Filed 2025-07-15 · Period ending 2025-03-31 · 59,005 words · SEC EDGAR
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# King Resources, Inc. (KRFG) — 10-K
**Filed:** 2025-07-15
**Period ending:** 2025-03-31
**Accession:** 0001683168-25-005108
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/774415/000168316825005108/)
**Origin leaf:** 0ed052924c0bc3f92b373214c83c2220fdd63ae91779b6467743b8e891c4ccce
**Words:** 59,005
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**Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
**FORM 10-K**
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended **March 31, 2025**
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: **000-56396**
****
**ONESOLUTION TECHNOLOGY INC.**
(Exact name of registrant as specified in its charter)
|
Delaware |
13-3784149 | |
|
(State or other jurisdiction of |
(I.R.S. Employer | |
|
incorporation or organization) |
Identification No.) | |
**Unit 1813, 18/F, Fo Tan Industrial Centre** ****
**26-28 Au Pui Wan Street** ****
**Fo Tan, Hong Kong**
(Address
of principal executive offices and zip code) 00000
Registrants telephone number, including
area code: **+ 852 3585 8905**
****
Securities registered pursuant to Section 12(b)
of the Act: None
|
Title of each class |
Name of each exchange on which registered | |
|
N/A |
N/A | |
Securities registered pursuant to Section 12(g)
of the Act:
Common Stock, par value $0.001 per share
Title of each class
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes
No
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes No
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or any emerging
growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting
company and emerging growth company in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
Accelerated filer | |
|
Non-accelerated filer |
Smaller reporting company | |
|
|
Emerging growth company | |
If an emerging growth company,
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.
Indicate by check mark whether
the registrant has filed a report on and attestation to its managements 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. YesNo
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 registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
Indicate the number of shares
outstanding of each of the registrants classes of common stock, as of the latest practicable date.
|
Common Stock |
|
Outstanding at July
8, 2025 | |
|
Common Stock, $0.0001 par value per share |
|
6,650,786,818 shares | |
The aggregate market value
of the 1,972,285,596 shares of Common Stock of the registrant held by non-affiliates on September 30, 2024, the last business day of the
registrants second quarter, computed by reference to the closing price reported by the Over-the-Counter Bulletin Board on that
date is $394,457.12.
**DOCUMENTS INCORPORATED BY REFERENCE: None**
****
| | | | |
**TABLE OF CONTENTS**
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Page | |
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Part I |
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Item 1 |
Description of Business |
1 | |
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Item 1A |
Risk Factors |
16 | |
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Item 1B |
Unresolved Staff Comments |
34 | |
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Item 1C |
Cybersecurity |
34 | |
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Item 2 |
Properties |
35 | |
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Item 3 |
Legal Proceedings |
35 | |
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Item 4 |
Mine Safety Disclosures |
35 | |
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Part II |
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| |
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Item 5 |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
36 | |
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Item 6 |
Reserved |
37 | |
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Item 7 |
Managements Discussion and Analysis of Financial Condition and Results of Operation |
37 | |
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Item 7A |
Quantitative and Qualitative Disclosures about Market Risk |
43 | |
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Item 8 |
Financial Statements and Supplementary Data |
43 | |
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Item 9 |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
44 | |
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Item 9A |
Controls and Procedures |
44 | |
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Item 9B |
Other Information |
45 | |
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Item 9C |
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections |
45 | |
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Part III |
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| |
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Item 10 |
Directors and Executive Officers and Corporate Governance |
46 | |
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Item 11 |
Executive Compensation |
48 | |
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Item 12 |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
52 | |
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Item 13 |
Certain Relationships and Related Transactions, and Director Independence |
58 | |
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Item 14 |
Principal Accounting Fees and Services |
59 | |
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Part IV |
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Item 15 |
Exhibits, Financial Statement Schedules |
60 | |
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Item 16 |
Form 10-K Summary |
60 | |
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Signatures |
|
61 | |
****
| | i | | |
****
**INTRODUCTORY COMMENT**
****
****
We are not a Hong Kong operating
company but a Delaware holding company with operations conducted through our wholly owned subsidiaries: (i) OneSolution Holdings Limited
(OSH), a BVI limited liability holding company formed in August 23, 2022; (ii) Heavenly Grace Limited (Heavenly Grace),
a Hong Kong limited liability company formed in June 13, 2012; (iii) OneSolution Management Limited (OSM), a BVI limited
liability company formed in August 24, 2022; and (iv) OneSolution Innotech Limited (OSIL), a Hong Kong limited liability
company formed in September 2, 2022. This structure presents unique risks as our investors may never directly hold equity interests in
our Hong Kong operating subsidiary and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Our
ability to obtain contributions from our subsidiaries are significantly affected by regulations promulgated by Hong Kong and the Peoples
Republic of China (the PRC) authorities. Any change in the interpretation of existing rules and regulations or the promulgation
of new rules and regulations may materially affect our operations and or the value of our securities, including causing the value of our
securities to significantly decline or become worthless. For a detailed description of the risks facing the Company associated with our
structure, please refer to **Risk Factors Risk Factors Relating to Doing Business in Hong Kong and China**.
We currently operate in Hong
Kong, and we intend to expand distribution of our products into China and other Asia markets as opportunities permit. While we have no
current intention of expanding our physical presence or operations into China, we expect to become directly subject to all PRC laws with
all risks described herein relating to the PRC to increase if we develop such physical presence or establish operations in China.
OneSolution Technology Inc.
and its Hong Kong and British Virgin Islands subsidiaries are not required to obtain permission from the Chinese authorities including
the China Securities Regulatory Commission, or CSRC, or Cybersecurity Administration Committee, or CAC, to operate or to issue securities
to foreign investors. In making this determination, we relied on the legal opinion of Ravenscroft & Schmierer, a copy of which is
attached as Exhibit 5 to the Companys Amendment No. 2 to the Registration Statement on Form 10 filed with the Securities and Exchange
Commission on April 21, 2022 (the Form 10). However, in light of the recent statements and regulatory actions by the PRC
government, such as those related to the extension of Chinas oversight and control into Hong Kong, the promulgation of regulations
prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns,
we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that the PRC
government could disallow our holding company structure, which may result in a material change in our operations, including our ability
to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to
offer securities to our investors. If our subsidiary or the holding company were required to obtain approvals in the future, or we erroneously
conclude that approvals were not required, or were denied permission from Chinese authorities to list on U.S. exchanges, our operations
may materially change, our ability to offer or continue to offer securities to our investors or to continue listing on a U.S. exchange
may be adversely affected, and the value of our common stock may significantly decline or become worthless, which would materially affect
the interest of the investors. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the
CSRC, if we fail to comply with such rules and regulations, which could adversely affect the ability of the Companys securities
to continue to trade on the Over-the-Counter Bulletin Board, which may cause the value of our securities to significantly decline or become
worthless.
There may be prominent risks
associated with our operations being in Hong Kong and China. For example,as a U.S.-listed Hong Kong public company, wemay
face heightened scrutiny, criticism and negative publicity, which could result in a material change in our operations and the value of
our common stock. It could also 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. Additionally, changes in Chinese internal regulatory
mandates, such as the M&A rules, Anti-Monopoly Law, and the Data Security Law, and recent statements and regulatory actions by the
PRC government such as those related to the use of variable interest entities, data security and anti-monopoly concerns, may target the
Company's corporate structure and impact our ability to conduct business in Hong Kong and China, accept foreign investments, or list on
an U.S. or other foreign exchange. For a detailed description of the risks facing the Company and the offering associated with our operations
in Hong Kong and future operations in China, please refer to **Risk Factors Risk Factors Relating to Doing Business in
Hong Kong and China**.
| | ii | | |
The recent joint statement
by the U.S. Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB),
and the Holding Foreign Companies Accountable Act (HFCAA) all call for additional and more stringent criteria to be applied
to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected
by the PCAOB. Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it cannot inspect or investigate
completely our auditor, and that as a result an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed
the Accelerating Holding Foreign Companies Accountable Act which would reduce the number of consecutive non-inspection years required
for triggering the prohibitions under the HFCAA from three years to two thus reducing the time before our securities may be prohibited
from trading or being delisted. On December 2, 2021, the SEC adopted rules to implement the HFCAA. Pursuant to the HFCAA, the PCAOB issued
its report notifying the Commission that it is unable to inspect or investigate completely accounting firms headquartered in mainland
China or Hong Kong due to positions taken by authorities in mainland China and Hong Kong. Our auditor is based in Nigeria and is subject
to PCAOBs inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event
the Nigerian authorities subsequently take a position disallowing the PCAOB to inspect our auditor, then we would need to change our auditor
to avoid having our securities delisted. Furthermore, due to the recent developments in connection with the implementation of the HFCAA,
we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering
the effectiveness of our auditors audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency
of resources, geographic reach or experience as it relates to the audit of our financial statements. The requirement in the HFCAA that
the PCAOB be permitted to inspect the issuers public accounting firm within two or three years, may result in the delisting of
our securities from applicable trading markets in the U.S, in the future if the PCAOB is unable to inspect our accounting firm at such
future time. Please see **Risk Factors The Holding Foreign Companies Accountable Act requires the Public Company Accounting
Oversight Board (PCAOB) to be permitted to inspect the issuer's public accounting firm within three years. This three-year period will
be shortened to two years if the Accelerating Holding Foreign Companies Accountable Act is enacted. There are uncertainties under the
PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations
and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations,
they may suspend or de-register our registration with the SEC and delist our securities from applicable trading market within the US.**
In addition to the foregoing
risks, we face various legal and operational risks and uncertainties arising from doing business in Hong Kong and China as summarized
below and in **Risk Factors Risks Factors Relating to Doing Business in Hong Kong and China.**
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|
There are significant risks associated with our operations being based in Hong Kong. Adverse changes in economic and political policies of the Hong Kong and PRC government could have a material and adverse effect on overall economic growth in China and Hong Kong, which could materially and adversely affect our business. Please see Risk Factors We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong currently, and in the future, in China, and the profitability of such business. and Substantial uncertainties and restrictions with respect to the political, legal and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in Hong Kong and the PRC, and accordingly on the results of our operations and financial condition. | |
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|
We are a holding company with operations conducted through our wholly owned subsidiary based in Hong Kong. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong subsidiary and will be dependent upon contributions from our subsidiary to finance our cash flow needs. Any limitation on the ability of our subsidiary to make payments to us could have a material adverse effect on our ability to conduct business. We do not anticipate paying dividends in the foreseeable future; you should not buy our stock if you expect dividends. Please see Risk Factors Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other cash payments is limited. | |
| | iii | | |
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There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. We rely on dividends from our Hong Kong subsidiary for our cash and financing requirements, such as the funds necessary to service any debt we may incur. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Please see Risk Factors Our Hong Kong subsidiary may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our common stock.; Risk Factors - PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.; Risk Factors - Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited. and Transfers of Cash to and from our Subsidiaries. | |
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PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiaries in Hong Kong. Substantial uncertainties exist with respect to the interpretation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. Please see Risk Factors PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business. | |
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In light of Chinas extension of its authority into Hong Kong, we are subject to risks arising from the legal system in Hong Kong and China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in Hong Kong and China can change quickly with little or no advance notice. There is also a risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong or PRC based issuers, which could result in a material change in our operations and/or the value of our securities. We are currently not required to obtain approval from Chinese authorities (including the CSRC and the CAC) to operate or to list on U.S. exchanges. However, to the extent that the Chinese government exerts more control over offerings conducted overseas and/or foreign investment in Hong Kong-based issuers over time and if our subsidiary or the holding company were required to obtain approvals in the future, or we erroneously conclude that approvals were not required, or were denied permission from Chinese authorities to list on U.S. exchanges, our operations may materially change, our ability to offer or continue to offer securities to our investors or to continue listing on a U.S. exchange may be significantly limited or completely hindered, and the value of our common stock (including those we are registering for sale now or in the future) may significantly decline or become worthless, which would materially affect the interest of the investors. To the extent that we expand our operations into China, all of the foregoing risks will become more prominent and directly applicable to us, and significantly adverse policies from the PRC may force us to divest of such Chinese operations or face other risks of forfeiture. Please see Risk Factors We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong currently, and in the future, in China, and the profitability of such business., Substantial uncertainties and restrictions with respect to the political, legal and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in Hong Kong and the PRC, and accordingly on the results of our operations and financial condition. and The PRC government has significant oversight and discretion over the conduct of a Hong Kong companys business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals. | |
| | iv | | |
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Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment. | |
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We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection, especially if we expand operations or physical presence into China. We may be liable for improper use or appropriation of personal information provided by our customers. Please see Risk Factors The PRC government has significant oversight and discretion over the conduct of a Hong Kong companys business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals. | |
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Under the Enterprise Income Tax Law of the PRC (EIT Law), we may be classified as a Resident Enterprise of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders. Please see Risk Factors Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations. | |
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Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident Shareholders to personal liability, may limit our ability to acquire Hong Kong and PRC companies or to inject capital into our Hong Kong subsidiary, may limit the ability of our Hong Kong subsidiaries to distribute profits to us or may otherwise materially and adversely affect us. | |
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You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of shares of our common stock. Please see Risk Factors Dividends payable to our foreign investors and gains on the sale of our shares of common stock by our foreign investors may become subject to tax by the PRC. | |
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We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Please see Risk Factors We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. | |
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We are organized under the laws of the State of Delaware as a holding company that conducts its business through a number of subsidiaries organized under the laws of foreign jurisdictions such as Hong Kong and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors to enforce a judgment obtained in U.S. Courts against these entities, bring actions in Hong Kong against us or our management or to effect service of process on the officers and directors managing the foreign subsidiaries. Please see Risk Factors Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Hong Kong based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management. | |
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U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China. | |
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There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits. Please see Risk Factors Our global income may be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations. | |
**
*References in this annual
report to the Company, KRFG, we, us and our refer to OneSolution
Technology Inc., a Delaware company and all of its subsidiaries on a consolidated basis. Where reference to a specific entity is required,
the name of such specific entity will be referenced.*
**
****
****
****
****
| | v | | |
****
**Transfers of Cash to and from Our Subsidiaries**
OneSolution Technology Inc.
is a Delaware holding company with no operations of its own. We conduct our operations in Hong Kong primarily through our operating subsidiary
in Hong Kong, and most of our cash is maintained in Hong Kong Dollars. We may rely on dividends to be paid by our Hong Kong or British
Virgin Islands subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash
distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. There is a possibility that the
PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business
or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements,
service debt or make dividend or other distributions to our shareholders. If our Hong Kong subsidiary 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. To date, our
subsidiaries have not made any transfers, dividends or distributions to OneSolution Technology Inc. and OneSolution Technology Inc. has
not made any transfers, dividends or distributions to its subsidiaries.
OneSolution Technology Inc. is
permitted under Delaware laws to provide funding to our subsidiaries in Hong Kong and the British Virgin Islands through loans or capital
contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval
and filing requirements. Our Hong Kong subsidiaries, OneSolution Innotech Limited and Heavenly Grace Limited, and British Virgin Islands
subsidiaries, OneSolution Holdings Limited and OneSolution Management Limited, are also permitted under the laws of Hong Kong and the
British Virgin Islands to provide funding to OneSolution Technology Inc. through dividend distributions without restrictions on the amount
of the funds. As of the date of this report, there has been no dividends or distributions among the parent company or the subsidiaries
nor do we expect such dividends or distributions to occur in the foreseeable future among the parent company and its subsidiaries.
We currently intend to retain
all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying
any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our
board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business
prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Currently, the treasury function
of OneSolution Technology Inc. and its subsidiaries is centralized and operated by the finance department of Heavenly Grace located in
Hong Kong under the management of its chief financial officer. In order to provide a process and guidance on collecting, accounting for,
and safeguarding all cash and cash equivalents of OneSolution Technology Inc. and its subsidiaries, we have established a cash management
policy that includes procedures on receiving funds, depositing funds, and proper documentation and recording of cash.
Subject to the Delaware General
Corporation Law and our bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an
amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets
will exceed our liabilities and we will be able to pay our debts as they become due. There is no further Delaware statutory restriction
on the amount of funds which may be distributed by us by dividend.
Under the current practice of
the Inland Revenue Department of Hong Kong, no tax is payable in HongKong in respect of dividends paid by us. The laws and regulations
of the PRC do not currently have any material impact on transfer of cash from OneSolution Technology Inc. to our Hong Kong subsidiaries
or from our Hong Kong subsidiaries to OneSolution Technology Inc. There are no restrictions or limitation under the laws of Hong Kong
imposed on the conversion of Hong Kong dollar into foreign currencies and the remittance of currencies out of Hong Kong or across borders
and to U.S. investors.
| | vi | | |
There is a possibility that
the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business
or for the payment of dividends. Any such controls or restrictions may adversely affect our ability to finance our cash requirements,
service debt or make dividend or other distributions to our shareholders. **Please see Risk Factors Our Hong Kong subsidiary
may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity
requirements, conduct business and pay dividends to holders of our common stock.; Risk Factors PRC regulation of
loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay
or prevent us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions
to our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.;
Risk Factors Because our holding company structure creates restrictions on the payment of dividends or other cash payments,
our ability to pay dividends or make other payments is limited.**
Current PRC regulations permit
PRC subsidiaries to pay dividends to Hong Kong subsidiaries only out of their accumulated profits, if any, determined in accordance with
Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of
its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of
such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although
the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be
used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective
companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As of the date of this report,
we do not have any PRC subsidiaries.
The PRC government also imposes
controls on the conversion of Renminbi (RMB) into foreign currencies and the remittance of currencies out of the PRC. Therefore,
we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency to finance our
cash requirements, service debt or make dividend or other distributions to our shareholders. Furthermore, if our subsidiaries in the PRC
incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.
If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common
stock.
Cash dividends, if any, on
our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay
to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of
up to 10%.
In order for us to pay dividends
to our shareholders, we will rely on payments made from our Hong Kong subsidiary to OneSolution Technology Inc. If in the future we have
PRC subsidiaries, certain payments from such PRC subsidiaries to our Hong Kong subsidiary will be subject to PRC taxes, including business
taxes and Value-added tax. As of the date of this report, we do not have any PRC subsidiaries and our Hong Kong subsidiary has not made
any transfers, dividends or distributions nor do we expect to make such transfer, dividends or distributions in the foreseeable future.
Pursuant to the Arrangement
between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income,
or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no
less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied,
including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong
Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt
of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply
for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case
basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and
enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by a PRC
subsidiary to its immediate holding company. As of the date of this report, we do not have a PRC subsidiary. In the event that we acquire
or form a PRC subsidiary in the future and such PRC subsidiary desires to declare and pay dividends to our Hong Kong subsidiary, our Hong
Kong subsidiary will be required to apply for the tax resident certificate from the relevant Hong Kong tax authority. In such event, we
plan to inform the investors through SEC filings, such as a current report on Form 8-K, prior to such actions. See **Risk Factors
Risk Factors Relating to Doing Business in Hong Kong and China**.
| | vii | | |
**CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS**
****
This Annual Report on Form
10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended that are not historical facts, and involve risks and uncertainties that
could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical
facts, included in this Form 10-K including, without limitation, statements in the Market Overview and Managements
Discussion and Analysis of Financial Condition and Results of Operations regarding the Companys market projections, financial
position, business strategy and the plans and objectives of management for future operations, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and
nature thereof); expansion and growth of the Company's business and operations; and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances.
However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of
risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that
may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control
of the Company.
These forward-looking statements
can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates,"
"expects," "estimates," "plans," "may," "will," or similar terms. These statements appear
in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its
directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations
for its limited history; (ii) the Company's business and growth strategies; and (iii) the Company's financing plans. Investors are cautioned
that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and
that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such
factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history,
potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information
identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements,
please refer to the Risk Factors section of this Annual Report.
Consequently, all of the forward-looking
statements made in this Form 10-K are qualified by these cautionary statements and there can be no assurance that the actual results or
developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence
to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
****
****
| | viii | | |
****
**PART I**
**ITEM 1. DESCRIPTION OF BUSINESS.**
**Overview**
Heavenly Grace Limited (Heaven
Grace), our primary operating subsidiary, is engaged in the arts and collectibles business. Heavenly Grace commenced operations
in Hong Kong in April 2025 and operates both an online and physical arts and collectibles trading business. Heavenly Grace utilizes blockchain
and NFT technologies to create title documentation and a transparent ledger for each artwork or collectible to enhance the overall experience
of each collector in order to facilitate sale transaction logistics. Through our physical arts and collectibles business, we provide authentication,
valuation and certification (AVC) service, sale and purchase, hire purchase, financing, custody, security and exhibition
(CSE) services to art and collectibles buyers through traditional methods as well as through leveraging blockchain technology
through the creation of Digital Ownership Tokens (DOTs). We are not required to obtain permission from the Chinese authorities
to operate or to issue securities to foreign investors.
We purchase collectibles at a
discount from market value as determined in accordance with valuations performed by market recognized valuation experts. We then sell
the collectibles at or over market valuation price either through our online trading platform or through third-party auction houses. We
primarily source our collectibles from China and Hong Kong, but we expect to expand our collectible sources worldwide as opportunity permits.
In the future, we plan to open up our online trading platform to connect sellers and collectors and enable them to conduct transactions
in exchange for platform and transaction fees from the sellers, without the workload handling the selling of the collectibles.
Our trading platform is hosted
in Hong Kong, and we work primarily with third-party auction houses in Hong Kong and France.
We generally do not maintain
custody of the DOTs or crypto assets. Any DOTs sold by the Company as ownership documents in association with the underlying physical
artwork or collectible are minted and held by third parties. Where possible, we adopt a sell then mint process, where the
DOTs are not minted unless they have been sold. This is in line with how legal documents are created where an Assignment is only drafted
and signed after a sale of a property (e.g., scanned copies of an Assignment can be created in PDF form thereafter). The DOT merely a
digital ownership title to a physical item.
Before the DOTs are sold, we
store the underlying physical art pieces in our warehouse. We have purchased insurance that covers the art pieces stored in our warehouse.
After the DOTs are sold, customers can choose to ship out the underlying art pieces or not. If customers want to ship out the art pieces,
they will have to pay for the shipping and insurance fees.
We are not a Chinese operating
company but a Delaware holding company with operations conducted through our wholly owned subsidiaries based in British Virgin Islands
and Hong Kong. This structure presents unique risks as our investors may never directly hold equity interests in our Hong Kong subsidiary
and will be dependent upon contributions from our subsidiaries to finance our cash flow needs. Our Hong Kong subsidiary is currently not
required to obtain permission from the Chinese authorities including the China Securities Regulatory Commission, or CSRC, or Cybersecurity
Administration Committee, or CAC, to operate or to issue securities to foreign investors. However, in light of the recent statements and
regulatory actions by the PRC government, such as those related to Hong Kongs national security, the promulgation of regulations
prohibiting foreign ownership of Chinese companies operating in certain industries, which are constantly evolving, and anti-monopoly concerns,
we may be subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently
conclude that such approvals are not required, that applicable laws, regulations or interpretations change such that we are required to
obtain approvals in the future, or that the PRC government could disallow our holding company structure, which would likely result in
a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business,
accept foreign investments, and offer or continue to offer securities to our investors. These adverse actions would likely cause the value
of our common stock to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC
regulatory agencies, including the Chinese Securities Regulatory Commission, if we fail to comply with such rules and regulations, which
would likely adversely affect the ability of the Companys securities to continue to trade on the Over-the-Counter Bulletin Board,
which would likely cause the value of our securities to significantly decline or become worthless.
| | 1 | | |
There may be prominent risks associated
with our operations being in Hong Kong and future operations in China. For example, as a U.S.-listed Hong Kong public company, wemay
face heightened scrutiny, criticism and negative publicity, which could result in a material change in our operations and the value of
our common stock. It could also 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. Additionally, changes in Chinese internal regulatory
mandates, such as the M&A rules, Anti-Monopoly Law, and the Data Security Law, and recent statements and regulatory actions by the
PRC government such as those related to the use of variable interest entities, data security and anti-monopoly concerns, may target the
Company's corporate structure and impact our ability to conduct business in Hong Kong, accept foreign investments, or list on an U.S.
or other foreign exchange. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations
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 variable interest entity structure, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement, The business of our subsidiary are not subject to cybersecurity review
with the Cyberspace Administration of China, or CAC, given that: (i) our products and services are offered not directly to individual
users but through our institutional customers; (ii) we do not possess a large amount of personal information in our business operations..
In addition, we are not subject to merger control review by Chinas anti-monopoly enforcement agency due to the level of our revenues
which provided from us and audited by our auditor and the fact that we currently do not expect to propose or implement any acquisition
of control of, or decisive influence over, any company with revenues within China of more than RMB400 million. Currently, these statements
and regulatory actions have had no impact on our daily business operation, the ability to accept foreign investments and list our securities
on an U.S. or other foreign exchange. However, since these statements and regulatory actions are new, it is highly uncertain how soon
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, and the potential impact such modified or new laws and regulations will have
on our daily business operation, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange.
For a detailed description of the risks facing the Company and the offering associated with our operations in Hong Kong, please refer
to **Risk Factors Risk Factors Relating to Doing Business in Hong Kong and China.**
****
We are organized under the laws
of the State of Delaware as a holding company that conducts its business through a number of subsidiaries organized under the laws of
foreign jurisdictions such as Hong Kong and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors
to enforce a judgment obtained in U.S. Courts against these entities, or to effect service of process on the officers and directors managing
the foreign subsidiaries.
We are organized under the laws
of the State of Delaware as a holding company that conducts its business through a number of subsidiaries organized under the laws of
foreign jurisdictions such as Hong Kong and the British Virgin Islands. This may have an adverse impact on the ability of U.S. investors
to enforce a judgment obtained in U.S. Courts against these entities, or to effect service of process on the officers and directors managing
the foreign subsidiaries.
We generated revenue of $76,921
and $70,296 for the years ended March 31, 2025 and 2024, respectively. We reported a net income of $1,948,092 and a net loss of $1,507,469
for the years ended March 31, 2025 and 2024, respectively. We had current assets of $2,417 and current liabilities of $956,950 as of March
31, 2025. As of March 31, 2024, our current assets and current liabilities were $119,866 and $3,165,453, respectively. We have prepared
our consolidated financial statements for the years ended March 31, 2025 and 2024 assuming that we will continue as a going concern. Our
continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders.
Our sources of capital in the
past have included the sale of equity securities, which include common stock sold in private transactions to our executive officers or
existing shareholders, capital leases and short-term and long-term debts. We expect to finance future acquisitions through a combination
of the foregoing. While we believe that existing shareholders and our officers and directors will continue to provide the additional
cash to make acquisitions and to meet our obligations as they become due or that we will obtain external financing, there can be no assurance
that we will be able to raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources
of liquidity discussed below are adequate to support operations for at least the next 12 months.
| | 2 | | |
Our corporate organization chart is as
below:
*
OneSolution Technology Inc. is
a holding company with no operations. It operates solely through its subsidiaries. We have four wholly-owned subsidiaries: (i) OneSolution
Holdings Limited (OSH), a BVI limited liability company formed in August 23, 2022; (ii) Heavenly Grace Limited (Heavenly
Grace), a Hong Kong limited liability company formed in June 13, 2012; (iii) OneSolution Management Limited (OSM),
a BVI limited liability company formed in August 24, 2022; and (iv) OneSolution Innotech Limited (OSIL), a Hong Kong limited
liability company formed in September 2, 2022.
| | 3 | | |
**History and Development of the Company**
We were incorporated in the
state of Delaware on September 8, 1995, under the name ARXA International Energy, Inc. On June 4, 2001, we changed our name to King Resources,
Inc.. Effective December 27, 2023, we changed our name to OneSolution Technology Inc., our current name.
