{"url_path":"/sec/lud/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 **","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1984124/0001213900-26-057512-index.html","accession_number":"0001213900-26-057512","cik":"0001984124","ticker":"LUD","issuer_name":"Luda Technology Group Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1984124/0001213900-26-057512-index.html","primary_entity_key":"0001984124","primary_entity_name":"Luda Technology Group Ltd"},"word_count":16232,"has_tables":true,"body_markdown":"**ITEM 4.**\n**INFORMATION ON THE COMPANY**\n\n \n\n**25.       History and Development\nof the Company**\n\n \n\n**Corporate history and structure**\n\n \n\nWe are a manufacturer and trader of stainless\nsteel and carbon steel flanges and fittings products. Our history began with Luda HK which was incorporated in Hong Kong in 2004 and is\nprincipally engaged in the trading of steel flanges and fittings. Our Company is a holding company incorporated under the laws of the\nCayman Islands with limited liability on October 21, 2021. Prior to the incorporation of our Company, the principal operations are carried\nout through Luda HK and Luda PRC which were founded by Mr. Ma Biu, our Controlling Shareholder. We have conducted a reorganization, primarily\nto facilitate our initial public offering, which was completed on December 19, 2023. The diagram below illustrates our corporate structure\nas of the date of this annual report:\n\n \n\n \n\nFor details of our principal shareholders’\nownership, please refer to the beneficial ownership table in “Item 6. Directors, Senior Management and Employees—E. Share\nOwnership”.\n\n \n\nThe background and ownership of our subsidiaries\nas of the date of this annual report are as follows:\n\n \n\n**Name**\n \n**Background**\n \n**Ownership**\n\nLuda BVI\n \nIncorporated on October 25, 2021 under the laws of the BVI as an investment holding company and owned by Diamond Horses Group Limited prior to the reorganization. As part of the reorganization, Luda Cayman has entered into a sale and purchase agreement to acquire Luda BVI on August 14, 2023. The reorganization was completed on December 19, 2023.\n \n100% owned by Luda Cayman\n\nLuda HK\n \nIncorporated on February 20, 2004 as a private company limited by shares under the laws of Hong Kong and owned by Diamond Horses Group Limited prior to the reorganization. As part of the reorganization, Luda BVI has entered into a sale and purchase agreement to acquire Luda HK on August 14, 2023. The reorganization was completed on December 19, 2023.\n \n100% owned by Luda BVI\n\nLuda PRC\n \nEstablished by Luda HK and incorporated on April 4, 2005 as a private company limited by shares under the laws of the PRC.\n \n100% owned by Luda HK.\n\n \n\n**Completion of the Initial Public Offering**\n\n \n\nOn February 26, 2025, our Company entered into\nan underwriting agreement, with Revere Securities LLC as the representative of several underwriters named thereof, in connection with\nour initial public offering (“IPO”) of 2,500,000 ordinary shares, at a price of $4.00 per share. Our Company has also granted\nthe underwriters a 45-day option to purchase up to an additional 375,000 Ordinary Shares to cover over-allotments (the “Over-Allotment\nOption”), if any.\n\n \n\nThe ordinary shares of our Company began trading\non NYSE American LLC on February 27, 2025 under the ticker symbol “LUD”.\n\n \n\nOn April 7, 2025, our Company issued and sold\nto the underwriter 190,000 Ordinary Shares at a price of $4.00 per share, pursuant to the partial exercise of the Over-Allotment Option,\nresulting in additional gross proceeds of approximately $760,000. As a result, our Company has raised aggregate gross proceeds of $10,760,000\nin the IPO, including the exercise of the Over-Allotment Option, prior to deducting underwriting discounts and commissions and estimated\noffering expenses payable by our Company.\n\n \n\n32\n\n \n\n**Corporate Information**\n\n** **\n\nOur principal executive office is located at Rooms 1604-1605, 16/F,\nYF Life Centre, 38 Gloucester Road, Wanchai, Hong Kong. Our phone number is + 852 2994 8774. Our registered offices Cayman Islands is\nlocated at the office of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1 -1111,\nCayman Islands.\n\n \n\nInvestors should submit any inquiries to the\naddress and telephone number of our principal executive offices. We maintain a corporate website at *www.ludahk.com.* The information\ncontained in, or accessible from, our website or any other website does not constitute a part of this annual report. Our agent for service\nof process in the United States is Cogency Global Inc., 122 East 42nd Street, 18th Floor, New York, NY 10168.  \n\n \n\nThe SEC maintains a website at www.sec.gov that\ncontains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using\nits EDGAR system.\n\n \n\nSee “Item 5. Operating and Financial Review\nand Prospects — B. Liquidity and Capital Resources — Capital Expenditures” for a discussion of our capital expenditures.\n\n \n\n**B. Business Overview**\n\n \n\nWe are a manufacturer and trader of stainless\nsteel and carbon steel flanges and fittings products. Our history began with Luda HK which was incorporated in Hong Kong in 2004 and is\nprincipally engaged in the trading of steel flanges and fittings. In 2005, the Company’s business expanded further upstream when\nLuda PRC was set up to commence the manufacturing of flanges and fittings with self-owned factory in China. We have established an operation\nhistory of over 20 years. We are principally engaged in (i) the manufacture and sale of stainless steel and carbon steel flanges and fittings\nproducts; and (ii) trading of steel pipes, valves, and other steel tubing products. We are headquartered in Hong Kong with manufacturing\nbase in Taian City, Shandong Province of the PRC. Our sales network comprises customers from China, South America, Australia, Europe,\nAsia (excluding China) and North America and our customers comprise manufacturers and traders from the chemical, petrochemical, maritime\nand manufacturing industries.\n\n \n\n**Our Products**\n\n \n\nOur wide range of flanges and fittings products\nare used in various industries for construction of facilities, plants and equipment as well as some specific applications such as pressure\nequipment, marine and offshore applications. Products are available in a variety of sizes, shapes, and specifications to meet the specific\nrequirements of different industries. We have the capabilities to manufacture our products in conformance with various countries’\nstandards.\n\n** **\n\n**Our in-house products — Steel flanges**\n\n \n\nWe manufacture and sell a broad line of steel\nflanges, including the following:\n\n \n\n \n\n \n**Usage**    \n\nBlind flange  \nFlange that seals off or terminates the end of a piping system, for instance, to seal a nozzle opening on a pressure vessel. It does not have a center hole (“bore”).\n\nSlip on flange    \nFlange that resembles a ring that is placed over the pipe end, and connected to the pipe or the fittings by two fillet welds. The bore size of a slip-on flange is larger than the outside diameter of the connecting pipe.\n\nPlate flange  \nFlange that resembles a circular disk that is welded onto the end of a pipe and allows it to be bolted to another pipe.\n\nThread flange\nFlange that is joined to pipes with external threads, that can be attached without welding.\n\nWelding neck flange  \nFlange that has a long tapered hub that can be welded with a pipe, typically used in high-pressure and high/low temperatures applications that require an unrestricted flow of the fluid.\n\n \n\n33\n\n \n\n**Our in-house products — Steel fittings**\n\n \n\nWe manufacture and sell a broad line of steel fittings, including the\nfollowing:\n\n \n\n \n\n \n\n \n**Usage**\n\nElbow\nChanges the direction of fluid flow.\n\nReducer\nChanges pipe size to meet hydraulic flow requirements.  \n\nCap\nCovers the end of a pipe.  \n\nTee\nCombines fluid flow from multiple branches.  \n\n \n\n**Products sourced from external suppliers — Related steel piping\nproducts**\n\n \n\nIn addition to the aforementioned in-house products\nmanufactured at our plant, we also trade high-quality steel valves, steel pipes and other piping system components sourced from trusted\nexternal suppliers.\n\n \n\nOur stainless-steel products are ideal for hazardous\nchemical and petrochemical environments, as they offer superior resistance to corrosion, high temperatures, and contamination risk. Most\nof our products are made from austenitic stainless steel, which offers good durability and is well-suited for demanding industrial applications.\n\n \n\nWe also provide carbon steel products, which are\ncharacterized by a higher carbon content and lower levels of other alloy metals. Carbon steel is generally a less expensive material than\nstainless steel and has lower resistance to corrosion and heat. However, certain properties of carbon steel products can be strengthened\nthrough forging and heat treatment to enhance their performance for specific applications and scenarios.\n\n \n\nThe table below sets out our revenue by product categories for the\nperiods indicated:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \n%  \nUS$  \n%  \nUS$  \n% \n\nFittings \n 11,018,432  \n 32.9  \n 13,617,429  \n 30.4  \n 9,784,712  \n 19.0 \n\nFlanges \n 21,732,191  \n 64.8  \n 30,923,382  \n 68.9  \n 40,773,687  \n 79.3 \n\nOthers \n 784,728  \n 2.3  \n 322,619  \n 0.7  \n 869,655  \n 1.7 \n\nTotal \n 33,535,351  \n 100.0  \n 44,863,430  \n 100.0  \n 51,428,054  \n 100.0 \n\n \n\n34\n\n \n\n**Production**\n\n \n\nWe manufacture and offer our stainless steel and\nflanges fittings products that are of standardized design and specifications to our customers. The production process of our products\nvaries model by model and our production process is certified under quality management systems ISO 9001:2015, Pressure Equipment Directive\n2014/68/EU, AD2000-Merkblatt and API Specification Q1.\n\n \n\n**Steel flanges**\n\n \n\nThe following chart illustrates the typical production workflow for\nsteel flanges:\n\n \n\n \n\n35\n\n \n\nThe production of steel flanges typically involves the following major\nsteps:\n\n \n\n**Cutting.** Cutting the steel billets\ninto the required size and dimensions using cutting machinery.\n\n \n\n**Heating.** Heating the sectioned billets\nto the required temperature in the furnace to achieve a malleable state for forging.\n\n \n\n**Forging.** Shaping the heated steel\nbillets into required die-cast flange shapes by applying compressive force.\n\n \n\n**Heat treatment.**Put the die-cast\nflange shapes into a kiln at temperature of minimum 1,040 degree Celsius for the production of stainless-steel flanges or at lower temperature\nof about 900 degree Celsius for the production of carbon steel flanges and then cooling by running water or in air. This process is to\nfortify and to ensure the hardness, ductility, toughness, or magnetic properties of the flange shapes can achieve desired specifications.\n\n \n\n**Machining.**Removing the iron oxide\nscales using computer numerical control (“CNC”) and lathe machines.\n\n \n\n**Finishing.**Drill the specific number\nand size of holes on the flanges, stamp product measurement and other details on the surface of the flanges, paint and galvanize the flanges\nfor corrosion protection.\n\n \n\n**Cleaning, Inspecting and Packing.**The\nfinished product is then cleaned and subject to final inspection before being packed and delivered to our customers.\n\n \n\nThe production process of steel flanges from cutting to packing takes\napproximately 20 to 30 days.\n\n \n\n**Steel fittings**\n\n \n\nThe following chart illustrates the typical production workflow for\nsteel fittings:\n\n \n\n \n\nThe production of steel fittings typically involves the following major\nsteps:\n\n \n\n**Cutting.** Cutting steel pipes to the required shape and\nsize using cutting machinery.\n\n \n\n36\n\n \n\nDepending on the specification of products, one\nor more of the following processes will be performed to produce the steel fittings:\n\n \n\n**Hot forming.**Heating the steel pipe\nwith an induction heating coil and pushing it over a dye which allows the pipe to expand and bend simultaneously. This process is suited\nfor fittings of carbon steel and alloy steel materials, and results in a rough form fittings.\n\n \n\n**Cold forming.** Pushing the cut pipe through a dye and\nform into its desired shape.\n\n \n\n**Polishing and heat treatment.**Put\nthe die-cast flange shapes into a kiln at temperature of minimum 1,040 degree Celsius for the production of stainless-steel flanges or\nat lower temperature of about 900 degree Celsius for the production of carbon steel flanges and then cooling by running water or in air.\nThis process is to fortify and to ensure the hardness, ductility, toughness, or magnetic properties of the flange shapes can achieve desired\nspecifications.\n\n \n\n**Shot blasting.** Removing impurities from the surface of\nthe steel fittings by using mechanical device.\n\n \n\n**Bevelling and reforming.** Smoothing out the ends of the\nsteel fitting part.\n\n \n\n**Finishing.**Stamp product measurement\nand other details on the surface of the steel fittings, paint and galvanize the steel fittings for corrosion protection.\n\n \n\n**Inspecting and Packaging.**The finished\nproduct is then inspected before being packed and delivered to our customers, including reviewing its traceability, visual and surface\ninspection.\n\n \n\nThe production process of steel fittings from\ncutting to packing takes approximately 20 to 30 days.