{"url_path":"/sec/chow/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/2041829/0001493152-26-023952-index.html","accession_number":"0001493152-26-023952","cik":"0002041829","ticker":"CHOW","issuer_name":"ChowChow Cloud International Holdings Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/2041829/0001493152-26-023952-index.html","primary_entity_key":"0002041829","primary_entity_name":"ChowChow Cloud International Holdings Ltd"},"word_count":8487,"has_tables":true,"body_markdown":"**ITEM\n5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\nYou\nshould read the following discussion together with our consolidated financial statements and the related notes included elsewhere in\nthis Report. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially\nfrom those we currently anticipate as a result of many factors, including those we describe under “Item 3.D. Risk Factors”\nand elsewhere in this Report on Form 20-F.\n\n \n\n**Overview**\n\n \n\nWe\nare a pioneer in providing one-stop cloud solutions that support companies across the IT industry value chain throughout their entire\ncloud transformation journey from consulting, deployment and migration to cloud environment building and management. We were founded\nin December 2014 by a group of passionate and experienced professionals, who envisioned the potential of cloud technology to transform\nthe way businesses of various sizes operate. Recognizing the growing need for digitization and the benefits that cloud technology could\nbring to businesses, our founders set out to create a company that would bridge the gap between cloud services providers and companies\nwho seek to move to the cloud.\n\n \n\n41\n\n \n\n \n\nOur\nbusiness primarily comprises (i) digital transformation consulting services consisting primarily of cloud suitability assessment, real-time\nresource management and strategic planning and advisory, (ii) professional IT services comprising a wide range of capabilities designed\nto facilitate seamless cloud integration and digital transformation, (iii) AI-powered proactive cloud managed services covering all aspects\nof day-to-day cloud maintenance and support, and (iv) IT infrastructure solutions covering on-premise private cloud setups and public\ncloud integrations, leveraging (including) our Sereno Cloud App360 AI and Data Science Platform (the “AI & Data Science Platform”).\n\n \n\nWe\nhave experienced a substantial growth in financial performance recently. Our revenue increased by 38.2%\nfrom HK$181.8 million in 2024 to HK$251.2\nmillion (US$32.2 million) in 2025.\n\n \n\n**Key\nFactors that Affect Results of Operations**\n\n \n\nWe\nbelieve the key factors affecting our financial condition and results of operations include the following:\n\n \n\n \n●\nWe\nmay fail to innovate or create new solutions which align with changing market and customer demand.\n\n \n \n \n\n \n●\nOur\nbusiness may face risks of clients’ default on payment.\n\n \n \n \n\n \n●\nWe\nmay not manage our growth effectively, and our profitability may suffer.\n\n \n \n \n\n \n●\nOur\nreputation and brand recognition is crucial to our business. Any harm to our reputation or failure to enhance our brand\n\n \n \n \n\n \n●\nRecognition\nmay materially and adversely affect our business, financial condition and results of operations.\n\n \n \n \n\n \n●\nIncreases\nin labor costs in Hong Kong may adversely affect our business and results of operations.\n\n \n\nThe\nabove does not list all the material risk factors that may affect our financial condition and results of operations. The above-mentioned\nrisks and others are discussed in more detail in the section titled “Risk Factors.”\n\n** **\n\n**Critical\nAccounting Policies and Estimates**\n\n \n\nWe\nprepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States of America\n(“U.S. GAAP”), which requires us to make estimates and assumptions that affect the amounts of assets and liabilities and\ndisclosures of contingent assets and liabilities at the date of the consolidated financial statements and the amounts of revenues and\nexpenses during the fiscal years. Significant accounting estimates reflected in our consolidated financial statements mainly include\nthe incremental borrowing rate used in the recognition of right-of-use assets and lease liabilities, allowance for the credit\nlosses, the useful lives of property and equipment, valuation allowance for deferred tax assets and the estimated performance obligations\ncompletion progress towards certain services revenue. We base our estimates on historical experience and on various other assumptions\nthat we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying\nvalues of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions\ncould cause a material change to our amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates\nunder different assumptions or conditions.\n\n \n\n**Revenue\nRecognition**\n\n \n\nOur\nrevenues are primarily generated from (i) *sale of hardware products,* (ii) *sale of software and IT application products,*(iii)\n*maintenance and support services, (iv) IT professional services and*(v) *contracts with multiple promises.*\n\n \n\n42\n\n \n\n \n\nWe\naccount for our revenue under ASC Topic 606, Revenue from Contracts with Customers. We recognize our revenue when control of the promised\ngoods or services is transferred to customers, in an amount that reflects the consideration to which we expect to be entitled in exchange\nfor those goods or services. To achieve this core principle, we apply the following five steps:\n\n \n\n \n(a)\nIdentification\nof the contract(s) with the customer;\n\n \n \n \n\n \n(b)\nIdentification\nof the performance obligations in the contract;\n\n \n \n \n\n \n(c)\nDetermination\nof the transaction price, including any variable consideration;\n\n \n \n \n\n \n(d)\nAllocation\nof the transaction price to the performance obligations in the contract based on their relative standalone selling prices; and\n\n \n \n \n\n \n(e)\nRecognition\nof revenue when, or as, we satisfy a performance obligation.\n\n \n\n*Sale\nof Hardware Products*\n\n \n\nWe\nrecognize revenue from the sale of hardware products at the point in time when control of the hardware is transferred to the customer.\nThis typically occurs upon delivery and acceptance of the hardware, when the customer gains the ability to use and benefit from the hardware.\n\n \n\n*Sale\nof Software and IT Application Products*\n\n \n\nWe\nrecognize revenue from the sale of software and IT application products, which may include packaged software, customized setup implementation,\nor integrated hardware and software platforms, at the point in time when control of the software is transferred to the customer.\n\n \n\nThe\nsoftware or IT application license constitutes a “right to use” intellectual property (IP), as defined in ASC 606-10-55-54,\nbecause it provides the customer with control over the software from the point of delivery or activation.\n\n \n\nA\nright-to-use license grants the customer a license to the software as it exists at the time the license is granted, with no significant\nongoing updates or support that would make it a “right to access” license.\n\n \n\nAs\nsuch, revenue for the license is recognized at a point in time when control is transferred, typically upon delivery or activation of\nthe software, in accordance with ASC 606.\n\n \n\n*Maintenance\nand Support Services*\n\n \n\nMaintenance\nand support services related to software products typically consist of unspecified future updates and upgrades, as well as technical\nsupport provided over a period of one to 12 months. These services represent stand-alone performance obligations, and we recognize revenue\nrateably over the service period. Revenue for maintenance and support is deferred and recognized over time as we satisfy our obligation\nto provide updates and technical support.