{"url_path":"/sec/hiho/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 Key Information**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1026785/0001213900-26-077959-index.html","accession_number":"0001213900-26-077959","cik":"0001026785","ticker":"HIHO","issuer_name":"HIGHWAY HOLDINGS LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1026785/0001213900-26-077959-index.html","primary_entity_key":"0001026785","primary_entity_name":"HIGHWAY HOLDINGS LTD"},"word_count":15210,"has_tables":true,"body_markdown":"** **\n\n**Item 3. Key Information**\n\n** **\n\n**Our Holding Company Structure**\n\n \n\nHighway Holdings\nLimited is a British Virgin Islands holding company. As a holding company with no operations on its own, Highway Holdings Limited conducts\nall of its business operations through various subsidiaries formed and existing in Hong Kong, in the PRC, in Myanmar and in Germany. Our\noperations in Hong Kong are conducted by various Hong Kong subsidiaries (the “Hong Kong Subsidiaries”), and in China through\nNissin Metal and Plastic (Shenzhen) Company Limited (“Nissin PRC”), a company that is registered in China and a wholly-owned\nsubsidiary of one of our Hong Kong Subsidiaries. We conduct our operations in Myanmar through our 84% owned Myanmar subsidiary Kayser\nMyanmar Manufacturing Company Ltd. (“Kayser Myanmar”). We conduct our operations in\nGermany through our 51% owned subsidiary Regent-Feinbau Adermann GmbH (“Regent-Feinbau”), a German-based manufacturer of precision\nsheet metal components and welded assemblies, which we acquired on March 1, 2026.\n\n \n\nOur administrative functions and most of our engineering,\ndesign and marketing functions, are conducted in Hong Kong, and some of our manufacturing, engineering, tooling and design functions are\nconducted at Nissin PRC’s factory complex in Long Hua, Shenzhen, China. Conducting business in Hong Kong and the PRC involves risks\nof uncertainty about any actions the Chinese government or other authorities may take in those jurisdictions. We do not operate our business\nthrough a variable interest entities (“VIE”) structure. See “*Item 4. Information on the Company–Organizational\nStructure/Offices and Manufacturing Facilities*.”\n\n \n\nThere are significant legal and operational risks\nassociated with having some of our operations in Hong Kong and the PRC, including changes in the legal, political and economic policies\nof the Chinese and the United States governments, the future relations between China and the U.S., and changes to Chinese or U.S. regulations\nthat may materially and adversely affect our business, financial condition and results of operations. While we do not believe that, as\nof the date of this annual report, our operations in Hong Kong or China are subject to the review or prior approval of the Cyberspace\nAdministration of China (the “CAC”) or the China Securities Regulatory Commission (the “CSRC”), we face various\nlegal and operational risks and uncertainties associated with being based in or having operations in the PRC, having clients who are PRC\ncompanies, and the complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on foreign\ninvestment in China-based issuers, anti-monopoly regulatory actions, and oversight on cybersecurity, data privacy and personal information.\nThe PRC government may also intervene or impose restrictions on our ability to move cash out of Nissin PRC. The PRC government may also\nenact new laws that may limit the ability of our Hong Kong Subsidiaries to distribute earnings and to pay dividends. Furthermore, PRC\nregulatory authorities may in the future promulgate laws, regulations or implementing rules that require us to obtain regulatory approval\nfrom PRC authorities before any future securities offering. These risks could result in a material adverse change in our business operations\nand the value of the common shares, restrictions in our ability to accept foreign investments, significantly limit or completely hinder\nour ability to continue to offer securities to investors or to continue listing of our securities on a U.S. exchange, which actions would\ncause the value of our securities to significantly decline or become worthless.\n\n \n\n**Acquisition of Regent-Feinbau Adermann GmbH**\n\n** **\n\nOn March 1, 2026, the Company completed the acquisition of 51% of the\noutstanding shares of Regent-Feinbau from LeMALe Beteiligungs-GmbH (“LeMALe”). The total purchase price was €662,000,\nconsisting of €612,000 paid in cash and €50,000 paid through the issuance of 64,851 Common Shares to LeMALe. Pursuant to the\npurchase agreement, the shares issued to LeMALe may not be sold, assigned, pledged or otherwise transferred until after March 31, 2027.\nLeMALe retained an option to acquire 1% of the outstanding shares of Regent-Feinbau at the original per-share purchase price if the Company\nintends to either (a) sell all or any of its Regent-Feinbau shares to a third party, (b) permanently shut down or relocate Regent-Feinbau’s\nbusiness, (c) implement any capital measure that would result in a dilution of the Company’s shareholdings, or (d) take any action\nthat would result in LeMALe holding less than 49% of the outstanding shares of Regent-Feinbau.\n\n** **\n\n1\n\n \n\n** **\n\nRegent-Feinbau was founded in 1949 and serves customers in the automotive,\ncommercial vehicle, aerospace and industrial sectors, including OEMs and Tier 1 suppliers. Regent-Feinbau’s manufacturing capabilities\ninclude laser cutting and bending, forming technology, component assembly and advanced welding. The Company expects the acquisition to\nexpand its manufacturing capabilities, diversify its customer and geographic base, and create additional growth opportunities in automotive\nand aviation markets. Matthias Bauer, the pre-acquisition Chief Executive Officer of Regent-Feinbau, will continue as Managing Director\nof Regent-Feinbau.\n\n** **\n\n**Permissions Required from the PRC Authorities for Our Operation**\n\n \n\nOur Shenzhen,\nChina, operations are conducted through Nissin PRC, our Chinese operating subsidiary. Nissin PRC has obtained all material permissions\nand approvals required for our operations in compliance with the relevant laws and regulations in the PRC. As of the date of this annual\nreport, the only permission required for operations are the business licenses of Nissin PRC. The primary business license that Nissin\nPRC is required to maintain is a permit issued by the Shenzhen Administration for Market Regulation that allows Nissin PRC to conduct\nspecific business activities in the Long Hua, Shenzhen geographical jurisdiction. As of the date of this annual report, Nissin PRC has\nreceived from PRC authorities all requisite licenses, permissions or approvals needed to engage in the businesses currently conducted\nin China, and no permission or approval has been denied. Although Nissin PRC currently holds the required operating permits and licenses,\nNissin PRC will have to reapply for the principal operating license in 2031.\n\n \n\nOn March 31, 2023, the CSRC published the Trial\nAdministrative Measures of Overseas Securities Offering and Listing by Domestic Companies and certain supporting guidelines (collectively\nthe “New Overseas Listing Rules”) that among other things, provide that certain PRC domestic companies seeking to offer and\nlist securities, either directly or indirectly, in overseas markets, must file with the CSRC an application for an overseas offering or\nlisting. As the New Overseas Listing Rules are newly published and there is substantial uncertainty\nsurrounding the implementation and enforcement thereof, we cannot assure you that, if required, we would be able to complete the filings\nand/or fully comply with the relevant new rules, on a timely basis or at all. Accordingly, it is uncertain what the potential impact these\nnew laws and regulations will have on the daily business operation of our Hong Kong and Shenzhen subsidiaries and on our ability to sell\nour securities on a U.S. exchange. These new regulations could significantly limit or completely hinder our ability to offer our securities\nto investors and could cause the value of our securities to significantly decline or become worthless. As of the date of this annual report,\nwe are not engaged in any activities relating to the offer and sale of our securities.\n\n \n\nEffective\nFebruary 15, 2022, the CAC promulgated new regulations that provide that certain operators of critical information infrastructure and\nonline platform operators carrying out data processing activities that affect or may affect national security shall conduct a cybersecurity\nreview, and any online platform operator who controls more than one million users’ personal information must go through a cybersecurity\nreview by the cybersecurity review office if it seeks to be listed in a foreign country. We do not believe that the new cybersecurity\nlaws apply to us or will have an impact on our business and operations because, among other things, neither our Hong Kong Subsidiaries\nnor Nissin PRC control more than one million users’ personal information, a majority of our business operations are located outside\nmainland China, the majority of our senior management personnel are Hong Kong citizens or citizens of other foreign countries and they\ndo not reside in mainland China, and the data processed in our business does not have a bearing on China’s national security. Nevertheless,\nbecause these statements and regulatory actions are relatively new, it is uncertain how these new regulations will be interpreted or implemented.\nAccordingly, it is highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business\noperations of Nissin PRC or our ability to sell and list our common shares on a U.S. exchange. See “*Item 3. Key Information–D.\nRisk Factors–The Chinese Government Exerts Substantial Influence Over The Manner In Which We Must Conduct Our Business Activities\nAnd May Intervene Or Influence Our Operations At Any Time, Which Could Result In A Material Change In Our Operations And The Value Of\nOur Common Stock”*and *“Item 3. Key Information–D. Risk Factors–In Response To The Data Security Law and\nPersonal Information Protection Law in China, And New Overseas Listing Rules in China, The Company May Face Additional Scrutiny From Its\nOperations In China.”*\n\n \n\nWe also may become subject to a variety of PRC\nlaws and other regulations regarding data security or securities offerings that are conducted overseas and/or other foreign investment\nin China-based issuers, and any failure to comply with applicable laws and regulations could have a material and adverse effect on the\nHong Kong and PRC subsidiaries’ business, financial condition and results of operations.\n\n** **\n\n2\n\n \n\n** **\n\n**The Holding Foreign Companies Accountable Act**\n\n \n\nOn December 18, 2020, the Holding Foreign Companies\nAccountable Act (“HFCAA”) was enacted. The HFCAA was further amended by the Consolidated Appropriations Act, 2023. The HFCAA\nrequires the SEC to prohibit the trading of securities of any foreign company identified by the SEC as a “Commission-Identified\nIssuer” on any U.S. securities exchanges. The SEC has identified Highway Holdings Limited as a foreign company and as a Commission-Identified\nIssuer that could be de-listed from Nasdaq if we retain a foreign accounting firm that cannot be inspected by the Public Company Accounting\nOversight Board (United States), or PCAOB, for two consecutive years, beginning in 2022. Our former independent registered public accounting\nfirm, ARK Pro CPA & Co is located in and organized under the laws of Hong Kong, a jurisdiction where, at the time of the adoption\nof the HFCAA, the PCAOB was unable to conduct inspections without the approval of the Chinese authorities. On March 7, 2025, we appointed\nMarcum Asia CPAs LLP as our independent registered public accounting firm to replace ARK Pro CPA & Co, which is headquartered in New\nYork. The appointment of Marcum Asia CPAs LLP, a U.S.-based accounting firm subject to regular PCAOB inspection, mitigates the risk of\ndelisting under the HFCAA by ensuring that our auditor is not located in a jurisdiction that may deny PCAOB access.\n\n \n\nOn August 26, 2022, the Chinese regulatory agency\nand the PCAOB signed a Statement of Protocol governing inspections and investigations of audit firms based in mainland China and Hong\nKong, thereby taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms\nheadquartered in mainland China and Hong Kong. