DRS 1 filename1.htm

As submitted confidentially to the U.S. Securities and Exchange Commission on 30 September, 2021. This draft registration statement has not been publicly filed with the U.S. Securities and Exchange Commission and all information herein remains strictly confidential.

Registration No. [●]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

J-Star Holding Co., Ltd.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Cayman Islands |  | 3949 |  | Not Applicable
(State or other jurisdiction of incorporation or organization) |  | (Primary Standard Industrial Classification Code Number) |  | (I.R.S. Employer Identification Number)

7/F-1, No. 633, Sec. 2, Taiwan Blvd.,

Xitun District, Taichung City 407,

Taiwan (R.O.C.)
Tel: + 886-423229900
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Puglisi & Associates

850 Library Avenue

Suite 204 Newark, DE19711

Tel: (302) 738-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:
Lawrence S. Venick, Esq. Loeb & Loeb LLP 10100 Santa Monica Boulevard Suite 2200 Los Angeles, CA 90067 Telephone: +1-310-282-2000 Facsimile: +1-310-282-2200 |  | Richard I. Anslow, Esq. Richard Baumann, Esq. Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, New York 10105 Telephone: (212) 370-1300

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company. ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

Title of Class of Securities to be Registered |  | Proposed Maximum Aggregate Offering Price(1) (2) (3) |  |  | Amount of Registration Fee |
Ordinary shares, par value US$0.36 per share |  | $ |  |  |  | $ |  |
Representative’s Warrant (4)(5) |  |  |  |  |  |  |  |
Ordinary shares underlying Representative’s Warrant (4) |  | $ |  |  |  | $ |  |
Total |  | $ | 15,000,000 |  |  | $ | 1,636.50 | (5)

(1) | Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2) | Pursuant to Rule 416, the securities being registered hereunder include such indeterminate number of additional securities as may be issuable to prevent dilution resulting from stock splits, stock dividends or similar transactions.
(3) | Includes the price of additional ordinary shares that the underwriter has the option to purchase to cover over-allotments, if any.
(4) | We have agreed to issue to the underwriter and/or persons related to the underwriter warrants to purchase the number of ordinary shares (the “Representative’s Warrant”) in the aggregate equal to ten percent (10%) of the total number of offered shares sold in the offering. The warrants will be exercisable at any time, and from time to time, with a cashless provision, within five (5) years from effective date of the Registration Statement, in whole or in part, but may not be transferred nor may the shares underlying the warrants be sold until 180 days from the effective date of this registration statement. The exercise price of the Representative’s Warrant is equal to 110% of the public offering price per share in the offering.
(5) | No separate registration fee required pursuant to Rule 457(g) under the Securities Act.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted

PRELIMINARY PROSPECTUS (Subject to Completion) | Dated 30 September, 2021

[●] Ordinary Shares

J-Star Holding Co., Ltd.

This is the initial public offering of our ordinary shares. We are offering [ ] of our ordinary shares, par value $[ ] per share, on a firm commitment basis. The estimated initial public offering price is $[ ] per share. Currently, no public market exists for our ordinary shares. We intend to apply to have our ordinary shares listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “YMAT.” We cannot guarantee that we will be successful in listing our ordinary shares on the Nasdaq; however, we will not complete this offering unless we are so listed.

We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, and will be subject to reduced public company reporting requirements. See “Prospectus Summary — Emerging Growth Company Status.”

Investing in our ordinary shares is highly speculative and involves a significant degree of risk. See “Risk Factors” beginning on page 9 of this prospectus for a discussion of information that should be considered before making a decision to purchase our ordinary shares.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

|  | Per Share |  |  | Total |
Public offering price |  | $ |  |  |  | $ |  |
Underwriter’s discount and commissions (1) |  | $ |  |  |  | $ |  |
Proceeds to us, before expenses |  | $ |  |  |  | $ |  |

(1) | ViewTrade Securities, Inc. (which we refer to herein as the Underwriter) will receive compensation in addition to the underwriting discount, as set forth in the section entitled “Underwriting” beginning on page 128 upon the closing of this offering. We have also agreed to reimburse Underwriter for certain expenses incurred by it. See “Underwriting” for additional information.

This offering is being conducted on a firm commitment basis. The Underwriter is obligated to take and pay for all of the shares if any such shares are taken. We have granted the Underwriter an option, exercisable in whole or in part, to purchase up to [●] additional ordinary shares from us at the public offering price, less the underwriting discounts and commissions, within 45 days from the date of this prospectus to cover over-allotments, if any. If the Underwriter exercises the option in full, the total underwriting discounts and commissions payable will be $[ ], and the total proceeds to us, before expenses, will be $[ ].

The Underwriter expects to deliver the ordinary shares to purchasers in the offering on or about [____], 2021.

VIEWTRADE SECURITIES, INC.

The date of this prospectus is [_____].

TABLE OF CONTENTS

| Page
Prospectus Summary | 2
Risk Factors | 9
Special Note Regarding Forward-Looking Statements | 34
Use of Proceeds | 35
Capitalization | 36
Dilution | 37
Enforceability of Civil Liabilities | 38
Corporate Structure | 40
Selected Consolidated Financial Data | 42
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 43
Industry | 51
Business | 66
Regulations | 91
Management | 102
Principal Shareholders | 108
Related Party Transactions | 110
Description of Securities | 113
Shares Eligible for Future Sale | 120
Taxation | 122
Underwriting | 128
Expenses Relating to this Offering | 133
Legal Matters | 133
Experts | 133
Change in Registrant Certifying Accountant | 133
Where You Can Find Additional Information | 134
Index to Consolidated Financial Statements | F-1

You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, the ordinary shares only in jurisdictions where offers and sales are permitted. Unless otherwise stated, the information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ordinary shares.

We have not taken any action to permit a public offering of the ordinary shares outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ordinary shares and the distribution of the prospectus outside the United States.

Until , 2021 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

1

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ordinary shares discussed under “Risk Factors,” before deciding whether to buy our ordinary shares.

All references to “we,” “us,” “our,” or similar terms used in this prospectus refer to J-Star Holding Co., Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands, including its consolidated subsidiaries, unless the context otherwise indicates.

“Group” refers to J-Star Holding Co., Ltd. and its subsidiaries.

“Predecessor Group” refers to the companies comprising Yuan Min An Enterprises Co., Ltd., Skyfort International PTE. Ltd., YMA Corporation (formerly known as Yuan Chuan International Co., Ltd.), Dongguan Yuantai Sports Equipment Co., Ltd., Forwell Sports Equipment Co., Ltd. and Time Yield Limited.

“Taiwan” refers to Taiwan, Republic of China.

“Hong Kong” or “HK” refers to the Hong Kong Special Administrative Region of the People’s Republic of China.

“PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this prospectus only, Taiwan, Hong Kong and Macau.

“NTD” refers to the New Taiwan dollar, the legal currency of Taiwan.

“RMB” or “Renminbi” refers to the legal currency of China.

“HKD” refers to the legal currency of Hong Kong Special Administrative Region of the People’s Republic of China.

“$,” “US$,” “USD” or “U.S. Dollars” refers to the legal currency of the United States.

“Companies Act” means the Companies Act (2021 Revision) of the Cayman Islands, as may be amended from time to time.

“share capital” or “shares in the capital of” or similar expressions include a reference to shares in a company that does not have a share capital under its governing law, but which is authorized to issue a maximum or unlimited number of shares.

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

Business Overview

Our Predecessor Group was established in 1970 and we have accumulated over 50 years know-how in material composite industry. We develop and commercialize the technology on carbon reinforcement and resin systems. With decades of experience and knowledge in composites and materials, we are able to apply our expertise and technology on designing and manufacturing a great variety of lightweight, high-performance carbon composite products, ranging from key structural parts of electric bicycles and sports bicycles, rackets, automobile parts to healthcare products. According to the industry report commissioned by us and prepared by Frost & Sullivan, we are one of the major global leading players in the carbon fiber bicycle parts industry and carbon fiber racket parts industry.

As our business is technology-driven, our vision is to offer cutting edge technology and manufacturing expertise in carbon composite to our customers, and many of our products are directly or indirectly supplied to different renowned international sports brand owners. Our carbon composite products deliver substantial weight savings, endurance and stiffness comparing to those constructed from conventional materials, such as steel and aluminum, and in doing so, our products offer remarkable and valuable efficiency and performance benefits to our customers in various applications. While our technology has potential applications over a broad range of industries, we currently have our main focus on the sporting goods industry and we prioritize the electric bicycle market to commercialize our technology.

2

We are based in Taiwan with our headquarters, research and development (“R&D”) center and material laboratory located in Taichung, Taiwan and our production plant and our second R&D center located in Dongguan, the PRC. The R&D center in Taichung focuses on resin material application, new product development and production process enhancement, and the R&D center in Dongguan, the PRC, which is located next to our production plant focuses on structural design of products, testing on product performance and enhancement on strength and stiffness of products. Our business focuses on the research and development as well as manufacturing a wide range of carbon composite products. We primarily generate revenue through three divisions and revenue streams, namely (i) sales of bicycles parts of sports bicycle and electric bicycle; (ii) sales of rackets for use in tennis, badminton, squash and beach tennis; and (iii) sales of other products, which mainly include structural parts of automobile, other sporting goods and healthcare products. Our bicycle parts and rackets are mainly supplied directly or indirectly to branded customers located in Switzerland, France, Italy, the Netherlands, Germany and Japan and they primarily market and distribute their products worldwide. Other customers which rely on our new products, such as automobile parts and healthcare products, are mainly located in Australia, Canada and Japan.

Advanced carbon composite materials offer a number of advantages relative to traditional materials, including light weight, high strength to weight ratio, high stiffness, and improved resistance to heat, corrosion and fatigue. Nonetheless, different products require different degrees and combinations of such properties according to their functions. Carbon composite materials are formed by combining carbon fibers and resins. The properties of carbon composite materials could vary largely due to different systems of resin and structural arrangement. Differing from our competitors in the industry, instead of using preset formulas of resins with lower degree of flexibility, we have our own R&D center to develop our own resin systems and formulas according to the product requirements. Therefore, we are able to incorporate customized resin systems that can be optimized for specific parameters, such as durability, temperature performance, cure times and viscosity. This not only allows us to manufacture our products with high precision to customers’ specifications, but also offers us flexibility in developing a greater variety of new products in the future. Thus, we believe that the parallel development of our complex product and process technology has resulted in our competitive advantage which makes it difficult for our competitor to replicate.

Our total revenue for the years ended December 31, 2020 and 2019 amounts to $22.2 million and $22.8 million, respectively. Our sales of bicycle parts accounted for approximately 64.4% and 64.9% of our total revenues for the years ended December 31, 2020 and 2019, respectively. Our sales of rackets business brought us considerable revenue for the years ended December 31, 2020 and 2019, which accounted for approximately 35.5% and 34.9%, respectively, of our total revenues, and sales of other products, which accounted for approximately 0.1% and 0.1%, respectively, of our total revenues for the years ended December 31, 2020 and 2019.

While having our main focus on development and sales of key structural parts of bicycles and rackets in the past years, we would not limit ourselves to the existing scope of product. We intend to extend our product spectrum by launching new products, such as sporting goods for new sports like padel racket and mast foil, and further expand our production on relatively new existing products that are emerging in the market, including key structural parts of electric bicycles, automobile and robotic arms, bicycle crank sets and other healthcare products, such as wheelchairs and senior walkers.

We target to achieve growth in terms of both scale and scope. To expand our scale, we plan to establish a new production plant in Yangzhou in the PRC. For such purpose, in March 2019, Bohong Technology (as defined below) acquired the land use right of a land parcel in Yangzhou, in which we entered into a share swap agreement with the shareholders of Bohong Technology on December 30, 2020 to obtain 100% of its ordinary shares, with a total gross land area of 64,851 square meter in order to build our new production plant for the production on key structural parts of electric bicycle, robotic arms, automobile parts and prepreg material. We intend to invest approximately RMB45.0 million on the construction of our production plant in Yangzhou and approximately RMB40.0 million on the machinery, in which we intend to commence the construction work of our production plant in Yangzhou by the end of 2021 and the first phase of such construction is expected to be completed by second quarter of 2022. The construction of our production plant in Yangzhou is expected to be fully completed by August 2022 and the machines are expected to be set up by the third quarter of 2022. As for growth in terms of scope, we anticipate that, by the first quarter of 2022, we will launch our own brand on electric bicycle and sporting goods and will set up sales and administration office in the U.S. and the Netherlands. We are in close dialogue with a reputed bicycle frame manufacturer in the U.S. on exploring investment opportunities, including but not limited to possibilities on acquisition, joint-venture and /or co-branding production. In addition, we intend to add a U.S. sales and administration office in Houston, Texas, which will work closely with our office in Taiwan in U.S. market sales and expansion, while our sales and administration office in the Netherlands will be handling sales on our online business platform expected to be launched around the first quarter of 2022. We also expect to further extend our production of automobile parts so as to leverage on the surging market demand of electric vehicles. By the end of 2023, we expect to launch our micro factory and R&D center in the U.S., with a view to developing automation of our production process and integrating the most advanced technology to our production. In this regard, we intend to invest in a manufacturer of carbon fiber products in the U.S. We have been in contacts with several potential target companies in the U.S., one of which is a U.S.-based aerospace composite parts manufacturer. We also plan to establish our third R&D center in Houston, Texas and our initial plan is to hire 4 to 6 employees on developing composite material and conducting researches on chemical interactions.

3

Summary of Risks Affecting Our Company

Our business is subject to numerous risks described in the section titled “Risk Factors” and elsewhere in this prospectus. The main risks set forth below and others you should consider are discussed more fully in the section entitled “Risk Factors,” which you should read in its entirety.

| ● | We rely on raw materials supplied by our suppliers for the production of our products which exposes us to risk of production shortages and fluctuations in prices of raw materials.
| ● | If we fail to adopt new technologies or develop new manufacturing technologies or adapt our products to evolving customer requirements, our business may be materially and adversely affected.
| ● | We recorded a negative cash flow for the year ended December 31, 2019, which may continue in the future.
| ● | We may incur losses in the future.
| ● | Our production capacity may not correspond precisely to our production demands, and intended economic results may not be achieved if there is any significant increase in production demand which exceeds our production capacity or any idle or unutilized production capacity during any particular period.
| ● | Our success depends on our ability to attract, retain and motivate members of senior leadership, technical personnel and other employees.
| ● | We are a holding company and our sole material asset after completion of this offering will be our equity interest in our subsidiaries. Accordingly, we will depend on distributions from our subsidiaries to pay dividends and cover our corporate and other expenses.
| ● | We face economic and political risks associated with doing business in Taiwan, particularly due to the geopolitical tension between Taiwan and China that could negatively affect our business and hence the value of your investment.
| ● | We have entered into land use right assignment transaction with PRC government authority and we may be subject to penalties for failure to fully comply with the contract thereunder.
| ● | Failure to comply with regulations related to export of processed materials may result in fines and legal or administrative actions.
| ● | Any lack of requisite approvals, licenses, permits or filings or failure to comply with any requirements of PRC laws, regulations and policies may materially and adversely affect our daily operations.
| ● | We may be subject to additional contributions under various employee benefits plans and late payments and fines imposed by relevant governmental authorities.
| ● | Failure to comply with PRC laws and regulations on employees’ overtime wages payment may expose us to potential compensations.
| ● | There has been no public market for our ordinary shares prior to this offering, and you may not be able to resell our ordinary shares at or above the price you paid, or at all.
| ● | Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

4

History and Corporate Structure

Our History

Our Predecessor Group commenced wood composite manufacturing and sports equipment processing business in 1970 and was one of the earliest private enterprises to manufacture wood composite in Taiwan. However, due to changes in the product development in the sporting goods industry with higher product requirements on the weight-saving, endurance and stiffness, our Predecessor Group gradually shifted the focus from wood composite manufacturing to carbon composite product manufacturing since 1980. Our Predecessor Group launched the carbon composite business line in 1980, targeting sporting goods, such as rackets. In 2005, our Predecessor Group launched the bicycle business line in order to expand our scope of carbon composite sporting goods to sports bicycle. In 2017, we produced our first electric bicycle frame. In 2018, in light of the prevalence of and favorable government policies on electric bicycle around the world, while continuing our development and sales of sports bicycle, we have in parallel strategically expanded further on the development and production of electric bicycle. We also developed our first carbon fiber robotic arm and other health care products in 2018. In 2019, we expanded our R&D team on the design and production of electric bicycle by addition of personnel. Through our R&D centers in Taiwan and the PRC, we have continued to upgrade and enhance our material technology, product structural design and production process technology, in order to uplift our product quality, product performance, production efficiency and expand our product spectrum.

Corporate Structure

On May 24, 2016, J-Star Holding Co., Ltd. (“J-Star”) was incorporated as an exempted company with limited liability under the laws of the Cayman Islands as our holding company. J-Star directly holds all the share capital of (i) Goal Beyond Limited (“Goal Beyond”), which is an International Company incorporated in Samoa on April 13, 2016, and (ii) Star Leader Trading Limited (“Star Leader Trading”), which was incorporated in Hong Kong on May 30, 2016 as a limited company. Our wholly owned subsidiary Goal Beyond, in turn, holds all the share capital of (i) YMA Corporation (“TW YMA”), which was incorporated in Taiwan on July 17, 2015, (ii) Time Yield Limited (“Time Yield”), which was incorporated in Samoa on January 30, 2013, (iii) YMA Composite Materials (DG) Co., Ltd. (“Dongguan YMA”), which was incorporated in the PRC on September 30, 2018, and (iv) Forwell Sports Equipment Co., Ltd. (“Dongguan Forwell”), which was incorporated in the PRC on December 5, 2003. We entered into a share swap agreement in respect of the share transfer of all equity ownership of Bohong Technology”), which was incorporated in the PRC on October 16, 2018, by a share swap of 838,053 treasury shares of J-Star, on December 30, 2020. We are undergoing the process of registration of the change of Bohong Technology’s shareholder with the local Market Supervision and Administration (which is expected to be completed prior to the listing of our ordinary shares on the Nasdaq), and thus, Bohong Technology has yet to be a part of the Group.

5

The diagram below shows our corporate structure subsequent to the completion of the reorganization:

Note(1): We are undergoing the process of registration of the change of Bohong Technology’s shareholder with the local Market Supervision and Administration (which is expected to be completed prior to the listing of our ordinary shares on Nasdaq).

Foreign Private Issuer Status

We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

| ● | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;
| ● | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;
| ● | we are not required to provide the same level of disclosure on certain issues, such as executive compensation;
| ● | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;
| ● | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and
| ● | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.

6

Implications of Being an Emerging Growth Company

As a company with less than US$1.07 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015) (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the previous three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

Corporate Information

Our principal executive offices in Taiwan are located at 7F-1, No. 633, Sec. 2, Taiwan Blvd., Xitun District, Taichung City 407, Taiwan (R.O.C.). Our telephone number at this address is +886-423229900. Our registered agent in Cayman Islands is Portcullis (Cayman) Ltd of The Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman, KY1-1208, Cayman Islands. Investors should submit any inquiries to the address and telephone number of our principal executive offices.

Our principal website is www.ymaunivers.com. The information contained on this website is not a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.

Conventions that Apply to this Prospectus

This prospectus contains information and statistics relating to Taiwan and the PRC’s economy and the industries in which we operate derived from various publications issued by market research companies and Taiwan and the PRC governmental entities, which have not been independently verified by us, the Underwriter or any of our affiliates or advisers including Frost & Sullivan, an independent market research and consulting firm with respect to information on the global carbon fiber industry, global carbon fiber bicycle parts industry, global carbon fiber racket parts industry and other carbon fiber sectors industry. The information in such sources may not be consistent with other information compiled in or outside Taiwan and the PRC.

Unless otherwise noted, all translations from NTD to U.S. Dollars and from U.S. Dollars to NTD or from RMB to U.S. Dollars and from U.S. Dollars to RMB in this prospectus are made at a rate of NTD27.91 to US$1.0000 and RMB6.46 to US$1.0000, respectively, the exchange rate in effect as of June 30, 2021 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any NTD or RMB or U.S. Dollar amounts or could have been, or could be, converted into U.S. dollars or NTD or RMB, as the case may be, at any particular rate, or at all.

7

The Offering

Shares being offered: | [_____] ordinary shares (or [_____] ordinary shares if the underwriter exercises its over-allotment option in full) on a firm commitment basis.
Initial offering price: | $[●] per share.
Number of ordinary shares outstanding before the offering: | [●] of our ordinary shares are outstanding as of the date of this prospectus.
Number of ordinary shares outstanding after the offering: | [●] of ordinary shares (or [●] ordinary shares if the underwriter exercises its over-allotment option in full).
Underwriter over-allotment option: | We have granted the underwriter an option for a period of up to [●] days to purchase up to [●] additional ordinary shares.
Use of proceeds: | We expect that we will receive net proceeds of approximately US$ million from this offering or approximately US$ million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of US$ per share, which is the midpoint of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We plan to use the net proceeds of this offering as follows: ● approximately 25% for acquiring and investing in production plant in the U.S. for the production of electric bicycle; ● approximately 25% for constructing our second production plant in Yangzhou, the PRC, for the production of key structural parts of electric bicycle, robotic arms, automobile and prepreg material; ● approximately 15% for investment on electric bicycle and sports bicycle brands in Michigan State, the U.S., through acquisition, joint venture and/or co-branding production; ● approximately 15% for establishing our R&D center in Houston, the U.S., for developing automation and advanced composite material and chemical technologies; ● approximately 15% for general administration and working capital expansion; and ● approximately 5% for establishing our sales and administration office in Houston, the U.S., to closely work with our office in Taiwan on U.S. market sales and expansion. See “Use of Proceeds.”
Lock-up: | We, all of our directors and officers and certain shareholders have agreed with the underwriter not to sell, transfer or dispose of, directly or indirectly, any of our ordinary shares or securities convertible into or exercisable or exchangeable for our ordinary shares for a period of [●] ([●]) months after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.
Listing: | We intend to apply to have our ordinary shares listed on the Nasdaq Capital Market, or Nasdaq. We cannot guarantee that we will be successful in listing our ordinary shares on the Nasdaq; however, we will not complete this offering unless we are so listed.
Proposed Nasdaq symbol: | YMAT
Risk factors: | Investing in our ordinary shares is highly speculative and involves a significant degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section.

