased by $7,322, or 21.9%, from $33,380 for the year ended September 30, 2024 to $26,058 for the year ended September 30, 2025, mainly due to decrease in unit costs for packing materials used for integrated cross-border logistics services.
Gross Profit
Our gross profit decreased by 1.8% to $2,375,097 for the year ended September 30, 2025, from $2,419,402 for the year ended September 30, 2024. Our gross profit margin decreased to 10.1% for the year ended September 30, 2025, from 14.6% for the year ended September 30, 2024. The decrease in gross profit margin was attributed to the higher last mile carriage and alliance costs which led to the lower margin in integrated cross-border logistics business.
General and Administrative Expenses
The following table set forth the breakdown of our general and administrative expenses for the periods indicated:
| Years ended September 30, | ||||||||
| 2024 | 2025 | |||||||
| Staff costs | $ | 351,155 | $ | 436,471 | ||||
| Audit fees | 190,256 | 250,103 | ||||||
| Travel expenses | 192,020 | 167,819 | ||||||
| Legal and professional fees | 191,428 | 331,826 | ||||||
| Depreciation charge and amortization of right-of-use assets | 64,688 | 104,340 | ||||||
| Allowance for (reversal) expected credit loss | 6,937 | (28,966 | ) | |||||
| Insurance expenses | 13,624 | 96,013 | ||||||
| Others | 69,241 | 59,488 | ||||||
| $ | 1,079,349 | $ | 1,417,094 | |||||
Our general and administrative expenses mainly represented staff costs, audit fees, traveling expenses, depreciation for fixture, furniture and office equipment and ROU asset, legal and professional fees, insurance expenses, allowance for expected credit loss and other administrative expenses. Our general and administrative expenses increased by $337,745, or 31.3%, from $1,079,349 for the year ended September 30, 2024 to $1,417,094 for the year ended September 30, 2025, mainly due to increase in staff costs, legal and professional fees, depreciation expenses and insurance expenses.
Our staff costs in this segment primarily represent salaries, contributions to retirement benefits, and welfare for our administrative and managerial employees and directors. For the year ended September 30, 2025, these costs increased by $85,316, or 24.3%, from $351,155 in 2024 to $436,471 in 2025. The increase in staff costs reflects the strengthening of our administrative and management teams to support the Company’s expanded corporate infrastructure and cross-border logistics operations.
Our legal and professional fees increased by $140,398, or 73.3%, from $191,428 for the year ended September 30, 2024 to $331,826 for the year ended September 30, 2025. This growth was mainly due to the heightened requirement for legal consulting and advisory services to maintain governance, compliance, and best practices within the organization.
Depreciation charge and amortization of right-of-use assets increased by $39,652, or 61.3%, from $64,688 for the year ended September 30, 2024 to $104,340 for the year ended September 30, 2025. This increase was primarily attributable to the extension of the rental arrangement for our warehouse premises to accommodate our scaled operations.
Insurance expenses rose from $13,624 in 2024 to $96,013 for the year ended September 30, 2025, representing an increase of $82,389 from $13,624 for the year ended September 30, 2024. This uptick reflects a comprehensive expansion of our corporate insurance coverage to align with the increased scale of our cross-border logistics activities and associated business risks.
Other Income/Expenses
Our other income mainly consists of interest income, interest expenses and foreign exchange gain/loss. Our net other expenses was $74,872 for the year ended September 30, 2025, as compared to net other income of $222,765 for the year ended September 30, 2024, primarily due to foreign exchange losses.
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The foreign exchange gains of $156,937 for the year ended September 30, 2024 and foreign exchange losses of $138,223 for the year ended September 30, 2025, primarily resulted from net variances of the exchange rate between the Australian dollars and Hong Kong dollars on Australian dollar-denominated transactions. During the years ended September 30, 2024 and 2025, the foreign currency fluctuations on the Company are not hedged by any currency borrowings or other hedging instruments.
Income Tax Expenses
The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
Cayman Islands and British Virgin Islands (“BVI”)
The Company is incorporated in the Cayman Islands and its wholly-owned subsidiary is incorporated in BVI. Under the current laws of the Cayman Islands and the BVI, these entities are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands and the BVI.
Hong Kong
The Company generated substantially all of its taxable income in the Hong Kong for the years ended September 30, 2024 and 2025. Accordingly, tax expenses records in the Company’s result of operations are almost entirely attributable to income earned in the Hong Kong.
The Hong Kong profits tax is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.
The effective tax rates on income before income taxes for the years ended September 30, 2024 and 2025 were approximately 14.3% and 22.7%, respectively.
The PRC
The Company’s subsidiary incorporated in the PRC is governed by the income tax laws of the PRC, and the income tax provisions in respect to operations in the PRC are calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified 25% enterprise income tax rate, while preferential tax rates, tax holidays and even tax exemptions may be granted on a case-by-case basis. EIT grants preferential tax treatment on certain Small and Micro Enterprises (“SMEs”). Under this preferential tax treatment, SMEs are entitled to a range from 12.5% to 20% of regular income tax. The Company’s PRC subsidiary is a SME.
For the years ended September 30, 2024 and 2025, the Company had no taxable income generated in the PRC, therefore, there was no income tax provision under the Enterprise Income Tax.
Australia
Australian companies are subject to a corporate income tax rate of 30% on their taxable income, other than those classified as a “base rate company”, which are businesses with revenue of less than A$50 million (US$78 million) that are subject to a reduced corporate income tax rate of 25%. For the years ended September 30, 2024 and 2025, the Company was not considered a taxable Australian company.
New Zealand
New Zealand companies are subject to a corporate income tax rate of 28% on their taxable income. For the years ended September 30, 2024 and 2025, the Company was not considered a taxable New Zealand company.
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Net Income
Our net income decreased by $656,026, or 49.0%, to $682,982 for the year ended September 30, 2025, as compared to $1,339,008 for the year ended September 30, 2024. The decrease in net income was predominantly due to the decreased gross profit and increased general and administrative expenses.
Year Ended September 30, 2024 Compared to Year Ended September, 2023
Comparison of Year Ended September 30, 2023 and 2024
| Years ended September 30, | ||||||||||||
| 2023 | 2024 | Changes | ||||||||||
| $ | $ | $ | ||||||||||
| Revenue | ||||||||||||
| Integrated cross-border logistics services | 16,872,539 | 15,116,783 | (1,755,756 | ) | ||||||||
| Air freight forwarding services | 1,713,989 | 1,423,396 | (290,593 | ) | ||||||||
| 18,586,528 | 16,540,179 | (2,046,349 | ) | |||||||||
| Cost of revenue | 10,521,866 | 7,223,445 | (3,298,421 | ) | ||||||||
| Cost of revenue – related party | 6,159,075 | 6,897,332 | 738,257 | |||||||||
| Cost of revenue | 16,680,941 | 14,120,777 | (2,560,164 | ) | ||||||||
| Gross profit | 1,905,587 | 2,419,402 | 513,815 | |||||||||
| General and administrative expenses | 758,726 | 1,079,349 | 320,623 | |||||||||
| Income from operation | 1,146,861 | 1,340,053 | 193,192 | |||||||||
| Other income | ||||||||||||
| Interest income | 3,481 | 68,205 | 64,724 | |||||||||
| Interest expense | (1,066 | ) | (2,393 | ) | (1,327 | ) | ||||||
| Other income | 120,367 | 156,953 | 36,586 | |||||||||
| Total other income, net | 122,782 | 222,765 | 99,983 | |||||||||
| Income before income taxes | 1,269,643 | 1,562,818 | 293,175 | |||||||||
| Income tax expenses | 192,251 | 223,810 | 31,559 | |||||||||
| Net income | 1,077,392 | 1,339,008 | 261,616 | |||||||||
Year Ended September 30, 2024 Compared to Year Ended September, 2023
Revenues
Our revenue decreased by $2,046,349, or 11.0%, from $18,586,528 for the year ended September 30, 2023 to $16,540,179 for the year ended September 30, 2024, primarily due to the decrease in the integrated cross-border logistics services and air freight forwarding services in 2024.
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Our revenue from integrated cross-border logistics services decreased by $1,755,756, or 10.4% from $16,872,539 for the year ended September 30, 2023 to $15,116,783 for the year ended September 30, 2024. The revenue was mainly derived from the integrated cross-border logistics services for delivering goods from Hong Kong to Australia and New Zealand. Logistics revenue is recognized over the logistics time. The decrease of revenue from the integrated cross-border logistics services is due to the higher average sales price per freight weight which driven down sales demand and volume from customers.
The following table set forth the breakdown of our revenue analysis for integrated cross-border logistics services for the periods indicated:
| Years ended September 30, | ||||||||
| 2023 | 2024 | |||||||
| Average daily number of packages | 5,654 | 6,135 | ||||||
| Average daily freight weight (kilogram) | 2,459 | 1,937 | ||||||
| Average daily number of shipments | 3.69 | 3.24 | ||||||
| Average daily revenue per freight weight | $ | 18.80 | $ | 21.32 | ||||
Our revenue from air freight forwarding services decreased by $290,593 or 17.0%, from $1,713,989 for the year ended September 30, 2023 to $1,423,396 for the year ended September 30, 2024, The Company sells air freight spaces to other freight forwarders to earn income through the price differences. Air freight forwarding revenue is recognized upon the completion of the transaction. The decrease of such revenue is mainly due to the change in pricing strategy. In order to reach a high gross profit, the Company focused on selling the air freight spaces with higher unit prices, which driven down the sales demand and lowered the sales volume from customers. Therefore, the revenue from air freight forwarding services decreased in general during the year ended September 30, 2024 while comparing to the same period in prior year.
Cost of Revenue
The following table set forth the breakdown of our cost of revenue for the periods indicated:
| Years ended September 30, | ||||||||
| 2023 | 2024 | |||||||
| Air freight charges | $ | 7,113,911 | $ | 3,520,270 | ||||
| Last mile carriage and alliance costs | 9,415,448 | 10,399,786 | ||||||
| Warehouse labor costs | 133,437 | 167,341 | ||||||
| Packing costs | 18,145 | 33,380 | ||||||
| $ | 16,680,941 | $ | 14,120,777 | |||||
Our cost of revenue mainly represented air freight charges, last mile carriage and alliance costs, packaging costs and labor costs. Our cost of revenue decreased by $2,560,164, or 15.3%, from $16,680,941 for the year ended September 30, 2023 to $14,120,777 for the year ended September 30, 2024, mainly due to decrease in air freight and courier expenses to fulfill the decreased sales transactions.
Our air freight charges mainly represented costs of air freight services. Our air freight charges decreased by $3,593,641, or 50.5%, from $7,113,911 for the year ended September 30, 2023 to $3,520,270 for the year ended September 30, 2024, mainly due to the decreased sales from both air freight forwarding services and integrated cross-border logistics services and lower air freight rates offered by suppliers during the year ended September 30, 2024.
Our last mile carriage and alliance costs mainly represented courier service charges, customs clearance fees and other alliance service charges. Our last mile carriage and alliance costs increased by $984,338, or 10.5%, from $9,415,448 for the year ended September 30, 2023 to $10,399,786 for the year ended September 30, 2024, mainly due to increase in unit price for last mile carriage and alliance costs.
Our warehouse labor costs mainly represented salaries and wages of warehouse staff. Our warehouse labor costs increased by $33,904, or 25.4%, from $133,437 for the year ended September 30, 2023 to $167,341 for the year ended September 30, 2024, mainly due to more part-time workers hired to improve the work efficiency, and the hourly rate for part-time workers has also been increased significantly. For the year ended September 30, 2023, some warehouse works were contributed by several full-time employees which salaries were incurred in general and administrative expenses.
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Our packing costs mainly represented packing materials, including boxes and labels, for repacking customers’ products. Our packing costs increased by $15,235, or 84.0%, from $18,145 for the year ended September 30, 2023 to $33,380 for the year ended September 30, 2024, mainly due to increase in unit costs for packing materials used for integrated cross-border logistics services.
Gross Profit
Our gross profit increased by 27.0% to $2,419,402 for the year ended September 30, 2024, from $1,905,587 for the year ended September 30, 2023. Our gross profit margin increased to 14.6% for the year ended September 30, 2024, from 10.3% for the year ended September 30, 2023. The increase in gross profit margin could be attributed to the lower freight costs and higher sales unit prices.
General and Administrative Expenses
The following table set forth the breakdown of our general and administrative expenses for the periods indicated:
| Years ended September 30, | ||||||||
| 2023 | 2024 | |||||||
| Staff costs | $ | 370,826 | $ | 351,155 | ||||
| Audit fees | 171,667 | 190,256 | ||||||
| Travel expenses | 45,056 | 192,020 | ||||||
| Legal and professional fees | 32,491 | 191,428 | ||||||
| Depreciation charge and amortization of right-of-use assets | 50,834 | 64,688 | ||||||
| Allowance for expected credit loss | 44,765 | 6,937 | ||||||
| Others | 43,087 | 82,865 | ||||||
| $ | 758,726 | $ | 1,079,349 | |||||
Our general and administrative expenses mainly represented staff costs, audit fees, traveling expenses, depreciation charge, amortization of right-of-use assets, legal and professional fees, allowance for expected credit loss and other administrative expenses. Our general and administrative expenses increased by $320,623, or 42.3%, from $758,726 for the year ended September 30, 2023 to $1,079,349 for the year ended September 30, 2024, mainly due to increase in travel expenses and legal and professional fees.
Our audit fees mainly represent annual audit fees incurred by the Company and its subsidiary. Audit fees increased by $18,589, or 10.8%, from $171,667 for the year ended September 30, 2023 to $190,256 for the year ended September 30, 2024. This was mainly due to the professional services fees on the audit related consent incurred for the year ended September 30, 2024.
Our staff costs mainly represent staff salaries, contribution to staff retirement benefits and staff welfare for office staff and director. Staff costs decreased by $19,671, or 5.3%, from $370,826 for the year ended September 30, 2023 to $351,155 for the year ended September 30, 2024. This was mainly due to the reduction in the one-off discretionary bonus and the decrease in the director’s salary upon listing. This decline was partially offset by increases in the salaries of other employees and the independent directors of the Company.
Our travel expenses increased by $146,964, or 326.2%, from $45,056 for the year ended September 30, 2023 to $192,020 for the year ended September 30, 2024 mainly due to increase in travelling activities in 2024 comparing to the prior year, in order to maintain better business relationship and investor relationship for the Listing.
Our legal and professional fees increased by $158,937, or 489.2%, from $32,491 for the year ended September 30, 2023 to $191,428 for the year ended September 30, 2024, mainly due to the increase in legal consulting and advisory service fees incurred after the Listing.
Our amortization of right-of-use assets mainly represented our operating lease of our Hong Kong office and warehouse on 9th, 18th and 24th floors of Tsuen Wan Industrial Centre. During the year ended September 30, 2023, the operating lease of 24th of Tsuen Wan Industrial Centre has been early terminated in order to centralize the warehouse operation for better management. During the year ended September 30, 2024, the operating lease of 18th of Tsuen Wan Industrial Centre has been early terminated and the warehouse and office have been moved to 9th floor of Tsuen Wan Industrial Centre with lower monthly rental, which leads to a decrease of 4.4% in amortization of right-of-use assets comparing the same period of 2023 and 2024. Our depreciation charge mainly represented depreciation of our fixture, furniture, office equipment and leasehold improvements. Our depreciation charge increased by 413.1% for the year ended September 30, 2024, which was mainly due to the additional logistics equipment and leasehold improvements.
Other Income/Expenses
Our other income mainly consists of interest income, interest expenses and foreign exchange gain/loss. Our net other income was $222,765 for the year ended September 30, 2024, as compared to net other income of $122,782 for the year ended September 30, 2023, primarily due to increase in interest income and foreign exchange gain.
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The foreign exchange gains of $118,508 and $156,937 for the years ended September 30, 2023 and 2024, respectively, primarily as a result of net variances of the exchange rate between the Australian dollars and Hong Kong dollars on Australian dollar-denominated transactions. During the years ended September 30, 2023 and 2024, the foreign currency fluctuations on the Company are not hedged by any currency borrowings or other hedging instruments.
Income Tax Expenses
The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
Cayman Islands and British Virgin Islands (“BVI”)
The Company is incorporated in the Cayman Islands and its wholly-owned subsidiary is incorporated in BVI. Under the current laws of the Cayman Islands and the BVI, these entities are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands and the BVI.
Hong Kong
The Company generated substantially all of its taxable income in the Hong Kong for the years ended September 30, 2023 and 2024. Accordingly, tax expenses records in the Company’s result of operations are almost entirely attributable to income earned in the Hong Kong.
The Hong Kong profits tax is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.
The effective tax rates on income before income taxes for the years ended September 30, 2023 and 2024 were approximately 15.1% and 14.3%, respectively.
Australia
Australian companies are subject to a corporate income tax rate of 30% on their taxable income, other than those classified as a “base rate company”, which are businesses with revenue of less than A$50 million (US$78 million) that are subject to a reduced corporate income tax rate of 25%. For the years ended September 30, 2023 and 2024, the Company was not considered a taxable Australian company.
New Zealand
New Zealand companies are subject to a corporate income tax rate of 28% on their taxable income. For the years ended September 30, 2023 and 2024, the Company was not considered a taxable New Zealand company.
Net Income
Our net income increased by 24.3% to $1,339,008 for the year ended September 30, 2024, as compared to $1,077,392 for the year ended September 30, 2023. The increase in net income was predominantly due to increased gross profit.
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As of September 30, 2025 Compared to September 30, 2024
The following table set forth our current assets and current liabilities as of the dates indicated:
| As of September 30, | ||||||||||||
| 2024 | 2025 | Changes | ||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 2,296,462 | $ | 7,505,388 | $ | 5,208,926 | ||||||
| Accounts receivable, net | 1,684,644 | 1,004,203 | (680,441 | ) | ||||||||
| Other receivable | - | 362,974 | 362,974 | |||||||||
| Amount due from a director | - | 33,094 | 33,094 | |||||||||
| Deposits and prepayment | 203,178 | 42,646 | (160,532 | ) | ||||||||
| Tax recoverable | - | 84,352 | 84,352 | |||||||||
| Deferred costs | 374,286 | 374,286 | - | |||||||||
| Contract assets | 897,409 | 553,218 | (344,191 | ) | ||||||||
| Total current assets | 5,455,979 | 9,960,161 | 4,504,182 | |||||||||
| Current liabilities | ||||||||||||
| Accounts payables | 649,183 | 745,032 | 95,849 | |||||||||
| Accounts payables – related party | 1,627,269 | - | (1,627,269 | ) | ||||||||
| Amount due to a director | 8,586 | - | (8,586 | ) | ||||||||
| Other payables and accrued liabilities | 235,193 | 391,868 | 156,675 | |||||||||
| Taxes payables | 224,438 | - | (224,438 | ) | ||||||||
| Operating lease liability – related party | 41,019 | 30,818 | (10,201 | ) | ||||||||
| Contract liabilities | - | 9,479 | 9,479 | |||||||||
| Total current liabilities | 2,785,688 | 1,177,197 | (1,608,491 | ) | ||||||||
| Net current assets | $ | 2,670,291 | $ | 8,782,964 | $ | 6,112,673 | ||||||
Cash and cash equivalents
Cash and cash equivalents consist of funds deposited with banks, which are highly liquid and are unrestricted as to withdrawal or use.