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete\naccess to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate\nits previous determinations to the contrary. As a result, if we use a public accounting firm headquartered in mainland China and Hong\nKong, and if the PCAOB is permitted to inspect such public accounting firm, our common shares will not be de-listed from trading on Nasdaq\nor any other U.S. exchange. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future,\nthe PCAOB Board will consider the need to issue a new determination, which could once again jeopardize the listing of our common shares\non a U.S. stock exchange if we use a public accounting firm headquartered in mainland China and Hong Kong. See “*Item 3. Key Information–D.\nRisk Factors–Uncertainty Under The Holding Foreign Companies Accountable Act That May Result In Future Delisting.”*\n\n** **\n\n**Cash Flows Through Our Organization**\n\n \n\nSubject to the BVI Business Companies Act, the\nprincipal British Virgin Islands statute that governs our organizational matters, and our Amended and Restated Memorandum and Articles\nof Association, Highway Holdings’ board of directors may authorize and declare a dividend to shareholders at such time and of such\nan amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend it will be able to pay\nits debts as they become due in the ordinary course of business and its assets exceed its liabilities. Since Highway Holdings is a holding\ncompany with no operations or independent source of income, Highway Holdings relies on dividends and other distributions on equity paid\nby its Hong Kong Subsidiaries for its cash and financing requirements. Under Hong Kong law, the Hong Kong Subsidiaries are permitted to\nprovide funding to Highway Holdings through dividend distribution without restrictions on the amount of the funds under the condition\nthat dividends could only be paid out of distributable profits (that is, accumulated realized profits less accumulated realized losses)\nor other distributable reserves. Dividends cannot be paid out of share capital. Under the current practice of the Inland Revenue Department\nof Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by our Hong Kong Subsidiaries. To date, our Hong Kong Subsidiaries\nhave from time-to-time paid dividends to Highway Holdings and to Highway Holdings’ shareholders, including to its U.S. shareholders.\nHowever, dividends that may be distributed to our shareholders are declared and paid at the discretion of our Board of Directors and depend\nupon, among other things, our results of operations, the anticipated future earnings, the success of our business activities, our capital\nrequirements, and the general financial conditions. Accordingly, no assurance can be given that Highway Holdings will continue to pay\ndividends to the holders of its common shares in the future. See “*Item 3. Key Information–D. Risk Factors– While\nThe Company Has In The Past Paid Dividends, No Assurance Can Be Given That The Company Will Declare Or Pay Cash Dividends In The Future.*”\nHighway Holdings may also transfer cash to its Hong Kong Subsidiaries. Highway Holdings may provide such funding to its Hong Kong\nSubsidiaries through loans or capital contributions without restrictions on the amount of the funds. For the fiscal years ended March\n31, 2024, 2025, and 2026, our Hong Kong Subsidiaries have declared and distributed profits earned to Highway Holdings in the amounts of\napproximately $616,000, $492,000, and $nil respectively. For the fiscal years ended March 31, 2024, 2025, and 2026, Highway Holdings has\nnot made any loans or capital contributions to its Hong Kong Subsidiaries.\n\n \n\n3\n\n \n\n \n\nUnder currently applicable PRC laws, Nissin PRC\ncan only pay dividends or make distributions to its parent company (a Hong Kong Subsidiary) out of its accumulated profits, if any, determined\nin accordance with PRC accounting standards and regulations. Under existing PRC foreign exchange regulations, payment of current account\nitems, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies\nwithout prior approval from the State Administration of Foreign Exchange (the “SAFE”), by complying with certain procedural\nrequirements. Therefore, our PRC subsidiary is able to pay dividends to us in foreign currencies without prior approval from SAFE, subject\nto compliance with certain procedures under PRC foreign exchange regulations. Approval from, or registration with, appropriate government\nauthorities is, however, required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses\nsuch as the repayment of loans denominated in foreign currencies. See “*Item 3. Key Information–D. Risk Factors– Our\nAbility To Transfer Funds From Our China And Myanmar Subsidiaries Is Limited by The Laws of China and Myanmar Respectively.*”\nTo date, Nissin PRC has primarily used its revenues and profits to fund its own internal operations, and has reinvested any profits that\nit has generated into its facilities and business. Accordingly, Nissin PRC does not make any cash distributions to our Hong Kong Subsidiaries.\nHowever, our Hong Kong Subsidiaries do, on an as needed basis, regularly transfer funds to Nissin PRC in USD to settle intercompany sales.\nFor the fiscal years ended March 31, 2024, 2025, and 2026, our Hong Kong Subsidiary has transferred cash to Nissin PRC to settle intercompany\nsales in the amounts of approximately $2,160,000, $2,920,000, and $2,450,000 respectively.\n\n \n\nFurther, our Hong Kong Subsidiaries also, on an\nas needed basis, regularly transfer funds to Kayser Myanmar in USD to settle sub-contracting fees. For the fiscal years ended March 31,\n2024, 2025, and 2026, our Hong Kong Subsidiary has transferred cash to Kayser Myanmar to settle sub-contracting fees in the amounts of\napproximately $325,000, $401,000 and $199,000 respectively. For the fiscal years ended March 31, 2024, 2025, and 2026, no intercompany\nloans were made. Beginning in April 2022, the Myanmar government has restricted the transfer of foreign currency abroad pursuant to Notification\nNo. 12/2022 issued by the Central Bank of Myanmar, which requires any transfer from Myanmar of foreign currency abroad to be approved\nby the Foreign Exchange Supervisory Committee of Myanmar. See “*Item 3. Key Information–D. Risk Factors– Our Ability\nTo Transfer Funds From Our China And Myanmar Subsidiaries Is Limited by The Laws of China and Myanmar Respectively.*”\n\n \n\nOn March 1, 2026, the Company acquired a 51% controlling\ninterest in Regent-Feinbau, our German operating subsidiary. Subject to applicable German law and Regent-Feinbau’s organizational\ndocuments and shareholder arrangements, Regent-Feinbau may distribute profits to its shareholders, including the Company, in Euros. As\na member state of the European Union and the Eurozone, Germany does not currently impose exchange control restrictions on the transfer\nof capital or the payment of dividends by Regent-Feinbau. However, because the Company owns 51% of Regent-Feinbau, distributions are subject\nto the rights of the minority shareholder and applicable German corporate law limitations, and any distribution requires that Regent-Feinbau\nhave sufficient distributable profits. Because the acquisition was completed near the year end of fiscal 2026, Regent-Feinbau did not\nmake any distributions to the Company, and the Company did not make any loans or capital contributions to Regent-Feinbau, during the fiscal\nyear ended March 31, 2026 following the acquisition date.\n\n \n\nOur management monitors the cash position of each\nof our operating entities within our organization regularly to ensure each entity has the necessary funds to fulfill its obligation for\nthe foreseeable future and to ensure adequate liquidity. In the event that there is a need for cash or a potential liquidity issue, we\nenter into an intercompany loan for the subsidiary at market interest rate in accordance with the applicable PRC and Myanmar laws and\nregulations. However, the funds or assets held in the PRC or Myanmar may not be available to fund operations or for other use outside\nof the PRC, Hong Kong or Myanmar due to interventions in or the imposition of restrictions and limitations on the ability of us or Nissin\nPRC by the PRC government, or us or Kayser Myanmar by the Myanmar government, to transfer cash or assets. There can be no assurance that\nthe PRC government or Myanmar government in the future will not restrict or prohibit the flow of cash into or out of Hong Kong and the\nPRC, or Myanmar, as applicable, thereby affecting the transfer of funds between our Hong Kong and PRC subsidiaries and our Hong Kong and\nMyanmar subsidiary. Any restrictions, prohibitions, interventions or limitations by the PRC government or the Myanmar government on the\nability of Nissin PRC or Kayser Myanmar, as applicable, to transfer cash or assets in or out of the PRC or Myanmar may result in these\nfunds or assets not being available to fund operations or for other uses outside of Hong Kong, the PRC, and Myanmar.\n\n** **\n\n**A. [Reserved]**\n\n** **\n\n**B. Capitalization and Indebtedness**\n\n \n\nNot applicable.\n\n** **\n\n**C. Reasons for the Offer and Use of Proceeds**\n\n \n\nNot applicable.\n\n** **\n\n4\n\n \n\n** **\n\n**D. Risk Factors**\n\n \n\nThe Company’s business and operations involve\nnumerous risks, some of which are beyond the Company’s control, which may affect future results and the market price of the Company’s\nCommon Shares. Investors should take into account the risks described below, and the other information contained in this annual report,\nwhen evaluating an investment in the Company.\n\n** **\n\n**Risks Related to Doing Business in China, Germany and Myanmar.**\n\n** **\n\n**The Ongoing Civil War in Myanmar Has Negatively Affected, and\nMay Continue to Negatively Impact, the Company’s Operations in Myanmar.**\n\n \n\nThe Company operates two manufacturing and assembly\nfacilities, one of which is located in Yangon, Myanmar. On February 1, 2021, Myanmar’s military seized control of the government,\ndeclared a state of emergency for the upcoming year, and reportedly placed the country’s civilian leader under house arrest. The\nU.S. State Department has concluded that the military takeover in Myanmar constituted a coup d’état. The military’s\ntakeover resulted in widespread civil unrest, including in the area of Yangon in which the Company’s facilities are located, the\ndevaluation of the Kyat, disruption to the existing banking system, and other restrictions. The military’s rule of Myanmar has been\nchallenged by various rebel factions. The amount of hostilities between the government’s forces and those of the insurgents has\nincreased significantly since the military takeover. While the fighting between the government and the insurgents has not directly affected\nthe Company’s facilities or its other operations in Yangon, the ongoing war has indirectly affected some of the Company’s\noperations. While no closure of the Company’s Yangon facility was caused by civil unrest in fiscal years 2025 and 2026, the civil\nwar has affected the existing and potential pool of employees of that facility. For example, as a result of the civil war, the Myanmar\nmilitary has drafted young men into the army, which has caused many men to flee the country. This, in turn, has resulted in a reduction\nof possible employees. The future impact of the military takeover and the ongoing civil war on the Company’s operations in Myanmar\nremains uncertain as of the date of this report. Political instability, military activity, civil unrest, strikes, curfews, transportation\ndisruptions, banking restrictions, utility interruptions, internet outages, import/export delays, employee safety concerns, currency instability,\ncustomer restrictions on Myanmar sourcing, or changes in local law could have a significant negative impact on our operations, increase\ncosts, reduce production capacity, delay shipments, impair our ability to hire or retain employees, or damage our facilities. In fiscal\nyear 2026, such issues have contributed to loss of business at our Yangon operations from two of our major customers. See also “*Item\n3. Key Information–D. Risk Factors–The Company Is Financially Dependent On A Few Major Customers.*” Any significant\ndisruption to our Yangon operations could materially and adversely affect our business, financial condition, results of operations and\ncustomer relationships.\n\n** **\n\n**Changes in Labor Laws, Environmental Regulation, Safety Regulation\nand Business Practices, and Operating Costs in China, and in Shenzhen in Particular, Have Significantly Increased the Costs and Burdens\nof Doing Business and Could Continue to Negatively Impact the Company’s Operations and Profitability.