The Company began filing periodic
reports with the Securities and Exchange Commission on May 15, 1996. On June 12, 2009, it filed a notice of termination of registration
on Form 15(d) suspending its duty to file reports under Section 13 and 15(d) of the Securities Exchange Act of 1934, as amended. In December
2010, the Company began posting periodic reports on the OTCMarkets website under the alternative reporting standard, its current reporting
standard.
On April 2, 2018, a change
of control occurred with respect to the Company to better reflect its new business direction. On October 18, 2018, Brian Kistler, the
then sole director and executive resigned from his position as the Chairman of the Board, Junrong Yin was appointed to fill the vacancy
caused by his resignation. On May 3, 2021, Mr. Kistler resigned from his positions as CEO with the Company and appointed Caren Currier
to fill the vacancies caused by his resignation.
On October 25, 2021, Caren
Currier entered into a Stock Purchase Agreement with Lee Ying Chiu Herbert pursuant to which Ms. Currier agreed to sell to Dr. Lee all
30 million shares of Series C Preferred Stock of the Company held by her for aggregate consideration of Four Hundred Ten Thousand Dollars
($410,000). This transaction consummated on November 10, 2021. In connection with the acquisition, Ms. Currier resigned from all her positions
with the Company and the following persons were appointed to serve in the positions set forth next to their names:
|
Name |
|
Position | |
|
FU Wah |
|
Chief Executive Officer, Secretary, Director | |
|
LAU Ping Kee |
|
Chief Financial Officer, Director | |
Acquisition of Powertech*
On December 15, 2021, we acquired
50,000 shares of Powertech Management Limited, a limited liability company organized under the laws of the British Virgin Islands (Powertech),
representing all of its issued and outstanding securities, from its shareholders Silver Bloom Properties Limited and FU Wah in exchange
for 2,835,820,896 shares of our Common Stock. In connection with the acquisition, each of Silver Bloom Properties Limited and FU Wah received
2,126,865,672 and 708,955,224 shares of our Common Stock, respectively. Powertech operates its smart power supply business through its
wholly owned subsidiary Powertech Corporation Limited, a limited liability company organized under the laws of Hong Kong. The Company
relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Act
in selling the Companys securities to the shareholders of Powertech.
Prior to the Share Exchange,
the Company was considered as a shell company due to its nominal assets and limited operation. The transaction was treated as a recapitalization
of the Company.
The Share Exchange between
the Company and Powertech on December 15, 2021, is deemed a merger of entities under common control for which FU Wah is the common director
and shareholder of both the Company and Powertech. Under the guidance in ASC 805 for transactions between entities under common control,
the assets, liabilities and results of operations, are recognized at their carrying amounts on the date of the Share Transfer, which required
the retrospective combination of the Company and Powertech for all periods presented.
As a result of our acquisition
of Powertech, we entered into the smart power supply business.
| | 4 | | |
*Certain corporate developments of the Company*
Effective December 27, 2023,
the Company amended its Certificate of incorporation to: (i) change its name to OneSolution Technology Inc.; (ii) increase the authorized
capital stock from 6,085,000,000, consisting of 6,000,000,000 shares of common stock, par value $0.001, and 85,000,000 shares of preferred
stock, to 36,100,000,000 consisting of 36,000,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock,
par value $0.001; (iii) elect not to be governed by Section 203 of the Delaware General Corporation Law; and (iv) adopt the Amended and
Restated Certificate of Incorporation for the purpose of consolidating the amendments to the Companys Certificate of Incorporation
and to conform the par values of the preferred stock.
On August 8, 2022, the Company
filed a registration statement on Form S-8, which authorized the issuance of the Companys common stock as the compensation for
the consultants who have provided services for the Company. On August 12, 2022, 151,515,152 shares of the Companys common stock
have been issued to the consultants.
On August 30, 2022, the Company
appointed the following individuals to serve as independent directors of the Company:
|
Name |
|
Age |
|
Office(s) | |
|
Wong Kan Tat Frederick |
|
58 |
|
Independent Director | |
|
Lo Mei Fan Pauline |
|
51 |
|
Independent Director | |
None of the foregoing persons
has a direct family relationship with any of the Corporations directors or executive officers, or any person nominated or chosen
by the Corporation to become a director or executive officer.
None of the foregoing officers
and directors will receive compensation in connection with their service on our Board of Directors or as an executive officer.
The Company adopted an Insider
Trading Compliance Program, established an audit committee, a compensation committee and a nomination and governance committee, and adopted
charters to govern the governance of such audit, compensation, nomination and governance committees. The audit and compensation committees
consist of Mr. Wong Kan Tat Frederick and Ms. Lo Mei Fan Pauline, our independent directors, and Mr. Lau Ping Kee, our Chief Financial
Officer and Director. Mr. Lau is the chair of our audit committee and compensation committee. Our nomination and governance committee
consists of Mr. Wong Kan Tat Frederick, Ms. Lo Mei Fan Pauline, and Mr. Fu Wah, our Chief Executive Officer, Secretary and Director. Mr.
Fu is the chair of our nomination and governance committee.
The Company believes that
the above actions are the first step for the Company to establish good corporate governance which could lead to corporate success and
growth in the future.
On January 22, 2025, the board
of directors of the Company and certain stockholders holding a majority of the voting rights of our common stock approved by written consent
in lieu of a special meeting the taking of all steps necessary to effect the corporate actions as described below:
****
|
|
1. |
Amend the Companys Certificate of Incorporation filed with the Delaware Secretary of State (the Certificate of Incorporation) to change the Companys name to King Resources, Inc.; |
| |
|
|
2. |
Amend the Companys Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State (the Certificate of Incorporation) to effect a 1-for-10,000 reverse stock split of our issued and outstanding Common Stock (the Reverse Stock Split); |
| |
|
|
3. |
Issue to all shareholders that directly as a result of the Reverse Stock Split would hold less than 100 shares of common stock of the Company (each, an Affected Shareholder) such number of additional shares of common stock so that each Affected Shareholder shall hold 100 shares of common stock of the Company after the Reverse Stock Split; and |
| |
|
|
4. |
Ratify certain prior corporate acts as valid acts of the Company. |
| |
****
The Company is in the process
of undergoing FINRA review regarding the above mentioned corporate actions.
| | 5 | | |
*Disposition of Powertech and Acquisition of Heavenly
Grace*
On September 30, 2024, the Company
conducted a corporate restructuring and disposed of all equity interests in Powertech Management Limited and Powertech Corporation Limited,
and the disposal of these subsidiaries resulted from a net gain of $2,513,875. As a result, the Company exited its former smart power
supply business.
On November
21, 2024, the Company acquired Heavenly Grace Limited from a related party at its net carrying value of approximately $7,000, which did
not operate any businesses in prior years. The Company is operating its arts and collectibles business through Heavenly Grace Limited.
****
**Our Business**
According to The Art Basel
and UBS Global Art Market Report 2021, the global arts market annual transactional volume is estimated to be $50.1 billion for 2020.
According to Forbes, the global collectibles market reached $370 billion in 2016. Reuters reported that the collectible NFT market is
approximately $13.7 million in the first half of 2020. Our DOT builds on top of the blockchain NFT technologies as the underlying technology
infrastructure, even though we are still in the early stages in adoption of our DOTs, the trading volume of NFTs as reported by Reuters
for the first half of 2021 has already reached approximately at $2.5 billion. Building on top of the blockchain NFT technologies, we
believe DOTs have the potential to be as revolutionary and widely adopted as the internet. The unique properties of DOTs position them
as a digital alternative to representing ownership of art and collectible pieces. We expect the DOT ecosystem to expand into the mainstream
of art community around the world in the coming decades.
Heavenly Grace Limited (Heaven
Grace), our primary operating subsidiary, is engaged in the arts and collectibles business and operates both an online and physical
arts and collectibles trading platform. The vision of Heavenly Grace is to modernize
the way we buy, collect and trade art and collectible pieces to provide a more pleasurable, transparent, and value enhancing experience
for the collector and artist communities.
Heavenly Grace currently purchases
collectibles that have been appraised by market recognized professionals. These collectibles are acquired at a discount of up to 50% of
appraised value and are primarily sourced collectibles from China and Hong Kong. We then sell the collectibles at or over the appraised
valuation price either through our online trading platform or through third-party auction houses located in Hong Kong or France. Heavenly
Grace is able to make a profit from the sale if it is able to sell the collectibles at a price above its total costs of acquisition. In
the future, we expect to expand our collectible sources worldwide as opportunity permits.
We are also continuing to develop
our online trading platform to incorporate P2P capabilities to allow sellers and collectors to directly engage and conduct transactions
in exchange for platform and transaction fees from the sellers. We expect our P2P development to proceed as working capital permits. Our
online trading platform is hosted in Hong Kong.
*Digital Ownership Token
(DOT)*
A
few of the challenges with collecting physical arts and collectibles are provenance of the piece, authenticity and valuation. To
facilitate the online and offline sales of collectibles, Heavenly Grace utilizes blockchain and NFT technologies to create title documentation
and a transparent ledger for each artwork or collectible to enhance the overall experience of each collector in order to facilitate sale
transaction logistics. In addition, we also provide authentication, valuation and certification (AVC) service, sale and
purchase, hire purchase, financing, custody, security and exhibition (CSE) services to art and collectibles buyers through
traditional methods as well as through leveraging blockchain technology through the creation of Digital Ownership Tokens (DOTs).
| | 6 | | |
Technologically, we store the
authenticated information of the items, as well as their relative trading and ownership history using NFT technology, which we call Digital
Ownership Token (DOT). All items that we acquire will be tagged with a DOT and the information will be stored using the
blockchain technology. We believe that DOTs can serve as a trusted certification of authenticity for collectible items. We also offer
the tagging of DOTs for clients onto their own collectible items.
We intend to leverage blockchain
technology to help resolve the issues of provenance, authenticity and ownership in the arts and collectibles market. We intend to embed
into the blockchain for each art or collectible piece an independently appraised valuation, a 3D rendering of the piece, a high-definition
photo of the piece, an AI recognition file of the piece and a set of legal documents to provide proof of ownership and provenance of the
piece to the blockchain. Each piece will be minted into an individual DOT with the list of items embedded. The DOTs are intended to provide
assurance on the authenticity of art or collectible pieces as well as act as a record of ownership transfers using blockchain technology
to establish provenance of the piece. We believe this type of DOT would address some of the key challenges collectors presently face with
arts and collectibles.
The metadata of an NFT allows
very little information to be included. Generally, NFTs may contain a link to where an image is stored, while bundling terms and conditions
governing the image, which are not incorporated in the NFT itself.
With this method, not only the
DOT is immutable by nature, the information pointed by the link in metadata of the DOT cannot be changed as well since it is also saved
in a decentralized storage system. The costs involved include (1) the 3D scanning of the item which takes between 2-3 days to be scanned
and rendered, (2) the taking of high quality images for each of the item, (3) the training of the AI recognition file which takes between
3-5 days, (4) obtaining a valuation report from the independent appraiser, and (5) minting the DOT onto the blockchain
We use NFT technology to create
our DOTs so that we can enhance the way people collect artwork. Each piece will be minted by third parties into an individual DOT with
the list of items embedded. We expect to mint our DOTs on the Binance Smart Chain and the Polygon Chain. We chose these two blockchains
based on the criteria of (i) fees, (ii) carbon footprint, and (iii) marketplaces. Binance Smart Chain has higher fees and carbon footprint
than Polygon but caters to a different market segment, which is the market that is familiar with the Binance ecosystem. We used them when
we needed to access the market segment that Binance Smart Chain targets and Polygon Chain does not target. Polygon Chain had lower fees
and carbon footprint as compared to Binance Smart Chain and was accepted by many marketplaces.
The DOTs are intended to provide
assurance on the authenticity of art or collectible pieces as well as act as a record of ownership transfers using blockchain technology
to establish provenance of the piece. We believe this type of DOT would address some of the key challenges collectors presently face with
arts and collectibles. The DOTs were not sold as separate products but instead represented ownership title to the physical artwork on
our platform in order to facilitate transaction logistics.
We generally do not mint or maintain
custody of the DOTs or crypto assets. Where possible, we adopt a sell then mint process, where the DOTs are not minted unless
the item have been sold. This is in line with how legal documents are created where an Assignment is only drafted and signed after a sale
of a property (e.g., scanned copies of an Assignment can be created in PDF form thereafter). The DOT merely a digital ownership title
to a physical item.
Before the DOTs are sold,
we store the underlying physical art pieces in our warehouse. We have purchased insurance that covers the art pieces stored in our warehouse.
After the DOTs are sold, customers can choose to ship out the underlying art pieces or not. If customers want to ship out the art pieces,
they will have to pay for the shipping and insurance fees.
The Company does not engage in
the business of purchasing, holding or trading crypto currencies. We receive fiat and cash from the sale of art and collectibles
and collection of transaction fees derived from the secondary and subsequent sales of the collectibles.
| | 7 | | |
We expect to provide several
services, including authentication, valuation and certification (AVC) service, sale and purchase, hire purchase, and custody,
security and exhibition (CSE) services.
*AVC Services*
As part of our AVC
services, we intend to conduct authentication appraisal and valuation assessment of arts and collectibles through a panel of
independent third-party appraisers. The appraisers will appraise the items and produce a certification showing whether the
collectible piece is authentic with their estimated value. Once the item has been authenticated, it will undergo a scanning process
to build a 3D model and a unique fingerprint ID for the item will be created through proprietary AI technology for
future verification.
*Hire
Purchase Services; Financing*
**
We can
facilitate the purchase of arts and collectibles by offering certain of our buyers the option of taking possession of the arts and collectibles
while paying on an installment basis. Prior to receipt of full payment, ownership of the arts and collectibles will remain with Heavenly
Grace. We would have a collateral interest in the artwork for the loan, in the form of a pledge, a charge, or a hypothecation, in the
same way that the collateral is taken over other assets. Once the buyer makes the last payment, the ownership of the arts and collectibles
will transfer to the buyer once full payment has been received.
*CSE
Services*
**
For collectors
who purchase our arts and collectibles and do not wish to take collection of the pieces, we intend to offer custodian services and have
these arts and collectibles stored and safely secured until the collector elects to take possession. We also intend to allow the collectors
to subscribe for additional security services for their art pieces be it when it is in our custody or when the item is on the move either
to be delivered or collected from the collector. We intend to also introduce exhibition services to collectors and artist to organize
exhibitions of artworks and collections in our gallery or other specialized art events.
*Sales and Marketing*
We expect to work with third party
auction houses as our primary sales channels for the art and collectibles. We anticipate relying on third party auction houses located
primarily in Hong Kong and France to sell the art and collectibles items to their global collector networks. As we continue to develop
our online art and collectibles platform, we plan to obtain our customers through our own online platform as well.
*Major Customers*
We have a single major customer,
Marvel Digital Group Limited, contributing our revenue of $76,921 and $70,296, for the years ended March 31, 2025 and 2024, respectively.
Our major customer is located
in Hong Kong. Generally, we are not a party to any long-term agreements with our customers. From time to time, we may enter into long
term contracts with major customers and subcontract the performance of the contract to corresponding network partners according to the
price and area.
**
*Seasonality*
The market of collectibles
may be affected by local and global economical cycles.
| | 8 | | |
*Insurance*
We maintain certain insurance
in accordance with customary industry practices in Hong Kong. Under Hong Kong law, there is a requirement that all employers in the city
must purchase Employee's Compensation Insurance to cover their liability in the event that their staff suffers an injury or illness during
the normal course of their work. We maintain Employees Compensation Insurance, office insurance and third-party risks insurance
for its business purposes.
**CORPORATE INFORMATION**
Our principal executive and
registered offices are located at Unit 1813, 18/F, Fo Tan Industrial Centre, 26-28 Au Pui Wan Street, Fo Tan, Hong Kong, telephone number
+852 3585 8905.
**COMPETITION**
We operate
in a highly specialized area that is evolving very quickly with rapid developments. Currently we compete with traditional collectibles
shops and leading arts and collectible sellers such as Christies and Sothebys which may offer substantially the same or
similar service offerings as us. Auction houses have a well-established customer base and brand name, but they have not developed sophisticated
technology to transform their business into the blockchain NFT technology area. We believe the principal competitive factors in our market
include the following:
breadth
of artist and collectibles base;
sophistication
of proprietary technologies;
excellence
in legal expertise; and
strength
and recognition of our brand.
Although we believe we compete
favorably on the factors described above, we anticipate that larger, more established companies may directly compete with us as we continue
to demonstrate the viability of our DOT solution. Many of our potential competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, larger product and services offerings, larger customer base and greater brand recognition.
These factors may allow our competitors to benefit from their existing customer base with lower acquisition costs or to respond more quickly
than we can to new or emerging technologies and changes in customer requirements. These competitors may engage in more extensive research
and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them
to build a larger customer base or to monetize that customer base more effectively than us. Our competitors may develop products or services
that are similar to our products and services or that achieve greater market acceptance than our products and services. In addition, although
we do not believe that merchant payment terms are a principal competitive factor in our market, they may become such a factor and we may
be unable to compete fairly on such terms.
| | 9 | | |
**EMPLOYEES AND CONSULTANTS**
We have the following full-time
employees and consultants located at Hong Kong and the PRC as set forth below:
|
Executive officers |
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1 |
| |
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Operations and R&D |
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|
1 |
| |
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Administration staff |
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|
1 |
| |
|
Total |
|
|
3 |
| |
We are required to contribute
to the pension fund for all eligible employees in Hong Kong who are at least 18 but under 65 years of age. We are required to contribute
a specified percentage of the participants income based on their ages and wage level. For the years ended March 31, 2025 and 2024,
no pension contributions are made by us. We have not experienced any significant labor disputes or any difficulties in recruiting staff
for our operations.
**GOVERNMENT AND INDUSTRY REGULATIONS**
OneSolution Technology Inc.
is a Delaware corporation with its operating business located in Hong Kong. As such, the parent holding company, OneSolution Technology
Inc. is subject to the laws and regulations of the United States of America while our operating business is subject to the laws and regulations
of Hong Kong, including labor, occupational safety and health, contracts, tort and intellectual property laws. Furthermore, we need to
comply with the rules and regulations of Hong Kong governing the data usage and regular terms of service applicable to our potential customers
or clients. As the information of our potential customers or clients is preserved in Hong Kong, we need to comply with the Hong Kong Personal
Data (Privacy) Ordinance.
If PRC authorities reinterpret
PRC laws to apply to Hong Kong companies, we may become subject to the laws and regulations of China governing businesses in general,
including labor, occupational safety and health, contracts, tort and intellectual property. We also expect to become subject to PRC laws
if we expand operations into or develop a physical presence in China. We may also become subject to foreign exchange regulations which
might limit our ability to convert foreign currency into Renminbi or Hong Kong Dollars, acquire any other PRC companies, establish VIEs
in the PRC, or make dividend payments from any future WFOEs to us.
*United States of America*
**
*Privacy and Protection of User Data*
**
**
We and subsidiaries are subject
to a number of laws, rules, directives, and regulations relating to the collection, use, retention, security, processing, and transfer
of personally identifiable information about our customers and employees in the countries where we operate. Our business will involve
the processing of personal data in many jurisdictions and the movement of data across national borders. As a result, much of the personal
data that we process, which may include certain financial information associated with individuals, is regulated by multiple privacy and
data protection laws and, in some cases, the privacy and data protection laws of multiple jurisdictions. In many cases, these laws apply
not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries, and other parties with
which we have commercial relationships.
**
**
**
**
| | 10 | | |
**
*Hong Kong*
The Employment Ordinance is
the main piece of legislation governing conditions of employment in Hong Kong since 1968. It covers a comprehensive range of employment
protection and benefits for employees, including Wage Protection, Rest Days, Holidays with Pay, Paid Annual Leave, Sickness Allowance,
Maternity Protection, Statutory Paternity Leave, Severance Payment, Long Service Payment, Employment Protection, Termination of Employment
Contract, Protection Against Anti-Union Discrimination. In addition, every employer must take out employees compensation insurance
to protect the claims made by employees in respect of accidents occurred during the course of their employment.
An employer must also comply
with all legal obligations under the Mandatory Provident Fund (MPF) Schemes Ordinance, (CAP. 485). These include enrolling
all qualifying employees in MPF schemes and making MPF contributions for them. Except for exempt persons, employer should enroll for
both full-time and part-time employees who are at least 18 but under 65 years of age into an MPF scheme within the first 60 days of employment.
The 60-day employment rule does not apply to casual employees in the construction and catering industries. Pursuant to the said Ordinance,
we are required to make MPF contributions for our Hong Kong employees once every contribution period (generally the wage period within
1 month). Employers and employees are each required to make regular mandatory contributions of 5% of the employees relevant income
to an MPF scheme, subject to the minimum and maximum relevant income levels. For a monthly-paid employee, the minimum and maximum relevant
income levels are $899 and $3,854, respectively.
*China*
Depending upon the political
climate, we may also become subject to the laws and regulations of China governing businesses in general, including labor, occupational
safety and health, contracts, tort and intellectual property. We may also become subject to foreign exchange regulations might limit our
ability to convert foreign currency into Renminbi, acquire PRC companies, or make dividend payments to KRFG.
****
**PRC Regulations on Tax**
*Enterprise Income Tax*
The EIT Law of the Peoples
Republic of China was promulgated by the Standing Committee of the National Peoples Congress on March 16, 2007 and became effective
on January1, 2008, and was later amended on February24, 2017. The Implementation Rules of the EIT Law(the Implementation
Rules) were promulgated by the State Council on December6, 2007 and became effective on January 1, 2008. According to the
EIT Law and the Implementation Rules, enterprises are divided into resident enterprises and non-resident enterprises. Resident enterprises
shall pay enterprise income tax on their incomes obtained in and outside the PRC at the rate of 25%. Non-resident enterprises setting
up institutions in the PRC shall pay enterprise income tax on the incomes obtained by such institutions in and outside the PRC at the
rate of 25%. Non-resident enterprises with no institutions in the PRC, and non-resident enterprises whose incomes having no substantial
connection with their institutions in the PRC, shall pay enterprise income tax on their incomes obtained in the PRC at a reduced rate
of 10%.
TheArrangement between
the PRC and Hong Kong Special Administrative Region for the Avoidance of Double Taxation the Prevention of Fiscal Evasion with respect
to Taxes on Income(the Arrangement) was promulgated by the State Administration of Taxation (SAT) on
August21, 2006 and came into effect on December8, 2006. According to the Arrangement, a company incorporated in Hong Kong
will be subject to withholding tax at the lower rate of 5% on dividends it receives from a company incorporated in the PRC if it holds
a 25% interest or more in the PRC company. The Notice on the Understanding and Identification of the Beneficial Owners in the Tax Treaty(the
Notice) was promulgated by SAT and became effective on October27, 2009. According to the Notice, a beneficial ownership
analysis will be used based on a substance-over-form principle to determine whether or not to grant tax treaty benefits.
| | 11 | | |
In April2009, the Ministry
of Finance, or MOF, and SAT jointly issued the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring
Business, or Circular 59. In December2009, SAT issued the Notice on Strengthening Administration of Enterprise Income Tax for Share
Transfers by Non-PRC Resident Enterprises, or Circular698. Both Circular59 and Circular698 became effective retroactively
as of January 2008. In February2011, SAT issued the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises,
or SAT Circular24, effective April 2011. By promulgating and implementing these circulars, the PRC tax authorities have enhanced
their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise.
Under Circular 698, where
a non-resident enterprise conducts an indirect transfer by transferring the equity interests of a PRC resident enterprise
indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may
be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable
commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular
698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related
parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable
income of the transaction.
In February 2015, the SAT
issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that
is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth
under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate
holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and
has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer)
of the taxable assets. Where a non-resident enterprise conducts an indirect transfer by transferring the taxable assets
indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the
transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer.
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.
On October17, 2017,
the SAT issued a Notice Concerning Withholding Income Tax of Non-Resident Enterprise, or SAT Notice No.37, which abolishes Circular698
andcertain provisions of Circular 7. SAT Notice No.37 reduces the burden of the withholding obligator, such as revocation
of contract filing requirements and tax liquidation procedures, strengthens the cooperation of tax authorities in different places, and
clarifies the calculation of tax payable and mechanism of foreign exchange.
*Value-added Tax*
Pursuant to the Provisional
Regulations on Value-added Tax of the PRC, or the VAT Regulations, which were promulgated by the State Council on December 13, 1993, took
effect on January 1, 1994, and were amended on November 10, 2008, February 6, 2016, and November 19, 2017, respectively, and the Rules
for the Implementation of the Provisional Regulations on Value-added Tax of the PRC, which were promulgated by the MOF on December 25,
1993, and were amended on December 15, 2008, and October 28, 2011, respectively, entities and individuals that sell goods or labor services
of processing, repair or replacement, sell services, intangible assets, or immovables, or import goods within the territory of the Peoples
Republic of China are taxpayers of value-added tax. The VAT rate is 17% for taxpayers selling goods, labor services, or tangible movable
property leasing services or importing goods, except otherwise specified; 11% for taxpayers selling services of transportation, postal,
basic telecommunications, construction and lease of immovable, selling immovable, transferring land use rights, selling and importing
other specified goods including fertilizers; 6% for taxpayers selling services or intangible assets.
| | 12 | | |
According to the Notice on
the Adjustment to the Value-added Tax Rates issued by the SAT and the MOF on April 4, 2018, where taxpayers make VAT taxable sales or
import goods, the applicable tax rates shall be adjusted from 17% to 16% and from 11% to 10%, respectively. Subsequently, the Notice on
Policies for Deepening Reform of Value-added Tax was issued by the SAT, the MOF and the General Administration of Customs on March 30,
2019 and took effective on April 1, 2019, which further adjusted the applicable tax rate for taxpayers making VAT taxable sales or importing
goods. The applicable tax rates shall be adjusted from 16% to 13% and from 10% to 9%, respectively.
*Dividend Withholding Tax*
The Enterprise Income Tax
Law provides that since January1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident
investors that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but
the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived
from sources within the PRC.
**PRC Laws and Regulations on Employment and
Social Welfare**
*Labor Law of the PRC*
Pursuant to the Labor Law
of the PRC, which was promulgated by the Standing Committee of the National Peoples Congress (NPC) on July5,
1994 with an effective date of January1, 1995 and was last amended on August27, 2009 and the Labor Contract Law of the PRC,
which was promulgated on June29, 2007, became effective on January1, 2008 and was last amended on December28, 2012,
with the amendments coming into effect on July 1, 2013, enterprises and institutions shall ensure the safety and hygiene of a workplace,
strictly comply with applicable rules and standards on workplace safety and hygiene in China, and educate employees on such rules and
standards. Furthermore, employers and employees shall enter into written employment contracts to establish their employment relationships.