\n\n \n\n*IT\nProfessional Services*\n\n \n\nIT\nprofessional services related to IT system setup, development, customization or integration services. These services represent stand-alone\nperformance obligations, and revenue is recognized upon the completion of the services, when the customer gains the ability to use the\nsystem and benefit from the services provided by us.\n\n \n\n43\n\n \n\n \n\nRevenue\nfrom IT professional services is recognized at a point in time upon the completion of services. This determination is based on the following\nconsiderations under ASC 606-10-25-27:\n\n \n\n \n(i)\n**Simultaneous\nReceipt and Consumption**: The customer does not simultaneously receive and consume the benefits of the IT professional services\nas they are performed. The services are delivered as a complete solution, and the customer derives value only upon full completion.\n\n \n \n \n\n \n(ii)\n**Creation\nor Enhancement of Customer-Controlled Asset***:* The services provided do not create or enhance an asset that the customer\ncontrols as the services are performed. The customer does not gain control until the services are completed.\n\n \n \n \n\n \n(iii)\n\n**No\nAlternative Use and Enforceable Right to Payment**: While the deliverables are tailored\nto customer-specific requirements, they do not meet the “no alternative use”\ncriterion because, in practice, the Company can reconfigure partially completed deliverables\nfor other projects, albeit with additional effort.\n\n \n\nMore\nimportantly, the Company does not have an **enforceable right to payment** for performance completed to date. Engagement letters\ntypically permit termination at any time without penalty, and payment terms do not obligate the customer to pay for partially completed\nwork.\n\n \n\nAccordingly,\ncontrol is transferred to the customer at a point in time, and revenue is recognized at that time.\n\n \n\n*Contracts\nwith Multiple Promises*\n\n \n\nThe\nCompany frequently enters into contracts with customers that contain multiple promises, including hardware, software, IT application\nlicenses, and IT professional services. To determine whether these promises are distinct within the context of the contract, the Company\napplies the guidance in ASC 606-10-25-19 through 25-22, which requires an assessment of whether:\n\n \n\n \n1.\nThe\ncustomer can benefit from the good or service on its own or with other readily available resources; and\n\n \n2.\nThe\npromise to transfer the good or service is separately identifiable from other promises in the contract.\n\n \n\nA\npromised good or service is not distinct if it is highly interdependent and interrelated with other promises, meaning its function is\nsignificantly affected by the other promises in the contract. BC32 of ASC 606 states:\n\n \n\n*“An\nentity should assess whether two or more promises in a contract are so highly interrelated and interdependent that they cannot be separated.”*\n\n \n\nAdditionally,\nBC33(a) and (b) explain that if an entity provides a significant service of integrating multiple items into a combined output, those\nitems are not distinct, as they serve as inputs to a unified deliverable rather than separate obligations.\n\n \n\nBased\non this guidance, the Company has determined that IT professional services are not distinct from hardware, software, or IT application\nlicenses in certain contracts because they are necessary inputs to delivering a fully integrated IT solution rather than stand-alone\ndeliverables.\n\n \n\n*Contract\nScenarios and Distinctness Evaluation*\n\n \n\n**(i)\nSale of Hardware Products with IT Professional Services (e.g., Setup, Development, Customization, or Integration Services)**\n\n \n\nNature\nof Promises & Intended Benefit to the Customer\n\n \n\nIn\ncontracts where the Company sells hardware products, the hardware provides computing capability to the customer. However, the hardware\nalone does not deliver its full intended benefit without installation, configuration, and integration services. IT professional services\nensure that the hardware is properly installed, tested, and integrated within the customer’s existing IT infrastructure, making\nit functional.\n\n \n\n44\n\n \n\n \n\nAssessment\nof Interdependency and Significant Effect on Utility\n\n \n\nThe\nCompany has determined that hardware and IT professional services are not separately identifiable because:\n\n \n\n \n●\nThe\nhardware requires IT services to be installed and configured before it can be used.\n\n \n●\nThe\nIT professional services significantly modify and enhance the hardware, making them highly interdependent.\n\n \n●\nPer\nBC33(a), IT professional services are an input to a combined output, rather than a separate deliverable.\n\n \n\nWhy\nIT Professional Services Are an Input to the Combined Output\n\n \n\nThe\nCompany considered the following factors in concluding that IT professional services are an input to a combined output:\n\n \n\n \n●\n**Level\nof Integration:** IT professional services ensure that the hardware is installed and operational within the customer’s environment.\n\n \n●\n**Modification\n& Customization:** The services configure the hardware to align with the customer’s operational needs.\n\n \n●\n**Customer\nDependency:** The customer does not receive a functional hardware system without the accompanying installation and integration\nservices.\n\n \n\nRevenue\nRecognition Conclusion\n\n \n\nSince\nthe hardware and IT professional services are highly interdependent and form a single performance obligation, revenue is recognized at\na point in time when the fully integrated system is transferred to the customer, typically upon completion of hardware installation and\ncustomer acceptance.\n\n** **\n\n**(ii)\nSale of Software and IT Application Products with IT Professional Services (e.g., Setup, Development, Customization, or Integration Services)**\n\n \n\nNature\nof Promises & Intended Benefit to the Customer\n\n \n\nIn\ncontracts where the Company provides software, the software delivers core processing and operational capabilities to the customer. However,\nin many cases, the software requires customization, configuration, and integration to be compatible with the customer’s existing\nIT environment. IT professional services ensure that the software is properly deployed, customized, and integrated to meet the customer’s\nspecific business processes.\n\n \n\nAssessment\nof Interdependency and Significant Effect on Utility\n\n \n\nThe\nCompany has determined that software and IT professional services are not separately identifiable because:\n\n \n\n \n●\nThe\nsoftware, on its own, may not provide full functionality without customization and integration.\n\n \n●\nIT\nprofessional services significantly modify the software, ensuring it is operational in the customer’s IT ecosystem.\n\n \n●\nPer\nBC33(b), IT professional services create a combined deliverable, rather than separate outputs.\n\n \n\nWhy\nIT Professional Services Are an Input to the Combined Output\n\n \n\nThe\nCompany considered the following factors in determining that IT professional services are an input to a combined output:\n\n \n\n \n●\n**Level\nof Integration:** IT professional services ensure that the software is fully functional within the customer’s system.\n\n \n●\n**Modification\n& Customization:** IT professional services tailor the software to meet customer-specific requirements.\n\n \n●\n**Customer\nDependency:** The customer cannot deploy or use the software effectively without IT professional services ensuring proper implementation.\n\n \n\n45\n\n \n\n \n\nRevenue\nRecognition Conclusion\n\n \n\nSince\nthe software and IT professional services are highly interdependent and form a single performance obligation, revenue is recognized at\na point in time when the fully customized and integrated software solution is delivered and accepted by the customer.\n\n \n\n**(iii)\nSale of Hardware, Software, and IT Application Products with IT Professional Services**\n\n \n\nNature\nof Promises & Intended Benefit to the Customer\n\n \n\nIn\ncontracts where the Company provides a combination of hardware, software, and IT professional services, each element works together to\ncreate a fully integrated IT system. The customer expects a turnkey solution, rather than individual components that must be assembled\nseparately.