**\n\n \n\nIn the past, foreign-owned enterprises, such as\nthe Company and its subsidiaries, have established manufacturing/assembly facilities in China because of China’s lower labor costs,\nlower facilities costs, less stringent regulations, and certain other benefits provided to foreign entities. These benefits are no longer\navailable to most companies operating in Shenzhen, including in particular foreign-owned entities. In fact, the costs and burdens on foreign-owned\ncompanies appear to be significantly greater than on local Chinese-owned companies. The cost of operating a manufacturing business in\nShenzhen have increased significantly, and the amount of governmental inspections and intrusion have further increased the costs and burdens\nof operating in China. These factors have significantly increased the cost of doing business in China in the past few years and have caused\nsome of the Company’s customers to source their products from other original equipment manufacturers (“OEMs”) outside\nof China that have a lower cost structure than the Company has. The increased costs of manufacturing and the increased regulatory burdens\nhave adversely affected the Company’s net sales and gross margins and may continue to do so in the future. While the Company is\ntrying to offset the increasing costs and burdens of doing business in China (primarily by increasing automation and moving labor-intensive\nactivities to Myanmar), no assurance can be given that in the longer term the Company will be able to continue to operate in China and/or\nremain viable under the new and evolving business or regulatory conditions in China.\n\n** **\n\n5\n\n \n\n** **\n\n**In Response to the Data Security Law\nand Personal Information Protection Law in China, and New Overseas Listing Rules in China, the Company May Face Additional Scrutiny from\nIts Operations in China.**\n\n \n\nIn the fall of 2021, China\nenacted two laws — the Data Security Law and the Personal Information Protection Law. The Data Security Law sets up a framework\nthat classifies data collected and stored in China based on its potential impact on Chinese national security and regulates its storage\nand transfer depending on the data’s classification level. The Personal Information Protection Law is China’s comprehensive\nlegislation regulating the protection of personal information. The Cyberspace Administration of\nChina (“CAC”) has published the Administration Measures for Cyber Data Security that authorizes the relevant government\nauthorities to conduct a cybersecurity review on a range of activities that affect or may affect national security, including listings\nin foreign countries by companies that possess personal data of more than one million users. We do not collect, process or use personal\ninformation of entities or individuals other than what is necessary for our business and do not disseminate such information. We do not\npossess information on more than a million entities/individuals. Although we believe we currently are not required to obtain clearance\nfrom the CAC under the Administration Measures for Cybersecurity Review, we face uncertainties as to the interpretation or implementation\nof such regulations or rules, and if required, whether such clearance can be timely obtained, or at all. While we do not believe that\nour Chinese subsidiary is subject to cybersecurity review or requires prior approval of the CAC or the China Securities Regulatory Commission\n(the “CSRC”), uncertainties still exist, the current laws, regulations or policies in China could change in the future, and\nChina’s laws and regulations relating to cybersecurity, data security, privacy and personal information protection in particular\ncontinue to evolve.\n\n \n\nOn March 22, 2024, the\nCAC published the Provisions on Promoting and Regulating Cross-Border Data Flows (the “2024 Cross-Border Data Provisions”),\neffective immediately, which supplement China’s Cybersecurity Law, Data Security Law and Personal Information Protection Law and\ntake precedence over the CAC’s earlier cross-border data transfer rules, including the Measures for the Security Assessment of Outbound\nData Transfer that took effect on September 1, 2022. The 2024 Cross-Border Data Provisions generally raised the thresholds for, and created\nadditional exemptions from, the security assessment, standard contract and personal information protection certification requirements\napplicable to outbound data transfers. Among other things, for a data processor that is not a critical information infrastructure operator,\na CAC security assessment is generally required only where the processor exports important data, the personal information of more than\none million individuals (excluding sensitive personal information), or the sensitive personal information of more than 10,000 individuals,\nin each case on a cumulative basis within a calendar year, and certain data transfers necessary for international trade, cross-border\nmanufacturing and human resources management are exempt from these mechanisms. Based on the nature and volume of the data we process,\nwe do not believe these requirements currently apply to our operations. However, because these regulations remain subject to interpretation\nand continued implementation, we cannot assure you how they will be applied to us, and we face uncertainty as to whether, and to what\nextent, our cross-border data transfers may become subject to security assessment, standard contract, certification, filing or other regulatory\nrequirements in the future.\n\n \n\nOn March 31, 2023 the\nCSRC’s new Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and certain supporting\nguidelines (collectively the “New Overseas Listing Rules”) went into effect. Among other things, these new regulations provide\nthat certain PRC domestic companies seeking to offer and list securities, either directly or indirectly, in overseas markets, must file\nwith the CSRC an application for an overseas offering or listing. Because these regulations remain subject to interpretation and continued\nimplementation, we cannot assure you that, if required, we would be able to complete the filings and/or fully comply with the relevant\nnew rules, on a timely basis or at all. Any future action by the Chinese government expanding the categories of industries and companies\nwhose foreign securities offerings are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability\nto offer or continue to offer securities to overseas investors and could cause such securities to significantly decline in value or to\nbecome worthless. Failure to comply with these laws may lead to fines and penalties from the Chinese government and could have a significant\nnegative impact on Company’s business operations. As of the date of this annual report, we are not engaged in any activities relating\nto the offer and sale of our securities.\n\n \n\n6\n\n \n\n \n\nIf Chinese authorities\ndetermine that our data processing activities, information systems, customer data, supplier data, employee data, products, overseas listing\nstatus, or future securities offerings are subject to cybersecurity review, data export assessment, security assessment, filing or other\nregulatory requirements, we may incur additional compliance costs or experience business disruption. We may also be required to change\nour data practices, localize data, restrict data transfers, enhance cybersecurity controls, or obtain approvals. Any failure to comply\nwith applicable Chinese cybersecurity, data security or personal information protection requirements could result in penalties, regulatory\ninvestigations, operational restrictions, reputational harm, or a material adverse effect on our business and results of operations.\n\n \n\n**Changing Internal Fiscal, Regulatory and Political Conditions\nContinue to Negatively Affect the Company’s Operations in China.**\n\n \n\nMany of the Company’s key functions, including\ntool design and manufacturing, engineering, administration, and automated manufacturing, are conducted from the Company’s facilities\nin China. As a result, the Company’s operations and assets are affected by the political, economic, legal and other uncertainties\nassociated with doing business in China. Changes in policies by the Chinese government to its laws, regulations, or the interpretation\nthereof, the imposition of confiscatory taxation, restrictions on imports and sources of supply, currency re-valuations, or the expropriation\nof private enterprises, could materially adversely affect the Company. For example, foreign-owned enterprises, including the Company,\nhave been subject to numerous governmental inspections and have been subjected to additional burdensome regulations and, on occasion,\nto cash penalties and fines. Certain recent actions by Chinese government authorities appear to be intended to force businesses deemed\nto be of lower technological sophistication, as well as foreign businesses, out of Shenzhen, China. While Nissin PRC, which obtained a\nhigh-technology enterprise certificate in China, has to date been able to continue its operations in China despite these changes and additional\nburdens, no assurance can be given that the increasing regulations and the more restrictive government policies will not, in the future,\ncause the Company’s operations to become financially untenable or otherwise materially affect its business, operations and financial\ncondition.\n\n ** **\n\n**Political Or Trade Controversies Between China and the United\nStates Could Harm the Company’s Operating Results or Depress the Company’s Stock Price.**\n\n \n\nRelations between the U.S. and China have during\nthe past few years been strained as a result of various economic and geopolitical disputes between the countries. The U.S. government\nhas made statements and taken actions that may impact U.S. and international trade policies, including tariffs, export controls, import\nrestrictions, sanctions, restrictions on technology transfers, and other trade-related measures affecting certain industries. Recent tariffs\nannounced by the U.S. administration include tariffs on imports from China, as well as on imports of certain specific goods and materials.\nThe administration also announced the imposition of a reciprocal tariff policy on most imports subject to certain specified exclusions,\nthat applies a baseline rate of duty. It is unknown whether and to what extent these new tariffs will be retained, expanded or otherwise\nmodified by the U.S., or the effect that any such actions would have on us or our industry.\n\n \n\nAlthough the Company exports less than 8% of its\nproducts to the U.S., and the Company does not import raw materials from the U.S., the political and trade tensions between China and\nthe U.S. could negatively affect the Company’s operations in China and its ability to transact with U.S. customers. If any new tariffs,\ncustoms restrictions, export controls, import bans, sanctions, supply-chain restrictions, changes in trade policy, legislation and/or\nregulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory\ntrade actions due to, among other things, ongoing U.S. and foreign trade tensions or in response to the imposition of retaliatory tariffs\nfrom other countries, such changes could have an adverse effect on our business, results of operations and financial condition, including\nthrough increases in our costs, reduction in customer demand, requiring customers to change sourcing decisions, delaying shipments, or\nmaking our products less competitive. Even if such measures do not apply directly to us, they may affect our customers, suppliers, logistics\nproviders, or end markets.\n\n \n\nNo assurance can be given that these, and any other\nfuture controversies will not negatively affect the Company’s business and operations in China, or the business and operations of\nour customers, vendors, or other partners. In addition, the political and trade friction between the U.S. and China could adversely affect\nthe prevailing market price for the Company’s Common Shares. The Company, whose shares are publicly listed on the U.S. Nasdaq stock\nmarket, could be perceived in China to be an American company and, as such, could face persecution in various forms from the government.\nSimilarly, because the Company operates in Shenzhen, China, the Company could be perceived to be a Chinese company by U.S. investors.\nThese trade or political disputes between the U.S. and China could affect U.S. investors’ perception of China-based manufacturing\ncompanies listed on U.S. stock markets, which could adversely affect the Company’s stock price.