The total balance of cash and cash equivalents increased by $5,208,926 from $2,296,462 as of September 30, 2024, to $7,505,388 as of September 30, 2025. The increase in the balance of cash and cash equivalents was mainly due to the net proceeds of the June 2025 Offering (as defined in Note 15 to the Consolidated Financial Statements) after deducting transaction costs of approximately $5,290,000 and the net cash generated from operation of $240,355, which offset the payment of deposit to director for operating lease arrangement of $297,436 for the year ended September 30, 2025.
Accounts Receivable, net
Our accounts receivable represented receivables from customers of our logistics and air freight forwarding services. Credit periods for customers are normally within 7 to 90 days after customers have received the services provided by the Company.
Our accounts receivable, net decreased by $680,441, or 40.4%, from $1,684,644 as of September 30, 2024, to $1,004,203 as of September 30, 2025. The decrease was mainly attributable to the decrease in revenue near the year end.
An impairment analysis is performed at the end of each year. There was an allowance for expected credit loss amounting to $42,932 made in the year ended September 30, 2024. There was an allowance for expected credit loss amounting to $23,067 made in the year ended September 30, 2025.
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Other receivable
Other receivable refers to amounts owed to the Company that do not fall within the typical category of accounts receivable.
Our other receivable amounted to nil and $362,974 as of September 30, 2024 and 2025, respectively. As of September 30, 2025, the amount was attributed to a deposit for purchasing of equipment. Following the end of the reporting period, the purchase agreement for such equipment was subsequently cancelled. Accordingly, the full amount of the deposit is expected to be refunded in the period subsequent to the end of reporting period.
Deposits and prepayment
Long-term deposits and prepayment consist of trade deposits, deposit paid to a related party for operating lease arrangement and prepaid accounting and financing service fee, which are classified as non-current assets.
Long-term deposits and prepayment decreased by $1,172,013, or 50.0% from $2,343,423 as of September 30, 2024 to $1,171,410 as of September 30, 2025. This reduction was primarily due to the balances of deposits and prepayments for financial services being fully offset against the $15 million raised in the June 2025 Offering, before deducting placement agent fees and other estimated expenses payable by the Company for the fiscal year ended September 30, 2025.
Deposits and prepayment consist of prepayment paid to suppliers, utility and other deposits, prepaid insurance expenses and prepaid accounting and financing service fee, which are classified as current assets.
Deposits and prepayment decreased significant by $160,532, or 79.0%, from $203,178 as of September 30, 2024, to $42,646 as of September 30, 2025. This reduction was primarily due to the balances of deposits and prepayments for financial services being fully offset against the $15 million raised in the June 2025 Offering, before deducting placement agent fees and other estimated expenses payable by the Company for the fiscal year ended September 30, 2025.
Contract assets
Contract assets include billed and unbilled amounts resulting from in-transit shipments, as the Company has an unconditional right to payment only when services have been completed (i.e., shipments have been delivered). Upon completion of the performance obligations, which can vary in duration based upon the method of transport, these amounts become classified within accounts receivable. Contract assets decreased by $344,191, or 38.4%, from $897,409 as of September 30, 2024, to $553,218 as of September 30, 2025. The decrease was mainly due to fewer in-transit deliveries that has not yet delivered to the customers near the year end 2025.
An impairment analysis is performed at the end of each year. There was an allowance for expected credit loss amounting to $14,940 and $5,839 made in the year ended September 30, 2024 and 2025.
Deferred costs
Deferred offering costs consist principally of incremental cost directly attributable to the Company’s share offering incurred by the Company, such as underwriting, legal, accounting, consulting, printing, and other registration related costs in connection with the offering of the Company’s ordinary shares. Such costs are deferred until the closing of the offering, at which time the deferred costs are offset against the offering proceeds. In the event the offering is unsuccessful or aborted, the costs will be expensed. The deferred costs remained unchanged as of September 30, 2024, and September 30, 2025. The balance as of September 30, 2024 and 2025 was related to the Equity Line of Credit offering.
Accounts payable
The accounts payable are derived from logistics and air freight service providers. The accounts payable increased by $95,849, or 14.8%, from $649,183 as of September 30, 2024, to $745,032 as of September 30, 2025. The balances arise from logistics service providers were settled within 7 to 30 days. The increase was mainly due to outstanding supplier invoices related to the air freight costs for the year ended September 30, 2025.
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Accounts payable – related party
The accounts payable – related party amounted to $1,627,269 and nil as of September 30, 2024 and September 30, 2025, respectively. For the year ended September 30, 2024, this balance consists of accounts payable to a related company arising from unsettled courier service fees.
Other payables and accrued liabilities
The line item consists of accrued payroll expenses, audit fees, government grant liability, other administrative expenses and accrued offering costs. The balance increased by $156,675, or 66.6%, from $235,193 as of September 30, 2024, to $391,868 as of September 30, 2025, the increase was mainly due to the increase of accrued insurance expenses and government grant liability.
Operating lease liabilities – related party
Our lease liabilities represented the current portion of the operating lease of our Hong Kong office and warehouse. As of September 30, 2025, the operating lease arrangement of the office and warehouse on 9th floor of Tsuen Wan Industrial Centre was a related party transaction with Mr. Wai Yiu Yau, a director of the Company.
The Company’s management believes that the Hong Kong Dollar Best Lending Rate (“BLR”) was the most indicative rate of the Company’s borrowing cost for the calculation of the present value of the lease payments; the rate used by the Company as quoted by the BLR minus 2.5%.
As of September 30, 2024 Compared to September 30, 2023
The following table set forth our current assets and current liabilities as of the dates indicated:
| As of September 30, | ||||||||||||
| 2023 | 2024 | Changes | ||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 554,132 | $ | 2,296,462 | $ | 1,742,330 | ||||||
| Accounts receivable, net | 1,429,299 | 1,684,644 | 255,345 | |||||||||
| Deposits and prepayment | 187,400 | 203,178 | 15,778 | |||||||||
| Deferred costs | 1,306,441 | 374,286 | (932,155 | ) | ||||||||
| Contract assets | 543,838 | 897,409 | 353,571 | |||||||||
| Total current assets | 4,021,110 | 5,455,979 | 1,434,869 | |||||||||
| Current liabilities | ||||||||||||
| Accounts payables | 2,601,253 | 649,183 | (1,952,070 | ) | ||||||||
| Accounts payables – related party | - | 1,627,269 | 1,627,269 | |||||||||
| Amount due to a director | - | 8,586 | 8,586 | |||||||||
| Other payables and accrued liabilities | 1,096,016 | 235,193 | (860,823 | ) | ||||||||
| Taxes payables | 155,210 | 224,438 | 69,228 | |||||||||
| Lease liabilities – current | 39,886 | 41,019 | 1,133 | |||||||||
| Total current liabilities | 3,892,365 | 2,785,688 | (1,106,677 | ) | ||||||||
| Net current assets | $ | 128,745 | $ | 2,670,291 | $ | 2,541,546 | ||||||
Cash and cash equivalents
Cash and cash equivalents consist of funds deposited with banks, which are highly liquid and are unrestricted as to withdrawal or use.
The total balance of cash and cash equivalents increased from $554,132 as of September 30, 2023 to $2,296,462 as of September 30, 2024. The increase in the balance of cash and cash equivalents was mainly due to the net proceeds of the share issuance after deduction of transaction cost of $5,379,500 and the net cash generated from operation of $326,089 which offset with the payment of offering costs and financial services deposits of $2,769,260, payment of deposit to director for operating lease arrangement of $600,000 and payment for purchase of property, plant and equipment of $592,585 for the year ended September 30, 2024.
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Accounts Receivable, net
Our accounts receivable represented receivables from customers of our logistics and air freight forwarding services. Credit periods for customers are normally within 7 to 90 days after customers have received the services provided by the Company.
Our accounts receivable, net increased by $255,345, or 17.9% from $1,429,299 as of September 30, 2023 to $1,684,644 as of September 30, 2024. The increase was mainly attributable to the increase in revenue near the year end.
An impairment analysis is performed at the end of each year. There was an allowance for expected credit loss amounting to $38,534 made in the year ended September 30, 2023. There was an allowance for expected credit loss amounting to $42,932 made in the year ended September 30, 2024.
Deposits and prepayment
Long-term deposits and prepayment consist of trade deposits, deposit paid to a related party for operating lease arrangement and prepaid financing service fee, which are classified as non-current assets.
Long-term deposits and prepayment increased by $2,022,910, or 631.1% from $320,513 as of September 30, 2023 to $2,343,423 as of September 30, 2024. The increase was mainly due to the increase in payment for operating lease deposits, prepayment and deposits for future financing services.
Deposits and prepayment consist of prepayment paid to suppliers, utility and other deposits and prepaid financing service fee, which are classified as current assets.
Deposits and prepayment increased by $15,778, or 8.4% from $187,400 as of September 30, 2023 to $203,178 as of September 30, 2024. The increase was mainly due to the increase in prepayment with financial service providers related to future financing services.
Contract assets
Contract assets include billed and unbilled amounts resulting from in-transit shipments, as the Company has an unconditional right to payment only when services have been completed (i.e., shipments have been delivered). Upon completion of the performance obligations, which can vary in duration based upon the method of transport, these amounts become classified within accounts receivable. Contract assets increased by 353,571 or 65.0% from $543,838 as of September 30, 2023 to $ 897,409 as of September 30, 2024. The increase was mainly due to more in-transit deliveries that has not yet delivered to the customers near the year end 2024.
An impairment analysis is performed at the end of each year. There was an allowance for expected credit loss amounting to $12,401 and $14,940 made in the year ended September 30, 2023 and 2024.
Deferred costs
Deferred offering costs consist principally of all direct offering costs incurred by the Company, such as underwriting, legal, consulting, printing, and other registration related costs in connection with the offering of the Company’s ordinary shares. Such costs are deferred until the closing of the offering, at which time the deferred costs are offset against the offering proceeds. In the event the offering is unsuccessful or aborted, the costs will be expensed. The deferred costs decreased by $932,155, or 71.4% from $1,306,441 as of September 30, 2023 to $374,286 as of September 30, 2024. The balance decreased as the deferred costs as of September 30, 2023 have been fully offset against the offering proceeds upon listing in November 2023. The balance as of September 30, 2024 was related to the Equity Line of Credit offering.
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Accounts payable
The accounts payable are derived from logistics and air freight service providers. The accounts payable decreased by $1,952,070, or 75.0% from $2,601,253 as of September 30, 2023 to $649,183 as of September 30, 2024. The balances arise from logistics service providers were settled within 7 to 30 days. The decrease was mainly due to outstanding supplier invoices related to the air freight costs for the year ended September 30, 2024.
Accounts payable – related party
The accounts payable – related party amounted to nil and $1,627,269 as of September 30, 2023 and September 30, 2024, respectively. For the year ended September 30, 2024, this balance consists of accounts payable to a related company arising from unsettled courier service fees.
Other payables and accrued liabilities
The line item consists of accrued payroll expenses, audit fees, other administrative expenses and accrued offering costs. The balance decreased significantly by $860,823, or 78.5% from $1,096,016 as of September 30, 2023 to $235,194 as of September 30, 2024, the decrease was mainly due to the decrease of accrued offering costs and audit expenses.
Lease liabilities – current
Our lease liabilities represented the current portion of the operating lease of our Hong Kong office and warehouse. As of September 30, 2024, the operating lease arrangement of the office and warehouse on 9th floor of Tsuen Wan Industrial Centre was a related party transaction with Mr. Wai Yiu Yau, a director of the Company.
The Company’s management believes that the Hong Kong Dollar Best Lending Rate (“BLR”) was the most indicative rate of the Company’s borrowing cost for the calculation of the present value of the lease payments; the rate used by the Company as quoted by the BLR minus 2.5%.
Cash Flow
Our use of cash is primarily related to operating activities, payment of dividends and payment of deferred IPO and offering costs. We have historically financed our operations primarily through our cash flow generated from our operations. The following table sets forth a summary of our cash flows information for the years indicated:
| Years ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 2,021,831 | $ | 326,089 | $ | 240,355 | ||||||
| Net cash used in investing activities | (7,455 | ) | (592,585 | ) | (8,333 | ) | ||||||
| Net cash (used in) provided by financing activities | (2,017,979 | ) | 2,008,826 | 4,976,681 | ||||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (3,603 | ) | 1,742,330 | 5,208,703 | ||||||||
| EFFECT OF CHANGES IN EXCHANGE RATES | - | - | 223 | |||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 557,735 | 554,132 | 2,296,462 | |||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 554,132 | $ | 2,296,462 | $ | 7,505,388 | ||||||
Operating Activities
Our cash inflow from operating activities was principally from the receipt of revenue. Our cash outflow used in operating activities was principally for payment of supplier costs and operating expenses.
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Net cash provided by operating activities was $240,355 for the year ended September 30, 2025, compared to net cash provided by operating activities of $326,089 for the year ended September 30, 2024, representing a decrease of approximately $0.1 million in the net cash inflow in operating activities. The decrease in net cash used in operating activities was primarily due to the following major working capital changes:
| (1) | Change in accounts receivable resulted in a cash inflow of $700,407 for the year ended September 30, 2025 compared to a cash outflow of $259,743 for the same period of 2024, which led to an approximately $960,000 increase in net cash inflow in operating activities. | |
| (2) | Change in deposits and prepayment resulted in a cash inflow of $127,904 for the year ended September 30, 2025 compared to a cash outflow of $78,278 for the same period of 2024, which led to an approximately $206,000 increase in net cash inflow in operating activities. | |
| (3) | Change in accounts payable and accounts payable – related party resulted in a cash outflow of $1,531,420 for the year ended September 30, 2025 compared to a cash outflow of $324,801 for the same period of 2024, which led to an approximately $1,207,000 increase in net cash outflow in operating activities. | |
| (4) | Change in other payables and accrued liabilities resulted in a cash inflow of 156,675 for the year ended September 30, 2025 compared to a cash outflow of $98,002 for the same period of 2024, which led to an approximately $255,000 increase in net cash inflow in operating activities. | |
| (5) | Change in contract assets resulted in a cash inflow of $353,292 for the year ended September 30, 2025 compared to a cash outflow of $356,110 for the same period of 2024, which led to an approximately $710,000 increase in net cash inflow in operating activities. | |
| (6) | Change in tax payables resulted in a cash outflow of $308,790 for the year ended September 30, 2025 compared to a cash inflow of $69,228 for the same period of 2024, which led to an approximately $378,000 increase in net cash outflow in operating activities. | |
| (7) | Net income of $682,982 in the year ended September 30, 2025 compared net income of $1,339,008 to the same period of 2024, which led to an approximately $660,000 decrease in net cash inflow in operating activities. |
Net cash provided by operating activities was $326,089 for the year ended September 30, 2024, compared to net cash provided by operating activities of $2,021,831 for the year ended September 30, 2023, representing a decrease of approximately $1.7 million in the net cash inflow in operating activities. The decrease in net cash used in operating activities was primarily due to the following major working capital changes:
| (1) | Change in accounts receivable resulted in a cash outflow of $259,743 for the year ended September 30, 2024 compared to a cash outflow of $350,767 for the same period of 2023, which led to an approximately $91,000 decrease in net cash outflow in operating activities. | |
| (2) | Change in deposits and prepayment resulted in a cash outflow of $78,278 for the year ended September 30, 2024 compared to a cash outflow of $175,862 for the same period of 2023, which led to an approximately $98,000 decrease in net cash outflow in operating activities. |
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| (3) | Change in accounts payable and accounts payable – related party resulted in a cash outflow of $324,801 for the year ended September 30, 2024 compared to a cash inflow of $1,114,707 for the same period of 2023, which led to an approximately $1,440,000 increase in net cash outflow in operating activities. | |
| (4) | Change in other payables and accrued liabilities resulted in a cash outflow of $98,002 for the year ended September 30, 2024 compared to a cash inflow of $320,152 for the same period of 2023, which led to an approximately $418,000 increase in net cash outflow in operating activities. | |
| (5) | Change in contract assets resulted in a cash outflow of $356,110 for the year ended September 30, 2024 compared to a cash outflow of $120,380 for the same period of 2023, which led to an approximately $236,000 increase in net cash outflow in operating activities. | |
| (6) | Change in tax payables resulted in a cash inflow of $69,228 for the year ended September 30, 2024 compared to a cash inflow of $102,896 for the same period of 2023, which led to an approximately $34,000 decrease in net cash inflow in operating activities. | |
| (7) | Net income of $1,339,008 in the year ended September 30, 2024 compared net income of $1,077,392 to the same period of 2023, which led to an approximately $262,000 increase in net cash inflow in operating activities. |
Investing Activities
For the years ended September 30, 2023, 2024 and 2025, our cash outflow used in investing activities was principally derived from the purchases of fixtures, furniture and equipment. For the year ended September 30, 2024, the outflows were principally directed toward leasehold improvements for our new warehouse and the procurement of logistics equipment necessary to support our expanded service capacity. For the year ended September 30, 2025, net cash used in investing activities decreased significantly upon the completion of our primary infrastructure expansion and equipment procurement conducted in the prior year.
Financing Activities
For the year ended September 30, 2023 our cash used in financing activities was principally for cash payment for the IPO expenses and dividend. For the year ended September 30, 2024, our cash provided by financing activities was principally from the net proceeds from share issuance after deduction of transaction cost, while partially offset by cash payment for the offering expenses and financial services and deposit paid to a related party for the operating lease arrangement. For the year ended September 30, 2025, our cash provided by financing activities was principally from the net proceeds from the Offering after deduction of transaction cost, while offset cash payment for the Offering and the deposit paid to a director.
The Company believes that, taking into consideration the financial resources presently available, including the current levels of cash and cash flows from operations, our cash and cash equivalent will be sufficient to meet its anticipated cash needs for at least the next twelve months from the date of this report.
Capital Expenditures
The Company did not incur any significant capital expenditure for the years ended September 30, 2023. For the year ended September 30, 2024, the Company has paid a deposit of $462,974 for purchase of property, plant and equipment. For the year ended September 30, 2025, the Company has paid an additional deposit of $297,436 to a related party for operating lease arrangement and a deposit of 8,333 for purchase of car.
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Off-Balance Sheet Arrangements
As of September 30, 2023, 2024 and 2025, 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.
Contractual Obligations
As of September 30, 2025, we have operating lease commitment with lease liability of $30,818 with a related party.
| B. | Liquidity and Capital Resources |
For the years ended September 30, 2023, 2024 and 2025, we have financed our operations primarily through cash generated from our business operation, capital contributions by our shareholders and the June 2025 Offering.
As of September 30, 2024, we had working capital of $2,670,291 as compared to working capital of $128,745 as of September 30, 2023. The total current assets increased 35.7%, from $4,021,110 on September 30, 2023 to $5,455,979 in September 30, 2024, mainly because of an increase in cash primarily due to net proceeds from share issuance after transaction cost for the year ended September 30, 2024. The total current liabilities decreased 28.4%, from $3,892,365 on September 30, 2023 to $ 2,785,688 as of September 30, 2024. The decrease in our current liabilities is mainly due to a decrease in accounts payable, other payables and accrued liabilities.