Employers are required to inform their employees about their job responsibilities, working conditions, occupational hazards, remuneration
and other matters with which the employees may be concerned. Employers shall pay remuneration to employees on time and in full accordance
with the commitments set forth in their employment contracts and with the relevant PRC laws and regulations. Our Hong Kong subsidiary
currently does not comply with PRC laws and regulations, but complies with Hong Kong laws and regulations.
*Social Insurance and Housing Fund*
Pursuant to theSocial
Insurance Law of the PRC, which was promulgated by the Standing Committee of the NPC on October28, 2010 and became effective on
July1, 2011, employers in the PRC shall provide their employees with welfare schemes covering basic pension insurance, basic medical
insurance, unemployment insurance, maternity insurance, and occupational injury insurance. Our Hong Kong subsidiary has not deposited
the social insurance fees in full for all the employees in compliance with the relevant regulations. We may be ordered by the social
security premium collection agency to make or supplement contributions within a stipulated period, and shall be subject to a late payment
fine computed from the due date at the rate of 0.05% per day; where payment is not made within the stipulated period, the relevant administrative
authorities shall impose a fine ranging from one to three times the amount of the amount in arrears. Our Hong Kong subsidiary has not
deposited the social insurance fees as required by relevant regulations.
| | 13 | | |
In accordance with theRegulations
on Management of Housing Provident Fund, which were promulgated by the State Council on April3, 1999 and last amended on March24,
2002, employers must register at the designated administrative centers and open bank accounts for depositing employees housing
funds. Employers and employees are also required to pay and deposit housing funds, with an amount no less than 5% of the monthly average
salary of the employee in the preceding year in full and on time. Our subsidiaries have not registered at the designated administrative
centers nor opened bank accounts for depositing employees housing funds. They also have not deposited employees housing
funds. Our subsidiaries may be ordered by the housing provident fund management center to complete the registration formalities, open
bank accounts, make the payment and deposit within a prescribed time limit if they become subject to PRC laws. Failing to register or
open bank accounts at the expiration of the time limit could result in fines of not less than RMB 10,000 nor more than RMB 50,000. And
an application may be made to a peoples court for compulsory enforcement if payment and deposit has not been made after the expiration
of the time limit.
**PRC Regulations Relating to Foreign Exchange**
*General Administration of Foreign Exchange*
The principal regulation governing
foreign currency exchange in the PRC is theAdministrative Regulations of the PRC on Foreign Exchange(the Foreign Exchange
Regulations), which were promulgated on January 29, 1996, became effective on April1, 1996 and were last amended on
August5, 2008. Under these rules, Renminbi is generally freely convertible for payments of current account items, such as trade-
and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as
capital transfer, direct investment, investment in securities, derivative products or loans unless prior approval by competent authorities
for the administration of foreign exchange is obtained. Under the Foreign Exchange Regulations, foreign-invested enterprises in the PRC
may purchase foreign exchange without the approval of SAFE to pay dividends by providing certain evidentiary documents, including board
resolutions, tax certificates, or for trade- and services-related foreign exchange transactions, by providing commercial documents evidencing
such transactions.
*Circular No. 37 and Circular No. 13*
Circular 37 was released by
SAFE on July4, 2014 and abolished Circular 75 which had been in effect since November1, 2005. Pursuant to Circular 37, a PRC
resident should apply to SAFE for foreign exchange registration of overseas investments before it makes any capital contribution to a
special purpose vehicle, or SPV, using his or her legitimate domestic or offshore assets or interests. SPVs are offshore enterprises directly
established or indirectly controlled by domestic residents for the purpose of investment and financing by utilizing domestic or offshore
assets or interests they legally hold. Following any significant change in a registered offshore SPV, such as capital increase, reduction,
equity transfer or swap, consolidation or division involving domestic resident individuals, the domestic individuals shall amend the registration
with SAFE. Where an SPV intends to repatriate funds raised after completion of offshore financing to the PRC, it shallcomply with
relevant PRC regulations on foreign investment and foreign debt management. A foreign-invested enterprise established through return investment
shall complete relevant foreign exchange registration formalities in accordance with the prevailing foreign exchange administration regulations
on foreign direct investment and truthfully disclose information on the actual controller of its shareholders.
If any shareholder who is
a PRC resident (as determined by the Circular No. 37) holds any interest in an offshore SPV and fails to fulfil the required foreign
exchange registration with the local SAFE branches, the PRC subsidiaries of that offshore SPV may be prohibited from distributing their
profits and dividends to their offshore parent company or from carrying out other subsequent cross-border foreign exchange activities.
The offshore SPV may also be restricted in its ability to contribute additional capital to its PRC subsidiaries. Where a domestic resident
fails to complete relevant foreign exchange registration as required, fails to truthfully disclose information on the actual controller
of the enterprise involved in the return investment or otherwise makes false statements, the foreign exchange control authority may order
them to take remedial actions, issue a warning, and impose a fine of less than RMB 300,000 on an institution or less than RMB 50,000
on an individual.
Circular 13 was issued by
SAFE on February13, 2015, and became effective on June1, 2015. Pursuant to Circular 13, a domestic resident who makes a capital
contribution to an SPV using his or her legitimate domestic or offshore assets or interests is no longer required to apply to SAFE for
foreign exchange registration of his or her overseas investments. Instead, he or she shall register with a bank in the place where the
assets or interests of the domestic enterprise in which he or she has interests are located if the domestic resident individually seeks
to make a capital contribution to the SPV using his or her legitimate domestic assets or interests; or he or she shall register with a
local bank at his or her permanent residence if the domestic resident individually seeks to make a capital contribution to the SPV using
his or her legitimate offshore assets or interests.
We cannot assure that our
PRC beneficial shareholders have completed registrations in accordance with Circular 37.
| | 14 | | |
*Circular 19 and Circular 16*
**
Circular 19 was promulgated
by State Administration of Foreign Exchange (SAFE) on March30, 2015, and became effective on June1, 2015. According
to Circular 19, the foreign exchange capital in the capital account of foreign-invested enterprises, meaning the monetary contribution
confirmed by the foreign exchange authorities or the monetary contribution registered for account entry through banks, shall be granted
the benefits of Discretional Foreign Exchange Settlement (Discretional Foreign Exchange Settlement). With Discretional Foreign
Exchange Settlement, foreign capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary
contribution have been confirmed by the local foreign exchange bureau, or for which book-entry registration of monetary contribution has
been completed by the bank, can be settled at the bank based on the actual operational needs of the foreign-invested enterprise. The allowed
Discretional Foreign Exchange Settlementpercentage of the foreign capital of a foreign-invested enterprise has been temporarily
set to be 100%. The Renminbi converted from the foreign capital will be kept in a designated account and if a foreign-invested enterprise
needs to make any further payment from such account, it will still need to provide supporting documents and to complete the review process
with its bank.
**
Furthermore, Circular 19 stipulates
that foreign-invested enterprises shall make bona fide use of their capital for their own needs within their business scopes. The capital
of a foreign-invested enterprise and the Renminbi it obtained from foreign exchange settlement shall not be used for the following purposes:
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directly or indirectly used for expenses beyond its business scope or prohibited by relevant laws or regulations; | |
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directly or indirectly used for investment in securities unless otherwise provided by relevant laws or regulations; | |
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directly or indirectly used for entrusted loan in Renminbi (unless within its permitted scope of business), repayment of inter-company loans (including advances by a third party) or repayment of bank loans in Renminbi that have been sub-lent to a third party; or | |
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directly or indirectly used for expenses related to the purchase of real estate that is not for self-use (except for foreign-invested real estate enterprises). | |
Circular 16 was issued by
SAFE on June9, 2016. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts from foreign
currency to Renminbi on a self-discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange capital
items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis applicable to all enterprises
registered in the PRC. Circular 16 reiterates the principle that an enterprises Renminbi capital converted from foreign currency-denominated
capital may not be directly or indirectly used for purposes beyond its business scope or purposes prohibited by PRC laws or regulations,
and such converted Renminbi capital shall not be provided as loans to non-affiliated entities.
PRC subsidiaries' distributions
to their offshore parents are required to comply with the requirements as described above.
**PRC Share Option Rules**
Under the Administration Measures
on Individual Foreign Exchange Control issued by the Peoples Bank of China (PBOC) on December 25, 2006, all foreign
exchange matters involved in employee share ownership plans and share option plans in which PRC citizens participate require approval
from SAFE or its authorized branch. Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed
companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special
purpose companies. In addition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Share Incentive Plans of Overseas Publicly-Listed Companies, or the Share Option Rules, issued by SAFE on February 15, 2012, PRC residents
who are granted shares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (i)
register with SAFE or its local branches, (ii) retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company
or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to
the share incentive plans on behalf of the participants, and (iii) retain an overseas institution to handle matters in connection with
their exercise of share options, purchase and sale of shares or interests and funds transfers.
| | 15 | | |
**PRC Regulation Relating to Dividend Distributions**
The principal laws, rules
and regulations governing dividend distributions by foreign-invested enterprises in the PRC are the Company Law of the PRC, as amended,
the Wholly Foreign-owned Enterprise Law and its implementation regulations, the Chinese-foreign Cooperative Joint Venture Law and its
implementation regulations, and the Chinese-foreign Equity Joint Venture Law and its implementation regulations. Under these laws, rules
and regulations, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance
with PRC accounting standards and regulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to set
aside a general reserve of at least 10% of their after-tax profit, until the cumulative amount of such reserve reaches 50% of their registered
capital. 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.
**REPORTS TO SECURITY HOLDERS**
We are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and accordingly, will file current and periodic reports, proxy statements
and other information with the Securities and Exchange Commission, or the Commission. Information that the Company previously publicly
disclosed was made through the OTC Disclosure and News Service and are available on the OTC Markets Groups website at www.otcmarkets.com.
With respect to disclosures filed or furnished to the Commission, you may obtain copies of our prior and future reports from the Commissions
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or on the SEC's website, at www.sec.gov. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
**Near-Term Requirements For
Additional Capital**
We believe that we will require
approximately $10 million over the next 18-24 months to implement our business plan. For the immediate future, we intend to finance our
business expansion efforts through loans from existing shareholders or financial institutions.
**Available
Information**
****
****Access
to all of our Securities and Exchange Commission (SEC) filings, including our annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the Exchange Act), is provided, free of charge, on our website (https://staging.heavenlygraceltd.com)
as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Except as expressly set
forth in this Form 10-K annual report, the contents of our website are not incorporated into, or otherwise to be regarded as part of
this report.
****
****
****
****
| | 16 | | |
****
|
Item 1A. |
Risk Factors | |
**Risks Related to Our Business and Industry**
****
**We have derived, and expect to continue to
derive, a significant amount of revenue from a small number of customers.**
Historically, we have earned,
and believe that in the future we will continue to earn, a substantial portion of our revenue from a relatively small number of customers.
During the fiscal year ended March 31, 2025, one customer accounted for 100% of our revenues. If we were to either lose one of our major
customers or have a major customer significantly reduce its volume of business with us, our business, results of operations and financial
condition would be harmed unless we are able to replace such demand with other orders promptly. We expect to continue to be dependent
on our major customers, the number and identity of which may change from period to period. Because our customers generally do not provide
us with firm, long-term volume purchase commitments, our customers, including our largest customers upon whom we may become dependent,
can reduce or terminate altogether their business with us at any time.
**We
rely on third-party service providers and partners for certain aspects of our operations, including the creation of DOTs, and any interruptions
in services provided by these third parties may impair our ability to support our users.**
We
rely on third parties in connection with many aspects of our business, including the minting of DOTs, payment processors, cloud computing
services and data centers that provide facilities, infrastructure, website functionality and access, components, and services, including
databases and data center facilities and cloud computing, which are critical to our intended operations. Because we intend to rely on
third parties to provide these services and to facilitate certain of our business activities, we face increased operational risks. We
do not control the operation of any of these third parties, including the third-party regulated trust and custodian entities we will use.
These third parties may be subject to financial, legal, regulatory, and labor issues, cybersecurity incidents, break-ins, computer viruses,
denial-of-service attacks, sabotage, acts of vandalism, privacy breaches, service terminations, disruptions, interruptions, and other
misconduct. They are also vulnerable to damage or interruption from human error, power loss, telecommunications failures, fires, floods,
earthquakes, hurricanes, tornadoes, pandemics (including the COVID-19 pandemic) and similar events. In addition, these third parties may
breach their agreements with us, disagree with our interpretation of contract terms or applicable laws and regulations, refuse to continue
or renew these agreements on commercially reasonable terms or at all, fail or refuse to process transactions or provide other services
adequately, take actions that degrade the functionality of our services, impose additional costs or requirements on us or our customers,
or give preferential treatment to competitors. There can be no assurance that third parties that will provide services to us or to our
users will do so on acceptable terms, or at all. If any third parties do not adequately or appropriately provide their services or perform
their responsibilities to us or our users, such as if third-party service providers close their data center facilities without adequate
notice, are unable to restore operations and data, fail to perform as expected, or experience other unanticipated problems, we may be
unable to procure alternatives in a timely and efficient manner and on acceptable terms, or at all, and we may be subject to business
disruptions, losses or costs to remediate any of the deficiencies, user dissatisfaction, reputational damage, legal or regulatory proceedings,
or other adverse consequences which could harm our business.
****
**We are also subject
to other risks and uncertainties that affect many other businesses, including:**
****
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increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits; | |
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the increasing costs of compliance with federal, state and foreign governmental agency mandates (including the Foreign Corrupt Practices Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies; | |
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the impact of any international conflicts on the U.S. and global economies in general, the transportation industry or us in particular, and what effects these events will have on our costs or the demand for our services; | |
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any impacts on our business resulting from new domestic or international government laws and regulation; | |
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market acceptance of our new service and growth initiatives; | |
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the impact of technology developments on our operations and on demand for our services; | |
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governmental under-investment in transportation infrastructure, which could increase our costs and adversely impact our service levels due to traffic congestion or sub-optimal routing of our vehicles; | |
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widespread outbreak of an illness or any other communicable disease, or any other public health crisis; and | |
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availability of financing on terms acceptable to our ability to maintain our current credit ratings, especially given the capital intensity of our operations. | |
****
****
****
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****
**If we are unable to
protect the confidentiality of our trade secrets, our business and competitive position would be harmed.**
We may rely on trade secrets,
including unpatented know-how, technology and other proprietary information, to maintain our competitive position. However, trade secrets
are difficult to protect. We limit disclosure of such trade secrets where possible but we also seek to protect these trade secrets, in
part, by entering into non-disclosure and confidentiality agreements with parties who do have access to them, such as our employees, contract
manufacturers, consultants, advisors and other third parties. Despite these efforts, any of these parties may breach the agreements and
may unintentionally or willfully disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate
remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive
and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or
unwilling to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a
competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position
would be harmed.
****
**Risk Factors Risk
Factors Relating to Doing Business in Hong Kong and China.**
****
**The PRC government has
significant oversight and discretion over the conduct of a Hong Kong companys business operations or to exert control over any
offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations,
may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities
to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.**
In light of Chinas
extension of authority into Hong Kong, we are subject to risks arising from the legal system in China, including risks and uncertainties
regarding the enforcement of laws and that rules and regulations in Hong Kong and China can change quickly with little to no advanced
notice. In addition, the PRC government may intervene or influence our operations at any time with little to no advanced notice, which
could result in a material change in our operations and/or the value of our common stock. These risks will become even more prominent
and direct if we expand our operations into or develop a physical presence in China. For example, the PRC government has recently published
new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the
possibility that it will in the future release regulations or policies regarding any industry that could adversely affect the business,
financial condition and results of operations of our company. To the extent that we expand into China in the future, significantly adverse
policies from the PRC may force us to divest of such Chinese operations or face other risks of forfeiture. Furthermore, the PRC government
has also recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities
that are conducted overseas and foreign investment in China-based companies. Any such action, once taken by the PRC government, 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 in extreme cases, become worthless.
Recently, the PRC government
initiated a series of regulatory actions and statements to regulate business operations 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 variable
interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly
enforcement. We believe we are not subject to cybersecurity review with the Cyberspace Administration of China, or CAC, given that: (i)
our products and services are offered not directly to individual users but through our institutional customers; (ii) we do not possess
a large amount of personal information in our business operations; and (iii) data processed in our business does not have a bearing on
national security and thus may not be classified as core or important data by the authorities. See also **Risk Factors
We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection.
We may be liable for improper use or appropriation of personal information provided by our customers.**In addition, we believe
that we are not subject to merger control review by Chinas anti-monopoly enforcement agency due to the level of our revenues which
provided from us and audited by our auditor, and the fact that we currently do not expect to propose or implement any acquisition of control
of, or decisive influence over, any company with revenues within China of more than RMB400 million. Currently, these statements and regulatory
actions have had no impact on our daily business operation, the ability to accept foreign investments and list our securities on an U.S.
or other foreign exchange. Since these statements and regulatory actions are new, it is highly uncertain how soon 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, and the potential impact such modified or new laws and regulations will have on our daily business
operation, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange.
****
| | 18 | | |
**We face the risk that
changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in Hong Kong
currently, and in the future, in China, and the profitability of such business.**
****
Our business and assets are
primarily located in Hong Kong, and we intend to expand distribution of our products into China in the future. Accordingly, economic,
political and legal developments in Hong Kong and the PRC will significantly affect our business, financial condition, results of operations
and prospects. Policies of the PRC government can have significant effects on economic conditions in Hong Kong. While we believe that
the PRC will continue to strengthen its economic and trading relationships with foreign countries and that business development in the
PRC will continue to follow market forces, we cannot assure you that this will be the case. Our interests may be adversely affected by
changes in policies by the PRC government, including:
****
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Uncertainties regarding enforcement of laws in Hong Kong, and as we expand into China, the PRC; | |
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changes in laws, regulations or their interpretation especially with respect to application of PRC tax, labor, currency restriction and other laws to Hong Kong operations, all of which can occur quickly and with little to no advanced notice; | |
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confiscatory taxation or changes in taxation; | |
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Currency revaluations or restrictions on currency conversion, imports or sources of supplies, or ability to continue as a for-profit enterprise; | |
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expropriation or nationalization of private enterprises, risks of forfeiture; and | |
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the allocation of resources. | |
**Substantial uncertainties
and restrictions with respect to the political, legal and economic policies of the PRC government and PRC laws and regulations could have
a significant impact upon the business that we may be able to conduct in Hong Kong and the PRC, and accordingly on the results of our
operations and financial condition.**
Our business operations (and
product sales, if we expand distribution of our products into China) may be adversely affected by the current and future political environment
in the PRC. The PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese
economy through regulation and state ownership. We expect the Hong Kong and PRC legal systems to rapidly evolve in the near future with
the Hong Kong legal system becoming closer aligned with legal system in China. There is a risk that the PRC government will intervene
or influence our operations at any time, including exerting more oversight and control over companies operating in Hong Kong and the PRC,
offerings conducted overseas and or foreign investment in Hong Kong and PRC based issuers, which could result in a material change in
our operations and or the value of our common stock. These actions may be reflected in the changing interpretations and enforcement of
many laws, regulations and rules in Hong Kong and the PRC that may not always be uniform and with little to no advance notice. Our business
operations and our ability to operate in Hong Kong, offer or continue to offer securities to investors and continue to invest in Hong
Kong and or PRC based issuers may be harmed by these changes in laws and regulations, including those relating to taxation, import and
export tariffs, healthcare regulations, environmental regulations, land use and property ownership rights, and other matters. Accordingly,
government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic
conditions in Hong Kong or particular regions thereof, and could limit or completely hinder our ability to offer or continue to offer
securities to investors or require us to divest ourselves of any interest we then hold in Hong Kong properties or joint ventures. Any
such actions (including divesture or similar actions) could result in a material adverse effect on us and on your investment in us and
could cause the value of our securities and your investment in our securities to significantly decline or be worthless.
| | 19 | | |
There are substantial uncertainties
regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing
our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory
liens, death, bankruptcy or criminal proceedings. Only after 1979 did the Chinese government begin to promulgate a comprehensive system
of laws that regulate economic affairs in general, deal with economic matters such as foreign investment, corporate organization and governance,
commerce, taxation and trade, as well as encourage foreign investment in China. Although the influence of the law has been increasing,
China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects
of economic activities in China. Also, because these laws and regulations are relatively new, and because of the limited volume of published
cases and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.
New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, there have
been constant changes and amendments of laws and regulations over the past 30 years in order to keep up with the rapidly changing society
and economy in China. Because government agencies and courts that provide interpretations of laws and regulations and decide contractual
disputes and issues may change their interpretation or enforcement very rapidly with little advance notice at any time, we cannot predict
the future direction of Chinese legislative activities with respect to either businesses with foreign investment or the effectiveness
on enforcement of laws and regulations in China. The uncertainties, including new laws and regulations and changes of existing laws, as
well as may cause possible problems to foreign investors.
Although the PRC government
has been pursuing economic reform policies for more than two decades, the PRC government continues to exercise significant control over
economic growth in the PRC through the allocation of resources, controlling payments of foreign currency, setting monetary policy and
imposing policies that impact particular industries in different ways. We cannot assure you that the PRC government will continue to pursue
policies favoring a market oriented economy or that existing policies will not be significantly altered, especially in the event of a
change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.
****
**The Holding Foreign
Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) to be permitted to inspect the issuer's public
accounting firm within three years. This three-year period will be shortened to two years if the Accelerating Holding Foreign Companies
Accountable Act is enacted. There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the
U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities
regulatory agencies are unable to conduct such investigations, they may suspend or de-register our registration with the SEC and delist
our securities from applicable trading market within the US.**
The Holding Foreign Companies
Accountable Act (HFCAA) was signed into law on December 18, 2020, and requires Auditors of publicly traded companies to submit to regular
inspections every three years to assess such auditors compliance with applicable professional standards. On June 22, 2021, the
U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which, if passed by the U.S. House of Representatives and
signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA
from three years to two. On September 22, 2021, the PCAOB adopted rules to create a framework for the PCAOB to use when determining, as
contemplated under the HFCAA, 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 adopted
amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. 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 the PCAOB is unable to inspect or investigate completely because of a position taken by an authority
in a foreign jurisdiction. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate
completely PCAOB-registered public accounting firms headquartered in China and in Hong Kong because of positions taken by PRC and Hong
Kong authorities in those jurisdictions. The PCAOB has made such designations as mandated under the HFCAA. Pursuant to each annual determination
by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such
suspensions in the future.
| | 20 | | |
Our auditor is based in Nigeria
and is subject to PCAOB inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the
event the Nigerian authorities subsequently take a position disallowing the PCAOB to inspect our auditor, then we would need to change
our auditor. Furthermore, due to the recent developments in connection with the implementation of the Holding Foreign Companies Accountable
Act, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after
considering the effectiveness of our auditors audit procedures and quality control procedures, adequacy of personnel and training,
or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. The requirement in
the HFCAA that the PCAOB be permitted to inspect the issuers public accounting firm within two or three years, may result in the
delisting of our securities from applicable trading markets in the U.S, in the future if the PCAOB is unable to inspect our accounting
firm at such future time. If the authorities in Nigeria subsequently take a position disallowing the PCAOB to inspect our auditor, the
lack of inspection could cause trading in our securities to be prohibited under the Holding Foreign Companies Accountable Act and as a
result, our securities may be delisted from applicable trading markets within the US.
If the U.S. securities regulatory
agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration
with the SEC and may also delist our securities from applicable trading market within the US.
According to Article 177 of
the Securities Law of the PRC (Article 177), overseas securities regulatory authorities are prohibited from engaging in
activities pertaining to investigations or evidence collection directly conducted within the territories of the PRC, and Chinese entities
or individuals are further prohibited from providing documents and information in connection with securities business activities to any
organizations and/or persons abroad without the prior consent of the securities regulatory authority of the State Council and the competent
departments of the State Council. As of the date of this report, we are not aware of any implementing rules or regulations which have
been published regarding application of Article 177.
We believe Article 177 is
only applicable where the activities of overseas authorities constitute a direct investigation or evidence collection by such authorities
within the territory of the PRC. Our principal business operation is conducted in Hong Kong. In the event that the U.S. securities regulatory
agencies carry out an investigation on us such as an enforcement action by the Department of Justice, the SEC or other authorities, such
agencies activities will constitute conducting an investigation or collecting evidence directly within the territory of the PRC
and accordingly fall within the scope of Article 177. In that case, the U.S. securities regulatory agencies may have to consider establishing
cross-border cooperation with the securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or establishing
a regulatory cooperation mechanism with the securities regulatory authority of the PRC. However, there is no assurance that the U.S. securities
regulatory agencies will succeed in establishing such cross-border cooperation in this particular case and/or establish such cooperation
in a timely manner.
Furthermore, as Article 177
is a recently promulgated provision, it remains unclear as to how it will be interpreted, implemented or applied by the Chinese Securities
Regulatory Commission or other relevant government authorities. As such, there are uncertainties as to the procedures and requisite timing
for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. The Holding
Foreign Companies Accountable Act requires the Public Company Accounting Oversight Board (PCAOB) be permitted to inspect the issuer's
public accounting firm within three years. This three year period will be shortened to two years if the Accelerating Holding Foreign Companies
Accountable Act is enacted. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk
that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from applicable trading
market within the US.
| | 21 | | |
**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, subject us to additional disclosure requirements.**
****
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, all
of which will materially and adversely affect our business, financial condition and results of operations. We may have to adjust, modify,
or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you
that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
On July30, 2021, in
response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement
asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies (including
Hong Kong) before their registration statements will be declared effective. On August 1, 2021, the China Securities Regulatory Commission
stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese
companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related
issuers. Since we operate in Hong Kong, we cannot guarantee that we will not be subject to tightened regulatory review and we could be
exposed to government interference from China.
**We may become subject
to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable
for improper use or appropriation of personal information provided by our customers.**
While we are currently not
subject to the laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection, there can be no assurance
that such laws will continue to be inapplicable to us in the future as these laws and regulations are continuously evolving and developing.
The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly
with respect to foreign laws. In particular, there are numerous laws and regulations regarding privacy and the collection, sharing, use,
processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may
be subject to differing interpretations, and may be inconsistent among different jurisdictions.
We expect to obtain information
about various aspects of our operations as well as regarding our employees and third parties. We also maintain information about various
aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data
is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required
by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard
such information.
The PRC Criminal Law, as amended
by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies
and their employees from selling or otherwise illegally disclosing a citizens personal information obtained during the course of
performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing
Committee of the PRC National Peoples Congress issued the Cyber Security Law of the PRC, or Cyber Security Law, which became effective
on June 1, 2017.
Pursuant to the Cyber Security
Law, network operators must not, without users consent, collect their personal information, and may only collect users personal
information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services
and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.
| | 22 | | |
The Civil Code of the PRC
(issued by the PRC National Peoples Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for
privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the Cyberspace Administration
of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data
protection.
The PRC regulatory requirements
regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration
of China, the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws and regulations with varying and
evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity Review Measures, which came into
effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity
review when purchasing network products and services which do or may affect national security.