\n\n \n\nAssessment\nof Interdependency and Significant Effect on Utility\n\n \n\nThe\nCompany has determined that none of the promises are distinct from each other, as they are highly interdependent and interrelated because:\n\n \n\n \n●\nHardware\nrequires software to operate, and software requires IT services for customization and integration.\n\n \n●\nIT\nprofessional services configure and connect the hardware and software to function as a unified system.\n\n \n●\nPer\nBC32, the contract’s objective is to deliver an integrated IT system, rather than discrete components.\n\n \n\nWhy\nIT Professional Services Are an Input to the Combined Output\n\n \n\nThe\nCompany considered the following factors in concluding that IT professional services are an input to a combined output:\n\n \n\n \n●\n**Level\nof Integration:** IT professional services configure both hardware and software to function as a single IT system.\n\n \n●\n**Modification\n& Customization:** IT professional services modify the components to meet customer-specific requirements.\n\n \n●\n**Customer\nDependency:** The customer does not receive a functional IT system unless all components are integrated.\n\n \n\nRevenue\nRecognition Conclusion\n\n \n\nSince\nthe hardware, software, and IT professional services are highly interdependent and form a single performance obligation, revenue is recognized\nat a point in time when control of the fully integrated IT system is transferred to the customer upon completion and acceptance.\n\n \n\n**(iv)\nSale of Software and IT Application Products with Maintenance and Support Services**\n\n \n\nNature\nof Promises & Intended Benefit to the Customer\n\n \n\nIn\ncertain contracts, the Company sells software and IT application licenses that grant customers the right to use proprietary software.\nThese software products and licenses provide immediate functionality and enable the customer to operate the software in their IT environment.\n\n \n\nAdditionally,\nthese contracts may include maintenance and support (M&S) services, which typically consist of:\n\n \n\n \n●\nTechnical\nsupport to assist the customer with troubleshooting and operational issues.\n\n \n●\nUnspecified\nsoftware updates and patches to enhance security, performance, or compatibility with evolving IT environments.\n\n \n●\nAccess\nto periodic feature upgrades, if applicable.\n\n \n\n46\n\n \n\n \n\nThe\nprimary intended benefit to the customer is the use of the software license. The maintenance and support services supplement the software\nusage by ensuring that it continues to operate effectively but do not modify or enhance the software’s core functionality at the\ntime of transfer.\n\n \n\nAssessment\nof Interdependency and Significant Effect on Utility\n\n \n\nTo\ndetermine whether the software license and M&S services are distinct within the context of the contract, the Company evaluates whether:\n\n \n\n \n●\n**The\ncustomer can benefit from the software license independently** – The software license, upon delivery or activation, provides\nimmediate utility and enables the customer to conduct business operations without requiring immediate maintenance or support intervention.\n\n \n●\n**The\nM&S services does not significantly affect the customer’s ability to benefit from the software license** – The\nmaintenance and support services do not alter the fundamental usability of the software, as the customer can continue to use the\nsoftware with or without receiving M&S services.\n\n \n●\n**The\nsoftware license and M&S services are not highly interdependent** – While M&S ensures the software remains functional\nover time, it does not significantly integrate with or modify the software itself. The software retains its core functionality independently,\nmaking M&S a separately identifiable promise rather than an input to a combined output.\n\n \n\nBased\non these factors, the Company concludes that the software license and M&S services are distinct performance obligations because they\ndo not significantly affect each other’s standalone utility. This assessment aligns with ASC 606-10-25-21 and BC32, which emphasize\nthat promises should be considered distinct if they do not integrate, modify, or significantly impact each other’s functionality.\n\n \n\nHowever,\nthe Company assessed that the M&S services are immaterial to the total transaction price and do not significantly impact the timing\nor amount of revenue recognized. In these cases, the software license and M&S services are treated as a single performance obligation,\nconsistent with ASC 606 guidance on immaterial performance obligations.\n\n \n\nWhy\nMaintenance & Support Services Are Not an Input to a Combined Output\n\n \n\nUnlike\nIT professional services, which significantly modify or integrate hardware and software to form a single functional solution, maintenance\n& support services:\n\n \n\n \n●\n**Do\nnot alter or enhance the software at the time of transfer** – The customer receives an operational software license upon\ndelivery, and M&S provides future support rather than modifying the existing software.\n\n \n●\n**Are\nnot required for the customer to derive initial benefit from the software** – The customer can use the software independently,\nand the M&S services merely support long-term usability.\n\n \n●\n**Do\nnot significantly integrate with or change the underlying software** – The services are supplementary rather than essential\nfor the initial use of the product.\n\n \n\nAs\nsuch, M&S services do not qualify as an input to a combined output under BC33(a) or (b) and are therefore evaluated separately from\nthe software license.\n\n \n\nRevenue\nRecognition Conclusion\n\n \n\nSince\nthe Company has determined that M&S services are immaterial to the total transaction price, the software license and M&S services\nare treated as a single performance obligation for simplicity in revenue recognition.\n\n \n\n \n●\nRevenue\nfor the combined performance obligation is recognized at a point in time when control of the software license is transferred to the\ncustomer, typically upon delivery or activation.\n\n \n●\nAny\nrevenue associated with M&S services is included in the total transaction price of the software license and recognized at the\nsame point in time, as the distinction between the two does not materially impact revenue timing.\n\n \n\n47\n\n \n\n \n\n**(v)\nSale of Software and IT Application Products with IT Professional Services (e.g., Setup, Development, Customization, or Integration Services)\nand with Maintenance and Support Services**\n\n \n\nNature\nof Promises & Intended Benefit to the Customer\n\n \n\nIn\ncertain contracts, the Company sells software and IT application licenses combined with both IT professional services (e.g., setup, customization,\nintegration) and maintenance and support services (M&S). The software license provides core processing capabilities. IT professional\nservices are required to customize, configure, and integrate the software into the customer’s existing IT environment to make it\nfully functional. The M&S services consist of technical support, unspecified updates, and patches that help maintain the software’s\noperation over time.\n\n \n\nThe\ncustomer’s primary intended benefit is to obtain a fully deployed and customized software solution that is ready for use, with\nongoing support to ensure continued operation.\n\n \n\nAssessment\nof Interdependency and Significant Effect on Utility\n\n \n\nThe\nCompany has determined that the software license and the IT professional services are highly interdependent and interrelated, and therefore\nnot distinct from each other, because:\n\n \n\n \n●\nThe\nsoftware license alone does not deliver its full intended functionality without customization, configuration, and integration into\nthe customer’s environment.\n\n \n●\nThe\nIT professional services significantly modify and tailor the software to meet customer-specific requirements.