As of September 30, 2025, we had working capital of $8,782,964 as compared to working capital of $2,670,291 as of September 30, 2024. The total current assets increased 82.6%, from $5,455,979 on September 30, 2024 to $9,960,161 on September 30, 2025, mainly because of an increase in cash primarily due to net proceeds from the June 2025 Offering after transaction cost for the year ended September 30, 2025. The total current liabilities decreased 57.7%, from $2,785,688 on September 30, 2024 to $ 1,177,197 as of September 30, 2025. The decrease in our current liabilities is mainly due to a decrease in accounts payable – related party and tax payable.
While our accounts receivable decreased from $1,684,644 as of September 30, 2024 to $1,004,203 as of September 30, 2025, our working capital increased from $2,670,291 as of September 30, 2024 to $8,782,964 as of September 30, 2025. The increase of working capital was mainly due to net proceeds from the June 2025 Offering after transaction cost for the year ended September 30, 2025.
Based on our total cash and cash equivalents as of September 30, 2025, the cash inflows from operating activities, we did not experience or identify any material trends or any known demands, commitments, events or uncertainties, in our liquidity, capital resources and results of operations, such as material commitments for capital expenditures and deposit on a short-term basis. We believe that our current cash and cash equivalents and cash flows provided by operating activities will be sufficient to meet our working capital needs in the next 12 months.
As of September 30, 2023, 2024 and 2025, the Company had a banking facility arrangement for a bank guarantee line with maximum amount of HK$3,690,000, which guaranteed by Mr. Wai Yiu Yau, the director of the Company, and secured by bank deposit from time to time charged in the bank’s favor. The outstanding principal as at September 30, 2025 is nil.
In long run, if we need additional capital in the future to fund our continued operations and that our cash requirements exceed the amount of cash and cash equivalents we have on hand at that time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity or convertible loans would result in dilution to our shareholders. The occurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
| C. | Research and development, patents and licenses, etc. |
See “Item 4. Information on the Company - B. Business Overview - Information Technology Infrastructure.”
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| D. | Trend Information |
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from October 1, 2024 to September 30, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
| E. | Critical Accounting Estimates |
Our significant accounting policies and their effect on our financial condition and results of operations are fully disclosed in our consolidated financial statements included elsewhere in this annual report. We have prepared our consolidated financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These estimates are prepared using our best judgment, after considering past and current events and economic conditions. While management believes the factors evaluated provide a meaningful basis for establishing and applying sound accounting policies, management cannot guarantee that the estimates will always be consistent with actual results. In addition, certain information relied upon by us in preparing such estimates includes internally generated financial and operating information and external market information. Actual results may differ from these estimates.
We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because the information was not available at the time or it included matters that were uncertain at the time we were making our estimate and (2) changes in the estimate could have a material impact on our financial condition or results of operations. Despite the fact that the management determines there are no critical accounting estimates, the most significant estimates relate to allowance for credit losses, for which we are required to estimate the collectability of accounts receivable. The estimates were based on a number of factors including historical loss rates and expectations of future conditions, and other factors that may affect our ability to collect from customers.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| A. | Directors and Senior Management |
The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
| Directors and Executive officers | Age | Position | ||
| Mr. Wai Yiu Yau | 42 | Founder, Chairman of the Board and Chief Executive Officer | ||
| Mr. Tsz Ngo Yu | 40 | Chief Financial Officer | ||
| Ms. San Man Leng | 48 | Independent Director | ||
| Mr. Ho Chuen Shin | 36 | Independent Director | ||
| Mr. Fan Cheung | 41 | Independent Director |
Mr. Wai Yiu Yau (“Mr. Yau”), Founder, Chairman of the Board and Chief Executive Officer
Mr. Wai Yiu Yau is the founder of the Company and has been its director and chairman of the Board since May 2023. He has also been the founder and director of Globavend HK since its inception in June 2016 and has over 20 years of experience in the logistics industry. Prior to the setting up of Globavend HK, Mr. Yau has been serving DHL eCommerce Limited, a leading worldwide logistics company in various positions for the period from January 2010 to June 2014, with his latest position being the Regional Operations Manager (Asia Pacific), responsible for its daily logistics operations in the Asia Pacific region. Mr. Yau has received a Bachelor of Science Degree in International Shipping Transport and Logistics from the Hong Kong Polytechnic University and a Master of Business Administration from the Chinese University of Hong Kong in 2005 and 2014, respectively.
Mr. Tsz Ngo Yu (“Mr. Yu”), Chief Financial Officer
Mr. Yu has served as our Chief Financial Officer since November 2, 2023. He is a member of the Certified Public Accountants Australia, a fellow member of the Hong Kong Institute of Certified Public Accountants since January 2011 and September 2018, respectively and has over 20 years of experience in the related fields of finance, auditing, accounting, corporate governance practices, and company secretarial matters. During the period between January 2007 and February 2012, Mr. Yu has successively served in various positions in Deloitte Touche Tohmatsu, an accounting firm, with his last position as an audit manager. From September 2013 to December 2020, he was a partner of H.F. Tam & Co (currently known as CTY & Co.), an accounting firm. He is currently the executive director of Marksman Corporate Services Limited a firm principally engaged in the provision of corporate secretarial services and corporate consulting services, a director of Marksman Corporate Consulting Limited, both since June 2019, and a partner of IPA CPA Limited, an accounting firm, since October 2020. Since May 2015 until the date of this annual report, Mr. Yu also serves as a company secretary of various companies listed on The Stock Exchange of Hong Kong Limited. He has received a Bachelor of Commerce Degree in Accounting and Finance and Master of Applied Finance, both from Monash University of Australia, in December 2005 and December 2006, respectively.
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Ms. San Man Leng (“Ms. Leng”), Independent Director
Ms. Leng has served as an independent director since November 2, 2023. Ms. Leng is also the chair of the audit committee, a member of the compensation committee as well as the nomination and corporate governance committee.
Ms. Leng is a licensed Certified Public Accountant, or CPA, in the State of California since November 2005 and member of the American Institute of Certified Public Accountants since December 2010 and has over 20 years of experience in providing accounting, auditing, business consulting, corporate services, IPO management, merger and acquisition consulting, US taxation, trade, and trust and fiduciary services. She is currently the US tax partner of East Asia Sentinel Group, a renowned consortium of independent professional service providers offering a wide range of advisory, fiduciary, taxation and compliance services. She is also a board member of BKI Asia Pacific, a prominent accounting network.
Ms. Leng received a Bachelor of Arts degree in Business Economics from the University of California, Santa Barbara in June 1999. We believe Ms. Leng is qualified to serve as our director based on her extensive accounting experience and tax advisory background.
Mr. Ho Chuen Shin (“Mr. Shin”), Independent Director
Mr. Shin has served as an independent director since November 2, 2023. Mr. Shin is also the chair of the compensation committee and the nominating and corporate governance committee, and as a member of the audit committee.
Mr. Shin is a solicitor of the High Court in Hong Kong with over 10 years extensive experience in corporate practice. He has been frequently advising companies and sponsors in initial public offerings on The Stock Exchange of Hong Kong Limited as well as in post-listing compliance, merger and acquisition matters. He is currently a partner of David Fong & Co., a firm of solicitors practicing in Hong Kong since August 2020. Mr. Shin is currently an independent non-executive director of Jiading International Group Holdings Limited (HKEX:8153), a company listed on The Stock Exchange of Hong Kong Limited and independent director of Onion Global Limited (OGBLY:OG), a company listed on the U.S. OTC Markets since February 2022 and March 2022, respectively. He receives a Bachelor of Laws Degree and Postgraduate Certificate in Laws from the Chinse University of Hong Kong in 2012 and 2013, respectively. We believe Mr. Shin is qualified to serve as our director based on his extensive experience in corporate law and practice as well as his legal background.
Mr. Fan Cheung (“Mr. Cheung”), Independent Director
Mr. Cheung has served as an independent director since November 2, 2023. Mr. Cheung is also a member of the compensation committee, the nominating and corporate governance committee and the audit committee.
Mr. Cheung has over 16 years’ experience in logistics field including international business expansion, cross-border transactions and corporate governance. He has been serving S.F. Express (Hong Kong) Limited, a leading logistics company operating express courier businesses, supply chain management and consulting services in Hong Kong during the period between December 2009 and April 2023, with his latest position as Deputy Director of Financial Planning. Mr. Cheung is a Chartered Secretary, a Chartered Governance Professional and an associate member of both The Hong Kong Chartered Governance Institute and The Chartered Governance Institute in the United Kingdom. He received a Bachelor of Social Science degree from The Chinese University of Hong Kong, a Bachelor of Laws degree from the Manchester Metropolitan University in the United Kingdom and a Master of Corporate Governance degree from the Hong Kong Metropolitan University in 2007, 2011 and 2015, respectively. We believe Mr. Cheung is qualified to serve as our director based on his extensive experience and industry background within the logistic industry.
Family Relationships
None of our directors or executive officers have a family relationship as defined in Item 401 of Regulation S-K.
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| B. | Compensation |
For the year ended September 30, 2025, we paid an aggregate of $78,900 (including salaries, bonus and mandatory provident fund) to our directors. Our Hong Kong subsidiary is required by law to contribute amounts equal to certain percentages of each employee’s salary for his or her mandatory provident fund. We have not made any agreements with our directors or executive officers to provide benefits upon termination of employment.
Equity Compensation Plan Information
We have not adopted any equity compensation plans.
Outstanding Equity Awards at Fiscal Year-End
As of September 30, 2025, we had no outstanding equity awards.
| C. | Board Practices |
Board of Directors
Our board of directors consists of four directors, comprising our sole executive director Mr. Yau and three independent directors, namely, Ms. Ling, Mr. Shin and Mr. Cheung. A director is not required to hold any shares in our Company to qualify to serve as a director. Subject to making appropriate disclosures to the board of directors in accordance with our Memorandum and Articles, a director may vote with respect to any contract, proposed contract, or arrangement in which he or she is interested; in voting in respect to any such matter, such director should take into account his or her directors’ duties. A director may exercise all the powers of the company to borrow money; mortgage its business, property, and uncalled capital; and issue debentures or other securities whenever money is borrowed or as security for any obligation of the Company or of any third party.
Board Diversity
We seek to achieve board diversity through the consideration of a number of factors when selecting the candidates to our board, including, but not limited to, gender, skills, age, professional experience, knowledge, cultural, education background, ethnicity, and length of service. The ultimate decision of the appointment will be based on merit and the contribution that the selected candidates will bring to our board.
Our directors have a balanced mix of knowledge and skills. We will have three independent directors with different industry backgrounds, representing a majority of the members of our board. Our board is well balanced and diversified in alignment with our business development and strategy.
Committees of the Board of Directors
We have established an audit committee, a compensation committee, and a nominating and corporate governance committee under the board of directors. We have adopted a charter for each of the three committees upon the establishment of the committees. Each committee’s members and functions are described below.
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Audit Committee
Our audit committee consists of Ms. Leng, Mr. Shin, and Mr. Cheung, and is chaired by Ms. Leng. We have determined that each of these three director nominees satisfies the “independence” requirements of the Nasdaq Listing Rules and meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Ms. Leng qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of our financial statements. The audit committee will be responsible for, among other things:
| ● | selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; |
| ● | reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s responses; | |
| ● | reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; | |
| ● | discussing the annual audited financial statements with management and the independent registered public accounting firm; | |
| ● | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; | |
| ● | annually reviewing and reassessing the adequacy of our audit committee charter; | |
| ● | meeting separately and periodically with management and the independent registered public accounting firm; | |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and | |
| ● | reporting regularly to the board. |
Compensation Committee
Our compensation committee consists of Mr. Shin, Ms. Leng and Mr. Cheung, and is chaired by Mr. Shin. We have determined that each of these directors satisfies the “independence” requirements of the Nasdaq Listing Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which their compensation is deliberated upon. The compensation committee is responsible for, among other things:
| ● | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; | |
| ● | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; | |
| ● | reviewing periodically and approving any incentive compensation or equity plans, programs, or other similar arrangements; and | |
| ● | selecting a compensation consultant, legal counsel, or other adviser only after taking into consideration all factors relevant to that person’s independence from management. |
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Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Mr. Shin, Ms. Leng and Mr. Cheung, and is chaired by Mr. Shin. We have determined that each of these directors satisfies the “independence” requirements of the Nasdaq Listing Rules. The nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things:
| ● | recommending nominees to the board for election or re-election to the board or for appointment to fill any vacancy on the board; | |
| ● | reviewing annually with the board the current composition of the board in regard to characteristics such as independence, knowledge, skills, experience, expertise, diversity, and availability of service to us; | |
| ● | selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; | |
| ● | developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law, practice of corporate governance, and our compliance with such laws and practices; and | |
| ● | evaluating the performance and effectiveness of the board as a whole. |
Foreign Private Issuer Exemption
We are a “foreign private issuer,” as defined under Rule 3b-4(c) of the Exchange Act. As a result, we are exempt from some of the requirements under the Exchange Act applicable to domestic issuers, and in accordance with the rules and regulations of Nasdaq, we may choose to 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:
| ● | Exemption from filing quarterly reports on Form 10-Q, from filing proxy solicitation materials on Schedule 14A or 14C in connection with annual or special meetings of shareholders, from providing current reports on Form 8-K disclosing significant events within four days of their occurrence, and from the disclosure requirements of Regulation FD. | |
| ● | 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. | |
| ● | 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. |
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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), but we are required to 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.
Duties of Directors
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company — a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
Employment Agreements and Indemnification Agreements
We have executed the following employment agreements with our named executive officers. The material terms of each of those arrangements are summarized below.
Under our employment agreement dated July 1, 2023 with our Chief Executive Officer, Mr. Yau, effective on July 1, 2023, we agreed that, for the initial term of 3 years renewed automatically for another 3 years, unless terminated earlier in accordance with its terms, we will pay Mr. Yau an annual cash compensation of $10,000, subject to annual review and adjustment. If we maintain a share incentive plan, Mr. Yau will be eligible to participate in such plan. In addition, Mr. Yau is also eligible to participate in our standard employee benefit plan, including but not limited to retirement plan, life insurance plan, health insurance plan and travel/holiday plan.
Mr. Yau’s employment agreement may be terminated by us with or without cause. If we terminate Mr. Yau’s employment agreement without cause, we shall give Mr. Yau a three-month prior written notice or by payment of three months’ salary in lieu of notice. If, certain events as listed in the employment agreement occur, we may terminate Mr. Yau’s employment agreement without notice or compensation.
Mr. Yau is also subject to certain confidentiality and non-competition provisions.
Under our employment agreement dated August 7, 2023 with our Chief Financial Officer, Mr. Yu, effective on 2 November 2023, we agreed that, for the initial term of 3 years renewed automatically for another 3 years, unless terminated earlier in accordance with its terms, we will pay Mr. Yu an annual cash compensation of $10,000, subject to annual review and adjustment. If we maintain a share incentive plan, Mr. Yu will be eligible to participate in such plan. In addition, Mr. Yu is also eligible to participate in our standard employee benefit plan, including but not limited to retirement plan, life insurance plan, health insurance plan and travel/holiday plan. Mr. Yu will also be entitled to an annual incentive bonus as determined by the Board of Directors within thirty (30) days of filing of the Company’s annual reports.
Mr. Yu’s employment agreement may be terminated by us with or without cause. If we terminate Mr. Yu’s employment agreement without cause, we shall give Mr. Yu a three-month prior written notice or by payment of three months’ salary in lieu of notice. If, certain events as listed in the employment agreement occur, we may terminate Mr. Yu’s employment agreement without notice or compensation.
Mr. Yu is also subject to certain confidentiality and non-competition provisions.
In addition, we have entered into agreements with all other independent directors whose service began on November 2, 2023. Pursuant to the agreements, each director has agreed to attend and participate in such number of meetings of the board and of the committees of which he or she may become a member as regularly or specially called and will agree to serve as a director for a year and be up for re-election each year at our annual shareholder meeting. The directors’ services will be compensated by cash under the agreement in an amount determined by the board.
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We have also entered into indemnification agreements with each of directors and executive officers. Under these agreements, we agree to indemnify them against certain liabilities and expenses that they incur in connection with claims made by reason of their being a director or officer of our company. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, or persons controlling us under the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
| D. | Employees |
As of September 30, 2025, we had nine full-time employees, six of whom are based in Hong Kong, one of whom is based in Australia and two of whom are based in the mainland China. As of September 30, 2024, we had seven full-time employees, six of whom are based in Hong Kong and one of whom is based in Australia. As of September 30, 2023, we had seven full-time employees, six of whom are based in Hong Kong and one of whom is based in Australia. The following table sets out a breakdown of our employees by function:
| As of September 30, 2023 |
As of September 30, 2024 |
As of September 30, 2025 |
||||||||||
| Management | 1 | 1 | 1 | |||||||||
| Administration and human resources | 1 | 1 | 2 | |||||||||
| Accounting and finance | 1 | 2 | 2 | |||||||||
| Supply-chain management | 1 | 1 | 2 | |||||||||
| Warehouse management (1) | 3 | 2 | 2 | |||||||||
| Total | 7 | 7 | 9 | |||||||||
| (1) | Includes full-time employees but excludes part-time employees. |
We believe we maintain a good working relationship with its employees, and it has not experienced any significant problems with our employees or any disruption to our operations due to labor disputes, nor have we experienced any material difficulties in the recruitment and retention of experienced core staff or skilled personnel during the years ended September 30, 2023, 2024 and 2025.
| E. | Share Ownership |
The following table sets forth information with respect to the beneficial ownership of our shares as of the date of this annual report by:
| ● | each of our current directors and executive officers; and | |
| ● | each person known to us to own beneficially 5% or more of our shares. |
The calculations in the table below are based on 2,286,819 Shares issued and outstanding, comprising of 2,286,719 Ordinary Shares and 100 Management Shares, as of the date of this annual report.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
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See “—B. Compensation” for more details on options and restricted shares granted to our directors and executive officers.
| Directors and Executive Officers: (1) | Number of Ordinary Shares | Approximate percentage of outstanding Ordinary Shares(2) | ||||||||
| Mr. Wai Yiu Yau(3) | 57,324 | 2.5 | % | |||||||
| Mr. Tsz Ngo Yu | — | — | ||||||||
| Ms. San Man Leng | — | — | ||||||||
| Mr. Ho Chuen Shin | — | — | ||||||||
| Mr. Cheung Fan | — | — | ||||||||
| All directors and executive officers as a group | 57,324 | 2.5 | % | |||||||
| Principal Shareholders: | % | |||||||||
Globavend Investments Limited(3) | 57,324 | 2.5 | % | |||||||
| Directors and Executive Officers (1) | Number of Ordinary Shares | Number of Management Shares | Approximate percentage of outstanding Shares (2) | Approximate percentage of voting power (2) | ||||||||||||
| Wai Yiu Yau | 57,224 | 100 | 2.5 | % | 97.8 | % | ||||||||||
| Tsz Ngo Yu | - | - | - | - | ||||||||||||
| San Man Leng | - | - | - | - | ||||||||||||
| Ho Chuen Shin | - | - | - | - | ||||||||||||
| Fan Cheung | - | - | - | - | ||||||||||||
| All directors and executive officers as a group | 57,224 | 100 | 2.5 | % | 97.8 | % | ||||||||||
| Principal Shareholders: | ||||||||||||||||
| Globavend Investments Limited (3) | 57,224 | - | 2.5 | % | - | % | ||||||||||
Notes:
| (1) | Beneficial ownership information disclosed herein represents direct and indirect holdings of entities owned, controlled or otherwise affiliated with the applicable holder as determined in accordance with the rules and regulations of the SEC. |
| (2) |
Based on 2,286,819 Shares issued and outstanding, comprising of 2,286,719 Ordinary Shares and 100 Management Shares, as at the date of this annual report. |
| (3) | Globavend Investments Limited is a company incorporated under the laws of the BVI and is wholly owned by Mr. Yau. The registered address of Globavend Investments Limited is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, BVI. |
At each general meeting, each shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) will have one vote for each Ordinary Share that such shareholder holds. There are no prohibitions to cumulative voting under the laws of the Cayman Islands, but our Memorandum and Articles do not provide for cumulative voting.