In November 2016, the Standing
Committee of the NPC passed Chinas first Cybersecurity Law (CSL), which became effective in June 2017. The CSL is
the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously
under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include
penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the
websites, and revocation of business license or relevant permits. In April 2020, the Cyberspace Administration of China and certain other
PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity
Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and
services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of
the Measures for Cybersecurity Review for public comments (Draft Measures), which required that, in addition to operator
of critical information infrastructure, any data processor carrying out data processing activities that affect or
may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when
assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or
a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of
critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or
maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed
rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations
because of the risk that such data and personal information could be affected, controlled, and maliciously exploited by foreign
governments, The cybersecurity review will also investigate the potential national security risks from overseas IPOs. We do not
know what regulations will be adopted or how such regulations will affect us and our listing on Nasdaq. In the event that the Cyberspace
Administration of China determines that we are subject to these regulations, we may be required to delist from Nasdaq and we may be subject
to fines and penalties. On June 10, 2021, the Standing Committee of the NPC promulgated the PRC Data Security Law, which took effect on
September 1, 2021. The Data Security Law also sets forth the data security protection obligations for entities and individuals handling
personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and
use of such data should not exceed the necessary limits The costs of compliance with, and other burdens imposed by, CSL and any other
cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business.
Further, if the enacted version of the Measures for Cybersecurity Review mandates clearance of cybersecurity review and other specific
actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.
We relied on the legal opinion
of Ravenscroft & Schmierer, and has determined that we are not subject to the cybersecurity review by the CAC, given that: (i) we
do not possess a large amount of personal information in our business operations; and (ii) data processed in our business does not have
a bearing on national security and thus may not be classified as core or important data by the authorities. However, there remains uncertainty
as to how the Draft Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt
new laws, regulations, rules, or detailed implementation and interpretation related to the Draft Measures. If any such new laws, regulations,
rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize
the adverse effect of such laws on us.
We cannot assure you that
PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply
with such laws. In the event that we are subject to any mandatory cybersecurity review and other specific actions required by the CAC,
we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all. Given such uncertainty,
we may be further required to suspend or shut down our relevant business, or face other penalties, which could materially and adversely
affect our business, financial condition, and results of operations.
| | 23 | | |
**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 enterprise income
tax law that became effective on January 1, 2008, an enterprise established outside the PRC with de facto management bodies
within the PRC is considered a resident enterprise for PRC enterprise income tax purposes and is generally subject to a
uniform 25% enterprise income tax rate on its worldwide income. On April 22, 2009, the State Administration of Taxation, or 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 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. Further to SAT Circular 82, on
August 3, 2011, the SAT issued the Administrative Measures of Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident
Enterprises (Trial), or SAT Bulletin 45, which became effective on September 1, 2011, to provide more guidance on the implementation of
SAT Circular 82.
According to SAT Circular 82,
an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered 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)not less than half of the enterprises directors
or senior management with voting rights habitually reside in the PRC. SAT Bulletin 45 further clarifies the resident status determination,
post-determination administration as well as competent tax authorities.
Although SAT Circular 82 and
SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise group instead of those
controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect SATs 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.
We believe that none of our
entities outside of China is a PRC resident enterprise for PRC tax purposes even if the standards for de facto management body
prescribed in the SAT Circular 82 are applicable to us. 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 or any of our subsidiaries outside of China is a PRC resident enterprise for enterprise income
tax purposes, we may be subject to PRC enterprise income on our worldwide income at the rate of 25%, which could materially reduce our
net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.
Although dividends paid by
one PRC tax resident to another PRC tax resident should qualify as tax-exempt income under the enterprise income tax law,
we cannot assure you that dividends by our Hong Kong subsidiary to our British Virgin Islands holding company or Delaware holding company
will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends,
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.
Non-PRC resident holders of
our common stock may also be subject to PRC withholding tax on dividends paid by us and PRC tax on gains realized on the sale or other
disposition of common stock, if such income is sourced from within the PRC. The tax would be imposed at the rate of 10% in the case of
non-PRC resident enterprise holders and 20% in the case of non-PRC resident individual holders. In the case of dividends, we would be
required to withhold the tax at source. Any PRC tax liability may be reduced under applicable tax treaties or similar arrangements. Although
our holding companies are incorporated in Delaware and the British Virgin Islands, it remains unclear whether dividends received and gains
realized by non-PRC resident holders of our common stock will be regarded as income from sources within the PRC if we are classified as
a PRC resident enterprise. Any such tax will reduce the returns on your investment in our common stock.
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We cannot assure you that the
PRC tax authorities will not, at their discretion, adjust any capital gains and impose tax return filing and withholding or tax payment
obligations with respect to any internal restructuring, and our Hong Kong subsidiary may be requested to assist in the filing. Any PRC
tax imposed on a transfer of our shares not through a public stock exchange, or any adjustment of such gains would cause us to incur additional
costs and may have a negative impact on the value of your investment in the company.
**PRC regulation of loans
to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent
us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to
our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.**
Any transfer of funds by us
to our Hong Kong subsidiaries, either as a shareholder loan or as an increase in registered capital, may become subject to approval by
or registration or filing with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested
enterprises in China, capital contributions to PRC subsidiaries are subject to the approval of or filing with the Ministry of Commerce
in its local branches and registration with a local bank authorized by SAFE. It is unclear if Hong Kong subsidiaries will be deemed a
PRC subsidiary. If Hong Kong subsidiaries are deemed to be PRC subsidiaries, (i)any foreign loan procured by our Hong Kong subsidiaries
will be required to be registered with SAFE or its local branches or filed with SAFE in its information system; and (ii)our Hong
Kong subsidiaries will not be able to procure loans which exceed the difference between their total investment amount and registered capital
or, as an alternative, only procure loans subject to the calculation approach and limitation as provided in the Peoples Bank of
China Notice No.9 (PBOC Notice No.9). We may not be able to obtain these government approvals or complete such
registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our Hong Kong subsidiaries,
if required. If we fail to receive such approvals or complete such registration or filing, our ability to use the proceeds we receive
from our offshore financing activities and to capitalize our Hong Kong operations may be negatively affected, which could adversely affect
our liquidity and ability to fund and expand our business. There is, in effect, no statutory limit on the amount of capital contribution
that we can make to our Hong Kong subsidiaries. This is because there is no statutory limit on the amount of registered capital for our
Hong Kong subsidiaries, and we are allowed to make capital contributions to our Hong Kong subsidiaries by subscribing for their initial
registered capital and increased registered capital, provided that the Hong Kong subsidiaries complete the relevant filing and registration
procedures.
The Circular on Reforming
the Administration of Foreign Exchange Settlement of Capital of Foreign-Invested Enterprises, or SAFE Circular 19, effective as of June1,
2015, as amended by Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement under the
Capital Account, or SAFE Circular 16, effective on June9, 2016, allows FIEs to settle their foreign exchange capital at their discretion,
but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capitals for expenditure beyond their
business scopes, and also prohibit FIEs from using such Renminbi fund to provide loans to persons other than affiliates unless otherwise
permitted under its business scope. If Safe Circulars 16 and 19 are interpreted to apply to the Hong Kong Dollar, our ability to use Hong
Kong Dollars converted from the net proceeds from our offshore financing activities to fund the establishment of new entities in Hong
Kong, to invest in or acquire any other Hong Kong or PRC companies may be limited, which may adversely affect our business, financial
condition and results of operations.
**Because our holding
company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other
cash payments is limited.**
We are a holding company
whose primary assets are our ownership of the equity interests in our subsidiaries. We conduct no other business and, as a result, we
depend entirely upon our subsidiaries earnings and cash flow. If we decide in the future to pay dividends or make other payments, as
a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from
our operating subsidiaries. Our subsidiaries and projects may be restricted in their ability to pay dividends, make distributions or
otherwise transfer funds to us prior to the satisfaction of other obligations, including the payment of operating expenses or debt service,
appropriation to reserves prescribed by laws and regulations, covering losses in previous years, restrictions on the conversion of local
currency into U.S. dollars or other hard currency, completion of relevant procedures with governmental authorities or banks and other
regulatory restrictions. Under the applicable PRC laws and regulations, foreign-invested enterprises in China may pay dividends only
out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested
enterprise in China is required to set aside a portion of its after-tax profit to fund specific reserve funds prior to payment of dividends.
In particular, at least 10% of its after-tax profits based on PRC accounting standards each year is required to be set aside towards
its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable
as cash dividends. If future dividends are paid in RMB, fluctuations in the exchange rate for the conversion of any of these currencies
into U.S. dollars may adversely affect the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars.
For a detailed description of the potential government regulations facing the Company associated with our operations in Hong Kong, please
refer to **Government and Industry Regulations China**. We do not presently have any intention to declare or
pay dividends in the future. You should not purchase shares of our common stock in anticipation of receiving dividends in future periods.
****
****
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| | 25 | | |
****
**If any dividend is declared
in the future and paid in a foreign currency, you may be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you
will actually ultimately receive.**
If you are a U.S. holder of
our shares of common stock, you will be taxed on the U.S. dollar value of your dividends, if any, at the time you receive them, even if
you actually receive a smaller amount of U.S. dollars when the payment is in fact converted into U.S. dollars. Specifically, if a dividend
is declared and paid in a foreign currency such as the RMB, the amount of the dividend distribution that you must include in your income
as a U.S. holder will be the U.S. dollar value of the payments made in the foreign currency, determined at the spot rate of the foreign
currency to the U.S. dollar on the date the dividend distribution is includible in your income, regardless of whether the payment is in
fact converted into U.S. dollars. Thus, if the value of the foreign currency decreases before you actually convert the currency into U.S.
dollars, you will be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you will actually ultimately receive.
**Dividends payable to
our foreign investors and gains on the sale of our shares of common stock by our foreign investors may become subject to tax by the PRC.**
Under the Enterprise Income
Tax Law and its implementation regulations issued by the State Council of the PRC, unless otherwise provided under relevant tax treaties,
a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment
or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected
with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Similarly, any gain
realized on the transfer of shares by such investors is also subject to PRC tax at a current rate of 10%, subject to any reduction or
exemption set forth in relevant tax treaties, if such gain is regarded as income derived from sources within the PRC. If we are deemed
a PRC resident enterprise, dividends paid on our shares, and any gain realized from the transfer of our shares, would be treated as income
derived from sources within the PRC and would as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise,
dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer shares by such investors may
be subject to PRC tax at a current rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties. It is unclear
whether we or any of our subsidiaries established outside of China are considered a PRC resident enterprise or whether holders of shares
would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends
payable to our non-PRC investors, or gains from the transfer of our shares by such investors are subject to PRC tax, the value of your
investment in our shares may decline significantly. For a detailed description of the potential government regulations facing the Company
associated with our operations in Hong Kong, please refer to **Government and Industry Regulations China**.
**Our global income may
be subject to PRC taxes under the PRC Enterprise Income Tax Law, which could have a material adverse effect on our results of operations.**
Under the PRC Enterprise Income
Tax Law, or the New EIT Law, and its amendment and implementation rules, which became effective in January 2008, an enterprise established
outside of the PRC with a de facto management body located within the PRC is considered a PRC resident enterprise and will
be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules define the term de facto
management bodies as establishments that carry out substantial and overall management and control over the manufacturing
and business operations, personnel and human resources, finance and treasury, and business combination and disposition of properties and
other assets of an enterprise. On April 22, 2009, the State Administration of Taxation (the SAT), issued a circular,
or 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 the SAT Circular 82 only applies to offshore enterprises controlled
by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the determining criteria set forth
in the SAT Circular 82 may reflect the SATs general position on how the de facto management body text should be applied
in determining the resident status of all offshore enterprises for the purpose of PRC tax, regardless of whether they are controlled by
PRC enterprises or individuals. Although we do not believe that our legal entities organized outside of the PRC constitute PRC resident
enterprises, it is possible that the PRC tax authorities could reach a different conclusion. In such case, we may be considered a PRC
resident enterprise and may therefore be subject to the 25% enterprise income tax on our global income, which could significantly increase
our tax burden and materially and adversely affect our cash flow and profitability. In addition to the uncertainty regarding how the new
PRC resident enterprise classification for tax purposes may apply, it is also possible that the rules may change in the future, possibly
with retroactive effect. For a detailed description of the potential government regulations facing the Company associated with our operations
in Hong Kong, please refer to **Government and Industry Regulations China**.
****
****
****
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| | 26 | | |
****
**We and our shareholders
face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.**
****
We face uncertainties regarding
the reporting on and consequences of private equity financing transactions involving the transfer of shares in the Company by non-resident
investors. In February2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC
Resident Enterprises, or SAT Bulletin 7, as amended in 2017. Pursuant to this bulletin, an indirect transfer of assets,
including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct
transfer of PRC taxable 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. According to SAT Bulletin 7, PRC taxable assets include assets attributed to an establishment in China, immovable
properties located in China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct
holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a reasonable
commercial purpose of the transaction arrangement, features to be taken into consideration include: whether the main value of the
equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise
mainly consist of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and
its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function
and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction
by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements.
In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise
income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise
income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or to equity investments
in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise
income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements,
and the party who is obligated to make the transfer payments has the withholding obligation. SAT Bulletin 7 does not apply to transactions
of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock
exchange.
There is uncertainty as to
the application of SAT Bulletin 7. We face uncertainties as to the reporting and other implications of certain past and future transactions
where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments.
We may be subject to filing obligations or taxed if we are a transferor in such transactions, and may be subject to withholding obligations
if we are a transferee in such transactions under SAT Bulletin 7. For transfer of shares in us by investors that are non-PRC resident
enterprises, our Hong Kong subsidiary may be requested to assist in the filing under SAT Bulletin 7. As a result, we may be required to
expend valuable resources to comply with SAT Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to
comply with these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect
on our financial condition and results of operations.
**The M&A Rules and
certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.**
****
The Regulations on Mergers
and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and
amended in 2009, and some other regulations and rules concerning mergers and acquisitions established complex procedures and requirements
for acquisition of Chinese companies by foreign investors, including requirements in some instances that the Ministry of Commerce of the
PRC be notified in advance of anychange-of-controltransaction in which a foreign investor takes control of a PRC domestic
enterprise. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National Peoples Congress, which became
effective in 2008, requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must
be cleared by the Ministry of Commerce before they can be completed. In addition, the security review rules issued by the Ministry of
Commerce and became effective in September2011 specify that mergers and acquisitions by foreign investors that raise national
defense and security concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic
enterprises that raise national security concerns are subject to strict review by the Ministry of Commerce, and the rules
prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual
control arrangement.
| | 27 | | |
In the future, we may pursue
potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of the above-mentioned
regulations and other rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining
approval or clearance from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect
our ability to expand our business or maintain our market share. Furthermore, according to the M&A Rules, if a PRC entity or individual
plans to merger or acquire its related PRC entity through an overseas company legitimately incorporated or controlled by such entity or
individual, such a merger and acquisition will be subject to examination and approval by the Ministry of Commerce. The application and
interpretations of M&ARules are still uncertain, and there is possibility that the PRC regulators may promulgate new rules or
explanations requiring that we obtain approval of the Ministry of Commerce for our completed or ongoing mergers and acquisitions. There
is no assurance that we can obtain such approval from the Ministry of Commerce for our mergers and acquisitions, and if we fail to obtain
those approvals, we may be required to suspend our acquisition and be subject to penalties. Any uncertainties regarding such approval
requirements could have a material adverse effect on our business, results of operations and corporate structure.
Furthermore, the M&A Rules,
among other things, purport to require that an offshore special purpose vehicle controlled directly or indirectly by PRC domestic companies
or individuals and formed for purposes of overseas listing through acquisition of PRC domestic interests obtain the approval of the CSRC
prior to the listing and trading of such special purpose vehicles securities on an overseas stock exchange. The CSRC has not issued
any definitive rules or interpretations concerning whether offerings such as this offering are subject to the CSRC approval procedures
under the M&A Rules. Although we are of the position that we are not required to obtain approval from the CSRC under the M&A Rules
for listing and trading of our securities after the consummation of the Business Combination, uncertainties still exist as to how the
M&A Rules will be interpreted and implemented and the opinion stated above is subject to any new laws, rules and regulations or detailed
implementations and interpretations in any form relating to the M&A Rules.
**PRC regulations relating
to offshore investment activities by PRC residents may limit our Hong Kong subsidiarys ability to increase their registered capital
or distribute profits to us or otherwise expose us to liability and penalties under PRC law.**
****
The State Administration of
Foreign Exchange (SAFE) promulgated the Circular on Relevant Issues Relating to PRC Residents Investment and Financing
and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July2014 that requires PRC residents or entities
to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the
purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the
offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC residents
or entities, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.
SAFE Circular 37 is issued
to replace the Circular on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip
Investments through Overseas Special Purpose Vehicles. If our shareholders who are PRC residents or entities do not complete their registration
with the local SAFE branches, our Hong Kong subsidiary 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 Hong
Kong subsidiary. Moreover, failure to comply with SAFE registration described above could result in liability under PRC laws for evasion
of applicable foreign exchange restrictions.
However, we may not be informed
of the identities of all the PRC residents or entities holding direct or indirect interest in us, nor can we compel our shareholders to
comply with the requirements of SAFE Circular37. As a result, we cannot assure you that all of our shareholders who are PRC residents
or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE Circular
37. Failure by such shareholders to comply with SAFE Circular 37, or failure by us to amend the foreign exchange registrations of its
Hong Kong subsidiary, if applicable, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities,
limit our Hong Kong subsidiarys ability to make distributions or pay dividends to us or affect our ownership structure, which could
adversely affect our business and prospects. For a detailed description of the potential government regulations facing the Company and
the offering associated with our operations in Hong Kong, please refer to **Government and Industry Regulations PRC Regulations
Relating to Foreign Exchange and Government and Industry Regulations PRC Regulations Relating to Dividend Distributions**.
| | 28 | | |
**PRC regulation of loans
to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent
us from using the proceeds we receive from offshore financing activities to make loans to or make additional capital contributions to
our Hong Kong subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand business.**
****
Any transfer of funds by us
to our Hong Kong subsidiary, either as a shareholder loan or as an increase in registered capital, may become subject to approval by or
registration or filing with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested
enterprises in China, capital contributions to PRC subsidiaries are subject to the approval of or filing with the Ministry of Commerce
in its local branches and registration with a local bank authorized by SAFE. It is unclear if Hong Kong subsidiaries will be deemed a
PRC subsidiary. If Hong Kong subsidiaries are deemed to be PRC subsidiaries, (i)any foreign loan procured by our Hong Kong subsidiary
will be required to be registered with SAFE or its local branches or filed with SAFE in its information system; and (ii)our Hong
Kong subsidiary will not be able to procure loans which exceed the difference between their total investment amount and registered capital
or, as an alternative, only procure loans subject to the calculation approach and limitation as provided in the Peoples Bank of
China Notice No.9 (PBOC Notice No.9). We may not be able to obtain these government approvals or complete such
registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our Hong Kong subsidiary,
if required. If we fail to receive such approvals or complete such registration or filing, our ability to use the proceeds we receive
from our offshore financing activities and to capitalize our Hong Kong operations may be negatively affected, which could adversely affect
our liquidity and ability to fund and expand our business. There is, in effect, no statutory limit on the amount of capital contribution
that we can make to our Hong Kong subsidiary. This is because there is no statutory limit on the amount of registered capital for our
Hong Kong subsidiary, and we are allowed to make capital contributions to our Hong Kong subsidiary by subscribing for their initial registered
capital and increased registered capital, provided that the Hong Kong subsidiary complete the relevant filing and registration procedures.
The Circular on Reforming
the Administration of Foreign Exchange Settlement of Capital of Foreign-Invested Enterprises, or SAFE Circular 19, effective as of June1,
2015, as amended by Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over
Foreign Exchange Settlement under the Capital Account, or SAFE Circular 16, effective on June9, 2016, allows FIEs to settle their
foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign
exchange capitals for expenditure beyond their business scopes, and also prohibit FIEs from using such Renminbi fund to provide loans
to persons other than affiliates unless otherwise permitted under its business scope. If Safe Circulars 16 and 19 are interpreted to apply
to the Hong Kong Dollar, our ability to use Hong Kong Dollars converted from the net proceeds from our offshore financing activities to
fund the establishment of new entities in Hong Kong, to invest in or acquire any other Hong Kong or PRC companies may be limited, which
may adversely affect our business, financial condition and results of operations.
**Our Hong Kong subsidiary
may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity
requirements, conduct business and pay dividends to holders of our common stock.**
****
We are a holding company incorporated
in Delaware with our operating subsidiary located in Hong Kong. Accordingly, most of our cash is maintained in Hong Kong Dollars. We rely
on dividends from our Hong Kong subsidiary for our cash and financing requirements, such as the funds necessary to service any debt we
may incur. There is a possibility that the PRC could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the
deployment of the cash into our business or for the payment of dividends. Any such controls or restrictions may adversely affect our ability
to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. Current PRC regulations permit
PRC subsidiaries to pay dividends to foreign parent companies only out of their accumulated after-tax profits upon satisfaction of relevant
statutory condition and procedures, if any, determined in accordance with Chinese accounting standards and regulations. In addition, PRC
subsidiaries are required to set aside at least 10% of their accumulated profits each year, if any, to fund certain reserve funds until
the total amount set aside reaches 50% of its registered capital. Furthermore, if PRC subsidiaries and their 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 payments
to the foreign parent company, which may restrict the ability of the foreign parent company to satisfy its liquidity requirements. If
such restrictions on dividend and other payments are interpreted to apply to Hong Kong entities, our ability to rely on payments from
our Hong Kong subsidiary will be adversely affected.
****
| | 29 | | |
In addition, the Enterprise
Income Tax Law of the PRC, or the PRC 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. For a detailed description of the potential government regulations facing the Company and the offering associated with our
operations in Hong Kong, please refer to **Government and Industry Regulations PRC Regulations Relating to Foreign Exchange
and Government and Industry Regulations PRC Regulations Relating to Dividend Distributions**.
****
**Governmental control
of currency conversion may limit our ability to utilize revenues effectively and affect the value of your investment.**
****
The PRC government imposes
controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China.
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. In light of the flood
of capital outflows of China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies
and stepped up scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting
process are put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated
by such policies fail to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be
subject to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future
to foreign currencies for current account transactions.
We receive substantially all
of our revenues in Hong Kong Dollars. Under our current corporate structure, our Delaware holding company may rely on dividend payments
from our Hong Kong subsidiary to fund any cash and financing requirements that we may have. If the PRC government expands its currency
controls to include the Hong Kong Dollar, we will be required to obtain SAFE approval to use cash generated from the operations of our
Hong Kong subsidiary and consolidated affiliated entities to pay off their respective debt in a currency other than Hong Kong Dollar or
Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi
or the Hong Kong Dollar. We may be prevented from obtaining sufficient foreign currencies to satisfy our foreign currency demands. As
a result, we may not be able to pay dividends in foreign currencies to its shareholders. For a detailed description of the potential government
regulations facing the Company and the offering associated with our operations in Hong Kong, please refer to **Government and
Industry Regulations PRC Regulations Relating to Foreign Exchange and Government and Industry Regulations
PRC Regulations Relating to Dividend Distributions**.
**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.**
Pursuant to SAFE Circular
37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or
its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our directors,
executive officers and other employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous period of
not less than one year, subject to limited exceptions, and who have been granted incentive share awards by us, may follow the Notices
on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed
Company, or 2012 SAFE notices, promulgated by the SAFE in 2012. Pursuant to the 2012 SAFE notices, PRC citizens and non-PRC citizens who
reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly
listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the
PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution
must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests.
Our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one
year and who have been granted options will be subject to these regulations. It is unclear if these regulations will be expanded to include
Hong Kong residents or citizens. Failure to complete the SAFE registrations may subject them to fines, and legal sanctions and may also
limit our ability to contribute additional capital into our Hong Kong subsidiary and limit our Hong Kong subsidiarys ability to
distribute dividends to us if Hong Kong residents or citizens are covered under these PRC regulations. We also face regulatory uncertainties
that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law.
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The SAT has issued certain
circulars concerning employee share options and restricted shares. Under these circulars, employees working in China who exercise share
options or are granted restricted shares will be subject to PRC individual income tax. It is unclear whether these regulations will be
expanded in the future to cover our employees in Hong Kong. Our Hong Kong subsidiary may become obligated to file documents related to
employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees
who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and
regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities.
**If we become directly
subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant
resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result
in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.**
Recently, U.S. public companies
that have substantially all of their operations in Hong Kong and China 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 around the effects of US-China governmental policies and political climate, 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. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock
of many U.S. listed Chinese companies has 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 our Company,
our business and our stock 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 growing our company. If such allegations are not proven to be groundless,
our company and business operations will be severely negatively affected and your investment in our stock could be rendered worthless.
**Investors may experience
difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in Hong Kong based upon U.S.
laws, including the federal securities laws or other foreign laws against us or our management.**
All of our current operations
are conducted in Hong Kong. Moreover, most of our current directors and officers are nationals or residents of Hong Kong. All or a substantial
portion of the assets of these persons are located outside the United States and in the Hong Kong. As a result, it may not be possible
to effect service of process within the United States or elsewhere outside Hong Kong upon these persons. In addition, uncertainty exists
as to whether the courts of Hong Kong would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or
directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent
to hear original actions brought in Hong Kong against us or such persons predicated upon the securities laws of the United States or any
state thereof.
**Cybersecurity Breaches
and other Disruptions to our Information Technology Systems**
**
The efficient operation of
our business is dependent on our information technology systems to process, transmit and store sensitive electronic data, including employee,
distributor and customer records, and to manage and support our business operations and manufacturing processes. The secure maintenance
of this information is critical to our operations. Despite our security measures, our information technology system may be vulnerable
to attacks by hackers or breaches due to errors or malfeasance by employees and others who have access to our system, or other disruptions
during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility
failures or natural disasters. Any such event could compromise our information technology systems, expose our customers, distributors
and employees to risks of misuse of confidential information, impair our ability to effectively and timely operate our business and manufacturing
processes, and cause other disruptions, which could result in legal claims or proceedings, disrupt our operations and the services we
provide to customers, damage our reputation, and cause a loss of confidence in our products and services, any of which could adversely
affect our results of operations and competitive position.
****
****
****
****
| | 31 | | |
****
**Risks Related to Our Finances and Capital Requirements**
**We will need additional
funding and may be unable to raise capital when needed, which would force us to delay any business expansions or acquisitions.**
****
Our business plan contemplates
the expansion of our operations through organic means and through acquisitions or investments in additional complementary businesses,
products and technologies. While we currently have no commitments or agreements relating to any of these types of transactions, we do
not generate sufficient revenue from operations to finance expansion or acquisition needs. We expect to finance such future cash needs
through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements, as well as through
interest income earned on cash and investment balances. We cannot be certain that additional funding will be available on acceptable terms,
or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our development
programs or our commercialization efforts.
**Raising additional capital
may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.**
Until such time, if ever,
as we can generate substantial revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings,
grants and license and development agreements in connection with any collaborations. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity financing, if
available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends.
If we raise additional funds
through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish
valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may
not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to
delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.