\n\n** **\n\n7\n\n \n\n** **\n\n**Increased Wages and the Other Costs of Labor in China and Myanmar\nHave a Material Negative Impact to the Company’s Operations and Continue to Increase Its Operating Costs.**\n\n \n\nWages in China and Myanmar in general, and in Shenzhen\nin particular, have significantly increased during the past few years. Increases in wages have also resulted in increases in employer\ncontributions for various mandatory social welfare benefits for Chinese employees that are based on percentages of their salaries. These\nincreases in the cost of labor will continue to increase the Company’s operating costs, will reduce the Company’s gross margins,\nand may continue to result in the loss of customers who may seek, and are able to obtain, comparable products and services in lower-cost\nregions of the world or from certain local Chinese or Myanmar companies that receive governmental support of subsidies.\n\n** **\n\n**The Company May Be Subject to Significant Employee Termination\nPayment Obligations in China and Myanmar.**\n\n \n\nUnder China’s labor laws, the Company’s\nlocal employees are entitled to receive significant employment termination payments if the Company terminates their employment. Although\nthe Company’s potential liability with respect to such termination payments has gradually reduced over time due to employees resigning\nor retiring, any mass layoff could trigger the sudden payment of the entire severance payment obligation. Under Myanmar’s labor\nlaws, depending on the length of an employee’s employment with the Company, the Company’s Myanmar employees may be entitled\nto receive severance payments upon termination of their employment contract with the Company. Any significant increase in wages, benefits,\nsocial welfare contributions, severance obligations, employee turnover, labor shortages, or labor disputes could increase our operating\ncosts, reduce margins, impair production, or materially adversely affect our results of operations. While the Company has been accruing\nthese severance payments as a liability on its financial statements (as of March 31, 2026, the Company accrued approximately $492,000\nof severance liabilities), the sudden obligation to pay all of these accrued amounts could result in a significant decrease in the Company’s\ncash reserves.\n\n** **\n\n**The Company’s Leases in China and Germany Could Subject\nthe Company to Substantial Future Risks and Costs.**\n\n \n\nThe Company’s engineering, research and development,\nand its automated manufacturing facilities are currently located in Long Hua, Shenzhen, China. In February 2026 the Company extended its\nleases for much of this facility until February 28, 2028. Due to the increasing rental rates and changes in the local regulatory environment\nthat disfavors manufacturing facilities, it is uncertain whether the Company will be able to renew its lease in 2028 on acceptable terms,\nor at all. If the Company cannot, or does not, renew its Shenzhen lease, the Company will incur significant costs to relocate its facilities,\nand its operations could be significantly disrupted. In addition, the termination of the Shenzhen leases may require the Company to terminate\nor relocate its Shenzhen employees farther away from its current location, which events would trigger the Company’s significant\nseverance payment obligations to its remaining China-based employees.\n\n \n\nRegent-Feinbau, the Company’s German manufacturing\nsubsidiary, leases its current factory under a lease that expires in August 31, 2028. As a result of significant rent increases indicated\nby the landlord, management has determined not to renew the lease on its current terms. The Company has not yet identified a replacement\nlocation. If the Company is unable to secure suitable replacement premises on acceptable terms, or at all, the Company will incur significant\ncosts to relocate Regent-Feinbau’s operations, and those operations could be significantly disrupted, which could materially and\nadversely affect the Company’s business, financial condition and results of operations.\n\n** **\n\n8\n\n \n\n** **\n\n**The Company’s Myanmar Subsidiary Faces Various Risks Related\nto Its Operations in an Underdeveloped Country.**\n\n \n\nThe Company’s labor-intensive manufacturing\noperations are currently conducted in Yangon, Myanmar (formerly Burma). The Company currently owns 84% of Kayser Myanmar, a foreign company\nauthorized to operate in Myanmar. Kayser Myanmar operates from a factory facility in Yangon. The Company has also transferred a substantial\nportion of its non-automated manufacturing equipment from its Shenzhen, China, operations to the Kayser Myanmar facilities to enable the\nMyanmar company to assemble and manufacture more of the Company’s products in Myanmar. However, operating in an underdeveloped country\nsuch as Myanmar is subject to numerous risks and uncertainties. These risks include strikes, the potential of the Company’s employees\nbeing drafted to serve in the Myanmar military, lack of infrastructure, uncertain rules and regulations, unpredictable access to utilities\n(including electricity), lack of government response to emergencies and disasters, cultural and political issues with local governmental\nauthorities, antiquated banking systems, and the lack of international financing expertise. See also “*Item 3. Key Information–D.\nRisk Factors–The Ongoing Civil War in Myanmar Has Negatively Affected, and May Continue to Negatively Impact, the Company’s\nOperations in Myanmar.*” and “*Item 3. Key Information–D. Risk Factors–The Company Is Financially Dependent\nOn A Few Major Customers.*”\n\n ** **\n\n**Uncertain Legal System and Application of Laws May Adversely\nAffect the Company’s Properties and Operations in Both China and Myanmar.**\n\n \n\nThe legal systems of China and Myanmar are often\nunclear and are continually evolving, and there can be no certainty as to the application of laws and regulations in particular instances.\nWhile China has an increasingly comprehensive system of laws, the application of these laws by the existing regional and local authorities\nis often in conflict and subject to inconsistent interpretation, implementation and enforcement. New laws and changes to existing laws\noccur quickly, sometimes unpredictably, and often arbitrarily. As is the case with all businesses operating in both China and Myanmar,\nthe Company often is also required to comply with informal laws and trade practices imposed by local and regional administrators. Local\ntaxes and other charges are levied depending on the local needs for tax revenues and may not be predictable or evenly applied. These local\nand regional taxes/charges and governmentally imposed business practices often affect the Company’s cost of doing business and require\nthe Company to constantly modify its business methods to both comply with these local rules and to lessen the financial impact and operational\ninterference of such policies. While the Company has, to date, been able to increase its compliance with the regulations and operate within\nthe newly enforced rules and business practices, no assurance can be given that it will continue to be able to do so in the future. The\njudiciary systems in China and Myanmar are relatively inexperienced in enforcing the laws that govern businesses, thereby making it difficult,\nif not impossible, to obtain swift and equitable enforcement of violations of law against the Company.\n\n** **\n\n**The Company’s Operations in Myanmar Are Dependent Upon\nIts Leased Factory Complex in Yangon, Myanmar, And the Loss or Interference with That Lease Would Materially, and Adversely, Affect the\nCompany’s Operations in Myanmar.**\n\n \n\nOn March 29, 2019 Kayser Myanmar entered into a\n50-year lease for an approximately 6,900 square meter (1.67 acres) factory estate in Yangon. Kayser Myanmar advanced $950,000 to the landlord\nas a prepayment of rent under the lease (at currency conversion rates in effect at that time, the prepayment represents approximately\n12 years of rental payments), and has spent approximately $570,000 on refurbishing the complex and building one new factory building and\na new office building at the site. Accordingly, this new facility represents a long-term investment by the Company in its operations in\nMyanmar. All of Kayser Myanmar’s operations are now being conducted at this new facility. Any interference or interruption of Kayser\nMyanmar’s right to operate at this new facility, or a challenge to the existence or validity of the 50-year lease, including as\na result of a dispute with the landlord or because of any actions or regulations by Myanmar governmental, administrative or taxation authorities,\ncould materially negatively affect the Company’s investment in the new factory and its ability to operate in Myanmar. During the\nfiscal year ended March 31, 2024, Kayser Myanmar further advanced $123,000 (equivalent to MMK 259 million) to the landlord as a prepayment\nof rental fees, due to the Company’s expectation of continued high inflation in Myanmar.\n\n \n\n9\n\n \n\n \n\n**The Company Has Substantial Assets in Myanmar, and Any Action\nby the Government to Expropriate or Restrict Those Assets Would Materially Harm the Company.**\n\n \n\nMyanmar has only recently permitted non-Myanmar\nbusinesses to operate in Myanmar. The laws governing foreign businesses regulate both the manner in which such foreign entities can operate\nas well as the ownership of assets by foreign entities. The laws and regulations under which foreign businesses can operate and own assets\nare still being developed and are changing. As a result, there is substantial uncertainty in operating in Myanmar and in owning equipment,\nmachinery and inventory (the Company currently does not own any real estate, but it does hold a long-term lease on its factory in Myanmar).\nFurthermore, the status of the laws prohibiting expropriation are uncertain since the military seized control of the government in early\n2021. No assurance can be given that Myanmar will not in the future adopt laws, or take actions, that affect the Company’s Myanmar\nassets and properties.\n\n \n\n**Labor Shortages and Employee Turnover May Negatively Affect the\nCompany’s Operations and Profitability.**\n\n \n\nOne of the principal economic advantages of locating\nthe Company’s operations in China and Myanmar has been the availability of low-cost labor. Due to the enormous growth in manufacturing\nin China and workers’ higher salary expectations, the Company has recently had difficulty in filling its lower cost labor needs\nin China. Due in part to these wage increases and labor shortages, the Company has stopped most of its labor-intensive manufacturing in\nChina and now uses its Shenzhen facilities mostly for engineering, tool manufacturing, design, automated manufacturing, and administrative\npurposes. Since these functions are performed by higher paid professional employees, the Company’s exposure to the labor issues\nin China has been reduced. However, the cost and risks of hiring and training new employees has shifted to Myanmar where the Company now\nperforms most of its labor-intensive manufacturing in Myanmar. Myanmar also observes an extended new year’s celebration each year\nin April during which the Company’s factories are closed and all workers temporarily leave. Because many of the Myanmar factory\nworkers are migrant workers who live far from the Company’s Yangon factory, many do not return after the holidays, as a result of\nwhich labor turnover can be high at times. The Company is required to annually hire, and train, new workers.\n\n** **\n\n**Import Duties and Restrictions May Negatively Affect the Company’s\nOperations and Liquidity.**\n\n \n\nChina is increasingly regulating and monitoring\nimports of raw materials and parts by manufacturers in China, which regulations make it more burdensome and expensive to import the materials\nthat the Company needs to manufacture its products. The Company now also has to operate under import customs contracts in Myanmar, or\nunder bonded warehouse arrangements, in order to be able to import goods into Myanmar without paying taxes or duties. Failure by the Company\nor by third parties who perform transportation services for the Company to comply with the import regulations can lead to financial penalties\non the Company, to additional restrictions on import activities, and could even result in the prohibition of future duty-free import/exports\nby the Company. Any such prohibition would adversely affect the Company’s business and operations. No assurance can be given that\nthe Company or its transportation service providers will or will be able to fully comply with the increased import regulations.