\n\n \n●\nPer\nASC 606-10-25-21 and BC33(b), the software and the IT professional services are inputs to a combined output (a fully functional,\ncustomized software system), rather than separate deliverables.\n\n \n\nIn\ncontrast, the M&S services do not significantly affect the customer’s ability to benefit from the customized software system\nat the time of transfer. The customer can use the deployed and customized software immediately upon completion of the IT professional\nservices, regardless of whether M&S is provided. However, the Company has assessed that the M&S services are immaterial relative\nto the total transaction price of these contracts. Furthermore, the M&S services do not fundamentally alter the software or the integrated\nsolution – they merely provide future support.\n\n \n\nWhy\nMaintenance & Support Services Are Not an Input to a Combined Output\n\n \n\nUnlike\nIT professional services, which significantly modify or integrate hardware and software to form a single functional solution, maintenance\n& support services:\n\n \n\n \n●\n**Do\nnot alter or enhance the software at the time of transfer** – The customer receives an operational software license upon\ndelivery, and M&S provides future support rather than modifying the existing software.\n\n \n●\n**Are\nnot required for the customer to derive initial benefit from the software** – The customer can use the software independently,\nand the M&S services merely support long-term usability.\n\n \n●\n**Do\nnot significantly integrate with or change the underlying software** – The services are supplementary rather than essential\nfor the initial use of the product.\n\n \n\nBecause\nthe M&S services are immaterial to the total transaction price, the Company treats the entire contract (software + IT professional\nservices + M&S) as a single performance obligation for revenue recognition purposes.\n\n \n\n48\n\n \n\n \n\nRevenue\nRecognition Conclusion\n\n \n\nRevenue\nis recognized at a point in time when the fully customized and integrated software solution is delivered and accepted by the customer.\nAt that moment, control of the combined deliverable (including the software as customized) is transferred to the customer. The immaterial\nM&S component does not change the timing of revenue recognition.\n\n \n\n**Variable\nConsideration**\n\n \n\nWe\nestimate variable consideration, including potential refunds, penalties, or performance bonuses, using the expected value or most\nlikely amount method, depending on which better predicts the amount of consideration to which we will be entitled. We recognize\nrevenue only to the extent that it is probable that a significant reversal of cumulative revenue will not occur. For the years ended\nDecember 31, 2023, 2024 and 2025, we did not have any contracts with variable consideration, and no adjustments to the transaction\nprice were necessary after initial recognition.\n\n \n\n**Principal\nversus Agent Considerations**\n\n \n\nIn\nevaluating whether we are acting as a principal or an agent in its contracts, we considered the guidance in ASC 606-10-55-36 through\n55-40. This evaluation focused on identifying the specified goods or services promised to the customer and assessing whether we obtain\ncontrol of these goods or services before they are transferred to the customer.\n\n \n\nOur\nIT solutions involve services, hardware, software, and IT application products. In these contracts, we provide a bundle of goods and\nservices necessary to fulfil the performance obligations. While certain components of the solution, such as hardware and software, may\nbe sourced from third-party providers, we direct and integrate these inputs into a cohesive IT solution that meets the customer’s\nneeds.\n\n \n\nSpecifically:\n\n \n\n*(i)\nControl of Goods and Services:*\n\n \n\nWe\ntake control of the services, hardware, software, and IT application products prior to their delivery to the customer. This is evidenced\nby the Company’s ability to direct the use of these goods and services and to obtain the benefits from them before transfer.\n\n \n\nWe\nassume inventory risk for these goods, either upon receipt from the third-party provider or during their customization or bundling into\nthe overall IT solution.\n\n \n\n**2.\nPrimary Responsibility for Fulfilment:**\n\n \n\nWe\nare responsible for ensuring the customer receives the specified solution, including resolving any issues with the delivery or functionality\nof the underlying services, hardware, software, and applications. This indicates that we are accountable for the overall performance\nof the arrangement.\n\n \n\n**3.\nPricing Discretion:**\n\n \n\nWe\ndetermine the pricing for the bundled solution, further supporting its role as principal.\n\n \n\nAlthough\nwe partner with cloud and technology service providers and outsources certain components to third-party providers, these third parties\nact as subcontractors or suppliers within our broader performance obligation. We do not merely arrange for the third parties to provide\ngoods or services directly to the customer.\n\n \n\nBased\non the above, we concluded that we act as the principal in these transactions because we control the specified goods and services before\ntransferring them to the customer.\n\n \n\n49\n\n \n\n \n\n**Accounts\nReceivable, Net**\n\n \n\nAccounts\nreceivable primarily consists of amounts due from our customers and related companies. We record these balances net of an allowance for\nexpected credit losses, which is established in accordance with ASC 326, Financial Instruments—Credit Losses.\n\n \n\nWe\nestimate our allowance for expected credit losses using a forward-looking model that incorporates historical loss experience, current\nconditions, and reasonable and supportable forecasts of future economic conditions. We determine the allowance is determined through\nPortfolio-level analysis, which applies a historical loss rate to pools of receivables with similar risk characteristics, adjusted for\nexpected changes in the macroeconomic environment and industry trends.\n\n \n\nOur\nmanagement evaluates receivables based on factors such as the aging of receivables, historical collection patterns, and the customer’s\nability to pay, as well as broader economic factors that may affect the collectability of receivables. Significant judgments include\nevaluating the impact of economic downturns, industry-specific risks, and other external factors on customer creditworthiness.\n\n \n\nReceivables\nare written off against the allowance when all reasonable collection efforts have been exhausted and our management determines that the\nlikelihood of collection is remote. The timing of the write-off is based on specific criteria, including the length of time a receivable\nhas been past due, customer bankruptcy, and other significant credit events.\n\n \n\nAs\nof December 31, 2024 and 2025, the Company had an allowance for credit losses of HK$1,001,086 and HK$8,727,283 (US$1,118,882), respectively.\nThe increase in the allowance was due to a modest rise in receivables aging beyond standard terms observed during the year.\n\n \n\n**Contract\nAssets and Contract Liabilities**\n\n \n\nContract\nassets represent our right to consideration in exchange for goods or services that have been transferred to the customer, but for which\nbilling has not yet occurred under the terms of the contract. We recognize contract assets when we satisfy a performance obligation and\nhas a right to payment, but the payment is conditional on something other than the passage of time (e.g., future performance or acceptance\nof goods or services by the customer). We evaluate contract assets for expected credit losses in accordance with ASC 326 and measure\nat the net realizable value.\n\n \n\nContract\nliabilities represent the billings to date, as allowed under the terms of a contract, but not yet recognized as contract revenue using\nour revenue recognition policy. Contract liabilities arise when billings exceed the amount of revenue recognized based on our revenue\nrecognition policy under ASC 606. We recognize revenue over time or at a point in time as performance obligations are satisfied, depending\non the nature of the contract and the specific terms of the agreement.