**Risks Relating to Securities Markets and Investment
in Our Stock**
**There is presently none
and there may not ever be an active market for our Common Stock. There are restrictions on the transferability of these securities.**
There currently is no market
for our Common Stock and, except as otherwise described herein, we have no plans to file any registration statement or otherwise attempt
to create a market for the shares. Even if an active market develops for the shares, Rule 144, which provides for an exemption from the
registration requirements under the Securities Act under certain conditions, requires, among other conditions, a holding period prior
to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements
under the Securities Act. There can be no assurance that we will fulfill any reporting requirements in the future under the Exchange Act
or disseminate to the public any current financial or other information concerning us, as is required by Rule 144 as part of the conditions
of its availability.
| | 32 | | |
**Our common stock is
subject to the penny stock rules of the sec and the trading market in our securities is limited, which makes transactions
in our stock cumbersome and may reduce the value of an investment in our stock.**
Under U.S. federal securities
legislation, our common stock will constitute "penny stock". Penny stock is any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that
a broker or dealer approve a potential investor's account for transactions in penny stocks, and the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order
to approve an investor's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment
experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that
person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions
in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by
the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the
suitability determination. Brokers may be less willing to execute transactions in securities subject to the penny stock
rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about
the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights
and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing
recent price information for the penny stock held in the account and information on the limited market in penny stocks.
**Our insiders beneficially
own a significant portion of our stock, and accordingly, may have control over stockholder matters, our business and management.**
****
As of the date of this report,
Herbert Lee owns 30,000,000 shares of Series C Preferred Stock, representing all of the issued and outstanding shares of the Series C
Preferred Stock, and Silver Bloom Properties Limited beneficially owns 2,835,820,896 shares of our common stock, or approximately 42.639%
of our issued and outstanding shares of common stock. Each one share of Series C Preferred Stock converts and votes as 100 shares of
common stock of the Company. As a result, our major stockholders will have significant influence to:
|
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Elect or defeat the election of our directors; | |
|
|
|
Amend or prevent amendment of our articles of incorporation or bylaws; | |
|
|
|
effect or prevent a merger, sale of assets or other corporate transaction; and | |
|
|
|
affect the outcome of any other matter submitted to the stockholders for vote. | |
Moreover, new investors may not
be able to effect a change in our business or management, and therefore, other shareholders outside of Herbert Lee and Silver Bloom Properties
would have no recourse as a result of decisions made by these controlling shareholders. In addition, sales of significant amounts of shares
held by these major shareholders, or the prospect of these sales, could adversely affect the market price of our common stock.
****
**State securities laws
may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this
registration statement.**
****
Secondary trading in common
stock sold in this offering will not be possible in any state until the common stock is qualified for sale under the applicable securities
laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available
for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading
of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state.
In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common
stock could be significantly impacted thus causing you to realize a loss on your investment.
The Company does not intend
to seek registration or qualification of its shares of common stock the subject of this offering in any State or territory of the United
States. Aside from a secondary trading exemption, other exemptions under state law and the laws of US territories may be
available to purchasers of the shares of common stock sold in this offering.
| | 33 | | |
**Anti-takeover
effects of certain provisions of Delaware state law hinder a potential takeover of our company.**
Though not now, in the future
we may become subject to Delawares business combination law which prohibits certain business combinations between Delaware corporations
and "interested stockholders" for three years after the "interested stockholder" first becomes an "interested
stockholder," unless the corporation's board of directors approves the combination in advance. For purposes of Delaware law, an "interested
stockholder" is any person who is the beneficial owner, directly or indirectly, of fifteen percent or more of the voting power of
the outstanding voting shares of the corporation. A corporation is subject to Delawares business combination law if it has more
than 2000 stockholders or has its securities listed on a national securities exchange. The effect of Delawares business combination
law is to potentially discourage parties interested in taking control of our company from doing so if it cannot obtain the approval of
our board of directors.
**Because we do not intend
to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell
them.**
We intend to retain any future
earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock
in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they
sell them. Stockholders may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there
are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual
report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business,
financial condition or results of operations could be materially adversely affected.
****
**Our stock may be subject
to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders
from reselling our Common Stock at a profit.**
The market prices for our
securities companies may be volatile and may fluctuate substantially due to many factors, including:
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market conditions in the arts and collectibles industry or the economy as a whole; | |
|
|
|
price and volume fluctuations in the overall stock market; | |
|
|
|
announcements of the introduction of new products and services by us or our competitors; | |
|
|
|
actual fluctuations in our quarterly operating results, and concerns by investors that such fluctuations may occur in the future; | |
|
|
|
deviations in our operating results from the estimates of securities analysts or other analyst comments; | |
|
|
|
additions or departures of key personnel; | |
|
|
|
legislation, including measures affecting e-commerce; and | |
|
|
|
developments concerning current or future strategic collaborations | |
****
****
| | 35 | | |
****
**ITEM 1B. Unresolved
Staff Comments.**
None.
**ITEM 1C. CYBERSECURITY.**
****
**Cybersecurity Risk Management and Strategy.**
We have developed and implemented
a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and
information.
Our cybersecurity risk management
program is aligned to the Company's business strategy. It shares common methodologies, reporting channels and governance processes that
apply to the other areas of enterprise risk, including legal, compliance, strategic, operational, and financial risk. Key elements of
our cybersecurity risk management program include:
|
|
|
risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment; | |
|
|
|
a security team principally responsible for managing our cybersecurity risk assessment processes and our response to cybersecurity incidents; | |
|
|
|
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security procedures; | |
|
|
|
training and awareness programs for team members that include periodic and ongoing assessments to drive adoption and awareness of cybersecurity processes and procedures; | |
|
|
|
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and | |
|
|
|
a third-party risk management process for service providers, suppliers, and vendors. | |
In the last two fiscal years, the Company has
not experienced any material cybersecurity incidents. For a discussion of whether and how any risks from cybersecurity threats, including
as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including
our business strategy, results of operations or financial condition, refer to Item 1A. Risk Factors - Cybersecurity Breaches and
other Disruptions to our Information Technology Systems, which is incorporated by reference into this Item 1C.
****
**Cybersecurity Governance**
The Board regularly receives
reports from our executive officers and third parties on cybersecurity matters. In addition, the Board receives reports addressing cybersecurity
as part of our overall enterprise risk management program and to the extent cybersecurity matters are addressed in regular business updates.
Management is responsible for developing cybersecurity
programs, including as may be required by applicable law or regulation. These individuals' expertise in IT and cybersecurity generally
has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience. They are
informed by their respective cybersecurity teams about, and monitor, the prevention, detection, mitigation and remediation of cybersecurity
incidents as part of the cybersecurity programs described above.
| | 36 | | |
**ITEM 2. Properties**.
Our corporate and executive
office is located at Unit 1813, 18/F, Fo Tan Industrial Centre, 26-28 Au Pui Wan Street, Fo Tan, Hong Kong, telephone number +852 3585
8905. We are parties to commit with office rental agreement at a monthly rate of $3,469, for a term of 24 months.
We believe that our current
facilities are adequate for our current needs. We expect to secure new facilities or expand existing facilities as necessary to support
future growth. We believe that suitable additional space will be available on commercially reasonable terms as needed to accommodate our
operations.
**ITEM 3. Legal Proceedings.**
There are no material pending
legal proceedings to which we or our subsidiaries are a party or to which any of our or their property is subject, nor are there any such
proceedings known to be contemplated by governmental authorities. None of our directors, officers, affiliates or any owner of record or
beneficially of more than 5% of our common stock, or any associate of any of the foregoing, is involved in a proceeding adverse to our
business or has a material interest adverse to our business.
**ITEM 4. MINE SAFETY DISCLOSURES.**
Not applicable.
****
****
****
****
****
| | 37 | | |
****
**PART II**
**ITEM
5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities****.**
(a) Market Information
Shares of our common stock
are quoted on the OTC Pink under the symbol KRFG. As of June 30, 2025, the last closing price of our securities was $0.0001.
The following table sets forth,
for the fiscal quarters indicated, the high and low bid information for our common stock, as reported on the Pink Sheets. The following
quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
|
Quarterly period | |
High | | |
Low | | |
|
Fiscal year ended March 31, 2025: | |
| | | |
| | | |
|
Fourth Quarter | |
$ | 0.0003 | | |
$ | 0.0001 | | |
|
Third Quarter | |
$ | 0.0003 | | |
$ | 0.0001 | | |
|
Second Quarter | |
$ | 0.0002 | | |
$ | 0.0001 | | |
|
First Quarter | |
$ | 0.0003 | | |
$ | 0.0001 | | |
|
| |
| | | |
| | | |
|
Fiscal year ended March 31, 2024: | |
| | | |
| | | |
|
Fourth Quarter | |
$ | 0.0006 | | |
$ | 0.0002 | | |
|
Third Quarter | |
$ | 0.0007 | | |
$ | 0.0002 | | |
|
Second Quarter | |
$ | 0.0005 | | |
$ | 0.0002 | | |
|
First Quarter | |
$ | 0.0006 | | |
$ | 0.0002 | | |
(b)Approximate Number of Holders of Common Stock
As of July 8, 2025, there
were approximately 1,006 shareholders of record of our common stock. Such number does not include any shareholders holding shares in nominee
or street name.
(c)Dividends
Holders of our common stock
are entitled to receive such dividends as may be declared by our board of directors. We paid no dividends during the years reported herein,
nor do we anticipate paying any dividends in the foreseeable future.
(d)Equity Compensation Plan Information
None.
(e)Recent Sales of Unregistered Securities
None.
****
| | 38 | | |
**ITEM 6. RESERVED**.
**ITEM 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.**
*This discussion summarizes
the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiary
for the fiscal years ended March 31, 2025 and 2024. The discussion and analysis that follows should be read together with the section
entitled Cautionary Note Concerning Forward-Looking Statements and our consolidated financial statements and the notes to
the consolidated financial statements included elsewhere in this annual report on Form 10-K.*
**
*Except for historical information,
the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments
concerning various factors that are beyond the Companys control. Consequently, and because forward-looking statements are inherently
subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the
forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.*
**Currency and exchange
rate**
*Unless otherwise noted,
all currency figures quoted as U.S. dollars, dollars or US$ refer to the legal currency of the
United States. References to Hong Kong Dollar are to the Hong Kong Dollar, the legal currency of the Hong Kong Special Administrative
Region of the Peoples Republic of China. Throughout this report, assets and liabilities of the Companys subsidiaries are
translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing
during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate
component of accumulated other comprehensive income within the statement of stockholders equity.*
**Forward-Looking Statements**
*Statements in the following
discussion and throughout this registration statement that are not historical in nature are forward-looking statements.
You can identify forward-looking statements by the use of words such as expect, anticipate, estimate,
may, will, should, intend, believe, and similar expressions. Although
we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk
and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this
registration statement because of numerous factors, many of which are beyond our control. These factors include, without limitation, those
described under Item1A Risk Factors. We undertake no obligation to update these forward-looking statements to reflect
events or circumstances after the date of this registration statement or to reflect actual outcomes. Please see Forward Looking
Statements at the beginning of this report.*
*The following discussion
of our financial condition and results of operations should be read in conjunction with our combined and consolidated financial statements
and the related notes thereto and other financial information appearing elsewhere in this report*.
| | 39 | | |
**Overview**
OneSolution Technology Inc. is
a holding company that prior to September 30, 2024, operated through its wholly-owned subsidiaries Powertech Corporation Limited and OneSolution
Innotech Limited, limited liability companies organized under the laws of Hong Kong. Powertech provided solutions for other companies
that are in the fields of developing high power, high voltage power supply and wireless charging technologies. On September 30, 2024,
the Company conducted a corporate restructuring and disposed of all equity interests in Powertech Management Limited and Powertech Corporation
Limited, and the disposal of these subsidiaries resulted from a net gain of $2,513,875. On November 21, 2024, the Company acquired Heavenly
Grace Limited from a related party at its net carrying value of approximately $7,000, which did not operate any businesses in prior years.
Heavenly Grace is engaged in the arts and collectibles business. As a result, the business of Heavenly Grace became the primary business
of OneSolution Technology Inc. after September 30, 2024.
We are not required to obtain
permission from the Chinese authorities to operate or to issue securities to foreign investors.
We are currently at the market
introduction phase as we are preparing to launch our first batch of smart chargers to the market. For the years ended March 31, 2025 and
2024, we reported a net income of $1,948,092 and a net loss of $1,507,469, respectively. As of March 31, 2025, we had current assets of
$2,417 and current liabilities of $956,950. As of March 31, 2024, we had current assets of $119,866 and current liabilities of $3,165,453.
Our financial statements for
the years ended March 31, 2025 and 2024 have been prepared assuming that we will continue as a going concern. Our continuation as a going
concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital
in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings,
capital leases and short-term and long-term debts.
**Results of Operations**
*Comparison of the fiscal years ended March
31, 2025 and 2024*
The following table sets forth
certain operational data for the years indicated:
|
| |
Fiscal Years Ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
Revenue | |
$ | 76,921 | | |
$ | 70,296 | | |
|
Cost of revenue | |
| (46,152 | ) | |
| (42,177 | ) | |
|
Gross profit | |
| 30,769 | | |
| 28,119 | | |
|
Operating expenses: | |
| | | |
| | | |
|
Research and development expenses | |
| (134,000 | ) | |
| (142,353 | ) | |
|
Sales and marketing expenses | |
| (135,517 | ) | |
| (183,428 | ) | |
|
General and administrative expenses | |
| (333,989 | ) | |
| (312,252 | ) | |
|
Loss from operation | |
| (572,737 | ) | |
| (609,914 | ) | |
|
Other income (expense), net | |
| 2,520,829 | | |
| (897,555 | ) | |
|
Income (loss) before income taxes | |
| 1,948,092 | | |
| (1,507,469 | ) | |
|
Income tax expense | |
| | | |
| | | |
|
Net income (loss) | |
$ | 1,948,092 | | |
$ | (1,507,469 | ) | |
| | 40 | | |
*Revenue*
During the year ended March
31, 2025, the following customers accounted for 10% or more of our total net revenues:
|
| |
Year ended March 31, 2025 | | |
March 31, 2025 | | |
|
Customer | |
Revenues | | |
Percentage of revenues | | |
Accounts receivable | | |
|
Marvel Digital Group Limited | |
$ | 76,921 | | |
| 100% | | |
$ | | | |
During the year ended March
31, 2024, the following customers accounted for 10% or more of our total net revenues:
|
| |
Year ended March 31, 2024 | | |
March 31, 2024 | | |
|
Customer | |
Revenues | | |
Percentage of revenues | | |
Accounts receivable | | |
|
Marvel Digital Group Limited | |
$ | 70,296 | | |
| 100% | | |
$ | | | |
**
*Cost of Revenue*
Cost of revenue for the years
ended March 31, 2025 and 2024, was $46,152 and $42,177, respectively. The increase was primarily attributable to one more month of outsourced
costs which was incurred for the year ended March 31, 2025.
*Gross Profit*
We achieved a gross profit
of $30,769 and $28,119 for the years ended March 31, 2025 and 2024, respectively. The increase in gross profit was attributable to an
relative growth in the revenue from technical consultancy services.
****
*Research and Development Expenses (R&D)*
Research and development expenses
was $134,000 and $142,353 for the years ended March 31, 2025 and 2024, respectively. The decrease in expenses was attributable to the
decrease in R&D activity associated with our smart chargers, power banks and IoT products development.
**
*Sales and Marketing Expenses*
Sales and marketing expenses
was $135,517 and $183,428 for the years ended March 31, 2025 and 2024, respectively. The expenses primarily include consulting fees. The
increase in expenses was primarily attributable to the increase in consulting fees.
*General and Administrative Expenses (G&A)*
General and administrative
expenses were $333,989 and $312,252 for the years ended March 31, 2025 and 2024, respectively. These expenses primarily include consulting
fees, personnel related expenses, as well as costs incurred on other professional fees incurred in connection with general operations
of the Company.
| | 41 | | |
*Other income (expense), net*
Other income (expense), net
was $2,520,829 and $(897,555) for the years ended March 31, 2025 and 2024, respectively. The increase was attributable to no amortization
of deferred financing cost on commitment shares issued for capital funding and gain on disposal of subsidiaries of $2,513,875 during the
year ended March 31, 2025.
*Income Tax Expense*
No income tax expense incurred
during the years ended March 31, 2025 and 2024.
*Net income (loss)*
As a result of the above,
we reported net income of $1,948,092 for the year ended March 31, 2025, as compared to the net loss of $1,507,469 for the year ended
March 31, 2024. The increase in net income (loss) was mainly attributable to the recorded gain on disposal of subsidiaries as mentioned
above.
**Liquidity and Capital Resources**
The following table summarizes
the key components of our cash flows for the years ended March 31, 2025 and 2024.
**
**
|
| |
Years ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
Net cash used in operating activities | |
$ | (85,555 | ) | |
$ | (284,789 | ) | |
|
Net cash used in investing activities | |
| (3,165 | ) | |
| | | |
|
Net cash provided by financing activities | |
| 103,035 | | |
| 286,341 | | |
**
*Net Cash Used In Operating Activities*
For the year ended March
31, 2025, net cash used in operating activities was $85,555, which consisted primarily of a net income of $1,948,092, an increase in
accrued liabilities and other payables of $39,973, an increase in account payables of $402, an increase in accrued consulting and service
fee of $430,995, a decrease in deposits, prepayments and other receivables of $7,842, plus non-cash items such as, depreciation expense
of $1,296, amortization expense of $6,562, and a gain on disposal of subsidiaries of $2,513,875.
****
For the year ended March 31,
2024, net cash used in operating activities was $284,789, which consisted primarily of a net loss of $1,507,469, an increase in accrued
liabilities and other payables of $14,381 and a decrease of lease liabilities of $34,509, offset by an decrease in deposits, prepayments
and other receivables of $8,821, and decrease in accounts receivable of $19,078, an increase in accrued consulting and service fee of
$132,000, and an increase in accounts payable of $59,212, plus non-cash items such as, depreciation of $35,400, amortization of $4,499,
non-cash lease expenses of $761, amortization and write-off of deferred financing expenses of $897,799 and share issued for services rendered
of $114,000.
We expect to continue to rely
on cash generated through financing from our existing shareholders and private placements of our securities to finance our operations
and future acquisitions.
*Net Cash Used In Investing Activities*
For the year ended March 31,
2025, net cash used in investing activities was $3,165, which consisted of cash outflow from disposal of subsidiaries of $4,195 and cash
inflow from acquisition of a subsidiary of $1,030.
| | 42 | | |
For the year ended March 31,
2024, no cash generated from investing activities.
*Net Cash Provided by Financing Activity*
**
**
For the year ended March
31, 2025, net cash provided by financing activity was $103,035, which consisted of advances from related parties.
For the year ended March 31,
2024, net cash provided by financing activity was $286,341, which consisted of advances from related parties.
Working Capital
As of March 31, 2025, we had
cash and cash equivalents of $2,417.
As of March 31, 2024, we had
cash and cash equivalents of $1,556, deposits, prepayments and other receivables of $106,150 and amount due from related party of $12,160.
As of March 31, 2025 and 2024,
we had working capital deficit of $954,533 and $3,045,587, respectively.
We expect to incur significantly
greater expenses in the near future as we expand our business or enter into strategic partnerships. We also expect our technology and
development, sales and marketing expenses to increase as we enhance our e-commerce platform and spend more efforts in building up customers
and communities and incur additional costs in investors and partnerships relationship for long-term corporate development.
During the year, we did not
pay dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion;
consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.
**Going Concern**
Our continuation as a going
concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital
may include the sale of equity securities, which include common stock sold in private transactions, capital leases and short-term and
long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional
cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources
on satisfactory terms. We believe that our current cash and other sources of liquidity discussed below are adequate to support operations
for at least the next 12 months.
We
require additional funding to meet its ongoing obligations and to fund anticipated operating losses. Our auditor has expressed substantial
doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on raising capital to
fund its initial business plan and ultimately to attain profitable operations. These consolidated financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result
in the Company not being able to continue as a going concern.
We
expect to incur production, marketing and professional and administrative expenses as well expenses associated with maintaining our filings
with the Commission. We will require additional funds during this time and will seek to raise the necessary additional capital. If we
are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could
harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at
all. We intend to continue to fund its business by way of equity or debt financing and advances from related parties. Any inability to
raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.
| | 43 | | |
If
we cannot raise additional funds, we will have to cease business operations. As a result, our common stock investors would lose all of
their investment.
**Material Cash Requirements**
We have not achieved profitability
since our inception, and we expect to continue to incur net losses for the foreseeable future. We expect net cash expended in 2025 to
be significantly higher than 2024. As of March 31, 2025, we had an accumulated deficit of $7,443,378. Our material cash requirements are
highly dependent upon the additional financial support from our major shareholders in the next 12 - 18 months and up to $20,000,000 investment
from Williamsburg Venture Holdings, LLC in the next 2 3 years.
**Off-Balance Sheet Arrangements**
We are not party to any off-balance
sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
**Critical Accounting Policies and Estimates**
The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments
and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our consolidated
financial statements. These accounting policies are important for an understanding of our financial condition and results of operations.
Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations
and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that
are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to consolidated financial statements and because of the possibility that future events affecting the estimate may differ
significantly from management's current judgments. We believe the following accounting policies are critical in the preparation of our
consolidated financial statements.
|
|
Impairment of long-lived assets | |
In accordance with the provisions
of ASC Topic 360, *Impairment or Disposal of Long-Lived Assets*, all long-lived assets such as property and equipment owned and held
by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its
estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has
been no impairment charge for the years ended March 31, 2025 and 2024.
|
|
Revenue recognition | |
The Company adopted Accounting
Standards Update ("ASU") No. 2014-09, *Revenue from Contracts with Customers* (Topic 606) (ASU 2014-09) using
the full retrospective transition method. The Company's adoption of ASU 2014-09 did not have a material impact on the amount and timing
of revenue recognized in its consolidated financial statements.
Under ASU 2014-09, the Company
recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods or services.
| | 44 | | |
The Company applies the following
five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
|
|
identify the contract with a customer; | |
|
|
|
identify the performance obligations in the contract; | |
|
|
|
determine the transaction price; | |
|
|
|
allocate the transaction price to performance obligations in the contract; and | |
|
|
|
recognize revenue as the performance obligation is satisfied. | |
For sale of goods, revenue
is recognized from the sale of products upon delivery to the customers at a point in time, when the title and risk of loss are fully transferred
to the customers.
The Companys services
revenue is derived from performing the research and development and technology development for the customers under fixed-price contracts.
Revenue is recognized at a point in time upon completion of the service.
Costs incurred in connection
with sales of goods, are included in cost of revenue which consist primarily of costs associated with the goods sold.
Costs incurred in connection
with the research and development, are included in cost of revenue. Product development costs charged to billable projects are recorded
as cost of revenue, which consist primarily of costs associated with personnel, supplies and materials.
Costs incurred in connection
with the technology service agreement, are included in cost of revenue which consist primarily of costs associated with labor cost.
|
|
Recent accounting pronouncements | |
From time to time, new accounting pronouncements
are issued by the Financial Accounting Standard Board (FASB) or other standard setting bodies and adopted by the Company
as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that
are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements and believed the future adoption of any such pronouncements may not be expected to cause
a material impact on its financial condition or the results of its operations.
**ITEM
7A. Quantitative and Qualitative Disclosures About Market Risk.**
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
****
**ITEM 8. Financial
Statements and Supplementary Data.**
****
The consolidated financial
statements and the Report of Independent Registered Certified Public Accounting Firm thereon are filed pursuant to this Item 8 and are
included in this report beginning on page F-1.
****
****
****
****
****
****
| | 45 | | |
**ONESOLUTION TECHNOLOGY INC.**
**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**
|
|
|
Page | |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 7057) |
|
F-2 | |
|
|
|
| |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 6743) |
|
F-3 | |
|
|
|
| |
|
Consolidated Balance Sheets |
|
F-5 | |
|
|
|
| |
|
Consolidated Statements of Operations and Comprehensive Loss |
|
F-6 | |
|
|
|
| |
|
Consolidated Statements of Cash Flows |
|
F-7 | |
|
|
|
| |
|
Consolidated Statements of Changes in Stockholders Deficit |
|
F-8 | |
|
|
|
| |
|
Notes to Consolidated Financial Statements |
|
F-9 F-24 | |
****
| | F-1 | | |
****
****
**REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM**
The Board of Director and Stockholder of
**ONESOLUTION TECHNOLOGY INC.**
**Opinion on the Financial Statement**
We have audited the accompanying consolidated
balance sheets of OneSolution Technology Inc. and its subsidiaries (the Company) as of March 31, 2025, and the related consolidated
statement of operations and comprehensive income, stockholders equity, and cash flows for the year ended March 31, 2025, and the
related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of March 31, 2025, and the results of its operations and its cash flows
for the year ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
**Substantial Doubt about the Companys
Ability to Continue as a Going Concern**
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company suffered from a working
capital deficit of $954,533 as of March 31, 2025. The Company has not yet established an ongoing source of revenue sufficient to cover
its operating costs and allow it to continue as a going concern. The continuation of the Company as a going concern is dependent upon
the continued financial support from its stockholders and external financing to enable the Company to meet its obligations as they become
due. However, there can be no assurance on the success of securing such funding and on terms satisfactory to the Company.
These matters raise substantial doubt about the
Companys ability to continue as a going concern. These financial statements do not include any adjustments that that may be necessary
to reflect the effects on the recoverability and classification of assets and additional liabilities that may arise if the Company is
not able to continue as a going concern.
**Basis for Opinion**
These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audit 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 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 audit, 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 Companys
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the 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 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 financial statements. We believe that our audit provides a reasonable basis for our opinion.
**Critical Audit Matters**
Critical audit matters are matters arising from
the current year audit of the financial statements that were communicated or are required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved especially challenging, subjective,
or complex judgements. We determined that there are no critical audit matters.
**
**
*/s/ Lateef Awojobi*
*LAO Professionals*
**
Firm ID: 7057
We have served as the Companys auditor
since 2025.
Lagos, Nigeria
July 15, 2025
| | F-2 | | |
|
|
J&S ASSOCIATE PLT
(formerly known as J & S Associate)
202206000037 (LLP0033395-LCA) & AF002380
(Registered with PCAOB and MIA)
B-11-14, Megan Avenue II
12,Jalan Yap Kwan Seng, 50450, Kuala Lumpur, Malaysia |
Tel: +603-4813 9469
Email : info@jns-associate.com
Website : jns-associate.com | |
|
|
|
| |
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
The Board of Director and Stockholder of
**ONESOLUTION TECHNOLOGY INC.**
**Opinion on the Financial Statement**
We have audited the accompanying consolidated
balance sheets of OneSolution Technology Inc. and its subsidiaries (the Company) as of March 31, 2024 and 2023, and the
related consolidated statement of operations and comprehensive income, stockholders equity (deficit), and cash flows for the year
ended March 31, 2024 and 2023, and the related notes (collectively referred to as the financial statements). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023,
and the results of its operations and its cash flows for the year ended March 31, 2024 and 2023, in conformity with accounting principles
generally accepted in the United States of America.