\n\n \n\n**Production capacity**\n\n \n\nOur factory is located in Taian City, Shandong\nProvince of the PRC with total plant area of approximately 21,914 square meters (“sq m”). The manufacturing process is certified\nunder quality management systems ISO 9001:2015, Pressure Equipment Directive 2014/68/EU, AD2000-Merkblatt and API Specification Q1.\n\n \n\n**Customers**\n\n** **\n\nFor the years ended December 31, 2025, 2024 and 2023, we transacted\nwith customers globally, which includes listed companies or state-owned enterprises in the PRC.\n\n \n\nFor the years ended December 31, 2025, 2024 and\n2023, we had the following customers that accounted for more than 10% of our revenue:\n\n** **\n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nAmount  \nPercentage  \nAmount  \nPercentage  \nAmount  \nPercentage \n\nMajor customers representing more than 10% of  the Company’s revenues \n   \n   \n   \n   \n   \n  \n\nCustomer A \n$4,037,204  \n 12.0% \n$*  \n *% \n$*  \n *%\n\nCustomer B \n 3,995,291  \n 11.9% \n *  \n *% \n *  \n *%\n\nCustomer C \n 3,552,714  \n 10.6% \n *  \n *% \n *  \n *%\n\nCustomer D \n *  \n *% \n 8,228,966  \n 18.3% \n *  \n *%\n\nCustomer E \n *  \n *% \n 5,957,404  \n 13.3% \n 8,390,058  \n 16.3%\n\nCustomer F \n *  \n *% \n 5,560,578  \n 12.4% \n *  \n *%\n\nCustomer G \n *  \n *% \n 4,497,689  \n 10.0% \n 15,852,474  \n 30.8%\n\n** **\n\n*Represents less than 10% of the Company’s revenue.\n\n** **\n\n37\n\n** **\n\n**Suppliers**\n\n \n\nFor the years ended December 31, 2025, 2024 and 2023, our suppliers\nare based in PRC who provide us with steel billets, finished and semi-finished steel flanges and pipe fittings. Depending on each client’s\nspecific needs, we purchase specific types of stainless-steel billet and different manufacturing techniques are used for processing raw\nmaterials into finished goods to make sure the products meet customer’s quality standard.\n\n \n\nWe purchase our raw materials from a variety of\nsources and consolidate purchases among our top suppliers to improve cost and delivery terms. We maintain flexibility to purchase raw\nmaterials from a variety of sources to optimize cost efficiency and delivery lead time.\n\n \n\nFor the years ended December 31, 2025, 2024 and 2023, we had the following\nsuppliers which accounted for more than 10% of our purchase:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nAmount  \nPercentage  \nAmount  \nPercentage  \nAmount  \nPercentage \n\nMajor suppliers representing more than 10% of the Company’s purchase \n   \n   \n   \n   \n   \n  \n\nSupplier A \n$ *  \n *% \n$ *  \n *% \n$11,425,454  \n 23.8%\n\nSupplier B \n 4,453,329  \n 17.7% \n 3,939,174  \n 12.4% \n *  \n *%\n\nSupplier C \n *  \n *% \n 4,651,267  \n 14.7% \n *  \n *%\n\nSupplier D \n 2,682,282  \n 10.7% \n *  \n *% \n *  \n *%\n\n \n\n*Represents less than 10% of the Company’s purchase.\n\n \n\n**Sales and Marketing**\n\n \n\nOur sales team is responsible for exploring business\nopportunities and maintaining customer relationships. The team will also coordinate with sales representatives and external agents based\nin Brazil, Korea, and the PRC and seek to expand our overseas network.\n\n \n\nOver the years, we have built up a broad and diversified\ncustomer base. Most of our customers are in the PRC and the rest are spread across the globe. The table below shows the breakdown of sales\nrevenue by geographical locations of our customers during the period under review:\n\n \n\n  \nFY2025  \nFY2024  \nFY2023 \n\n  \nSales Amount  \nAs %  \nSales Amount  \nAs %  \nSales Amount  \nAs % \n\nRevenue by International Markets: \n(In USD)  \nof Sales  \n(In USD)  \nof Sales  \n(In USD)  \nof Sales \n\n  \n   \n   \n   \n   \n   \n  \n\nPeople’s Republic of China \n$22,397,641  \n 66.8% \n$36,863,348  \n 82.2% \n$45,237,236  \n 88.0%\n\nSouth America \n 6,708,846  \n 20.0% \n 4,100,965  \n 9.1% \n 2,769,090  \n 5.3%\n\nAsia excluding PRC \n 2,281,627  \n 6.8% \n 871,783  \n 1.9% \n 888,563  \n 1.7%\n\nAustralia \n 1,020,860  \n 3.0% \n 1,802,150  \n 4.0% \n 1,373,689  \n 2.7%\n\nNorth America \n 828,038  \n 2.5% \n 699,013  \n 1.6% \n 445,423  \n 0.9%\n\nEurope \n 219,957  \n 0.7% \n 368,772  \n 0.8% \n 666,772  \n 1.3%\n\nOthers \n 78,382  \n 0.2% \n 157,399  \n 0.4% \n 47,281  \n 0.1%\n\nTotal revenue \n$33,535,351  \n 100% \n$44,863,430  \n 100% \n$51,428,054  \n 100%\n\n \n\n**Seasonality**\n\n \n\nGenerally, we do not experience any material seasonality\nin our business.\n\n \n\n**Competition**\n\n** **\n\nWe operate in a highly fragmented and competitive\nindustry and believe that factors which affect competitiveness in our business include pricing and quality, range of products and the\nproduct certifications and lead time to delivery. There were estimated to be more than 1,000 pipe fittings manufacturers/companies in\nPRC.\n\n** **\n\n38\n\n** **\n\n**Permits and licenses**\n\n \n\nAs of the date of this annual report, we and the\noperating entities have received from PRC government authorities all requisite permits or licenses needed to engage in the businesses\ncurrently conducted in China. Such permits and licenses include Business License, Special Equipment Registration and Certificate of High\nand New Technology Enterprises. The following table provides details on the material permits and licenses held by Luda PRC.\n\n \n\n**Description of approval/ license/permit/other regulatory requirements**\n \n**Date of issue**\n \n**Date of expiration**\n \n**Regulatory authority**\n\nBusiness License (No. 913709007731521882)\n \nApril 20, 2020\n \nApril 3, 2035\n \nAdministration for Market Regulation of Taian\n\nProduction License of Special Equipment People’s Republic of China (Serial No. TS2737538- 2027)\n \nMarch 6, 2023\n \nMarch 5, 2027\n \nAdministration for Market Regulation of Shandong\n\nA total of 56 Certificates of Type Test of Special Equipment in relation to the production of pressure pipeline components\n \nFrom March 17, 2023 to April, 28, 2024\n \nNo expiration date\n \nHebei Special Equipment Supervision and Inspection Institute\n\nCertificate of High and New Technology Enterprises (No. GR202337003102)    \n \nNovember 29, 2023\n \nNovember 29, 2026\n \nDepartment of Science & Technology of Shandong Province Shandong Provincial Department of Finance\n\nShandong Provincial Tax Service, State Taxation Administration\n\nCustoms Declaration Entity Registration (No. 3709942919)\n \nSeptember 11, 2014\n \nNo expiration date\n \nCustoms of PRC, Taian Branch\n\nDischarges of Pollutants from Stationary Sources of Pollution Registration (No. 913709007731521882001Z)\n \n\nMarch 13, 2024\n\n \n\nMarch 12, 2029\n\n \nTaian Environmental Protection Bureau\n\nFood Business License (No. JY33709830042776)\n \nMay 17, 2022\n \nMay 16, 2027\n \nAdministrative Approval Service Bureau of Feicheng City, Taian\n\nCertificate of Motor Vehicle Registration (No. Lu J635NF)\n \nMay 24, 2023  \n \nNo expiration date  \n \nTaian Traffic Police Detachment, Public Security Bureau\n\nSpecial Equipment Utilization Registration (Serial No. Che 11 Lu J40094(19))\n \nJune 26, 2019    \n \nNo expiration date    \n \nAdministration for Market Regulation of Taian\n\nSpecial Equipment Utilization Registration (Serial No. Che 11 Lu J40138(18))\n \nOctober 26, 2018    \n \nNo expiration date\n \nTaian Quality and Technical Supervision Bureau\n\nSpecial Equipment Utilization Registration (Serial No. Che 11 Lu J40033 (19))\n \nApril 12, 2019    \n \nNo expiration date    \n \nAdministration for Market Regulation of Taian\n\nCertificate of Special Equipment Service Registration (Serial No. Qi 27 Lu JB0021(15))\n \nJuly 13, 2015    \n \nNo expiration date    \n \nTaian Quality and Technical Supervision Bureau\n\nSpecial Equipment Utilization Registration (Serial No. Qi 17 Lu J40129 (18))\n \nSeptember 14, 2018    \n \nNo expiration date    \n \nTaian Quality and Technical Supervision Bureau\n\nSpecial Equipment Utilization Registration (Serial No. Qi 17 Lu JB0195 (13))\n \nSeptember 3, 2013    \n \nNo expiration date    \n \nTaian Quality and Technical Supervision Bureau\n\nPlanning Permit of Construction Engineering (Serial No. Jian Zi No. 370983202310026)\n \nJuly 18, 2023    \n \nNo expiration date    \n \nFeicheng Natural Resources and Planning Bureau\n\nBuilding Construction Permit (Serial No.370983202310120101)\n \nOctober 12, 2023  \n \nNo expiration date  \n \nAdministrative Approval Service Bureau of Feicheng City, Taian\n\nBuilding Construction Completion and Acceptance Permit (Serial No.3709832310090002)\n \nAugust 2, 2024      \n \nNo expiration date      \n \nTaian Building Construction Quality Supervision Station\n\n** **\n\n39\n\n** **\n\n**Intellectual Property**\n\n \n\nOur success and future revenue growth depend,\nin part, on our ability to protect our intellectual property. We rely primarily on patents, trademarks, copyrights and trade secret laws,\nas well as confidentiality procedures, to protect our proprietary technologies and processes. We rely on a combination of trademark law\nand confidentiality and non-disclosure agreements to protect our intellectual property rights. We also regularly monitor any infringement\nor misappropriation of our intellectual property rights.\n\n* *\n\nAs of the date of this annual report, we have registered the following\ntrademarks:\n\n \n\n**Nature and description of Intellectual Property Right (including Intellectual Property Number)**\n \n**Granted by**  \n \n**Date of Approval**\n \n**Duration of right (including expiry date)**\n \n**Right\nof** **renewal** \n \n**Other**  **remarks**\n \n**Acquisition Method**\n \n**Encumbrance**\n\n \n\n \n\n(19024680)\n\n \nTrademark Office of National Intellectual Property Administration, PRC (“Trademark\nOffice”)\n \nJune 21, 2017\n \nJune 20, 2027\n \nSubject to an application within 12 months before the expiry of the duration of right.\n \nClassification:6 Flanges of metal; Stainless flanges; Carbon steel flanges; welding neck flanges; forging flanges\n \nOriginal Acquisition\n \nNil\n\n \n\n(6332104)\n\n \nTrademark Office\n \nMarch 28, 2020\n \nMarch 27, 2030\n \nSubject to an application within 12 months before the expiry of the duration of right.\n \nClassification:6\n\nFlanges of metal\n \nOriginal Acquisition\n \nNil\n\n \n\n(19024679)\n\n \nTrademark Office\n \nMarch 7, 2017\n \nMarch 6, 2027\n \nSubject to an application within 12 months before the expiry of the duration of right.\n \nClassification:6 Steel alloy; Valves of metal (other parts of machines); Elbows of metal for pipes; Junctions of metal for pipes; Flanges of metal; Stainless flanges; Carbon steel flanges; welding neck flanges; forging flanges\n \nOriginal Acquisition\n \nNil\n\n \n\n40\n\n \n\n*As of the date of this annual report, we have registered the following\npatents:*\n\n \n\n**No.**\n \n**Patent number**\n \n**Patent type**\n \n**Registration\nDate**\n \n**Expiration\nDate**\n \n**Acquisition\nMethod**\n \n**Registered\nOwner**\n \n**Encumbrance**\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n1\n \n2016205291864\n \nUtility model patent – Gas forging tank door\n \nJune 3, 2016\n \nJune 2, 2026\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n2\n \n2016205291883\n \nUtility model patent – Blanking mold for flange production\n \nJune 3, 2016\n \nJune 2, 2026\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n3\n \n2016205291898\n \nUtility model patent – Manual cutter gauge\n \nJune 3, 2016\n \nJune 2, 2026\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n4\n \n2016205291915\n \nUtility model patent – Gas forging loading car\n \nJune 3, 2016\n \nJune 2, 2026\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n5\n \n2016205291934\n \nUtility model patent – Mobile platform for equipment inspection\n \nJune 3, 2016\n \nJune 2, 2026\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n6\n \n2016205291953\n \nUtility model patent – Platform for pipe repair\n \nJune 3, 2016\n \nJune 2, 2026\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n7\n \n2019211728203\n \nUtility model patent – Large diameter blind plate hooks\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n8\n \n2019211728383\n \nUtility model patent – Debris protection device for CNC drilling machine\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n9\n \n2019211728398\n \nUtility model patent – Simple CNC lathe protective cover\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n10\n \n2019211728260\n \nUtility model patent – Elbow pipe blasting equipment\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n11\n \n2019211735527\n \nUtility model patent – Device for grabbing hot raw materials from a high-heat furnace\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n12\n \n2019211728379\n \nUtility model patent – Twist drill bit and drill sleeve storage toolbox\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n13\n \n2019211735531\n \nUtility model patent – Automatic briquetting device for flange debris\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n\n41\n\n \n\n**No.