None of our shareholders has informed us that it is affiliated with a registered broker-dealer or is in the business of underwriting securities. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
To our knowledge, except as disclosed elsewhere in this annual report, we are not directly or indirectly owned or controlled by another corporation, any foreign government or any other natural or legal person, severally or jointly.
| F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation |
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
| A. | Major Shareholders |
Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
| B. | Related Party Transactions |
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Employment Agreements and Indemnification Agreements.”
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Other Related Party Transactions
Set forth below are the related party transactions of our company that occurred during the past three fiscal years up to the date of this annual report:
Balances with related parties
| As of September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Deposit and prepayment – related parties: | ||||||||||||
| Panaicia Pty Ltd | 155,093 | - | - | |||||||||
| Prezario UNO Pty Ptd | 14,741 | - | - | |||||||||
| Mr. Wai Yiu Yau (note) | - | 600,000 | 897,436 | |||||||||
| As of September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Accounts payable – related party: | ||||||||||||
| Panaicia Pty Ltd | - | 1,563,137 | - | |||||||||
| Prezario UNO Pty Ptd | - | 64,133 | - | |||||||||
| As of September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Amount due from (to) a director: | ||||||||||||
| Mr. Wai Yiu Yau | - | (8,586 | ) | 33,094 | ||||||||
Note: As of September 30, 2025, a deposit of $897,436 was paid to Mr. Wai Yiu Yau, a director of the Company, for the Company’s exclusivity to acquire the warehouse and office at Tsuen Wan Industrial Centre, of which an operating lease has been entered into with the Company. The deposit was refundable upon the termination of arrangement. Imputed interest was calculated by interest rate of 3.375% over the lease term of 24 months.
Transactions with related parties
| For the years ended September 30, | ||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||
| Related Party | Nature of transaction | US$ | US$ | US$ | ||||||||||
| Panaicia Pty Ltd | Last mile carriage expenses | 5,526,462 | 6,462,561 | 12,593,926 | ||||||||||
| Prezario UNO Pty Ltd | Last mile carriage expenses | 632,613 | 434,771 | 464,928 | ||||||||||
| Mr. Wai Yiu Yau | Rental expense | - | 8,308 | 43,615 | ||||||||||
| Mr. Wai Yiu Yau | Interest income | - | 5,030 | 21,317 | ||||||||||
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Names and relationship of related parties
| Existing Relationship with the Company | ||
| Panaicia Pty Ltd | Sole director and sole shareholder is one of the shareholders Mr. Wai Yiu Yau. | |
| Prezario UNO Pty Ltd | Sole shareholder is the spouse of one of the shareholders Mr. Wai Yiu Yau. |
| C. | Interests of Experts and Counsel |
Not applicable.
ITEM 8. FINANCIAL INFORMATION
| A. | Consolidated Statements and Other Financial Information |
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
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 September 30, 2023, 2024 and 2025, Globavend Holdings and Globavend BVI have not distributed any cash dividends or made any other cash distributions.
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.
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Subject to the Companies Act and our Memorandum and Articles, the holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Subject to a solvency test, as prescribed in the Companies Act, and the provisions, if any, of our Memorandum and Articles, a company may pay dividends and distributions out of its share premium account. In addition, dividends may be paid out of profits available on company level.
We are a holding company incorporated in the Cayman Islands with no operating revenue or profit of our own. We 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 (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.
Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars.
| B. | Significant Changes |
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTING
| A. | Offering and Listing Details |
See “-Markets.”
| B. | Plan of Distribution |
Not applicable
| C. | Markets |
The Ordinary Shares have been listed on the Nasdaq Capital Market since November 8, 2023 under the symbol “GVH.”
| D. | Selling Shareholders |
Not applicable.
| E. | Dilution |
Not applicable
| F. | Expenses of the Issue |
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
| A. | Share Capital |
Not applicable.
| B. | Memorandum and Articles of Association |
We are a Cayman Islands exempted company and our affairs are governed by our Memorandum and Articles and the Companies Act. The following are summaries of material provisions of the Memorandum and Articles, as well as the Companies Act insofar as they relate to the material terms of our Ordinary Shares and Management Shares.
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Objects of Our Company. Under our Memorandum and Articles, the objects of our company are unrestricted, and we are capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided by section 27(2) of the Companies Act.
Shares. Our Ordinary Shares and Management Shares are issued in registered form and are issued when registered in our register of members. We may not issue shares to bearer. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.
Dividends. The holders of our Ordinary Shares are entitled to such dividends as may be declared by our board of directors. The holders of our Management Shares are not entitled to any dividend or distribution (whether upon a winding up or otherwise). Our Memorandum and Articles provide that dividends may be declared and paid out of the funds of our company lawfully available therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account; provided that in no circumstances may a dividend be paid out of our share premium if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by:
| ● | the chairperson of such meeting; | |
| ● | by at least three shareholders present in person or by proxy for the time being entitled to vote at the meeting; | |
| ● | by shareholder(s) present in person or by proxy representing not less than one-tenth of the total voting rights of all shareholders having the right to vote at the meeting; and | |
| ● | by shareholder(s) present in person or by proxy and holding shares in us conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right. |
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the Ordinary Shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the issued and outstanding Ordinary Shares at a meeting. A special resolution will be required for important matters such as a change of name, making changes to our Memorandum and Articles, a reduction of our share capital and the winding up of our company. Our shareholders may, among other things, divide or combine their shares by ordinary resolution.
Unless otherwise provided in the Memorandum and Articles of the Company and/or the terms of issue of the Management Shares, holders of Ordinary Shares and Management Shares shall at all times vote together as one class on all matters submitted to a vote by the shareholders. Each Ordinary Share has one (1) vote and each Management Share has one million (1,000,000) votes at a meeting of shareholders or on any resolution of shareholders of the Company (whether in writing or otherwise).
General Meetings of Shareholders. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our Memorandum and Articles provide that we shall, if required by the Companies Act, in each year hold a general meeting as its annual general meeting, and shall specify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and place as may be determined by our directors. General meetings, including annual general meetings, may be held at such times and in any location in the world as may be determined by the Board. A general meeting or any class meeting may also be held by means of such telephone, electronic or other communication facilities as to permit all persons participating in the meeting to communicate with each other, and participation in such a meeting constitutes presence at such meeting.
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Shareholders’ general meetings may be convened by the chairperson of our board of directors or by a majority of our board of directors. Advance notice of at least ten clear days is required for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our shareholders. A quorum required for any general meeting of shareholders consists of, at the time when the meeting proceeds to business, two shareholders holding shares which carry in aggregate (or representing by proxy) not less than one-third of the voting rights of the total issued voting shares of our company.
The Companies Act does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting. Our Memorandum and Articles also do not provide our shareholders with any right to requisite any general meeting nor to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
Under our Articles, written resolutions of shareholders (or shareholders of a class of shares) are permissible without the need for any notice, but if any resolution of shareholders is adopted otherwise than by the unanimous written consent of all shareholders, a copy of such resolution shall forthwith be sent to all shareholders not consenting to such resolution. A special resolution must however be consented to by all shareholders entitled to vote in accordance with the Companies Act.
Transfer of Shares. Subject to the restrictions set out below and save for Management Shares, any of our shareholders may transfer all or any of his or her Ordinary Shares by an instrument of transfer in the usual or common form or in a form prescribed by Nasdaq or any other form approved by our board of directors. Notwithstanding the foregoing, Ordinary Shares may also be transferred in accordance with the applicable rules and regulations of Nasdaq.
Our board of directors may, in its absolute discretion, decline to register any transfer of any Ordinary Share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any Ordinary Share unless:
| ● | the instrument of transfer is lodged with us, accompanied by the certificate for the Ordinary 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; | |
| ● | the instrument of transfer is in respect of only one class of Ordinary Shares; | |
| ● | the instrument of transfer is properly stamped, if required; |
| ● | in the case of a transfer to joint holders, the number of joint holders to whom the Ordinary Share is to be transferred does not exceed four; and | |
| ● | a fee of such maximum sum as the Nasdaq may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required in accordance with the rules of the 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 as our board may determine.
Under our Articles, no Management Share shall be sold, transferred, assigned or disposed of, whether directly or indirectly, whether through voting proxy or otherwise by a holder thereof to any person or entity except (i) with the prior approval of the Board; or (ii) if the transferee is ultimately controlled by a Founder (as defined in our Articles) or another holder of Management Shares, or is an affiliate of a Founder (as defined in our Articles) or another holder of Management Shares in which case no prior approval of the Board is strictly required.
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Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, such assets will be distributed so that, as nearly as may be, the losses are borne by our shareholders in proportion to the par value of the shares held by them. If there are any surplus assets upon a winding up or dissolution of the Company, only the holders of Ordinary Shares, not Management Shares, are entitled to such surplus assets.
Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner as may be determined by our board of directors. Our company may also repurchase any of our shares on such terms and in such manner as have been approved by our board of directors. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits, share premium or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital if our company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.
Variations of Rights of Shares. Whenever the capital of our company is divided into different classes, the rights attached to any such class may, subject to any rights or restrictions for the time being attached to any class, only be varied with the sanction of a resolution passed by a majority of two-thirds of the votes cast at a separate meeting of the holders of the shares of that class or by written resolutions of all holders of the shares of that class (if such variation is recommended by a majority of the Board). The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation, allotment or issue of further shares ranking pari passu with such existing class of shares. No separate general meetings of the holders of a class or series of shares or written resolutions of holders of a class or series of shares may be convened or passed, as the case may be, unless such class meeting is called by the chairman of the Board or a majority of the Board, or such written resolutions of holders of a class or series of shares is recommended by the Board.
Issuance of Additional Shares. Our Memorandum and Articles authorizes our board of directors to issue additional shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our Memorandum and Articles also authorizes our board of directors to establish from time to time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including, among other things:
| ● | the designation of the series; | |
| ● | the number of shares of the series; | |
| ● | the dividend rights, dividend rates, conversion rights and voting rights; and | |
| ● | the rights and terms of redemption and liquidation preferences. |
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Our board of directors may issue preference shares without action by our shareholders to the extent of available authorized but unissued shares. Issuance of these shares may dilute the voting power of holders of Ordinary Shares.
Inspection of Books and Records. Holders of our Ordinary Shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, our Memorandum and Articles have provisions that provide our shareholders the right to inspect our register of shareholders without charge or for a nominal charge, and to receive our annual audited financial statements. See “Where You Can Find Additional Information.”
Anti-Takeover Provisions. Some provisions of our Memorandum and Articles may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:
| ● | authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders; and | |
| ● | limit the ability of shareholders to requisition and convene general meetings of shareholders. |
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and Articles for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:
| ● | does not have to file an annual return of its shareholders with the Registrar of Companies; | |
| ● | is not required to open its register of members for inspection; | |
| ● | does not have to hold an annual general meeting; | |
| ● | may issue negotiable or bearer shares or shares with no par value; |
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that shareholder’s shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
Differences in Corporate Law
The Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent English statutory enactments and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the Companies Act differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.
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Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The plan must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that member agrees otherwise. For this purpose, a company is a “parent” of a subsidiary if it holds issued shares that together represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary.
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
Save in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation is entitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upon dissenting to the merger or consolidation, provided the dissenting shareholder complies strictly with the procedures set out in the Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.
Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by in the case of a scheme of arrangement with members or class of members, seventy-five per cent in value of the members or class of members, as the case may be, with whom the arrangement is to be made and in the case of a scheme of arrangement with creditors, a majority in number of the class of creditors or class of creditors, as the case may be, with whom the arrangement is to be made, and who must in addition represent seventy-five per cent in value of the creditors or each such class of creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
| ● | the statutory provisions as to the required majority vote have been met; | |
| ● | the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class; | |
| ● | the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and | |
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act. |
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The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of a dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected, the offeror may, within two months after the approval by such holders, require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made and accepted, in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights, save that objectors to a takeover offer may apply to the Grand Court of the Cayman Islands for various orders that the Grand Court of the Cayman Islands has a broad discretion to make, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
The Companies Act also contains statutory provisions which provide that a company may present a petition to the Grand Court of the Cayman Islands for the appointment of a restructuring officer on the grounds that the company (a) is or is likely to become unable to pay its debts within the meaning of section 93 of the Companies Act; and (b) intends to present a compromise or arrangement to its creditors (or classes thereof) either, pursuant to the Companies Act, the law of a foreign country or by way of a consensual restructuring. The petition may be presented by a company acting by its directors, without a resolution of its members or an express power in its articles of association. On hearing such a petition, the Cayman Islands court may, among other things, make an order appointing a restructuring officer or make any other order as the court thinks fit.
Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands courts can be expected to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivative actions in the name of the company to challenge actions where:
| ● | a company acts or proposes to act illegally or ultra vires; | |
| ● | the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and | |
| ● | those who control the company are perpetrating a “fraud on the minority.” |
Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles provide that that we shall indemnify our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such persons, other than by reason of such person’s dishonesty, willful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
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In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our Memorandum and Articles.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company — a duty to act in good faith in the best interests of the company, a duty not to make a personal profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law permits us to eliminate the right of shareholders to act by written consent and our Articles provide that any action required or permitted to be taken at any general meetings may be taken upon the vote of shareholders at a general meeting duly noticed and convened in accordance with our Articles or by written consent of the shareholders without a meeting.
Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
The Companies Act does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting. Our Memorandum and Articles also do not provide our shareholders with any right to requisite any general meeting nor to put proposals before annual general meetings or extraordinary general meetings. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.
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Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our Articles do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our Articles, subject to certain restrictions as contained therein, directors may be removed with or without cause, by an ordinary resolution of our shareholders. An appointment of a director may be on terms that the director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any specified event or after any specified period in a written agreement between the company and the director, if any; but no such term shall be implied in the absence of express provision. Under our Articles, a director’s office shall be vacated if the director (i) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; (ii) is found to be or becomes of unsound mind or dies; (iii) resigns his office by notice in writing to the company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director or; (vi) is removed from office pursuant to the laws of the Cayman Islands or any other provisions of our Memorandum and Articles.
Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the minority shareholders.
Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
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Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our Articles, if our share capital is divided into more than one class of shares, the rights attached to any such class may only be varied with the sanction of a resolution passed by a majority of two-thirds of the votes cast at a separate meeting of the holders of the shares of that class or by written resolutions of all holders of the shares of that class (if such variation is recommended by a majority of the Board). Pursuant to our Articles, no separate general meetings of the holders of a class or series of shares or written resolutions of holders of a class or series of shares may be convened or passed, as the case may be, unless such class meeting is called by the chairman of the Board or a majority of the Board, or such written resolutions of holders of a class or series of shares is recommended by the Board.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under Cayman Islands law, our Memorandum and Articles may only be amended with a special resolution of our shareholders.
Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our Memorandum and Articles on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Memorandum and Articles governing the ownership threshold above which shareholder ownership must be disclosed.
| C. | Material Contracts |
We have not entered into any material contracts other than in the ordinary course of our business and other than those described under “Item 4. Information on the Company – B. Business Overview – (ii) Block Space arrangements,” “Item 7. Major Shareholders and Related Party Transactions” or elsewhere in this annual report.
| D. | Exchange Controls |
There are currently no exchange control regulations in the Cayman Islands applicable to us or our shareholders.
| E. | Taxation |
The following is a discussion on certain Cayman Islands and Hong Kong income tax consequences of an investment in the Ordinary Shares. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands and Hong Kong laws.
Cayman Islands Taxation
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 save for certain stamp duties which may be applicable, from time to time, on certain instruments. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies save for those which hold interests in land in the Cayman Islands. There are no exchange control regulations or currency restrictions in effect in the Cayman Islands.
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We have received an undertaking from the Governor in Cabinet of the Cayman Islands to the effect that, for a period of 20 years from the date of the undertaking, no law that thereafter is enacted in the Cayman Islands imposing any tax or duty to be levied on profits, income, gains or appreciations shall apply to our Company or its operations; and that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (a) on or in respect of the shares, debentures or other obligations of our Company; or (b) by way of the withholding in whole or in part of any relevant payment as defined in the Tax Concessions Act of the Cayman Islands.
Hong Kong Profits Taxation
No tax is imposed in Hong Kong in respect of capital gains from the sale of property, such as our Ordinary Shares. Generally, gains arising from disposal of the Ordinary Shares which are held more than two years are considered capital in nature. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profit tax. Liability for Hong Kong profits tax would therefore arise in respect of trading gains from the sale of Ordinary Shares realized by persons in the course of carrying on a business of trading or dealing in securities in Hong Kong where the purchase or sale contracts are effected (being negotiated, concluded and/or executed) in Hong Kong. Effective from April 1, 2018, profits tax is levied on a two-tiered profits tax rate basis, with the first HK$2 million of profits being taxed at 8.25% for corporations and 7.5% for unincorporated businesses, and profits exceeding the first HK$2 million being taxed at 16.5% for corporations and 15% for unincorporated businesses.
In addition, Hong Kong does not impose withholding tax on gains derived from the sale of stock in Hong Kong companies and does not impose withholding tax on dividends paid outside of Hong Kong by Hong Kong companies. Accordingly, investors will not be subject to Hong Kong withholding tax with respect to a disposition of their Ordinary Shares or with respect to the receipt of dividends on their Ordinary Shares, if any. No income tax treaty relevant to the acquiring, withholding or dealing in the Ordinary Shares exists between Hong Kong and the United States.
Material Australian Tax Considerations
The following discussions provide a general summary of the material Australian income tax, stamp duty, and goods and services tax considerations generally applicable to the acquisition, ownership, and disposal by the absolute beneficial owners of the Ordinary Shares issued by us.
This discussion is based upon existing Australian tax law as of the date of this annual report, which is subject to change, possibly retrospectively. This discussion does not address all aspects of Australian tax law, which may be important to particular investors in light of their investment circumstances, such as shares held by investors subject to special tax rules (for example, financial institutions, insurance companies, or tax-exempt organizations).
It does not purport to address all possible tax situations that may be relevant to a decision to purchase, own, or deposit our Ordinary Shares. It is included herein solely for preliminary information purposes and is not intended to be, nor should it be construed to be, legal or tax advice. We, our officers, employees, taxation or other advisers do not accept any liability or responsibility in respect of any statement concerning taxation consequences or the taxation consequences.
Prospective purchasers of our Ordinary Shares should consult their tax advisers on the applicable tax consequences related to the ownership of our Ordinary Shares, based on their particular circumstances.