8

RISK FACTORS

An investment in our ordinary shares involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ordinary shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ordinary shares could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

We rely on raw materials supplied by our suppliers for the production of our products which exposes us to risk of production shortages and fluctuations in prices of raw materials.

Our major raw materials comprise carbon fiber yam and resin. We generally purchase carbon fiber yam and resin from independent suppliers in Japan. The procurement of such raw materials required to manufacture carbon fiber composite material, which is a key component of our products, represents a major component of our cost of sales. Any failure to secure adequate supplies of such raw materials or any interruptions in any part of the supply chain may disrupt our operations. During the years ended December 31, 2020 and 2019, the purchases from our top supplier accounted for approximately 22.6% and 28.9% of our total purchases, respectively. We cannot assure you that our relationship with our top supplier will continue to be as stable, or that our current supplier will continue to supply products to us on terms acceptable to us, or that we will be able to establish new or extend current supplier relationships to ensure a steady supply in a timely and cost-efficient manner. If our relationships with our important suppliers are terminated, interrupted, or modified in any way adverse to us, our business, financial condition and results of operations could be adversely affected.

In addition, these raw materials used in our manufacturing are subject to price volatility caused by external conditions, such as market supply and demand, commodity price fluctuations, government control, business performance and operational needs (such as scheduled maintenance shutdowns) of the suppliers, which are beyond our control. For instance, there was certain price volatility for carbon fiber yam during the year ended December 31, 2020 due to regulatory investigation on a carbon fiber supplier in Japan, who is one of our carbon fiber suppliers, by the Japanese government. The said carbon fiber supplier exported a portion of carbon fiber products, which had been transferred to third parties to which such supplier had no license to export the products. In this regard, the Ministry of Economy Trade and Industry of Japan has issued a warning to request the said supplier to implement recurrence prevention measures and strict security export control. Such event raised concern in the market as to the stable supply of carbon fiber by such supplier for a short period of time. As such, our supplier base has ever since been diversified to include more suppliers in Taiwan. However, if any price volatility occurs again and we fail to effectively manage the price fluctuations in our raw materials or transfer the increased costs to our customers or modify our products or adjust our procurement strategy, any significant increase in the prices of our major raw materials would affect our profit margin and more generally, our business, financial condition and prospect.

If we fail to adopt new technologies or develop new manufacturing technologies or adapt our products to evolving customer requirements, our business may be materially and adversely affected.

Our edge lies in our carbon fiber composite materials, which as key structural component is used or featured in electronic bicycles, sports bicycles, rackets, other sporting goods, automobile and healthcare products for its light, stiff and durable qualities. As such it is crucial that the functionality, compatibility and quality of our carbon fiber composite materials can be designed and manufactured in a manner effective for and compatible to the respective purpose of electronic bicycles, rackets, other sporting goods, automobile, healthcare products and any other new products our customers request us to co-design or co-develop.

As the developments of certain of these goods and products, or goods and products that carbon fiber composite materials are increasingly used or featured in (such as electric vehicles), are evolving and speeding up at a rapid pace, we prioritize and invest heavily in the research and development of new technologies to enhance the qualities of lightweight and durability in our products. We need to continue to enhance and improve by adopting new technologies, develop new manufacturing technologies as well as adapt our products to the evolving customer requirements and preferences so as to keep up with the market trends and industry competition. If we are unable to anticipate the evolving customer requirements and preferences or the market trends and respond effectively and timely, our business, prospects, financial condition and results of operations may be materially and adversely affected.

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We recorded a negative cash flow for the year ended December 31, 2019, which may continue in the future.

We recorded a negative cash flow from operating activities of $2.5 million for the year ended December 31, 2019. For the main reason leading to the negative cash flow from operating activities for the year ended December 31, 2019, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cash Flows.” Although we seek to manage our working capital from time to time and we have unused credit lines from bank loans of the Group, we cannot assure you that we will be able to match the timing and amounts of our cash inflows with the timing and amounts of our payment obligations and other cash outflows. As a result, there could be a period during which we experience net cash outflow from operating activities. Net cash outflow from operating activities may impact our business growth and adversely affect our financial condition and results of operations.

We may incur losses in the future

We had a net income of approximately $1.1 million and $11.0 million for the fiscal year ended December 31, 2020 and 2019, respectively. As a growing public company, we anticipate that our operating expenses might increase in the foreseeable future as we seek to maintain and continue to grow our business, attract potential customers and further enhance our product offering. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. As a result of the foregoing and other factors, we may incur net losses in the future and may be unable to achieve or maintain profitability on a quarterly or annual basis for the foreseeable future.

Our production capacity may not correspond precisely to our production demands, and intended economic results may not be achieved if there is any significant increase in production demand which exceeds our production capacity or any idle or unutilized production capacity during any particular period

We have two production lines for the manufacture of different types of carbon fiber composite, and all of the carbon fiber composites are applied as key structural parts of electric bicycles and sports bicycle, rackets, automobile and healthcare products and which are custom-made to the requests of our customers. Except for the outsourcing of part of the painting, cosmetic and sanding processes for greater cost efficiency, we do not outsource any production processes to independent sub-contractors. As our production demands depend on the specific orders of our customers, our actual production volume varies with various factors such as customers’ preferences, market trend, economic conditions, industry competitors’ pricing strategies or any other factors beyond our control. As a result, our production capacity may not correspond precisely to our production demands. If there is any significant increase in production demand which exceeds our production capacity, unless we are able to expand our production capacity or outsource certain production processes, we may have to reject orders from customers and intended economic results may not be achieved. And in case we opt for the outsourcing of certain production processes to meet production demands, we may experience a lower gross profit margin and it may be difficult to ensure the quality of the products. If the orders from our customers are not sufficient to fully utilize our production capacity and there is idle or unutilized production capacity which is much lower than the desired rate of utilization of our production lines, our business, financial condition and results of operations may be adversely affected.

Our success depends on our ability to attract, retain and motivate members of senior leadership, technical personnel and other employees.

Our success and growth are, to a large extent, attributable to our experienced talent pool of senior management team with strong execution capabilities, our highly skilled technical personnel who keep pace with the latest developments and manufacturing technologies in the carbon fiber composite industry, as well as our committed and qualified employees. Given the technology-driven nature of our business, as of the date of this prospectus, we have over 60 technical personnel who are responsible for research and development of new technologies and manufacturing technologies in relation to carbon fiber composite materials and we made continued and substantial investment in our technical personnel by providing them with training and various types of incentives.

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Notwithstanding our efforts to reward them for their services and contributions, there is no assurance that our compensation packages will attract and retain our senior management team, technical personnel and employees. In particular, we may not be able to recruit talents upon unanticipated departure of our members of senior management team or key technical personnel. In addition, to keep pace with our anticipated growth, we may need to recruit additional personnel with necessary industry expertise and such candidates may not be readily available. Therefore, any failure to attract, retain and motivate senior leadership, technical personnel and other employees may impact our competitiveness and our ability to meet our growth targets, and in turn, have an adverse impact on our business operations and profitability.

We may be exposed to product returns and product liability claims and latent defect liability claims

Our products are used as key components in electric bicycles and sports bicycle parts, rackets, automobile parts and healthcare products of our customers who will, after assembling various parts of and packaging the products, provide such products to the end-users. We are exposed to potential product returns, product liability claims and latent defect liability claims from our customers and the end-users of goods and products. Although we have put in place stringent quality control measures, including the setting up of different teams for incoming quality control, quality control and quality assurance which monitor the quality of the raw material, semi-finished products as well as finished products, there may be undetected flaws or manufacturing defects or other irregularities that may be subsequently detected at any point in the life of our products. We have adopted return policy on products with manufacturing defects to accommodate our customers. If after any checkup or analysis by our laboratory the defect of a product is found to be manufacturing defect, return and replacement of products will be made. Therefore, if undetected flaws or manufacturing defects or other irregularities from either the design or manufacture of our products are to occur, additional costs and expenses which we may not recoup may incur and our revenue and costs control can be negatively impacted.

In addition, if our defective or sub-standard products cause bodily injuries or property damage, we as the manufacturer may face product liability claims or latent defect liability claims from our customers or the end-users of goods and products made with our products and regardless of the merits or the outcome of these claims, we may be required to address and, if necessary, defend ourselves against such claims, which may incur substantial legal costs and divert management attention and other resources from our business and operations. We may also face adverse publicity associated with such claims, which could have an adverse effect on our business, results of operations and financial condition.

As we target to increase U.S. market exposure, if relations between the United States and PRC worsen, our business plan and operating results may be adversely impacted.

During the years ended December 31, 2020 and 2019, our products are supplied to customers in Europe, Japan and U.S. and we target to increase our U.S. market exposure as we see growing demand in the U.S. markets. However, the U.S. government and Chinese government have in recent years made respective statements and taken respective actions that signal changes to its global trade policies and trade protection measures, including trade restriction or tariffs which affect certain products manufactured in the PRC and exported to the U.S. As our production is based in PRC, the export of our products may be affected by adverse changes and developments in such global trade policies and trade protection measures, such as the imposition of new trade barriers, sanctions, boycotts and other measures, which are beyond our control. It is unknown whether and to what extent new tariffs (or other new laws or regulations) will be adopted, or the effect that any such actions would have on us or our industry and users. Any trade restrictions imposed by the U.S. government or tariffs imposed by the PRC could significantly affect our gross profit margin if our products manufactured in PRC are subject to the trade restriction or tariffs or could disrupt our plan to increase U.S. market exposure, and in turn, have an adverse effect on our business plan, financial condition and results of operations.

We may not be able to obtain, maintain and protect our intellectual property rights and proprietary information, which could harm our business and competitive position.

The protection of our intellectual property rights, including trade secrets, trademarks, patents, domain names and other technical and proprietary know-how is critical to our success as we operate in an industry where technological innovation and technical capabilities and knowledge are the key to remain competitive. As of the date of this prospectus, we have obtained 31 registered patents related to our bicycle, racket and manufacturing process (with 7 invention patents, 14 utility model patents and 10 design patents) in Taiwan, PRC, Japan, Europe and the U.S. and 12 trademarks in PRC and Taiwan. We have also applied for the registration of 6 invention patents in Taiwan, PRC, Vietnam, Cambodia and Germany. See “Business – Intellectual Property.”

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We rely on, and expect to continue to rely on a combination of intellectual property laws and contractual arrangements, including confidentiality agreements and non-complete covenants with our employees and independent parties which we have business relationships with, to protect our intellectual property and proprietary rights. We also have security system in place to ensure that access to the manufacturing process will not be misappropriated. For instance, we have 24 hours door security at the production plant and laboratory, and our computer server is safeguarded as external partners’ access is not permitted. However, there is no assurance that such efforts, policies and precautions are either sufficient or effective. As a result, our intellectual property rights may be infringed, misappropriated, or challenged. Legal proceedings involving intellectual property rights are generally costly and time consuming, and may divert management attention and other resources from our business and operations. Any failure in protecting or enforcing our intellectual property rights could materially and adversely affect our business, financial condition and results of operations.

We may be subject to third-party intellectual property infringement claims.

We depend, to a large extent, on our ability to effectively develop and maintain intellectual property rights relating to our business. However, we cannot assure you that third parties will not put forward claims that our business infringes upon or otherwise violates patents, copyrights or other intellectual property rights which they hold, whether such claims are valid or otherwise. We may face allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our competitors, or allegations that we are involved in unfair trade practice. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and any such liability or prohibition may materially and adversely affect our business, financial condition and results of operations.

Our profitability, financial condition and results of operations may be adversely affected by a downturn in the global economies.

Our products are supplied directly or indirectly to branded customers around the world, especially in Switzerland, France, Italy, the Netherlands, Germany and Japan. Sales attributable to the markets in Europe are substantial, in particular the revenue from customers in Switzerland, Italy, Germany and France represented approximately 23.0%, 10.4%, 10.1% and 9.4%, respectively, of our total revenue for the year ended December 31, 2020. We estimate our sales to markets in Europe will continue to be our major source of income in the foreseeable future. Therefore, our results of operation are largely affected by the level of demand for our products from our customers located in Europe which is in turn influenced by various factors which are beyond our control, including, among others, economic downturn. We cannot predict the timing, magnitude or duration of any economic downturn. These and other economic factors may have a negative impact on our profitability, financial condition and results of operations.

Our insurance coverage may not be adequate to cover all the risks related to our business and operations.

We maintain commercial fire insurance for our headquarters, R&D center and warehouses in Taiwan and public general liability insurance in Taiwan, as well as property all risks insurance for the production plant, R&D center and warehouse in Dongguan, PRC. In addition, we purchase cargo transportation insurance to insure the risks and liabilities in relation to the shipping of our products and raw materials between our warehouse in Taiwan, production plant and warehouse in the PRC and delivery points designated by customers. We also maintain credit insurance in respect of debts arising in the course of business activity and from the trading of products and performance of services under TW YMA. We also maintain commercial general liability insurance with products liability coverage in respect of the bicycle parts products, senior walker products, motorcycle handler and pre-preg materials manufactured or distributed by us and exported or sold worldwide.

We had not made any material claims under our insurance policies. However, there is no assurance that injuries or casualties or similar or other accidents will not occur or that our insurance coverage would be adequate to cover all our potential losses associated with serious or major accidents. If we were subject to substantial liabilities that were not covered by our insurance, we may suffer loss that may adversely affect our business, financial condition and results of operations.

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We are exposed to various risks associated with our business and operations, and we have limited liability insurance coverage. A successful liability claim against us due to injuries or damages suffered by our users could materially and adversely affect our reputation, results of operations and financial conditions. Even if unsuccessful, such a claim could cause us adverse publicity, require substantial costs to defend, and divert the time and attention of our management. In addition, we do not have any business disruption insurance. Any business disruption event could result in substantial costs to us and a diversion of our resources.

Our operations have been and may continue to be affected by the COVID-19 pandemic.

The COVID-19 pandemic and the measures imposed to contain the pandemic disrupted our operation and business in early 2020. As the pandemic continues to rapidly evolve around the world, with several new COVID-19 variants discovered in recent months, we cannot anticipate with any certainty the length or severity of the effects of COVID-19. As of the date of this prospectus, our business has been adversely affected by COVID-19 pandemic primarily in the following aspects:

● Operation: Our production plant in Dongguan, the PRC, suspended work for approximately one month in 2020 which adversely affected our production schedules, despite that the operation of our headquarters and offices in Taiwan remained unaffected. The pandemic also casted minor negative impacts on our supply chain such as manufacturing, warehousing and shipping of our products.

● Operating results and other financial metrics: Negative impact of COVID-19 on our business has resulted in a decrease in our revenue. Our revenue decreased slightly by approximately 2.7% from $22.8 million in the year ended December 31, 2019 to $22.2 million in the year ended December 31, 2020.

Furthermore, the COVID-19 pandemic has resulted in, and may intensify, economic distress in different countries, and the duration and extent of the impact of COVID-19 outbreak is still uncertain at this time. If the COVID-19 pandemic cannot be contained and it subsequently results in greater global economic distress, there may be reduced consumer confidence and spending cut backs, which may result in reduced demand for our products and in which case our business and results of operations would be adversely affected.

The occurrence of force majeure events and natural disasters may adversely affect our business, financial condition and results of operations.

The occurrence of force majeure events and natural disasters, including hurricanes, floods, earthquakes, tornadoes, fires and pandemics may adversely affect our business, financial condition or results of operations. For instance, in 2019, there was an outbreak of COVID-19 in PRC and there was emergency public health policies and measures such as suspension of work, travel restrictions and/or traffic control measures in various cities in PRC. For instance, our production plant suspended work for approximately one month in 2020 in light of such policies and measures. Additionally, some regions in PRC and Taiwan, including certain cities in which we have operations, are under the threat of flood, earthquake, fire and drought.

The potential impact of a force majeure event or natural disaster on our results of operations and financial position is speculative and would depend on numerous factors. The impact and severity of these natural disasters determines their effect on each given economy. Where there is an outbreak or a recurrence of such force majeure event or natural disaster which are beyond our control, this could result in disruption to our business or that of our customers, which could in turn materially and adversely affect our business, financial condition and results of operations.

Any labor shortage or unrest or increased labor cost may adversely affect our business, financial condition and results of operations.

Our production plant is located in the PRC. Some of our manufacturing processes, such as lamination and decals, are labor intensive and cannot be completely replaced by automation technology at this time. At the same time, there has been labor shortage from time to time in certain cities in the PRC. Although we did not experience material operational difficulty due to labor shortage in the past, there is no assurance that there will be no labor shortage for our production plant in the future. In addition, we may also be required to increase the wages to keep our labor force or attract new workers if there is labor shortage or other changes in the labor market conditions. If we cannot transfer the increased costs to our customers, our profit may be significantly impacted in such case. Also, although we have no experienced any labor unrest in the past, any future labor unrest will disrupt our production or pose threat to our properties. Therefore, any labor shortage or unrest or increased labor cost may adversely affect our business, financial condition and results of operations.

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If we fail to implement and maintain an effective system of internal controls or fail to remediate the material weaknesses in our internal control over financial reporting that has been identified, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of our shares may be materially and adversely affected.

Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the years ended December 31, 2019 and 2020, we and our independent registered public accounting firm identified weaknesses in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB. The material weakness identified arose from our lack of effective financial reporting oversight process for our period-end financial reporting as well as our lack of policies and procedures over evaluation of significant complex transactions and evaluation of certain general ledger accounts. Following the identification of the material weakness, we have taken and plan to continue to take remedial measures to remedy the weakness. For details of these remedies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control over Financial Reporting.” However, the implementation of these measures may not fully address the material weakness in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct the material weakness or our failure to discover and address any other material weakness or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our shares may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such firm might have identified additional material weakness and deficiencies. Upon completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, will require that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2022. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

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We adopt cost-plus pricing approach as our general pricing model and the results of our operations are dependent on the ability to remain cost competitive.

We adopt a cost-plus pricing approach for our general pricing model. The unit price of our products is determined by reference to various factors, including the technical complexity of the product, the volume of the order, estimated material cost, labor cost and production overhead. Our ability to continue to implement our pricing model and maintain our margins will depend on our ability to remain cost competitive, which means we will have to actively manage our cost of sales, and in particular, our cost of materials, labor costs and product development costs.

Historically, we have been able to pass any increases in material cost, labor cost onto our customers as we generally negotiate and agree on the estimated unit price of a product prior to confirming the purchase orders from customers. However, if there is sudden and significant increase in such costs after the purchase orders are confirmed, we will not be able to pass such increased costs onto our customers. In such event, if we are not able to lower other costs in amounts sufficient to compensate such increased costs, our margins would be negatively impacted which could have a material and adverse effect on our results of operations.

Risks Related to Our Corporate Structure

We are a holding company and our sole material asset after completion of this offering will be our equity interest in our subsidiaries. Accordingly, we will depend on distributions from our subsidiaries to pay dividends and cover our corporate and other expenses.

We are a holding company and will have no material assets other than our equity interest in our subsidiaries. Because we will have no independent means of generating revenue, our ability to pay dividends, if any, and cover our corporate and other expenses is dependent on the ability of our subsidiaries to generate revenue to pay such dividends and expenses and then distribute them up to us. The ability of our subsidiaries to make any distributions will be subject, among others, to restrictions in our exiting or future credit facilities or other debt instruments and applicable law and regulations, which could impose withholding taxes on internal distributions. Our existing credit facilities, for example, significantly restrict our ability to pay dividends. To the extent that we need funds and our subsidiaries are restricted from making such distributions or payments under the terms of any financing arrangements or under applicable law or regulation, or otherwise are unable to provide such funds, our liquidity and financial condition could be materially adversely affected.

The audit work on our PRC subsidiaries may not be inspected fully by the Public Company Accounting Oversight Board and, as such, our investors are deprived of the benefits of such inspection.

Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the PCAOB, and are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with the relevant professional standards. Our auditor, which is based in Taiwan, is currently subject to inspection by the PCAOB every three years, without restriction. The audit work on our China subsidiaries is performed directly by our auditor under a temporary license issued by the Ministry of Finance of the PRC. However, our auditor is unable to provide audit working papers of the Company’s subsidiaries in China for PCAOB’s inspection without the approval of the PRC authorities.

The PCAOB’s inspections of other firms outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB’s inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditors operating in China. Also, the potential inability of the PCAOB to fully inspect our auditor’s working paper of our China subsidiaries prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, investors may be deprived of the benefits of PCAOB inspections. The inability of the PCAOB to fully inspect our auditor’s working paper makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to other auditors that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

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As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress, which if passed, would require the SEC to maintain a list of issuers for which the PCAOB is not able to inspect or investigate an auditor report issued by a foreign public accounting firm. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (EQUITABLE) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges of issuers included on the SEC’s list for three consecutive years. In December 2020, the United States enacted the Holding Foreign Companies Accountable Act (the “HFCAA”). The HFCAA requires that the SEC identify issuers that retain an auditor that has a branch or office that is located in a foreign jurisdiction and that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction. Amongst other things, the HFCAA also requires the SEC to prohibit the securities of any issuer from being traded on any of the U.S. national securities exchanges, such as Nasdaq, or on the U.S. “over-the-counter” markets, if the auditor of the issuer’s financial statements is not subject to PCAOB inspections for three consecutive “non-inspection” years after the law became effective. On April 5, 2021, the SEC’s interim final rule to implement the disclosure and submission requirements of the HFCAA was published in the U.S. Federal Register, along with the SEC’s request for public comment on the interim final rule. Regarding how the term “retain” should be interpreted for purposes of determining whether an issuer has retained an auditor that has a branch or office that is located in a foreign jurisdiction and that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction, the SEC noted in the interim final rule that the HFCAA does not define the term “retain,” and requested comment on how the term “retain” should be understood for purposes of the HFCAA. Enactment of any of such legislations or other efforts to increase U.S. regulatory access to audit information could cause investor uncertainty for affected issuers, including us, the market price of our ordinary shares could be adversely affected, and we could be delisted if we are unable to cure the situation to meet the PCAOB inspection requirement in time. Furthermore, there have been recent media reports on deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. If any such deliberations were to materialize, the resulting legislation may have material and adverse impact on the stock performance of China-based issuers listed in the United States.