\n\n \n\nWe\nclassify contract assets and liabilities as current or noncurrent depending on the timing of when the performance obligations are expected\nto be satisfied and when the related billings will occur. For contracts with multiple promises, we allocate the transaction price to\neach performance obligation based on relative stand-alone selling prices. We regularly review our estimates of transaction prices, performance\nobligations, and the progress toward satisfaction of those obligations.\n\n \n\nAny\nsignificant changes in contract assets and liabilities are disclosed separately in the financial statements and are primarily driven\nby the timing of the satisfaction of performance obligations and the receipt of customer payments.\n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\nSee\nthe discussion of the recent accounting pronouncements contained in Note 2 to the financial statements, “Summary of Significant\nAccounting Policies.\n\n \n\n50\n\n \n\n \n\n**Years\nended December 31, 2023, 2024 and 2025**\n\n \n\n**Results\nof Operations**\n\n \n\nThe\nfollowing table sets forth a summary of our consolidated results of operations for the years indicated, both in absolute amount.\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025  \nVariance  \n2024 to 2023  \n2025 to 2024 \n\n  \nHK$  \nHK$  \nHK$  \nUS$  \nHK$  \n% Change  \n% Change \n\n  \n   \n   \n   \n   \n   \n   \n  \n\nRevenues \n 141,372,358  \n 181,830,126  \n 251,216,649  \n 32,207,262  \n 69,386,523  \n 28.6  \n 38.2 \n\nCost of revenues \n (121,462,858) \n (156,575,791) \n (218,793,249) \n (28,050,417) \n (62,217,458) \n 28.9  \n 39.7 \n\nGross profit \n 19,909,500  \n 25,254,335  \n 32,423,400  \n 4,156,845  \n 7,169,065  \n 26.8  \n 28.4 \n\n  \n    \n    \n    \n    \n    \n    \n   \n\nOperating expenses \n    \n    \n    \n    \n    \n    \n   \n\nSelling and marketing expenses \n (1,024,598) \n (2,776,713) \n (31,627,720) \n (4,054,836) \n (28,851,007) \n 171.0  \n 1,039.0 \n\nGeneral and administrative expenses \n (4,989,693) \n (8,527,081) \n (24,332,020) \n (3,119,489) \n (15,804,939) \n 70.9  \n 185.3 \n\nTotal operating expenses \n (6,014,291) \n (11,303,794) \n (55,959,740) \n (7,174,325) \n (44,655,946) \n 87.9  \n 395.1 \n\nOperating income / (loss) \n 13,895,209  \n 13,950,541  \n (23,536,340) \n (3,017,480) \n (32,036,986) \n 0.4  \n (267.4)\n\nInterest income \n 13,838  \n 47,591  \n 20,860  \n 2,674  \n (26,731) \n 243.9  \n (56.2)\n\nInterest expense \n -  \n (100,939) \n (145,289) \n (18,627) \n (44,350) \n 100  \n 43.9 \n\nOther income, net \n 358,441  \n 173,715  \n 109,803  \n 14,077  \n (63,912) \n (51.5) \n (36.8)\n\nIncome / (Loss) before taxes \n 14,267,488  \n 14,070,908  \n (23,550,966) \n (3,019,356) \n (37,621,874) \n (1.4) \n (267.4)\n\nIncome tax expenses \n (2,161,815) \n (2,200,654) \n -  \n -  \n 2,200,654  \n 1.8  \n (100)\n\nNet income / (loss) \n 12,105,673  \n 11,870,254  \n (23,550,966) \n (3,019,356) \n (35,421,220) \n (1.9) \n (298.4)\n\n  \n    \n    \n    \n    \n    \n    \n   \n\nEarnings / (loss) per share attributable to ordinary shareholders of the shareholders \n    \n    \n    \n    \n    \n    \n   \n\nBasic and diluted \n 0.37  \n 0.37  \n (0.71) \n (0.09) \n -  \n -  \n - \n\nWeighted average shares used in calculating basic and diluted net income / (loss) per share \n 32,500,000  \n 32,500,000  \n 33,376,521  \n 33,376,521  \n -  \n -  \n - \n\n \n\n**Revenues**\n\n \n\nThe\nfollowing table presented the breakdown of our revenue for the years ended December 31, 2023, 2024 and 2025:\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025  \n2024 to 2023  \n2025 to 2024 \n\n  \nHK$  \n%  \nHK$  \n%  \nHK$  \nUS$  \n%  \n% Change  \n% Change \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nRevenue from Products: \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nContracts with Multiple Promises*: \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\n- Sale of Hardware with IT Professional Services \n 58,250,642  \n 41.2  \n 70,398,140  \n 38.7  \n 66,224,103  \n 8,490,270  \n 26.4  \n 20.9  \n (5.9)\n\n- Sale of Software and IT Application products with IT Professional Services \n 52,958,769  \n 37.5  \n 79,469,485  \n 43.7  \n 32,730,302  \n 4,196,192  \n 13.0  \n 50.1  \n (58.8)\n\n- Sale of Hardware, Software and IT Application Products with IT Professional Services \n 5,095,674  \n 3.6  \n -  \n -  \n 7,993,333  \n 1,024,786  \n 3.2  \n (100) \n 100 \n\n- Sale of Software and IT Application Products with IT Professional Services and Maintenance and Support Services \n -  \n -  \n -  \n -  \n 12,932,244  \n 1,657,980  \n 5.1  \n -  \n 100 \n\n- Sale of Software and IT Application Products with Maintenance and Support Services \n 17,239,574  \n 12.2  \n 22,112,152  \n 12.2  \n 114,489,700  \n 14,678,166  \n 45.6  \n 28.3  \n 417.8 \n\nSale of Hardware Products \n 834,848  \n 0.6  \n 492,705  \n 0.3  \n 638,259  \n 81,828  \n 0.3  \n (41.0) \n 29.5 \n\n  \n 134,379,507  \n 95.1  \n 172,472,482  \n 94.9  \n 235,007,941  \n 30,129,222  \n 93.5  \n 28.3  \n 36.3 \n\nRevenue from Services: \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nIT Professional Services \n 4,848,321  \n 3.4  \n 4,779,716  \n 2.6  \n 6,336,954  \n 812,430  \n 2.5  \n (1.4) \n 32.6 \n\nMaintenance and Support Services \n 2,144,530  \n 1.5  \n 4,577,928  \n 2.5  \n 9,871,754  \n 1,265,610  \n 3.9  \n 113.5  \n 115.6 \n\n  \n 6,992,851  \n 4.9  \n 9,357,644  \n 5.1  \n 16,208,708  \n 2,078,040  \n 6.5  \n 33.8  \n 73.2 \n\nTotal revenues \n 141,372,358  \n 100.0  \n 181,830,126  \n 100  \n 251,216,649  \n 32,207,262  \n 100  \n 28.6  \n 38.2 \n\n \n\n**Revenue\nRecognition for Contracts with Non-Distinct Obligations*\n\n \n\n51\n\n \n\n \n\nThe\nCompany enters into contracts that include a combination of goods (e.g., hardware, software) and services (e.g., IT professional services,\nintegration, and maintenance). When these elements are highly interdependent and interrelated, they are treated as a single performance\nobligation under ASC 606-10-25-21, and revenue is recognized at a point in time when control transfers to the customer, typically upon\ncustomer acceptance.\n\n \n\nBecause\nthese contracts represent an integrated solution, the Company does not allocate revenue to individual components (hardware, software,\nor services). Instead, revenue is categorized as product revenue, as the predominant characteristic of the combined deliverable is the\nhardware and software provided to the customer.\n\n \n\nIn\ndetermining the predominant characteristic, the Company considers:\n\n \n\n \n●\nThe\nprimary benefit to the customer, which is the acquisition of a functional IT system.\n\n \n●\nThe\nrelative significance of each component, including the cost composition of hardware, software, and services within the contract.\n\n \n●\nThe\ncustomer’s primary reason for entering into the arrangement, which is to obtain a fully integrated IT solution rather than\nstandalone services.\n\n \n\nThis\nclassification reflects the nature of the Company’s contracts and ensures consistency with how control is transferred to the customer.