**\n \n**Patent number**\n \n**Patent type**\n \n**Registration Date**\n \n**Expiration\nDate**\n \n**Acquisition\nMethod**\n \n**Registered\nOwner**\n \n**Encumbrance**\n\n14\n \n2019211735508\n \nUtility model patent – Automatic conveyor device for transporting round steel\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n15\n \n201921173557X\n \nUtility model patent – Automatic double-sided bevelling machine\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n16\n \n2019211735512\n \nUtility model patent – Conveyor device for connecting regenerative heating furnace and reaming machine\n \nJuly 24, 2019\n \nJuly 23, 2029\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n17\n \n2021108658194\n \nInvention patent – An intelligent hydraulic baler\n \nJuly 29, 2021\n \nJuly 28, 2041\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n18\n \n2021108658315\n \nInvention patent – Pipe bending welding device for metal products processing\n \nJuly 29, 2021\n \nJuly 28, 2041\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n19\n \n2021230937926\n \nUtility model patent – Connecting type shot blasting machine with a guard mechanism\n \nDecember 10,  2021\n \nDecember 9, 2031\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n20\n \n2021231126942\n \nUtility model patent – Vertical drilling machine with improved drilling accuracy\n \nDecember 10,  2021\n \nDecember 9, 2031\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n21\n \n2021231225685\n \nUtility model patent – Automatic hole reaming machine with a hole adjustment mechanism\n \nDecember 10,  2021\n \nDecember 9, 2031\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n22\n \n2021231133113\n \nUtility model patent – A CNC lathe positioning clamping device\n \nDecember 10,  2021\n \nDecember 9, 2031\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n23\n \n2022206287433\n \nUtility model patent – High- efficiency double- chamber heat storage burner forging heating furnace\n \nMarch 22, 2022\n \nMarch 21, 2032\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n24\n \n2021200174583\n \nUtility model patent – An industrial marking machine with pre- cleaning function\n \nJanuary 4, 2021\n \nJanuary 3, 2031\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n25\n \n2021200051418\n \nUtility model patent – A kind of fixing device for bending pipe welding which is easy to limit position\n \nJanuary 4, 2021\n \nJanuary 3, 2031\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n26\n \n2021200174598\n \nUtility model patent – High- efficiency closed cooling tower capable of preventing dust pollution\n \nJanuary 4, 2021\n \nJanuary 3, 2031\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n27\n \n2021200046072\n \nUtility model patent – Automate tapping machine\n \nJanuary 4, 2021  \n \n  January 3, 2031  \n \nOriginal Acquisition  \n \nLuda PRC \n \nNil  \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n28\n \n2021228794799\n \nUtility model patent – Drill bit grinding machine with liquid-cooled structure\n \nNovember 23, 2021\n \nNovember 22, 2031\n \nOriginal  Acquisition\n \nLuda PRC\n \nNil\n\n \n\n42\n\n \n\n**No.**\n \n**Patent number**\n \n**Patent type**\n \n**Registration\nDate**\n \n**Expiration\nDate**\n \n**Acquisition\nMethod**\n \n**Registered Owner**\n \n**Encumbrance**\n\n29\n \n2021228869189\n \nUtility model patent – Water-saving automatic pass-through type workpiece spray cleaning machine\n \nNovember 23, 2021\n \nNovember 22, 2031\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n30\n \n2021228794905\n \nUtility model patent – Automatic packaging machine with cutting function\n \nNovember 23, 2021\n \nNovember 22, 2031\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n31\n \n2022215716616\n \nUtility model patent – A kind of flange machining jig\n \nJune 22,\n\n2022\n \nJune 21, 2032\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n32\n \n2023210588781\n \nUtility model paten – A kind of stainless steel shaped flange\n \nMay 6, 2023\n \nMay 5, 2033\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n\n \n \n \n \n \n \n\n33\n \n2023210588739\n \nUtility model paten – A flange welding device for flange fittings production\n \nMay 6, 2023\n \nMay 5, 2033\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n34\n \n2023211868281\n \nUtility model paten – A kind of automatic welding equipment for metal pipe fittings\n \nMay 17,\n\n2023\n \nMay 16, 2033\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n35\n \n2023214496878\n \nUtility model paten – A new type of flange surface roughness meter\n \nJune 8,\n\n2023\n \nJune 7, 2033\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n36\n \n2024204064571\n \nUtility model patent – Surface pretreatment device for forging pipe fittings processing\n \nMarch 4,\n\n2024\n \nMarch 3, 2034\n \nOriginal   Acquisition\n \nLuda PRC\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n37\n \n2024204064590\n \nUtility model patent – One step device for forging tee pipe fittings\n \nMarch 4,   2024\n \nMarch 3, 2034\n \nOriginal Acquisition\n \nLuda PRC\n \nNil\n\n  \n  \n  \n  \n  \n  \n  \n \n\n38 \n2024204064618 \nUtility model patent – Pipe fitting packaging positioning mechanism for pipe fitting production \nMarch 4,\n\n2024 \nMarch 3, 2034 \nOriginal Acquisition \nLuda PRC \nNil\n\n  \n  \n  \n  \n  \n  \n  \n \n\n39 \n2024206606457 \nUtility model patent – A new type of flange production mold \nApril 2,\n\n2024 \nApril 1, 2034 \nOriginal Acquisition \nLuda PRC \nNil\n\n  \n  \n  \n  \n  \n  \n  \n \n\n40 \n2019201616767 \nUtility model patent – Automatic flange cleaning device \nJanuary 30, 2019 \nJanuary 29, 2029 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n41 \n201920161409X \nUtility model patent – Packing rack \nJanuary 30, 2019 \nJanuary 29, 2029 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n42 \n2019201623845 \nUtility model patent – Processing tool for double groove welding \nJanuary 30, 2019 \nJanuary 29, 2029 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n43 \n2019201701331 \nUtility model patent – Auxiliary spreader to support spraying and hoisting of pipe fitting \nJanuary 31, 2019 \nJanuary 30, 2029 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n \n\n43\n\n \n\n**No.**\n \n**Patent number**\n \n**Patent type**\n \n**Registration\nDate**\n \n**Expiration\nDate**\n \n**Acquisition\nMethod**\n \n**Registered\nOwner**\n \n**Encumbrance**\n\n44 \n2019201701897 \nUtility model patent – Auxiliary frame to lift blind plates \nJanuary 31, 2019 \nJanuary 30, 2029 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n45 \n2019113854563 \nInvention patent – Cutting mechanism for fully automatic stainless-steel tube cutting \nDecember 28,  2019 \nDecember 27, 2039 \nDerivative Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n46 \n2018213946443 \nUtility model patent – Workpiece inspection device \nAugust 28, 2018 \nAugust 27, 2028 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n47 \n2018213953080 \nUtility model patent – New borehole flange drilling tool \nAugust 28, 2018 \nAugust 27, 2028 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n48 \n2018213935754 \nUtility model patent – Multi-purpose mold to slide flanges for forging \nAugust 28, 2018 \nAugust 27, 2028 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n49 \n2018213953095 \nUtility model patent – Double- headed groove equipment \nAugust 28, 2018 \nAugust 27, 2028 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n50 \n2017216684359 \nUtility model patent – Set of mold used to make high-necked flanges \nDecember 5, 2017 \nDecember 4, 2027 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n51 \n2019201701350 \nUtility model patent – caliper tool too for flange forging \nJanuary 31, 2019 \nJanuary 30, 2029 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Bank of Taian, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n52 \n2022205352933 \nUtility model patent – A new type of natural gas furnace environmental\nprotection nitrogen oxide treatment device \nMarch 14, 2022 \nMarch 13, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n53 \n2022205353669 \nUtility model patent – High safety fiber laser cutting machine \nMarch 14, 2022 \nMarch 13, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n54 \n2022206287556 \nUtility model patent – Magnetic pipe cutting machine for easy cleaning of iron chips \nMarch 22, 2022 \nMarch 21, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n55 \n2022215202078 \nUtility model patent – Flange processing reverse mechanism \nJune 17, 2022 \nJune 16, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n56 \n2022215202097 \nUtility model patent – Cooling device for flange forging production \nJune 17, 2022 \nJune 16, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n57 \n2022215689322 \nUtility model patent – Receiver flange grinding and rust removal device \nJune 22, 2022 \nJune 21, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n  \n  \n  \n  \n  \n  \n  \n \n\n58 \n2022223647317 \nUtility model patent – Flange rotary machining platform \nSeptember 6,  2022 \nSeptember 5, 2032 \nOriginal Acquisition \nLuda PRC \nBeing pledge to Luda PRC’s loan at Postal Savings Bank of China, Feicheng Branch\n\n \n\n44\n\n \n\nAs of the date of this annual report, we have registered the\nfollowing copyrights:\n\n \n\n  \nCategory of \nDate of completion of \nDate of Initial \n**Registered**\n\nCopyright number \nWorks \nwork \nPublication \nOwner\n\n  \n  \n  \n  \n \n\nGuo Zuo Deng Zi-2014-F-00143945\n \nArt \nMay 1, 2005 \nMay 1, 2005 \nLuda PRC\n\n \n\n**Awards and accreditations**\n\n \n\nAs of the date of this annual report, our Company received\nthe following awards and accreditations:\n\n \n\n  \nDate of \nDate of \nRegulatory\n\nDescription of awards/accreditations \nissue \nexpiration \nauthority\n\n  \n  \n  \n \n\nCertificate in relation to Manufacturing and Sales of Steels Flanges, Forgings and Pipe Fittings (Certificate Registration No. TUV100083155) \nFebruary 13, 2024 \nFebruary 12, 2027 \nTUV SUD Asia Pacific\n\nTUV SUD Group\n\n \n\n  \nDate of \nDate of \nRegulatory\n\nDescription of awards/accreditations \nissue \nexpiration \nauthority\n\n  \n  \n  \n \n\nQTR Qualification Test Record NORSOK M-650 \nFebruary 4, 2021 \nApril 27, 2026 \nTUV SUD Industries Service GmbH\n\n*(The renewal application has been submitted and examined. The Company is currently awaiting the issuance of new certificate.)*\n\n  \n  \n  \n \n\nABS Certificate of Forging Facility and Process Approval in relation to Steel Forging and Stainless Steel Forging components for marine applications (Certificate No. FOR-T2442346) \nAugust 31, 2023 \nOctober 23, 2028 \nABS\n\n  \n  \n  \n \n\nRecognition for BV MODE II SCHEME (Certificate No. SMS.W.II./122215/B.0) \nJuly 27, 2023 \nAugust 8, 2027 \nBureau Veritas Marine & Offshore\n\n  \n  \n  \n \n\nApproval of Manufacturer Certificate\n(Certificate No. AMMM00002KR Rev No. 3) \nOctober 6, 2025 \nSeptember 12, 2028 \nDNV GL\n\n  \n  \n  \n \n\nCertificate of Works Approval in relation to Forging and Steel Forgings (Certificate No. QD23PWA00047_01) \nOctober 18, 2023 \nOctober 30, 2027 \nChina Classification Society\n\n  \n  \n  \n \n\nCertificate of Works Approval in relation to Steel Pipe Fittings (Certificate No. QD23PWA00047_02) \nOctober 18, 2023 \nOctober 30, 2027 \nChina Classification Society\n\n  \n  \n  \n \n\nCertificate of Registration in relation to Manufacture of Steel Flanges, Forgings and Pipe Fittings (Registration No. Q1-2235) \nMarch 31, 2024 \nMarch 31, 2027 \nAmerican Petroleum Institute\n\n  \n  \n  \n \n\nCertificate of Registration in relation to Manufacture of Steel Flanges, Forgings and Pipe Fittings in relation to ISO 9001:2015 (APIQR Registration No. 2331) \nMarch 31, 2024 \nMarch 31, 2027 \nAmerican Petroleum Institute Quality Registrar (APIQR)\n\n  \n  \n  \n \n\nCertificate in relation to forged flanges and seamless pipe fittings (Certificate No. DGR-0036-QS-W 681/2015/MUC-001) \nMarch 3, 2024 \nFebruary 27, 2027 \nTUV SUD Industries Service GmbH\n\n  \n  \n  \n \n\nRegistration of Fittings in relation\nto comply with the requirements of PIPE FLANGES AND FLANGED FITTINGS NPS 1/2 THROUGH NPS 24 (ASME B16.5) (CRN: 0B09888.5R2) \nSeptember 26, 2025 \nSeptember 26, 2035 \nTechnical Standards & Safety Authority (TSSA)\n\n  \n  \n  \n \n\nRegistration of Fittings in relation to comply with the requirements of FACTORY-MADE WROUGHT BUTTWELDING FITTINGS (ASME B16.9) (CRN: 0A10221.5R2) \nOctober 14, 2025 \nOctober 14, 2035 \nTechnical Standards & Safety Authority (TSSA)\n\n  \n  \n  \n \n\n45\n\n \n\n  \nDate of \nDate of \nRegulatory\n\nDescription of awards/accreditations \nissue \nexpiration \nauthority\n\n  \n  \n  \n \n\nEnvironmental Management System Certificate (Certificate No. ZM034124E33431R0M) \nNovember 22, 2024 \nNovember 21, 2027 \nShan Dong ZhengMing Certification Service Co., Ltd.\n\n  \n  \n  \n \n\nOccupational Health and Safety Management System Certificate (Certificate No. ZM034124S33432R0M) \nNovember 22, 2024 \nNovember 21, 2027 \nShan Dong ZhengMing Certification Service Co., Ltd.\n\n  \n  \n  \n \n\nEnergy Management System Certificate (Certificate No. ZM034124EN30051R0M) \nNovember 22, 2024 \nNovember 21, 2027 \nShan Dong ZhengMing Certification Service Co., Ltd.\n\n  \n  \n  \n \n\nCertificate of Authority to use Official API Monogram (in the scope of Blind and Test Flanges at PSL1, Psl2) (License Num. 6A-2260) \nMarch 3, 2024 \nMarch 31, 2027 \nAmerican Petroleum Institute\n\n  \n  \n  \n \n\nApproval of Steel Forgings (in the scope of Steel forgings, Carbon, Carbon/Manganese Steel. Maximum weight 450kg/0.45 tons) (Certificate No. LR2032729WA) \nOctober 20, 2023 \nOctober 19, 2026 \nLloyd’s Register\n\n  \n  \n  \n \n\nCRC — Certificado de Registro\nCadastral (Certificate No. 7000230889-0) \nJanuary 19, 2026 \nJanuary 15, 2027 \nPETROBRAS\n\n \n\n**Facilities**\n\n \n\nOur principal executive office is located in Hong\nKong, where we leased an office with an aggregate area of approximately 6,400 square feet, under two separate lease terms. The first lease\ncovers from August 28, 2025 to August 27, 2027 at a monthly rent of $13,128 and the first three months are rent-free with a $0.13 license\nfee charged for fitting-out works. The second lease covers from November 7, 2025 to November 6, 2027 at a monthly rent of $13,338 and\nthe first two months are rent-free with a $0.13 license fee charged for fitting-out works.