Our auditor, which is based in Taiwan, conducts audit work directly on our China subsidiaries under a temporary license issued by the Ministry of Finance of the PRC. However, given the restriction imposed by the PRC government, our auditor is unable to provide audit working papers of our subsidiaries in China for PCAOB’s inspection without the approval of the PRC authorities. Given the current question as to how “retain” should be understood for purposes of the HFCAA, we cannot assure you that we will not be identified by the SEC as an issuer that has retained an auditor that has a branch or office that is located in a foreign jurisdiction that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction as a result of the fact that the auditor of our China subsidiaries is located in, and organized under the laws of, the PRC. In addition, there can be no assurance that, if we have a “non-inspection” year, we will be able to take remedial measures in response thereto. If any such event were to occur, trading in our securities could in the future be prohibited under the HFCAA, so we cannot assure you that we will be able to maintain the listing of the ordinary shares on Nasdaq or that you will be allowed to trade our ordinary shares in the United States on the “over-the-counter” markets or otherwise. Should the common chares not be listed or tradeable in the United States, the value of the ordinary shares could be materially affected.

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Risks Related to Doing Business in Taiwan

We face economic and political risks associated with doing business in Taiwan, particularly due to the geopolitical tension between Taiwan and PRC that could negatively affect our business and hence the value of your investment.

Our headquarters, R&D center and material laboratory are located in Taiwan. Accordingly, our business, financial condition and results of operations and the market price of our ordinary shares may be affected by changes in governmental policies, taxation, growth rate, inflation rate or interest rates and by social instability and diplomatic and social developments in or affecting Taiwan. In particular, the unique political status of Taiwan and its internal political movement cause sustained tension between PRC and Taiwan. Past developments related to the interactions between PRC and Taiwan, especially in relation to trade activities such as bans on exports of goods from time to time, have on occasions depressed the transactions and business operations of certain Taiwanese companies and overall economic environment. We cannot predict whether there will be escalation of the tensions between PRC and Taiwan which would lead to new bans or tariffs on exports or even conflict. Any conflict which threatens the military, political or economic stability in Taiwan could have a material adverse effect on our current or future business and financial conditions and results of operations.

The imposition of foreign exchange restrictions in Taiwan may have an adverse effect on foreign investors’ abilities to acquire securities of a Taiwan company, including the shares of our subsidiaries in Taiwan, or to repatriate the interest, dividends or sale proceeds from those securities.

Taiwan government may impose foreign exchange restrictions in certain emergency situations, including situations where there are sudden fluctuations in interest rates or exchange rates, where Taiwan government experiences extreme difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in Taiwan. These restrictions may require foreign investors to obtain Taiwan government’s approval before acquiring securities of a Taiwan company, including the shares of our subsidiaries in Taiwan, repatriating the interest or dividends from those securities or repatriating the proceeds from the sale of those securities.

Risks Related to Conducting Operations in PRC

We have entered into land use right assignment transaction with PRC government authority and we may be subject to penalties for failure to fully comply with the contract thereunder.

Under PRC laws and regulations, if the land assignee fails to develop and use the land according to the terms of the land use right assignment contract (including those relating to designated use of land, time for commencement and completion of development of the land) or fails to pay any outstanding land grant premium by the stipulated deadlines, the relevant government authorities may issue a warning to, or impose a penalty on, the land assignee or require the land assignee to forfeit the land use rights. Specifically, under current PRC laws, if land assignee fails to pay any outstanding land grant premium by the stipulated deadlines, the land assignee may be subject to late land fees or the repossession of the land by the PRC government. If land assignee fails to commence development within one year of the commencement date stipulated in the land use right assignment contract, the relevant PRC land bureau may issue a warning to the land assignee and impose an idle land penalty of up to 20% of the land premium.

If the land assignee fails to commence development within two years from the commencement date stipulated in the land use right assignment contract, the relevant PRC land bureau may confiscate its land use right without compensation, except where the delay in the development is attributable to a force majeure event or the action of relevant government department or delay in the requisite preliminary work preceding commencement of such development. Moreover, under typical land use right assignment contracts, violation of certain terms under the land use right assignment contracts may subject the land assignee to claims on liquidated damages equivalent to certain percentage of the total purchase price for the right to use the state-owned construction land.

Bohong Technology, has entered into the State-Owned Construction Land Use Right Assignment Contract (the “Assignment Contract”) with Hanjiang Branch of Yangzhou Land and Resource Bureau (the “Hanjiang Land Bureau”) for a land parcel in Yangzhou. According to the Assignment Contract, Bohong Technology shall commence construction prior to August 28, 2020 or such later date as agreed by Hanjiang Land Bureau. The Assignment Contract also provides that if Bohong Technology cannot commence construction on schedule, it shall apply to Hanjiang Land Bureau for an extension of thirty (30) days prior to the scheduled commencement date; if such extension is approved by Hanjiang Land Bureau, the completion date of the construction project shall be extended accordingly, provided that the extended construction period shall not exceed one year. However, due to COVID-19 and its impact on economic and social activities, Bohong Technology failed to commence construction on schedule and failed to apply to and obtain the approval for extension within the prescribed 30-day period. Pursuant to the Assignment Contract, if Bohong Technology fails to commence construction on the scheduled date or a later date as agreed by Hanjiang Land Bureau, for each day of delay, Bohong Technology shall pay Hanjiang Land Bureau a liquidated damage equivalent to 0.1% of the total purchase price for the right to use the state-owned construction land. The Assignment Contract provides further that if the land is left idle for not less than one year but not more than two years, Bohong Technology shall pay the land idle fees according to the applicable laws.

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As of the date of this prospectus, Hanjiang Land Bureau requests Bohong Technology to complete the construction project on or prior to August 28, 2022 as indicated in the Assignment Contract without granting any extension. As of the date of this prospectus, Bohong Technology has not commenced the development of the construction project, and thus the land is left idle. If we fail to obtain a written wavier from Hanjiang Land Bureau, we may be exposed to a liquidated damage in the amount of approximately RMB 4 million (approximately $619,195) calculated as of August 31, 2021, and we may be exposed to land idle fees up to 20% of the land premium, which, in turn, may have a material and adverse effect on our business, results of operations and financial condition. We cannot assure you that circumstances leading to the repossession of land or delays in the commencement and completion of construction on our acquired land in Yangzhou will not arise in the future. If our land is repossessed, we will not be able to continue our construction on the forfeited land, recover the costs incurred for the initial acquisition of the repossessed land or recover construction costs and other costs incurred up to the date of the repossession. In addition, we cannot assure you that regulations relating to idle land or other aspects of land use right assignment contracts will not become more restrictive or punitive in the future. If we fail to comply with the terms of any land use right assignment contract as a result of delays in land construction, or as a result of other factor, we may lose the opportunity to develop the land as well as our past investments in the land, which could materially and adversely affect our business, financial condition and results of operations.

Failure to comply with regulations related to export of processed materials may result in fines and legal or administrative actions.

During the years ended December 31, 2020 and 2019, our products are exported from PRC to branded customers around the world, especially in Switzerland, France, Italy, the Netherlands, Germany and Japan. Pursuant to the Regulation of the PRC on the Implementation of Customs Administrative Punishment, for a PRC entity managing businesses such as the transportation, storage, processing, assembly, consignment sale and exhibition of goods under customs supervision, if it fails to provide justifiable reasons for the relevant goods that are lost or short in quantity or whose records are untrue, a fine of 5% up to 30% the value of goods may be imposed upon, and the illegal gains shall be confiscated. During the year ended December 31, 2018, due to administrative oversight, one of our PRC subsidiaries, Dongguan Forwell, arbitrarily supplied the bonded materials which it imported for third party’s use (including for the use of Dongguan Yuantai Sports Equipment Co., Ltd., as Dongguan Forwell’s affiliate at that time); as a result, the short of bonded materials was identified and a fine of RMB 492,500 (approximately $76,238) was imposed upon Dongguan Forwell, and the fine was duly paid by Dongguan Forwell.

As we aim to increase our presence in overseas market, we are subject to a variety of risks and uncertainties associated with exporting of goods, such as compliance with foreign laws and regulatory requirements, foreign taxes and trade barriers. Any failure to comply with regulations related to import of raw materials or export of processed materials may result in fines and legal or administrative actions, which may have material adverse impact on our financial condition, results of operations and prospects.

Any lack of requisite approvals, licenses, permits or filings or failure to comply with any requirements of PRC laws, regulations and policies may materially and adversely affect our daily operations.

In accordance with the relevant PRC laws and regulations, we are required to maintain various approvals, licenses, permits and filings to operate our business, including but not limited to business license, sewage discharge permits, pollution discharge registration of stationary pollution source, customs registration certificate for customs declaration entities, record-filing form for entry-exit inspection and quarantine for declaration enterprise, food operation permit, and those with respect to environment protection and fire safety inspection. The obtaining of these approvals, licenses, permits and filings are subject to satisfactory compliance with, among other things, the applicable laws and regulations.

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Furthermore, uncertainties exist with respect to the interpretation of relevant legal requirements regarding certain licenses and permits. In practice, relevant government authorities may take the view that certain license is not required for operating our business though there may be different interpretations with respect to the licensing requirements. We cannot assure you that relevant government authorities’ interpretation on such licensing requirements will remain the same in the future. If we are required to obtain relevant licenses, we will have to obtain those licenses in a timely manner. In addition, government authorities may impose additional licenses or permits or provides more strict supervision requirements when we make application, extension or renewal of licenses or permits. There is no guarantee that we would be able to obtain such licenses or permits or meet all the supervision requirements in a timely manner, or at all, or that they will not be subsequently revoked by relevant authorities. If we are unable to obtain any of such licenses and permits or extend or renew any of our current licenses or permits upon their expirations, or if we are required to incur significant additional costs to obtain or renew these licenses, permits and approvals, our daily operations could be materially and adversely affected.

We may be subject to additional contributions under various employee benefits plans and late payments and fines imposed by relevant governmental authorities.

Companies operating in PRC are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing provident funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based.

During the years ended December 31, 2018 and 2019, two of our PRC subsidiaries, Dongguan YMA and Dongguan Forwell, did not make adequate contributions for the social insurance premiums, consisted of pension premium, medical insurance premium, work-related injury insurance premium, unemployment insurance premium and maternity insurance premium, for our employees in accordance with the statutory payment base required by the relevant PRC laws. Our failure in paying the social insurance premiums may subject us to any order to pay the shortfall of the social security insurance premiums within the prescribed time limited by the relevant PRC governmental authority. As of December 31, 2018, 2019 and 2020, we have provided in the sum of approximately RMB2.9 million (approximately $0.4 million), RMB4.6 million (approximately $0.7 million) and RMB 4.7 million (approximately $0.7 million) for the underpaid social insurance premiums, respectively.

Furthermore, Dongguan YMA and Dongguan Forwell may be liable for a late fee of 0.5% per day of the underpaid amount, calculated from the original due date of such underpaid amount. In the event that Dongguan YMA and Dongguan Forwell failed to pay the underpaid amount within the period specified by the PRC authority, a fine of no less than one time and up to three times of the aggregate unpaid amount may be imposed. Furthermore, the relevant PRC governmental authority may apply the relevant administrative department for a decision on the allocation of the social insurance premium and notify the bank in writing for the allocation of the social insurance premium from Dongguan YMA’s and Dongguan Forwell’s bank accounts. If the balance of the bank account of Dongguan YMA and Dongguan Forwell is insufficient to cover the underpaid amount, the relevant PRC governmental authority may order Dongguan YMA and Dongguan Forwell to offer guarantee. If Dongguan YMA and Dongguan Forwell still fail to pay the social insurance premium in full amount and do not provide guarantee, the relevant PRC governmental authority may apply to competent people’s court for compulsory enforcement.

In addition, Dongguan YMA and Dongguan Forwell did not make adequate contributions for the housing provident fund for certain employees or pay such fund for our employees in accordance with the statutory payment base required by the relevant PRC laws. The reason for Dongguan YMA’s and Dongguan Forwell’s failure to pay the housing provident fund for part of their employees is that those employees are not willing to participate in the housing provident fund scheme and pay the housing provident fund. In this regard, Dongguan YMA and Dongguan Forwell may be ordered to pay the housing provident fund by the relevant PRC governmental authority. As of December 31, 2018, 2019 and 2020, we have provided in the sum of approximately RMB2.4 million (approximately $0.3 million), RMB3.4 million (approximately $0.5 million) and RMB4.3 million (approximately $0.7 million) for the underpaid housing provident fund, respectively. If Dongguan YMA and Dongguan Forwell fail to make the payment within the specified period, the relevant PRC governmental authority may apply to the competent people’s court for compulsory enforcement.

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Failure to comply with PRC laws and regulations on employees’ overtime wages payment may expose us to potential compensations.

From time to time, we are under tight production schedule in order to meet customers’ requested timeline in different projects, and this, we may require employees to work overtime in order to fulfill the tight production schedule. Under the PRC labor law and regulations, employers are required to pay overtime wages to employees for the extended working hours. According to the PRC Labor Law, wage payments to an employee shall be no less than 150% of his/her wage if such employee is required to work longer hours during business days; wage payments to an employee shall be no less than 200% of his/her wages if such employee is required to work on days off and no rest can be arranged ex post facto; and wage payments to an employee shall be no less than 300% of his/her wages if such employee is required to work on national holidays. Two of our PRC subsidiaries, Dongguan YMA and Dongguan Forwell, have not formulated an employee overtime system and did not pay overtime wages to their employees for the extended working hours as they made payment to the employees on a piecework basis. There exists the circumstance that Dongguan YMA and Dongguan Forwell requested their employees to work overtime but did not pay overtime wages to such employees. Failure to make overtime wages payment to employees may lead to the relevant PRC governmental authority’s order on Dongguan YMA and Dongguan Forwell to pay overtime wages to employees who worked overtime within a prescribed time limit. If Dongguan YMA or Dongguan Forwell failed to do so, it may be ordered to pay a compensation of not less than fifty percent and up to one time the aggregate unpaid amount to the employees.

In addition, there can be no assurance that there will be additional or new labor laws, rules and regulations in the PRC, which may lead to potential increases in the labor costs with our employees. In such events, our business, financial condition and results of operations may be materially and adversely affected.

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

We have three subsidiaries in the PRC and all of which are subject to various PRC laws and regulations generally applicable to companies in the PRC. The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in the PRC.

As relevant laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in the PRC could materially and adversely affect our business and impede our ability to continue our operations

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The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.

The PRC Labor Law and the Labor Contract Law require that employers must execute written employment contracts with full-time employees. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines, compensations and other administrative sanctions, and serious violations may constitute criminal offenses.

The PRC Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to enter into written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. According to the PRC Social Insurance Law, which became effective on July 1, 2011, and was amended on December 29, 2018, and the Administrative Regulations on the Housing Provident Funds, companies operating in PRC are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance and housing provident funds plans, and the employers must pay all or a portion of the social insurance premiums and housing provident funds for their employees.

As the interpretation and implementation of these laws and regulations are still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

Changes in PRC’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

Currently, most of our production is conducted in PRC. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in PRC generally and by continued economic growth in PRC as a whole.

PRC’s economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the late 1970’s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, which are generally viewed as a positive development for foreign business investment, a substantial portion of productive assets in PRC is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth through allocating resources, controlling payments of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While PRC’s economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing down. Some of the governmental measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation. In addition, the PRC government has implemented in the past certain measures to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and services, and consequently have a material adverse effect on our businesses, financial condition and results of operations.

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Failure to comply with PRC laws and regulations on leased property may expose us to potential fines.

Certain of our leasehold interests in leased properties have not been registered with the relevant PRC governmental authorities as required by PRC law, which may expose us to potential fines if we fail to remediate after receiving any notice from the relevant PRC government authorities. Our PRC subsidiary, Dongguan YMA, has subleased real properties located at Factory #B, No. 8, Block A, No. 128 Industrial Zone, Tangxia Town, Dongguan City, PRC to our another PRC subsidiary, Dongguan Forwell for its production and office, and they have not processed the lease registration in respect of such sub-lease. According to the Measures for Dongguan Housing Lease Management in the PRC, the parties to a lease agreement shall, within 15 days from the date of signing the lease contract, apply to the local housing rental management administrative authority where the house is located for the lease registration. Failure to process with the lease registration may lead to the administrative authority’s order on the lessor to make corrections within a prescribed time limit and a fine ranging from one to three times the monthly rent will be imposed on the lessor. [As of the date of this prospectus, we have not been ordered by relevant governmental authorities for failure of registering our lease agreements.] However, we may still be subject to potential fines if we fail to remediate after receiving any notice from the relevant PRC government authorities.

Failure to conform to the employment agreement regarding the practice of reassignment of employees’ job positions may expose us to lawsuits.

We enter into employment agreement with our employees when there are new hires and will reassign an employee’s job position when we need to meet production and operation demands or for other administrative reasons. We adopt our template employment agreement when entering into employment with our employees. Pursuant to the template employment agreement adopted by one of our PRC subsidiaries, Dongguan Forwell, if Dongguan Forwell intends to reassign an employee’s job position due to production and operation demands or other reasons, it shall reach a consensus with its employee through negotiation and the parties shall enter into a supplemental agreement. However, during the years ended December 31, 2017 and 2019 there were labor lawsuits where Dongguan Forwell unilaterally reassigned the employees’ job positions without reaching consensus with the employees, and Dongguan Forwell further terminated the employment agreement with the employees when the employees rejected to follow the reassignment. In such lawsuits, the court determined that Dongguan Forwell violated the relevant PRC labor laws for its unilateral termination of the employment agreement. As of the date of this prospectus, the abovementioned lawsuits have been duly settled and we are not aware of any other potential labor lawsuit in respect of the reassignment of employees’ job positions. However, if we are unable to conform to the employment agreement terms in any further reassignment of employees’ job positions, we may be liable for fines assessed by the relevant governmental authorities or incur settlement costs in order to resolve labor disputes and, and we may even be subject to higher labor costs in the future when recruiting new employees due to the reputation damage caused by labor disputes or related incidents.

Fluctuations in exchange rates could result in foreign currency exchange losses to us.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. In August 2015, the People’s Bank of China, or PBOC, changed the way it calculates the mid-point price of Renminbi against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. In 2017, the value of the Renminbi appreciated by approximately 6.3% against the U.S. dollar; and in 2018, the Renminbi depreciated by approximately 5.7% against the U.S. dollar. From the end of 2018 through the end of June 2021, the value of the Renminbi appreciated by approximately 7.2% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the Renminbi against the U.S. dollar.

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Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency into or out of China, which essentially may restrict the ability to transfer funds into or out of China. We receive part of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company relies on dividend payments from our PRC subsidiaries to fund some of the cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands structured as a holding company. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of PRC subsidiaries is required to set aside at least 10% of its accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. Each of our PRC subsidiaries may also, at its discretion, allocate a portion of its after-tax profits based on its articles of association and PRC accounting standards to certain reserve funds. These reserves are not distributable as cash dividends. Furthermore, if our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or to make payments to us may restrict our ability to satisfy our liquidity requirements.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

PRC regulation on loans to, and direct investment in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of our initial public offering to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands structured as a holding company conducting our partial operations in China through our PRC subsidiaries. As permitted under PRC laws and regulations, in utilizing the proceeds of our initial public offering, we may make loans to our PRC subsidiaries subject to the approval from governmental authorities and limitation of amount, or we may make additional capital contributions to our PRC subsidiaries. Furthermore, loans by us to our PRC subsidiaries to finance its activities cannot exceed the difference between their respective total project investment amount and registered capital or 2.5 times of their net worth and capital contributions to our PRC subsidiaries are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System and registration with other governmental authorities in China.

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The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of bank loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether the SAFE will permit such capital to be used for equity investments in the PRC in actual practice. The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our initial public offering, to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.

In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from our initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.

Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the Ministry of Commerce of the PRC, or the MOFCOM, be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the Anti-Monopoly Bureau of State Administration for Market Regulation, or the Anti-Monopoly Bureau before they can be completed. In addition, PRC national security review rules which became effective in September 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM or the Anti-Monopoly Bureau or its local counterparts, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by China’s State Administration of Taxation (“SAT”) on December 10, 2009, where a foreign investor transfers the equity interests of a resident enterprise indirectly via disposition of the equity interests of an overseas holding company, or an “indirect transfer,” and such overseas holding company is located in a tax jurisdiction that (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report the indirect transfer to the competent PRC tax authority. The PRC tax authority will examine the true nature of the indirect transfer, and if the tax authority considers that the foreign investor has adopted an “abusive arrangement” in order to avoid PRC tax, it may disregard the existence of the overseas holding company and re-characterize the indirect transfer and as a result, gains derived from such indirect transfer may be subject to PRC withholding tax at a rate of up to 10%.

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On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or SAT Bulletin 7, to supersede existing provisions in relation to the “indirect transfer” as set forth in SAT Circular 698, while the other provisions of SAT Circular 698 remain in force. Pursuant to SAT Bulletin 7, where a non-resident enterprise indirectly transfers properties such as equity in PRC resident enterprises without any justifiable business purposes and aiming to avoid the payment of enterprise income tax, such indirect transfer must be reclassified as a direct transfer of equity in PRC resident enterprise. To assess whether an indirect transfer of PRC taxable properties has reasonable commercial purposes, all arrangements related to the indirect transfer must be considered comprehensively and factors set forth in SAT Bulletin 7 must be comprehensively analyzed in light of the actual circumstances. SAT Bulletin 7 also provides that, where a non-PRC resident enterprise transfers its equity interests in a resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises as Source, or SAT Bulletin 37, which repealed the entire SAT Circular 698 and the provision in relation to the time limit for the withholding agent to declare to the competent tax authority for payment of such tax of SAT Bulletin 7. Pursuant to SAT Bulletin 37, the income from a property transfer, as stipulated in the second item under Article 19 of the Enterprise Income Tax Law, shall include the income derived from transferring such equity investment assets as stock equity. The balance of deducting the equity’s net value from the total income from equity transfer shall be taxable income from equity transfer. Where a withholding agent enters into a business contract, involving the income specified in the third paragraph of Article 3 in the Enterprise Income Tax Law, with a non-resident enterprise, the tax-excluding income of the non-resident enterprise will be treated as the tax-including income, based on which the tax payment will be calculated and remitted, if it is agreed in the contract that the withholding agent shall assume the tax payable.