The comments in this section deal only with the Australian taxation implications of the ownership and disposition of our Ordinary shares if you hold our Ordinary shares as investments on a capital account. In addition, this summary does not discuss any non-Australian or state tax considerations, other than stamp duty and goods and services tax.
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For this summary, a holder of our Ordinary Shares that is not an Australian tax resident and is not carrying on business in Australia at or through a permanent establishment is referred to as a “Non-Australian Holder”.
Conversely, for the purposes of this summary, a holder that is an Australian tax resident or is carrying on business in Australia at or through a permanent establishment is referred to as an “Australian Resident Holder”.
Please be aware that the residence concept used in this section applies for Australian tax assessment purposes only. Any reference in this section to a tax, duty, levy impost, or other charge or withholding of a similar nature refers to Australia’s tax laws and/or concepts only. Also, please note that a reference to Australian income tax encompasses corporate income tax and personal income tax generally.
Taxation of the Company
As the Company is a fully taxable Australian company, its taxable income is subject to corporate income tax in Australia. All Australian companies are subject to a corporate income tax rate of 30%, other than those classified as a “base rate company”, which are businesses with revenue of less than A$50 million (US$78 million) that are subject to a reduced corporate income tax rate of 25% for the 2024/2025 income year. The Company is not considered an Australian company for the years ended September 30, 2023, 2024 and 2025.
Taxation of Australian Resident Holders
Taxation of Dividends
Dividends paid by us on our Ordinary Shares should constitute the assessable income of an Australian Resident Holder. Australia operates a dividend imputation system under which dividends may be declared to be “franked” to the extent they are paid out of company profits that have been subject to income tax.
Individuals and complying superannuation entities
Australian Resident Holders who are individuals or complying superannuation entities should include the dividend in their assessable income in the year the dividend is paid, together with any franking credit attached to that dividend.
Subject to the comments concerning ‘Qualified Persons’ below, such Australian Resident Holders should be entitled to a tax offset equal to the franking credit attached to the dividend. The tax offset can be applied to reduce the tax payable on the investor’s taxable income. Where the tax offset exceeds the tax payable on the investor’s taxable income, the investor should be entitled to a tax refund equal to the excess.
To the extent that the dividend is unfranked, an Australian individual Shareholder will generally be taxed at their prevailing marginal rate on the dividend received (with no tax offset). Complying Australian superannuation entities will generally be taxed at the prevailing rate for complying superannuation entities on the dividend received (with no tax offset).
Companies
Australian Resident Holders that are companies are also required to include both the dividend and the associated franking credits (if any) in their assessable income.
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Subject to the comments in relation to ‘Qualified Persons’ below, such companies should be entitled to a tax offset up to the amount of the franking credit attached to the dividend. Likewise, the company should be entitled to a credit in its own franking account to the extent of the franking credits attached to the distribution received. This will allow the Australian Resident Holders that are companies to pass on the franking credits to its investor(s) on the subsequent payment of franked dividends.
Excess franking credits received by the company shareholder will not give rise to a refund entitlement for a company but may be converted into carry forward tax losses instead. This is subject to specific rules on how the carry forward tax loss is calculated and utilized in future years. For completeness, this tax loss cannot be carried back under the loss carry back tax offset rules introduced in the 2020-21 Federal Budget.
Trusts and partnerships
Australian Resident Holders who are trustees (other than trustees of complying superannuation entities, which are dealt with above) or partnerships are also required to include any dividends and any franking credits in calculating the net income of the trust or partnership. Where a fully franked or partially franked dividend is received, the relevant beneficiary or partner may be entitled to a tax offset equal to the beneficiary’s or partner’s share of the net income of the trust or partnership.
To the extent that the dividend is unfranked, an Australian trustee (other than trustees of complying superannuation entities) or partnerships, will be required to include the unfranked dividend in the net income of the trust or partnership. The relevant beneficiary will be taxed at the relevant prevailing tax rate on their share of the net income of the trust or partnership (with no tax offset).
Qualified Persons
The benefit of franking credits can be denied where an Australian Resident Holder is not a ‘qualified person’ in which case the Holder will not be able to include an amount for the franking credits in their assessable income and will not be entitled to a tax offset.
Broadly, to be a qualified person, a shareholder must satisfy the holding period rule and, if necessary, the related payment rule. The holding period rule requires a shareholder to hold the shares ‘at risk’ for at least 45 days continuously during the qualification period - starting from the day after acquiring the shares and ending 45 days after the shares become ex-dividend - in order to qualify for franking benefits.
This holding period rule is subject to certain exceptions, including where the total franking offsets of an individual in a year of income do not exceed A$5,000.
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Whether you are qualified person is a complex tax issue which requires analysis based on each shareholder’s individual circumstances. Iris Energy ordinary shareholders should obtain their own tax advice to determine if these requirements have been satisfied.
Capital Gains Tax (“CGT”) Implications
Disposal of shares
For Australian Resident Holders, who hold their Ordinary Shares on capital account, the future disposal of Ordinary shares will give rise to a CGT event at the time which the legal and beneficial ownership of the Ordinary Shares are disposed of. Australian Resident Holders will derive a capital gain on the disposal of their Ordinary Shares in Iris Energy to the extent that the capital proceeds exceed the cost base of their Ordinary Shares.
A capital loss will be made where the capital proceeds are less than the cost base of their Ordinary Shares. Where a capital loss is made, capital losses can only be offset against capital gains derived in the same or later incomes years. They cannot be offset against ordinary income nor carried back to offset net capital gains arising in earlier income years. Capital losses may be carried forward to future income years subject to the satisfaction of the Australian loss testing provisions.
Capital Proceeds
The capital proceeds should generally be equal to any consideration received by the Australian Resident Holder in respect to the disposal of our Ordinary Share.
Cost base of an Ordinary Shares
The cost base of an Ordinary Share will generally be equal to the cost of acquiring the Ordinary Share, plus any incidental costs of acquisition and disposal (i.e. brokerage costs and legal fees).
CGT Discount
The CGT discount may apply to Australian Resident Holders that are individuals complying Australian superannuation funds or trusts, who have held, or are taken to have held, their Ordinary Shares for at least 12 months (not including the date of acquisition or date of disposal) at the time of the disposal of their Ordinary Shares.
The CGT discount is:
| ● | One-half if the Australian Resident Holder is an individual or trustee: meaning only 50% of the capital gain will be included in the Australian Resident Holder’s assessable income; and |
| ● | One-third if the Australian Resident Holder is a trustee of a complying superannuation entity: meaning only two-thirds of the capital gain will be included in the Australian Resident Holder’s assessable income. |
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The CGT discount is not available to Australian Resident Holders that are companies.
If an Australian Resident Holder makes a discounted capital gain, any current year and/or carried-forward capital losses will be applied to reduce the undiscounted capital gain before the relevant CGT discount is applied. The resulting amount forms the Australian Resident Holder’s net capital gain for the income year and is included in its assessable income.
The CGT discount rules relating to trusts are complex. Subject to certain requirements being satisfied, the capital gain may flow through to the beneficiaries in that trust, who will assess the eligibility for the CGT discount in their own right. Accordingly, we recommend trustees seek their own independent advice on how the CGT discount applies to the trust and its beneficiaries.
Taxation of Non-Australian Holders
Taxation of Dividends
Non-Australian Holders who do not have a permanent establishment in Australia should not be subject to Australian income tax. As the Company is not regarded as an Australian company for taxation purposes, Non-Australian Holders should not be subject to Australian dividend withholding tax on their Ordinary Shares dividends.
Capital Gains Tax (“CGT”) Implications
Disposal of shares
As we are not considered an Australian company, Non-Australian Holders who are treated as the owners of the underlying shares on the basis that they are absolutely entitled to those Ordinary Shares will not be subject to Australian capital gains tax on the gain made on a sale or other disposal of Ordinary Shares.
Dual Residency
If a holder of Ordinary Shares is a resident of both Australia and the United States under those countries’ domestic taxation laws, that holder may be subject to tax as an Australian resident. If, however, the holder is determined to be a U.S. resident for the purposes of the Double Taxation Convention between the United States and Australia, the Australian tax would be subject to limitation by the Double Taxation Convention. Holders should obtain specialist taxation advice in these circumstances.
General Australian Tax Matters
The below comments apply to both Australian Resident Holders and Non-Australian Holders.
Stamp Duty
No Australian stamp duty is payable on the issue, transfer and/or surrender of the Ordinary Shares, provided that the securities issued, transferred and/or surrendered do not represent 90% or more of our issued shares.
Goods and Services Tax
No Australian GST will be payable on the supply of the Ordinary Shares.
Subject to certain requirements, there may be a restriction on the entitlement of our Ordinary Share holders to claim an input tax credit for any GST incurred on costs associated with the acquisition or disposal of our Ordinary Shares (e.g. lawyer’s and accountants’ fees).
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New Zealand Profits Taxation
We believe that the Company, or Globavend HK, should not be treated as tax resident in New Zealand for New Zealand income tax purposes because each of them is not incorporated in New Zealand, does not have its head office or center of management in New Zealand and its board of directors does not exercise control of the company in New Zealand. However, there can be no assurance that the New Zealand taxation authorities will ultimately take a view that is consistent with us.
Provided that the Company is not tax resident in New Zealand for New Zealand income tax purposes:
| ● | it will be subject to New Zealand income tax on income it derives or is deemed to derive which has a New Zealand source (such as income derived from or attributable to a permanent establishment that Globavend HK has or is deemed to have in New Zealand, and dividends it receives from a New Zealand tax resident company); |
| ● | holders of our Ordinary Shares who are not New Zealand tax residents should not be subject to New Zealand income tax on distributions by Globavend HK or gains realized from the sale or other disposition of our Ordinary Shares; and |
| ● | holders of our Ordinary Shares who are New Zealand tax residents will be subject to New Zealand income tax on income which they derive or are deemed to derive from the holding and disposition of our Ordinary Shares at the rate applicable to that holder (currently of up to 33%). It is possible that the rate of New Zealand income tax in such situations may be reduced or eliminated by the operation of an applicable double tax agreement between New Zealand and another jurisdiction in which the holder is tax resident. It is also possible that the amount of tax payable in New Zealand may be reduced or offset by a tax credit available for non-New Zealand taxes paid by or on behalf of the holder. |
People’s Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is considered a resident enterprise. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the SAT issued the SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i) the places where the senior management and senior management departments responsible for the daily production, operation and management of the enterprise perform their duties are mainly located within the territory of the PRC; (ii) decisions relating to the enterprise’s financial matters (such as money borrowing, lending, financing and financial risk management) and human resource matters (such as appointment, dismissal and salary and wages) are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. In addition, the SAT issued the Bulletin of the State Administration of Taxation on Printing and Distributing the Administrative Measures for Income Tax on Chinese-controlled Resident Enterprises Incorporated Overseas (Trial Implementation) in 2011, providing more guidance on the implementation of SAT Circular 82. This bulletin clarifies matters including resident status determination, post determination administration, and competent tax authorities. In January 2014, the SAT issued the SAT Bulletin 9. According to SAT Bulletin 9, a Chinese-controlled offshore incorporated enterprise that satisfies the conditions prescribed under the SAT Circular 82 for being recognized as a PRC tax resident must apply for being recognized as a PRC tax resident to the competent tax authority at the place of registration of its main investor within the territory of China.
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We believe that we are not a PRC resident enterprise for PRC tax purposes. Globavend Holdings Limited is not controlled by a PRC enterprise or PRC enterprise group and we do not believe that Bon Natural Life Limited meets all of the conditions above. Globavend Holdings Limited is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”
If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we would be subject to 25% enterprise income tax on its worldwide income. Furthermore, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our Shares. In addition, non-resident enterprise shareholders may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non- resident individual shareholders and any gain realized on the transfer of ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% unless a reduced rate is available under an applicable tax treaty. It is also unclear whether non- resident shareholders of Globavend Holdings Limited would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that Globavend Holdings Limited is treated as a PRC resident enterprise.
On February 3, 2015, the SAT issued the SAT Bulletin 7, which came into effect on February 3, 2015, but will also apply to cases where their PRC tax treatments are not yet concluded. Pursuant to SAT Bulletin 7, an “indirect transfer” of PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of the underlying PRC assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
On October 17, 2017, the SAT issued the SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.
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Where a non-resident enterprise transfers taxable assets in China indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity whose equity is transferred, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and we may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
Material U.S. Federal Income Tax Considerations for U.S. Holders
The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of our Ordinary Shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that purchase our Ordinary Shares and hold such Ordinary Shares as capital assets. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, U.S. Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions; insurance companies; dealers or traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes; tax-exempt entities or governmental organizations; retirement plans; regulated investment companies; real estate investment trusts; grantor trusts; brokers, dealers, or traders in securities, commodities, currencies, or notional principal contracts; certain former citizens or long-term residents of the United States; persons who hold our Ordinary Shares as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security,” or integrated investment; persons that have a “functional currency” other than the U.S. dollar; persons that own directly, indirectly, or through attribution 10% or more of the voting power of our Ordinary Shares; corporations that accumulate earnings to avoid U.S. federal income tax; partnerships and other pass-through entities; and investors in such pass-through entities). This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift, or alternative minimum tax consequences.
As used in this discussion, the term “U.S. Holder” means a beneficial owner of our Ordinary Shares who is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons has the authority to control all of its substantial decisions, or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes.
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If an entity treated as a partnership for U.S. federal income tax purposes holds our Ordinary Shares, the U.S. federal income tax consequences relating to an investment in such Ordinary Shares will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership, and disposition of our Ordinary Shares.
Persons considering an investment in our Ordinary Shares should consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership, and disposition of our Ordinary Shares, including the applicability of U.S. federal, state, and local tax laws and non-U.S. tax laws.
Passive Foreign Investment Company (“PFIC”) Consequences
In general, a corporation organized outside the United States will be treated as a PFIC for any taxable year in which either (i) at least 75% of its gross income is “passive income” (“PFIC income test”), or (ii) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income (“PFIC asset test”). Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash (even if held as working capital or raised in a public offering), marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Although PFIC status is determined on an annual basis and generally cannot be determined until the end of a taxable year, based on the nature of our current and expected income and the current and expected value and composition of our assets, we do not presently expect to be a PFIC for our current taxable year or the foreseeable future. However, there can be no assurance 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 IRS will agree with our conclusion or that the IRS would not successfully challenge our position.
If we are a PFIC in any taxable year during which a U.S. Holder owns our Ordinary Shares, the U.S. Holder could be liable for additional taxes and interest charges under the “PFIC excess distribution regime” upon (i) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for our Ordinary Shares; and (ii) any gain recognized on a sale, exchange, or other disposition, including a pledge, of our Ordinary Shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for our Ordinary Shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.
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If we are a PFIC for any year during which a U.S. Holder holds our Ordinary Shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds such Ordinary Shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to our Ordinary Shares. If the election is made, the U.S. Holder will be deemed to sell our Ordinary Shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s Ordinary Shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder holds our Ordinary Shares and one of our non-U.S. subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Any of our non-U.S. subsidiaries that have elected to be disregarded as entities separate from us or as partnerships for U.S. federal income tax purposes would not be corporations under U.S. federal income tax law and, accordingly, cannot be classified as lower-tier PFICs. However, non-U.S. subsidiaries that have not made the election may be classified as a lower-tier PFIC if we are a PFIC during your holding period and the subsidiary meets the PFIC income test or PFIC asset test. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to any of our non-U.S. subsidiaries.
If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on our Ordinary Shares if a valid “mark-to-market” election is made by the U.S. Holder for our Ordinary Shares. An electing U.S. Holder generally would take into account, as ordinary income each year, the excess of the fair market value of our Ordinary Shares held at the end of such taxable year over the adjusted tax basis of such Ordinary Shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such Ordinary Shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in our Ordinary Shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange, or other disposition of our Ordinary Shares in any taxable year in which we are a PFIC would be treated as ordinary income, and any loss from such sale, exchange, or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss. If, after having been a PFIC for a taxable year, we cease to be classified as a PFIC because we no longer meet the PFIC income test or PFIC asset test, the U.S. Holder would not be required to take into account any latent gain or loss in the manner described above, and any gain or loss recognized on the sale or exchange of the Ordinary Shares would be classified as a capital gain or loss.
A mark-to-market election is available to a U.S. Holder only for “marketable stock.” Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.
Our Ordinary Shares will be marketable stock as long as they remain listed on the Nasdaq Capital Market and are regularly traded. A mark-to-market election will not apply to the Ordinary Shares for any taxable year during which we are not a PFIC, but it will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any of our non-U.S. subsidiaries. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs notwithstanding the U.S. Holder’s mark-to-market election for the Ordinary Shares.
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Our Company and all distributions, interest, and other amounts paid by us in respect to our shares to persons who are not resident in the Cayman Islands are exempt from all provisions of the Income Tax Ordinance in the Cayman Islands. No estate, inheritance, succession, or gift tax, rate, duty, levy, or other charge is payable by persons who are not resident in the Cayman Islands with respect to any of our shares, debt obligations, or other securities. All instruments relating to transactions in respect to our shares, debt obligations, or other securities and all instruments relating to other transactions relating to our business are exempt from payment of stamp duty in the Cayman Islands, except for those which hold interests in land in the Cayman Islands. There are currently no withholding taxes or exchange control regulations in the Cayman Islands applicable to us or our shareholders.
The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing fund (“QEF”) election. As we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election, prospective investors should assume that a QEF election will not be available.
The U.S. federal income tax rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership, and disposition of our Ordinary Shares, the consequences to them of an investment in a PFIC, any elections available with respect to the Ordinary Shares, and the IRS information reporting obligations with respect to the purchase, ownership, and disposition of Ordinary Shares of a PFIC.
Distributions
Subject to the discussion above under “PFIC Consequences,” a U.S. Holder that receives a distribution with respect to our Ordinary Shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s Ordinary Shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s Ordinary Shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends.
Distributions on our Ordinary Shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Such dividends will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations. Dividends paid by a “qualified foreign corporation” to certain non-corporate U.S. Holders may be eligible for taxation at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income, provided that a holding period requirement (more than 60 days of ownership, without protection from the risk of loss, during the 121-day period beginning 60 days before the ex-dividend date) and certain other requirements are met. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends to its particular circumstances. However, if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year (see discussion above under “PFIC Consequences”), we will not be treated as a qualified foreign corporation, and therefore, the reduced capital gains tax rate described above will not apply.
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Dividends will be included in a U.S. Holder’s income on the date of the depositary’s receipt of the dividend. The amount of any dividend income paid in Cayman Islands dollars will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect to the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.
A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation with respect to any dividend it pays on Ordinary Shares that are readily tradable on an established securities market in the United States.
Sale, Exchange or Other Disposition of Our Ordinary Shares
Subject to the discussion above under “PFIC Consequences,” a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange, or other disposition of our Ordinary Shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange, or other disposition and such U.S. Holder’s adjusted tax basis in the Ordinary Shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on the date of sale, exchange, or other disposition, the Ordinary Shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of our Ordinary Shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes.