\n\n \n\nWe continued to lease a flat in Hong Kong from a related party, Won\nFittings Company Limited, for document storage purposes. The flat has a total area of approximately 3,460 square feet. The lease term\nwas from April 1, 2025 to March 31, 2026 and was renewed for further term from April 1, 2026 to March 31, 2027. The monthly rent is $6,795.\n\n \n\n46\n\n \n\nThere is no private land ownership in China. Individuals\nand entities are permitted to acquire land use rights for specific purposes and for limited periods. Upon expiration of the term of grant,\nrenewal is possible subject to the payment of a new land premium and execution of a new land grant contract. Granted land use rights are\ntransferable and may be used as security for borrowings and other obligations.\n\n \n\nWe believe that the offices and product facilities\nthat we currently own in the PRC and/or leased in Hong Kong are adequate to meet our needs for the immediate future. As of the date of\nthis annual report, we own the following properties:\n\n** **\n\n**No.**\n \n**Address  **\n \n**Estate\nRights No.**\n \n**Certificate No.**\n \n**Usage**\n \n**Size**\n \n**Tenure**\n \n**Encumbrance**\n\n1\n \nHigh-tech zone, Feicheng City\n \n\nLu (2016) Fei Cheng Shi\n\nBudongchanquan\n\nNo. 0001526\n\n \n\nLu Fei Cheng\n\nGuoyong\n\n(2013)\n\nNo.040003\n\n \n\nOffice and\n\nProduction\n\n \n\nArea of land:\n\n25,702.39 sq m\n\nArea of plant\n\ncomprising two (2)\n\nproperties on land: (1)\n\nF0006: 3,787.2m2;\n\n(2) F0010: 3,704.01m2\n\n \n\nLand use\n\nrights from\n\nMarch 26,\n\n2013 to\n\nMarch 26,\n\n2063\n\n \n\nMortgaged to Luda PRC’s loan at Shandong Feicheng Rural\nCommercial Bank Co., Ltd\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n2\n \nHigh-tech zone, Feicheng City\n \n\nLu (2021) Fei Cheng Shi\n\nBudongchanqua\n\nNo. 0081166\n\n \n\nLu Fei Cheng\n\nGuoyong\n\n(2007)\n\nNo.040038\n\n \nProduction  \n \n\nProduction Area of land: 29,544.54 sq m\n\nArea of plant\n\ncomprising eight (8)\n\nproperties on land:\n\n14,423.61 sq m\n\n \n\nLand use\n\nrights from\n\nDecember 31, 2006 to\n\nDecember 31, 2056\n\n \n\nMortgaged to Luda PRC’s loan at Bank\n\nof China, Feicheng\n\nBranch\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n3\n \n\nNo. 20-157\n\nQian Fo Shan\n\nRoad, Dong Ying City\n\n \n\nLu (2020) Dong\n\nYing Shi\n\nBudongchanquan\n\nNo. 0249808\n\n \nN/A\n \nCommercial use\n \nExclusive and shared floor area: 84.24 sq m and 2.68 sq m\n \nUntil August 22, 2052\n \nNil \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n4\n \nRoom 302, Unit 1, Building 33, No. 89, Shizhong Road, Shikou Town, Dongying District\n \n\nLu (2024) Dong\n\nYing Shi\n\nBudongchanqua\n\nNo. 0066978\n\n \n\nDong\n\nGuoyong\n\n(2014)\n\nNo.014140\n\n \nCommercial /Residential  \n \nBuilding Area: 116.07 sq m\n \n\nLand use\n\nrights from\n\nSeptember 18, 2013 to\n\nSeptember 17, 2083\n\n \nNil\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n5\n \nRoom 502, Unit 1, Building 29, No. 89, Shizhong Road, Shikou Town, Dongying District\n \n\nLu (2024) Dong\n\nYing Shi\n\nBudongchanquan\n\nNo. 0066976\n\n \n\nDong\n\nGuoyong\n\n(2014)\n\nNo.014140\n\n \nCommercial /Residential  \n \nBuilding Area: 103.38 sq m\n \n\nLand use\n\nrights from\n\nSeptember 18, 2013 to\n\nSeptember 17, 2083\n\n \nNil \n\n* *\n\n**Our Competitive Strengths**\n\n** **\n\n**Experienced management team**\n\n** **\n\nOur Company is headed by our Chief Executive Officer,\nMr. Ma Biu who is the founder of the Company and Chief Operating Officer, Ms. Liu Liangping who joined the Company since 2007. Our management\nteam also comprises technical team members and experts in the flange and pipe fitting industry, including the General Manager, Deputy\nGeneral Manager and Head of Production who have been serving the Company for more than 10 years. We are confident that our management\nteams’ profound knowledge and experience will serve as a solid foundation to our success in the business and enable us to stay competitive\nand capture market opportunities.\n\n \n\n**Broad product portfolio**\n\n** **\n\nWe offer an extensive range of approximately 12,000\ntypes of products under four main categories, namely carbon steel flanges, stainless steel flanges, carbon steel fittings and stainless-steel\nfittings. The diverse product range can cater for the requirement of customers from different industries.\n\n \n\n47\n\n \n\n**Solid customer base and established reputation**\n\n** **\n\nFor the years ended December 31, 2025, 2024 and 2023, we transacted\nwith customers globally, which includes listed companies or state-owned enterprises in the PRC. We have accumulated specialized knowledge\nand good understanding of product requirements that meet the specific application of our customers, particularly in the chemical and petrochemical\nindustries. We have established our reputation by consistently delivered quality products of different material grade and technical specifications\nthat satisfy customers’ requirements.\n\n \n\n**Established business relationships with\nsuppliers**\n\n** **\n\nOur raw materials and products are sourced from\napproved vendors, who are reliable and reputable manufacturers, stockists, and traders. Through our years of partnership, we have established\na stable relationship with our suppliers and we are able to secure timely and reliable supplies for our production needs.\n\n \n\n**Stringent quality control systems**\n\n \n\nLuda PRC has been awarded ISO 9001:2015, as well\nas Pressure Equipment Directive 2014/68/EU, Annex I, Section 4.3 and AD 2000-Merkblatt W 0 and EN764-5, Para 4.2 and Norsok M-650. The\nPressure Equipment Directive is a mandatory standard in Europe and Norsok M-650 is a manufacturing qualification specific to the Norwegian\noffshore industry that is an internationally trusted certification. We are able to manufacture in conformance with international product\nand quality management standards.\n\n** **\n\n**Technological achievements from research\nand development**\n\n** **\n\nWe\nproactively engaged in research and development in our in-house laboratory. We are awarded the Certificate of High and New Technology\nEnterprises by PRC government as a testament of our technological achievements. Since 2016, we have registered 55 utility patents and\n3 invention patents for tooling and equipment to enhance our production of steel flanges and fittings products.\n\n \n\n**Regulations**\n\n** **\n\n**Laws and Regulations in the PRC**\n\n** **\n\n**Laws and Regulations In Relation to Foreign Investment**\n\n** **\n\n*Foreign Investment Law*\n\n** **\n\nOn March 15, 2019, the National People’s\nCongress promulgated the Foreign Investment Law of the PRC, or the Foreign Investment Law, which came into effect on January 1, 2020 and\nreplaced the three major existing laws regulating foreign investment in PRC, namely, the Sino-foreign Equity Joint Venture Enterprise\nLaw, the Sino -foreign Cooperative Joint Venture Enterprise Law of the PRC and the Wholly Foreign-invested Enterprise Law of the PRC,\ntogether with their implementation rules and ancillary regulations. Meanwhile, the Regulations for the Implementation of the Foreign Investment\nLaw was promulgated by the State Council on December 26, 2019 and came into force as of January 1, 2020, which provided clarification\nand elaboration for the relevant provisions of the Foreign Investment Law. The organization form, organization and activities of foreign-invested\nenterprises shall be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises\nset up prior to the implementation of the Foreign Investment Law may retain the original business organization and so on within five years\nafter the implementation of this Law.\n\n \n\nThe Foreign Investment Law is legislated to further\nexpand opening-up, vigorously promote foreign investment and protect the legitimate rights and interests of foreign investors. According\nto the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management\nsystem. The pre-entry national treatment refers to the treatment given to foreign investors and their investments at the stage of investment\naccess shall not be less favorable than that of domestic investors and their investments. The negative list management system means that\nthe state implements special administrative measures for access of foreign investment in specific fields.\n\n \n\nForeign investors’ investment, earnings\nand other legitimate rights and interests in PRC shall be protected in accordance with the law, and all national policies on supporting\nthe development of enterprises shall equally apply to foreign-invested enterprises. Among others, the state ensures that foreign-invested\nenterprises participate in the formulation of standards in an equal manner and that foreign -invested enterprises participate in government\nprocurement activities through fair competition according to the law. Further, the state shall not expropriate any foreign investment\nexcept under special circumstances. In special circumstances, the state may levy or expropriate the investment of foreign investors under\nthe law for the need of the public interest. The expropriation and requisition shall be conducted in accordance with legal procedures\nand timely and reasonable compensation shall be provided. In carrying out business activities, foreign-invested enterprises shall comply\nwith relevant laws and regulations on labor protection.\n\n** **\n\n48\n\n** **\n\n*Foreign Investment Industrial Policy*\n\n \n\nInvestment activities in the PRC by foreign investors\nare principally governed by the Catalog of Industries for Encouraging Foreign Investment, or the Encouraging Catalog, and the Special\nAdministrative Measures for Access of Foreign Investments, or the Negative List, which were promulgated and are amended from time to time\nby the Ministry of Commerce of the PRC, or MOFCOM and the National Development and Reform Commission, or NDRC, and together with the Foreign\nInvestment Law and their respective implementation rules and ancillary regulations. The Encouraging Catalog and the Negative List provide\nthe basic regulatory framework for foreign investment in the PRC, classifying businesses into three categories regarding foreign investment:\n“encouraged,” “restricted,” and “prohibited.” On October 26, 2022, the MOFCOM and the NDRC released\nthe Catalog of Industries for Encouraging Foreign Investment (2022 Edition), which became effective on January 1, 2023, to substitute\nthe previous one. On September 6, 2024, the MOFCOM and the NDRC promulgated the Special Administrative Measures for Access of Foreign\nInvestments (Negative List) (2024 Edition), or the Negative List 2024, which came into force on November 1, 2024, to replace the previous\nNegative List. \n\n** **\n\n**Laws and Regulations In Relation to Workplace\nSafety and Special Equipment**\n\n** **\n\n*Production Safety Law*\n\n* *\n\nIn accordance with the Production Safety Law of\nthe PRC, which took effect on November 1, 2002 and subsequently amended on August 31, 2014 and June 10, 2021, and other laws and regulations\nto production safety, production enterprises shall strengthen work safety management, enhance work safety conditions, promote work safety\nstandardization and improve work safety levels. The entity which does not meet safety conditions prescribed by this law and other relevant\nlaws, administrative regulations, and national or industry standards should not engage in production and the other business activities.\nTo assure work safety rules being observed in production process, business entities should establish and improve work safety responsibility\nsystems and work safety policies which specify the responsible person for each position, the scope of duties and the evaluation criteria.\nBusiness entities shall provide their employees with labor protection products and work safety training. Where the primary person in charge\nof a business entity fails to perform his or her duties in work safety as provided for in the Production Safety Law, he or she would be\nsubject to legal liabilities regarding the seriousness of work safety accident.\n\n \n\n*Use of Special Equipment*\n\n* *\n\nPursuant to the Law of the PRC on the Safety of\nSpecial Equipment promulgated on June 29, 2013 and effective on January 1, 2014, special equipment refers to boilers, pressure vessels\n(including gas cylinders), pressure pipelines, elevators, cranes, passenger cable -ways, large entertainment facilities and in-plant (in-factory)\nspecial motor vehicles that involve great danger to the personal and property safety, as well as other special equipment applicable to\nthe law according to relevant laws and administrative regulations. Special equipment producers shall be licensed by the relevant department\nin charge of the safety supervision and administration of special equipment before engaging in relevant production activities. Special\nequipment users shall use special equipment produced with a permit and passing inspection, and such users shall, before or within 30 days\nafter putting special equipment to use, register the use with the department responsible for special equipment safety supervision and\nadministration, obtain a use registration certificate. The entities using special equipment shall have special equipment safety management\npersonnel, testing personnel and operating personnel with corresponding qualifications in accordance with the relevant state provisions.