During the effective period of SAT Circular 698 and by the application of SAT Bulletin 7 and SAT Bulletin 37, some intermediary holding companies were actually looked through by the PRC tax authorities, and consequently the non-PRC resident investors were deemed to have transferred the PRC subsidiary and PRC corporate taxes were assessed accordingly. It is possible that we or our non-PRC resident investors may become at risk of being taxed under SAT Bulletin 7 and SAT Bulletin 37 and may be required to expend valuable resources to comply with SAT Bulletin 7 and SAT Bulletin 37 or to establish that we or our non-PRC resident investors should not be taxed under SAT Bulletin 7 and SAT Bulletin 37, which may have an adverse effect on our financial condition and results of operations or such non-PRC resident investors’ investment in us.

It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within PRC.

Shareholder claims or regulatory investigation that are common in the U.S. generally are difficult to pursue as a matter of law or practicality in PRC. For example, in PRC, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside PRC or otherwise with respect to foreign entities. Although the authorities in PRC may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, or Article 177, the securities regulatory authority of the State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further provides that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within PRC may further increase difficulties faced by you in protecting your interests.

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You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in PRC against us or our directors and officers based on foreign laws.

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands, and we conduct substantially all of our operations in Taiwan and PRC and substantially all of our assets are located in Taiwan and PRC. In addition, certain of our directors and officers reside outside the U.S. As a result, it may be difficult for you to effect service of process within the U.S. or elsewhere outside PRC upon us or those persons. In addition, there is uncertainty as to whether the courts of PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between PRC and the country where the judgment is made or on principles of reciprocity between jurisdictions. PRC does not have any treaties or other forms of written arrangement with the U.S. that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.

Regulation and censorship of information disseminated over the internet in PRC may adversely affect our business, and we may be liable for content that is displayed on our website.

PRC has enacted laws and regulations governing internet access and the distribution of products, services, news, information, audio-video programs and other content through the internet. In the past, the PRC government has prohibited the distribution of information through the internet that it deems to be in violation of PRC laws and regulations. If any of our internet information was deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. We may also be subject to potential liability for any unlawful actions of our customers or users of our website or for content we distribute that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability to us, and if we are found to be liable, we may be prevented from operating our website in PRC.

Additional factors outside of our control related to doing business in PRC could negatively affect our business.

Additional factors that could negatively affect our business include a potential significant revaluation of the Renminbi, which may result in an increase in the cost of producing products in PRC, labor shortages and increases in labor costs in PRC as well as difficulties in moving products manufactured in PRC out of the country, whether due to port congestion, labor disputes, slowdowns, product regulations and/or inspections or other factors. Prolonged disputes or slowdowns can negatively impact both the time and cost of transporting goods. Natural disasters or health pandemics impacting PRC can also have a significant negative impact on our business. Further, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of “normal trade relations” status with, PRC, could significantly increase our cost of products exported outside of PRC and harm our business.

Risks Related to this Offering and Ownership of Our Ordinary Shares

There has been no public market for our ordinary shares prior to this offering, and you may not be able to resell our ordinary shares at or above the price you paid, or at all.

Prior to this initial public offering, there has been no public market for our ordinary shares. We have applied to list our ordinary shares on Nasdaq under the symbol “YMAT.” If an active trading market for our ordinary shares does not develop after this offering, the market price and liquidity of our ordinary shares will be materially and adversely affected. Negotiations with the underwriter determine the initial public offering price for our ordinary shares which may bear no relationship to their market price after the initial public offering. We cannot assure you that an active trading market for our ordinary shares will develop or that the market price of our ordinary shares will not decline below the initial public offering price.

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Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

We cannot assure you that our securities will continue to be listed on Nasdaq after our initial public offering. In order to continue listing our securities on Nasdaq, we must maintain certain financial, distribution and share price levels. In general, we must maintain a minimum amount in shareholders’ equity (generally $2,500,000) and a minimum of 300 round lot holders. For instance, our share price would generally be required to be at least $4.00 per share, our shareholders’ equity would generally be required to be at least $5.0 million and we would be required to have a minimum of 300 round lot holders of our securities (with at least 50% of such round lot holders holding securities with a market value of at least $2,500). We cannot assure you that we will be able to meet those initial listing requirements at that time.

If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

| ● | a limited availability of market quotations for our securities;
| ● | reduced liquidity for our securities;
| ● | a determination that our ordinary shares is a “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
| ● | a limited amount of news and analyst coverage; and
| ● | a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our ordinary shares will be listed on Nasdaq, our ordinary shares will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our ordinary shares may be volatile.

As a company conducting a relatively modest public offering, we are subject to the risk that a small number of investors will purchase a high percentage of the offering. If this were to happen, investors could find our shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their stock price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their shares.

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The market price for our ordinary shares may be volatile, which could result in substantial losses to investors.

The trading prices of our ordinary shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of companies based in Taiwan that have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial decline in their trading prices. The trading performances of other Taiwan companies’ securities after their offerings may affect the attitudes of investors toward Taiwan companies listed in the United States, which consequently may impact the trading performance of our ordinary shares, regardless of our actual operating performance. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, which may have a material adverse effect on the market price of our shares. In addition to the above factors, the price and trading volume of our ordinary shares may be highly volatile due to multiple factors, including the following:

| ● | regulatory developments affecting us, our customers, or our industry;
| ● | announcements of studies and reports relating to our service offerings or those of our competitors;
| ● | actual or anticipated fluctuations in our results of operations and changes or revisions of our expected results;
| ● | changes in financial estimates by securities research analysts;
| ● | announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments;
| ● | additions to or departures of our senior management;
| ● | detrimental negative publicity about us, our management or our industry;
| ● | fluctuations of exchange rates between the NTD, Renminbi and the U.S. dollar;
| ● | release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares; and
| ● | sales or perceived potential sales of additional ordinary shares.

Shares eligible for future sale may adversely affect the market price of our ordinary shares, as the future sale of a substantial amount of outstanding ordinary shares in the public marketplace could reduce the price of our ordinary shares.

The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise through future offerings of our ordinary shares. An aggregate of [*] shares were outstanding before the consummation of this offering and [*] shares will be outstanding immediately after this offering. All of the shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining shares will be “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act.

You will experience immediate and substantial dilution.

The initial public offering price of our shares is expected to be substantially higher than the pro forma net tangible book value per share of our ordinary shares. Assuming the completion of the offering, if you purchase shares in this offering, you will incur immediate dilution of approximately $[*] or approximately [*]% in the pro forma net tangible book value per share from the price per share that you pay for the shares. Accordingly, if you purchase shares in this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”

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As an exempted company with limited liability incorporated under the laws of the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.

As a Cayman Islands company that is expected to be listed on Nasdaq, we are subject to Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from Nasdaq corporate governance listing standards. For example, neither the Companies Act nor our [post-offering] amended and restated memorandum and articles of association requires a majority of our board of directors to be independent and we could include non-independent directors as members of our compensation committee and nominating committee and our independent directors would not necessarily hold regular scheduled meetings at which only independent directors are present. In addition, we will be able to follow our home country law instead of the Nasdaq listing rules that require us to obtain shareholder approval for certain dilutive events, such as certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and acquisitions of the stock or assets of another company. If we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under Nasdaq’s corporate governance listing standards applicable to U.S. domestic issuers.

Our management has a certain level of discretion over use of proceeds of this offering.

While we have identified the priorities to which we expect to put the proceeds of this offering, our management will have considerable discretion in the application of the net proceeds received by us. Specifically, we intend to use the net proceeds from this offering to upgrade manufacturing facility and equipment and for working capital and general corporate purposes. We have reserved the right to re-allocate funds currently allocated to that purpose to our general working capital. If that were to happen, then our management would have significant discretion over even more of the net proceeds to be received by our company in this offering. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve profitability or increase our stock price. The net proceeds from this offering may be placed in investments that do not produce profit or increase value. See “Use of Proceeds.”

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.

Our corporate affairs are governed by our memorandum and articles of association as amended from time to time, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies (other than copies of our Memorandum and Articles of Association, as amended, and register of mortgages and charges). Under Cayman Islands law, the names of our current directors can be obtained from a search conducted at the Registrar of Companies. Our directors have discretion under our memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

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As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ from the Nasdaq corporate governance requirements; these practices may afford less protection to shareholders than they otherwise would under rules and regulations applicable to United States domestic issuers.

As a result of all of the above, our public shareholders may encounter different issues in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. public company.

We are a foreign private issuer and, as a result, will not be subject to U.S. proxy rules and will be subject to more lenient and less frequent Exchange Act reporting obligations than a U.S. issuer.

Upon consummation of this offering, we will report under the Securities Exchange Act as a foreign private issuer. Because we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including:

| ● | the sections of the Exchange Act that regulate the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
| ● | the sections of the Exchange Act that require insiders to file public reports of their stock ownership and trading activities and impose liability on insiders who profit from trades made in a short period of time; and
| ● | the rules under the Exchange Act that require the filing of quarterly reports on Form 10-Q containing unaudited financial and other specified information and current reports on Form 8-K upon the occurrence of specified significant events.

In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are not large accelerated filers or accelerated filers are required to file their annual report on Form 10-K within 90 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, aimed at preventing issuers from making selective disclosures of material information. As a result, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

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In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on [*]. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.

There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our ordinary shares to significant adverse United States income tax consequences.

A non-United States corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income.

Based on our current composition of assets, subsidiaries and market capitalization (which will fluctuate from time to time), we do not expect to be or become a PFIC for U.S. federal income tax purposes. However, the determination of whether we will be or become a PFIC will depend, in part, upon the value of our goodwill and other unbooked intangibles. Furthermore, the determination of whether we will be or become a PFIC will depend, in part, on the composition of our income and assets. Fluctuations in the market price of our ordinary shares may cause us to become a PFIC for the current or subsequent taxable years. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. In addition, because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangible assets.

Because determination of PFIC status is a fact-intensive inquiry made on an annual basis that depends upon the composition of our assets and income, no assurance can be given that we are not or will not become classified as a PFIC. If we were to be or become classified as a PFIC in any taxable year, a U.S. Holder (as defined in “Taxation—United States Federal Income Taxation”) may incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of our ordinary shares and on the receipt of distributions on the ordinary shares to the extent such gain or distributions is treated as an “excess distribution” under the U.S. federal income tax rules. Further, if we are classified as a PFIC for any year during which a U.S. Holder holds our ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ordinary shares. You are urged to consult your tax advisor concerning the United States federal income tax consequences of acquiring, holding, and disposing of ordinary shares if we are or become classified as a PFIC. For more information, see “Taxation— Certain United States Federal Income Tax Considerations.”

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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ordinary shares and trading volume could decline.

The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our ordinary shares or publish inaccurate or unfavorable research about our business, the market price for our ordinary shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ordinary shares to decline.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands and certain of our officers and directors are residents of jurisdictions outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the United States courts against our directors or officers.

Our corporate affairs will be governed by our amended and restated memorandum and articles of association as amended from time to time, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

We have been advised by our Cayman Islands legal counsel, Ogier, that there is uncertainty as to whether the courts of the Cayman Islands would:

| ● | recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and
| ● | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

There is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment, without any re-examination or re-litigation of matters adjudicated upon, provided such judgment:

| (a) | is given by a foreign court of competent jurisdiction;
| (b) | imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;
| (c) | is final;

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| (d) | is not in respect of taxes, a fine or a penalty;
| (e) | was not obtained by fraud; and
| (f) | is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our board of directors, management or controlling shareholders than they would as public shareholders of a U.S. company. For a discussion of certain differences between the provisions of the Companies Act, remedies available to shareholders and the laws applicable to companies incorporated in the United States and their shareholders, see “Enforceability of Civil Liabilities” and “Description of Securities.”

Judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands company and substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted in Taiwan and/or PRC. In addition, certain of our directors and officers reside outside the United States. As a result, it may be difficult for you to effect service of process within the United States or elsewhere outside Taiwan and/or PRC upon these persons. It may also be difficult for you to enforce in Taiwan and/or PRC or Cayman Islands courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. It may be difficult or impossible for you to bring an action against us in the Cayman Islands if you believe your rights under the U.S. securities laws have been infringed. In addition, there is uncertainty as to whether the courts of the Cayman Islands or Taiwan and/or PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state and it is uncertain whether such Cayman Islands or Taiwan and/or PRC courts would hear original actions brought in the Cayman Islands or Taiwan and/or PRC against us or such persons predicated upon the securities laws of the United States or any state. See “Enforceability of Civil Liabilities.”

Provisions in our [post-offering] amended and stated memorandum and articles of association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our shares and could entrench management.

Our [post-offering] amended and restated memorandum and articles of association will contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our shares.

We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.

We are subject to rules and regulations by various governing bodies, including, for example, the Securities and Exchange Commission, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

| ● | our goals and growth strategies;
| ● | our expectations regarding demand for and market acceptance of our products and services;
| ● | our future business development, results of operations and financial condition;
| ● | competition in our industry;
| ● | the expected growth of, and trends in, the markets for our products and services;
| ● | government policies and regulations relating to our corporate structure, business and industry;
| ● | our expectation regarding the use of proceeds from this offering;
| ● | our ability to comply with the continued listing standards on the exchange or trading market on which our ordinary shares is listed for trading;
| ● | the possibility that COVID-19 may adversely affect our results of operations, financial position and cash flows;
| ● | general economic and business condition in Taiwan and elsewhere; and
| ● | assumptions underlying or related to any of the foregoing.

You should read thoroughly this prospectus and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

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USE OF PROCEEDS

After deducting the estimated underwriter’s discount and offering expenses payable by us, we expect to receive net proceeds of approximately $ (or $ in the aggregate if the underwriter exercise its over-allotment option in full) from this offering. The net proceeds from this offering must be remitted to Taiwan before we will be able to use the funds to grow our business.

We intend to use the net proceeds of this offering as follows, after we complete the remittance process:

| ● | approximately 25% for acquiring and investing in production plant in the U.S. for the production of electric bicycle;
| ● | approximately 25% for constructing our second production plant in Yangzhou, the PRC, for the production of key structural parts of electric bicycle, robotic arms, automobile and prepreg material;
| ● | approximately 15% for investment on electric bicycle and sports bicycle brands in Michigan State, the U.S., through acquisition, joint venture and/or co-branding production;
| ● | approximately 15% for establishing our R&D center in Houston, the U.S., for developing automation and advanced composite material and chemical technologies;
| ● | approximately 15% for general administration and working capital; and
| ● | approximately 5% for establishing our sales and administration office in Houston, the U.S., to closely work with our office in Taiwan on U.S. market sales and expansion.

The precise amounts and percentage of proceeds we devote to particular categories of activity, and their priority of use, will depend on prevailing market and business conditions as well as on the nature of particular opportunities that may arise from time to time. Accordingly, we reserve the right to change the use of proceeds that we presently anticipate and describe herein.

The foregoing is set forth based on the order of priority of each purpose and represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

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CAPITALIZATION

The following tables set forth our capitalization as of June 30, 2021:

| ● | on an actual basis; and

| ● | on a pro forma as adjusted basis to reflect the issuance and sale of [_______] shares at an assumed initial public offering price of $[_______] per share after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

You should read the tables together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

|  | As of June 30, 2021 |
|  | Actual |  |  | As Adjusted |
|  |  | (in US$) |
Current: |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | [●] |  |  |  |  |
Current: |  |  |  |  |  |  |  |
Short-term loans |  |  | [●] |  |  |  |  |
Short-term loan from related party |  |  | [●] |  |  |  |  |
Current portion of long-term loans |  |  | [●] |  |  |  |  |
Subtotal |  |  | [●] |  |  |  |  |
Non-current: |  |  |  |  |  |  |  |
Long-term loans |  |  | [●] |  |  |  |  |
Subtotal |  |  | [●] |  |  |  |  |
Total interest-bearing loans and borrowings |  |  | [●] |  |  |  |  |
Equity: |  |  |  |  |  |  |  |
Ordinary shares, $0.31 par value, 35,000,000 shares authorized, 21,892,899 ordinary shares outstanding on an actual basis; and [●] outstanding on an as adjusted basis |  |  | [●] |  |  |  |  |
Additional paid-in capital (1) |  |  | [●] |  |  |  |  |
Accumulated other comprehensive loss |  |  | [●] |  |  |  |  |
Retained earnings |  |  | [●] |  |  |  |  |
Total equity |  |  | [●] |  |  |  |  |
Total capitalization |  |  | [●] |  |  |  |  |

(1) | Additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting fee, underwriter expense allowance and other expenses. We expect to receive net proceeds of approximately $[●] (offering proceeds of $[_______], less underwriting discounts of $[_______], non-accountable expense of $[●] and offering expenses of $[_______]). The additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting discounts, Underwriter expense allowance and other expenses.

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DILUTION

If you invest in our ordinary shares, you will incur immediate dilution since the public offering price per share you will pay in this offering is more than the net tangible book value per ordinary share immediately after this offering.

The net tangible book value of our ordinary shares as of [●] was $[●], or $[●] per share based upon [●] ordinary shares outstanding. Net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of ordinary shares outstanding. Tangible assets equal our total assets less deferred tax assets and deferred offering cost.

The dilution in net tangible book value per share to new investors, represents the difference between the amount per share paid by purchasers of shares in this offering and the pro forma net tangible book value per share immediately after completion of this offering. After giving effect to the sale of the [______] shares being sold pursuant to this offering price of $[______] per share and after deducting underwriter’s discount and commission payable by us in the amount of $[______], non-accountable expenses of $[______] payable to the underwriter and estimated offering expenses in the amount of $[______], our pro forma net tangible book value would be approximately $[______], or $[______] per share of ordinary shares. This represents an immediate increase in net tangible book value of $[______] per share to existing shareholders and an immediate decrease in net tangible book value of $[______] per share to new investors purchasing the shares in this offering.

The following table illustrates this per share dilution:

|  | As of [●] |
Public offering price per ordinary share |  | $ |  |
Net tangible book value per share as of [●] |  | $ | [●] |
Increase in net tangible book value per share attributable to existing shareholders |  | $ |  |
Pro forma net tangible book value per share after this offering |  | $ |  |
Dilution per share to new investors |  | $ |  |

Our adjusted pro forma net tangible book value after the offering, and the decrease to new investors in the offering, will change from the amounts shown above if the underwriter’s over-allotment option is exercised.

A $[______]] increase (decrease) in the assumed public offering price would increase (decrease) our pro forma net tangible book value per share after this offering by approximately $[______], and increase the dilution per share to new investors by approximately $[______], after deducting the underwriter’s discount and estimated offering expenses payable by us.

The following table sets forth, on a pro forma as adjusted basis as of [●], the difference between the number of ordinary shares purchased from us, the total cash consideration paid, and the average price per share paid by our existing shareholders and by new public investors before deducting estimated underwriter’s discounts and commissions and estimated offering expenses payable by us, using an assumed public offering price of $[______] per ordinary share:

|  | Shares Purchased |  |  | Total Cash Consideration |  |  | Average Price Per |
|  | Number |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Share |
Existing shareholders |  |  | [●] |  |  |  | [●] | % |  | $ | [●] |  |  |  | [●] | % |  | $ | [●] |
New investors from public offering |  |  |  |  |  |  |  | % |  | $ |  |  |  |  |  | % |  | $ |  |
Total |  |  |  |  |  |  | 100.00 | % |  |  |  |  |  | $ | 100.00 | % |  | $ |  |

The pro forma as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.

37

ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability in order to enjoy the following benefits:

| ● | political and economic stability;
| ● | an effective judicial system;
| ● | a favorable tax system;
| ● | the absence of foreign exchange control or currency restrictions; and
| ● | the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:

| ● | the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and
| ● | Cayman Islands companies may not have standing to sue before the federal courts of the United States.

Currently, substantially all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. All of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

We have appointed Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, DE19711, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

Ogier, our counsel as to Cayman Islands law, Lee and Li, Attorneys-at-Law, our counsel as to Taiwan law, and L&L-Leaven, Attorneys-at-Law, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands, Taiwan and China, respectively, would:

| ● | recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of securities laws of the United States or any state in the United States; or
| ● | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

Ogier has informed us that it is uncertain whether the courts of the Cayman Islands will allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Ogier has further advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign judgement, without any re-examination or re-litigation of matters adjudicated upon, provided such judgment:

| (a) | is given by a foreign court of competent jurisdiction;

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| (b) | imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;
| (c) | is final;
| (d) | is not in respect of taxes, a fine or a penalty;
| (e) | was not obtained by fraud; and
| (f) | is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

Our Taiwan counsel, Lee and Li, Attorneys-at-Law, has advised us that any United States judgments obtained against us will be enforced by courts in Taiwan without further review of the merits only if the court of Taiwan in which enforcement is sought is satisfied with the following:

| ● | the court rendering the judgment has jurisdiction over the subject matter according to the laws of Taiwan;
| ● | if the judgment was rendered by default by the court rendering the judgment, (i) we were duly served within a reasonable period of time within the jurisdiction of such court in accordance with the laws and regulations of such jurisdiction, or (ii) process was served on us with judicial assistance of Taiwan;
| ● | the judgment and the court procedures resulting in the judgment are not contrary to the public order or good morals of Taiwan; and
| ● | judgments of the courts of Taiwan are recognized in the jurisdiction of the court rendering the judgment on a reciprocal basis.