**Substantial Doubt about the Companys
Ability to Continue as a Going Concern**
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company incurred a net loss
of $1,507,469 and suffered from a working capital deficit of $3,045,587 as of March 31, 2024. The Company has not yet established an ongoing
source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The continuation of the Company
as a going concern is dependent upon the continued financial support from its stockholders and external financing to enable the Company
to meet its obligations as they become due. However, there can be no assurance on the success of securing such funding and on terms satisfactory
to the Company.
These matters raise substantial doubt about the
Companys ability to continue as a going concern. These financial statements do not include any adjustments that that may be necessary
to reflect the effects on the recoverability and classification of assets and additional liabilities that may arise if the Company is
not able to continue as a going concern.
**Basis for Opinion**
These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audit 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 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 audit, 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 Companys
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the 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 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 financial statements. We believe that our audit provides a reasonable basis for our opinion.
| | F-3 | | |
|
|
J&S ASSOCIATE PLT
(formerly known as J & S Associate)
202206000037 (LLP0033395-LCA) & AF002380
(Registered with PCAOB and MIA)
B-11-14, Megan Avenue II
12,Jalan Yap Kwan Seng, 50450, Kuala Lumpur, Malaysia |
Tel: +603-4813 9469
Email : info@jns-associate.com
Website : jns-associate.com | |
**Critical Audit Matters**
Critical audit matters are matters arising from
the current year audit of the financial statements that were communicated or are required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved especially challenging, subjective,
or complex judgements. We determined that there are no critical audit matters.
*Deferred Financing Expenses*
**
As described in Note 2 to the financial statements,
the Company applies Accounting Standards Codification (ASC) Topic 835-20, *Interest, Capitalization of Interest*and Accounting Standards
Codification (ASC) Topic 310-20, *Receivables, Nonrefundable Fees and Other Costs*in accounting for its deferred financing costs.
We assessed the capitalization of the asset and the subsequent measurement as a critical audit matter in relation to the complexity and
judgment involved in applying ASC 835 and ASC 310 to the Companys accounting for the deferred financing costs.
Our audit procedures to assess the above, among
others, included:
|
|
1. |
Inspection of the equity purchase agreement with a Venture Capitalist (VC), hereafter referred to as the EPA to understand the underlying terms of the agreement and document salient aspects of extracts from the agreement; | |
|
|
2. |
Understanding and evaluating the Companys capitalization of the deferred financing costs (costs of commitment shares issued) in relation to ASC 835; | |
|
|
3. |
Understanding and evaluating the Companys subsequent measurement of the deferred financing costs (costs of commitment shares issued) in relation to ASC 310; | |
|
|
4. |
Performance of a background check on the VC to determine if there are any identified issues which give rise to a financial or business risk, including whether related party relationship has arisen; | |
|
|
5. |
Reperformance of the calculation of the cost of the commitment shares and agree the inputs of the calculation to the relevant underlying supporting agreements and reliable sources of information; | |
|
|
6. |
Obtaining the schedule of the deferred financing costs from management and ensuring that the key data of the calculation have been input into the calculation accurately and tested the mathematical accuracy of the schedule; | |
|
|
7. |
Assessment of the remaining balance of the deferred financing costs (at financial year end, March 31, 2024) for impairment by having discussion with management on the rationale and verifying the considerations against the criteria as included in the EPA to determine appropriateness of the conclusion that the future benefits to be derived from the asset over the remaining term of the EPA was remote. | |
|
|
8. |
Ascertaining that the impairment had been accounted for correctly; | |
|
|
9. |
Considering consistency of evidence obtained in other areas of the audit; | |
|
|
10. |
Assessment of the adequacy of the Companys disclosures related to deferred financing costs; | |
We determined that there were no other critical
audit matters.
*/s/ J&S Associate PLT*
(Formerly known as J & S Associate)
Certified Public Accountants
Firm ID: 6743
We have served as the Companys auditor
since 2022.
Kuala Lumpur, Malaysia
16 July, 2024
****
| | F-4 | | |
****
**ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES**
**CONSOLIDATED BALANCE SHEETS**
**AS OF MARCH 31, 2025 AND 2024**
**(Currency expressed in United States Dollars
(US$), except for number of shares)**
****
****
|
| |
| | |
| | |
|
| |
As of March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
ASSETS | |
| | | |
| | | |
|
Current assets: | |
| | | |
| | | |
|
Cash and cash equivalents | |
$ | 2,417 | | |
$ | 1,556 | | |
|
Amount due from a related party | |
| | | |
| 12,160 | | |
|
Prepayment to suppliers | |
| | | |
| 83,926 | | |
|
Deposits, prepayments and other receivables | |
| | | |
| 22,224 | | |
|
| |
| | | |
| | | |
|
Total current assets | |
| 2,417 | | |
| 119,866 | | |
|
| |
| | | |
| | | |
|
Non-current assets: | |
| | | |
| | | |
|
Property and equipment, net | |
| | | |
| 2,524 | | |
|
Intangible assets, net | |
| 1,507 | | |
| 10,486 | | |
|
| |
| | | |
| | | |
|
Total non-current assets | |
| 1,507 | | |
| 13,010 | | |
|
| |
| | | |
| | | |
|
TOTAL ASSETS | |
$ | 3,924 | | |
$ | 132,876 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND STOCKHOLDERS DEFICIT | |
| | | |
| | | |
|
Current liabilities: | |
| | | |
| | | |
|
Accounts payable | |
$ | | | |
$ | 57,615 | | |
|
Accrued liabilities and other payables | |
| 254,139 | | |
| 241,158 | | |
|
Accrued consulting and service fee | |
| 400,000 | | |
| 399,000 | | |
|
Advance received from customer | |
| | | |
| 287,567 | | |
|
Amounts due to related parties | |
| 302,811 | | |
| 2,180,113 | | |
|
| |
| | | |
| | | |
|
Total current liabilities | |
| 956,950 | | |
| 3,165,453 | | |
|
| |
| | | |
| | | |
|
TOTAL LIABILITIES | |
| 956,950 | | |
| 3,165,453 | | |
|
| |
| | | |
| | | |
|
Commitments and contingencies | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
STOCKHOLDERS DEFICIT | |
| | | |
| | | |
|
Preferred Stock, par value $0.0001, 100,000,000 shares authorized, 50,000,000 shares undesignated as of March 31, 2025 and 2024, respectively | |
| | | |
| | | |
|
Series C Preferred Stock, par value $0.001, 50,000,000 shares designated, 30,000,000 shares issued and outstanding as of March 31, 2025 and 2024, respectively | |
| 30,000 | | |
| 30,000 | | |
|
Common stock, par value $0.0001, 36,000,000,000 shares authorized, 6,650,786,818 and 5,634,167,213 shares issued and outstanding as of March 31, 2025 and 2024, respectively | |
| 665,079 | | |
| 563,417 | | |
|
Common stock to be issued | |
| | | |
| 15,000 | | |
|
Additional paid-in capital | |
| 5,794,218 | | |
| 5,750,885 | | |
|
Accumulated other comprehensive income (loss) | |
| 1,055 | | |
| (409 | ) | |
|
Accumulated deficit | |
| (7,443,378 | ) | |
| (9,391,470 | ) | |
|
| |
| | | |
| | | |
|
Stockholders deficit | |
| (953,026 | ) | |
| (3,032,577 | ) | |
|
| |
| | | |
| | | |
|
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT | |
$ | 3,924 | | |
$ | 132,876 | | |
See accompanying notes to consolidated financial
statements.
****
****
| | F-5 | | |
****
**ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF OPERATIONS AND**
**COMPREHENSIVE INCOME (LOSS)**
**FOR THE YEARS ENDED MARCH 31, 2025 AND 2024**
**(Currency expressed in United States Dollars
(US$))**
|
| |
| | | |
| | | |
|
| |
Years ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Revenue, net | |
$ | 76,921 | | |
$ | 70,296 | | |
|
Cost of revenue | |
| (46,152 | ) | |
| (42,177 | ) | |
|
| |
| | | |
| | | |
|
Gross profit | |
| 30,769 | | |
| 28,119 | | |
|
| |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
|
Research and development expenses | |
| (134,000 | ) | |
| (142,353 | ) | |
|
Sales and marketing expenses | |
| (135,517 | ) | |
| (183,428 | ) | |
|
General and administrative expenses | |
| (333,989 | ) | |
| (312,252 | ) | |
|
Total operating expenses | |
| (603,506 | ) | |
| (638,033 | ) | |
|
| |
| | | |
| | | |
|
Loss from operation | |
| (572,737 | ) | |
| (609,914 | ) | |
|
| |
| | | |
| | | |
|
Other income (expense): | |
| | | |
| | | |
|
Interest expenses | |
| | | |
| (897,943 | ) | |
|
Interest income | |
| | | |
| 5 | | |
|
Sundry income | |
| 6,954 | | |
| 383 | | |
|
Gain on disposal of subsidiaries | |
| 2,513,875 | | |
| | | |
|
Total other income (expense), net | |
| 2,520,829 | | |
| (897,555 | ) | |
|
| |
| | | |
| | | |
|
INCOME (LOSS) BEFORE INCOME TAXES | |
| 1,948,092 | | |
| (1,507,469 | ) | |
|
| |
| | | |
| | | |
|
Income tax expense | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
NET INCOME (LOSS) | |
| 1,948,092 | | |
| (1,507,469 | ) | |
|
| |
| | | |
| | | |
|
Other comprehensive loss: | |
| | | |
| | | |
|
Foreign currency adjustment loss | |
| (15,387 | ) | |
| (5,773 | ) | |
|
| |
| | | |
| | | |
|
COMPREHENSIVE INCOME (LOSS) | |
$ | 1,932,705 | | |
$ | (1,513,242 | ) | |
|
| |
| | | |
| | | |
|
Net income (loss) per share Basic and Diluted* | |
| | | |
| | | |
|
Basic | |
$ | 0.00 | | |
$ | (0.00 | ) | |
|
Diluted | |
$ | 0.00 | | |
$ | (0.00 | ) | |
|
| |
| | | |
| | | |
|
Weighted average outstanding shares | |
| | | |
| | | |
|
Basic | |
| 6,035,659,235 | | |
| 5,503,071,323 | | |
|
Diluted | |
| 9,035,659,235 | | |
| 8,503,071,323 | | |
|
* |
Less than $0.001 | |
See accompanying notes to consolidated financial
statements.
****
| | F-6 | | |
****
**ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF CASH FLOWS**
**FOR THE YEARS ENDED MARCH 31, 2025 AND 2024**
**(Currency expressed in United States Dollars
(US$))**
|
| |
| | |
| | |
|
| |
Years ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Cash flows from operating activities: | |
| | | |
| | | |
|
Net income (loss) | |
$ | 1,948,092 | | |
$ | (1,507,469 | ) | |
|
| |
| | | |
| | | |
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | | |
|
Depreciation - property and equipment | |
| 1,296 | | |
| 2,588 | | |
|
Depreciation - right-of-use assets | |
| | | |
| 32,812 | | |
|
Amortization | |
| 6,562 | | |
| 4,499 | | |
|
Non-cash lease expenses | |
| | | |
| 761 | | |
|
Amortization of deferred financing expenses | |
| | | |
| 897,799 | | |
|
Share issued for services rendered | |
| | | |
| 114,000 | | |
|
Negative goodwill | |
| (6,842 | ) | |
| | | |
|
Gain on disposal of subsidiaries | |
| (2,513,875 | ) | |
| | | |
|
Change in operating assets and liabilities: | |
| | | |
| | | |
|
Accounts receivable | |
| | | |
| 19,078 | | |
|
Deposit, prepayments and other receivables | |
| 7,842 | | |
| 8,821 | | |
|
Accrued liabilities and other payables | |
| 39,973 | | |
| (14,381 | ) | |
|
Accounts payable | |
| 402 | | |
| 59,212 | | |
|
Accrued consulting and service fee | |
| 430,995 | | |
| 132,000 | | |
|
Right-of-use assets and lease liabilities | |
| | | |
| (34,509 | ) | |
|
| |
| | | |
| | | |
|
Net cash used in operating activities | |
| (85,555 | ) | |
| (284,789 | ) | |
|
| |
| | | |
| | | |
|
Cash flows from investing activities: | |
| | | |
| | | |
|
Cash outflow from acquisition of a subsidiary | |
| 1,030 | | |
| | | |
|
Cash outflow from disposal of subsidiaries | |
| (4,195 | ) | |
| | | |
|
| |
| | | |
| | | |
|
Net cash used in investing activities | |
| (3,165 | ) | |
| | | |
|
| |
| | | |
| | | |
|
Cash flows from financing activities: | |
| | | |
| | | |
|
Advances from related parties | |
| 103,035 | | |
| 286,341 | | |
|
| |
| | | |
| | | |
|
Net cash provided by financing activities | |
| 103,035 | | |
| 286,341 | | |
|
| |
| | | |
| | | |
|
Foreign currency translation adjustment | |
| (13,454 | ) | |
| (4,907 | ) | |
|
| |
| | | |
| | | |
|
Net change in cash and cash equivalents | |
| 861 | | |
| (3,355 | ) | |
|
| |
| | | |
| | | |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | |
| 1,556 | | |
| 4,911 | | |
|
| |
| | | |
| | | |
|
CASH AND CASH EQUIVALENTS, END OF YEAR | |
$ | 2,417 | | |
$ | 1,556 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | | |
|
Cash paid for income taxes | |
$ | | | |
$ | | | |
|
Cash paid for interest | |
$ | | | |
$ | | | |
See accompanying notes to consolidated financial
statements.
| | F-7 | | |
****
**ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
DEFICIT**
**FOR THE YEARS ENDED MARCH 31, 2025 AND 2024**
**(Currency expressed in United States Dollars
(US$), except for number of shares)**
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
Series C Preferred stock | | |
Common stock | | |
Common stock to be issued | | |
Additional | | |
Accumulated other compre- hensive | | |
| | |
Total stock- | | |
|
| |
No. of | | |
| | |
No. of | | |
| | |
No. of | | |
| | |
paid-in | | |
income | | |
Accumulated | | |
holders | | |
|
| |
shares | | |
Amount | | |
shares | | |
Amount | | |
shares | | |
Amount | | |
capital | | |
(loss) | | |
losses | | |
deficit | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of April 1, 2023 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 5,484,167,213 | | |
$ | 548,417 | | |
| | | |
$ | | | |
$ | 5,666,885 | | |
$ | 5,364 | | |
$ | (7,884,001 | ) | |
$ | (1,633,335 | ) | |
|
Share issued for services rendered | |
| | | |
| | | |
| 150,000,000 | | |
| 15,000 | | |
| 150,000,000 | | |
| 15,000 | | |
| 84,000 | | |
| | | |
| | | |
| 114,000 | | |
|
Foreign translation adjustment | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (5,773 | ) | |
| | | |
| (5,773 | ) | |
|
Net loss for the year | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,507,469 | ) | |
| (1,507,469 | ) | |
|
Balance as of March 31, 2024 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 5,634,167,213 | | |
$ | 563,417 | | |
| 150,000,000 | | |
$ | 15,000 | | |
$ | 5,750,885 | | |
$ | (409 | ) | |
$ | (9,391,470 | ) | |
$ | (3,032,577 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Disposal of subsidiaries | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 16,851 | | |
| | | |
| 16,851 | | |
|
Share issued for services rendered | |
| | | |
| | | |
| 1,016,666,664 | | |
| 101,667 | | |
| (150,000,000 | ) | |
| (15,000 | ) | |
| 43,333 | | |
| | | |
| | | |
| 130,000 | | |
|
Share cancellation | |
| | | |
| | | |
| (47,059 | ) | |
| (5 | ) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (5 | ) | |
|
Foreign translation adjustment | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (15,387 | ) | |
| | | |
| (15,387 | ) | |
|
Net income for the year | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 1,948,092 | | |
| 1,948,092 | | |
|
Balance as of March 31, 2025 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 6,650,786,818 | | |
$ | 665,079 | | |
| | | |
$ | | | |
$ | 5,794,218 | | |
$ | 1,055 | | |
$ | (7,443,378 | ) | |
$ | (953,026 | ) | |
See accompanying notes to consolidated financial
statements.
****
| | F-8 | | |
****
****
**ONESOLUTION TECHNOLOGY INC. AND SUBSIDIARIES**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED MARCH 31, 2025 AND 2024**
**(Currency expressed in United States Dollars
(US$), except for number of shares)**
**NOTE 1 DESCRIPTION OF BUSINESS AND ORGANIZATION**
OneSolution Technology Inc. (the Company)
was incorporated in the State of Delaware on September 8, 1995 under the name of ARXA International Energy, Inc. On June 4, 2001, the
Company changed its name to King Resources, Inc. Effective December 27, 2023, the Company changed its name to OneSolution Technology Inc.,
its current name. Currently, the Company through its subsidiaries, is engaged primarily in the rendering of smart power supply solutions
and the related technical service as well as lifestyle products in Hong Kong.
On December 15, 2021, the Company consummated
the Share Exchange Transaction (the Share Exchange) among Powertech Management Limited (PML) and its shareholders.
The Company acquired all of the issued and outstanding shares of PML from PMLs shareholders, in exchange for 2,835,820,896 shares
of the issued and outstanding common stock. On January 25, 2022, the Company issued the shares to PMLs shareholders and completed
the Share Exchange Transaction, PML became a 100% owned subsidiary of the Company.
Prior to the Share Exchange, the Company was considered
as a shell company due to its nominal assets and limited operation. The transaction was treated as a recapitalization of the Company.
Upon the Share Exchange between the Company and
PML on December 15, 2021, the transaction is considered as a merger of entities under common control that Mr. FU Wah is the common director
and shareholder of both the Company and PML. Under the guidance in ASC 805 for transactions between entities under common control, the
assets, liabilities and results of operations, are recognized at their carrying amounts on the date of the Share Exchange, which required
retrospective combination of the Company and PML for all periods presented.
On August 25, 2022, the Company formed OneSolution
Holdings Limited and OneSolution Management Limited, respectively.
On September 2, 2022, the Company formed OneSolution
Innotech Limited.
On September 30, 2024, the Company conducted the
corporate restructuring by disposing of all equity interests in Powertech Management Limited and Powertech Corporation Limited, and the
disposal of these subsidiaries resulted from a net gain of $2,513,875.
On November 21, 2024, the Company acquired Heavenly
Grace Limited from a related party at its net carrying value of approximately $7,000, which did not operate any businesses in prior years.
| | F-9 | | |
Description of subsidiaries
|
Schedule of description of subsidiaries |
|
|
|
|
|
|
|
| |
|
Name |
|
Place of incorporation
and kind of
legal entity |
|
Principal activities
and place of operation |
|
Particulars of registered/paid-up capital |
|
Effective interest
held | |
|
|
|
|
|
|
|
|
|
| |
|
Powertech Management Limited # |
|
British Virgin Islands |
|
Investment holding |
|
50,000 ordinary shares at par value of $1 |
|
100% | |
|
|
|
|
|
|
|
|
|
| |
|
Powertech Corporation Limited # |
|
Hong Kong |
|
Provision of information technology services |
|
10,000 ordinary shares for HK$10,000 |
|
100% | |
|
|
|
|
|
|
|
|
|
| |
|
OneSolution Holdings Limited |
|
British Virgin Islands |
|
Investment holding |
|
50,000 ordinary shares at par value of $1 |
|
100% | |
|
|
|
|
|
|
|
|
|
| |
|
OneSolution Management Limited |
|
British Virgin Islands |
|
Investment holding |
|
50,000 ordinary shares at par value of $1 |
|
100% | |
|
|
|
|
|
|
|
|
|
| |
|
OneSolution Innotech Limited |
|
Hong Kong |
|
Product development and trading |
|
10,000 ordinary shares for HK$10,000 |
|
100% | |
|
|
|
|
|
|
|
|
|
| |
|
Heavenly Grace Limited* |
|
Hong Kong |
|
Product development and trading |
|
10,000 ordinary shares for HK$10,000 |
|
100% | |
|
# |
these subsidiaries were disposed under the corporate restructuring exercise during the year ended March 31, 2025. | |
|
|
| |
|
* |
this subsidiary was acquired under the corporate restructuring exercise during the year ended March 31, 2025. | |
The Company and its subsidiaries are hereinafter
referred to as the Company.
| | F-10 | | |
**NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES**
The accompanying consolidated financial statements
reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated
financial statements and notes.
|
|
Basis of presentation | |
These accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP).
|
|
Use of estimates and assumptions | |
In preparing these consolidated financial statements,
management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues
and expenses during the periods reported. Actual results may differ from these estimates. If actual results significantly differ from
the Companys estimates, the Companys financial condition and results of operations could be materially impacted. Significant
estimates in the period include the valuation and useful lives of intangible assets, allowance for expected credit losses and valuation
allowance of deferred tax assets.
|
|
Basis of consolidation | |
The consolidated financial statements include
the accounts of OneSolution Technology Inc. and its subsidiaries. All significant inter-company balances and transactions within the Company
have been eliminated upon consolidation.
|
|
Segment reporting | |
Under ASC 280,*Segment Reporting*,
operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly
by the chief operating decision maker (CODM), in deciding how to allocate resources and in assessing performance. The Company
operates as a single segment, consisting of provision of technical consultancy services in Hong Kong. Therefore, the Companys
Chief Executive Officer, who is also the CODM, makes decisions and manages the Companys operations based on the consolidated operating
segment for the distribution of its products.
|
|
Cash and cash equivalents | |
Cash and cash equivalents are carried at cost
and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an
original maturity of three months or less as of the purchase date of such investments.
|
|
Accounts receivable | |
Accounts receivable are recorded at the invoiced
amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit
is extended based on evaluation of a customers financial condition, the customer credit-worthiness and their payment history. Accounts
receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified
amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customers
financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables.
The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to
make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are
taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does
not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2025 and 2024, there was no allowance for doubtful
accounts.
| | F-11 | | |
|
|
Allowance for expected credit losses | |
ASU No.
2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities
to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. The Companys allowance
for expected credit loss estimates the amount of expected future credit losses by analyzing accounts receivables balance by age and applying
historical write-off and collection experience. The Companys estimate separately considers macroeconomics trends, specific circumstances
and credit conditions of customer receivables. Account balances are written off against the allowance when it is determined the receivable
will not be recovered. There was no allowance for expected credit loss for the years ended March 31, 2025 and 2024, respectively.
|
|
Intangible assets | |
Intangible assets consist of trademarks and trade
names. The intangible assets are stated at the purchase cost and are amortized based on their economic benefits expected to be realized
and assessed for impairment annually. There was no impairment of intangible assets identified for the years ended March 31, 2025 and 2024,
respectively.
|
|
Property and equipment | |
Property and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following
expected useful lives from the date on which they become fully operational:
|
Schedule of expected useful lives |
|
| |
|
|
|
Expected useful lives | |
|
Office equipment |
|
3 years | |
|
Furniture and fixtures |
|
3 years | |
|
Computer equipment |
|
3 years | |
Expenditures for repair and maintenance are expensed
as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the results of operations.
|
|
Website development costs | |
The Company accounts for its website development
costs in accordance with ASC 350-50, *Website Development Costs*. These costs, if any, are included in intangible assets in the accompanying
consolidated financial statements. Upgrades or enhancements that add functionality are capitalized while other costs during the operating
stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated useful life of five
years.
|
|
Impairment of long-lived assets | |
In accordance with the provisions of ASC Topic
360, *Impairment or Disposal of Long-Lived Assets*, all long-lived assets such as property and equipment owned and held by the Company
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for
the years ended March 31, 2025 and 2024, respectively.
| | F-12 | | |
|
|
Revenue recognition | |
The Company adopted Accounting Standards Update
("ASU") No. 2014-09, *Revenue from Contracts with Customers* (Topic 606) (ASU 2014-09) using the full retrospective
transition method. The Companys adoption of ASU 2014-09 did not have a material impact on the amount and timing of revenue recognized
in its consolidated financial statements.
Under ASU 2014-09, the Company recognizes revenue
when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects
to be entitled to in exchange for those goods or services.
The Company applies the following five steps in
order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
|
identify the contract with a customer; | |
|
|
identify the performance obligations in the contract; | |
|
|
determine the transaction price; | |
|
|
allocate the transaction price to performance obligations in the contract; and | |
|
|
recognize revenue as the performance obligation is satisfied. | |
For sale of goods, revenue is recognized from
the sale of products upon delivery to the customers at a point in time, when the title and risk of loss are fully transferred to the customers.
The Companys services revenue is derived
from performing the research and development and technology development for the customers under fixed-price contracts. Revenue is recognized
at a point in time upon completion of the service.
Costs incurred in connection with sales of goods,
are included in cost of revenue which consist primarily of costs associated with the goods sold.
Costs incurred in connection with the research
and development, are included in cost of revenue. Product development costs charged to billable projects are recorded as cost of revenue,
which consist primarily of costs associated with personnel, supplies and materials.
Costs incurred in connection with the technology
service agreement, are included in cost of revenue which consist primarily of costs associated with labor cost.
|
|
Income taxes | |
The Company adopted the ASC Topic 740, *Income
tax* provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed
on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, 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 unaudited
condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than
fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company
had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
| | F-13 | | |
The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs
and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides
valuation allowances as management deems necessary.
|
|
Uncertain tax positions | |
The Company did not take any uncertain tax positions
and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the years
ended March 31, 2025 and 2024.
|
|
Stock based compensation | |
The Company
accounts for non-employee stock-based compensation in accordance with the guidance of ASC Topic 718, *CompensationStock Compensation*,
which requires all share-based payments to non-employees to be recognized in the financial statements based on their fair values as at
date that the service is provided. The fair value of the equity instrument is charged directly to compensation expense and credited to
additional paid-in capital.
|
|
Net loss per share | |
The Company calculates net loss per share in accordance
with ASC Topic 260, *Earnings per Share*. Basic income per share is computed by dividing the net income by the weighted-average number
of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the
denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock
equivalents had been issued and if the additional common shares were dilutive.
|
|
Foreign currencies translation | |
Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement
of operations.
The reporting currency of the Company is United
States Dollar ("US$") and the accompanying unaudited condensed consolidated financial statements have been expressed in US$.
In addition, the Company and its subsidiaries are operating in Hong Kong and maintain the books and record in a local currency, Hong Kong
Dollars (HKD), which is the functional currency, being the primary currency of the economic environment in which their operations
are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$
are translated into US$, in accordance with ASC Topic 830-30, *Translation of Financial Statement*, using the exchange
rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive
income within the statements of changes in stockholders equity.
Translation of amounts from HKD into US$ has been
made at the following exchange rates for the years ended March 31, 2025 and 2024:
|
Schedule of translation rate |
|
|
|
|
|
| |
|
|
|
March 31, 2025 |
|
|
March 31, 2024 |
| |
|
Year-end HKD:US$ exchange rate |
|
|
0.1286 |
|
|
|
0.1278 |
| |
|
Annualized average HKD:US$ exchange rate |
|
|
0.1283 |
|
|
|
0.1278 |
| |
| | F-14 | | |
|
|
Comprehensive income | |
ASC Topic 220, *Comprehensive Income*, establishes
standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying
consolidated statements of changes in stockholders equity, consists of changes in unrealized gains and losses on foreign currency
translation. This comprehensive income is not included in the computation of income tax expense or benefit.
|
|
Leases | |
At the inception of an arrangement, the Company
determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater
than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company
has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding
right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain
adjustments to the right-of-use assets may be required for items such as prepaid or accrued lease payments. The interest rate implicit
in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are
the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic
environment.