\n\n \n\nThe\nfollowing table summarizes disaggregated revenue from contracts with customers by geographic areas for the years ended December 31,\n2023, 2024 and 2025:\n\n \n\n  \nYear\nended December 31, \n\n  \n2023  \n2024  \n2025  \n2024\nto 2023  \n2025\nto 2024 \n\n  \n**HK$**  \n%  \nHK$  \n%  \nHK$  \nUS$  \n%  \n%\nChange  \n%\nChange \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nHong\nKong \n 128,519,292  \n 90.9  \n 144,495,457  \n 79.5  \n 225,302,675  \n 28,884,958  \n 89.7  \n 12.4  \n 76.7 \n\nSingapore \n 10,090,715  \n 7.1  \n 33,751,584  \n 18.5  \n 21,777,817  \n 2,792,028  \n 8.7  \n 234.5  \n (37.3)\n\nOthers,\nincluding Philippines, Macau, Japan and Malaysia \n 2,762,351  \n 2.0  \n 3,583,085  \n 2.0  \n 4,136,156  \n 530,276  \n 1.6  \n 29.7  \n 15.4 \n\nTotal\nrevenues \n 141,372,358  \n 100.0  \n 181,830,126  \n 100  \n 251,216,649  \n 32,207,262  \n 100  \n 28.6  \n 38.2 \n\n \n\n52\n\n \n\n \n\nThe\nfollowing table presented the disaggregated revenues from contracts with customers by the timing of revenue recognition for the years\nended December 31, 2023, 2024 and 2025:\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025  \n2024 to 2023  \n2025 to 2024 \n\n  \n**HK$**  \n%  \nHK$  \n%  \nHK$  \nUS$  \n%  \n% Change  \n% Change \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nRevenue recognized at point in time \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nSale of Hardware Products \n 834,848  \n 0.6  \n 492,705  \n 0.3  \n 638,259  \n 81,828  \n 0.2  \n (41.0) \n 29.5 \n\nIT Professional Services \n 3,600,962  \n 2.5  \n 3,860,692  \n 2.1  \n 1,922,094  \n 246,422  \n 0.8  \n 7.2  \n (50.2)\n\nContracts with Multiple Promises \n 133,544,659  \n 94.5  \n 171,979,777  \n 94.6  \n 234,369,682  \n 30,047,395  \n 93.3  \n 28.8  \n 36.3 \n\n  \n 137,980,469  \n 97.6  \n 176,333,174  \n 97.0  \n 236,930,035  \n 30,375,645  \n 94.3  \n 27.8  \n 34.4 \n\nRevenue recognized over time \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nMaintenance and Support Services \n 2,144,530  \n 1.5  \n 4,577,928  \n 2.5  \n 9,871,754  \n 1,265,610  \n 3.9  \n 113.5  \n 115.6 \n\nIT Professional Services \n 1,247,539  \n 0.9  \n 919,024  \n 0.5  \n 4,414,860  \n 566,007  \n 1.8  \n (26.3) \n 380.4 \n\n  \n 3,391,889  \n 2.4  \n 5,496,952  \n 3.0  \n 14,286,614  \n 1,831,617  \n 5.7  \n 62.1  \n 159.9 \n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nTotal revenues \n 141,372,358  \n 100.0  \n 181,830,126  \n 100.0  \n 251,216,649  \n 32,207,262  \n 100.0  \n 28.6  \n 38.2 \n\n \n\nRevenues\nincreased by HK$69.4 million, or 38.2%,\nto HK$251.2 million (US$32.2 million) for\nthe year ended December 31, 2025 compared to HK$181.8 million for the same period in 2024.\n\n \n\nThe\nincrease was primarily attributable to higher demand for integrated IT solutions, particularly software and IT application products bundled\nwith maintenance and support services, which grew by HK$92.4 million, as well as growth in hardware-with-services contracts. This was\npartially offset by a decrease in certain software-with-professional services packages.\n\n \n\n**Cost\nof revenues**\n\n \n\nThe\nfollowing table presented the breakdown of our costs of revenues for the years ended December 31, 2023, 2024 and 2025:\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025  \n2024 to 2023  \n2025 to 2024 \n\n  \nHK$  \n%  \nHK$  \n%  \nHK$  \nUS$  \n%  \n% Change  \n% Change \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nCost of Products: \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nContracts with Multiple Promises*: \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\n- Sale of Hardware with IT Professional Services \n 52,158,964  \n 43.0  \n 65,259,321  \n 41.7  \n 59,880,675  \n 7,677,010  \n 27.4  \n 25.1  \n (8.2)\n\n- Sale of Software and IT Application products with IT Professional Services \n 46,521,405  \n 38.3  \n 66,764,480  \n 42.6  \n 25,453,232  \n 3,263,235  \n 11.6  \n 43.5  \n (61.9)\n\n- Sale of Hardware, software and IT application products with IT Professional Services \n 4,098,581  \n 3.4  \n -  \n -  \n 5,778,437  \n 740,825  \n 2.7  \n (100) \n 100 \n\n- Sale of Software and IT Application Products with IT Professional Services and Maintenance and Support Services \n -  \n -  \n -  \n -  \n 10,552,321  \n 1,352,862  \n 4.8  \n -  \n 100 \n\n- Sale of Software and IT Application Products with Maintenance and Support Services \n 14,996,495  \n 12.3  \n 17,827,166  \n 11.4  \n 106,856,111  \n 13,699,501  \n 48.8  \n 18.9  \n 499.4 \n\nSale of Hardware Products \n 719,270  \n 0.6  \n 347,470  \n 0.2  \n 549,444  \n 70,442  \n 0.3  \n (51.7) \n 58.1 \n\n  \n 118,494,715  \n 97.6  \n 150,198,437  \n 95.9  \n 209,070,220  \n 26,803,875  \n 95.6  \n 26.8  \n 39.2 \n\nCost of Services: \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nIT Professional Services \n 2,335,938  \n 1.9  \n 3,312,547  \n 2.1  \n 3,283,943  \n 421,018  \n 1.5  \n 41.8  \n (0.9)\n\nMaintenance and Support Services \n 632,205  \n 0.5  \n 3,064,807  \n 2.0  \n 6,439,086  \n 825,524  \n 2.9  \n 384.8  \n 110.1 \n\n  \n 2,968,143  \n 2.4  \n 6,377,354  \n 4.1  \n 9,723,029  \n 1,246,542  \n 4.4  \n 114.9  \n 52.5 \n\nTotal cost of revenues \n 121,462,858  \n 100.0  \n 156,575,791  \n 100  \n 218,793,249  \n 28,050,417  \n 100  \n 28.9  \n 39.7 \n\n \n\n53\n\n \n\n \n\nCost\nof revenues consists primarily of subcontracting fees, cost of hardware, software license and IT application license directly attributable\nto services provided.\n\n \n\nFor\nthe year ended December 31, 2025, cost of revenues was HK$218.8 million (US$28.1 million),\nincreased by HK$62.2 million or 39.7% from\nHK$156.6 million in the same period in 2024. The increase was mainly attributable to the higher volume of integrated IT solution projects,\nparticularly those involving software products with maintenance and support, which carry higher direct costs. The increase in cost of\nrevenues was consistent with the increase in revenue.\n\n \n\n**Gross\nprofit and gross profit margin**\n\n \n\nAs\na result of the foregoing, the overall gross profit for the year ended December 31, 2025 was HK$32.4\nmillion (US$4.2 million), an increase of HK$7.1\nmillion from HK$25.3 million for the same period in 2024. The overall gross profit margin\nremained stable, with a slight decline from 13.9% for the year ended December 31, 2024 to 12.9%\nfor the year ended December 31, 2025.\n\n \n\nThe\ngross profit margin on revenue on products decreased from 12.9% for the year ended December\n31, 2024 to 11.0% for the year ended December 31, 2025, while the gross profit margin\non revenue on services increased from 31.8% for the year ended December 31, 2024 to 40.0%\nfor the year ended December 31, 2025.\n\n \n\n**Selling\nand marketing expenses**\n\n \n\nSelling\nand marketing expenses consisted primarily of (i) marketing service fee paid to the third parties; (ii) business development expenses\npaid to the third parties and (iii) commission paid to the third parties relevant to the sales function.\n\n \n\nOur\nmajor selling and marketing expenses were comprised of the following items during the years indicated:\n\n \n\n \n \n**Year ended December 31,**\n \n\n \n \n**2023**\n \n \n**2024**\n \n \n**2025**\n \n \n**2023 to 2024**\n \n \n**2024 to 2025**\n \n\n \n \n**HK$**\n \n \n**%**\n \n \n**HK$**\n \n \n**%**\n \n \n**HK$**\n \n \n**US$**\n \n \n**%**\n \n \n**% Change**\n \n \n**% Change**\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nMarketing service fee paid to the third parties\n \n \n986,495\n \n \n \n96.3\n \n \n \n2,564,915\n \n \n \n92.4\n \n \n \n19,009,426\n \n \n \n2,437,106\n \n \n \n60.1\n \n \n \n160.0\n \n \n \n641.1\n \n\nBusiness development expenses paid to the third parties\n \n \n \n \n \n \n \n \n \n \n-\n \n \n \n-\n \n \n \n12,558,000\n \n \n \n1,610,000\n \n \n \n39.7\n \n \n \n-\n \n \n \n100\n \n\nCommission paid to the third parties\n \n \n38,103\n \n \n \n3.7\n \n \n \n211,798\n \n \n \n7.6\n \n \n \n60,294\n \n \n \n7,730\n \n \n \n0.2\n \n \n \n455.9\n \n \n \n(71.5\n)\n\n**Total**\n \n \n**1,024,598**\n \n \n \n**100.0**\n \n \n \n**2,776,713**\n \n \n \n**100.0**\n \n \n \n**31,627,720**\n \n \n \n**4,054,836**\n \n \n \n**100.0**\n \n \n \n**171.0**\n \n \n \n**1,039.0**\n \n\n \n\nSelling\nand marketing expenses increased by HK$28.9 million or 1,039.0% from HK$2.8 million for the year ended December 31, 2024 to HK$31.6 million\n(US$4.1 million) for the year ended December 31, 2025. The significant increase was mainly driven by (i) an increase in marketing service\nfees paid to third parties by HK$16.4 million, and (ii) new business development expenses paid to third parties amounting to HK$12.6\nmillion incurred during the year to support the expansion of the Company’s market and customer base.