Our PRC counsel, L&L-Leaven, Attorneys-at-Law, has advised us that the recognition and enforcement of foreign judgments are subject to compliance with the PRC Civil Procedures Law and relevant civil procedure requirements in the PRC. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

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CORPORATE STRUCTURE

On May 24, 2016, J-Star Holding Co., Ltd was incorporated as an exempted company with limited liability in the Cayman Islands as our holding company. J-Star directly holds all the share capital of (i) Goal Beyond Limited, which is incorporated as an international company in Samoa on April 13, 2016; and (ii) Star Leader Trading Limited, which was incorporated in Hong Kong on May 30, 2016 as a limited company. Our wholly-owned subsidiary Goal Beyond, in turn, holds all the share capital of (i) YMA Corporation, which was incorporated in Taiwan on July 17, 2015; (ii) Time Yield Limited, which was incorporated in Samoa on January 30, 2013; (iii) YMA Composite Materials (DG) Co., Ltd., which was incorporated in the PRC on September 30, 2018; and (iv) Forwell Sports Equipment Co., Ltd., which was incorporated in the PRC on December 5, 2003. As described below, J-Star, through a series of transactions which is accounted for as a reorganization of entities under a common control (the “Reorganization”), became the ultimate parent entity of its subsidiaries. We entered into a share swap agreement in respect of the share transfer of all equity ownership of Bohong Technology”), which was incorporated in the PRC on October 16, 2018, by a share swap of 838,053 treasury shares of J-Star, on December 30, 2020. We are undergoing the process of registration of the change of Bohong Technology’s shareholder with the local Market Supervision and Administration (which is expected to be completed prior to the listing of our ordinary shares on the Nasdaq), and thus, Bohong Technology has yet to be a part of the Group. Our principal executive offices are located at 7/F-1, No. 633, Sec.2, Taiwan Blvd., Xitun District, Taichung City 407, Taiwan (R.O.C.), and our phone number is +886-423229900. We maintain a corporate website at www.ymaunivers.com. The information contained in, or accessible from, our website or any other website does not constitute a part of this prospectus.

The diagram below shows our corporate structure subsequent to the completion of the reorganization:

Note(1): We are undergoing the process of registration of the change of Bohong Technology’s shareholder with the local Market Supervision and Administration (which is expected to be completed prior to the listing of our ordinary shares on the Nasdaq).

The Reorganization

The Reorganization involved (i) the incorporation of J-Star under the laws of the Cayman Islands on May 24, 2016; (ii) the incorporation of J-Star’s wholly-owned subsidiary, Star Leader Trading, under the laws of Hong Kong on May 30, 2016; (iii) the transfer of all equity ownership of Goal Beyond to J-star from the former shareholders on August 31, 2016; (iv) a share swap agreement in respect of the transfer of all equity ownership of Bohong Technology to J-Star from the former shareholders signed on December 30, 2020; (v) the transfer of all equity ownership of TW YMA to Goal Beyond from the former shareholders on August 16, 2016; (vi) the transfer of all equity ownership of Time Yield to Goal Beyond from the former shareholders on July 6, 2016; (vii) the incorporation of Dongguan YMA, a wholly-owned subsidiary of Goal Beyond, under the laws of PRC on September 30, 2018; (viii) the disposal of all equity ownership of Dongguan Yuantai Sports Equipment Co., Ltd. (“Dongguan Yuantai”), a company incorporated under the laws of PRC, by Skyfort International Pte. Limited (“Skyfort International”), a former wholly-owned subsidiary of Goal Beyond incorporated under the laws of Singapore, on April 3, 2019; (ix) the transfer of all equity ownership of Dongguan Forwell to Goal Beyond from the former shareholder on January 17, 2020; and (x) the deregistration of Skyfort International on February 13, 2020.

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On July 6, 2016, Mr. Kuo-Pin Yu and Mr. Hsiu-Shan Chao transferred all of their respective shares of Time Yield to Goal Beyond, through a share purchase agreement dated June 1, 2016, in a total consideration of $1,000,000. After the transfer, Goal Beyond owns 100% equity interests of Time Yield.

On August 31, 2016, Mr. Jing-Bin Chiang, Mr. Kuo-Pin Yu, New Moon Corporation, Star Centurion Limited, Radian Faith Limited, Glitter Group Ltd., Colossal City Limited and Vantage Wave Limited (the “Goal Beyond Former Shareholders”), being the former shareholders of Goal Beyond transferred all of their respective shares of Goal Beyond to J-Star, through a share subscription agreement entered into between each of the Goal Beyond Former Shareholders, J-Star and Goal Beyond on June 1, 2016, for the subscription of J-Star’s newly-issued shares by Goal Beyond Former Shareholders through contributing all of their respective shares of Goal Beyond to J-Star to offset the obligation on the subscription payment. After the transfer, J-Star owns 100% equity interests of Goal Beyond.

On August 16, 2016, Mr. Kuo-Pin Yu and Ms. Hsiu-Shan Chao transferred all of their respective shares of TW YMA to Goal Beyond, through share transfer agreements dated July 27, 2016, in a total consideration of NTD1,000,000. After the transfer, Goal Beyond owns 100% equity interests of TW YMA.

Under a share transfer agreement dated August 14, 2018 (“Yuantai Share Transfer Agreement”), Skyfort International agreed to sell and Shenzhen Meishangsheng Technology Co., Ltd. (“Shenzhen Meishangsheng”), an independent third party, among others, agreed to purchase 100% equity ownership of Dongguan Yuantai, in a total consideration of RMB142.0 million, of which RMB12.0 million were agreed to be paid to certain independent third parties as agency commission fee under a separate undertaking dated May 29, 2018. Through the disposal of Dongguan Yuantai, the Group disposed of the ownership of two parcels of land in Dongguan, the PRC (“Dongguan Land”) held by Dongguan Yuantai, including the constructions and equipment implanted thereon, without disposing the assets and liabilities, production plant and products held under Dongguan Yuantai. Lease back arrangement has been made, in which Dongguan Yuantai (as lessor) leases out part of Dongguan Land (the “Leased Back Portions”) to Dongguan YMA (as lessee), which are currently used for operating our production plant in Dongguan, the PRC, and part of the consideration under Yuantai Share Transfer Agreement has been set off by rent of the Leased Back Portion for the lease period from July 2019 to June 2021. For further details on the lease concerning the Leased Back Portions, please refer to the two leased properties in Dongguan, the PRC, summarized under “Business – Properties.” The transfer of 50% equity ownership of Dongguan Yuantai to Shenzhen Meishangsheng was completed on November 13, 2018 and the transfer of another 50% of equity ownership of Dongguan Yuantai was completed on April 3, 2019. The assets and liabilities under Dongguan Yuantai were then transferred to Dongguan YMA on September 30, 2018.

On January 17, 2020, Goal Beyond acquired 100% equity ownership of Dongguan Forwell from Skyfort International Pte. Limited in a total consideration of HKD20.0 million through a share transfer agreement dated November 20, 2019. After the transfer, Goal Beyond owns 100% equity interests of Dongguan Forwell.

On December 30, 2020, J-Star, New Moon Corporation, Barium Glory Financial Ltd., Sendai Investments entered into a share swap agreement, whereby J-Star would acquire all share capital of Bohong Technology from New Moon Corporation, Barium Glory Financial Ltd., Sendai Investments, being the former shareholders of Bohong Technology, by a share swap of 838,053 treasury shares of J-Star. Meanwhile, we are still pending for the completion of registration of the change of Bohong Technology’s shareholder with the local Market Supervision and Administration.

On April 23, 2021, J-Star, Mr. Frédéric Sallet, Mr. Christophe Quiniou, Le Gallion and 6ème Sens Immobilier entered into an investment agreement, whereby the Group agreed to invest in 19.5% of the equity interest in Cycles Services Loire, a bicycle assemble house in France engaging in the assembly and trading of bicycles, bicycle accessories and other leisure products, in consideration of 19,500 euros, and the Group intended to invest further in Cycles Services Loire, in the amount of 40,500 euros, by September 2021, with a view to expanding our market in Europe and enhancing our proximity with customers in Europe.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statements of income data for the years ended December 31, 2019 and 2020, selected consolidated balance sheets data as of December 31, 2019 and 2020 and selected consolidated statements of cash flow data for the years ended December 31, 2019 and 2020 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRSs”). Our historical results are not necessarily indicative of results expected for future periods. You should read this Selected Consolidated Financial Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

Selected Consolidated Statements of Operation:

|  | For the Years Ended December 31, |
|  | 2019 |  |  | 2020 |
|  | USD |  |  | USD |
Operating revenue |  | $ | 22,786,951 |  |  | $ | 22,178,572 |
Gross profit from operations |  | $ | 4,583,825 |  |  | $ | 7,361,667 |
Operating expenses |  | $ | (7,054,734 | ) |  | $ | (5,675,281 | )
Gains on disposals of non-current asset held for sale |  | $ | 6,859,542 |  |  | $ | - |
Gain arising from sale and leaseback transactions |  | $ | 6,948,966 |  |  | $ | - |
Other income and expenses |  | $ | (205,804 | ) |  | $ | 13,691 |
Net operating income |  | $ | 11,131,795 |  |  | $ | 1,700,077 |
Income taxes expense |  | $ | (159,807 | ) |  | $ | (355,273 | )
Profit from continuing operations |  | $ | 11,005,799 |  |  | $ | 1,110,146 |
Total comprehensive income |  | $ | 11,011,108 |  |  | $ | 940,595 |
Profit from continuing operations per ordinary share: |  |  |  |  |  |  |  |
Basic and diluted |  | $ | 0.44 |  |  | $ | 0.06 |

Selected Consolidated Balance Sheets Data:

|  | As of December 31, |
|  | 2019 |  |  | 2020 |
|  | USD |  |  | USD |
Current assets |  | $ | 20,970,214 |  |  | $ | 21,657,681 |
Total assets |  | $ | 25,995,359 |  |  | $ | 28,592,759 |
Current liabilities |  | $ | 17,520,315 |  |  | $ | 18,619,237 |
Total liabilities |  | $ | 20,954,072 |  |  | $ | 19,373,708 |
Total equity |  | $ | 5,041,287 |  |  | $ | 9,219,051 |

Selected Consolidated Statements of Cash Flow Data:

|  | For the Years Ended December 31, |
|  | 2019 |  |  | 2020 |
|  | USD |  |  | USD |
Net cash (used in) from operating activities |  | $ | (2,307,509 | ) |  | $ | 239,408 |
Net cash from (used in) investing activities |  | $ | 10,212,576 |  |  | $ | (1,238,681 | )
Net cash (used in) from financing activities |  | $ | (7,046,625 | ) |  | $ | 858,786 |
Effect of foreign exchange rate changes on cash and cash equivalents |  | $ | 117,877 |  |  | $ | (85,751 | )
Net increase (decrease) in cash, cash equivalents |  | $ | 976,319 |  |  | $ | (226,238 | )
Cash, cash equivalents at beginning of year |  | $ | 586,739 |  |  | $ | 1,563,058 |
Cash, cash equivalents at end of year |  | $ | 1,563,058 |  |  | $ | 1,336,820 |

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of financial condition and results of operations contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus.

Overview

Our vision is to offer cutting edge technology and manufacturing expertise in carbon composite to our customers. We have preliminarily engaged in the research and development as well as manufacturing of carbon fiber for a wide variety products including carbon bicycles, carbon rackets, automotive parts, outdoor sports gears and healthcare products.

For the fiscal years ended December 31, 2019 and 2020, our operating revenue were approximately $22.8 million and $22.2 million, respectively, and our profit after income tax from continuing operations were approximately $11.0 million and $1.1 million, respectively. We primarily generates revenue through three divisions and revenue streams, namely (i) sales of bicycle parts for sports bicycle and electric bicycle, (ii) sales of rackets, and (iii) sales of other products.

Key Factors that Affect Operating Results

We believe the following key factors may affect our financial condition and results of operations:

| ● | our ability to increase our bicycle parts sales volume;
| ● | our ability to increase our rackets sales volume;
| ● | our ability to increase our other products sales volume;
| ● | our ability to enhance our operational efficiency; and
| ● | our ability to research and develop new products.

COVID-19

The outbreak of novel coronavirus (COVID-19) began in December 2019 and was declared as a pandemic on March 11, 2020 by the World Health Organization. Subsequent to the outbreak, COVID-19 has spread rapidly to many parts of China and other parts of the world. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in China and elsewhere.

As our production plant is located in China, the COVID-19 pandemic has adversely affected our business operations and financial condition, operating results and cash flow for fiscal year 2020, including but not limited to adverse impacts to our production pipeline and total revenue. Our operating revenue decreased by approximately 2.7% for the year ended December 31, 2020 as compared to the same period in 2019. In response to the COVID-19 pandemic, our primary focuses are on our cash flow management and timely collection of accounts receivables.

43

Results of Operations

The following table sets forth a summary of our consolidated statements of income for the fiscal years ended December 31 2019 and 2020, respectively. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The results of operations in any period are not necessarily indicative of our future trends.

Years Ended December 31, 2019 and 2020

|  | For the Years Ended December 31, |  |  |  |
|  | 2019 |  |  | 2020 |  |  | Change |
|  | USD |  |  | % |  |  | USD |  |  | % |  |  | Amount |  |  | % |
Operating revenue |  | $ | 22,786,951 |  |  |  | 100 |  |  | $ | 22,178,572 |  |  |  | 100 |  |  | $ | (608,379 | ) |  |  | (3 | )
Less: Cost of revenue |  |  | (18,203,126 | ) |  |  | (80 | ) |  |  | (14,816,905 | ) |  |  | (67 | ) |  |  | 3,386,221 |  |  |  | 19 |
Gross profit from operations |  |  | 4,583,825 |  |  |  | 20 |  |  |  | 7,361,667 |  |  |  | 33 |  |  |  | 2,777,842 |  |  |  | 61 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling expenses |  |  | (1,927,635 | ) |  |  | (9 | ) |  |  | (1,386,309 | ) |  |  | (6 | ) |  |  | 541,326 |  |  |  | 28 |
Administrative expenses |  |  | (3,152,487 | ) |  |  | (14 | ) |  |  | (2,517,208 | ) |  |  | (11 | ) |  |  | 635,279 |  |  |  | 20 |
Research and development expenses |  |  | (1,744,141 | ) |  |  | (7 | ) |  |  | (1,689,817 | ) |  |  | (8 | ) |  |  | 54,324 |  |  |  | 3 |
Expected credit losses |  |  | (230,471 | ) |  |  | (1 | ) |  |  | (81,947 | ) |  |  | (0 | ) |  |  | 148,524 |  |  |  | 64 |
Gains on disposals of non-current asset held for sale |  |  | 6,859,542 |  |  |  | 30 |  |  |  | - |  |  |  | - |  |  |  | (6,859,542 | ) |  |  | (100 | )
Gain arising from sale and leaseback transactions |  |  | 6,948,966 |  |  |  | 31 |  |  |  | - |  |  |  | - |  |  |  | (6,948,966 | ) |  |  | (100 | )
Other income and expenses |  |  | (205,804 | ) |  |  | (1 | ) |  |  | 13,691 |  |  |  | 0 |  |  |  | 219,495 |  |  |  | 107 |
Net operating income |  |  | 11,131,795 |  |  |  | 49 |  |  |  | 1,700,077 |  |  |  | 8 |  |  |  | (9,431,718 | ) |  |  | (85 | )
Non-operating income and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 9,502 |  |  |  | 0 |  |  |  | 2,802 |  |  |  | 0 |  |  |  | (6,700 | ) |  |  | (71 | )
Other gains and losses |  |  | 514,890 |  |  |  | 2 |  |  |  | 180,463 |  |  |  | 1 |  |  |  | (334,427 | ) |  |  | (65 | )
Finance costs |  |  | (490,581 | ) |  |  | (2 | ) |  |  | (417,923 | ) |  |  | (2 | ) |  |  | 72,658 |  |  |  | 15 |
Non-operating income and expenses |  |  | 33,811 |  |  |  | 0 |  |  |  | (234,658 | ) |  |  | (1 | ) |  |  | (268,469 | ) |  |  | (794 | )
Profit before income tax |  |  | 11,165,606 |  |  |  | 49 |  |  |  | 1,465,419 |  |  |  | 7 |  |  |  | (9,700,187 | ) |  |  | (87 | )
Income tax expense |  |  | (159,807 | ) |  |  | (1 | ) |  |  | (355,273 | ) |  |  | (2 | ) |  |  | (195,466 | ) |  |  | (122 | )
Profit after income tax |  |  | 11,005,799 |  |  |  | 48 |  |  |  | 1,110,146 |  |  |  | 5 |  |  |  | (9,895,651 | ) |  |  | (90 | )
Exchange differences on translation of foreign operations |  |  | 5,309 |  |  |  | 0 |  |  |  | (169,551 | ) |  |  | (1 | ) |  |  | (174,860 | ) |  |  | (3394 | )
Total comprehensive income |  | $ | 11,011,108 |  |  |  | 48 |  |  | $ | 940,595 |  |  |  | 4 |  |  | $ | (10,070,513 | ) |  |  | (91 | )

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Segment Information

For the years ended December 31, 2019 and 2020, we primarily generates revenue through three divisions and revenue streams, namely (i) sales of bicycle parts for sports bicycle and electric bicycle, (ii) sales of rackets, (iii) sales of other products. We also received revenue of $146,282 from providing coating service for the year ended December 31, 2019.

The following tables present the summary of each reportable segment’s revenue and income (loss), which are considered as segment operating performance measures, for the years ended December 31, 2019 and 2020:

|  |  |  |  | Year ended December 31, 2020 |
|  | Bicycle parts segment |  |  | Racket segment |  |  | Others |  |  | Total segments |
Total segment revenue |  | $ | 14,275,730 |  |  | $ | 7,880,514 |  |  | $ | 22,328 |  |  | $ | 22,178,572 |
Inter-segment revenue |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Revenue from contracts with customers |  | $ | 14,275,730 |  |  | $ | 7,880,514 |  |  | $ | 22,328 |  |  | $ | 22,178,572 |
Segment profit before income tax |  | $ | 1,893,547 |  |  | $ | (436,219 | ) |  | $ | 8,091 |  |  | $ | 1,465,419 |

|  |  |  |  | Year ended December 31, 2019 |
|  | Bicycle parts segment |  |  | Racket segment |  |  | Others |  |  | Total segments |
Total segment revenue |  | $ | 14,794,649 |  |  | $ | 7,964,035 |  |  | $ | 28,267 |  |  | $ | 22,786,951 |
Inter-segment revenue |  | $ | 0 |  |  | $ | 0 |  |  | $ | - |  |  | $ | 0 |
Revenue from contracts with customers |  | $ | 14,794,649 |  |  | $ | 7,964,035 |  |  | $ | 28,267 |  |  | $ | 22,786,951 |
Segment profit before income tax |  | $ | (11,969,151 | ) |  |  | (567,260 | ) |  | $ | (236,285 | ) |  | $ | 11,165,606 |

* | Please refer to the analysis of operating revenue in the paragraph headed “Components of Results of Operations” in this section.

Components of Results of Operations

Years Ended December 31, 2019 and 2020

Operating revenues

The following table identifies the disaggregation of our revenue from continuing operations and reportable segments for the years ended December 31, 2019 and 2020, respectively:

|  | For the Year Ended December 31, |  |  | Change |
Segment |  | 2019 |  |  | % |  |  | 2020 |  |  | % |  |  | Amount |  |  | % |
Bicycle parts |  | $ | 14,794,649 |  |  |  | 64.9 |  |  | $ | 14,275,730 |  |  |  | 64.4 |  |  | $ | (518,919 | ) |  |  | (4 | )
Racket |  |  | 7,964,035 |  |  |  | 35.0 |  |  |  | 7,880,514 |  |  |  | 35.5 |  |  |  | (83,521 | ) |  |  | (1 | )
Others |  |  | 28,267 |  |  |  | 0.1 |  |  |  | 22,328 |  |  |  | 0.1 |  |  |  | (5,939 | ) |  |  | (21 | )
Revenue from contracts with customers |  | $ | 22,786,951 |  |  |  | 100 |  |  | $ | 22,178,572 |  |  |  | 100 |  |  | $ | (608,379 | ) |  |  | (3 | )

Our operating revenue for the years ended December 31, 2019 and 2020 were $22,786,951 and $22,178,572, respectively. The decrease in operating revenue was mainly due to the decrease in sales of bicycle parts and racket. The decrease in sales of bicycle parts as (i) the decrease in revenue from the sales of bicycle parts from $14,794,649 for the year ended December 31, 2019 to $14,275,730 for the year ended December 31, 2020 was mainly due to slight decrease on the volumes; and (ii) no revenue has been received from the sale of bicycle parts in the United States for the year ended December 31, 2020, compared to the revenue from bicycle parts in the United States of $164,354 we received for the year ended December 31, 2019. The revenue from racket decreased was mainly due to the decrease in the sales of racket in Asia and Europe for the year ended December 31, 2020. The decrease in the sales of racket in Asia and Europe was mainly due to the delay in cargo transportation in Asia and Europe as a consequence of the outbreak of COVID-19.

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Cost of revenue

Cost of revenue consists primarily of (i) cost of goods sold; (ii) loss on physical inventory observation; and (iii) Reversal of inventory valuation. Our cost of revenue decreased by $3,386,221, or approximately 18.6%, to $14,816,905 for the year ended December 31, 2020 from $18,203,126 for the year ended December 31, 2019, which was primarily due to the decrease in (i) cost of goods sold such as decrease in raw materials and supplies used and decrease in labor cost incurred during the year ended December 31, 2020; and (ii) loss on physical inventory.

Gross profit

Gross profit for the years ended December 31, 2019 and 2020 was $4,583,825 and $7,361,667, respectively, representing 20.1% and 33.2%, respectively, of operating revenue. Gross profit for the year ended December 31, 2020 increased by 60.6% due to (i) the increase in the selling price of bicycle parts mainly for new customers and the increase in the number of new customers, such increase in operating revenue from new customers was partially offset by the decrease in our total operating revenue due to the reasons mentioned above; and (ii) the decrease in raw materials and supplies used and decrease in labor cost incurred during the year ended December 31, 2020.

Operating expenses

Our operating expenses primarily consist of (i) selling expenses; (ii) administrative expenses; (iii) research and development expenses; and (iv) expected credit losses, and our operating expenses decreased by $1,379,453 from $7,054,734 for the year ended December 31, 2019 to $5,675,281 for the year ended December 31, 2020. Such decrease was primarily due to the outbreak of COVID-19 that affected our business operation, resulting in decrease in salary expenses and depreciation under our administrative expenses. Our selling expenses, research and development expenses and expected credit losses also decreased during the year ended December 31, 2020, resulting the decrease in our operating expenses.

Gains on disposals of non-current asset held for sale and gains arising from sale and leaseback transactions

In 2019, we sold certain land use right and buildings to Shenzhen Meishangsheng Technology Co., Ltd. and lease back a portion of the land use right and buildings sold. As a result, we recognized gains on disposals of non-current asset held for sale of $6,859,542 and gains arising from sale and leaseback transactions of $6,948,966.