\nThey shall conduct routine maintenance and regular self-check of the special equipment used by them and conduct regularly check and repair\nthe safety accessories and safety protection devices, and keep records thereof.\n\n \n\nIn addition to the regulations above, according\nto the Regulations on Safety Supervision over Special Equipment issued on March 11, 2003 and amended by the State Council on January 24,\n2009, special equipment users shall make a request for the periodic inspection to a special equipment inspection and testing institution\nas required by the safety technical codes for the periodic inspection.\n\n \n\n**Laws and Regulations In Relation to Product\nQuality**\n\n \n\n*Product Quality*\n\n* *\n\nThe principal legal provisions on product liability\nare set out under the Product Quality Law of the PRC issued by the Standing Committee of the National People’s Congress, or SCNPC,\non February 22, 1993 and was recently amended on December 29, 2018. The Product Quality Law requests that the producers shall have their\nown proper regulations for the management of product quality, rigorously implementing quality regulations, quality liabilities and relevant\nmeasures for their assessment. As prescribed in this law, producers shall be responsible for the quality of products they produce and\nthey shall be liable for failing to meet the prescribed quality standards. Violation of the Product Quality Law may result in fines and\nthe violator will be ordered to suspend its operations, or its business license will be revoked and criminal liability may be incurred\nif the case is serious enough to constitute a crime.\n\n \n\n49\n\n \n\n**Laws and Regulations In Relation to Import and Export Trade**\n\n* *\n\n*Customs Law*\n\n* *\n\nPursuant to the PRC Customs Law, promulgated by\nthe SCNPC on January 22, 1987, amended on July 8, 2000, June 29, 2013, December 28, 2013, November 7, 2016, November 4, 2017, and April\n29, 2021 and came into force on April 29, 2021, unless otherwise stipulated, the consignee or consignor of import and export goods may\ntake import and export goods through Customs declaration procedures and pay duties themselves, and Customs clearing enterprises which\nare authorized by the consignee or consignor of import and export goods and have been granted registration by Customs may also take import\nand export goods through Customs declaration procedures and pay duties. Where a consignee or consignor of import or export goods or a\nCustoms clearing enterprise handles Customs declaration procedures, they shall be subject to registration by Customs in accordance with\nlaw. Customs clearing personnel shall obtain the occupational qualifications for Customs clearances in accordance with law. Where an enterprise\nhas not been registered by Customs in accordance with law, and where personnel have not obtained their professional qualifications for\nCustoms clearances in accordance with law, they shall not engage in Customs declarations.\n\n \n\nImport and Export Commodity Inspection Law\n\n \n\nIn accordance with the PRC Import and Export Commodity\nInspection Law, which was promulgated by the SCNPC on February 21, 1989, amended on April 28, 2002, June 29, 2013, April 27, 2018, December\n29, 2018 and April 29, 2021 and effective on April 29, 2021, and the Implementing Regulation for the PRC Import and Export Commodity Inspection\nLaw, which was promulgated by the State Council on August 31, 2005, amended on July 18, 2013, February 6, 2016, March 1, 2017, March 2,\n2019 and March 29, 2022 and effective on May 1, 2022, the General Administration of Customs of China is responsible for the inspection\nof import and export commodities nationwide, the formulation and adjustment of the catalog of import and export commodities that shall\nbe inspected, as well as the announcement and implementation of the catalog. The import and export commodities included in the catalogue\nshall be inspected, otherwise the related bodies may be confiscated of their illegal income and subjected to a fine ranging from 5% to\n20% of the value of the goods, and where the case constitutes a criminal offence, criminal liability shall be pursued in accordance with\nthe law.\n\n \n\n**Laws and Regulations in relation to Intellectual\nProperty Rights**\n\n** **\n\n*Patent*\n\n \n\nAccording to the Patent Law of the PRC, or the\nPatent Law, promulgated by the SCNPC on March 12, 1984 and amended on September 4, 1992, August 25, 2000, December 27, 2008, and October\n17, 2020, the latest amendment took effect on June 1, 2021, respectively, and the Implementation on Rules of the Patent Law of the PRC,\nor the Implementation Rules of the Patent Law, promulgated by the State Council on June 15, 2001, respectively amended on December 28,\n2002, January 9, 2010 and December 11, 2023, the patent administrative department under the State Council is in charge of the administration\nof patent-related work nationwide and the patent administration departments of provincial or autonomous regions or municipal governments\nare responsible for administering patents within the respective administrative areas. The Patent Law and Implementation Rules of the Patent\nLaw provide for three types of patents, namely “inventions,” “utility models” and “designs.” Invention\npatents are valid for twenty years, utility model patents are valid for ten years, and since June 1, 2021, the validation period for design\npatents whose application date is after June 1, 2021 are extended to fifteen years in each case from the date of application. The Chinese\npatent system adopts a “first come, first file” principle, which means that where more than one person files a patent application\nfor the same invention, a patent will be granted to the person who files the application first. An invention or a utility model must possess\nnovelty, inventiveness and practical applicability to be patentable. A third party must obtain the consent or proper license from the\npatent owner to use the patent. Otherwise, the unauthorized use constitutes an infringement on the patent rights. \n\n* *\n\n*Trademark*\n\n* *\n\nAccording to the Trademark Law of the PRC promulgated\nby the SCNPC on August 23, 1982, and amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, respectively,\nthe Trademark Office of the State Administration for Industry and Commerce Authority, or the SAIC, under the State Council is responsible\nfor the registration and administration of trademarks in mainland China. The Trademark Review and Adjudication Board was established by\nthe SAIC to resolve trademark disputes. Registered trademarks are valid for 10 years from the date of approval of registration. A registrant\nmay apply for renewal of the registration within twelve months before the expiration date of the registration. If the registrant fails\nto apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply in a timely manner,\nthe registered trademark shall be deregistered. Renewed registrations are valid for ten years. The State Council promulgated the Implementing\nRegulations of the Trademark Law of the PRC on August 3, 2002, on April 29, 2014, the State Council issued the revised Implementing Regulations\nof the Trademark Law of the PRC, which clarifies the requirements of applying for trademark registration and renewal.\n\n \n\n50\n\n* *\n\n*Copyright*\n\n* *\n\nPursuant to the Copyright Law of the PRC, which\nwas first promulgated by the SCNPC on September 7, 1990 and became effective from June 1, 1991, and was amend on October 27, 2001, February\n26, 2010, and November 11, 2020 and effected on June 1, 2021, respectively, copyrights include personal rights such as the right of publication\nand that of attribution as well as property rights such as the right of production and that of distribution. Except as otherwise provided\nin the Copyright Law of the PRC, reproducing, distributing, performing, projecting, broadcasting or compiling a work or communicating\nthe same to the public via an information network without permission from the owner of the copyright therein shall constitute infringements\nof copyrights. The infringer shall, according to the circumstances of the case, undertake to cease the infringement, take remedial measures\nand compensate for damages, etc.\n\n \n\n**Laws and Regulations In Relation to Social\nSecurity and Housing Provident Funds**\n\n** **\n\n*Employment*\n\n* *\n\nThe Labor Law of the PRC, which was promulgated\non July 5, 1994, effective since January 1, 1995, and amended on August 27, 2009, and December 29, 2018, the Labor Contract Law of the\nPRC, which was promulgated on June 29, 2007, and amended on December 28, 2012, and the Implementation Regulations of the Labor Contract\nLaw of the PRC, which was promulgated and became effective on September 18, 2008, are the principal regulations that govern employment\nand labor matters in the PRC. According to the aforementioned laws and regulations, labor contracts shall be concluded in writing if labor\nrelationships are to be or have been established between employers and the employees. Employers are prohibited from forcing employees\nto work above certain time limit and employers shall pay employees for overtime work in accordance with national regulations. In addition,\nwages shall not be lower than the local minimum wage standard. Employers shall establish a system for labor safety and sanitation, strictly\ncomply with national standards, and provide relevant education to its employees. Employees are also required to work under safe and sanitary\nconditions.\n\n \n\n*Social Insurance and Housing Fund*\n\n* *\n\nUnder the PRC Social Insurance Law that was promulgated\nby the SCNPC on October 28, 2010, and came into force as of July 1, 2011, and was most recently amended on December 29, 2018 (also the\neffective date), together with other laws and regulations, employers are required to pay basic pension insurance, unemployment insurance,\nbasic medical insurance, employment injury insurance, maternity insurance, and other social insurance for its employees at specified percentages\nof the salaries of the employees, up to a maximum amount specified by the local government regulations from time to time. When an employer\nfails to pay social insurance premiums in full, relevant social insurance collection agency shall order it to make up the shortfall within\nthe prescribed period and may impose a late payment fee of 0.05% per day of the outstanding amount from the due date. If such employer\nstill fails to make up for the shortfalls within the prescribed time limit, the relevant administrative authorities shall impose a fine\nof one to three times the outstanding amount upon such employer.\n\n \n\nIn accordance with the Regulations on the Management\nof Housing Provident Fund promulgated by the State Council in April 3, 1999 and amended on March 24, 2002, and March 24, 2019 (which became\neffective as of March 24, 2019), employers shall register at the designated administrative centers and open bank accounts for depositing\nemployees’ housing funds. Employer and employee are also required to pay and deposit housing provident funds, with an amount no\nless than 5% of the monthly average salary of the employee in the preceding year in full and on time. When an employer fails to pay the\nhousing provident fund in full, the designated administrative centers shall order it to make the payment and deposit within a prescribed\ntime limit; If the payment and deposit have not been made by the expiration of the time limit, an application for enforcement may be made\nto a people’s court.\n\n \n\n51\n\n** **\n\n**Laws and Regulations In Relation to Environmental\nProtection**\n\n** **\n\n*Environmental Protection*\n\n* *\n\nPursuant to the PRC Environmental Protection Law,\nwhich the trial implementation was promulgated on September 13, 1979, and was promulgated by the SCNPC on December 26, 1989, amended on\nApril 24, 2014, and effective on January 1, 2015, any entity which discharges or will discharge pollutants in the course of its operations\nor other activities shall implement effective environmental protection safeguards and procedures to control and properly dispose of exhaust\ngases, waste water, waste residue, dust, malodorous gases, radioactive substances, noise, vibrations, electromagnetic radiation, and other\nhazards produced during such activities.\n\n \n\nEnvironmental protection authorities impose various\nadministrative penalties on individuals or enterprises that violate the Environmental Protection Law. Such penalties include warnings,\nfines, orders to rectify within a prescribed period, orders to cease construction, orders to restrict or suspend production, orders to\nmake recovery, orders to disclose relevant information or make an announcement, imposition of administrative action against relevant responsible\npersons, and orders to shut down enterprises. Any person or entity that pollutes the environment resulting in damage could also be held\nliable under the Civil Code of the PRC. In addition, environmental organizations may also bring lawsuits against any entity that discharges\npollutants detrimental to the public welfare.