\n\n \n\n**General\nand administrative expenses**\n\n \n\nGeneral\nand administrative expenses primarily consist of salaries, bonuses, and benefits for employees involved in general corporate functions,\nsuch as finance, human resources, legal, and executive management. These expenses also include depreciation and amortization related\nto assets used in corporate activities, legal and professional service fees, entertainment expenses, short-term rental expenses for office\nspaces, and other administrative expenses.\n\n \n\n54\n\n \n\n \n\nOur\nmajor general and administrative expenses were comprised of the following items during the years indicated:\n\n \n\n  \nYear ended December 31, \n\n  \n2023  \n2024  \n2025  \n2023 to 2024  \n2024 to 2025 \n\n  \nHK$  \n%  \nHK$  \n%  \nHK$  \nUS$  \n%  \n% Change  \n% Change \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nSalaries, bonuses, and benefits for employees \n 3,513,248  \n 70.4  \n 5,738,353  \n 67.3  \n 7,883,461  \n 1,010,700  \n 32.4  \n 63.3  \n 37.4 \n\nIndependent directors’ fees \n -  \n -  \n -  \n -  \n 127,400  \n 16,333  \n 0.5  \n -  \n 100 \n\nAmortization of intangible asset \n 378,802  \n 7.6  \n 681,514  \n 8.0  \n 781,475  \n 100,189  \n 3.2  \n 79.9  \n 14.7 \n\nDepreciation of property and equipment \n 22,940  \n 0.4  \n 25,179  \n 0.3  \n 20,361  \n 2,610  \n 0.1  \n 9.8  \n (19.1)\n\nShort-term rental expenses \n 423,158  \n 8.5  \n 424,824  \n 5.0  \n 404,422  \n 51,849  \n 1.7  \n 0.4  \n (4.8)\n\nAudit fee \n -  \n -  \n -  \n -  \n 1,248,000  \n 160,000  \n 5.1  \n -  \n 100 \n\nLegal and professional service fees \n 183,055  \n 3.7  \n 443,942  \n 5.2  \n 5,290,205  \n 678,232  \n 21.7  \n 142.5  \n 1,091.6 \n\nAllowance for the current credit losses on accounts receivable \n (348,954) \n (7.0) \n 507,230  \n 5.9  \n 7,726,197  \n 990,538  \n 31.8  \n 245.4  \n 1,432.2 \n\nEntertainment expenses \n 363,067  \n 7.3  \n 227,573  \n 2.7  \n 385,929  \n 49,478  \n 1.6  \n (37.3) \n 69.6 \n\nOthers \n 454,377  \n 9.1  \n 478,466  \n 5.6  \n 464,570  \n 59,560  \n 1.9  \n 5.3  \n (2.9)\n\nTotal \n 4,989,693  \n 100.0  \n 8,527,081  \n 100.0  \n 24,332,020  \n 3,119,489  \n 100.0  \n 70.9  \n 185.3 \n\n \n\nGeneral and administrative\nexpenses increased by HK$15.8 million or 185.3% from HK$8.5 million for the year ended\nDecember 31, 2024 to HK$24.3 million (US$3.1 million) for the year ended December 31,\n2025. The significant increase was mainly driven by:\n\n \n\n(i)\nan increase in salaries, bonuses and employee benefits of HK$2.1 million (US$0.3 million) due to headcount growth and higher average\nmonthly compensation;\n\n \n\n(ii) an increase in legal and professional service fees of HK$4.8 million\n(US$0.6 million), which included auditor’s interim review fee, service fees driven by post-initial public offering (“IPO”)\nstrategic initiatives, and financial reporting and internal control advisory fees incurred in connection with the public company compliance;\n\n \n\n(iii)\nincurrence of audit fee of HK$1.2 million (US$0.2 million) for the statutory audit of the 2025 financial statements;\n\n \n\n(iv) a net increase in allowance for credit losses on accounts receivable\nof HK$7.2 million (US$0.9 million); and\n\n \n\n(v)\n**i**ncurrence of independent directors’ fees of HK$0.1 million (US$0.02 million).\n\n** **\n\n**Interest\nincome**\n\n \n\nInterest\nincome represented the interest income derived from bank saving deposits. For the years ended December 31, 2024 and 2025, we recorded\ninterest income of HK$47,591 and HK$20,860 (US$2,674), respectively.\n\n \n\n**Interest\nexpense**\n\n \n\nInterest\nexpense represented the interest on an instalment bank loan of HK$5 million (US$0.6 million) under the SME Financing Guarantee Scheme\nwith a 100% guarantee provided by HKMC Insurance Limited secured during the year ended December 31, 2024. For the years ended December\n31, 2024 and 2025, we recorded interest expense of HK$100,939 and HK$145,289 (US$18,627), respectively.\n\n \n\n55\n\n \n\n** **\n\n**Income\ntax expenses**\n\n \n\nFor the year ended December 31, 2025, the Company recorded a loss before\ntax of HK23.6 million (US$3.0 million). As a result, no income tax expense was accrued for the year ended December 31, 2025.\n\n \n\n**Net\nincome / (loss)**\n\n \n\nAs\na result of the above discussion, we recorded a net loss of HK$23.6 million (US$3.0\nmillion) for the year ended December 31, 2025, compared to net income of HK$11.9 million in 2024. The swing was driven by the significant\nincrease in operating expenses, particularly selling and marketing costs related to the IPO and business expansion, partially offset\nby higher gross profit.\n\n** **\n\n**Liquidity\nand Capital Resources**\n\n \n\nWe\nfinanced our daily operations and business development through cash generated from operations and proceeds from the IPO. As of\nDecember 31, 2024 and 2025, our cash and cash equivalents balance were HK$10.5\nmillion and HK$21.6 million (US$2.8\nmillion), respectively.\n\n \n\nThe\nfollowing table set forth a summary of our cash flows for the years indicated:\n\n \n\n  \nYear\nended December 31, \n\n  \n2024  \n2025  \n2025 \n\n  \nHK$  \nHK$  \nUS$ \n\n  \n   \n   \n  \n\nNet\ncash provided by / (used in) operating activities \n 7,934,436  \n (56,614,740) \n (7,258,299)\n\nNet\ncash used in investing activities \n (1,213,177) \n (11,133,199) \n (1,427,333)\n\nNet\ncash (used in) / provided by financing activities \n (6,072,678) \n 78,840,078  \n 10,107,702 \n\n \n\n**Cash\nFlow Activities for the Years Ended December 31, 2024 and 2025**\n\n \n\n*Cash\nProvided by / (Used in) Operating Activities:*\n\n \n\nFor the year ended December 31, 2024, net cash provided by operating activities was HK$7.9 million (US$1.0 million), primarily resulted\nfrom the net income of HK$11.9 million (US$1.5 million) as adjusted for non-cash items and changes in operating assets and liabilities.\nAdjustments for non-cash items primarily consisted of (i) amortization of intangible asset of HK$0.7 million (US$87,374); and (ii) allowance\nfor the current expected credit losses on accounts receivable of HK$0.5 million (US$65,029). Changes in operating assets and liabilities\nprimarily driven by a decrease in deferred revenue (contract liabilities) of HK$1.2 million (US$0.2 million), a decrease in accounts payable\nof HK$2.5 million (US$0.3 million) and an increase in accounts receivable of HK$2.5 million (US$0.3 million), partially offset by an increase\nof tax payable of HK$2.2 million (US$0.3 million).\n\n \n\nFor\nthe year ended December 31, 2025, net cash used in operating activities was HK$56.6 million\n(US$7.3 million), primarily resulted from (i) the net loss of HK$23.6 million; (ii) a large increase in accounts receivable of HK$35.7\nmillion (US$4.6 million); and (iii) a decrease in deferred revenue (contract liabilities) of HK$13.6 million (US$1.7 million), partially\noffset by an increase in accounts payable of HK$8.2 million (US$1.0 million) and increase in accrued expenses and other current liabilities\nof HK$2.1 million (US$0.3 million).\n\n \n\n*Cash\nUsed in Investing Activities:*\n\n \n\nFor the year ended December 31, 2024, net cash used in investing activities was HK$1.2 million (US$0.2 million), which was mainly for\nthe enhancement cost of an information technology service management system paid to a third-party system developer.\n\n \n\nFor\nthe year ended December 31, 2025, net cash used in investing activities was HK$11.1 million\n(US$1.4 million), mainly for prepayment for development of intangible assets (HK$11.1 million) related to the information technology\nservice management system.\n\n* *\n\n*Cash\nUsed in / Provided by Financing Activities:*\n\n \n\nFor the year ended December 31, 2024, net cash used in financing activities of HK$6.1 million (US$0.8 million) consisted of dividend paid\nof HK$8.3 million (US$1.1 million) and deferred offering costs paid of HK$2.8 million (US$0.4 million), partially offset by proceeds from\nbank borrowing of HK$5.0 million (US$0.6 million).