Medicare Tax
Certain U.S. Holders that are individuals, estates, or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of our Ordinary Shares. If you are a U.S. person that is an individual, estate, or trust, you are encouraged to consult your tax advisor regarding the applicability of this Medicare tax to your income and gains in respect to your investment in our Ordinary Shares.
Information Reporting and Backup Withholding
U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in our Ordinary Shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “PFIC Consequences,” each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than US$100,000 for our Ordinary Shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.
Dividends on and proceeds from the sale or other disposition of our Ordinary Shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (i) fails to provide an accurate U.S. taxpayer identification number or otherwise establish a basis for exemption, or (ii) is described in certain other categories of persons. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules.
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Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.
U.S. Holders should consult their own tax advisors regarding the backup withholding tax and information reporting rules.
| F. | Dividends and Paying Agents |
Not applicable.
| G. | Statement by Experts |
Not applicable.
| H. | Documents on Display |
We previously filed a registration statement on Form F-1 (Registration No. 333-274166) with the SEC to register the issuance and sale of our Ordinary Shares in our initial public offering. We also filed a registration statement on Form F-1 (Registration No. 333-280554) with the SEC to register for resale of the ELOC Shares.
We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers and are required to file reports and other information with the SEC. Specifically, we are required to file annually an annual report on Form 20-F within four months after the end of each fiscal year, which is September 30.
All information filed with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
| I. | Subsidiary Information |
Not applicable.
| J. | Annual Report to Security Holders |
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Credit Risk
On October 1, 2020, we adopted ASC 326. We estimate expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash, accounts receivable, deposits and prepayment and contract assets. The Company has designed their credit policies with an objective to minimize their exposure to credit risk.
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Our exposure to credit risk, which will cause a financial loss to us due to failure to discharge an obligation by the counterparties, relates primarily to our bank deposits (including our own cash at banks), accounts receivable, deposits and prepayment and contract assets. We consider the maximum exposure to credit risk equals to the carrying amount of these financial assets in the consolidated statement of financial position. As of September 30, 2025, the cash balance of $7,505,388 was substantially maintained at financial institutions in Hong Kong.
We believe that there is no significant credit risk associated with cash, which was held by reputable financial institutions in the jurisdictions where we and our subsidiaries are located.
Credit risks associated with account receivables, deposits and prepayment and contract assets are typically accounted for by creating an allowance for expected credit losses. Credit risks are mitigated by performing ongoing credit evaluations of customers’ financial condition. We have adopted a credit policy of dealing with creditworthy counterparties to mitigate the credit risk from defaults. We estimate the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current risk characteristics.
Foreign Currency Risk
We are a global provider of integrated cross-border logistics services and air freight forwarding services and our functional currency is the Hong Kong dollars. Most of our transactions during the periods presented in this annual report are denominated in Hong Kong dollars, Australian dollars and New Zealand dollars. Historically, our principal exposure to foreign currency fluctuations is mainly with respect to our expenses incurred denominated in Australian dollars and New Zealand dollars. For the years ended September 30, 2023, 2024 and 2025, we incurred approximately 54.3%, 62.0% and 70.7% of our cost of revenue, respectively, denominated in foreign currencies for customs clearance fees and local courier expenses. We do not use currency exchange contract to reduce the risk of adverse foreign currency movements, but we would closely monitor our exposure from foreign currency fluctuations. Foreign currency fluctuations had a positive impact on net income for the years ended September 30, 2023, 2024 and a negative impact on net income for the years ended September 30, 2025. For the years ended September 30, 2023 and 2024, the foreign exchange gains were $118,508 and $156,937, respectively. For the years ended September 30, 2025, the foreign exchange loss was $138,223.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.
Typically, we ensure that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| A. | Debt Securities |
Not applicable.
| B. | Warrants and Rights |
As of the date of this Annual Report, we had the following warrants and options outstanding:
| ● | Warrants issued to investors as follows: |
| ○ | Series A Warrants to purchase a total of 108,696 Ordinary Shares, at an exercise price of $28 per share; and | |
| ○ | Pre-Funded Warrants to purchase a total of 128,753 Ordinary Shares, at an exercise price of $0.0001 per share. |
| C. | Other Securities |
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
None. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the rights of securities holders.
Use of Proceeds
None.
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, management, including our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitations, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding our required disclosures.
Based on the foregoing, our chief executive officer and our chief financial officer have concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective due to the material weakness in our internal control over the financial statement closing process.
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Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of a company’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the financial statements.
Our management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our Company’s internal control over financial reporting as of September 30, 2025 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). However, as this annual report on Form 20-F does not include an attestation report of our registered public accounting firm regarding internal control over financial report and, by reasons of the material weakness that we identified in our internal control over financial reporting below, our management, with the participation of our chief executive officer and chief financial officer, could not conclude that our internal control over financial reporting was effective as of September 30, 2025.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm
This annual report on Form 20-F does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC where domestic and foreign registrants that are non-accelerated filers, which we are, and “emerging growth companies,” which we also are, are not required to provide the auditor attestation report.
Internal Control Over Financial Reporting
In connection with the audit of our combined and consolidated financial statements included in this annual report, we identified one material weakness in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness identified relates to the lack of sufficient competent financial reporting and accounting personnel with appropriate understanding of U.S. GAAP and SEC rules and regulations to address complex technical accounting issues and SEC reporting requirements. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.
To remedy the identified material weaknesses, we have implemented and will continue to implement several measures to improve our internal control over financial reporting, including: (i) recruiting additional employees and external consultants with extensive knowledge of U.S. GAAP and SEC financial reporting requirements within our finance and accounting department; (ii) setting up a comprehensive accounting policy, checklists, and procedure manual in accordance with U.S. GAAP and SEC financial reporting requirements; (iii) implementing new closing and reporting procedures to ensure the accuracy and adequacy of financial data for the preparation of financial statements; (iv) conducting regular and continuous U.S. GAAP training programs and webinars for our financial reporting and accounting personnel; (v) improving financial oversight function for handling complex accounting issues under U.S. GAAP; and (vi) continuously developing and enhancing our internal audit function for the financial reporting matters. To date, we have engaged external consultants with knowledge and expertise of U.S. GAAP and SEC financial reporting requirements to assist our finance and accounting department, and we have also conducted various trainings with our accounting personnel to enhance our financial reporting capabilities.
However, we cannot assure you that all these measures will be sufficient to remediate our material weakness in time, or at all. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Ordinary Shares — Any lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud, which may affect the market for and price of our Ordinary Shares.”
As a company with less than US$1.235 billion in revenue for the fiscal year 2025, 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.
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Changes in Internal Control over Financial Reporting
Other than the remediation of material weaknesses as described above, there has been no change in our internal controls over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Ms. San Ming Ling, an independent director (under the standards set forth in Nasdaq Stock Market Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act) and chair of our audit committee, is an audit committee financial expert.
ITEM 16B. CODE OF ETHICS
Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors, officers, and employees. Our code of business conduct and ethics is publicly available on our website at http://www.globavend.com/.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by ZH CPA, LLC, our principal external auditors, for the periods indicated.
| 2025 | 2024 | |||||||
| Audit fees(1) | $ | 186,923 | 187,077 | |||||
| Audit related service fees(2) | 30,000 | 30,000 | ||||||
| Tax fees(3) | - | - | ||||||
| All other fees(4) | - | - | ||||||
| 216,923 | 217,077 | |||||||
| (1) | “Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors for the audit of our annual financial statements. |
| (2) | “Audit related service fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors for the audit related services, including assistance with, review and consent of documents filed with the SEC. |
| (3) | “Tax fees” means the aggregate fees billed for professional services rendered by our principal auditors for tax compliance, tax advice and tax planning. |
| (4) | “All other fees” means the aggregate fees billed for professional services rendered by our principal auditors other than the professional services reported under “audit fees”, “audit-related fees” and “tax fees”. |
The policy of our audit committee is to pre-approve all audit and non-audit services provided by ZH CPA, LLC, including audit services and other services as described above, other than those for de minimis services which are approved by the audit committee prior to the completion of the audit.
The Audit Committee of the Board of Directors on an annual basis reviews audit and non-audit services performed by the independent auditors. All audit and non-audit services are pre-approved by the Audit Committee, which considers, among other things, the possible effect of the performance of such services on the auditors’ independence.
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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
ITEM 16G. CORPORATE GOVERNANCE
As a Cayman Islands exempted company listed on the Nasdaq Capital Market, we are subject to the Nasdaq Stock Market Rules corporate governance listing standards. However, Nasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Stock Market Rules. We have not relied on any home country practice exemption as of the date of this annual report. However, we may choose to follow certain home country practices in the future, which may cause our shareholders to be afforded less protection than they would otherwise enjoy under the Nasdaq Stock Market’s corporate governance listing standards applicable to U.S. domestic issuers. See “Item 3. Key Information—D. 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.”
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICY
We have
The policies include provisions for blackout periods, the establishment of Rule 10b5-1 trading plans, and certain pre-clearance procedures that our directors and officers, as well as directors and officers of our subsidiaries and/or affiliates, must observe prior to effecting any transaction in our securities.
We believe that these policies are reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our insider trading policy is filed as an exhibit to this annual report on Form 20-F.
ITEM 16K. CYBERSECURITY
The Company currently has
an informal cybersecurity policy.
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PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements of Globavend Holdings Limited and its subsidiaries are included at the end of this annual report.
ITEM 19. EXHIBITS
| Exhibit | ||
| Number | Description of Document | |
| 1.1* | Third Amended and Restated Memorandum and Articles of Association of the registrant | |
| 2.1 | Registrant’s Specimen certificate evidencing Ordinary Shares (incorporated herein by reference to Exhibit 4.1 to the Form F-1/A filed on October 6, 2023 (File No. 333-274166)) | |
| 2.2* | Description of Share Capital | |
| 4.1 | Form of Indemnification Agreement between the Registrant and its officers and directors (incorporated herein by reference to Exhibit 10.1 to the Form F-1 filed on August 23, 2023 (File No. 333-274166)) | |
| 4.2 | Employment Agreement between the registrant and Mr. Wai Yiu Yau, its director and chief executive officer (incorporated herein by reference to Exhibit 10.2 to the Form F-1 filed on August 23, 2023 (File No. 333-274166)) | |
| 4.3 | Form of Independent Director Agreement between the registrant and its independent directors (incorporated herein by reference to Exhibit 10.3 to the Form F-1 filed on August 23, 2023 (File No. 333-274166)) | |
| 4.4 | Employment Agreement between the registrant and Mr. Tsz Ngo Yu, its chief financial officer (incorporated herein by reference to Exhibit 10.4 to the Form F-1 filed on August 23, 2023 (File No. 333-274166)) | |
| 4.5 | Lease Contract, by and between Lu Xue Feng and Globavend (HK) Limited, dated as of November 10, 2023 (incorporated herein by reference to Exhibit 4.6 to the Form 20-F filed on January 30, 2024) | |
| 4.6 | Tenancy Agreement, by and between Wai Yiu Yau and Globavend (HK) Limited, dated as of February 4, 2025 (incorporated herein by reference to Exhibit 4.7 to the Form 20-F filed on February 12, 2025) | |
| 4.7 | Block Space Agreement between Qantas Airways Limited and Globavend (HK) Limited, dated as of December 20, 2022 (incorporated herein by reference to Exhibit 10.6 to the Form F-1/A filed on September 11, 2023 (File No. 333-274166)) | |
| 4.8* | Block Space Agreement between Qantas Airways Limited and Globavend (HK) Limited, dated as of February 1, 2024 | |
| 4.9* | Block Space Agreement between Qantas Airways Limited and Globavend (HK) Limited, dated as of January 9, 2025 | |
| 4.10* | Variation Agreement between Qantas Airways Limited and Globavend (HK) Limited, dated as of January 5, 2026 | |
| 4.11 | Form of Pre-Funded Warrant (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 6-K filed on July 1, 2025) | |
| 4.12 | Form of Series A Warrant (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 6-K filed on July 1, 2025) | |
| 4.13 | Form of Series B Warrant (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 6-K filed on July 1, 2025) | |
| 8.1* | List of Subsidiaries of the registrant | |
| 10.1 | Equity Purchase Agreement, by and between the registrant and Square Gate Capital Master Fund, LLC – Series 1, dated as of March 15, 2024 (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 6-K filed on March 25, 2024) | |
| 10.2 | Registration Rights Agreement, by and between the registrant and Square Gate Capital Master Fund, LLC – Series 1, dated as of March 15, 2024 (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 6-K filed on March 25, 2024) | |
| 10.3 | Form of Securities Purchase Agreement (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 6-K filed on July 1, 2025) | |
| 10.4 | Placement Agency Agreement, dated as of June 25, 2025, by and between the registrant and Univest Securities, LLC (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 6-K filed on July 1, 2025) | |
| 11.1 | Code of Business Conduct and Ethics of the registrant (incorporated herein by reference to Exhibit 99.7 to the Form F-1 filed on August 23, 2023 (File No. 333-274166)) | |
| 11.2* | Insider Trading Policy | |
| 12.1* | Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 12.2* | Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 13.1** | Certification by Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 13.2** | Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 97.1* | Clawback Policy | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
| * | Filed herewith |
| ** | Furnished herewith |
141
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| Globavend Holdings Limited | ||
| By: | /s/ Wai Yiu Yau | |
| Name: | Wai Yiu Yau | |
| Title: | Chief Executive Officer | |
Date: February 13, 2026
142
GLOBAVEND HOLDINGS LIMITED
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
| Reports of Independent Registered Public Accounting Firms (PCAOB # | F-2 |
| Consolidated Balance Sheets as of September 30, 2024 and 2025 | F-3 |
| Consolidated Statements of Operations and Comprehensive Income for the years ended September 30, 2023, 2024 and 2025 | F-4 |
| Consolidated Statements of Changes in Shareholders’ Equity for the years ended September 30, 2023, 2024 and 2025 | F-5 |
| Consolidated Statements of Cash Flows for the years ended September 30, 2023, 2024 and 2025 | F-6 |
| Notes to the Consolidated Financial Statements | F-7 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Globavend Holdings Limited
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Globavend Holdings Limited and its subsidiaries (the “Company”) as of September 30, 2025 and 2024, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ | |
| We have served as the Company’s auditor since 2022. | |
February 13, 2026 |
999 18th Street, Suite 3000, Denver, CO, 80202 USA Phone: 1.303.386.7224 Fax: 1.303.386.7101 Email: admin@zhcpa.us |
F-2
GLOBAVEND HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2024 AND 2025
(US$, except share data, or otherwise note)
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| US$ | US$ | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivable | ||||||||
| Amount due from a director | ||||||||
| Deposits and prepayment | ||||||||
| Tax recoverable | ||||||||
| Deferred costs | ||||||||
| Contract assets | ||||||||
| Total current assets | $ | $ | ||||||
| NON-CURRENT ASSETS | ||||||||
| Property, plant, equipment, net | $ | $ | ||||||
| Right-of-use assets, operating lease | ||||||||
| Deposits and prepayment | ||||||||
| Deposits – related party | ||||||||
| Total non-current assets | $ | $ | ||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related party | ||||||||
| Other payables and accrued liabilities | ||||||||
| Contract liabilities | ||||||||
| Amount due to a director | ||||||||
| Taxes payables | ||||||||
| Operating lease liabilities – related party | ||||||||
| Total current liabilities | $ | $ | ||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Commitments | ||||||||
| EQUITY | ||||||||
| Ordinary shares, $ | ||||||||
| Management shares, $ | ||||||||
| Subscription receivable | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated Other Comprehensive Income | ||||||||
| Retained earnings | ||||||||
| Total shareholders’ equity | $ | $ | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
| * |
See accompanying notes to the consolidated financial statements.
F-3
GLOBAVEND HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2024 AND 2025
(US$, except share data, or otherwise note)
| For the year ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Revenue | ||||||||||||
| Cost of revenue | ||||||||||||
| Cost of revenue – related party | ||||||||||||
| Cost of revenue | ||||||||||||
| Gross Profit | ||||||||||||
| Operating expenses: | ||||||||||||
| General and administrative expenses | ||||||||||||
| Total operating expenses | $ | $ | $ | |||||||||
| Income from operations | $ | $ | $ | |||||||||
| Other income: | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||
| Other income (expenses) | ( | ) | ||||||||||
| Total other income (expenses), net | ( | ) | ||||||||||
| Income before income taxes | $ | $ | $ | |||||||||
| Income taxes provision | ||||||||||||
| Net income attributable to Globavend Holdings Limited | $ | $ | $ | |||||||||
| Foreign currency translation adjustment | $ | $ | $ | |||||||||
| Comprehensive income | $ | $ | $ | |||||||||
| Earnings per share - Basic and diluted* | $ | $ | $ | |||||||||
| Weighted Average Basic and Diluted Number of Ordinary Shares Outstanding* | ||||||||||||
| * |
See accompanying notes to the consolidated financial statements.
F-4
GLOBAVEND HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2024 AND 2025
(US$, except share data, or otherwise note)
| Ordinary Shares* | Management Shares | Subscription | Additional paid-in | Accumulated
Other Comprehensive | Retained | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Receivable | capital | Income | Earnings | Total | ||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | - | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Net income for the year | - | - | ||||||||||||||||||||||||||||||||||
| Dividends declared | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
| Net income for the year | - | - | ||||||||||||||||||||||||||||||||||
| Share issued in initial public offering | ||||||||||||||||||||||||||||||||||||
| Shares issued to Square Gate relating to ELOC | - | |||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||
| Shares issued to Square Gate as incentive | ||||||||||||||||||||||||||||||||||||
| Shares issued related to the Offering in June 2025 | ||||||||||||||||||||||||||||||||||||
| Exercise of series B warrant | ( | ) | ||||||||||||||||||||||||||||||||||
| Management shares issued to Mr. Wai Yiu Yau | ( | ) | ||||||||||||||||||||||||||||||||||
| Net income for the year | - | - | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||||||
| * |
See accompanying notes to the consolidated financial statements.
F-5
GLOBAVEND HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2024 AND 2025
(US$, except share data, or otherwise note)
| For the year ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Non-cash adjustments: | ||||||||||||
| Depreciation of property, plant and equipment | ||||||||||||
| Non-cash operating lease expense | ||||||||||||
| Allowance for expected credit loss | ( | ) | ||||||||||
| Compensation to Square Gate | ||||||||||||
| Interest income from Director | ( | ) | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| (Increase) Decrease In: | ||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||
| Deposits and prepayment | ( | ) | ( | ) | ||||||||
| Deposits and prepayment – related party | ( | ) | ||||||||||
| Contract assets | ( | ) | ( | ) | ||||||||
| Increase (Decrease) In: | ||||||||||||
| Accounts payable | ( | ) | ||||||||||
| Accounts payable – related party | ( | ) | ( | ) | ||||||||
| Other payables and accrued liabilities | ( | ) | ||||||||||
| Contract liabilities | ||||||||||||
| Tax payables | ( | ) | ||||||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash provided by operating activities | $ | $ | $ | |||||||||
| Cash flows used in investing activities: | ||||||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Cash flows (used in) provided by financing activities: | ||||||||||||
| Dividends paid | $ | ( | ) | $ | $ | |||||||
| Payment of offering costs | ( | ) | ( | ) | ( | ) | ||||||
| Prepayment for financing services | ( | ) | ||||||||||
| Deposit paid to a director | ( | ) | ( | ) | ||||||||
| Payment of offering costs related to ELOC | ( | ) | ||||||||||
| Gross Proceeds from Offering | ||||||||||||
| Net borrowings from (repayment to) a director | ( | ) | ||||||||||
| Net cash (used in) provided by financing activities | $ | ( | ) | $ | $ | |||||||
| Net (decrease) increase in cash and cash equivalents | $ | ( | ) | $ | $ | |||||||
| Effect of changes in exchange rates | ||||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||
| Cash and cash equivalents at end of year | $ | $ | $ | |||||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||
| Interest received | ||||||||||||
| Income tax paid | ( | ) | ( | ) | ( | ) | ||||||
| Non-cash investing and financing activities | ||||||||||||
| Right-of-use assets obtained in exchange for new operating lease obligations | ||||||||||||
| Accrual of offering costs | ||||||||||||
| Ordinary shares issued for settlement of deferred financing costs and Shares issued as compensation for Square Gate | ||||||||||||
F-6
GLOBAVEND HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
| (a) | Organization |
Globavend Holdings Limited (the “Company”)
was incorporated under the laws of the Cayman Islands on
On May 24, 2023, Globavend Associates Limited (“Globavend BVI”) was incorporated under the laws of the British Virgin Islands. Globavend BVI is a wholly owned subsidiary of the Company, which was incorporated for the purposes of acting as intermediary holding companies of the Company’s operating entity.