Other income and expenses

Our other income and expenses consist primarily of (i) losses on disposals of property, plant and equipment; (ii) government grants; (iii) others. We recorded an other expenses of $205,804 for the year ended December 31, 2019 while we incurred other income $13,691 for the year ended December 31, 2020. The change was mainly due to the losses on disposals of property, plant and equipment decreased by $149,264 from $221,065 for the year ended December 31, 2019 to $71,801 for the year ended December 31, 2020.

Non-operating income and expenses

Our non-operating income and expenses consist primarily of (i) interest income; (ii) other gains and losses; and (iii) finance costs. We recorded a non-operating income of $33,811 for the year ended December 31, 2019 while we incurred a non-operating expenses of $234,658 for the year ended December 31, 2020. The change from non-operating income to non-operating expenses was mainly due to foreign exchange gains decreased by $334,427 from $514,890 for the year ended December 31, 2019 to $180,463 for the year ended December 31, 2020.

Income tax expense

We recorded income tax expense of $159,807 and $355,273 for the years ended December 31, 2019 and 2020, respectively.

The effective tax rate was 1.4% and 24.2% for the years ended December 2019 and 2020. The increase in effective tax rate was mainly because the majority of our profit before income tax for the year ended December 31, 2019 was derived from gains on disposals of non-current asset held for sale and gains from sale and leaseback transactions and such gains are non-taxable.

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Profit after income tax

Our profit after income tax for the years ended December 31, 2019 and 2020, was $11,005,799 and $1,110,146, respectively.

Exchange differences on translation of foreign operations

We recorded an exchange loss of $169,551 for the year ended December 31, 2020 while we recorded an exchange gain of $5,309 for the year ended December 31, 2019. The changes in exchange differences on translation of foreign operations year-over-year of $174,860 from gain to loss was primarily due to foreign currency translation loss from our subsidiaries located in China and Taiwan as a result of the translation of assets, liabilities, and results of operations into U.S. dollars using the relevant foreign currency exchange rates.

We do not currently engage in currency hedging activities in order to reduce our currency exposure.

Total comprehensive income

As a result of the foregoing, our total comprehensive income for the years ended December 31, 2019 and 2020, was $11,011,108 and $940,595, respectively.

Liquidity and Capital Resources

Our primary sources of liquidity consist of existing cash balances, cash flows from our operating activities and availability under our loan arrangements with banks. As of December 31, 2020, we have outstanding short-term loans with aggregate principal amount of $2,743,646 and $663,000 of long-term loans (including current portion), respectively. The short-term loans have floating interest rate between 1.69% to 2.6%. Long-term loans, however, has floating interest rate between 0.66% to 0.94%. As of December 31, 2020, we had cash and cash equivalents of $1,336,820 and working capital of $3,038,444. As of December 31, 2019, we had cash and cash equivalents of $1,563,058 and working capital of $3,449,899. We also had unused credit lines from bank loans of $0 as of December 31, 2019 and $3,349,619, of which $3,310,619 expires within one year and $39,000 expires beyond one year, as of December 31, 2020. Our short-term capital requirements are mainly due to strong growth of the market demand and accordingly, the increase of working capital requirements.

For the expansion of our production capacity through Bohong Technology in Yangzhou, China, our plan is to commence the construction before the end of 2021. We expect to use cash generated from operations, additional bank secured borrowings with collateral of land use right and around $3 million of capital contribution, which have yet to arranged or received to support factory construction with cost amounted to RMB 45.0 million (approximately $6.5 million) and the capital expenditures on machinery amounted to RMB 40.0 million (approximately $5.8 million). To date, we have financed our operations primarily through capital contributions, bank borrowings and from operations. We believe that we will generate sufficient cash flows after taking into account cash and cash equivalents on hand, our operating cash flows, available financing facilities and around $3 million of capital contributions, which have yet to arranged or received, to fund our operations and to meet our obligations on a timely basis for the next 12 months from the date our financial statements as of and for the year ended December 31, 2020 was authorized for issuance.

Current foreign exchange and other regulations in the PRC may restrict our PRC entities in their ability to transfer their net assets to us and our subsidiary. However, we have no present plans to declare dividend and we plan to retain our retained earnings to continue to grow our business.

We are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. The relevant filing and registration processes for capital contributions to our PRC subsidiaries typically take approximately eight weeks to complete. The filing and registration processes for loans either to our PRC subsidiaries typically take approximately four weeks or longer to complete. While we currently see no material obstacles to completing the filing and registration procedures with respect to future capital contributions to our PRC subsidiaries and loans to our PRC subsidiaries, we cannot assure you that we will be able to complete these filings and registrations on a timely basis, or at all. See “Risk Factors—Risks Related to Conducting Operations in PRC—Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.’’ Additionally, while there is no statutory limit on the amount of capital contribution that we can make to our PRC subsidiaries, loans provided to our PRC subsidiaries are subject to certain statutory limits. We are able to use all of the net proceeds from this offering for investment in our PRC operations by funding our PRC subsidiary through capital contributions which is not subject to any statutory limit on the amount under PRC laws and regulations. We expect the net proceeds from our initial public offering to be used in the PRC will be in the form of Renminbi and, therefore, our PRC subsidiaries will need to convert any capital contributions or loans from U.S. dollars into Renminbi in accordance with applicable PRC laws and regulations.

Cash Flows

Years Ended December 31, 2019 and 2020

The following table summarizes our cash flows for the periods indicated:

|  | For the Years Ended December 31, |
|  | 2019 |  |  | 2020 |
|  | USD |  |  | USD |
Net cash (used in) from operating activities |  | $ | (2,307,509 | ) |  | $ | 239,408 |
Net cash from (used in) investing activities |  | $ | 10,212,576 |  |  | $ | (1,238,681 | )
Net cash (used in) from financing activities |  | $ | (7,046,625 | ) |  | $ | 858,786 |
Effect of foreign exchange rate changes |  | $ | 117,877 |  |  | $ | (85,751 | )
Net increase (decrease) in cash, cash equivalents |  | $ | 976,319 |  |  | $ | (226,238 | )
Cash, cash equivalents at beginning of year |  | $ | 586,739 |  |  | $ | 1,563,058 |
Cash, cash equivalents at end of year |  | $ | 1,563,058 |  |  | $ | 1,336,820 |

47

Operating Activities

Net cash from operating activities was $239,408 for the year ended December 31, 2020, primarily derived from profit before tax of $1,465,419, adjusted mainly by (a) a decrease in prepayments of $1,109,801 mainly because we made large sum of prepayment to our supplier at the end of 2019; (b) an increase in accounts and payable of $850,274, and offset by an increase in inventories of $3,522,931 as we intended to increase the inventories to avoid for shortage of inventory as a consequence of the outbreak of COVID-19 that delayed the shipment of raw materials to us during the year ended December 31, 2020.

Net cash used in operating activities was $2,307,509 for the year ended December 31, 2019, primarily derived from profit before tax of $11,165,606, adjusted mainly by (a) gains on disposals of a building held for sale of $6,859,542; (b) gains of $6,948,966 arising from sale and leaseback transactions of certain land and buildings to Shenzhen Meishang Technology Co., Ltd. in March 2019; (c) a decrease in accounts receivable of $1,417,142 mainly due to the decrease in revenue during the year ended December 31, 2019; (d) a decrease in other receivables of $2,611,063; (e) an increase in current contract liabilities of $986,139 mainly due to the increase in prepayments received from our customers during December 31, 2019; (f) an increase in inventories of $2,000,366; (g) an increase in prepayments from our customers of $815,807; and (h) an decrease in other payables of $1,780,811.

Investing Activities

For the year ended December 31, 2020, net cash used in investing activities was $1,238,681, mainly for (i) acquisition of financial assets at amortized cost of $704,776; and (ii) acquisition of property, plant and equipment of $659,266.

For the year ended December 31, 2019, net cash from investing activities was $10,212,576, mainly consist of the proceeds from the sale and leaseback transactions and disposal of non-current asset held for sale of $11,457,760, mainly offset by cash for acquisition of property, plant and equipment of $1,080,399.

Financing Activities

For the year ended December 31, 2020, net cash from financing activities was $858,786, mainly consisted of proceeds from short-term bank loans of $2,011,783 and long-term bank loans of $638,444, and offset by decrease in other payables to related parties of $1,137,495.

For the year ended December 31, 2019, net cash used in financing activities was $7,046,625, mainly consisted of treasury shares acquired for the repurchase of 4,999,447 treasury shares amounting to $8,022,078, and offset by an increase in other payables to related parties of $770,250.

Trend Information

Other than as disclosed in “Risk Factors—Risks Related to Our Business and Industry—The occurrence of force majeure events and natural disasters may adversely affect our business, financial condition and results of operations” in this prospectus, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our operating revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

48

Internal Control Over Financial Reporting

Prior to this offering, we were a private company with limited accounting personnel and other resources to address our internal control over financial reporting. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the years ended December 31, 2019 and 2020, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting as of December 31, 2020, in accordance with the standards established by PCAOB. As defined in standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified arose from our lack of effective financial reporting oversight process for our period-end financial reporting as well as our lack of policies and procedures over evaluation of significant complex transactions and evaluation of certain general ledger accounts. Following the identification of the material weaknesses, we have taken and plan to continue to take remedial measures to remedy the material weaknesses. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control over financial reporting under the Sarbanes-Oxley Act for purposes of identifying and reporting any weakness or significant deficiency in our internal control over financial reporting, as we and they will be required to do so once we become a public company. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional control deficiencies may have been identified.

To remedy our identified material weaknesses, we are in the process of adopting several measures that will improve our internal control over financial reporting, including: (i) recruiting a chief financial officer with extensive financial reporting experience to effectively oversight our financial reporting process; (ii) establishing a comprehensive accounting policies and procedures manual, which document the current IFRS accounting policies and technical accounting guidance and are tailored to the Company’s business; (iii) establishing an ongoing program to provide sufficient and additional appropriate training to its accounting staff, especially trainings related to IFRSs and SEC financial reporting requirements; and (iv) implementing internal controls over financial reporting to ensure our controls over accounting policies and procedures are operating effectively.

We expect to complete the measures above as soon as practicable and we will continue to implement measures to remedy our internal control deficiencies in order to meet the deadline imposed under Section 404 of the Sarbanes-Oxley Act. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. If we fail to develop or maintain an effective system of internal controls over our financial reporting, we may not be able to accurately report our financial results, prevent fraud or meet our reporting obligations. As a result, investor confidence and the market price of our shares may be materially and adversely affected. See “Risk Factors—Risks Related to Our Business and Industry—If we fail to implement and maintain an effective system of internal controls or fail to remediate the material weaknesses in our internal control over financial reporting that has been identified, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of our shares may be materially and adversely affected.”

For the Critical Accounting Policies, please refer to - Note 4. “Summary of significant accounting policies” of our consolidated financial statements.

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Quantitative and Qualitative Disclosures about Market Risks

Market Risks

Our exposure to financial market risks relates primarily to changes in foreign exchange rates and interest rates. To mitigate these risks, we utilize derivative financial instruments, the application of which is primarily for hedging, and not for speculative purposes.

Foreign Currency Exchange Rate Risks

Our foreign currency exposure gives rise to market risks associated with exchange rate movements against the NT dollar, the RMB, the HKD and the US dollar. As of December 31, 2020, we do not hold or issue any derivative for trading purposes or to hedge against fluctuations in foreign exchange rates. We mitigate this risk by conducting sales and purchases transactions in the same currency. Doing so helps to reduce, but do not eliminate, the impact of foreign currency exchange rate movements. An average appreciation of the US dollar against all other relevant foreign currencies of 5% would decrease our exchange loss by US$329,499 based on our outstanding assets and liabilities denominated in foreign currencies as of December 31, 2020. As of December 31, 2019 and 2020, we had no outstanding forward exchange or foreign currency option contracts.

See Note 37 of our audited consolidated financial statements for additional information on financial risk management.

Interest Rate Risks

As of December 31, 2020, we had aggregate debts outstanding of US$3,406,646, which was incurred for capital expenditure and general operating expenses. Of our outstanding debts as of December 31, 2020, 100% bear interest at variable rates. The interest rate for the majority of our variable rate debts varies based on a fixed percentage spread over the prime rate established by our lenders. Our variable rate debts had an annual interest rate between 0.66% and 2.60% as of December 31, 2020. Accordingly, we have cash flows and earnings exposure due to market interest rate changes for our variable rate debts. An increase in interest rates of 1% would increase our annual interest charge by US$34,066 based on our outstanding floating rate indebtedness as of December 31, 2020.

As of December 31, 2019 and 2020, we had no interest rate swap agreements outstanding.

50

INDUSTRY

The information presented in this section has been derived from an industry report commissioned by us and prepared by Frost & Sullivan, an independent research firm, regarding our industry and our market position around the world.

Global Carbon Fiber Industry Overview

Carbon fiber is a kind of fiber material with the carbon content of more than 90%. Because of its fibrous shape and softness, it can be processed into various fabrics. It is usually combined with resin, metal and ceramic materials to make advanced composite materials. Carbon fiber is widely used in many fields because of its high specific strength, high specific modulus, corrosion resistance, high-temperature tolerance, friction resistance, good electrical conductivity and low thermal expansion coefficient. The figure below summarizes the classification of carbon fiber.

Figure 1: Overview of classification of carbon fiber

Source: Frost & Sullivan

As shown in the figure below, the carbon fiber industry chain is divided into upstream, midstream and downstream, in which the production process of carbon fiber in midstream is complex. The precursors are obtained after a series of treatment processes which include polymerization and spinning process by raw material. Then, applying the pre-oxidation and carbonization process on precursors to obtain carbon fiber. To meet different requirements, carbon fiber is processed together with other materials like resin, metal and ceramic to composite material parts, which are used in downstream products. For instance, because of its lightweight, high rigidity and other advantages, carbon fiber is used instead of wood in sports goods like golf clubs, hockey clubs, ski clubs, tennis rackets, badminton rackets, bicycles, fishing rods and bows.

51

Figure 2: Overview of the industry chain of carbon fiber

Source: Frost & Sullivan

Market Size

The concept of carbon fiber has appeared for many years and carbon fiber products have increased market presence over the past few years. As shown in Figure 3, the market size of the global carbon fiber industry increased from approximately USD2,114.7 million in 2016 and reached approximately USD2,630.0 million in 2020 at a Compound Annual Growth Rate (“CAGR”) of approximately 5.6%. In 2020, carbon fiber is mainly used in aerospace (38%), wind blade (17%) and sports/leisure (14%), which shows major application markets of carbon fiber are for commercial and industrial use (Figure 4). At present, there is a fierce competition in the low-end carbon fiber market with low profit margins. There is still a large profit margin in the mid-end and high-end carbon fiber markets. However, in the future, the demands of carbon fiber products for consumption use will continue to be released. With the development of technology, there will be increasing application of carbon fiber for new purpose and usage, and the cost of carbon fiber products will be reduced. It is expected that these factors will enable a higher margin for the manufacturers and promote people’s willingness to buy carbon fiber sports and leisure products. Therefore, the global carbon fiber industry market size is expected to maintain a CAGR of approximately 10.1%, reaching approximately USD4,117.6 million by 2025 from approximately USD2,806.2 million in 2021. In the future, long-term low-price competition will force low-end carbon fiber products manufacturers to face business transformation. However, manufacturers who develop mid-end and high-end products will maintain their first-mover advantages through resource accumulation and research and development capability and maintain a leading position in the industry.

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Figure 3: Market Size of Global Carbon Fiber Industry, 2016-2025E

Source: Frost & Sullivan

Figure 4: Breakdown by Application Segments of Global Carbon Fiber Market, 2020

Source: Frost & Sullivan

Market Drivers and Development Trends

Favorable policies

The global major countries and regions pay attention to the development of carbon fiber industry and have launched relevant policies to stimulate the development of carbon fiber industry. For example, the “Going Climate Neutral” by 2050 which issued by European Commission calls for the study of carbon fiber products to reduce costs. The “Research and Development of Innovative Structural Materials” from the New Energy and Industrial Technology Development Organization aim to develop new carbon fiber precursor compounds, clarified the formation mechanism of carbonization structure and standardize evaluation methods for carbon fibers. There are not only policies to encourage R&D, but also many policies to encourage industrialization and capacity improvement. Policy support will provide a good external environment for the development of the carbon fiber industry, which is conducive to the rapid development of the industry.

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Strong downstream demand

With the release of the National Fitness Plan (2021-2025), China will focus on promoting table tennis, badminton, cycling and other sports in the next five years. The plan will also focus on supporting research and development of fitness equipment and manufacturing enterprises. With the promotion of policies and the continuous integration of outdoor sports and tourism, more people will participate in these sports activities, which will directly promote the development of related equipment. In addition, with the increasing influence of cycling events such as the Tour de France, the Tour of Italy, the Tour of Spain, and the Crossing the U.S. Cycling Race, the number of cyclists in Europe and the United States is also increasing, which will also push up the demands for sports and fitness equipment. As important equipment for sports such as bicycles, tennis, badminton and surfing, carbon fiber products will have greater market demand in the future.

High-end products

Europe attaches importance to the application of carbon fiber in the aerospace field and emphasizes the use of carbon fiber composite aerospace materials to reduce the generation of waste in “Horizon 2020” released by the European Commission. American companies such as SpaceX, Blue Origin and Boeing also use carbon fiber materials in their products in the aerospace field. Compared with the foreign carbon fiber market, domestic carbon fiber is mainly concentrated in low value-added areas, which results in competitive pressure on the price. At the same time, key technologies of China’s carbon fiber industry lag behind developed countries, which leads to the limitation of carbon fiber materials in high value-added fields such as aviation manufacturing. With policy support and the pursuit of high value-added products, more domestic enterprises will invest in the research and development of high-end carbon fiber so that the products of the whole industry will develop into a high-end trend.

Global Carbon Fiber Bicycle Parts Industry Overview

Carbon fiber bicycle is the second largest segment of the sports/leisure market. Major components of bicycles made of carbon fiber (CF) composite materials include bicycle frame, fork, wheelset, pedal, seat post, etc. Since the 1970s, carbon fiber has become the material for bicycle frames on account of its lightweight, ease of shaping, high strength, high stiffness, etc., and has been mainly used in mid-to-high-end products for professional athletes or bicycle enthusiasts. Compared with traditional racing bicycles made of aluminium alloys, carbon fiber bicycles could remarkably reduce the extra energy consumption of athletes due to the lightweight of the bicycle and reduce bendability occurred by accidental collision. Carbon fiber and its composite materials have now become mainstream materials for racing bicycles and high-end bicycle products (including electric bicycles). Figure 5 below shows the comparison of features between regular bicycles and carbon bicycles and Figure 6 below shows different types of carbon fiber composite bicycles.

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As shown in Figure 7 below, carbon fiber bicycle is the second largest segment of the sports/leisure market, which accounts for around 25.0% of the market share in the global carbon fiber demand in sports/leisure market in 2020. Major components of bicycles made of carbon fiber composite materials include bicycle frame, fork, wheelset, pedal, seat post, etc. Since the 1970s, carbon fiber has become the material for bicycle frames on account of its lightweight, ease of shaping, high strength, high rigidity, etc., and has been mainly used in mid-to-high-end products for professional athletes or bicycle enthusiasts. Compared with traditional racing bicycles made of aluminium alloys, carbon fiber bicycles could remarkably reduce the extra energy consumption of athletes due to the lightweight of the bicycle and reduce bendability occurred by accidental collision. Up to date, carbon fiber and its composite materials have now become mainstream materials for racing bicycles and high-end bicycle products (including electric bicycles).

Figure 5: Comparison of Regular Bicycles and Carbon Bicycles

Source: Frost & Sullivan

Figure 6: Types of Carbon Fiber Composite Bicycles

Source: Frost & Sullivan

Figure 7: Global Carbon Fiber Demand in Sports/Leisure Market, 2020

Source: Frost & Sullivan

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Market Size

As shown in Figure 8 below, in recent years, global carbon fiber bicycle parts market experienced moderate growth, increasing from approximately USD288.0 million in 2016 to USD462.0 million in 2020, registering a CAGR of 12.5%. Driven by improving people’s living standards, transformation of consumers’ lifestyle and technology development, the market size of global carbon fiber bicycle parts industry is expected to increase from approximately USD522.1 million in 2021 to USD945.0 million in 2025, representing a CAGR of 16.0%. The penetration of carbon fiber in professional-grade bicycles is expected to further grow due to its outstanding physical performance, while as the manufacturing process becomes mature, carbon fiber or carbon fiber composite materials are expected to expand its application in regular bicycles and electric bicycles.

Followed by the implementation of policies in the U.S. and Europe and the other countries to encourage replacement of public transportation by bicycle, such as addition of bicycle lanes and other bicycle-related infrastructures, the market demand on electric bicycles increased, which recorded an annual growth rate of 23.4% from January 2020 to May 2020. The pandemic in 2020 has changed people’s commuting behavior in Europe and the U.S. Government’s policies and subsidies on encouraging the use of bicycles also contribute to the increasing market demand on electric bicycles.

Figure 8: Market Size of Global Carbon Fiber Bicycle Parts Industry, 2016-2025E

Source: Frost & Sullivan

As shown in Figure 9 below, the market size of global electric bicycle reached approximately USD40.5 billion in 2020, and is expected to further increase to approximately USD68.3 billion in 2025, with a CAGR of 10.5% from 2021 to 2025. Compared with other public transportation systems, the electric bicycle has advantages of affordability and convenience. Most countries are working on boosting electric bicycle to reduce the stress on public transportation systems. Driven by the growing urbanization, traffic congestion in the city, as well as support and initiatives from governments, the demand of electric bicycle is expected to further expand.

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Figure 9: Market Size of Global Electric Bicycle Industry, 2016-2025E

Source: Frost & Sullivan

Market Drivers and Development Trends

Sustainable Cooperation with Cycling Brands

As bicycle parts manufacturers, companies who have established expansive and stable client networks with well-known cycling brands may stand out in the competition globally. For example, for racing bicycles, carbon fiber bicycle parts manufacturers produce frames, wheelsets, forks, cranks according to specifications and functions required by racing bicycle brands. Thus, carbon fiber bicycle parts are highly customized products, and reliable bicycle parts manufacturers which can design and manufacture products that meet or exceed the requirement would be a determining success factor for carbon fiber bicycle brand customers in their operation. Besides, brand spillover effects could increase the market visibility of carbon fiber bicycle parts companies due to supplier relationships with award-winning racing bicycles.