In accordance with the guidance in ASC Topic 842,
components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g.
common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance
fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values
to the lease components and non-lease components.
The Company made the policy election to not separate
lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.
|
|
Deferred financing costs | |
In accordance with ASC Topic 835-20, *Interest,
Capitalization of Interest*, costs related to the issuance of debt, including costs incurred for revolving credit facilities which
is considered to be applicable to the commitment shares for an equity purchase agreement, are deferred and recorded as an asset on the
balance sheet. In accordance with ASC 310 -20 *Receivables, Nonrefundable Fees and Other Costs,*these deferred financing costs are
amortized to interest expense over the life of the related debt instrument.
The Company regularly reviews the carrying value
of the deferred financing costs to determine whether there are any events or changes in circumstances that may indicate impairment. If
such events or changes in circumstances are present, the Company assesses the recoverability of the deferred financing costs by comparing
the carrying amount of the asset to the future unamortized interest expense that the asset is expected to offset. If the carrying amount
of the deferred financing costs exceeds this amount, the Company recognizes an impairment loss equal to the difference.
Amortization expense for the year ended March
31, 2025 and 2024 were $0 and $402,500, respectively.
Impairment of deferred finance costs for the
years ended March 31, 2025 and 2024 were $0 and $495,298, respectively.
| | F-15 | | |
|
|
Related parties | |
The Company follows the ASC 850-10, *Related
Party* for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties
include a)affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the
election of the fair value option under the Fair Value Option Subsection of section 8251015, to be accounted for by the
equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed
by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g)other parties that
can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one
of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be
prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include
disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items
in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall include: a)the nature of the relationship(s) involved;
b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods
for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions
on the financial statements; c)the dollar amounts of transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that used in the preceding period; and d)amount due from
or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
|
|
Commitments and contingencies | |
The Company follows the ASC 450-20, *Contingencies,*
to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result
in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such
contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the
perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought therein.
If the assessment of a contingency indicates that
it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would
be accrued in the Companys consolidated 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, and an
estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon
information available at this time that these matters will have a material adverse effect on the Companys financial position, results
of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Companys
business, financial position, and results of operations or cash flows.
| | F-16 | | |
|
|
Fair value of financial instruments | |
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37
of the FASB Accounting Standards Codification (Paragraph 820-10-35-37) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value
hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
|
Level 1 |
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
|
|
|
| |
|
Level 2 |
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
|
|
|
| |
|
Level 3 |
|
Pricing inputs that are generally observable inputs and not corroborated by market data. | |
Financial assets are considered Level 3 when their
fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant
model assumption or input is unobservable.
The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Companys financial
assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.
|
|
Recent accounting pronouncements | |
From time to time, new accounting pronouncements
are issued by the Financial Accounting Standard Board (FASB) or other standard setting bodies and adopted by the Company
as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that
are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements and believe the future adoption of any such pronouncements may not be expected to cause
a material impact on its financial condition or the results of its operations.
| | F-17 | | |
**NOTE 3 GOING CONCERN UNCERTAINTIES**
The accompanying consolidated financial statements
have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business.
The Company reported an accumulated deficit of
$7,443,378 as at March 31, 2025. The continuation as a going concern is dependent upon improving profitability and obtaining the continued
financial support from the stockholders and external financing to provide the additional cash to meet the Companys obligations
as they become due. Whilst the management believes that external financing can be obtained, there can be no assurance on the success of
raising such additional capital resources on terms satisfactory to the Company.
These consolidated financial statements do not
include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that
may result in the Company not being able to continue as a going concern.
**NOTE 4 DISPOSAL OF SUBSIDIARIES**
On September 30, 2024, the Company consummated
the corporate restructuring exercise to focus on the product development and trading business by disposing two subsidiaries, namely Powertech
Management Limited and Powertech Corporation Limited to a third party.
As a result, the Company recorded a net gain of
$2.5 million from the disposal of subsidiaries.
**NOTE 5 PROPERTY AND EQUIPMENT, NET**
Property and equipment consisted of the following:
|
Schedule of property and equipment | |
| | |
| | |
|
| |
As of March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Office equipment | |
$ | | | |
$ | 12,007 | | |
|
Furniture and fixtures | |
| | | |
| 15,667 | | |
|
Computer equipment | |
| | | |
| 26,939 | | |
|
Foreign translation difference | |
| | | |
| 177 | | |
|
Property and equipment gross | |
| | | |
| 54,790 | | |
|
Less: accumulated depreciation | |
| | | |
| (52,106 | ) | |
|
Less: foreign translation difference | |
| | | |
| (160 | ) | |
|
Property and equipment, net | |
$ | | | |
$ | 2,524 | | |
Depreciation expense for the years ended March
31, 2025 and 2024 were $1,296 and $2,588, respectively.
| | F-18 | | |
**NOTE
6 INTANGIBLE ASSETS**
As of March 31,
2025 and 2024, intangible assets consisted of the following:
|
Schedule of intangible assets | |
| |
| | |
| | |
|
| |
| |
As of March 31, | | |
|
| |
Useful life | |
2025 | | |
2024 | | |
|
At cost: | |
| |
| | | |
| | | |
|
Website development cost | |
5 years | |
$ | | | |
$ | 21,147 | | |
|
Trademarks | |
10 years | |
| 5,815 | | |
| 2,545 | | |
|
Less: accumulated amortization | |
| |
| (4,308 | ) | |
| (13,254 | ) | |
|
Foreign translation adjustment | |
| |
| | | |
| 48 | | |
|
| |
| |
$ | 1,507 | | |
$ | 10,486 | | |
Amortization of intangible assets for the year
ended March 31, 2025 and 2024 were $6,562 and $4,499, respectively.
**NOTE 7 AMOUNTS DUE FROM (TO) RELATED
PARTIES**
The amount due from a related party represented
temporary advances to the related party for research and development conducted. The amount due from a related party was $0 and $12,160,
as of March 31, 2025 and 2024, respectively. The amount is unsecured, interest-free and recoverable on demand.
The amount due to related parties was $302,811
and $2,180,113 as of March 31, 2025 and 2024, respectively. As at March 31, 2025, the amount of $302,811 represented temporary
advances for working capital purpose. As of March 31, 2024, $2,134,326 and $45,787 represented temporary advances for working capital
purpose and trade nature purpose respectively. The amounts are due to the Companys shareholders and their controlling companies,
which were unsecured, interest-free and are repayable on demand.
**NOTE 8 STOCKHOLDERS DEFICIT**
The Company is authorized to issue two classes
of capital stock, up to 36,100,000,000 shares.
The Company is authorized to issue 100,000,000
shares of preferred stock, with a par value of $0.0001. The Company has one class of Preferred Stock designated with 50,000,000 shares
authorized as Series C Preferred Stock, with a par value of $0.001 per share.
The Company is authorized to issue 36,000,000,000
shares of common stock, with a par value of $0.0001.
On December 27, 2023, the Company filed an Amended
and Restated Certificate of Incorporation effectuating all of the foregoing corporate actions. The Amended and Restated Certificate of
Incorporation also confirmed the cancellation of the Series A Preferred Stock and Series B Preferred Stock. The Company amended the Companys
Certificate of Incorporation to increase the authorized capital stock from 6,085,000,000, consisting of 6,000,000,000 shares of common
stock, par value of $0.001, and 85,000,000 shares of preferred stock, to 36,100,000,000 consisting of 36,000,000,000 shares of common
stock, par value of $0.0001, and 100,000,000 shares of preferred stock, par value of $0001.
*Series C Preferred Stock*
The Company has designated 50,000,000 shares of
Series C Preferred Stock. Each one share of Series C Convertible Preferred Stock converts into 100 shares of common stock of the Company
at the election of the holder, subject to equitable adjustments.
| | F-19 | | |
As of March 31, 2025 and 2024, the Company had
30,000,000 shares of Series C Preferred Stock issued and outstanding.
*Common Stock*
On April 12, 2024, the Company issued 150,000,000
shares of its common stock to settle the consulting and service fee to consultants who rendered services to the Company.
On December 6, 2024, 47,059 shares of its common
stock were cancelled.
On December 13, 2024, the Company issued 866,666,664
shares of its common stock to settle the consulting and service fee to consultants who rendered services to the Company.
As of March 31, 2025 and 2024, the Company had
a total of 6,650,786,818 shares and 5,634,167,213 shares of its common stock issued and outstanding, respectively.
**NOTE 9 NET INCOME (LOSS) PER SHARE**
The following table sets forth the computation
of basic and diluted net income (loss) per share for the years ended March 31, 2025 and 2024:
|
Schedule of computation of basic and diluted net income (loss) per share | |
| | |
| | |
|
| |
Years ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Net income (loss) attributable to common shareholders | |
$ | 1,948,092 | | |
$ | (1,507,469 | ) | |
|
| |
| | | |
| | | |
|
Weighted average common shares outstanding: | |
| | | |
| | | |
|
Basic | |
| 6,035,659,235 | | |
| 5,503,071,323 | | |
|
Diluted | |
| 9,035,659,235 | | |
| 8,503,071,323 | | |
|
| |
| | | |
| | | |
|
Net income (loss) per share: | |
| | | |
| | | |
|
Basic# | |
$ | 0.00 | | |
$ | (0.00 | ) | |
|
Diluted# | |
$ | 0.00 | | |
$ | (0.00 | ) | |
____________________
|
# |
Less than $0.001 | |
| | F-20 | | |
**NOTE
10 INCOME TAX**
For the years ended March 31, 2025 and 2024, the
local (United States of America) and foreign components of income (loss) before income taxes were comprised of the following:
|
Schedule of income before income tax, domestic and foreign | |
| | |
| | |
|
| |
Years ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
Tax jurisdiction from: | |
| | | |
| | | |
|
- Local | |
$ | (129,172 | ) | |
$ | (1,148,669 | ) | |
|
- Foreign, including | |
| | | |
| | | |
|
British Virgin Islands | |
| 2,110,959 | | |
| (254,779 | ) | |
|
Hong Kong | |
| (34,419 | ) | |
| (104,021 | ) | |
|
| |
| | | |
| | | |
|
Income (loss) before income taxes | |
$ | 1,948,092 | | |
$ | (1,507,469 | ) | |
The effective tax rate in the years presented
is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company mainly
operates in Hong Kong that is subject to taxes in the jurisdictions in which they operate, as follows:
*United States of America*
OneSolution Technology Inc. is registered in the
State of Delaware and is subject to tax laws of the United States of America. The U.S. corporate income tax rate is 21% effective January
1, 2018. The Companys policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income
tax provision. The Company has not accrued for interest or penalties as they were not material to its results of operations for the periods
presented.
As of March 31, 2025, the operations in the United
States of America incurred $2,030,174 of cumulative net operating losses which can be carried forward indefinitely to offset future taxable
income. The Company has provided for a full valuation allowance against the deferred tax assets of $426,336 on the expected future tax
benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be
realized in the future.
*BVI*
Under the current BVI law, the Company is not
subject to tax on income.
| | F-21 | | |
*Hong Kong*
The Companys subsidiary operating in Hong
Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits
arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate
to the effective income tax rate for the years ended March 31, 2025 and 2024 is as follows:
|
Schedule of reconciliation of tax effective rate | |
| | |
| | |
|
| |
Years ended March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Loss before income taxes | |
$ | (34,419 | ) | |
$ | (104,021 | ) | |
|
Statutory income tax rate | |
| 16.5% | | |
| 16.5% | | |
|
Income tax expense at statutory rate | |
| (5,679 | ) | |
| (17,163 | ) | |
|
Tax effect of non-deductible items | |
| 8,212 | | |
| 1,169 | | |
|
Tax effect of non-taxable items | |
| (139 | ) | |
| (301 | ) | |
|
Tax operating loss | |
| (2,394 | ) | |
| 16,295 | | |
|
Income tax expense | |
$ | | | |
$ | | | |
As of March 31, 2025, the operations in Hong Kong
incurred $11,892 of cumulative net operating losses which can be carried forward to offset future taxable income. There is no expiry in
net operating loss carryforwards under Hong Kong tax regime. the Company has provided for a full valuation allowance against the deferred
tax assets of $4,303 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more
likely than not that these assets will not be realized in the future.
The following table sets forth the significant
components of the deferred tax assets of the Company as of March 31, 2025 and 2024:
|
Schedule of deferred income taxes | |
| | |
| | |
|
| |
As of March 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Deferred tax assets: | |
| | | |
| | | |
|
Net operating loss carryforward, from | |
| | | |
| | | |
|
US tax regime | |
$ | 524,068 | | |
$ | 399,210 | | |
|
Hong Kong tax regime | |
| 4,303 | | |
| 313,096 | | |
|
Less: valuation allowance | |
| (528,371 | ) | |
| (712,306 | ) | |
|
Deferred tax assets, net | |
$ | | | |
$ | | | |
The Company filed income tax returns in the United
States federal tax jurisdiction and the Delaware state tax jurisdiction. Since the Company is in a loss carryforward position, it is generally
subject to examination by federal and state tax authority for all tax years in which a loss carryforward is available.
| | F-22 | | |
**NOTE 11 RELATED PARTY TRANSACTIONS**
From time to time, the Companys related
companies and director advanced working capital funds to the Company for working capital purpose. Those advances are unsecured, non-interest
bearing and is repayable on demand.
For the years ended March 31, 2025 and 2024, the
Company outsourced and incurred technical consultancy services of $46,152 and $42,177 respectively from a related company which is related
to a shareholder.
For the years ended March 31, 2025 and 2024, the
Company earned technical consultancy services income of $76,921 and $70,296 respectively to a related company which is related to a shareholder.
For the years ended March 31, 2025 and 2024, the
Company incurred consulting fee expenses of $134,000 and $33,000 respectively to a director - Wong Nga Yin Polin. As at March 31, 2025 and
2024, the balances payable to Wong Nga Yin Polin was $0 and $33,000 respectively.
The amount due from a related party represented
temporary advances to the related party for research and development conducted. The amount due from a related party was $0 and $12,160,
as of March 31, 2025 and 2024, respectively. The amount is unsecured, interest-free and recoverable on demand.
Apart from the transactions and balances detailed
elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions
during the years presented.
**NOTE 12 CONCENTRATIONS OF RISKS**
The Company is exposed to the following concentrations of risks:
|
(a) |
Major customers | |
For the year ended March 31, 2025, there was a
single customer exceeding 10% of the Companys revenue. This customer is located in Hong Kong, and accounted for 100% of the Companys
revenue amounting to $76,921 with $0 accounts receivable at March 31, 2025.
For the year ended March 31, 2024, there was a
single customer exceeding 10% of the Companys revenue. This customer is located in Hong Kong, and accounted for 100% of the Companys
revenue amounting to $70,296 with $0 accounts receivable at March 31, 2024.
|
(b) |
Major vendors | |
For the year ended March 31, 2025, there was a
single vendor exceeding 10% of the Companys cost of revenue. This vendor accounted for 100% of the Companys cost of revenue
amounting to $46,152 with $0 accounts payable at March 31, 2025.
For the year ended March 31, 2024, there was a
single vendor exceeding 10% of the Companys cost of revenue. This vendor accounted for 100% of the Companys cost of revenue
amounting to $42,177 with $0 accounts payable at March 31, 2024.
| | F-23 | | |
|
(c) |
Economic and political risk | |
The Companys major operations are conducted
in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kongs
economy may influence the Companys business, financial condition, and results of operations. The Company may also be exposed to
the broader global economic conditions.
The present global economic climate with rising
global tensions, rising costs and fuel shortage could potentially escalate and result in global inflation that may also impact the Companys
business, financial condition, and results of operations.
|
(d) |
Exchange rate risk | |
The Company cannot guarantee that the current
exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable
periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted
to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
|
(e) |
Liquidity risk | |
Liquidity risk is the risk that the Company will
not be able to meet its financial obligations as they become due. The Companys policy is to ensure that it has sufficient cash
to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Companys reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections.
This is presently managed through shareholder financial support. If future cash flows are fairly uncertain, the liquidity risk increases.
**NOTE 13 COMMITMENTS AND CONTINGENCIES**
As of March 31, 2025, the Company has no material
commitments or contingencies.
**NOTE 14 SUBSEQUENT EVENTS**
In accordance with ASC Topic 855, *Subsequent
Events*, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date
but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after March
31, 2025, up through the date the Company issued the audited consolidated financial statements. There were no material recognizable subsequent
events since March 31, 2025.
****
****
****
****
| | F-24 | | |
****
**ITEM 9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure.**
None.
**ITEM 9A. Controls and
Procedures**
**Evaluation of Disclosure
Controls and Procedures**
****
Our management is responsible
for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including
its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure.
As required by Rule 13a-15
under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation of the
effectiveness of the design and operation of our companys disclosure controls and procedures. Under the direction of our Chief
Executive Officer and our Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial
reporting and concluded that were effective as of March 31, 2025.
However, it should be noted
that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
**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 Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal
control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404). Management,
under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, assessed the effectiveness
of our internal control over financial reporting as of March 31, 2025. In making this assessment, we used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework. Based on that
evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 2025.
This Annual Report 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 Securities and Exchange Commission
that permit the Company to provide only management's report.
| | 43 | | |
**Changes in Internal Control over Financial
Reporting**
There were no changes in the
Companys internal control over financial reporting that occurred during the last fiscal year that have materially affected, or
is reasonably likely to materially affect, the Companys internal control over financial reporting.
**ITEM 9B. Other Information.**
During the three months
ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or
terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of
Regulation S-K under the Securities Act).
**ITEM 9C. DISCLOSURE REGARDING
FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.**
None.
****
****
| | 44 | | |
****
**PART III**
**ITEM 10. Directors,
Executive Officers and Corporate Governance.**
Set forth below are the present
directors and executive officers of the Company. Note that there are no other persons who have been nominated or chosen to become directors
nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between
any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are
elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers
are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors
have been elected and qualified.
|
Name |
|
Age |
|
Position | |
|
WONG Nga Yin Polin |
|
45 |
|
Chief Executive Officer, Chief Financial Officer, Secretary and Director | |
**Biographies**
Set forth below are brief
accounts of the business experience during the past five years of each director, executive officer and significant employee of the Company.
**Wong
Nga Yin Polin**, age 45, was appointed to serve as our Chief Executive Officer, Chief Financial
Officer, Secretary and Director on April 12, 2024. Ms. Wong is currently the Business Development Manager of Marvel Digital Limited, a
subsidiary of Marvion, Inc. (MVNC: OTC PK). From September 2021 to March 2023, she served as the Business Development Manager of Xtreme
Business Enterprises Limited where she conducted research in glasses-free 3D display technologies. Ms. Wong was the Business Development
Manager of Marvel Research Limited from April 2018 to August 2021 where she conducted research in glasses-free 3D display technologies.
From August 2016 to March 2018, she served as the Project Associate of the State Key Laboratory of Ultraprecision Machining Technology
at the Hong Kong Polytechnic University. From July 2015 to 2016, she was the research assistant at the same lab. From January 2003 to
March 2013, Ms. Wong served as the Assistant Project Engineer and Project Engineer at Forexim (H.K.) Ltd. Ms. Wong received her Master
of Science in Engineering (Mechanical Engineering) and Bachelor of Engineering (Mechanical Engineering) from the University of Hong Kong
in 2013 and 2002, respectively. Ms. Wong brings to our Board her deep experience in research of 3d imaging and display technologies.
**Family Relationships.**
There are no family relationships between any of
our directors or executive officers.
**Involvement in Certain Legal Proceedings**
No executive officer or director
has been involved in the last ten years in any of the following:
|
|
|
Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
| | 45 | | |
|
|
|
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
|
|
|
| |
|
|
|
Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; | |
|
|
|
| |
|
|
|
Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
|
|
|
| |
|
|
|
Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or | |
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Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. | |
**Board Committees and Audit Committee Financial Expert**
We do not currently have
a standing audit, nominating or compensation committee of the board of directors, or any committee performing similar functions. Our
board of directors performs the functions of audit, nominating and compensation committees. As of the date of this report, no member
of our board of directors qualifies as an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K
promulgated under the Securities Act. We hope to attract a director who qualifies as an audit committee financial expert
as our business operations mature.
On August 30, 2022, the Board of Directors adopted an Insider Trading Compliance Program, established
an audit committee, a compensation committee and a nomination and governance committee, and adopted charters to govern the governance
of such audit, compensation, nomination and governance committees. The forms of
the Insider Trading Compliance Program, the Audit Committee Charter, the Compensation Committee Charter, and the Nomination and Governance
Committee Charter are incorporated herein by reference and attached hereto as Exhibits 99.1 through and including 99.3.
Our board of directors does
not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors
has determined that it is in the best position to evaluate our companys requirements as well as the qualifications of each candidate
when the board considers a nominee for a position on our board of directors.
****
**Code of Ethics**
We have not yet adopted a
code of ethics that applies to our principal executive officer, principal financial officer principal accounting officer or controller
in light of our Companys current stage of development. We expect to adopt a code of ethics in the near future.
| | 46 | | |
**ITEM 11. Executive
Compensation.**
**Compensation Philosophy and Objectives**
Our executive compensation
philosophy is to create a long-term direct relationship between pay and our performance. Our executive compensation program is designed
to provide a balanced total compensation package over the executives career with us. The compensation program objectives are to
attract, motivate and retain the qualified executives that help ensure our future success, to provide incentives for increasing our profits
by awarding executives when corporate goals are achieved and to align the interests of executives and long-term stockholders. The compensation
package of our named executive officers consists of two main elements:
|
|
1. |
base salary for our executives that is competitive relative to the market, and that reflects individual performance, retention and other relevant considerations; and | |
|
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|
| |
|
|
2. |
discretionary bonus awards payable in cash and tied to the satisfaction of corporate objectives. | |
**Process for Setting Executive Compensation**
Until such time as we establish
a Compensation Committee, our Board is responsible for developing and overseeing the implementation of our philosophy with respect to
the compensation of executives and for monitoring the implementation and results of the compensation philosophy to ensure compensation
remains competitive, creates proper incentives to enhance stockholder value and rewards superior performance. We expect to annually review
and approve for each named executive officer, and particularly with regard to the Chief Executive Officer, all components of the executives
compensation. We process and factors (including individual and corporate performance measures and actual performance versus such measures)
used by the Chief Executive Officer to recommend such awards. Additionally, we expect to review and approve the base salary, equity-incentive
awards (if any) and any other special or supplemental benefits of the named executive officers.
The Chief Executive Officer
periodically provides the Board with an evaluation of each named executive officers performance, based on the individual performance
goals and objectives developed by the Chief Executive Officer at the beginning of the year, as well as other factors. The Board provides
an evaluation for the Chief Executive Officer. These evaluations serve as the bases for bonus recommendations and changes in the compensation
arrangements of our named executives.
**Our Compensation Peer Group**
We currently engage in informal
market analysis in evaluating our executive compensation arrangements. As the Company and its businesses mature, we may retain compensation
consultants that will assist us in developing a formal benchmark and selecting a compensation peer group of companies similar to us in
size or business for the purpose of comparing executive compensation levels.
**Program Components**
Our executive compensation
program consists of the following elements:
| | 47 | | |
**Base Salary**
Our base salary structure
is designed to encourage internal growth, attract and retain new talent, and reward strong leadership that will sustain our growth and
profitability. The base salary for each named executive officer reflects our past and current operating profits, the named executive officers
individual contribution to our success throughout his career, internal pay equity and informal market data regarding comparable positions
within similarly situated companies. In determining and setting base salary, the Board considers all of these factors, though it does
not assign specific weights to any factor. The Board generally reviews the base salary for each named executive officer on an annual basis.
For each of our named executive officers, we review base salary data internally obtained by the Company for comparable executive positions
in similarly situated companies to ensure that the base salary rate for each executive is competitive relative to the market.
**Discretionary Bonus**
The objectives of our bonus
awards are to encourage and reward our employees, including the named executive officers, who contribute to and participate in our success
by their ability, industry, leadership, loyalty or exceptional service and to recruit additional executives who will contribute to that
success.
**
**Summary Compensation Table**
The following summary compensation
table sets forth the aggregate compensation we paid or accrued during the fiscal years ended March 31, 2025 and 2024, to (i) our Chief
Executive Officer (principal executive officer), (ii) our Chief Financial Officer (principal financial officer), (iii) our three most
highly compensated executive officers other than the principal executive officer and the principal financial officer who were serving
as executive officers on March 31, 2025, whose total compensation was in excess of $100,000, and (iv) up to two additional individuals
who would have been within the two-other-most-highly compensated but were not serving as executive officers on March 31, 2025.
|
Name and Principal Position | |
Year | | |
Salary | | |
Bonus | | |
Stock Awards | | |
Option Awards | | |
Non-Equity Incentive Plan Compensation | | |
Change in Pension Value and Non-qualified Deferred Compensation Earnings | | |
All Other Compensation | | |
Total | | |
|
WONG Nga Yin Polin | |
| 2025 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | | | |
|
CEO, Secretary and Director (1) | |
| 2024 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | | | |
|
FU Wah | |
| 2025 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | | | |
|
CEO, Secretary and Director (2) | |
| 2024 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | | | |
______________
(1) Ms. Wong joined as our Chief Executive Officer,
Chief Financial Officer, Secretary and Director on April 12, 2024.
(2) Mr. Fu served as our Chief Executive Officer,
Secretary and Director from December 15, 2021, to April 12, 2024.
| | 48 | | |
**Narrative disclosure to Summary Compensation**
Ms. Wong did not receive any
compensation in her capacity as the sole executive officer and director of the Company. As our business matures, we hope to enter into
an employment arrangement with Ms. Wong in the future.
Other than set out above and
below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
We expect to establish one or more incentive compensation plans in the future. Our directors and executive officers may receive securities
of the Company as incentive compensation at the discretion of our board of directors in the future. We do not have any material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.
**Equity Awards**
There are no unvested options,
warrants or convertible securities outstanding.
At no time during the last
fiscal year with respect to any of any of our executive officers was there:
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any outstanding option or other equity-based award repriced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined); | |
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any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts; | |
|
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any option or equity grant; | |
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any non-equity incentive plan award made to a named executive officer; | |
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any nonqualified deferred compensation plans including nonqualified defined contribution plans; or | |
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any payment for any item to be included under All Other Compensation in the Summary Compensation Table. | |
****
**Granting of Certain Equity Awards Close in Time to the Release of Material
Nonpublic Information**
****
We do not
grant equity awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price
of our common stock, and do not time the public release of such information based on award grant dates. During the last completed fiscal
year, we have not made awards to any named executive officer or director during the period beginning four business days before and ending
one business day after the filing of a period report on Form 10-Q or Form 10-K or the filing or furnishing of a current report on Form
8-K, and we have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
**Compensation of Directors**
None of our directors received
any compensation for their service as a director for the year ended March 31, 2025.