\n\n \n\n*Environmental Assessment and Management of\nConstruction Projects*\n\n* *\n\nThe Environmental Impact Assessment Law of the\nPRC, or Environmental Impact Assessment Law, was issued by the SCNPC on October 28, 2002 and came into force on September 1 2003, and\nwas amended on July 2, 2018, December 29, 2018. Under the provisions of the Environmental Impact Assessment Law, the PRC government applied\nthe environmental impact evaluation system to construction projects and implemented classification management in accordance with the degree\nof environmental impact of the construction project.\n\n \n\nThe State Council promulgated and implemented\nthe Regulations on Environmental Protection Management of Construction Projects on November 29, 1998, which was amended on July 16, 2017\nand came into force on October 1, 2017. The Ministry of Environment Protection (the predecessor of the Ministry of Ecological Environment\nof the PRC) issued the Interim Measure for Environmental Protection Acceptance of Construction Projects on November 20, 2017. In accordance\nwith the above regulations, upon completion of a construction project for which an environmental impact report or an environmental impact\nstatement has been prepared, the construction unit shall implement acceptance check of the supporting environmental facilities being constructed\nand prepare an acceptance report pursuant to the standards and procedures required by the administrative department of environmental protection,\nand such supporting environmental protection facilities shall be put into operation simultaneously or used together with the main body\nof the project. If a construction unit violates the aforesaid provisions, it could be ordered to rectify within a specified time limit\nand charged a fine of more than RMB 200,000 less than RMB 1.0 million; if it fails to make rectification within the time limit, a fine\nof more than RMB 1.0 million but less than RMB 2.0 million shall be imposed on it and the construction unit could even be ordered to cease\nits production or operation, or to close down when material environmental pollution is caused.\n\n \n\n*Regulations Related to Fire Control*\n\n \n\nPursuant to the PRC Fire Safety Law, which was\npromulgated by the SCNPC on April 29, 1998, amended on October 28, 2008 and April 23, 2019, and April 29, 2021, and the Interim Provisions\non Administration of Fire Control Design Review and Acceptance of Construction Project promulgated by the Ministry of Housing and Urban-Rural\nDevelopment on April 1, 2020 and amended on August 21, 2023, the construction entity of a large-scale crowded venue (including the construction\nof a manufacturing plant whose size is over 2,500 square meters) and other special construction projects must apply for fire prevention\ndesign review with fire control authorities, and complete fire assessment inspection and acceptance procedures after the construction\nproject is completed. The construction entity of other construction projects must complete the filing for fire prevention design and the\nfire safety completion inspection and acceptance procedures within five business days after passing the construction completion inspection and\nacceptance. If the construction entity fails to pass the fire safety inspection before such venue is put into use or fails to conform\nto the fire safety requirements after such inspection, it will be subject to (i) orders to suspend the construction of projects, use of\nsuch projects, or operation of relevant business, and (ii) a fine between RMB30,000 and RMB300,000.\n\n \n\n52\n\n \n\n**Laws and Regulations In Relation to Taxation**\n\n* *\n\n*Enterprise Income tax*\n\n* *\n\nAccording to the Enterprise Income Tax Law of\nthe PRC, or the EIT Law, which was promulgated on March 16, 2007, became effective from January 1, 2008 and amended on February 24, 2017\nand December 29, 2018, respectively, an enterprise established outside mainland China with de facto management bodies within mainland\nChina is considered a resident enterprise for mainland China enterprise income tax purposes and is generally subject to a uniform 25%\nenterprise income tax rate on its worldwide income. The Implementing Rules of the Enterprise Income Law of the PRC, or the Implementing\nRules of the EIT Law defines a de facto management body as a managing body that in practice exercises “substantial and overall management\nand control over the production and operations, personnel, accounting, and properties” of the enterprise. Non-mainland China resident\nenterprises without any branches in mainland China pay an enterprise income tax in connection with their income originating from mainland\nChina at the tax rate of 10%.\n\n \n\nOn February 3, 2015, the State Taxation Administration,\nor SAT, issued the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non -Resident\nEnterprises, or the SAT Circular 7, as amended in 2017. The SAT Circular 7 repeals certain provisions in the Notice of the State Administration\nof Taxation on Strengthening the Administration of Enterprise Income Tax on Income from Equity Transfer by Non-Resident Enterprises, or\nthe SAT Circular 698, issued by SAT on December 10, 2009 and the Announcement on Several Issues Relating to the Administration of Income\nTax on Non -resident Enterprises issued by SAT on March 28, 2011 and clarifies certain provisions in the SAT Circular 698. The SAT Circular\n7 provides comprehensive guidelines relating to, and heightening the Chinese tax authorities’ scrutiny on, indirect transfers by\na non-resident enterprise of assets (including assets of organizations and premises in mainland China, immovable property in mainland\nChina, equity investments in mainland China resident enterprises), or the PRC Taxable Assets. For instance, when a non-resident enterprise\ntransfers equity interests in an overseas holding company that directly or indirectly holds certain mainland China Taxable Assets and\nif the transfer is believed by the Chinese tax authorities to have no reasonable commercial purpose other than to evade enterprise income\ntax, the SAT Circular 7 allows Chinese tax authorities to reclassify the indirect transfer of PRC Taxable Assets into a direct transfer\nand therefore impose a 10% rate of mainland China enterprise income tax on the non-resident enterprise. The SAT Circular 7 lists several\nfactors to be taken into consideration by tax authorities in determining whether an indirect transfer has a reasonable commercial purpose.\n\n \n\nHowever, regardless of these factors, the overall\narrangements relating to an indirect transfer that satisfies all of the following criteria will be deemed to lack a reasonable commercial\npurpose: (i) 75% or more of the equity value of the intermediary enterprise being transferred is derived directly or indirectly from mainland\nChina Taxable Assets; (ii) at any time during the one -year period before the indirect transfer, 90% or more of the asset value of the\nintermediary enterprise(excluding cash) is comprised directly or indirectly of investments in mainland China, or during the one-year period\nbefore the indirect transfer, 90% or more of its income is derived directly or indirectly from mainland China; (iii) the functions performed\nand risks assumed by the intermediary enterprise and any of its subsidiaries and branches that directly or indirectly hold the mainland\nChina Taxable Assets are limited and are insufficient to prove their economic substance; and (iv) the foreign tax payable on the gain\nderived from the indirect transfer of the mainland China Taxable Assets is lower than the potential mainland China tax on the direct transfer\nof those assets. On the other hand, indirect transfers falling into the scope of the safe harbors under the SAT Circular 7 may not be\nsubject to mainland China tax under the SAT Circular 7. The safe harbors include qualified group restructurings, public market trades\nand exemptions under tax treaties or arrangements.\n\n \n\nOn October 17, 2017, SAT issued the Announcement\non Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Circular 37, which became effective\non December 1, 2017. Certain provisions of the SAT Circular 37 were repealed by the Announcement of the State Administration of Taxation\non Revising Certain Taxation Normative Documents issued by SAT on June 15, 2018. According to the SAT Circular 37, the balance after deducting\nthe equity net value from the equity transfer income shall be the taxable income amount for equity transfer income. Equity transfer income\nrefers to the consideration received by the equity transferor from the equity transfer, including various income in monetary form and\nnon -monetary form. Equity net value shall mean the tax computation basis for obtaining the said equity. The tax computation basis for\nequity is calculated based on: (i) the actual costs of capital contribution paid by the equity transferor to a PRC resident enterprise\nat the time of investment and equity participation, or (ii) the actual costs of equity transfer paid at the time of acquisition of such\nequity to the original transferor of the said equity. Where there is reduction or appreciation of value during the equity holding period,\nand the gains or losses may be confirmed pursuant to the rules of the finance and tax authorities of the State Council, the equity net\nvalue shall be adjusted accordingly. When an enterprise computes equity transfer income, it shall not deduct the amount in the shareholders’\nretained earnings, such as undistributed profits, of the investee enterprise, which may be distributed based on the said equity. In the\nevent of partial transfer of equity under multiple investments or acquisitions, the enterprise shall determine the costs corresponding\nto the transferred equity in accordance with the transfer ratio, out of all costs of the equity.\n\n \n\n53\n\n \n\nUnder the SAT Circular 7 and the Law of the PRC\non the Administration of Tax Collection promulgated by the SCNPC on September 4, 1992 and amended on February 28, 1995, April 28, 2001,\nJune 29, 2013, and April 24, 2015, in the case of an indirect transfer, entities or individuals obligated to pay the transfer price to\nthe transferor shall act as withholding agents. Where the withholding agent fails to make the withholding, and the transferor of the equity\ndoes not pay the tax payable amount, the tax authority may impose late payment interest on the transferor. In addition, the tax authority\nmay also hold the withholding agents liable and impose a penalty of ranging from 50% to 300% of the unpaid tax. The penalty imposed on\nthe withholding agents may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the\nindirect transfer to the mainland China tax authorities in accordance with the SAT Circular 7.\n\n \n\nAccording to the Circular of Printing the Administrative\nMeasures for Recognition of High-Tech Enterprises issued by Ministry of Science and Technology, Ministry of Finance of the PRC, or MOF\nand SAT on April 14, 2008, and amended on January 29, 2016 and came into effect since January 1, 2016, upon the accreditation of the qualification\nof High -tech enterprises, such enterprises may apply for the entitlement of the preferential enterprise income tax treatment since the\ncurrent year beginning from the valid period approved by the accreditation. A “high and new technology enterprise” is entitled\nto a favorable statutory tax rate of 15% and such an enterprise should keep all statutory required relevant materials in case of future\ninspection. This qualification is reassessed by relevant government authorities every three years.\n\n \n\n*Withholding tax on dividend distribution*\n\n* *\n\nThe EIT Law imposes a standard withholding tax\nrate of 20% on dividends and other mainland China-sourced income of non-mainland China resident enterprises which have no establishment\nor place of business in mainland China, or if established, the relevant dividends or other mainland China-sourced income are in fact not\nassociated with such establishment or place of business in mainland China. However, the Implementing Rules of the EIT Law reduced the\nrate from 20% to 10%, effective from January 1, 2008 and amended on April 23, 2019.\n\n \n\nHowever, a lower withholding tax rate might be\napplied if there is a tax treaty or similar agreement between mainland China and the jurisdiction of the foreign holding company, for\nexample, pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of\nDouble Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, or the Double Tax Avoidance Arrangement, issued\nby the SAT and the Government of the Hong Kong Special Administrative Region on August 21, 2006, and other applicable mainland China laws,\nif a Hong Kong resident enterprise directly owns at least 25% of the shares of a mainland China resident enterprise paying the dividends,\nthe 10% withholding tax on the dividends that the Hong Kong resident enterprise receives from a mainland China resident enterprise may\nbe reduced to 5% upon receiving approval from the tax authority in charge.\n\n \n\nBased on the Notice on Relevant Issues Relating\nto the Enforcement of Dividend Provisions in Tax Treaties issued on February 20, 2009 by the SAT, if the relevant mainland China tax authorities\ndetermine, at their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily\ntax-driven, such mainland China tax authorities may adjust the preferential tax treatment. The Announcement of the State Administration\nof Taxation on Issues concerning “Beneficial Owners” in Tax Treaties, promulgated by the SAT on February 3, 2018 and took\neffect on April 1, 2018, further specifies the analysis standard in determining one’s qualification for beneficial owner status.