Globavend (HK) Limited (“Globavend HK”) was incorporated under the laws of Hong Kong and commenced its operations since June 2016. Globavend HK provides integrated cross-border logistics services and air freight forwarding services with business spans Hong Kong, Australia and New Zealand.
Globavend Warehouse Limited (“Globavend Warehouse”) was incorporated under the laws of Hong Kong in September 2024. Globavend Warehouse was inactive during the reporting period.
Zhiyi International Logistics (Shenzhen) Limited (“Zhiyi”) was incorporated under the laws of the PRC and commenced its operations since May 2025. Zhiyi provides integrated cross-border logistics services with business spans the PRC, Australia and New Zealand.
| (b) | Principal activities |
The Company and its subsidiaries engage in provision of integrated cross-border logistics services and air freight forwarding services with networks across Hong Kong, Australia and New Zealand. The Company conduct its operations through its subsidiary in Hong Kong (the “operating subsidiary”).
The operating subsidiary mainly provides air freight forwarding services and integrated cross-border logistics services, which is one-stop logistics services including the provision of supporting transportation for freight forwarding purpose, storage of consignment, labelling of consignments, other related logistic services for freight forwarding purpose, freight management services, and delivery at destination.
Generally, the Company’s services are divided into integrated cross-border logistics services and air freight forwarding services.
The followings are the consolidated entities:
| Name | Date of Incorporation | Place of Incorporation | Percentage of effective ownership | Principal activities | |||||||
| Parent company | |||||||||||
| Globavend Holdings Limited | % | ||||||||||
| Wholly-owned subsidiaries | |||||||||||
| Globavend Associates Limited | % | ||||||||||
| Globavend (HK) Limited | % | ||||||||||
| Globavend Warehouse Limited | % | ||||||||||
| Zhiyi International Logistics (Shenzhen) Limited | % | ||||||||||
| Vault BRS LLC | % | ||||||||||
| Vault DAT Cayman | % | ||||||||||
F-7
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reorganization
On May 22, 2023, Globavend
Holdings Limited (“Globavend Holdings” or the “Company”) was incorporated in the Cayman Islands having an authorized
share capital of US$
Pursuant to the Company’s
reorganization (“Reorganization”) that took place on May 29, 2023, the former shareholder of Globavend HK, namely Mr. Wai
Yiu Yau transferred all the shares of, inter alia, Globavend HK to Globavend BVI in consideration of Globavend BVI allotting and issuing
Following such share swap,
Globavend HK became the Company’s indirectly owned subsidiaries through Globavend BVI, whereas Globavend Investments became the
controlling shareholders of the Company holding
The combination has been
treated as a corporate restructuring (“Reorganization”) of entities under common control and thus the current capital structure
has been retroactively presented in prior periods as if such structure existed at that time and in accordance with ASC 805-50-45-5, the
entities under common control are presented on a combined basis for all periods to which such entities were under common control. Since
all of the subsidiaries were under common control for the entirety of the years ended September 30, 2021, 2022 and 2023, the results of
these subsidiaries are included in the financial statements for both periods. After the Restructuring (“Reorganization”),
the Company has
On November 10, 2023,
the Company completed its IPO and listed its Ordinary Shares on the Nasdaq Capital Market under the symbol “GVH”. With
the above IPO, the Company received total gross proceeds of US$
On April 28, 2025, the
authorized share capital of the Company increased from US$
On June 26, 2025, the Company
raised an aggregate gross proceed of $
On July 2, 2025, the
board of directors of the Company, approved a reverse stock split that would consolidate every
On August 27, 2025, the
Company entered into a share subscription agreement with Wai Yiu Yau pursuant to which the Company has agreed to issue and allot, and
the Subscriber has agreed to subscribe for,
On September 2, 2025,
the authorized share capital of the Company be increased from US$
F-8
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include all accounts of the Company and its wholly owned subsidiaries (Collectively, the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the financial statements of the Company and its subsidiaries. All inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
Measurement of Credit Losses on Financial Instruments
The Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments”. This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.
The Company reviews accounts receivable and contract
assets on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances.
The loss-rate method is used to estimate the expected credit loss for accounts receivable and contract assets. The loss-rates are estimated
based on the age of the balances of accounts receivable, historical experience, current general economic conditions, future expectations
and customer specific quantitative and qualitative factors that may affect the customers’ ability to pay. The assessment of the
correlation among historical observed default rates, forecast economic conditions and expected credit losses is a significant estimate.
The amount of expected credit loss is sensitive to changes in circumstances and forecast economic conditions. The historical credit loss
experience and forecast of economic conditions may also not be representative of a customer’s actual default in the future. As of
September 30, 2024 and 2025, balance of allowance for expected credit loss was $
Use of Estimates
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates and differences could be material. Changes in estimates are recorded in the period they are identified.
Judgments, estimates and underlying assumptions are evaluated on an ongoing basis by management and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances and such changes are reflected in the assumptions when they occur.
Significant estimates required to be made by management include, but are not limited to, allowance of expected credit losses. Actual results could differ from those estimates.
F-9
The measurement of the expected credit loss allowance for financial assets measured at amortized cost is an area that requires the use of significant assumptions about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring expected credit loss, such as:
| ● | Assessing relevant historical and forward-looking quantitative and qualitative information; | |
| ● | Choosing appropriate models and assumptions for the measurement of expected credit loss. |
Risks and uncertainties
The main operations of the Company are located in Hong Kong. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in Hong Kong, as well as by the general state of the economy in Hong Kong. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in Hong Kong. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, such experience may not be indicative of future results.
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.
Following the Outbreak of COVID-19 (the “Outbreak”), a series of precautionary and control measures have been and will continue to be implemented in Hong Kong. The directors of the Company will keep continuous attention on monitoring the development of the Outbreak. Based on the currently available information, the directors of the Company consider that the Outbreak would not have a material financial impact on the Company’s overall operation and sales performance.
As an infectious disease, the Outbreak was first reported in late December 2019 and has since spread to various countries all over the world. On 11 March 2020, the World Health Organization announced that COVID-19 be characterized as a pandemic based on its assessment and the governments of different countries have taken drastic measures to curb the spread of the Epidemic. The Epidemic has not only endangered the health of citizens but has also disrupted the business operations of various enterprises. While the Company’s business operations are primarily based in Hong Kong, there was no significant impact on the Company’s business in 2023, 2024 and 2025.
Concentration risk
The risk is mitigated by the Company’s assessment of the level of concentration on its major customers and its ongoing monitoring of outstanding balances.
Concentration of major customers and suppliers:
For the year ended September 30, | ||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Major customers representing more than 10% of the Company’s revenues | ||||||||||||||||||||||||
| Customer A | $ | % | $ | % | $ | % | ||||||||||||||||||
| Customer B | % | % | % | |||||||||||||||||||||
| Customer C | % | % | % | |||||||||||||||||||||
| Customer D | % | % | % | |||||||||||||||||||||
| Total Revenues | $ | % | $ | % | $ | % | ||||||||||||||||||
F-10
| As of September 30, | ||||||||||||||||
| 2024 | 2025 | |||||||||||||||
| US$ | % | US$ | % | |||||||||||||
| Major customers of the Company’s accounts receivable, net | ||||||||||||||||
| Company A | $ | % | $ | % | ||||||||||||
| Company B | % | % | ||||||||||||||
| Company C | % | % | ||||||||||||||
| Company D | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| For the year ended September 30, | ||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Major suppliers representing more than 10% of the Company’s cost of revenue | ||||||||||||||||||||||||
| Supplier A | $ | % | $ | % | $ | % | ||||||||||||||||||
| Supplier B | % | % | % | |||||||||||||||||||||
| Panaicia Pty Ltd (note) | % | % | % | |||||||||||||||||||||
| Supplier C | % | % | % | |||||||||||||||||||||
| Supplier D | % | % | % | |||||||||||||||||||||
| Total Cost of Revenue | $ | % | $ | % | $ | % | ||||||||||||||||||
| As of September 30, | ||||||||||||||||
| 2024 | 2025 | |||||||||||||||
| US$ | % | US$ | % | |||||||||||||
| Major suppliers of the Company’s accounts payables, net | ||||||||||||||||
| Supplier A | $ | % | $ | % | ||||||||||||
| Supplier B | % | % | ||||||||||||||
| Panaicia Pty Ltd (note) | % | % | ||||||||||||||
| Supplier C | % | % | ||||||||||||||
| Supplier D | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
Note: Panaicia Pty Ltd is a related party of the Company, in which its sole director and sole shareholder is one of the shareholders of the Company, Mr. Wai Yiu Yau.
F-11
Foreign Currency Translation
The Company uses United State Dollar (“US$”) as its reporting currency. The Company’s operations are principally conducted in Hong Kong and the PRC where Hong Kong dollar and Renminbi (“RMB”) are the functional currencies.
Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currency at the prevailing rates of exchange at the balance date. The resulting exchange differences are reported in the consolidated statements of operations and comprehensive income.
The exchanges rates used for translation from
Hong Kong dollar to USD was
| For the year ended September 30, |
||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Year end HKD: US$ exchange rate | ||||||||||||
| Year end RMB: US$ exchange rate | ||||||||||||
| Year average HKD: US$ exchange rate | ||||||||||||
| Year average RMB: US$ exchange rate | ||||||||||||
Credit Risk
On October 1, 2020, the Company adopted ASC 326. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable, deposits and contract assets. The Company has designed their credit policies with an objective to minimize their exposure to credit risk.
The exposure to credit risk, which will cause
a financial loss to us due to failure to discharge an obligation by the counterparties, relates primarily to our bank deposits (including
our own cash at banks), accounts receivable, deposits and contract assets. The Company considers the maximum exposure to credit risk equals
to the carrying amount of these financial assets in the consolidated statement of financial position. As of September 30, 2024 and 2025,
the cash balances of $
The Company believes 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 Company has adopted a credit policy of dealing with creditworthy counterparties to mitigate the credit risk from defaults. The credit exposure is controlled by counterparty limits that are reviewed and approved by the senior management of the Company periodically. The management team periodically evaluates the creditworthiness of the existing customers in determining an allowance for expected credit loss primarily based on many factors, including the age of the balance, customer’s historical payment history, its current creditworthiness and current or future economic trends.
F-12
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Foreign Exchange Risk
The reporting currency of the Company is U.S.
Dollar. To date the majority of the revenues and costs are denominated in Hong Kong Dollar, Australian dollars and New Zealand. Historically,
our principal exposure to foreign currency fluctuations is mainly with respect to our expenses incurred denominated in Australian dollars
and New Zealand dollars. Foreign currency fluctuations had a slightly positive impact on net income for the years ended September 30,
2023 and 2024 and had a slightly negative impact on net income for the year ended September 30, 2025. For the years ended September 30,
2023 and 2024, the foreign exchange gains were $
The following table presents the potential effects on net foreign exchange gains or losses of a hypothetical change of +/- 5% in the exchange rate:
| For the year ended September 30, 2024 | For the year ended September 30, 2025 | |||||||||||||||||||||
| Net Foreign exchange gains (US$) | Impact on net foreign exchange gains/(losses) +5% (US$) | Impact on net foreign exchange gains/(losses) -5% (US$) | Net Foreign exchange loss (US$) | Impact on net foreign exchange gains/(losses) +5% (US$) | Impact on net foreign exchange gains/(losses) -5% (US$) | |||||||||||||||||
| ( | ) | ( | ) | |||||||||||||||||||
Fair Value of Financial Instruments
The Company applies the provisions of ASC 820, Fair Value Measurements and Disclosures, to the financial instruments that are required to be carried at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy based upon observable and non-observable inputs that prioritizes the information used to develop our assumptions regarding fair value. Fair value measurements are separately disclosed by level within the fair value hierarchy.
| ● | Level 1—defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; | |
| ● | Level 2—defined as inputs other than quoted prices in active markets, that are either directly or indirectly observable; and | |
| ● | Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
F-13
The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, deposit, other receivable, accounts payable, other payables, lease liabilities and accrued liabilities and due to (from) a director.
The carrying value of cash and cash equivalents, accounts receivable, deposit, other receivable, accounts payable, other payables and accrued liabilities and due to (from) a director approximate fair value because of the short-term nature of these items. For lease liabilities, fair value approximates their carrying value at the year-end, as the interest rates used to discount the host contracts approximate market rates.
The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2025 and 2024.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash held
in banks, which are highly liquid and have original maturities of three months or less and are unrestricted as to withdrawal or use. The
Company maintains all bank accounts in Hong Kong. Cash balances in bank accounts in Hong Kong are protected under Deposit Protection Scheme
in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up to HKD
Accounts Receivable, net
Accounts receivables are carried at net realizable
value. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as
to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers
many factors, including the age of the balance, customer’s historical payment history, its current creditworthiness and current
or future economic trends. Accounts are written off after exhaustive efforts at collection. The Company only grants credit terms to established
customers who are deemed to be financially responsible. Credit periods to customers are normally within 7 to 90 days after customers received
services provided by the Company. If accounts receivables are to be provided for, or written off, they would be recognized in the consolidated
statements of operations and comprehensive income within operating expenses. The Company used loss-rate methods to estimate allowance
for credit loss. For those past due balances over 1 year and other higher risk receivables identified by management are reviewed individually
for collectability. In establishing an allowance for credit losses, the Company use reasonable and supportable information, which is based
on historical collection experience, the financial condition of its customers and assumptions for the future movement of different economic
drivers and how these drivers will affect each other. Loss-rate approach is based on the historical loss rates and expectations of future
conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined
that the amounts will not be collected or if a settlement with respect to a disputed receivable is reached for an amount that is less
than the carrying value. Balance of allowance for expected credit loss for accounts receivables was $
F-14
Related Party
In general, related parties exist when there is a relationship that offers the potential for transactions at less than arm’s-length, favorable treatment, or the ability to influence the outcome of events different from that which might result in the absence of that relationship. A related party may be any of the following: a) an affiliate, which is a party that directly or indirectly controls, is controlled by, or is under common control with another party; b) a principle owner, owner of record or known beneficial owner of more than 10% of the voting interest of an entity; c) management, which are persons having responsibility for achieving objectives of the entity and requisite authority to make decision; d) immediate family of management or principal owners; e) a parent Company and its subsidiaries; and f) other parties that have ability to significant influence the management or operating policies of the entity. The Company discloses all significant related party transactions.
Contract Assets and contract liabilities
Contract assets include billed and unbilled amounts
resulting from in-transit shipments, as the Company has an unconditional right to payment only when services have been completed (i.e.,
shipments have been delivered). Amounts do not exceed their net realizable value. Contract assets are generally classified as current
and the full balance is converted within
Contract assets were $
Contract liabilities consist of payment received from customers in excess of revenue recognized.
Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.
As of September 30, 2025, the contract liabilities balance is classified as current based on the timing of when we expect to complete the tasks required for the recognition of revenue.
Deferred costs
Deferred offering costs consist principally of
incremental cost directly attributable to the Company’s share offering incurred by the Company, such as underwriting, legal, accounting,
consulting, printing, and other registration related costs in connection with the offering of the Company’s ordinary shares. Such
costs are deferred until the closing of the offering, at which time the deferred costs are offset against the offering proceeds. In the
event the offering is unsuccessful or aborted, the costs will be expensed. As of September 30, 2024 and September 30, 2025, deferred costs
were $
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost less accumulated depreciation and impairment, and include expenditure that substantially increases the useful lives of existing assets. Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred, whereas significant renewals and betterments are capitalized.
Depreciation is provided over their estimated
useful lives with an estimated residual value of the assets, using the straight-line method.
| Fixtures, furniture, equipment | ||
| Leasehold improvements |
When assets are sold or retired, their costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from their disposal is recognized in the period of disposition as an element of other income.
F-15
Impairment of Long-Lived Assets
Long-lived assets are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable in accordance with FASB ASC 360, “Property, Plant and Equipment”.
In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in accordance with FASB ASC 360-10-15. To the extent that estimated future, undiscounted cash inflows attributable to the asset, less estimated future, undiscounted cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value. Assets to be disposed of and for which there is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying value or fair value less costs to sell.
There was impairment loss recognized for the years ended September 30, 2023, 2024 and 2025.
Lease
The Company adopted this ASU and related amendments
as of October 1, 2020 under the modified retrospective approach and elected to adopt the following lease policies in conjunction with
the adoption of ASU 2016-02: the Company elected to apply the package of practical expedients for existing arrangements entered into prior
to October 1, 2021 to not reassess (a) whether an arrangement is or contains a lease, (b) the lease classification applied to existing
leases, and (c) initial direct costs. No cumulative-effect adjustment to retained earnings was required upon adoption of Topic 842 because
payments made under operating leases are also recognized as an expense on a straight-line basis over the lease term prior to the adoption
of ASC 842. The Company makes an accounting policy election not to separate non-lease components to measure the lease liability and lease
asset. For operating leases with a term of
Operating leases
Upon adoption of ASC 842, the lease liabilities are recognized upon lease commencement for operating leases based on the present value of lease payments over the lease term, operating leases are recognized as right-of-use assets (“ROU”) and lease liabilities in the consolidated balance sheets if the initial lease term is greater than 12 months. For leases with an initial term of 12 months or less the Company recognizes those lease payments on a straight-line basis over the lease term.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. Lease expense is recognized on a straight-line basis over the lease term and are included in general and administrative (“G&A”) expenses.
Revenue Recognition
The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation.
F-16
Revenue may be recognized at a point in time or over time following the timing of satisfaction of the performance obligation. If a performance obligation is satisfied over time, revenue is recognized based on the percentage of completion reflecting the progress towards complete satisfaction of that performance obligation.
The Company’s revenues are primarily from the provision of (i) integrated cross-border logistics services, which including supporting transportation for freight forwarding purpose, storage of consignment, labelling of consignments, other related logistic services for freight forwarding purpose, freight management services, and delivery at destination, and (ii) air freight forwarding services.