\n\n \n\nFor the year ended December 31, 2025, net cash provided by financing activities\nof HK$78.8 million (US$10.1 million). This primarily consisted of proceeds from the initial public offering of HK$93.3 million (US$12.0\nmillion), which was partially offset by payment of underwriting discounts and commissions of HK$6.5 million (US$0.8 million), payment\nof deferred offering costs of HK$6.4 million (US$0.8 million), dividend paid of HK$0.7 million (US$0.1 million), net movement in amount\ndue from / to shareholders of HK$0.6 million (US$0.1 million) and repayment of bank borrowing of HK$0.3 million (US$0.04 million).\n\n \n\n56\n\n \n\n \n\nThe\nfollowing table set forth a summary of our working capital as of the dates indicated:\n\n \n\n  \nAs\nof December 31, \n\n  \n2024  \n2025 \n\n  \nHK$  \nHK$  \nUS$ \n\n  \n   \n   \n  \n\nCurrent\nassets \n 44,954,744  \n 84,485,465  \n 10,831,341 \n\nCurrent\nliabilities \n (28,790,057) \n (24,562,743) \n (3,149,072)\n\nWorking\ncapital \n 16,164,687  \n 59,922,722  \n 7,682,269 \n\n \n\nCurrent\nassets as of December 31, 2025 were HK$84.5 million (US$10.8 million). Out of this balance, we had cash and cash equivalents of\nHK$21.6 million (US$2.8 million), which were primarily deposited in financial institutions in Hong Kong Special Administrative\nRegion. The increase in cash was mainly attributable to the net proceeds from the IPO completed in September 2025. The current asset\nbalance also mainly included accounts receivable, net of HK$45.6 million (US$6.0 million), representing a significant increase from\nthe prior year due to higher sales volume; prepayment and other current assets, net of HK$15.1 million (US$1.9 million), primarily\nconsisting of prepaid marketing and business development expenses and strategic advisory fees; unbilled receivables (contract\nassets) of HK$1.6 million (US$0.2 million); and amounts due from related parties of HK$0.6 million (US$0.1 million).\n\n \n\nCurrent\nliabilities as of December 31, 2025 were HK$24.6 million (US$3.1 million). This amount was mainly composed of accounts payable of HK$12.7\nmillion (US$1.6 million), reflecting increased procurement of hardware and software licenses to support revenue growth; accrued expenses\nand other current liabilities of HK$2.9 million (US$0.4 million), primarily for payroll and welfare payables; deferred revenue (contract\nliabilities) of HK$3.6 million (US$0.5 million), mainly representing advance billings for maintenance and support services and integrated\nsolution contracts to be recognized in the next financial year; tax payable of HK$4.8 million (US$0.6 million); and current portion of\nbank borrowings of HK$0.5 million (US$0.1 million).\n\n \n\nThe\nsignificant increase in working capital from HK$16.2 million as of December 31, 2024 to HK$59.9 million (US$7.7 million) as of December\n31, 2025 was primarily due to the net proceeds from the IPO, which substantially increased cash and cash equivalents, and a decrease\nin deferred revenue (contract liabilities) as more performance obligations were satisfied during the year. The improvement in working\ncapital provides the Company with enhanced liquidity to fund its ongoing operations and future growth initiatives.\n\n \n\nWe\nwill have sufficient working capital to meet our present requirements and for the next 12 months from the date of this form.\n\n \n\n**Contractual\nObligations**\n\n \n\nThe\nfollowing table summarized our contractual obligations as of December 31, 2025:\n\n \n\n  \nPayments\nDue by Period \n\n  \n\n**Less\nThan**\n\n**1\nYear**\n  \n\n**1\nto 3**\n\n**Years**\n  \n\n**3\nto 5**\n\n**Years**\n  \n\n**More**\n\n**Than\n5**\n\n**Years**\n  \nTotal \n\n  \nHK$  \nHK$  \nHK$  \nHK$  \nHK$ \n\n  \n   \n   \n   \n   \n  \n\nContractual\nObligations: \n    \n    \n    \n    \n   \n\nBank\nborrowings \n    \n    \n    \n    \n   \n\n-\nPrincipal payments \n 504,838  \n 1,052,226  \n 1,111,675  \n 2,046,344  \n 4,715,083 \n\n-\nInterest payments \n 123,323  \n 204,097  \n 144,648  \n 99,968  \n 572,036 \n\nTotal\ncontractual obligations \n 628,161  \n 1,256,323  \n 1,256,323  \n 2,146,312  \n 5,287,119 \n\n \n\n**Off-Balance\nSheet Arrangements**\n\n \n\nWe\nhave no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support,\nand credit risk support or other benefits.\n\n \n\n57\n\n \n\n \n\n**Concentration\nof Risks**\n\n \n\n**Political,\nSocial and Economic Risks**\n\n \n\nOur\nmain operations are located in Hong Kong. Accordingly, our business, financial condition, and results of operations may be influenced\nby political, economic, and legal environments in Hong Kong, as well as by the general state of the economy in Hong Kong. Our results\nmay be adversely affected by changes in the political, regulatory and social conditions in Hong Kong. Although we have not experienced\nlosses from these situations and believe that we are in compliance with existing laws and regulations including our organization and\nstructure disclosed in Note 1 to the consolidated financial statements, such experience may not be indicative of future results.\n\n \n\nOur\nbusiness, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme\nweather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt our operations.\n\n \n\n**Interest\nRate Risk**\n\n \n\nWe\nare exposed to interest rate risk on our interest-bearing assets and liabilities. As part of our asset and liability risk management,\nwe review and take appropriate steps to manage our interest rate exposure on our interest-bearing assets and liabilities. We have not\nbeen exposed to material risks due to changes in market interest rates, and have not used any derivative financial instruments to manage\nthe interest risk exposure during the years presented.\n\n \n\n**Credit\nRisk**\n\n \n\nFinancial\ninstruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, accounts receivable,\namounts due from related parties and prepayment and other current assets. As of the year ended\nDecember 31, 2025, approximately HK$21,339,065 (US$2,735,778) were\ndeposited with financial institutions located in Hong Kong, respectively. In accordance with the relevant regulations in Hong\nKong, the maximum insured bank deposit amount is HK$800,000 for each financial institution. The bank deposit amounts of the Company that\nwere not covered by the insurance were approximately HK$19,739,065 (US$2,530,649) as of the year ended December 31, 2025 respectively.\nWhile the Company believes that these financial institutions are of high credit quality, it also\ncontinually monitors their credit worthiness.\n\n \n\nWe\nare also exposed to risk from our accounts receivable and prepayment and other current assets. These assets are subjected to credit evaluations.\nAn allowance has been made for estimated unrecoverable amounts which have been determined by reference to past default experience and\nthe current economic environment.\n\n \n\n**Concentration\nRisk**\n\n \n\nThere were three, two and two customers\nfrom whom revenues individually represent greater than 10% of the total revenues of the Company for the fiscal years ended December 31,\n2023, 2024 and 2025, respectively. The total sales to these customers accounted for approximately 62.2%, 28.5% and 26.5% of total revenues\nfor the fiscal years ended December 31, 2023, 2024 and 2025, respectively. There were three and five customers individually representing greater\nthan 10% of the total gross accounts receivable of the Company as of December 31, 2024 and\n2025 respectively. The total receivables from these customers accounted for approximately\n56.3% and 80.8% of the Company’s accounts\nreceivable as of December 31, 2024 and 2025 respectively.\n\n \n\n**Future\nFinancings**\n\n \n\nWe\nmay sell our Ordinary Shares in order to fund our business growth. Issuances of additional shares will result in dilution to existing\nshareholders. There is no assurance that we will achieve sales of our equity securities or arrange for debt or other financing to fund\nour growth in case it is necessary, or if we are able to do so, there is no guarantee that existing shareholders will not be substantially\ndiluted.\n\n \n\n58"}