\n\n \n\nIn addition, the Administrative Measures for Convention\nTreatment for Non-resident Taxpayers, which promulgated by the SAT on October 14, 2019, and became effective on January 1, 2020, requires\nthat non-resident taxpayers claiming treaty benefits shall be handled in accordance with the principles of “self-assessment, claiming\nfor the enjoyment of treaty benefits, and retention of the relevant materials for future inspection.” Where a non-resident taxpayer\nself-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax\ndeclaration or at the time of withholding through a withholding agent, and simultaneously collect and retain the relevant materials in\naccordance with the provisions of these Measures for future inspection, and subject to subsequent administration by relevant competent\ntax authorities. \n\n \n\n54\n\n* *\n\n*Value-Added Tax*\n\n* *\n\nPursuant to the Interim Regulations on Value-Added\nTax of the PRC, which was promulgated by the State Council on December 13, 1993 and amended on November 10, 2008, February 6, 2016 and\nNovember 19, 2017, respectively, and the Implementation Rules for the Interim Regulations on Value -Added Tax of the PRC, which was promulgated\nby MOF on December 25, 1993, and as amended by MOF and SAT on December 15, 2008 and as amended by MOF on October 28, 2011, and became\neffective on November 1, 2011, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement\nservices, selling services, sales of intangible assets or importation of goods within the territory of mainland China shall pay value-added\ntax, or VAT. Unless otherwise specified, the VAT rate is 17% on sales and 6% on the services. On April 4, 2018, MOF and SAT jointly issued\nthe Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates, or the Circular\n32, pursuant to which (i) for VAT taxable sales acts or import of goods originally subject to VAT rates of 17% and 11%, respectively,\nsuch tax rates shall be reduced to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to tax rate\nof 11%, such tax rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purpose of production and sales or\nconsigned processing of goods subject to tax rate of 16%, such tax shall be calculated at the tax rate of 12%; (iv) for exported goods\noriginally subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be reduced to 16%; and (v) for\nexported goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund\nrate shall be adjusted to 10%. Circular 32 became effective on May 1, 2018 and shall supersede existing provisions which are inconsistent\nwith Circular 32.\n\n \n\nOn March 20, 2019, MOF, SAT and the General Administration\nof Customs jointly promulgated the Announcement on Relevant Policies for Deepening Value -Added Tax Reform, which became effective on\nApril 1, 2019 and stipulates that (i) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16%\nand 10%, respectively, such tax rates shall be reduced to 13% and 9%, respectively; (ii) with respect to purchase of agricultural products\noriginally subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (iii) with respect to purchase of agricultural products\nfor the purpose of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate\nof 10%; (iv) with respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the\nexport tax refund rate shall be reduced to 13%; and (v) with respect to export of goods and cross-border taxable acts originally subject\nto tax rate of 10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.\n\n \n\n**Regulation In Related to M&A Regulation\nand Overseas Listing**\n\n** **\n\nOn August 8, 2006, six PRC governmental agencies\njointly promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which\nbecame effective on September 8, 2006 and amended on June 22, 2009. The M&A Rules requires, among other things, that if an overseas\ncompany established or controlled by PRC companies or individuals, or PRC Citizens, intends to acquire equity interests or assets of any\nother PRC domestic company affiliated with the PRC Citizens, such acquisition shall be submitted to the MOFCOM for approval. The M&A\nRules also require offshore special purpose vehicles established to pursue overseas listing of equity interests in PRC companies and controlled\ndirectly or indirectly by PRC companies or individuals to obtain the approval of the Chinese Securities Regulatory Commission, or the\nCSRC, prior to the listing and trading of such special purpose vehicle’s securities on any stock exchange overseas.\n\n \n\nOn February 17, 2023, the CSRC promulgated Trail\nAdministrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures and five supporting guidelines,\nwhich will become effective on March 31, 2023. According to the Trial Measures, among other requirements, (1) domestic companies that\nseek to offer or list securities overseas, both directly and indirectly, shall fulfil the filing procedures with the CSRC; if a domestic\ncompany fails to complete the filing procedure, such domestic company may be subject to administrative penalties; (2) if the issuer satisfies\nboth of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by\na domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the\nmost recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial\nstatements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located\nin China, or the senior managers responsible for operation and management of the issuer are mostly Chinese citizens or are domiciled in\nChina; and (3) if the domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate\na major domestic operating entity responsible for all filing procedures with the CSRC, and shall submit the filings to the CSRC within\nthree business days after the submission of the overseas offering and listing application. Further, at the press conference held for the\nTrial Measures on February 17, 2023, officials from the CSRC clarified that a six-month transition period will be granted to domestic\ncompanies which, before the effective date of the Trial Measures, have already obtained the approval from overseas regulatory authorities\nor stock exchanges (such as the completion of hearing in the market of Hong Kong or the completion of registration in the market of the\nUnited States), but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing within\nsuch six-month transition period, they shall file with the CSRC in accordance with the requirements.\n\n \n\n55\n\n \n\nOn February 24, 2023, the CSRC, MOF, National\nAdministration of State Secrets Protection and National Archives Administration of China promulgated the Provisions on Strengthening Confidentiality\nand Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which will come\ninto force on March 31, 2023. According to the Archives Rules, domestic companies seeking for overseas offering and listing shall strictly\ncomply with relevant laws and regulations of the PRC and the Archives Rules, enhance legal awareness of keeping state secrets and strengthening\narchives administration, establish a sound administration system of confidentiality and archives, and take necessary means to fulfill\nconfidentiality and archives administration obligations. Such domestic companies shall not leak any state secret and working secret of\ngovernment agencies, and shall not harm national security and public interest. In addition, a domestic company that plans to, either directly\nor through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies,\nsecurities service providers and overseas regulators, any document and materials that contain state secrets or working secrets of government\nagencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department\nat the same level. Moreover, a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose\nor provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators,\nany other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill\nrelevant procedures stipulated by applicable national regulations. The Archives Rules also specify that a domestic company that provides\naccounting archives or copies of accounting archives to any entities including securities companies, securities service providers and\noverseas regulators and individuals shall fulfill due procedures in accordance with applicable national regulations.\n\n \n\nThe Anti-Monopoly Law, which was promulgated by\nthe SCNPC on August 30, 2007 and became effective on August 1, 2008 and was amended on June 24, 2022 requires that transactions which\nare deemed concentrations and involve parties with specified turnover thresholds must be cleared by MOFCOM before they can be completed.\nMoreover, on February 3, 2011, the General Office of the State Council promulgated the Notice on Establishing the Security Review System\nfor Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or Circular 6, which officially established a security review\nsystem for mergers and acquisitions of domestic enterprises by foreign investors. In addition, on August 25, 2011, MOFCOM issued the Regulations\non Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the MOFCOM\nSecurity Review Regulations, which became effective on September 1, 2011, to implement Circular 6. According to Circular 6, a security\nreview is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers\nand acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national\nsecurity” concerns. Under the MOFCOM Security Review Regulations, MOFCOM will focus on the substance and actual impact of the transaction\nwhen deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition\nis subject to security review, it will submit it to the Inter -Ministerial Panel, an authority established under the Circular 6 led by\nthe NDRC, and MOFCOM under the leadership of the State Council, to implement the security review. The regulations prohibit foreign investors\nfrom structuring transactions through trusts, indirect investments, leases, loans, contractual arrangements control or offshore transactions\nto bypass the security review. On February 7, 2021, the Anti -Monopoly Committee of the State Council promulgated the Anti-monopoly Guidelines\nfor the Platform Economy Sector, or the Anti-monopoly Guideline, aiming to improve anti-monopoly administration on online platforms. The\nAnti-monopoly Guideline, operating as the compliance guidance under the existing PRC anti-monopoly regulatory regime for platform economy\noperators, specifically prohibits certain acts of the platform economy operators that may have the effect of eliminating or limiting market\ncompetition, such as concentration of undertakings. The Decision of the SCNPC to Amend the Anti-Monopoly Law of the PRC, or the Decision\non Amending the Anti-Monopoly Law, was adopted on June 24, 2022, and became effective as of August 1, 2022. The Decision on Amending the\nAnti -Monopoly Law strengthens the regulation on the internet platforms, requiring that undertakings shall not use data and algorithms,\ntechnologies, capital advantages, platform rules, and other measures to engage in monopolistic conduct; and also escalates in full scale\nthe administrative penalties for monopolistic conducts, for the failure to notify the anti-monopoly agencies on the proposed concentration\nof undertakings, the state council anti-monopoly enforcement agency may order to reinstate the original status prior to the concentration\nand impose a fine up to ten percent of the operator’s last year’s sales revenue, provided that the concentration of undertakings\nhas or may have an effect on excluding or limiting competition; if the concentration does not have the effect on excluding or limiting\ncompetition, a fine up to RMB 5 million may be imposed on operators. Since such provisions are relatively new, uncertain still remains\nas to the interpretation and implementation of such laws and regulations.\n\n \n\n56\n\n** **\n\n**Regulations In Related to Foreign Exchange**\n\n** **\n\nThe principal regulations governing foreign currency\nexchange in mainland China are the Administrative Regulations on Foreign Exchange of the PRC, or the Foreign Exchange Administrative Regulation,\nwhich were promulgated by the State Council on January 29, 1996, became effective on April 1, 1996 and was amended on January 14, 1997\nand August 1, 2008 (which became effective on August 5, 2008), respectively, and the Administrative Regulations on Foreign Exchange Settlement,\nSales and Payment, which was promulgated by People’s Bank of China, or the PBOC, on June 20, 1996 and became effective on July 1,\n1996. Under these regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange\ntransactions can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying\nwith certain procedural requirements. By contrast, approval from or registration with appropriate governmental authorities or the designated\nbanks is required where RMB is to be converted into foreign currency and remitted outside of mainland China to pay capital account items\nsuch as the repayment of foreign currency-denominated loans, direct investment overseas and investments in securities or derivative products\noutside of mainland China. Foreign Invested Enterprises, or FIEs, are permitted to convert their after-tax dividends into foreign exchange\nand to remit such foreign exchange out of their foreign exchange bank accounts in mainland China.\n\n \n\nOn March 30, 2015, SAFE promulgated the Circular\non Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or the SAFE Circular 19, which\ncame into effect on June 1, 2015 and subsequently revised in December 30, 2019 and March 23, 2023. Pursuant to the SAFE Circular 19, the\nforeign currency capital contribution to an FIE in its capital account may be converted into RMB on a discretional basis.