\n\n** **\n\n**The Increasing Rate of Inflation, Particularly in Myanmar, May\nNegatively Impact Our Operations.**\n\n \n\nThe rate of inflation in Myanmar has noticeably\nincreased, in particular following the control of Myanmar’s government by its military. Inflation in Myanmar was estimated to be\nmore than 26% per annum in 2024 and more than 22% per annum in 2025. The inflation rate in Myanmar appears to be at a similar level in\n2026 compared to 2025. As a result, employee compensation and other operating expenses in Myanmar could significantly increase. Although\nthe rate of inflation in China has been relatively modest recently, we can provide no assurance that our operations in China and Hong\nKong will not be affected in the future by higher rates of inflation. Inflation could materially affect our financial performance by increasing\nour operating costs and expenses, including employee compensation and the cost of raw materials. Additionally, because a substantial portion\nof our assets from time to time consists of cash and cash equivalents and short-term investments, high inflation could significantly reduce\nthe value and purchasing power of these assets.\n\n** **\n\n10\n\n \n\n** **\n\n**The\nChinese Government Exerts Substantial Influence Over the Manner in Which We Must Conduct Our Business Activities and May Intervene or\nInfluence Our Operations at Any Time, Which Could Result in a Material Change in Our Operations and the Value of Our Common Stock.**\n\n** **\n\nThe Chinese government\nhas exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and\nstate ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to securities\nregulation, data protection, cybersecurity and other matters. The central or local governments of these jurisdictions may impose new,\nstricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to\nensure our compliance with such regulations or interpretations. Our business may be subject to various government and regulatory interference\nin the province in which we operate. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations\nor penalties for any failure to comply. Our operations could be adversely affected, directly or indirectly, by existing or future laws\nand regulations relating to our business or industry. Given recent statements by the Chinese government indicating an intent to exert\nmore oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, any such action\ncould significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of\nsuch securities to significantly decline or become worthless. See also “*Item 3. Key Information–D. Risk Factors–In\nResponse to the Data Security Law and Personal Information Protection Law in China, and New Overseas Listing Rules in China, The Company\nMay Face Additional Scrutiny from Its Operations in China.*”\n\n** **\n\n**Our Ability to Transfer Funds from Our\nChina and Myanmar Subsidiaries Are Limited by The Laws of China and Myanmar Respectively.**\n\n* *\n\nWe conduct our operations\nin China through Nissin PRC, a wholly-owned subsidiary that is registered in China. Under our current corporate structure, Highway Holdings\nLimited may need dividend payments or other distributions from Nissin PRC to fund any cash and financing requirements we may have. In\nrespect of the transfer of earnings from Nissin PRC to Highway Holdings Limited, under applicable Chinese laws and regulations our Chinese\nsubsidiary is permitted to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting\nstandards and regulations. Nissin PRC primarily generates its revenue in RMB, which is not freely convertible into other currencies. As\na result, any restriction on currency exchange may limit the ability of our Chinese subsidiary to use its RMB revenues to pay dividends\nto us. The Chinese government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may\nbe put forward by the SAFE for cross-border transactions falling under both the current account and the capital account. In addition,\nthe Enterprise Income Tax Law of China and its implementation rules provide that a withholding tax rate of up to 10% will be applicable\nto dividends payable by Chinese companies to non-Chinese-resident enterprises unless otherwise exempted.\n\n \n\nFurther, our operations\nin Myanmar are conducted through our subsidiary Kayser Myanmar. Beginning in April 2022, the Myanmar government has restricted the transfer\nof foreign currency abroad pursuant to Notification No. 12/2022 issued by the Central Bank of Myanmar, which requires any transfer from\nMyanmar of foreign currency abroad to be approved by the Foreign Exchange Supervisory Committee of Myanmar.\n\n \n\nFunds held in China or Myanmar may not be\navailable to fund operations or for other use outside those jurisdictions due to legal restrictions, foreign exchange controls, governmental\napprovals, banking restrictions, tax rules, local political conditions, or other limitations. To date, profits generated by Nissin\nPRC have mostly been reinvested in the Shenzhen factory’s operations, and we have not relied on dividends or other distributions\nfrom Nissin PRC or Kayser Myanmar to fund our operations outside of China or Myanmar respectively. However, any limitation on the ability\nof Nissin PRC or Kayser Myanmar to pay dividends or make other kinds of payments to us in the future could materially and adversely limit\nour ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, satisfy obligations, or\notherwise fund and conduct our business.\n\n \n\n**Risks Related to the Company’s Operations, Structure and Strategy.**\n\n** **\n\n**The Company Is Financially Dependent On A Few Major Customers.**\n\n \n\nDuring the years ended March 31, 2026 and 2025\nthe Company’s aggregate sales to its three largest customers accounted for approximately 80.4% and 88.5% of net sales respectively.\nWhile there are material benefits to limiting its customer base to a few, large, well-established and financially strong customers, having\nfewer customers also has significant risks. The Company’s success will depend to a significant extent on maintaining its major customers\nand on the businesses of its major customers. The Company could be materially adversely affected if it loses one or more of its major\ncustomers or if the business and operations of its existing major customers decline.\n\n \n\n11\n\n \n\n \n\nIn addition, a substantial portion of the Company’s\nsales to its major customers are made on credit, which exposes the Company to the risk of significant revenue loss if a major customer\nis unable to honor its credit obligations to the Company. Any material delay in being paid by its larger customers, or any default by\na major customer on its obligations to the Company would significantly and adversely affect the Company’s liquidity. As of March\n31, 2026 and 2025, accounts receivable from the three customers with the largest receivable balances at year-end represented, in the aggregate,\n74.8% and 79.8% of the total outstanding receivables, respectively.\n\n \n\nIn fiscal 2026, two of the Company’s major\ncustomers significantly reduced orders that had been manufactured at the Myanmar facility. As a result, the Company significantly reduced\nmanufacturing activity at its Myanmar facility and downsized its Myanmar headcount. See also “*Item 3. Key Information–D.\nRisk Factors–The Ongoing Civil War in Myanmar Has Negatively Affected, and May Continue to Negatively Impact, the Company’s\nOperations in Myanmar.*”\n\n** **\n\n**Interruptions In Supplies Provided by the Company’s Third-Party\nSuppliers, Including Due to the Ongoing War in Ukraine, May Subject the Company to External Procurement Risks That Negatively Affect Its\nBusiness.**\n\n \n\nThe Company depends on third-party suppliers for\nits raw materials and many of its components. Any disruptions to the Company’s supply chain, significant increase in component costs,\nor shortages of critical components, could adversely affect the Company’s business and result in lost sales, customer dissatisfaction\nand increased costs. Such a disruption could occur as a result of any number of events, including, but not limited to, an extended closure\nof or any slowdown at our supplier’s plants or shipping delays due to health epidemics like the outbreak of COVID-19 or implementation\nof post-COVID-19 policies or practices, war and economic sanctions against third parties, including those arising from the ongoing war\nbetween Russia and Ukraine, market shortages due to surge in demand for any particular part or component, increases in prices or impact\nof inflation, the imposition of tariffs, regulations, quotas or embargoes on components, transportation delays or other failures affecting\nthe supply chain and shipment of materials and finished goods.\n\n** **\n\n**Fluctuating Shipping Costs and Disruptions in Shipping Could\nMaterially and Adversely Affect Our Business and Operating Results.**\n\n \n\nOur foreign based customers purchase the products\nthat we manufacture for them in Germany, China and Myanmar based on an expectation of timely delivery at a reasonable transportation cost.\nGenerally, we ship most of our products from the ports in Hong Kong, Shenzhen, China and Yangon, Myanmar to their final destinations,\nmostly in Europe, and our customers bear the transportation costs of their products. Certain of our customers also transport their products\nby air. During the past few years, the shipping costs and availability of shipping containers have fluctuated wildly. In recent years,\nthere have been global shipping and logistics crises resulting in lengthy port wait times and a very significant spike in shipping costs.\nWhile shipping costs have moderated and returned to pre-COVID-19 levels, shipping costs remain volatile. Delays in the transportation\nof products and significant increases in shipping costs could adversely affect our customers production schedules and production costs.\nThese factors, in turn could cause our customers to consider using suppliers closer to their facilities or even manufacturing those products\nthemselves at their own domestic facilities. The loss of customers because of international transportation disruptions and cost fluctuations\ncould have a material adverse effect on our business and operating results. No assurance can be given that our customers will continue\nto purchase our products if the delays in delivery and major shipping price increases return.\n\n \n\n**The ongoing conflict involving Iran and related disruption in\nthe Middle East, including risks relating to the Strait of Hormuz, could adversely affect our supply chain, shipping costs, energy costs,\ncustomer demand and results of operations.**\n\n \n\nThe ongoing conflict involving Iran, the United\nStates, Israel and other regional actors, and related instability in the Middle East, have created significant uncertainty for global\ntrade, shipping routes, energy markets, insurance markets and supply chains. The Strait of Hormuz is a critical maritime route for global\nenergy shipments, and disruptions, restrictions, attacks, threats of closure, navigational interference, increased military activity,\nsanctions, vessel rerouting, or increased war-risk insurance costs affecting the Strait of Hormuz or nearby waters could materially affect\nthe cost and availability of energy, shipping, raw materials and components.\n\n \n\n12\n\n \n\n \n\nAlthough we do not currently operate facilities\nin the Middle East, our business and manufacturing operations depend on global supply chains, international customers and suppliers, ocean\nfreight, air freight, fuel, electricity, raw materials, components and customer demand in Europe, Asia and other markets. Any escalation,\ncontinuation or recurrence of the conflict could increase freight rates, insurance costs, fuel prices, energy costs, raw material prices,\ncomponent costs and lead times; reduce the availability of shipping capacity; delay delivery of raw materials or finished products; disrupt\ncustomer production schedules; reduce customer demand; impair the ability of customers or suppliers to perform their obligations; or increase\ninflationary pressures in the markets in which we operate.