Technology Upgrade of Manufacturing

With the development of carbon fiber and composite materials manufacturing technology, as well as the decreasing manufacturing cost, carbon fiber has been applied in regular bicycles and emerging electric bicycles. Some leading companies in the industry have set up the prototyping center for manufacturing carbon fiber frames, and applied automated painting technology to continuously optimize the production process and enhance manufacturing efficiency. Additionally, the state-of-the-art technology includes vacuum forming, plasma surface treatment technology, etc. Companies who own strong R&D capabilities, ability to design resin formulas and diverse product portfolios are more likely to stand out in the global competition. The disruptive technology innovation is conducive to elevating the industrialization of carbon fiber bicycle parts to a new level, increasing production capacities and expanding downstream applications.

Growing Consumer Demand for Carbon Fiber Bicycles

As consumers’ health awareness rises around the globe, cycling is considered a new symbol of a healthy lifestyle. The outbreak of COVID-19 in 2020 has greatly impacted consumers’ perceptions of health and fitness, which is reflected by the increasing number of road and mountain bicycle enthusiasts, not only for races but also for tour or leisure purposes. Besides, more and more people have chosen cycling as a fast, flexible and reliable method of transport, which spurs the demand for carbon fiber bicycle parts.

Currently, major consumers of high-end bicycles are located in Europe and North America, while it is expected that Asia-Pacific area will become the next promising carbon fiber bicycle market. Thus, the global carbon fiber bicycle parts market is expected to embrace growth opportunities in the next few years.

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Increasing Environmental Awareness

In recent years, the environmental awareness of people around the globe is growing. In April 2018, the United Nations General Assembly declared June 3 as International World Bicycle Day to foster environmental stewardship and health. In 2020, due to the impact of the COVID-19, the European and American governments have begun to encourage people to walk or ride bicycles in order to prevent people from using public transportation, which might in turn cause group infections, and at the same time to avoid traffic jams. Countries such as the U.K., France and Italy have also expanded bicycle lanes and provided subsidies on purchasing bicycles, in order to encourage citizens to opt for zero-carbon bicycles, which has also led to a rapid growth in bicycle sales. Bicycles contribute to cleaner air, reduce congestion and make education, health care and other social services more accessible to the most vulnerable populations. A sustainable transport system that promotes economic growth reduces inequalities while bolstering the fight against climate change is critical to achieving sustainable development goals. Copenhagen and Amsterdam are considered as bicycle capitals in the world, which have been building their bicycle infrastructure since the 1970s and fostered a sustainable lifestyle. Therefore, the growing environmental consciousness is conducive to the development of carbon bicycle industry and related upstream industries.

Vertical Integration

At present, many carbon fiber composite material manufacturers purchase yarns and resin raw materials from suppliers, and then produce prepreg according to a specific ratio, followed by laminating, molding, heat treatment and other processes. However, the material properties cannot be standardized, which prolongs the product launch period and raises production costs. Many industry-leading players proactively extend their business to the upstream industry, including establishing their own material research centers, investing material analysis instruments and equipment, and recruiting technical talents to develop differentiated products by self-developed resin formations, which reduces production costs and capture a larger portion of the value chain. On the other hand, some carbon bicycle parts manufacturers step into the manufacturing of carbon bicycles business by providing bicycle assembly service or cooperating with renowned carbon bicycle brands to achieve vertical integration, which expands business portfolio and increases brand awareness.

Favorable Government Policies

Electric Bicycle Incentive Kickstart for the Environment (E-BIKE) Act

In 2021, the Senate and House of Representatives of the United States issued the Electric Bicycle Incentive Kickstart for the Environment (E-BIKE) Act, which encourages the use of electric bicycles through a consumer tax credit. Due to the distance, speed and ease by which they can travel, electric bicycle will help replace vehicle trips and commutes and reduce carbon emissions. If the E-BIKE Act is passed, it would create a consumer tax credit that (i) covers 30% of the cost of the electric bicycle, up to a US$1,500 credit, (ii) applies to new electric bicycles that cost less than US$8,000, and (iii) is fully refundable, which allows lower-income workers to claim the credit.

Recommendations for Delivering Green Growth and an Effective Mobility in 2030

In 2020, the European Commission issued Recommendations for Delivering Green Growth and an Effective Mobility in 2030, in which recommends that cycling should be an equal partner in the mobility system. It suggests that there is an increase in use of bicycle in European Union by 50% in average in 2019-2020 and expects that such trend will be continued until 2030. It also indicates that the European Union investment in cycling will be raised to 3 billion Euros from 2021 to 2027 and 6 billion Euros from 2028 to 2034.

Bicycle Sports Industry Development Plan

In 2018, the General Administration of Sports and Development and Reform Commission in China issued the Bicycle Sports Industry Development Plan. It takes the supply-side structural reform of the bicycle sports industry as the main line, focusing on consolidating the foundation of the bicycle sports industry, improving the ability and quality of the supply of bicycle sports products and services, promoting industrial agglomeration and integration, and promoting the marketization, standardization and branding of bicycle sports in China. It also promotes the healthy and sustainable development of the bicycle sports industry and provides solid and stable support for expanding sports consumption and demand, realizing the transformation and upgrading the sports industry in China.

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Light Industry Development Plan

In 2016, the Ministry of Industry and Information Technology in China issued the Light Industry Development Plan. It is pointed out that the bicycle industry should be promoted in the direction of lightweight, diversified, fashionable and intelligent. Such plan accelerates the research and development and application of high-strength lightweight materials, transmissions, transmission systems, new energy, smart sensing technologies and Internet of Things technologies. The Light Industry Development Plan also focus on the development of diversified bicycles such as fashion leisure, sports fitness, long-distance cross-country and high-performance folding, as well as standard-compliant lithium-ion battery electric bicycles and smart electric bicycles.

E-bike Subsidy Schemes by European Cyclists’ Federation in 2016

In 2016, the European Commission set up the E-bike Subsidy Schemes, in which subsidies aimed at cycling can be provided to encourage uptake or an increase in cycle use through providing a financial benefit. Using a subsidy to encourage cycling can take one of two forms: providing a financial benefit for commuters to switch to cycling by paying for km travelled or subsidising the untaxed purchase of equipment through employee schemes.

Competitive Landscape - Competitor Profiles

The table below shows the major global leading players in the carbon fiber bicycle parts industry:-

Company Name |  | Listed or Unlisted |  | Year Established/ HQ |  | Business Introduction |  | Major Products
YMA Corporation |  | Unlisted |  | 2015, Taichung City, Taiwan |  | YMA Corporation, a subsidiary of J-Star, is principally engaged in the R&D, manufacture and processing and trading of carbon fiber composite materials. YMA has reached the production capacity of about 100,000 carbon bicycle frames per year and 200,000 carbon forks per year. YMA has established cooperation with multiple renowned bicycle brands, including Conalgo etc. YMA has obtained many patents regarding bicycle products, which are well recognized by global athletes and cycling enthusiasts; for example, Thomas Pidcock won the MTB World Cup championship on a YMA-built Lightrider Worldcup (EST-MS-08) frame in 2021. |  | Tennis rackets parts, badminton rackets parts, road bicycle parts, mountain bicycle parts, electric bicycle parts, automotive parts, healthcare products, etc.
Topkey Group |  | Listed (4536 .TPE） |  | 1980, Taichung City, Taiwan |  | Topkey Group is principally engaged in the manufacture, processing and trading of carbon fiber materials in sports and leisure products and aerospace medical equipment. |  | Tennis rackets parts, helmets parts, bicycle racks and aerospace materials, etc.
XDS Shenzhen Xidesheng Bicycles Co., Ltd. |  | Unlisted |  | 1995, Shenzhen City, Guangdong |  | As the largest manufacturer of carbon-fiber bicycles in the world, XDS specializes in the integration of R&D, manufacturing, sales and services of bicycles. |  | Parts of mountain bicycles, road bicycles, electric bicycles, folding bicycles, city bicycles, etc.
Tentech Composite Technology Co., Ltd |  | Unlisted |  | 2003, Dongguan City, Guangdong |  | Tentech is principally engaged in the manufacture, processing and trading of carbon fiber composite products. |  | Bicycle frames, accessories, modules, etc.

Source: Frost & Sullivan

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Global Carbon Fiber Racket Parts Industry Overview

Carbon fiber is widely used in tennis and badminton rackets due to its excellent performance. With the gradual development of material technology, rackets have gradually evolved from traditional wooden rackets and metal rackets (such as iron and aluminum) to aluminum alloy and carbon fiber materials. Carbon fiber is the high-end material of the current racket frame, and is mainly used in sports events and professional or amateurish training. Compared with aluminum alloy rackets, carbon fiber rackets have the characteristics of light weight, good mechanical properties, good impact resistance and good damping properties. The carbon fiber racket has low vibration, which can provide better hitting feel and ball control without hurting the wrist, but the price of carbon fiber racket is still high; while the aluminum alloy racket has a simple production process and lower production cost, its weight is high and the damping property is poor, and hence, players’ wrist is easily injured. In addition, in order to further improve the performance of the racket, some leading companies produce hybrid carbon fiber rackets by adding high-performance materials such as graphite and glass fiber. At present, the U.S., Europe and Japan markets are the major consumer markets of rackets.

Market Size

Driven by the higher requirements on the mechanical properties of rackets and increasing purchasing ability of high-end sports goods customers, as shown in Figure 9 below, the market size by revenue of global carbon fiber applied in rackets has witnessed a steady growth, increasing from $194.1 million in 2016 to $242.6 million in 2019. The outbreak of the COVID-19 has caused a negative impact in the carbon fiber racket parts industry due to the limited sports events and reduced daily sports activities around the world. As a result, the sales revenue of global carbon fiber racket parts declined to USD230.5 million in 2020.

Looking forward, as the pandemic is gradually controlled, the carbon fiber racket parts industry is expected to recover from 2021. Promoted by the increasing health awareness post-pandemic, encouraging policies of sports activities in developing countries, as well as progressed carbon fiber manufacturing techniques, it is estimated that the demand of carbon fiber applied in the rackets will further rise and the market size by revenue of carbon fiber racket parts will increase from USD243.9 million in 2021 to USD332.4 million in 2025, representing a CAGR of approximately 8.0%.

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Figure 10: Market Size of Global Carbon Fiber Racket Parts Industry, 2016-2025E

Source: Frost & Sullivan

Market Drivers and Development Trends

Increasing Tennis and Badminton Participants

Driven by the supportive policies on sports activities, the number of people participating in tennis and badminton is increasing all over the world. In 2019, the State Council of China issued the “outline of building a sports power” and stated the target that the proportion of people who regularly participate in physical exercise will reach more than 45%, and the per capita sports area will reach 2.5 square meters in 2035. In Japan, facing issues such as aging problem and declining birth rates, the Japanese government has successively promulgated the “Basic Sports Law” and “Basic Sports Plan,” emphasizing the right of everyone to participate in sports, and promoting the development of “sports for all” by holding the international events such as the Olympic Games. In the United States, a new iteration of “Healthy People” initiative is launched at the beginning of every decade to set measurable objectives to improve the health and well-being of people nationwide. According to the “2021 Physical Activity Council’s Overview Report on U.S. Participation” released by the Physical Activity Council (PAC), around 75.6% of people in the U.S. regularly participate in sports, and the penetration rate of racket sports has increased from 12.4% in 2013 to 13.9% in 2020. In Europe, voluntary sports clubs are promoted by many countries to support mass sports participation. According to the data released by European Union, there were over 320,000 people employed in the sports and fitness sector in the European Union in 2020. Under the continuous publicity, public health awareness is also increasing year by year. Besides, with the investment of various government agencies, the construction of sports facilities is gradually improved and sports events are more abundant. Meanwhile, the emergence of many badminton and tennis superstars has further stimulated people’s enthusiasm for participating in these two sports. Badminton has become an extremely popular sport, which is played regularly by over 300 million people around the world. It is particularly popular in Asia, with many of the best players ever to grace the game hailing from the continent. The number of global tennis players reached 87 million in 2019, of which China accounted for the highest of 22.5%, according to the report released by the ITF (International Tennis Association). Therefore, the increasing participants of tennis and badminton are expected to drive the demand for relevant sports equipment such as carbon fiber rackets.

Application of Carbon Fiber Rackets Expanding from Professional Events to the Public

From 2016 to 2020, the global per capita GDP increased from USD10,365.2 to USD10,953.6 at a CAGR of 1.4%. Driven by the growing economy, people’s health awareness and average purchasing ability on sports equipment are rising as well, especially in developing countries like China. For example, the overall sales value of sports equipment in China increased from RMB12.0 billion in 2016 to RMB13.9 billion in 2019, representing a CAGR of 5.1%. In addition, the sport industry in the developed world has also experienced a continuous growth. Taking Switzerland as an example, a recent report published by Federal Department of Defense, Civil Protection and Sport shows that Switzerland has witnessed a rapid increase of sport over the past few years as increasing sports events are hold in the country (e.g., European Athletics Championships, the Youth Olympic Games and the World Road Cycling Championships), with the estimated turnover of sport sector in Switzerland reaching 22.2 billion francs in 2017, increasing by 31% from 2005. Besides, the media strengthened the promotion and marketing of carbon fiber rackets such as the excellent properties of the carbon fiber material, which enhanced consumers’ recognition and demand for carbon fiber rackets. Some racket manufacturers also launch co-branding carbon fiber rackets with other famous brands or IPs and promoting the same racket models used by sports stars to attract customers. As result, carbon fiber rackets is not just limited to the professional market. It is expected that increasing amateurs will be willing to purchase carbon fiber rackets in the future.

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Technology Breakthrough of Carbon Fiber Racket Parts

Among high-end rackets, major brands have strong brand recognition and brand loyalty, and hence, well-known brands. Under the absolute leadership of brand manufacturers, there are fewer tennis racket manufacturers developing their own brands, and most of them adopt OEM or ODM business models. As one of the key competitive factors of carbon fiber manufacturers, technological upgrade accelerates the production speed of carbon fiber rackets and improves the quality of finished products. The carbon fiber racket is composed of a carbon fiber composite racket frame which is made of a racket surface interlaced with mesh and a resin material skeleton wrapped with carbon fiber belt. For most players in the carbon fiber racket parts industry, the carbon fiber used to make rackets is purchased from upstream suppliers, but the resin formula is the secret and R&D focus of each company. Our breakthrough nanoresin formula and patented technology are the key to improve the performance and durability of the carbon fiber rackets. After years of accumulation of technology and experience, leading companies in the industry continue to improve resin formulations and produce prepreg materials according to product characteristics and customer needs. In addition, driven by the improving automation level, emerging moulding technologies can improve the product quality and production efficiency of carbon fiber rackets. Some leading carbon fiber racket manufacturers have made great efforts in core technology development such as microscopic analysis of material, product structure design, module design, tooling design and customized process design, and so on. In the future, with further maturity of material technology and production techniques, the price of carbon fiber rackets will gradually decrease, attracting more consumers.

Competitive Landscape – Competitor Profiles

The table below shows the major global leading players in the carbon fiber racket parts industry:-

Company Name |  | Listed or Unlisted |  | Year Established/ HQ |  | Business Introduction |  | Major Products
Topkey Group |  | Listed (4536 .TPE) |  | 1980, Taichung City, Taiwan |  | Topkey Group is principally engaged in the manufacture, processing and trading of sports and leisure products and aerospace medical equipment. |  | Tennis rackets, helmets, bicycle racks and aerospace materials, etc.
OTIS Co., Ltd. |  | Unlisted |  | 2002, Dongguan, Guangdong |  | The company is a Taiwan-funded enterprise, mainly engaged in the production, sales and processing of carbon fiber composite materials. In 2017, the company became a partner supplier of Decathlon, participating in the R&D and production of carbon fiber related sports products. It is a cooperative manufacturer of many sports goods companies in Europe and America. |  | Carbon Fiber parts of tennis rackets, badminton rackets, squash rackets, beach rackets, paddles, hockey sticks, fishing rods, arrow shafts, golf clubs, etc.

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Forwell Sports Equipment Co., Ltd. |  | Unlisted |  | 2003, Dongguan, Guangdong |  | As a subsidiary of J-Star, the company is a Taiwan-funded enterprise with more than 20 years of professional carbon fiber bicycle and racket manufacturing experience. The company has built a wide customer network of many world-renowned brands such as Tecnifiber etc. Its products are exported to Europe, America, Asia and other countries and has supported many athletes to win the champion in the international competitions. |  | Golf clubs, ice hockey sticks, carbon bicycle tubes, bicycle accessories, shoe accessories, composite products, rackets, etc.
Bonny Worldwide Co., Ltd. |  | Listed (8467 .TPE) |  | 1982, Taichung City, Taiwan |  | The company is a professional manufacturer of carbon fiber rackets OEM and ODM and related sports goods. The company has developed a variety of new deceleration patents, and many all-carbon fiber rackets with novel and unique designs and shapes. The company has become an important partner of many well-known international companies, and its products are sold all over the world. |  | Carbon fiber parts products of hockey sticks, tennis rackets, badminton rackets etc.
Long Yi Industrial (Huizhou) Co., Ltd. |  | Unlisted |  | 2004, Huizhou, Guangdong |  | The company is a wholly foreign-owned manufacturing enterprise focusing on the development and production of carbon fiber tennis racket sports goods series and carbon fiber tube sheet industrial products series. The company is currently one of the largest and most prominent enterprises in the international high-end carbon fiber tennis racket industry. |  | Carbon fiber parts products in the fields of tennis rackets, badminton rackets, golf clubs, water skis, bicycles, automobiles, home appliances, and medical applications, etc.
Xiamen Keentech Composite Technology Co., Ltd. |  | Unlisted |  | 1988, Xiamen, Fujian |  | As a subsidiary of Topkey Group, the company is engaged in the development and manufacturing of advanced carbon fiber composite products. The company’s R&D and production in the application of composite materials ranks the highest level in the world. It cooperates with many world-renowned brand manufacturers and sells its products to Europe, America, Japan and other countries. |  | Carbon fiber tennis rackets, badminton rackets, racing helmets, bicycle racks, aviation knots, medical equipment, etc, etc.
Xiamen Leader Sporting Goods Co., Ltd. |  | Unlisted |  | 1988, Xiamen, Fujian |  | Attached to Lianjie Group, Xiamen Leader Sporting Goods Co., Ltd. is a Hong Kong-invested enterprise having been specialized in the R&D and manufacture of carbon fiber composite products for 25 years, being one of the largest professional manufacturers of composite products. |  | Frame of mountain bicycle, frame of road bicycle, front fork of road bicycle, tennis racket, pelota racket, squash racket, bow and arrow, badminton racket, baseball bat, etc.

Source: Frost & Sullivan

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Other Global Carbon Fiber Sectors Industry Overview

Automobile

Compared to metals, carbon fiber composite materials applied in some car parts such as chassis, car roof, cockpits, interior accessories and the car body could reduce the weight by approximately 10%. Simultaneously, the lighter the vehicle, the higher fuel efficiency, the lower volume of carbon dioxide emissions. Due to the integration, designability, high vibration damping, carbon fiber composite materials could make vehicles lighter, which accelerates the development of anti-pollution and lower fuel consumption. For example, Volkswagen’s “2L car” CC1 used carbon material as 45% of its car body. The market size of global carbon fiber automotive parts industry is USD1,147.5 million in 2020 and is expected to increase from 1,319.6 million in 2021 to USD2,044.8 million in 2025, registering a CAGR of 11.6%.

Foil Masts and Padel Rackets

With the increasing popularity of surfing and padel around the world, the foil masts made of carbon fiber are coming into people’s spotlight. Carbon foil masts have unique advantages compared to aluminium foil masts due to the high strength, corrosion resistance, strong seismic performance, good balance, and high flexibility. Carbon foil masts enable surfers to maintain stability and avoid damage when riding big waves or immersing in seawater for a long period, achieving protection for surfers. The market size of global carbon fiber foil mast parts industry is expected to reach over USD30 million in 2025 with a CAGR of 10.4% from 2021 to 2025.

The excellent performance of carbon padel rackets is widely recognized by athletes and the public. Padel rackets made of carbon fiber are lighter, more durable and can withstand high temperature. For athletes, carbon fiber rackets can reduce the load on the arm during long rallies and improve the speed and efficiency when hitting the ball. The market size of global carbon fiber padel racket parts industry is expected to reach over USD35 million in 2025 with a CAGR of 9.2% from 2021 to 2025.

Healthcare Products

Carbon fiber is widely applied in healthcare products. Due to the lightweight, high stability, high strength and fatigue resistance, carbon fiber is generally used in wheelchairs, senior walkers and other medical equipment. Carbon fiber is usually used in the chassis and backrest frame of wheelchairs and the body of senior walkers, featuring lightness, stiffness and exceptional durability. The stability and biocompatibility of carbon fiber materials have attracted extensive attention in medical devices and biomaterials. With the average expenditure on health care in China increasing from RMB1,307 in 2016 to RMB1,843 in 2020, as well as population ageing, healthcare products made of carbon fiber are expected to fulfill growth potential in the future. In developed countries, per capita healthcare spending in the US, the UK, Denmark and Japan were USD10,948, USD4,500, USD5,47 and USD4,691 in 2019. The global market size of medical device in 2019 is USD445.93 billion and is expected to increase to USD587.41 in 2024, registering a CAGR of 5.7%. The market size of global carbon fiber healthcare product parts industry is expected to reach over USD300 million in 2025 with a CAGR of 19.0% from 2021 to 2025.

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Robotic Arm

With the continuous improvement of carbon fiber production and processing technology, carbon fiber has gained more market share in robotic arms, particularly industrial robots. Compared to traditional robotic arms made of aluminium alloy and alloy steel, carbon fiber robotic arms have higher flexibility, fracture resistance and a longer service life. Also, the vibration dampening of carbon fiber robotic arms allows for precise control and positioning, enhancing working speed and efficiency of robots. With the accelerated automation process and wide application of industrial robotics, carbon fiber is expected to develop further and be favored by downstream customers. The global robotic arm market is expected to grow at a CAGR of approximately 14.0% during the forecast period, growing from USD24.9 billion in 2021 to USD42.0 billion by 2025.