\n\n \n\nOn June 9, 2016, SAFE issued the Circular on Reforming\nand Regulating Policies on the Management of the Settlement of Foreign Exchange of Capital Accounts, or the SAFE Circular 16. The SAFE\nCircular 16 unifies the discretional foreign exchange settlement for all the domestic institutions. The Discretional Foreign Exchange\nSettlement refers to the foreign exchange capital in the capital account which has been confirmed by the relevant policies subject to\nthe discretional foreign exchange settlement (including foreign exchange capital, foreign loans and funds remitted from the proceeds from\nthe overseas listing) can be settled at the banks in accordance with the actual operational needs of the domestic institutions. The proportion\nof Discretional Foreign Exchange Settlement of the foreign exchange capital is temporarily determined as 100%. Violations of SAFE Circular\n19 or SAFE Circular 16 could incur administrative penalties under the Foreign Exchange Administrative Regulation and relevant provisions.\n\n \n\nFurthermore, SAFE Circular 16 stipulates that\nthe use of foreign exchange incomes of capital accounts by FIEs shall follow the principles of authenticity and self-use within the business\nscope of the enterprises. The foreign exchange incomes of capital accounts and capital in RMB obtained by the FIE from foreign exchange\nsettlement shall not be used for the following purposes: (i) directly or indirectly used for the payment beyond the business scope of\nthe enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities\nor financial schemes other than bank-guaranteed products unless otherwise stipulated by relevant laws and regulations; (iii) used for\ngranting loans to non-affiliated enterprises, unless otherwise permitted by the scope of its business; and (iv) used for the construction\nor purchase of real estate that is not for self-use (except for real estate enterprises). \n\n \n\n57\n\n \n\nOn October 23, 2019, SAFE promulgated the Circular\nof the SAFE on Further Promoting the Facilitation of Cross-border Trade and Investment, or the SAFE Circular 28. The SAFE Circular 28\nstipulates that non-investment FIEs may use capital to carry out domestic equity investment in accordance with the law under the premise\nof not violating the negative list and the projects invested are true and in compliance with laws and regulations.\n\n \n\nOn April 10, 2020, SAFE issued Circular of the\nSAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business Growth, or the SAFE Circular\n8. The SAFE Circular 8 stipulates that under the condition that the use of funds is genuine and compliant with current administrative\nprovisions on use of income related to capital account, enterprises are allowed to use income under capital account such as capital funds,\nforeign debts, and overseas listings for domestic payment, without submission to the bank prior to each transaction of materials evidencing\nthe veracity of such payment.\n\n \n\n**Regulations Relating to Dividend Distribution**\n\n \n\nThe principal regulations governing distribution\nof dividends of wholly foreign-owned enterprises, or WFOEs, include the Company Law of PRC. Under these regulations, WFOEs in mainland\nChina may pay dividends only out of their accumulated profits, if any, determined in accordance with the mainland China accounting standards\nand regulations. In addition, foreign investment enterprises in mainland China shall allocate at least 10% of their accumulated profits\neach year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises.\nThese reserves are not distributable as cash dividends.\n\n \n\n**Laws and Regulations in Hong Kong**\n\n \n\n*Business Registration*\n\n* *\n\nThe Business Registration Ordinance (Chapter 310\nof the Laws of Hong Kong) requires every entity which carries on a business in Hong Kong to apply for business registration and to display\nthe valid business registration certificate at the place of business. Any person who fails to apply for business registration or display\na valid business registration certificate at the place of business shall be guilty of an offence and shall be liable to a fine of HK$5,000\nand imprisonment for one year.\n\n \n\n*Import and Export*\n\n* *\n\nRegulations 4 and 5 of the Import and Export (Registration)\nRegulations (Chapter 60E of the Laws of Hong Kong) (the “IAE Registration Regulations”) provide that every person who imports\nor exports any article other than an exempted article shall lodge an accurate and complete import or export declaration relating to such\narticle using services provided by a specified body with the Commissioner of Customs and Excise within 14 days after the importation or\nexportation of the article.\n\n \n\nAny person failing to declare within 14 days after\nthe importation or exportation of the article without reasonable excuse is liable to a fine of HK$2,000 upon summary conviction, and after\nthe date of conviction, to a fine of HK$100 in respect of every day during which his failure or neglect to lodge the declaration in that\nmanner continues. Furthermore, the IAE Registration Regulations also provides that any person knowingly or recklessly lodges any declaration\nwith the Commissioner of Customs and Excise that is inaccurate in any material particular shall be liable to a fine of HK$10,000 upon\nsummary conviction.\n\n \n\nIn addition to any fines imposed, an administrative\npenalty (which ranges from HK$20 to HK$200 per incident depending on the time of lodging the declaration and the total value of the articles\nspecified in the declaration) would also be payable for late declaration.\n\n \n\n**Sale of Goods Ordinance**\n\n \n\nSale of Goods Ordinance (Chapter 26 of the Laws\nof Hong Kong) provides that where a seller sells goods in the course of a business, there is an implied condition that (i) where the goods\nare purchased by description, the goods shall correspond with the description; (ii) the goods supplied are of merchantable quality; and\n(iii) the goods shall be reasonably fit for the purpose for which they are purchased. Otherwise, a buyer has the right to reject the defective\ngoods unless he or she has had a reasonable opportunity to examine the goods. A breach of the implied term may give rise to a civil action\nfor breach of contract by the customers. However, no criminal liability arises from such breach of implied term.\n\n \n\n58\n\n* *\n\n*Trade Descriptions*\n\n* *\n\nThe Trade Descriptions Ordinance (Chapter 362\nof the Laws of Hong Kong) prohibits false trade descriptions, false, misleading or incomplete information, false marks and misstatements\nin respect of goods in the course of trade. Under the Trade Descriptions Ordinance, it is an offence for a person, in the course of trade\nor business, to apply a false or misleading trade description to any goods or supply any goods with false or misleading trade descriptions,\nforge any trade mark or falsely apply any trade mark to any goods, or engages in relation to a consumer in a commercial practice that\nis a misleading omission, is aggressive, or constitutes bait advertising, a bait and switch, or wrongly accepting payment for a product.\n\n \n\nA person who commits any such offence is subject\nto, on conviction on indictment, a fine of HK$500,000 and imprisonment for five years, and, on summary conviction, to a fine of HK$100,000\nand imprisonment for two years.\n\n \n\n*Taxation*\n\n* *\n\nThe Inland Revenue Ordinance (Chapter 112 of the\nLaws of Hong Kong) (“IRO”) regulates taxes on property, earnings and profits in Hong Kong. The IRO provides that every person\nincluding corporations, partnerships, trustees and bodies of persons, carrying on any trade, profession or business in Hong Kong are liable\nfor tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade,\nprofession or business. As at the Latest Practicable Date, the standard profits tax rate for corporations is at 8.25% on assessable profits\nup to HK$2,000,000 and 16.5% on any part of assessable profits over HK$ 2,000,000. The IRO also contains provisions relating to, among\nothers, permissible deductions for outgoings and expenses, set-offs for losses and allowances for depreciations.\n\n \n\n**Employment**\n\n** **\n\n*Employment Ordinance*\n\n* *\n\nThe Employment Ordinance (Chapter 57 of the Laws\nof Hong Kong) provides for, among other things, the basic employment protection of wages to all employees to regulate the general conditions\nof employment and for matters connected therewith.\n\n \n\nThe Employment Ordinance provides that where a\ncontract of employment is terminated, any sum due to the employee shall be paid to him as soon as is practicable and in any case not later\nthan seven days after the day of termination. Under the Employment Ordinance, any employer who willfully and without reasonable excuse\nfails to pay the said sum due to the employee within seven days after the day of termination, commits an offence and is liable to a fine\nof HK$350,000 and to imprisonment for three years.\n\n \n\nFurther, the Employment Ordinance provides that\nif any wages or any sum earned by the employee for work done over the period commencing on the expiry of his wage period next preceding\nthe time of termination up to that time are not paid within seven days from the day on which they become due, the employer shall pay interest\nat a specified rate on the outstanding amount of wages or sum from the date on which such wages or sum become due up to the date of actual\npayment. Any employer who willfully and without reasonable excuse fails to pay such wages or sum within seven days from the day on which\nthey become due, commits an offence and is liable on conviction to a fine of HK$10,000.\n\n \n\n*Mandatory Provident Fund Schemes Ordinance*\n\n* *\n\nThe Mandatory Provident Fund Schemes Ordinance\n(Chapter 485 of the Laws of Hong Kong) (“MPFSO”) provides that every employer must take all practicable steps to ensure that\neach employee is covered under a Mandatory Provident Fund (MPF) scheme. An employer who fails to comply with such a requirement may face\na fine and imprisonment. The MPFSO provides that an employer must, for each contribution period, (a) from the employer’s own funds,\ncontribute to the relevant MPF scheme the amount determined in accordance with the MPFSO; and (b) deduct from the employee’s relevant\nincome for that period as a contribution by the employee to that scheme the amount determined in accordance with the MPFSO.\n\n \n\nThe amount to be contributed and/or deducted by\nan employer for a contribution period is in the case of a casual employee who is a member of an industry scheme, an amount determined\nby reference to a scale specified in an order made in accordance with the MPFSO.\n\n \n\n59\n\n* *\n\n*Employees’ Compensation Ordinance*\n\n* *\n\nThe Employees’ Compensation Ordinance (Chapter\n282 of the Laws of Hong Kong) (“ECO”) establishes a no-fault and non-contributory employee compensation system for work injuries\nand lays down the rights and obligations of employers and employees respectively in respect of injuries or death caused by accidents arising\nout of and in the course of employment, or by prescribed occupational diseases.\n\n \n\nUnder the ECO, if an employee sustains an injury\nor dies as a result of an accident arising out of and in the course of his employment, his employer is generally liable to pay compensation\neven if the employee might have committed acts of faults or negligence when the accident occurred. Similarly, an employee who suffers\nincapacity arising from an occupational disease or dies from an occupational disease is entitled to receive the same compensation as that\npayable to employees injured in occupational accidents.\n\n \n\nUnder the ECO, an employer must notify the Commissioner\nfor Labor of any work accident by submitting the prescribed form (within fourteen days after the accident for general work accidents and\nwithin seven days after the accident for fatal accidents), irrespective of whether the accident gives rise to any liability to pay compensation.\nIf the happening of such accident was not brought to the notice of the employer or did not otherwise come to his knowledge within such\nperiod of seven or fourteen days (as the case may be), then such notice shall be given not later than seven days or, as may be appropriate,\nfourteen days after the happening of the accident was first brought to the notice of the employer or otherwise came to his knowledge.\n\n \n\nThe ECO further provides that all employers are\nrequired to take out insurance policies to cover their liabilities under the ECO and common law for injuries at workplace for all of their\nemployees. An employer failing to do so is liable on conviction upon indictment to a fine of HK$ 100,000 and to imprisonment for two years,\nand on summary conviction to a fine of HK$100,000 and imprisonment for one year.\n\n \n\n*Minimum Wage Ordinance*\n\n \n\nThe prescribed minimum hourly wage rate (currently\nset at HK$40 per hour) for every employee is governed by the Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) (the “MWO”).\nSection 15 of the MWO provides that any provision of employment contract which purports to extinguish or reduce the right, benefit or\nprotection conferred on the employee under the MWO is void.\n\n \n\n**C. Organizational structure**\n\n \n\nSee “Item 4. Information on the Company—A.\nHistory and Development of the Company — Corporate history and structure”. \n\n \n\n**D. Property, Plants and Equipment**\n\n \n\nSee “Item 4. Information on the Company—A.\nHistory and Development of the Company — Facilities”."}