Integrated cross-border logistics services
In general, each logistics order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed upon transaction price exists. The transaction price is typically fixed and not contingent upon the occurrence or non-occurrence of any other event. The transaction price is generally due 7 to 90 days from the date of invoice. The Company’s logistics services provide for the arrangement of the movement of shipments to a customer’s destination. The logistics services, including certain ancillary services, such as loading/unloading and customs clearance, that are provided to the customer represent a single performance obligation as these promises aren’t distinct in the context of the contract. This performance obligation is satisfied over time and recognized in revenue upon the transfer of control of the services over the requisite transit period as the customer’s goods move from origin to destination. The Company determines the period to recognize revenue in transit based upon the departure date and the delivery date, which may be estimated if delivery has not occurred as of the reporting date. Determination of the transit period and the percentage of completion of the transportation as of the reporting date requires management to make judgments that affect the timing of revenue recognition. The Company has determined that revenue recognition over the transit period provides a reasonable estimate of the transfer of services to its customers as it depicts the pattern of the Company’s performance under the contracts with its customers.
Air freight forwarding services
The Company also provides air freight forwarding services by purchasing transportation services from direct carriers or other freight forwarders and reselling those services to its customers. The contracts with customers generally contain a single performance obligation. The Company recognizes revenue from this performance obligation at a point in time, which is the completion of the services.
The Company uses independent contractors and third-party carriers in the performance of its logistics and air freight forwarding services. The Company evaluates who controls the logistics and air freight forwarding services to determine whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party. The Company determined it acts as the principal for its logistics and air freight forwarding services performance obligation since it is in control of establishing the prices for the specified services, managing all aspects of the logistics and air freight forwarding process, and assuming the risk of loss for delivery and collection. Such logistics and air freight forwarding services revenue is presented on a gross basis in the consolidated statements of operations and comprehensive income.
A summary of the Company’s gross revenues disaggregated by major service lines and timing of revenue recognition for the years ended September 30, 2023, 2024 and 2025, respectively, are as follow:
| Year ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Integrated cross-border logistics services | $ | $ | $ | |||||||||
| Air freight forwarding services | ||||||||||||
| Total | $ | $ | $ | |||||||||
F-17
Cost of revenue
Cost of revenue consists primarily of cargo space charged by airlines or other freight forwarders and ancillary logistics services fee including costs of custom handling services, last mile carriage, warehouse labor costs and warehouse packaging.
General and Administrative Expenses
General and administrative expenses include salaries and employee benefits, depreciation for fixture, furniture and office equipment and ROU assets, legal and professional fees, travel and entertainment, insurance expenses, audit fees, bank charges, credit loss expense and other office expenses.
Income Taxes
The Company accounts for income taxes following the liability method pursuant to FASB ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in income in the period that includes the enactment date.
The Company also follows FASB ASC 740, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of September 30, 2024 and 2025, the Company did not have a liability for unrecognized tax benefits. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company’s historical tax years will remain open for examination by the local authorities until the statute of limitations has passed.
Earnings per share
The Company calculates earnings per share in accordance with ASC Topic 260 “Earnings per Share.” Basic earnings per share is computed by dividing the net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential ordinary shares equivalents had been issued and if the additional common shares were dilutive. As of September 30, 2023, 2024 and 2025, there were dilution impact.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
As of September 30, 2024 and 2025, the Company
had a banking facility arrangement for a bank guarantee line with maximum amount of HK$
F-18
Segment Reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s business segments.
The Company’s chief operating decision maker, Mr. Wai Yiu Yau, is the director, who reviews the financial information of each separate operating segment when making decisions about allocating resources and assessing the performance of the segment. The Company has determined that it has a single operating segment for purposes of allocating resources and evaluating financial performance; accordingly, the Company does not provide additional segment reporting in these accompanying notes.
Government Grant
Government grants are accounted for by analogy to ASC 958-605, Contributions Received and Contributions Made. Grant proceeds are not recognized in income until all conditions specified by the granting authority are substantially met. Amounts received in advance of satisfying grant conditions are recorded as government grant liability Once the conditions are satisfied the amounts are recognized in income within other income (or as a reduction of the related expenses).
In 2023, the Company successfully applied for funding support from the Employment Support Scheme, set up by the Hong Kong Government, to provide financial support to enterprises to retain their employees who may otherwise be made redundant.
In 2025, the Company successfully applied for the Dedicated Fund on
Branding, Upgrading and Domestic Sales (“BUD Fund”) (Mainland Programme). This fund is designed to assist Hong Kong enterprises
in developing brands, upgrading and restructuring operations, and promoting domestic sales in Mainland China to enhance competitiveness
and facilitate business development. As of September 30, 2025, the Company recognized a government grant liability of $
For the years ended September 30, 2023 and 2024,
government grants in the amounts of $
Recently Issued Accounting Pronouncements
The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable is presented net of allowance for credit loss:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for expected credit loss | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The movement of allowances for credit loss is as follow:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Balance at beginning of the year | $ | ( | ) | $ | ( | ) | ||
| Increase (reversal) | ( | ) | ||||||
| Balance at ending of the year | $ | ( | ) | $ | ( | ) | ||
F-19
NOTE 4 – DEPOSITS AND PREPAYMENT
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Deposits and prepayment classified as non-current assets: | ||||||||
| Trade deposit | $ | $ | ||||||
| Financing service deposit (note) | ||||||||
| Prepaid accounting service fee (note) | ||||||||
| Prepaid financing service fee (note) | ||||||||
| Deposits paid for purchase of property, plant and equipment | ||||||||
| Total deposits classified as non-current assets | $ | $ | ||||||
| Deposit – related party classified as non-current assets: | ||||||||
| Deposit for operating lease arrangement | ||||||||
| Total deposit – related party classified as non-current assets | $ | $ | ||||||
| Deposits and prepayment classified as current assets: | ||||||||
| Prepaid insurance expenses | $ | $ | ||||||
| Prepaid logistics costs | ||||||||
| Prepaid accounting service | ||||||||
| Financial service deposit (note) | ||||||||
| Utility and other deposit | ||||||||
| Total deposits and prepayment classified as current assets | $ | $ | ||||||
Note: During the fiscal year ended September 30, 2025, such balances
were fully offset against the $
F-20
NOTE 5 – CONTRACT ASSETS
Contract assets are presented net of allowance for credit loss:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Contract assets | $ | $ | ||||||
| Less: allowance for expected credit loss | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The movement of allowances for credit loss is as follow:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Balance at beginning of the year | $ | ( | ) | $ | ( | ) | ||
| Increase (Reversal) | ( | ) | ||||||
| Balance at ending of the year | $ | ( | ) | $ | ( | ) | ||
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
As of September 30, 2024 and 2025, property, plant and equipment, net consisted of the following:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Fixture, Furniture and Equipment | $ | $ | ||||||
| Leasehold improvement | ||||||||
| Total property plant and equipment, at cost | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property, plant and equipment, net | $ | $ | ||||||
Depreciation expenses for the years ended September
30, 2023, 2024 and 2025 were $
F-21
NOTE 7 – OPERATING LEASES
The Company has one operating lease for office
space and warehouse with lease terms of
As of September 30, 2025, the operating lease arrangement of the office and warehouse on 9th floor of Tsuen Wan Industrial Centre was a related party transaction with Mr. Wai Yiu Yau, a director of the Company.
As of September 30, 2024 and 2025, operating lease consist of the following:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Right-of-use assets, costs | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Modification | ||||||||
| Disposal due to early termination | ( | ) | ||||||
| Right-of-use assets, net | $ | $ | ||||||
As of September 30, 2024 and 2025, consist of the following:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Operating lease liabilities - current portion | $ | $ | ||||||
| Operating lease liabilities - non-current portion | ||||||||
| Total | $ | $ | ||||||
F-22
During the years ended September 30, 2023, 2024
and 2025, the Company incurred total operating lease expenses of $
Other lease information is as follows:
| As of September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
| Operating cash flows used in operating leases | $ | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | $ | |||||||||
| Weighted-average remaining lease term - operating leases | ||||||||||||
| Weighted-average discount rate - operating leases | % | % | % | |||||||||
The following is a maturity analysis of the annual undiscounted cash flows for operating lease liabilities as of September 30, 2024 and 2025:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Year 1 | $ | $ | ||||||
| Total lease payments | $ | $ | ||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Total operating lease liabilities, net of interest | $ | $ | ||||||
NOTE 8 – OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities are summarized as follow:
| As of September 30, | ||||||||
| 2024 | 2025 | |||||||
| Accrued staff salaries | $ | $ | ||||||
| Accrued administrative expenses | ||||||||
| Accrued offering costs | ||||||||
| Government grant liability | ||||||||
| Other payables | ||||||||
| Total | $ | $ | ||||||
NOTE 9 – SEGMENT INFORMATION
The Company follows FASB ASC Topic 280, Segment
Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments
and evaluating their performance.
F-23
Based on the management’s assessment, the
Company determined that it has only
Information for the Company’s breakdown of integrated cross-border logistics revenue destination for the years ended September 30, 2023, 2024 and 2025 are as follows:
| For the year ended September 30, | ||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||
| USD | USD | USD | ||||||||||||||||||||||
| Australia | $ | % | $ | % | $ | % | ||||||||||||||||||
| New Zealand | % | % | % | |||||||||||||||||||||
| Total integrated cross-border logistics revenue | $ | % | $ | % | $ | % | ||||||||||||||||||
NOTE 10 – OTHER INCOME (EXPENSES)
For the year ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Foreign exchange gains/ (losses) | ( | ) | ||||||||||
| Miscellaneous income | ||||||||||||
| Total | $ | $ | $ | ( | ) | |||||||
NOTE 11 – GENERAL AND ADMINISTRATIVE EXPENSES
| Years ended September 30 | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Staff costs | $ | $ | $ | |||||||||
| Audit fees | ||||||||||||
| Travel expenses | ||||||||||||
| Legal and professional fees | ||||||||||||
| Insurance | ||||||||||||
| Depreciation charge and amortization of right-of-use assets | ||||||||||||
| Allowance (reversal) for expected credit loss | ( | ) | ||||||||||
| Others | ||||||||||||
| $ | $ | $ | ||||||||||
F-24
NOTE 12 – INCOME TAXES
Cayman Islands and British Virgin Islands (“BVI”)
The Company is incorporated in the Cayman Islands and several of its wholly-own subsidiaries are incorporated in BVI. Under the current laws of the Cayman Islands and the BVI, these entities are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands and the BVI.
The PRC
The Company’s subsidiary incorporated in
the PRC is governed by the income tax laws of the PRC, and the income tax provisions in respect to operations in the PRC are calculated
at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect
thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises
(the “FIE”) are usually subject to a unified
Hong Kong
On March 21, 2018, the Hong Kong Legislative Council
passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduces the two-tiered profits tax rates regime.
The Bill was signed into law on March 28, 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the
first HK$
For the years ended September 30, 2023, 2024 and
2025, Hong Kong Government allowed tax reduction of
For the years ended September 30, 2023, 2024 and 2025, the Company generated substantially all of its taxable income in the Hong Kong. The tax expenses records in the Company’s result of operations are almost entirely attributable to income earned in the Hong Kong. Should the Company’s operations expand or change in the future, where the Company generates taxable income in other jurisdictions, the Company’s effective tax rates may substantially change.
Significant components of the provision for income taxes are as follows:
| For the year ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Hong Kong profit tax: | ||||||||||||
| - Current income tax | $ | $ | $ | |||||||||
| - Tax Concession | ( | ) | ( | ) | ( | ) | ||||||
| Income tax expenses | $ | $ | $ | |||||||||
The effective tax rates on income before income
taxes for the years ended September 30, 2023, 2024 and 2025 was
No provision for deferred taxation has been made as there were no material temporary difference at reporting period end date.
F-25
Reconciliation between the income tax expenses computed by applying the BVI statutory tax rate to income before income taxes and actual provision were as follows:
| Year ended September 30, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| (Loss) before income tax – Cayman and BVI entities | ( | ) | ||||||||||
| (Loss) before income tax – PRC entities | ( | ) | ||||||||||
| Income before income tax – Hong Kong entity | ||||||||||||
| Tax expenses at the BVI statutory income tax rate | ||||||||||||
| Tax effect of rate differences in various jurisdictions | ||||||||||||
| Tax effect of provision (reversal) for expected credit loss | ( | ) | ||||||||||
| Tax effect of depreciation allowance | ( | ) | ( | ) | ||||||||
| Tax effect of non-deductible expenditure | ||||||||||||
| Tax effect of deductible income | ( | ) | ( | ) | ||||||||
| Tax concession | ( | ) | ( | ) | ( | ) | ||||||
| Additional tax reduction related to two-tiered profits tax regime | ( | ) | ( | ) | ( | ) | ||||||
| Income tax expense | ||||||||||||
NOTE 13 – RELATED PARTY TRANSACTIONS
(a)
| Existing Relationship with the Company | ||
| Panaicia Pty Ltd | ||
| Prezario UNO Pty Ltd | ||
| Mr. Wai Yiu Yau |
(b)
| As of September 30, | ||||||||||
| Deposit and prepayment – related parties: | Note | 2024 | 2025 | |||||||
| Mr. Wai Yiu Yau | (1) | $ | $ | |||||||
| Total | $ | $ | ||||||||
| As of September 30, | ||||||||||
| Accounts payable – related party: | Note | 2024 | 2025 | |||||||
| Panaicia Pty Ltd | (2) | $ | $ | |||||||
| Prezario UNO Pty Ltd | ||||||||||
| Total | $ | $ | ||||||||
| As of September 30, | ||||||||||
| Amount due from (to) a director: | Note | 2024 | 2025 | |||||||
| Mr. Wai Yiu Yau | (3) | $ | ( | ) | $ | |||||
| Total | $ | ( | ) | $ | ||||||
Notes:
| 1 | |
| 2 | |
| 3 |
F-26
(c) Summary of Related Party Transactions:
A summary of trade transactions with related parties for years ended September 30, 2023, 2024 and 2025 are listed below:
| For the year ended September 30, | ||||||||||||
| Last mile delivery cost charged by related parties: | 2023 | 2024 | 2025 | |||||||||
| Panaicia Pty Ltd | $ | $ | $ | |||||||||
| Prezario UNO Pty Ltd | ||||||||||||
| Total | $ | $ | $ | |||||||||
| For the year ended September 30, | ||||||||||||
| Salaries paid to related parties: | 2023 | 2024 | 2025 | |||||||||
| Mr. Wai Yiu Yau | $ | $ | $ | |||||||||
| Mr. Chun Lin Yau | ||||||||||||
| Ms. Lai Ching Ng | ||||||||||||
| Total | $ | $ | $ | |||||||||
| For the year ended September 30, | ||||||||||||
| Rental expense related to related party lease: | 2023 | 2024 | 2025 | |||||||||
| Mr. Wai Yiu Yau | $ | $ | $ | |||||||||
| Total | $ | $ | $ | |||||||||
| For the year ended September 30, | ||||||||||||
| Interest income from related party: | 2023 | 2024 | 2025 | |||||||||
| Mr. Wai Yiu Yau | $ | $ | $ | |||||||||
| Total | $ | $ | $ | |||||||||
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Contingencies
The Company accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines.
For the year ended September 30, 2023, IATA has cancelled the bank guarantee requirement and the bank guarantee has been released with the principal bank of the Company.
As of September 30, 2024 and 2025, a bank provided guarantee of and , respectively, for covering the performance of obligations of the Company.
We have confirmed that as of September 30, 2024 and 2025 and as at the date of the annual report, no enforcement of bank guarantees was made by our suppliers against us. The Company’s management is of the opinion that there are no contingencies to account for.
Commitments
As at September 30, 2025, save as disclosed in note 7 in the consolidated financial statements, the Company did not have any significant capital and other commitments.
F-27
NOTE 15 – ORDINARY SHARES AND STRUCTURE SECTION
Globavend Holdings Limited was incorporated under the laws of the Cayman
Islands on May 22, 2023. As of September 30, 2024 and 2025, the Company was authorized to issue up to
Initial public offering
On November 8, 2023, the Company completed the
initial public offering and listed its ordinary shares on the Nasdaq Capital Market under the symbol “GVH”, and raised approximately
US$
ELOC Offering
On March 15, 2024, the Company entered into an
equity purchase agreement (the “ELOC Purchase Agreement”) with Square Gate Capital Master Fund, LLC – Series 1, a Delaware
limited liability company (the “Investor”), pursuant to which the Investor has committed to purchase up to $
On November 11, 2024, the Company issued
The June 2025 Offering
On June 26, 2025, the Company entered into an underwriting agreement
with Univest Securities, LLC, pursuant to which the Company sold (i)
Each Series A was issued with an initial exercise
price of $
Each Series B Warrant was issued with an exercise
price of $
The Company evaluated the Warrants under the guidance of ASC 470-20, “Debt with Conversion and Other Options, as amended by ASU 2020-06” and ASC 815, “Derivatives and Hedging.” The Company determined that the Series B warrant met the criteria for equity classification and the Series A warrant met the criteria classification under ASC 815-40. Accordingly, the relative fair value of the Series B warrant was recorded as a component of additional paid-in capital on the issuance date. The Series A warrants were initially recognized as liabilities at fair value upon issuance and remeasured at each reporting date, with changes in fair value recognized in the consolidated statements of operations.
The estimated fair value of both Series A warrants and Series B warrants
are immaterial and close to at the issuance.
| Series A Warrants | Series B Warrants | |||||||
| No. of warrants | ||||||||
| Risk-free rate | % | % | ||||||
| Estimated volatility rate | % | % | ||||||
| Dividend yield rate | % | % | ||||||
| Spot price of underlying ordinary shares | ||||||||
| Initial exercise price | ||||||||
| Expire date | ||||||||
| Term (in years) | ||||||||
F-28
The Company applied the residual value method
to allocate the gross proceeds ($
| Ordinary share | Series A Warrants | Series B Warrants | ||||||||||
| Gross proceeds of the 2025-06 Offering | $ | $ | $ | |||||||||
Pursuant to the 2025-05 Offering, the Company
issued
As of July 24, 2025 and September 30, 2025, all Series B warrants have
been fully exercised and
As of September 30, 2025,
2025 Reverse Stock Split
On July 2, 2025, the board of directors of the Company, approved a
reverse stock split that would consolidate every
Share subscription agreement
On August 27, 2025, the Company entered into
a share subscription agreement with Wai Yiu Yau pursuant to which the Company has agreed to issue and allot, and the Subscriber has agreed
to subscribe for,
Increase in share capital
On September 2, 2025, the authorized share capital of the Company was
increased from US$
NOTE 16 – SUBSEQUENT EVENTS
The Company has assessed all events from September 30, 2025, up through February 13, 2026, which is the date that these consolidated financial statements are available to be issued, unless as disclosed below, there are not any material subsequent events that require disclosure in these consolidated financial statements.
On November 12, 2025 and November 21, 2025, Vault BRS and Vault Cayman were incorporated under the laws of Delaware, United States and the Cayman Islands, respectively. Vault BRS is a direct wholly owned subsidiary of Globavend Holdings and wholly owns Vault Cayman. The Dormant Subsidiaries were established for further development of our business and are currently dormant.
On December 31, 2025, the Company priced a registered
direct offering of
F-29