We currently have no formal
plan for compensating our directors for their services in their capacity as directors, although we may elect to issue stock options to
such persons from time to time. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred
in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director
undertaking any special services on our behalf other than services ordinarily required of a director.
| | 49 | | |
****
****
**Compensation Risk Management**
Our board of directors and
human resources staff conducted an assessment of potential risks that may arise from our compensation programs. Based on this assessment,
we concluded that our policies and practices do not encourage excessive and unnecessary risk taking that would be reasonably likely to
have material adverse effect on the Company. The assessment included our cash incentive programs, which awards non-executives with cash
bonuses for punctuality. Our compensation programs are substantially identical among business units, corporate functions and global locations
(with modifications to comply with local regulations as appropriate). The risk-mitigating factors considered in this assessment included:
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the alignment of pay philosophy, peer group companies and compensation amounts relative to local competitive practices to support our business objectives; and | |
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| |
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effective balance of cash, short- and long-term performance periods, caps on performance-based award schedules and financial metrics with individual factors and Board and management discretion. | |
**Compensation Committee Interlocks and Insider
Participation**
We have not yet established
a Compensation Committee. Our board of directors performs the functions that would be performed by a compensation committee. During the
fiscal year ended March 31, 2025, none of our executive officers has served: (i) on the compensation committee (or other board committee
performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose
executive officers served on our board of directors; (ii) as a director of another entity, one of whose executive officers served on the
compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire
board of directors) of the registrant; or (iii) as a member of the compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers
served as a director of the Company.
**Compensation Committee Report**
Our board of directors has
reviewed and discussed the Compensation Discussion and Analysis in this report with management. Based on its review and discussion with
management, the board of directors recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form
10-K for the year ended March 31, 2025. The material in this report is not deemed filed with the SEC and is not incorporated by reference
in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on,
before, or after the date of this Report on Form 10-K and irrespective of any general incorporation language in such filing.
*Submitted by the board of directors:*
WONG Nga Yin Polin
| | 50 | | |
**ITEM 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**
The following table
sets forth certain information concerning the number of shares of our common stock owned beneficially as of July 8, 2025, by:
(i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii)
each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation S-K), and (iii)
officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with
respect to the shares shown.
Except as indicated in footnotes
to this table, we believe that the stockholders named in this table will have sole voting and investment power with respect to all shares
of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated,
the address for each director and executive officer listed is: c/o King Resources, Inc., Unit 1813, 18/F, Fo Tan Industrial Centre, 26-28
Au Pui Wan Street, Fo Tan, Hong Kong.
|
| |
Common Stock Beneficially Owned | | |
Series C Preferred Stock Owned | | |
|
Name and Address of BeneficialOwner | |
Number of Shares and Nature of Beneficial Ownership | | |
Percentage of Total Common Equity (1) | | |
Number of Shares and Nature of Beneficial Ownership | | |
Percentage of Total Series C Preferred Equity (1) | | |
|
WONG Nga Yin Polin | |
| | | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
All executive officers and directors as a Group (2 persons) | |
| | | |
| | | |
| | | |
| | | |
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| | | |
| | | |
| | | |
| | | |
|
5% or Greater Stockholders: | |
| | | |
| | | |
| | | |
| | | |
|
Silver Bloom Properties Limited (3) | |
| 2,835,820,896 | | |
| 42.639% | | |
| | | |
| | | |
|
TRX Fundco Inc. (4) | |
| 875,000,000 | | |
| 13.156% | | |
| | | |
| | | |
|
Lo Mei Fan Pauline (2) | |
| 866,666,664 | | |
| 13.031% | | |
| | | |
| | | |
|
Lee Ying Chiu Herbert (5) | |
| | | |
| | | |
| 30,000,000 | | |
| 100% | | |
|
All 5% or Greater Stockholders | |
| 4,577,487,560 | | |
| 68.826% | | |
| 30,000,000 | | |
| 100% | | |
________________
|
(1) |
Applicable percentage ownership is based on 6,650,786,818 shares of common stock outstanding as of July 8, 2025, together with securities exercisable or convertible into shares of common stock within 60 days of July 8, 2025. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that a person has the right to acquire beneficial ownership of upon the exercise or conversion of options, convertible stock, warrants or other securities that are currently exercisable or convertible or that will become exercisable or convertible within 60 days of July 8, 2025, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the number of shares beneficially owned and percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. | |
|
(2) |
Lo Mei Fan Pauline resigned from her position as our director effective October 8, 2024. | |
|
(3) |
Lung Yuen is the sole shareholder and director of Silver Bloom Properties Limited. | |
|
(4) |
To our knowledge, Kevin Price is the Chief Executive Officer of TRX Fundco Inc. | |
|
(5) |
Lee Ying Chiu Herbert holds 30,000,000 shares of our Series C Preferred Stock. Each one share of Series C Preferred Stock converts into 100 shares of common stock of the Company at the election of the holder, subject to equitable adjustments. | |
****
****
| | 51 | | |
****
**Background of the 2022 Plan**
On August
8, 2022, the board of directors of the Company approved the King Resources Inc. 2022 Stock Incentive Plan (the 2022 Plan).
The 2022 Plan provides for the grant of awards to eligible employees, directors, consultants, independent contractors, and advisors in
the form of options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock-based awards
or dividend equivalents (each, an award).
**Summary of the 2022 Plan**
The principal
terms of the 2022 Plan are summarized below. This summary is not a complete description of the 2022 Plan, and it is qualified in its entirety
by reference to the complete text of the 2022 Plan document which is attached as Exhibit 10.2 hereto.
**Shares Available for Issuance**
We reserved
533,000,000 Shares to be issued under the 2022 Plan (plus certain other Shares related to awards which are forfeited, repurchased or used
to satisfy the exercise price or tax withholding on an award). The number of Shares reserved for grant and issuance under the 2022 Plan
increases automatically on April 1 of each of the ten (10) financial years during the term of the Plan following August 5, 2022, by a
number of Shares equal to the lesser of (i) 2.5% of the number of shares of Common Stock issued and outstanding on each March 31 immediately
prior to the date of increase or (ii) such number of Shares determined by the Board; provided, however, that such limitation may be increased
subject to approval by the Companys stockholders (the Evergreen Feature).
The 2022 Plan
authorizes the award of RSUs, stock options, RSAs, RSUs, SARs, performance awards and other stock based awards and dividend equivalents
(each as more fully described below). No person will be eligible to receive more than 300,000,000 Shares in any 12 month period under
the 2022 Plan. The maximum fair market value, as determined on the date of grant, of Awards granted for services as a Director during
any twelve (12)-month period shall not exceed $2,000,000. Any awards in Shares or cash that are made outside of the 2022 Plan and permitted
by applicable listing requirements are not subject to these limitations.
**Administration**
The 2022 Plan
is administered by our Compensation Committee of the Board or such other committee, if any, that may be designated by the Board to administer
the Plan (the Administrator). The Administrator has the authority to construe and interpret the 2022 Plan, select participants
and grant awards, and make all other determinations necessary or advisable for the administration of the 2022 Plan. The Committee may
delegate to the Board or to one or more other committees of the Board comprised of one or more independent Directors the authority to
grant Awards to Employees who are not subject to Section 16(b) of the Exchange Act. Further, the Committee may delegate to the Governance
Committee of the Board the authority to make non-discretionary (routine) Awards to Directors, including to determine which Director shall
receive an Award, the time or times when such an Award shall be made, the terms and conditions of such an Award, the type of Award that
shall be made to a Director, the number of shares subject to such an Award, and the value of such an Award; provided, however, that the
Committee may not delegate its authority to grant discretionary (non-routine) Awards to Directors. The Committee may delegate to the Chief
Executive Officer or one or more other senior officers of the Company its administrative functions under this Plan with respect to the
Awards. Any delegation described in this paragraph shall contain such limitations and restrictions as the Committee may provide and shall
comply in all respects with the requirements of applicable law, including the Nevada Revised Statutes. The Committee may engage or authorize
the engagement of a third party administrator or administrators to carry out administrative functions under the Plan.
| | 52 | | |
**Eligibility**
The
2022 Plan provides for the grant of awards to our employees, directors, consultants, independent contractors, and advisors, provided
the consultants, independent contractors, directors, and advisors render services not in connection with the offer and sale of securities
in a capital-raising transaction. As of March 31, 2025, only 1 employee (including each
of our executive officers) was eligible to participate in the 2022 Plan. The basis for participation in the 2022 Plan is the Administrators
decision, in its sole discretion, that an award to an eligible participant will further the 2022 Plans purposes of providing incentives
to attract, retain and motivate eligible persons whose present and potential contributions are important to our success and the success
of our affiliates, by offering them an opportunity to participate in our future performance through the grant of awards. In exercising
its discretion, the Administrator will consider the recommendations of management and the purposes of the 2022 Plan.
**Forms of Awards**
The
following is a description of the types of awards permitted to be issued under the 2022 Plan. As of the date of this report, the Company
had issued an aggregate of 451,515,152 shares of common stock pursuant to the 2022 Plan.
No other awards had been issued under the 2022 Plan.
**Stock Options**.
The 2022 Plan provides for the grant of incentive stock options that qualify under Section 422 of the Code only to our employees. All
awards other than incentive stock options, including awards of non-qualified stock options, may be granted to our employees, directors,
consultants, independent contractors, and advisors, provided the consultants, independent contractors, and advisors render services not
in connection with the offer and sale of securities in a capital-raising transaction. The exercise price of each stock option must be
at least equal to the fair market value of our common stock on the date of grant. The exercise price of incentive stock options granted
to 10% stockholders must be at least equal to 110% of that value. The maximum term of options granted under the 2022 Plan is seven years
or, in the case of an incentive stock option granted to 10% stockholders, five years.
**Restricted
Stock Award***.*An RSA is an offer by us to sell Shares subject to restrictions. The price, if any, of an RSA will be determined
by the Administrator. These awards are subject to forfeiture or repurchase prior to vesting as a result of termination of employment or
failure to achieve certain vesting conditions.
**Restricted
Stock Units***.*An RSU is an award that covers a number of Shares that may be settled upon vesting in cash, by the issuance
of the underlying Shares or a combination of both. These awards are subject to forfeiture prior to vesting as a result of termination
of employment or failure to achieve certain vesting conditions.
**Stock Appreciation
Rights***.*SARs provide for a payment, or payments, in cash or Shares, to the holder based upon the difference between the
fair market value of our common stock on the date of exercise and the stated exercise price up to a maximum amount of cash or number of
Shares. These awards are subject to forfeiture prior to vesting as a result of termination of employment or failure to achieve certain
vesting conditions.
**Performance
Awards***.*A performance award is an award that covers an amount of cash or a number of Shares that may be settled upon achievement
of the pre-established performance conditions in cash or by issuance of the underlying shares. These awards are subject to forfeiture
prior to vesting as a result of termination of employment or failure to achieve the performance conditions.
****
**Other Awards
and Dividend Equivalents***.*The Committee is authorized to grant other stock-based awards to any employee, consultant or
director. The number or value of shares of Common Stock of any other stock-based award shall be determined by the Committee and may be
based upon one or more performance targets based on one or more performance measures or any other specific criteria, including service
to the Company or any affiliate, as determined by the Committee.
| | 53 | | |
Dividend equivalents
may be granted by the Committee based on dividends declared on shares of Common Stock, to be credited as of dividend payment dates with
respect to dividends with record dates that occur during the period between the date an Award is granted to a Participant and the date
such Award vests, is exercised, is distributed or expires, as determined by the Committee. Such Dividend Equivalents will be converted
to cash or additional shares of Common Stock by such formula and at such time and subject to such restrictions and limitations as may
be determined by the Committee.
**Additional Provisions**
Awards granted
under the 2022 Plan may not be transferred in any manner other than by will or by the laws of descent and distribution, pursuant to a
qualified domestic relations order, or if vested, with the consent of the Committee. Notwithstanding the foregoing, Restricted Stock,
once vested and free of any restrictions, may be transferred at will.
Stock options
granted under the 2022 Plan generally may be exercised for a period of three months after the termination of the optionees service
to us, except in the case of death or permanent disability, in which case the options may be exercised for up to twenty four months following
termination of the optionees service to us. Unless otherwise set forth in a participants award agreement, vesting of RSUs,
RSAs, SARs, performance awards and stock bonus awards ceases on such participants termination of service.
****
**Change of Control or Other
Corporate Transactions**
If we experience
a change in control transaction, outstanding awards, including any vesting provisions, may be assumed or substituted by the successor
company. Outstanding awards that are not assumed or substituted may, at the discretion of the Committee, be accelerated, replaced with
other rights or property of similar value, be terminated and replaced by cash or the terms and conditions of such outstanding awards (including
adjustments to the exercise price) may be otherwise equitably adjusted.
In the event
there is a specified type of change in our capital structure without our receipt of consideration, such as a stock split, appropriate
adjustments will be made to the number of Shares reserved under the 2022 Plan, the maximum number of Shares that can be granted in a calendar
year, and the number of Shares and exercise price, if applicable, of all outstanding awards under the 2022 Plan.
****
**Repricing**
The Board
and the Administrator may not take action to impair the rights of a participant with respect to any outstanding award without the consent
of the participant. Further, the Board nor the Committee may not, without approval of the stockholders of the Company, or except as provided
under Paragraph XIII of the 2022 Plan, (a) increase the maximum aggregate number of shares that may be issued under the Plan, (b) reduce
the price per share of any outstanding Option or Stock Appreciation Right granted under the Plan, or (c) cancel any outstanding Option
or Stock Appreciation Right in exchange for cash or another Award when the per share price of the Option or Stock Appreciation Right exceeds
the fair market value of the underlying shares of Common Stock.
**Amendment and Termination**
The 2022 Plan
will terminate in August 7, 2032 (ten years following the date the Board approved the amendment and restatement of the 2022 Plan), unless
it is terminated earlier by the Board. The Board may amend or terminate the 2022 Plan at any time, which may be without shareholder approval,
unless required by applicable law or listing standards.
****
****
****
****
| | 54 | | |
****
**Federal Income Tax Consequences**
The following
is a brief summary of the federal income tax consequences applicable to awards granted under the 2022 Plan based on federal income tax
laws in effect on the date of this Information Statement.
This summary
is not intended to be exhaustive and does not address all matters that may be relevant to a particular participant. The summary does not
discuss the tax laws of any state, municipality, or foreign jurisdiction, or gift, estate, excise, payroll, or other tax laws other than
federal income tax law. The following is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer
penalties. Because circumstances may vary, we advise all participants to consult their own tax advisors under all circumstances.
****
**Incentive
Stock Options (ISOs)**. An optionee generally realizes no taxable income upon the grant or exercise of an ISO. However, the exercise
of an ISO may result in an alternative minimum tax liability to the employee. With some exceptions, a disposition of shares purchased
under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the optionee equal
to the value of the shares at the time of exercise less the exercise price. The same amount is deductible by the Company as compensation,
provided that the Company reports the income to the optionee. Any additional gain recognized in the disposition is treated as a capital
gain for which the Company is not entitled to a deduction. However, if the optionee exercises an ISO and satisfies the holding period
requirements, the Company may not deduct any amount in connection with the ISO. If a sale or disposition of shares acquired with the ISO
occurs after the holding period, the employee will recognize long-term capital gain or loss at the time of sale equal to the difference
between proceeds realized and the exercise price paid. In general, an ISO that is exercised by the optionee more than three months after
termination of employment is treated as an NQSO. ISOs are also treated as NQSOs to the extent that they first become exercisable by an
individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.
**Non-Qualified
Stock Options (NQSOs)**. An optionee generally has no taxable income at the time of grant of an NQSO but realizes income in connection
with exercise of the option in an amount equal to the excess (at the time of exercise) of the fair market value of shares acquired upon
exercise over the exercise price. The same amount is deductible by the Company as compensation, provided that, in the case of an employee
option, the Company reports the income to the employee. Upon a subsequent sale or exchange of the shares, any recognized gain or loss
after the date of exercise is treated as capital gain or loss for which the Company is not entitled to a deduction.
****
**SARs**.
Generally, the recipient of a SAR will not recognize taxable income at the time the SAR is granted. If a participant receives the appreciation
inherent in the SAR in cash, the cash will be taxed as ordinary income to the participant at the time it is received. If a participant
receives the appreciation inherent in the SAR in shares, the spread between the then-current market value and the base price will be taxed
as ordinary income to the participant at the time it is received. In general, there will be no federal income tax deduction allowed to
the Company upon the grant or termination of SARs. However, upon the settlement of a SAR, the Company will be entitled to a deduction
equal to the amount of ordinary income the recipient is required to recognize as a result of the settlement.
****
**Restricted
Stock Awards**. The recipient of a RSA will not recognize any taxable income for federal income tax purposes in the year of the award,
provided that the shares are subject to restrictions (that is, they are nontransferable and subject to a substantial risk of forfeiture).
However, the recipient may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the
award in an amount equal to the fair market value of the shares on the date of the award (less the purchase price, if any, paid for such
shares), determined without regard to the restrictions. If a Section 83(b) election is made, the capital gain/loss holding period for
such shares commences on the date of the award. Any further change in the value of the shares will be taxed as a capital gain or loss
only if and when the shares are disposed of by the recipient. If the recipient does not make a Section 83(b) election, the fair market
value of the shares on the date the restrictions lapse will be treated as compensation income to the recipient and will be taxable in
the year the restrictions lapse, and the capital gain/ loss holding period for such shares will also commence on such date.
****
****
****
****
| | 55 | | |
****
**Restricted
Stock Units**. No income generally will be recognized upon the award of RSUs. The recipient of an RSU generally will be subject to tax
at ordinary income rates on the market price of unrestricted shares on the date that such shares are transferred to the participant under
the award (reduced by any amount paid, if any, by the participant for such RSUs), and the capital gain/loss holding period for such shares
will also commence on such date.
****
**New Plan
Benefits**
Awards under
the 2022 Plan are within the discretion of the Administrator. As a result, the benefits that will be awarded under the 2022 Plan, including
to our non-employee directors, are not determinable at this time.
**Existing
Plan Benefits to Named Executive Officers and Others**
The following
table summarizes the grants made to our named executive officers (as identified under Executive Compensation, below), all
current executive officers as a group, all current non-executive directors as a group and all current non-executive employees as a group,
from the inception of the 2022 Plan through March 31, 2025. The closing price per share of our common stock on March 31, 2025 was $0.0002.
|
Name
and Position(1) | |
RSA
Granted Since Adoption of the 2022 Plan | | |
|
WONG Nga Yin Polin, Chief Executive
Officer, Chief Financial Officer, Secretary and Director | |
| 38,636,364 | | |
|
| |
| | | |
|
All current executive officers and directors
(1 person) | |
| 38,636,364 | | |
|
All employees,
including all officers who are not executive officers, as a group (1 person)(1) | |
| | | |
|
All non-employees, including
all directors, as a group (1 person) | |
| 412,878,788 | | |
|
TOTAL(2) | |
| 451,515,152 | | |
_______________
|
(1) |
No person has received 5% or more of the total awards granted under the 2022 Plan since its inception. | |
|
(2) |
Represents total shares of common stock granted since the adoption of the 2022 Plan to all employees and non-employees (current and former) who received awards under the 2022 Plan. As of March 31, 2025, there were no total RSUs outstanding under the 2022 Plan. | |
The
following table provides information about the Companys equity compensation plans as of March 31, 2025.
|
| |
Number
of securities to be issued upon exercise of outstanding options, warrants and rights | | |
Weighted-average
exercise price of outstanding options, warrants and rights | | |
Number
of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)) | | |
|
PLAN CATEGORY | |
(a) | | |
(b) | | |
(c) | | |
|
Equity compensation plans approved by security
holders | |
| | | |
| | | |
| | | |
|
Equity
compensation plans not approved by security holders(1) | |
| | | |
| | | |
| 81,484,848 | | |
|
Total | |
| | | |
| | | |
| 81,484,884 | (2) | |
|
(1) |
Pursuant to SEC rules and the reporting requirements for this table, we have not included in (a) above 451,515,152 shares of restricted stock issued pursuant to the plan. | |
|
(2) |
Represents securities remaining available for issuance under our 2022 Plan as of March31, 2025, that may be granted in the form of unrestricted common stock, restricted common stock, options to purchase shares of common stock, stock appreciation rights, restricted stock units, dividend equivalents, performance awards or other stock-based awards. | |
| | 56 | | |
**Registration with the Securities
and Exchange Commission**
Pursuant to
the Registration Statement on Form S-8 (File No. 333-266626) filed by the Company with the Securities and Exchange Commission (the Commission)
on August 8, 2022, as amended by Amendment No. 1 to Registration Statement on Form S-8 filed with the Commission on September 15, 2022
(collectively, the Prior Registration Statements), the Company registered an aggregate of 202,000,000 shares of Common Stock
under the 2022 Plan. On February 9, 2024, the Company filed a Registration Statement on Form S-8 to register 331,000,000 additional shares
of Common Stock issuable pursuant to the Plan, for an aggregate of 533,000,000 shares of common stock reserved for issuance under the
2022 Plan.
****
**ITEM 13.
Certain Relationships and Related Transactions, and Director Independence.**
Other than as disclosed below,
there are no transactions during our two most recent fiscal years ended March 31, 2025, and March 31, 2024, or any currently proposed
transaction, in which our Company was or to be a participant and the amount exceeds the lesser of $120,000 or one percent of the average
of our Companys total assets at year-end for our last two completed years, and in which any of our directors, officers or principal
stockholders, or any other related person as defined in Item 404 of Regulation S-K, had or have any direct or indirect material interest.
From time to time, our directors
and shareholders advanced funds to us for working capital purpose. Those advances are unsecured, non-interest bearing and have no fixed
terms of repayment. As of March 31, 2025, the amounts due to related parties of $768,423, and advances of $871 from our shareholder,
Lee Ying Chiu Herbert and related companies controlled by Dr. Lee. As of March 31, 2024, the amounts due to related parties of $2,134,953
represented the temporary advances of $8,081 from Fu Wah, our former CEO and director, and advances of $2,126,872 from our shareholder,
Lee Ying Chiu Herbert and related companies controlled by Dr. Lee.
We have not adopted policies
or procedures for approval of related person transactions but review them on a case-by-case basis. We believe that all related party transactions
were on terms at least as favorable as we would have secured in arms-length transactions with third parties. Except as set forth
above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five
percent or more of our common stock, or family members of such persons.
**Director Independence**
Though not
a NASDAQ listed company, we intend to adhere to the corporate governance standards adopted by NASDAQ. NASDAQ rules require our Board to
make an affirmative determination as to the independence of each director. Consistent with these rules, our Board conducted its annual
review of director independence. During the review, our Board considered relationships and transactions since incorporation between each
director or any member of her immediate family, on the one hand, and us and our subsidiaries and affiliates, on the other hand. The purpose
of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director
is independent. Based on this review, our Board determined that none of the current members of our Board are independent directors under
the criteria established by NASDAQ and by our Board.
| | 57 | | |
**ITEM 14. Principal
AccountING Fees And Services.**
Lao Professional audited our
financial statements for the fiscal years ended March 31, 2025.
J&S Associate (J&S)
audited our financial statements for the fiscal years ended March 31, 2024.
All audit work was performed
by the full-time employees of Lao Professional and J&S, as applicable, for the above-mentioned fiscal years. Our board of directors
does not have an audit committee. The functions customarily delegated to an audit committee are performed by our full board of directors.
Our board of directors approves in advance, all services performed by Lao Professional and J&S, as applicable, but have not adopted
pre-approval policies or procedures. Our board of directors has considered whether the provision of non-audit services is compatible with
maintaining the principal accountants independence, and has approved such services.
The following table sets forth
fees billed by our auditors during the last two fiscal years for services rendered for the audit of our annual financial statements and
the review of our quarterly financial statements, services by our auditors that are reasonably related to the performance of the audit
or review of our financial statements and that are not reported as audit fees, services rendered in connection with tax compliance, tax
advice and tax planning, and all other fees for services rendered.
|
| |
March 31, 2025 | | |
March 31, 2024 | | |
|
| |
| | |
| | |
|
Audit fees | |
$ | 20,000 | | |
$ | 30,000 | | |
|
Audit related fees | |
| | | |
| | | |
|
Tax fees | |
| | | |
| | | |
|
All other fees | |
| | | |
| | | |
|
Total | |
$ | 20,000 | | |
$ | 30,000 | | |
****
****
****
****
****
****
****
****
| | 58 | | |
****
**PART IV**
**ITEM 15. Exhibits
and Financial Statement Schedules.**
The following documents are filed as part of this report:
|
(1) |
Financial Statements | |
Financial Statements are included in Part II, Item 8 of this report.
|
(2) |
Financial Statement Schedules | |
No financial statement schedules are included because
such schedules are not applicable, are not required, or because required information is included in the financial statements or notes
thereto.
|
(3) |
Exhibits | |
|
Exhibit
No. |
|
Description | |
|
|
| |
|
3.1 |
|
Amended and Restated Certificate of Incorporation(1) | |
|
3.2 |
|
Bylaws(2) | |
|
4.1 |
|
Specimen certificate evidencing shares of Common Stock(3) | |
|
4.2 |
|
Description of Securities(1) | |
|
5 |
|
Opinion of Ravenscroft & Schmierer(4) | |
|
10.1 |
|
Share Exchange Agreement dated December 15, 2021, by and among King Resources, Inc., Powertech Management Limited, a British Virgin Island corporation, FU Wah and Silver Bloom Properties Limited(2) | |
|
10.2 |
|
King Resources, Inc. 2022 Stock Incentive Plan(5) | |
|
19 |
|
Insider Trading Compliance Program (6) | |
|
21 |
|
Subsidiaries* | |
|
31.1 |
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
|
21.2 |
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
|
32.1 |
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350* | |
|
32.2 |
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350* | |
|
99.1 |
|
Audit Committee Charter (6) | |
|
99.2 |
|
Compensation Committee Charter (6) | |
|
99.3 |
|
Nomination and Governance Committee Charter (6) | |
|
101.INS |
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 in iXBRL, and included in exhibit 101). | |
_______________________
|
* |
Filed herewith | |
|
(1) |
Incorporated by reference to the Exhibits of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 16, 2024. | |
|
(2) |
Incorporated by reference to the Exhibits of the Registration Statement on Form 10 filed with the Securities and Exchange Commission on February 14, 2022. | |
|
(3) |
Incorporated by reference to the Exhibits of Amendment No. 1 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on March 25, 2022. | |
|
(4) |
Incorporated by reference to the Exhibits of Amendment No. 2 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on April 21, 2022. | |
|
(5) |
Incorporated by reference to Exhibit 99.1 of the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 9, 2024. | |
|
(6) |
Incorporated by reference to the Exhibits of the Current Report on Form
8-K filed with the Securities and Exchange Commission on September 1, 2022. | |
**ITEM 16. FORM 10-K SUMMARY.**
None.
| | 59 | | |
****
**SIGNATURES**
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
|
ONESOLUTION TECHNOLOGY INC. | |
|
|
| |
|
|
| |
|
|
By: |
/s/ WONG Nga Yin Polin | |
|
|
|
Name: WONG Nga Yin Polin | |
|
|
|
Title: Chief Executive Officer, Chief Financial Officer, Secretary and Director | |
Date:July 15, 2025
| | 60 | | |