\n\n \n\nIn addition, the conflict may result in sanctions,\nexport controls, import restrictions, banking restrictions, payment delays, cybersecurity threats, or other government actions that could\naffect our customers, suppliers, logistics providers or financial counterparties, even if such actions do not apply directly to us. We\nmay not be able to pass increased costs on to customers, and any prolonged disruption to global shipping, energy markets or customer demand\ncould materially and adversely affect our business, financial condition, results of operations and cash flows.\n\n** **\n\n**Transactions Between the Company and Its Subsidiaries May Be\nSubject to Scrutiny by Various Tax Authorities and Could Expose the Company to Additional Taxes.**\n\n \n\nThe Company operates through various subsidiaries\nin various countries. These subsidiaries make inter-company purchases at various prices. Under China’s enterprise income tax law,\nall such inter-company transactions have to be made on an arm’s-length basis and are subject to scrutiny as transfer pricing transactions\nbetween related parties. Transactions between the various subsidiaries located inside and outside of China must also meet China’s\ntransfer pricing documentation requirements that include the basis for determining pricing between the related entities, as well as the\ncomputation methodology. The Company could face material and adverse consequences if the Chinese tax authorities determine that transactions\nbetween the Company’s various subsidiaries do not represent arm’s-length pricing regulations and, therefore, that such transactions\nare deemed to be structured to avoid taxes. Such a determination could result in increased tax liabilities of the affected subsidiaries\nand potentially subject the Company to late payment interest and other penalties.\n\n** **\n\n**The Company Is Highly Dependent Upon Its Executive Officers and\nIts Other Managers.**\n\n \n\nThe Company is highly dependent upon Roland Kohl,\nthe Company’s Chief Executive Officer, and its other officers and managers. Although the Company has signed employment contracts\nwith Mr. Kohl and certain of its other key officers/managers, no assurance can be given that those employees will remain with the Company\nduring the terms of their employment agreements. The loss of the services of any of the foregoing persons would have a material adverse\neffect on the Company’s business and operations. The Company no longer maintains a life insurance policy in the event of Mr. Kohl’s\ndeath. Mr. Kohl is the primary contact between the Company and certain of its larger customers, particularly those based in Germany. Accordingly,\nthe resignation, retirement or other departure of Mr. Kohl from the Company could have a material negative impact on the Company’s\nrelationship with these customers and on the Company’s ability to retain these clients.\n\n** **\n\n**The Company Faces Significant Competition from Numerous Larger,\nBetter Capitalized, and International Competitors.**\n\n \n\nThe Company competes against numerous manufacturers\nfor all of its current products. Such competition arises from both third-party manufacturers and from the in–house manufacturing\ncapabilities of existing customers. Many of the larger, international competitors also operate competing facilities in Shenzhen, China,\nwhile others have also established manufacturing facilities in other low-cost manufacturing countries, which have given those competitors\nthe ability to shift their manufacturing to those locations whenever costs at those other locations are cheaper. Many of our competitors\nhave achieved substantial market share and many have lower cost structures and greater manufacturing, financial or other resources than\nwe do. If we are unable to provide comparable manufacturing services and high-quality products at a lower cost than the other companies\nin our market, our net sales could decline. In addition, many of our local competitors in China receive ongoing financial support or subsidies\nfrom central and local government authorities, which they may use to undercut our prices and to invest in advanced machinery and equipment\nthat increases their production efficiency. Because we do not receive comparable government support, these competitors may be able to\ncompete more effectively on price and capacity, which could cause us to lose customers or sales, reduce our margins, and materially and\nadversely affect our business and results of operations.\n\n \n\n13\n\n \n\n \n\n**We Previously Identified Material Weaknesses In Our Internal\nControl Over Financial Reporting. Although We Believe These Material Weaknesses Have Been Remediated, If We Fail To Maintain An Effective\nSystem Of Internal Control Over Financial Reporting, Our Ability To Accurately And Timely Report Our Financial Results Or Prevent Fraud\nMay Be Adversely Affected, And Investor Confidence And The Market Price Of Our Common Shares May Be Adversely Impacted.**\n\n \n\nWe are subject to reporting obligations under the\nU.S. securities laws. Section 404 of the Sarbanes-Oxley Act of 2002 requires every public company to include a management report on such\ncompany’s internal control over financial reporting in its annual report, which report contains management’s assessment of\nthe effectiveness of our internal control over financial reporting.\n\n \n\nIn connection with the preparation and external\naudit of our consolidated financial statements for the year ended March 31, 2025, we and our independent registered public accounting\nfirm identified material weaknesses related to internal control over financial reporting in respect of our operations in Myanmar. During\nthe fiscal year ended March 31, 2026, we implemented remediation measures designed to address these material weaknesses, as described\nunder “Item 15. Controls and Procedures.” Based on the implementation and testing of these remediation measures, management\nhas concluded that the previously identified material weaknesses have been remediated and that our internal control over financial reporting\nwas effective as of March 31, 2026.\n\n \n\nThe material weaknesses previously identified as\nof March 31, 2025 were that: (i) we did not have sufficient and skilled accounting personnel with an appropriate level of technical accounting\nknowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial\nreporting requirements; and (ii) we did not have appropriate and adequate policies and procedures in place to evaluate the proper accounting\nand disclosures of key transactions and documents. Although management has concluded that these material weaknesses have been remediated\nas of March 31, 2026, we cannot assure you that we will not identify additional material weaknesses or control deficiencies in the future.\nAny failure to maintain effective internal control over financial reporting could result in inaccuracies in our consolidated financial\nstatements, impair our ability to comply with applicable financial reporting requirements and make related regulatory filings on a timely\nbasis, and, as a result, our business, financial condition, results of operations and prospects, as well as the trading price of our common\nshares, may be materially and adversely affected.\n\n** **\n\n**Fluctuations in Foreign Currency Exchange Rates Will Continue\nto Affect the Company’s Operations and Profitability.**\n\n \n\nBecause the Company engages in international trade\nand operates using five different currencies, the Company is subject to the risks of foreign currency exchange rate fluctuations. The\nCompany’s operations are based in the PRC, Hong Kong, Myanmar and, following the acquisition of Regent-Feinbau on March 1, 2026,\nGermany. Because most of the Company’s customers are located outside of these markets (primarily in Europe and in the U.S.), the\nCompany makes and/or receives payments in various currencies (including U.S. dollars, Hong Kong dollars, RMB and Euros), and pays its\nexpenses in U.S. dollars, RMB, Hong Kong dollars, MMK and Euros. As a result, the Company is exposed to the risks associated with possible\nforeign currency controls, currency exchange rate fluctuations or devaluations. For example, the Company realized currency exchange gains\nof approximately $22,000 and $124,000 in the fiscal years ended March 31, 2026 and 2025, respectively. Notwithstanding its exposure to\ncurrency conversion rate fluctuations, the Company does not attempt to hedge its currency exchange risks and, therefore, will continue\nto experience certain gains or losses due to changes in foreign currency exchange rates. The Company does attempt to limit its currency\nexchange rate exposure in certain of its OEM contracts through contractual provisions, which may limit, though not eliminate, these currency\nrisks. No assurance can be given that the Company will not suffer future currency exchange rate losses that will materially impact the\nCompany’s financial results and condition.\n\n \n\n14\n\n \n\n \n\n**The Company is Exposed to Significant Worldwide Political, Economic,\nLegal and Other Risks Related to Its International Operations.**\n\n \n\nThe Company is incorporated in the British Virgin\nIslands, has administrative offices for its subsidiaries in Hong Kong, and has all of its manufacturing facilities in China and Myanmar.\nThe Company sells its products to customers in China, Europe, Hong Kong, North America and elsewhere in Asia. As a result, its operations\nare subject to significant political and economic risks and legal uncertainties, including changes in international and domestic customs\nregulations, changes in tariffs, trade restrictions, trade agreements and taxation, changes in economic and political conditions and in\ngovernmental policies, difficulties in managing or overseeing foreign operations, and wars, civil unrest, acts of terrorism and other\nconflicts. The occurrence or consequences of any of these factors may restrict the Company’s ability to operate in the affected\nregion and decrease the profitability of the Company’s operations in that region.\n\n** **\n\n**Acquisitions Or Strategic Investments May Not Be Successful And\nMay Harm The Company’s Operating Results.**\n\n \n\nThe Company has in the past acquired, invested\nin, or entered into strategic arrangements with other companies in China, Myanmar and Germany. In order to expand its business, the Company\nbelieves that it may, once again, have to expand its operations in countries other than China and Myanmar, which may include the need\nto acquire and/or invest in foreign businesses or entities. Such acquisitions or strategic investments could have a material adverse effect\non the Company’s business and operating results because of:\n\n \n\n \n●\nThe assumption of unknown liabilities, including employee obligations.\n\n \n\n \n●\nThe Company could incur significant expenses related to bringing the financial, accounting and internal control procedures of the acquired business into compliance with U.S. GAAP financial accounting standards and the Sarbanes Oxley Act of 2002.\n\n \n\n \n●\nThe Company’s operating results could be impaired as a result of restructuring or impairment charges related to amortization expenses associated with intangible assets.\n\n \n\n \n●\nThe Company could experience significant difficulties in successfully integrating any acquired operations, technologies, customers’ products and businesses with its operations.\n\n \n\n \n●\nTo the extent that the Company uses its cash resources to acquire or establish any future foreign operations, the Company’s cash reserves could be depleted.\n\n \n\n \n●\nFuture acquisitions could divert the Company’s management’s attention to other business concerns.\n\n \n\n \n●\nThe Company may not be able to hire the key employees necessary to manage or staff the acquired enterprise operations.\n\n \n\n \n●\nThe restrictions on the transfer of funds across borders or repatriation of earnings.\n\n \n\n \n●\nThe Company may have to obtain approval from governmental authorities in order to comply with applicable laws.\n\n \n\n**We Face Risks Related to Health Epidemics and Natural Disasters**.\n\n \n\nOur business could be materially and adversely\naffected by natural disasters, health epidemics or other public safety concerns affecting the PRC and Myanmar. Natural disasters may give\nrise to server interruptions, breakdowns, system failures, website or app failures or internet failures, which could cause the loss or\ncorruption of data or malfunctions of software or hardware, as well as adversely affecting our ability to operate our website or apps\nand provide services and solutions. Our business could also be adversely affected if our employees are affected by health epidemics, such\nas new variants of COVID-19 or outbreaks of other diseases. In addition, our results of operations could be adversely affected to the\nextent that any health epidemic harms the Chinese or Myanmar economy in general. Our headquarters are located in Hong Kong, where most\nof our directors and management and many of our employees currently reside. Consequently, if any natural disasters, health epidemics or\nother public safety concerns were to affect China, our operation may experience material disruptions, which may materially and adversely\naffect our business, financial condition and results of operations.\n\n \n\n15\n\n \n\n \n\n**We may not realize the expected benefits of our acquisition of\nRegent-Feinbau, and the acquisition may expose us to integration, operational and financial risks.**\n\n \n\nOn March 1, 2026, we completed the acquisition of 51% of the outstanding\nshares of Regent-Feinbau, a German-based manufacturer of precision sheet metal components and welded assemblies. We expect the acquisition\nto expand our manufacturing capabilities, diversify our customer base and provide growth opportunities in the automotive and aviation\nindustries. However, we may not realize these anticipated benefits on the timeline expected, or at all.\n\n \n\nThe success of the acquisition will depend on, among other things,\nour ability to integrate Regent-Feinbau into our group, coordinate operations across Germany, Hong Kong, China and Myanmar, retain key\nmanagement and employees, maintain relationships with Regent-Feinbau’s customers and suppliers, manage regulatory and compliance\nobligations in Germany and the European Union, and identify and execute growth opportunities. The acquisition also exposes us to risks\nrelating to German labor laws, manufacturing costs, customer qualification requirements, quality certifications, automotive and aerospace\nindustry standards, environmental and workplace-safety regulation, warranty or product-quality claims, and potential liabilities arising\nfrom Regent-Feinbau’s pre-acquisition operations.\n\n \n\nIn addition, Regent-Feinbau will require management attention and may\nrequire additional working capital, capital expenditures, systems integration, accounting resources or operational support. If Regent-Feinbau\ndoes not perform as expected, if integration costs exceed our expectations, if we lose key customers or personnel, or if we fail to identify\nor manage liabilities associated with the acquisition, our business, financial condition, results of operations and ability to create\nshareholder value could be materially and adversely affected.\n\n \n\n**Because we own 51% of Regent-Feinbau, we may not receive all\nof the economic benefits of its operations and may face risks associated with shared ownership.**\n\n \n\nWe acquired 51% of the outstanding shares of Regent-Feinbau and therefore\ndo not own 100% of the business. The remaining shareholders of Regent-Feinbau may have rights under German law, Regent-Feinbau’s\norganizational documents, shareholder arrangements or other agreements that could affect our ability to direct certain actions, distribute\ncash, approve transactions, implement operational changes, or exit the investment. We will also be required to allocate a portion of Regent-Feinbau’s\nearnings or losses to non-controlling interests.\n\n \n\nDisagreements with other shareholders, limitations on our ability to\ncause Regent-Feinbau to take certain actions, restrictions on distributions, or governance requirements under German law could limit our\nability to realize the expected benefits of the acquisition. In addition, if Regent-Feinbau requires additional capital, we may need to\nprovide funding, experience dilution of our ownership interest, or accept other arrangements that may not be favorable to us.\n\n \n\nIn addition, LeMALe retained an option to acquire 1% of the outstanding\nshares of Regent-Feinbau at the original per-share purchase price if we intend to take certain actions, including selling all or any of\nour Regent-Feinbau shares to a third party, permanently shutting down or relocating Regent-Feinbau’s business, implementing any\ncapital measure that would result in dilution of our shareholdings, or taking any action that would result in LeMALe holding less than\n49% of Regent-Feinbau’s outstanding shares. If LeMALe exercises this option, our ownership interest in Regent-Feinbau would be reduced\nfrom 51% to 50%, which could reduce our control rights, economic interest and strategic flexibility with respect to Regent-Feinbau.\n\n \n\nThe existence or exercise of this option could make it more difficult\nor costly for us to sell our interest in Regent-Feinbau, raise capital at Regent-Feinbau, restructure, relocate or discontinue Regent-Feinbau’s\noperations, or otherwise take actions that we believe may be in the best interests of the Company. Any limitation on our ability to control\nor implement strategic actions involving Regent-Feinbau could adversely affect our ability to realize the expected benefits of the acquisition.\n\n** **\n\n16\n\n \n\n** **\n\n**We Have Limited Experience in the Market for Products and Services\nfor Elderly People, and Our SilverAge Initiative May Not Be Successful and May Expose Us to New Risks.**\n\n \n\nDuring fiscal 2026, we formed SilverAge to test,\non a small and exploratory basis, the market for providing and selling products and services to elderly people in China. We have limited\nor no prior experience operating in this market, which differs significantly from our OEM manufacturing business. This initiative may\nnot achieve market acceptance or become profitable, and it may require greater capital, management attention and other resources than\nwe anticipate, diverting time and cash away from our core manufacturing operations. In addition, operating in this market may expose us\nto risks that are unfamiliar to us. SilverAge remained in an early, exploratory stage during fiscal 2026 and did not generate material\nrevenues, and we may modify, scale back or discontinue the initiative at any time. Any of these factors could materially and adversely\naffect our business, financial condition and results of operations.\n\n** **\n\n**Risks Related to Regulatory Oversight and the Company’s Charter.**\n\n** **\n\n**Certain Legal Consequences of Incorporation in the British Virgin\nIslands.**\n\n \n\nThe Company is incorporated under the laws of the\nBritish Virgin Islands, and its corporate affairs are governed by its Amended and Restated Memorandum of Association and Articles of Association\nand by the BVI Business Companies Act of the British Virgin Islands. Principles of law relating to such matters as the validity of corporate\nprocedures, the fiduciary duties of the Company’s management, directors and controlling shareholders and the rights of the Company’s\nshareholders differ from those that would apply if the Company were incorporated in a jurisdiction within the U.S. Further, the rights\nof shareholders under British Virgin Islands law are not as clearly established as the rights of shareholders under legislation or judicial\nprecedent in existence in most U.S. jurisdictions. Thus, the public shareholders of the Company may have more difficulty in protecting\ntheir interests in the face of actions of the management, directors or controlling shareholders than they might have as shareholders of\na corporation incorporated in a U.S. jurisdiction. In addition, there is doubt that the courts of the British Virgin Islands would enforce,\neither in an original action or in an action for enforcement of judgments of U.S. courts, liabilities that are predicated upon the securities\nlaws of the U.S.\n\n** **\n\n**The Company’s Rights Plan, And Certain Provisions of Its\nAmended and Restated Memorandum And Articles of Association May Discourage a Change of Control.**\n\n \n\nIn April 2018, the Company adopted a shareholder\nrights plan (the “Rights Plan”) that provides for the issuance of one right (“Right”) for each of our outstanding\ncommon shares. The Rights are designed to assure that all shareholders receive fair and equal treatment in the event of any proposed takeover\nand to guard against partial tender offers, open market accumulations, undisclosed voting arrangements and other abusive or coercive tactics\nto gain control of the Company or the Board of Directors without paying all shareholders a control premium. The Rights will cause substantial\ndilution to a person or group that acquires 15% or more of the Common Shares on terms not approved by our board of directors. The Rights\nPlan may discourage, delay or prevent a change in control of the Company or management that shareholders may consider favorable.\n\n \n\nSome provisions of the Company’s Amended\nand Restated Memorandum and Articles of Association also may discourage, delay or prevent a change in control of the Company or management,\nincluding provisions that (1) provide that a meeting of shareholders can be called only by the Company’s Board of Directors, Chairman\nof the Board, Chief Executive Officer, or President and not by shareholders; (2) provide that directors of the Company may be removed\nonly for cause, and only by the affirmative vote of the holders of at least two-thirds in voting power of the Series A Preferred Shares\nand a majority of the outstanding common shares; and (3) require a vote of at least two-thirds in voting power of the outstanding shares\nto amend these and certain other provisions of the Amended and Restated Memorandum and Articles of Association.\n\n \n\nThese provisions could make it more difficult for\na third party to acquire the Company, even if the third party’s offer may be considered beneficial by many shareholders. As a result,\nshareholders may be limited in their ability to obtain a premium for their shares.\n\n** **\n\n17\n\n \n\n** **\n\n**It May be Difficult to Serve the Company with Legal Process or\nEnforce Judgments Against the Company’s Management or the Company.**\n\n \n\nThe Company is a British Virgin Islands holding\ncorporation with subsidiaries in Hong Kong, Myanmar and China. Substantially all of the Company’s assets are located in the PRC,\nHong Kong and Myanmar, and no assets, employees or operations are located in the U.S. In addition, all of the Company’s officers\nand directors reside outside of the U.S. It may not be possible to effect service of process within the United States or elsewhere outside\nthe PRC, Myanmar or Hong Kong upon the Company’s directors, or executive officers, including effecting service of process with respect\nto matters arising under United States federal securities laws or applicable state securities laws. Neither the PRC nor Myanmar have treaties\nproviding for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries. As a\nresult, recognition and enforcement in the PRC or Myanmar of judgments of a court in the United States or many other jurisdictions in\nrelation to any matter, including securities laws, may be difficult or impossible. Enforcement of a foreign judgment in Hong Kong or the\nBritish Virgin Islands may also be limited or affected by applicable bankruptcy, insolvency, liquidation, arrangement and moratorium,\nor similar laws relating to or affecting creditors’ rights generally, and will be subject to a statutory limitation of time within\nwhich proceedings may be brought.\n\n \n\n**Our acquisition of Regent-Feinbau subjects us to additional risks\nassociated with operating in Germany and the European Union.**\n\n \n\nAs a result of the Regent-Feinbau acquisition, we now operate through\na majority-owned subsidiary in Germany. German and European Union laws and regulations may impose significant obligations relating to\nlabor and employment, employee consultation, workplace safety, environmental protection, product quality, data protection, taxation, customs,\nexport controls, sanctions, anti-bribery, accounting, corporate governance and other matters. Compliance with these requirements may increase\nour costs and require additional management, legal, accounting and compliance resources.\n\n \n\nGermany also has higher labor, energy, tax and regulatory costs than\ncertain jurisdictions in which we have historically operated. Changes in German or European Union law, inflation, energy costs, union\nor works council matters, employee claims, environmental requirements, product liability rules, supply-chain diligence obligations, or\nregulatory enforcement could adversely affect Regent-Feinbau’s operations, margins and growth prospects. If we are unable to manage\nthese risks effectively, our business, financial condition and results of operations could be adversely affected.\n\n \n\n**Risks Related to Our Common Shares.**\n\n** **\n\n**Volatility Of Market Price of the Company’s Shares.**\n\n \n\nThe markets for equity securities have been volatile,\nand the price of the Company’s Common Shares has been and could continue to be subject to material fluctuations in response to quarter\nto quarter variations in operating results, news announcements, trading volume, general market trends both domestically and internationally,\ncurrency movements and interest rate fluctuations.\n\n** **\n\n**Exemptions Under the Exchange Act as a Foreign Private Issuer.**\n\n \n\nThe Company is a foreign private issuer within\nthe meaning of rules promulgated under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”). As such, and though\nits Common Shares are registered under Section 12(b) of the Exchange Act, it is exempt from certain provisions of the Exchange Act applicable\nto United States public companies including: the rules under the Exchange Act requiring the filing with the Commission of quarterly reports\non Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations\nwith respect to a security registered under the Exchange Act; the sections of the Exchange Act requiring insiders to file public reports\nof their stock ownership and trading activities and establishing insider liability for profits realized from any “short-swing”\ntrading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer’s equity securities within six months or less),\nand the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information. In addition,\ncertain provisions of the Sarbanes-Oxley Act of 2002 do not apply to the Company. Because of the exemptions under the Exchange Act and\nSarbanes-Oxley Act applicable to foreign private issuers, shareholders of the Company are not afforded the same protections or information\ngenerally available to investors in public companies organized in the United States and it may be more difficult for investors to evaluate\nour business and financial condition.\n\n** **\n\n18\n\n \n\n** **\n\n**While The Company Has Paid Dividends in the Past, No Assurance\nCan Be Given That the Company Will Declare or Pay Cash Dividends in the Future.**\n\n \n\nThe Company’s policy has been to pay a cash\ndividend at least once a year to all holders of its Common Shares, subject to its profitability and cash position. However, the Company\ndid not declare any dividends in the fiscal year ended March 31, 2026 due to net loss of $1,524,000. Dividends are declared and payable\nat the discretion of the Board of Directors and depend upon, among other things, the Company’s results of operations, the anticipated\nfuture earnings of the Company, the success of the Company’s business activities, the Company’s capital requirements, and\nthe general financial conditions of the Company. The Company may cease making dividend payments if the Company determines that retaining\nfunds may be necessary to achieve other corporate goals, such as expanding its operations or acquiring other businesses. Accordingly,\nno assurance can be given that the Company will pay dividends in the future. If the Company does not pay a cash dividend, the Company’s\nshareholders will not realize a return on their investment in the Common Shares except to the extent of any appreciation in the value\nof the Common Shares. \n\n** **\n\n**Risk of Cybersecurity Breaches Could Adversely Affect Our Business,\nRevenues and Competitive Position.**\n\n \n\nSecurity breaches and other disruptions could compromise\nthe Company’s information and expose the Company to liability, which would cause the Company’s business and reputation to\nsuffer. In the ordinary course of the Company’s business, the Company stores sensitive data, including business information and\nregarding its customers, suppliers and business partners, in the Company’s networks. The secure maintenance and transmission of\nthis information is critical to the Company’s operations. Despite the Company’s security measures, its information technology\nand infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Cybersecurity\nthreats, including malware, ransomware, phishing, unauthorized access, business email compromise, data theft, system failures, employee\nerror, third-party service provider failures, or attacks on our networks, could disrupt our operations or compromise sensitive information.\nAny such breach could compromise the Company’s networks and the information stored there could be accessed, publicly disclosed,\nlost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, regulatory penalties,\ndisrupt the Company’s operations, and damage the Company’s reputation, which could adversely affect its business, revenues\nand competitive position.\n\n** **\n\n**Uncertainty Under the Holding\nForeign Companies Accountable Act That May Result In Future Delisting.**\n\n \n\nOn December 18, 2020, the Holding Foreign Companies\nAccountable Act (“HFCAA”) was enacted. Pursuant to the HFCAA, if the Public Company\nAccounting Oversight Board (United States), or PCAOB, is unable to inspect an issuer’s auditors\nfor three consecutive years, the issuer’s securities are prohibited to trade on a U.S. stock exchange. The PCAOB has determined\nthat registered public accounting firms headquartered in Hong Kong are subject to the HFCAA’s provisions. On June 22, 2021, United\nStates Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would decrease the number of “non-inspection\nyears” from three years to two years, and thus, would reduce the time before our securities may be prohibited from trading or delisted\nif the PCAOB determines that it cannot inspect or investigate completely our auditor. On July 21, 2022 the SEC notified us that our registered\npublic accounting firm at the time, Centurion ZD CPA & Co. (“Centurion”), was a PCAOB-Identified Firm because Centurion\nwas based in Hong Kong. On May 3, 2023 we appointed ARK Pro CPA & Co (“ARK”) as our independent registered public\naccounting firm to replace Centurion. Both Centurion and ARK are headquartered in Hong Kong, which may expose us to delisting if Centurion\nand ARK cannot be inspected by the PCAOB. On March 7, 2025, we appointed Marcum Asia CPAs LLP (“Marcum Asia”) as\nour independent registered public accounting firm to replace ARK, which is headquartered in New York. As\na result of our prior auditors being based in Hong Kong, the SEC would prohibit our securities from being traded on a national securities\nexchange or through any other method that is within the jurisdiction of the SEC, including through over-the-counter trading, if the PCAOB\nwas unable to inspect our prior auditors. On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “Statement\nof Protocol”) with the CSRC and the Ministry of Finance of China under which the PCAOB will be given complete access to audit work\npapers and other information so that it may inspect and investigate PCAOB-registered accounting firms headquartered in China and Hong\nKong. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate\nregistered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the\ncontrary. However, should Chinese authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB\nBoard will consider the need to issue a new determination. Whether the PCAOB will continue to be\nable to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in China and Hong Kong is subject\nto uncertainty and depends on a number of factors out of our, and our prior auditors’, control. In the event it is later determined\nthat the PCAOB is unable to inspect or investigate completely our prior auditors because of a position taken by an authority in Hong Kong\nor China, then such lack of inspection could cause trading in our securities to be prohibited under the HFCAA.\n\n \n\n19\n\n \n\n \n\n**The PCAOB Had Historically Been Unable to Inspect Our Prior Auditor\nin Relation to Their Audit Work Performed for Our Financial Statements and the Inability of the PCAOB to Conduct Inspections of Our Auditor\nIn The Past Has Deprived Our Investors with The Benefits Of Such Inspections.**\n\n \n\nOur prior auditor, ARK, is currently based in Hong\nKong, and is required to undergo regular inspections by the PCAOB as an auditor of companies that are publicly traded in the United States\nand a firm registered with the PCAOB. Our prior auditor is based in Hong Kong, a jurisdiction where the PCAOB was historically unable\nto conduct inspections and investigations completely before 2022. As a result, we and investors in the Common Shares were deprived of\nthe benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in Hong Kong in the past has made\nit more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality\ncontrol procedures as compared to auditors outside of China that are subject to the PCAOB inspections. While the PCAOB has determined\non December 15, 2022 that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered\nin mainland China and Hong Kong, whether the PCAOB will continue to be able to satisfactorily conduct\ninspections of PCAOB-registered public accounting firms headquartered in China and Hong Kong is subject to uncertainty and depends on\na number of factors out of our, and our prior auditor’s, control. In the event it is later determined that the PCAOB is unable to\ninspect or investigate completely our auditors because of a position taken by an authority in Hong Kong or China, our prior auditor and\nits audit work would not be able to be inspected independently and fully by the PCAOB.\n\n \n\nInspections of other auditors conducted by the\nPCAOB outside Hong Kong have at times identified deficiencies in those auditors’ audit procedures and quality control procedures,\nwhich may be addressed as part of the inspection process to improve future audit quality. Following the PCAOB’s December 2022 determination\nthat it was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China\nand Hong Kong, the PCAOB has in fact conducted an inspection of ARK. Should the PCAOB be prevented from inspecting our prior auditor’s\naudits and its quality control procedures in the future, however, investors may be deprived of the benefits of PCAOB inspections and may\nlose confidence in our reported financial information and procedures and the quality of our financial statements. This risk relates to\nperiods audited by our former auditor, ARK. As of March 7, 2025, we appointed Marcum Asia CPAs LLP, a PCAOB-registered firm based in New\nYork, which is subject to regular PCAOB inspections. Accordingly, we do not expect this risk to apply to financial statements audited\nby Marcum Asia.\n\n \n\n**If we fail to satisfy Nasdaq continued listing requirements,\nour common shares could be delisted, which could adversely affect liquidity and market price.**\n\n \n\nOur common shares are listed on the Nasdaq Capital Market under the\nsymbol “HIHO”. Nasdaq imposes continued listing requirements, including requirements relating to minimum bid price, market\nvalue, shareholders’ equity, publicly held shares, number of shareholders, corporate governance and other matters. If we fail to\nsatisfy Nasdaq’s continued listing requirements, Nasdaq may issue a deficiency notice and, if we are unable to regain compliance\nwithin the applicable period, our common shares could be delisted.\n\n \n\nOn March 17, 2026, we received a written notification from Nasdaq stating\nthat, for the preceding 30 consecutive business days, the closing bid price of our common shares had been below the $1.00 per share minimum\nbid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). We are still in the compliance\nperiod and have until September 14, 2026 to regain compliance by having the closing bid price of our common shares be at least $1.00 per\nshare for at least 10 consecutive business days. If we do not regain compliance during this period, we may be eligible for an additional\n180 calendar day compliance period if we satisfy applicable Nasdaq requirements and provide notice of our intention to cure the deficiency,\nincluding by effecting a reverse stock split, if necessary. If we fail to regain compliance, Nasdaq may delist our common shares.\n\n \n\nDelisting could reduce the liquidity of our common shares, impair our\nability to raise capital, reduce analyst or investor interest, limit the ability of shareholders to trade our common shares, and result\nin a decline in the market price of our common shares. If our common shares were delisted, they may trade on an over-the-counter market,\nwhere trading volumes and liquidity are generally lower and transaction costs may be higher.\n\n** **\n\n20"}