Aerospace

Carbon fiber composite materials are widely applied in aircraft and aerospace fields, such as civil and military aircraft, rockets for space development and artificial satellites etc. Subject to a harsh operating environment, aerospace equipment is usually required to have high tensile and compression performance, high impact and fatigue resistance, etc. Thus, the carbon fiber product in aerospace is on the high end of the quality and cost spectrum. In recent years, the proportion of carbon fiber composite materials employed in aircraft has increased, which could significantly reduce the weight of the plane body, improve aeroelasticity and enhance the overall performance. Therefore, the square, weight and parts of carbon fiber composite materials used in aircraft are forecast to grow in the next few years.

Electronics

Driven by the lightweight of consumer electronics, carbon fiber is gradually applied in 3C products. For example, Lenovo, a leading PC brand, released the YOGA Pro 13s Carbon 2021 laptop in 2020, with its body made of carbon fiber and magnesium alloy, weighing only 966 grams. Chopped carbon fiber reinforced plastic with anti-static, electromagnetic shielding and other functions in copiers, printers, digital cameras, data transmission cable connectors and other products has been applied in different products. Compared with other similar materials such as carbon black and metal, carbon fiber with reinforced plastic has a more affordable price, which raises the demand for the market.

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BUSINESS

Overview

Our Predecessor Group was established in 1970 and we have accumulated over 50 years know-how in material composite industry. We currently develop and commercialize the technology on carbon reinforcement and resin systems. With decades of experience and knowledge in composites and materials, we are able to apply our expertise and technology on designing and manufacturing a great variety of lightweight, high-performance carbon composite products, ranging from key structural parts of electric bicycles and sports bicycles, rackets, automobile parts to healthcare products. According to the industry report commissioned by us and prepared by Frost & Sullivan, we are one of the major global leading players in the carbon fiber bicycle parts industry and carbon fiber racket parts industry.

As our business is technology-driven, our vision is to offer cutting edge technology and manufacturing expertise in carbon composite to our customers, and many of our products are directly or indirectly supplied to different renowned international sports brand owners. Our carbon composite products deliver substantial weight savings, endurance and stiffness comparing to those constructed from conventional materials, such as steel and aluminum, and in doing so, our products offer remarkable and valuable efficiency and performance benefits to our customers in various applications. While our technology has potential applications over a broad range of industries, we currently have our main focus on the sporting goods industry and we prioritize the electric bicycle market to commercialize our technology.

We are based in Taiwan with our headquarters, R&D center and material laboratory located in Taichung, Taiwan and our production plant and our second R&D center located in Dongguan, the PRC. The R&D center in Taichung focuses on resin material application, new product development and production process enhancement, and the R&D center in Dongguan, the PRC, which is located next to our production plant focuses on structural design of products, testing on product performance and enhancement on strength and stiffness of products. Our business focuses on the research and development as well as manufacturing a wide range of carbon composite products. We primarily generate revenue through three divisions and revenue streams, namely (i) sales of bicycles parts of sports bicycle and electric bicycle; (ii) sales of rackets for use in tennis, badminton, squash and beach tennis; and (iii) sales of other products, which mainly include structural parts of automobile, other sporting goods and healthcare products. Our bicycle parts and rackets are mainly supplied directly or indirectly to branded customers located in Switzerland, France, Italy, the Netherlands, Germany and Japan and they primarily market and distribute their products worldwide. Other customers which rely on our new products, such as healthcare products, are mainly located in Australia, Canada and Japan.

Advanced carbon composite materials offer a number of advantages relative to traditional materials, including light weight, high strength to weight ratio, high stiffness, and improved resistance to heat, corrosion and fatigue. Nonetheless, different products require different degrees and combinations of such properties according to their functions. For instance, automobile parts, such as hoods and seatback, require higher heat resistance, while bicycle frames require greater degree of stiffness. Hence, material application technology plays an important role in refining the production of different types of carbon composite products. Carbon composite materials are formed by combining carbon fibers and resins. The properties of carbon composite materials could vary largely due to different systems of resin and structural arrangement. Differing from our competitors in the industry, instead of using preset formulas of resins with lower degree of flexibility, we have our own R&D center to develop our own resin systems and formulas according to the product requirements. Therefore, we are able to incorporate customized resin systems that can be optimized for specific parameters, such as durability, temperature performance, cure times and viscosity. This not only allows us to manufacture our products with high precision to customers’ specifications, but also offers us flexibility in developing a greater variety of new products in the future. Apart from our advanced material application technology, our R&D team is also experienced in providing technical recommendations and solutions to and respond to feedbacks from our customers regarding the structural design of product. Our advanced material application technology and expertise in product design and development complement each other. Thus, we believe that the parallel development of our complex product and process technology has resulted in our competitive advantage which makes it difficult for our competitor to replicate.

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Our total revenue for the years ended December 31, 2020 and 2019 amounts to $22.2 million and $22.8 million, respectively. Our sales of bicycle parts accounted for approximately 64.4% and 64.9% of our total revenues for the years ended December 31, 2020 and 2019, respectively. Our sales of rackets business brought us considerable revenue for the years ended December 31, 2020 and 2019, which accounted for approximately 35.5% and 34.9%, respectively, of our total revenues, and sales of other products, which accounted for approximately 0.1% and 0.1%, respectively, of our total revenues for the years ended December 31, 2020 and 2019.

While having our main focus on development and sales of key structural parts of bicycles and rackets in the past years, we would not limit ourselves to the existing scope of product. We intend to extend our product spectrum by launching new products, such as sporting goods for new sports like padel racket and mast foil, and further expand our production on relatively new existing products that are emerging in the market, including key structural parts of electric bicycles, automobile and robotic arms, bicycle crank sets and other healthcare products, such as wheelchairs and senior walkers.

Our production plant is located in Dongguan in the PRC with two production lines in place. The production plant has a total gross floor area of 42,695 square meter. We selected Dongguan, the PRC, as a place to set up our production plant due to its geographical proximity to Hong Kong which favors the shipping of products and its strong labor supply in the region. As of June 30, 2021, we had 27 forming machines and 10 prepreg machines in use and other equipment including vacuum forming machine, automated painting robotic arm and an EFBE standard (“EFBE”) testing machine with testing standards specific to the bicycle and electric bicycle. The prepreg machines and forming machines are major machines we used in our manufacturing process. We use our prepreg machines to convert our raw material, carbon fiber yam, to carbon fiber sheet by adding our self-engineered resin to enhance the material’s malleability. We then utilize our forming machines to give designated shape, stiffness and strength to our products under high temperature. These machines and equipment form two production lines in total, one of which focuses on the production of key structural parts of sports bicycle, electric bicycle and automobile, while the another focuses on manufacturing rackets and healthcare products. Equipped with these automation and testing machines, and leveraged on our strong research and development efforts, we are able to offer a wide range of high-quality customized products to our customers. In the future, in order to enhance our production capacity, we intend to recruit more manpower for our production team, acquire more forming machines, increase the operating hours of forming machines and outsource our painting, cosmetic and sanding processes, which are labor-intensive manufacturing procedures with lower technical requirements.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. Countries across Asia, North America, Europe have continued to report increases in COVID-19 infections, which has resulted in governments implementing travel bans, lockdowns, quarantines and social distancing measures in those countries in an effort to contain the virus. In response to the outbreak of pandemic, in January 2020, the People’s Government of Guangdong Province announced certain measures to prevent continuing widespread of the disease in the community, among others, corporates were not allowed to resume operation before February 10, 2020. In compliance with the government instructions, we temporarily suspended the operation of our production plant in Dongguan, the PRC, from February 3, 2020 to February 26, 2020, which has then fully resumed our production on March 9, 2020 and remained normal thereafter. In this regard, we had arranged for tighter production schedule from June 2020 to December 2020 to make up for the suspension of operation of our production plant in February 2020.

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History and Milestones

Our Predecessor Group commenced wood composite manufacturing and sports equipment processing business in 1970 and was one of the earliest private enterprises to manufacture wood composite in Taiwan. However, due to changes in the product development in the sporting goods industry with higher product requirements on the weight-saving, endurance and stiffness, our Predecessor Group gradually shifted the focus from wood composite manufacturing to carbon composite product manufacturing since 1980. Our Predecessor Group launched the carbon composite business line in 1980, targeting sporting goods, such as rackets. In 2005, our Predecessor Group launched the bicycle business line in order to expand the scope of carbon composite sporting goods to sports bicycle. In 2017, we launched our first electric bicycle. In 2018, in light of the prevalence of and favorable government policies on electric bicycle around the world, while continuing our development and sales of sports bicycle, we have in parallel strategically expanded further on the development and production of electric bicycle. We also developed our first carbon fiber robotic arm and other health care products in 2018. In 2019, we expanded our R&D team on the design and production of electric bicycle by addition of personnel. Through our R&D centers in Taiwan and the PRC, we have continued to upgrade and enhance our material technology, product structural design and production process technology, in order to uplift our product quality, product performance, production efficiency and expand our product spectrum.

We target to achieve growth in terms of both scale and scope. To expand our scale, we plan to establish a new production plant in Yangzhou in the PRC. For such purpose, in March 2019, Bohong Technology (as defined below) acquired the land use right of a land parcel in Yangzhou, in which we entered into a share swap agreement with the shareholders of Bohong Technology on December 30, 2020 to obtain 100% of its ordinary shares, with a total gross land area of 64,851 square meter in order to build our new production plant for the production on key structural parts of electric bicycle, robotic arms, automobile parts and prepreg material. We intend to invest approximately RMB45.0 million on the construction of our production plant in Yangzhou and approximately RMB40.0 million on the machinery, in which we intend to commence the construction work of our production plant in Yangzhou by the end of 2021 and the first phase of such construction is expected to be completed by second quarter of 2022. The construction of our production plant in Yangzhou is expected to be fully completed by August 2022 and the machines are expected to be set up by the third quarter of 2022. As for growth in terms of scope, we anticipate that, by the first quarter of 2022, we will launch our own brand on electric bicycle and sporting goods and will set up sales and administration office in the U.S. and the Netherlands. We are in close dialogue with a reputed bicycle frame manufacturer in the U.S. on exploring investment opportunities, including but not limited to possibilities on acquisition, joint-venture and/or co-branding production. In addition, we intend to add a U.S. sales and administration office in Houston, Texas, which will work closely with our office in Taiwan in U.S. market sales and expansion, while our sales and administration office in the Netherlands will be handling sales on our online business platform expected to be launched around the first quarter of 2022. We also expect to further extend our production of automobile parts so as to leverage on the surging market demand of electric vehicles. By the end of 2023, we expect to launch our micro factory and R&D center in the U.S., with a view to developing automation of our production process and integrating the most advanced technology to our production. In this regard, we intend to invest in a manufacturer of carbon fiber products in the U.S. We have been in contacts with several potential target companies in the U.S., one of which is a U.S.-based aerospace composite parts manufacturer. We also plan to establish our third R&D center in Houston, Texas and our initial plan is to hire 4 to 6 employees on developing composite material and conducting researches on chemical interactions.

The following events are our key business developments and milestones:

Year |  | Event
1970 |  | Our Predecessor Group commenced business of manufacturing and trading of wood composite products and processing of sports equipment. Our Predecessor Group developed our first wooden racket and commenced production for wooden composite rackets in Taiwan.
1978 |  | Our Predecessor Group commenced graphite or wood composite processing for rackets.

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1980 |  | Our Predecessor Group established carbon composite production line and developed our first carbon fiber racket, ski stick and golf shaft.
1990 |  | Our Predecessor Group established the first production plant in Dongguan, the PRC for manufacturing of rackets.
1992 |  | Our Predecessor Group developed our first full carbon racket.
2000 |  | Our Predecessor Group acquired the hot-melt prepreg technology and applied the technology to the production.
2005 |  | Our Predecessor Group established the bicycle business line and the second production plant in Dongguan, the PRC, for the production of carbon fiber bicycles. Our Predecessor Group then developed our first carbon fiber bicycle.
2012 |  | Our Predecessor Group applied for numerous patents on manufacturing of a variety of carbon fiber products.
2016 |  | We produced our first Olympic Champion badminton racket used by Misaki Matsutomo in winning her champion in the badminton women’s doubles tournament at 2016 Summer Olympics.
2017 |  | We established our R&D center and material laboratory in Taiwan. We also produced our first electric bicycle frame.
2018 |  | We developed our first carbon fiber automobile parts, robotic arm and other health care products, such as wheelchairs and senior walkers.
2019 |  | We expanded our R&D team on the design and production of key structural parts of electric bicycles.

On May 24, 2016, we established J-Star as a holding and management company, holding 100% of the equity of Goal Beyond, 100% of the equity of Star Leader Trading and 100% of Bohong Technology(1). Goal Beyond, in turn, holds 100% of the equity of TW YMA, 100% of equity of Time Yield, 100% of equity of Dongguan YMA and 100% of equity of Dongguan Forwell. For further details regarding the Reorganization of the Group, see “Corporate Structure – The Reorganization.”

Note(1): The registration of the change of Bohong Technology’s shareholder with the local Market Supervision and Administration has not been completed.

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Our Business Model

We are engaged in the design, development, manufacturing and sale of carbon fiber composite products, with our main focus on key structural bicycle parts and racket products, on an original equipment manufacturing (“OEM”) & original design manufacturing (“ODM”) basis. For our OEM model, we manufacture our products in accordance with the customer’s specifications and are marketed under the customer’s own brand names. Our products are mainly supplied directly or indirectly to international sports brand owners. We secure sales contracts with customers on project basis.

Our ODM business begins with receiving customer’s request in designing and developing a new product. After our sales team communicates client’s requests with our R&D team, our R&D team will then consult with our procurement team and production team on our production capacity in order to assess the production timeline and make quotation. The product design and development process will be commenced once our customers confirmed our quotation. Our sales team is responsible for preparing the project summary which lists out the customers’ specification on the new product, including but not limited to requirements on physical properties of product material, special features on the design of product, product performance, accessories, outlook, the brand name to be used and expected size of order, etc. Our R&D team will then work on the structural design and composite material formula design based on the specifications required by our customers. Throughout the entire process of design, customization and modification of product, we communicate and receive feedbacks from our customers and provide various technical solutions in response to customers’ feedbacks regarding the product design and development. We will then deliver a prototype to our customers for their review and confirmation. Meanwhile, we will also conduct preliminary product testing with our in-house testing equipment or recognized independent third party institutions on the prototype to ensure that the product meets our customers’ required standard.

After the product development process is completed, the customers will place purchase orders with us according to their needs. We will then arrange for procurement of raw materials and commence production. We will conduct quality control on the raw materials, semi-finished product and the finished product. We have our technical staff on-site to provide supervision and technical support in our production plant in Dongguan, the PRC. We also have quality control staff on-site to monitor the production process. The finished products will then be delivered to designated place agreed with our customers. For example, for bicycle parts, we will send them to customer’s designated bicycle assemble house for assembly, while for racket products, we will send them to our customers directly.

Competitive Strengths

We attribute our success to the following key competitive strengths:

Strong research and products development capabilities

With over 50 years of composite product manufacturing experience accumulated from our Predecessor Group and our continuous commitment to enhance our composite material application technologies and production process, we pride ourselves on our accumulated know-how and research and development capabilities focused on the development of new products and the improvement of our production process. For instance, our resin technologies allow for prepreg-ing of our carbon fiber composite and creating higher ratio of strength and stiffness with lower weight. Some of the bicycle and racket products we co-designed and developed with our customer had been used by players in Olympic Games and international tournaments in winning their champion. We believe our accumulated composite material application know-how and continuous dedication to research and product development has enabled us to increase our product quality, production efficiency, technical expertise, ability to tailor-make products to meet customers specifications and reduce costs, which would in turn help us retain and attract customers who demand precise, reliable and high quality composite products and obtain higher profit margin. We also believe that our strong research and development ability will widen the product types to effectively satisfy customers’ changing needs, which in turn will enhance our organic growth.

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Our research and development primarily focuses on product development, new application discovery and production process improvement. Our objectives in research and development is to promote innovation, automation and differentiation in our production and enhance our product quality. Our investment in research and development are significant. From January 2017 to June 2021, our continued expenditure in research and development has amounted to approximately $7.5 million. We had a R&D team of 65 members as of June 30, 2021. The majority of our R&D team members also have over 10 years of experience in industries relevant to our business. Our R&D centers have accomplished a number of research results and successfully developed and improved various composite materials formulas and application as well as the production process. In addition, we have also undertaken leading research and development projects on resins formulas and production processes, such as formulas on highly heat resistant resins, formulas on biomass materials, vacuum forming technology and waterborne paint technology, which could enhance the performance, cleanliness and durability of products, as well as satisfy our customers’ particular requirements on different products. As of June 30, 2021, we had registered 7 invention patents, 10 design patents and 14 utility model, including but not limited to patents on structure of bicycle frame, structure and design of rackets and manufacturing process of carbon fiber products, in Taiwan, PRC, Japan, Europe and the U.S. We have also applied for the registration of 6 invention patents. We also work with research institute to improve our production process, to discover new product applications, and to develop our material technologies. In particular, we are collaborating with National Chin-Yi University of Technology in Taiwan on carrying out comprehensive analysis and testing on our product materials, researches on production techniques of thermoplastic composite material and market research and comparisons on our products and other similar products readily available in the market. We believe that this collaboration will give us synergy and allow us to focus on the development of high-value and cost-effective products.

We have been devoting research and development efforts in respect of our carbon composite technology and application. In particular, we developed new resins systems, Nano-CT and Nano-GS, which are applied to our bicycle frame and racket products. Comparing to resins of regular formulation, Nano-CT and Nano-GS can increase the material strength, resistance to fatigue and stiffness, which effectively enhance the performance and toughness of our bicycle and racket products and lower their susceptibility to shocks. We also developed our nano-powder modification technology which uplifts the strength and impact resistance of our product material. We are also developing resins with higher degree of heat resistance and strength which are applicable to carrier plates of furnace and bicycle wheels, and halogen-free resins with higher degree of strength and transparency which are applicable to exhaust pipe, engine protector and brake disc of automobile.

We have optimized our production processes through our research and development efforts. We applied our vacuum forming technology in the production process to maintain the strength and quality of our products. We also developed and applied our waterborne paint technology to our bicycle frames, air intakes and engine rods of automobile, which enhance the cleanliness of our production process and improve the durability, gloss finish extent and corrosion and abrasion resistance of our products. We also introduced automated painting technology with robotic arms in order to promote automation in the painting process of our products, which in turn improves cost efficiency in our production process. With a view to further upgrading our production process, we commenced our major research and development projects on resins rapid curing technology, which not only could boost the production efficiency by speeding up the curing process, but also could enhance the strength, malleability and manufacturability of material. Being one of the major global leading players in the carbon fiber bicycle parts industry and the carbon fiber racket parts, we believe we have been able to capture the relevant technology and know-how in advance of our competitors in the industry.

In order to optimize the research and development effort, we have set up two R&D centers carefully designed for different purposes. The R&D center in Taiwan, which includes a laboratory, focuses on resin material application, new product development and production process enhancement, while R&D center in the PRC, which locates next to our production plant focuses on structural design of products, testing on product performance and enhancement on strength and stiffness of products. Under such arrangement, research and development in Taiwan can adopt a more experimental and innovative oriented approach while research and development conducted in the PRC, can focus more on resources and process enhancement which can be quickly implemented and tested in the production plant. We intend to establish our third R&D center in the U.S. to carry out researches on automation of production processes.

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Quality product and comprehensive services which cater our customers’ needs

Leveraging on our solid experience and expertise in research and development, we are able to develop and produce high quality products satisfying our customers’ specific requirements. Depending on the needs of our customers, we also offer comprehensive services covering the processes of product analysis, product design and development; processing and manufacturing; product testing and adjustment; trial production of final products; and after sales services. Our product development team and our sales team work closely with our branded customers to understand their needs and make recommendations to them. Our product development team assists our customers in either (i) advising on the product designs; or (ii) designing products based on the customers’ ideas, concepts or specifications, with a view to enhancing the product efficiency, functionality and endurance.

Our quality control team is responsible for developing and implementing quality control policy specifying various quality control procedures for different kinds of products. We have adopted stringent quality assurance procedures throughout each stage in the entire production processes from the inspection of raw materials to finished products. We have our internal quality control room for testing the quality of the incoming raw materials. We inspect the appearance, structure, dimensions and performance of raw materials according to our inspection standards. We will also produce prototype as part of the product development process and perform a series of tests on the prototype to ensure it performs as designed. Throughout the manufacturing process, we carry out quality control procedures at the stage of molding, machining, gluing, mending, grinding and painting. Various performance tests, such as fatigue resistance test, compressive strength test, loading test, shock resistance test, are carried out in our in-house laboratory or by recognized independent third party to ensure our products meet the quality and safety requirements. Before packing and shipment, our quality control team will conduct final checking on products so as to ascertain that the quality of our products complies with the specifications and standards of our customers.

We have a stringent quality management system to ensure adherence to and consistency in the quality of our products. In 2011, we obtained ISO9001:2015 certification for manufacture of carbon fiber rackets. In 2019, we also obtained IATF 16949:2016 certification for manufacture of carbon fiber seat fittings. We also adopt the EFBE standards, which is a testing standard specific to the bicycle and electric bicycle industry, on certain bicycle and electric bicycle products. EFBE tests offer comprehensive and high-standard tests on bicycle-related products, such as fatigue tests on bicycle parts, maximum load and overload test stands and stiffness test stands. The EFBE test standards are compatible with ISO 4210 and European standard EN15194. In consideration of saving time and cost, we have acquired EFBE testing machines in March 2021, so that we are capable of quickly running our own in-house tests, and hence, we could ensure that our bicycle and electric bicycle products adhere to the EFBE.

We believe our ability to provide customized composite products of quality to meet customers’ requirements in a timely and cost efficient manner enables us to develop strong customer relationship and reputation, which are crucial in our long-term growth.

Strong presence in the carbon composite application industry and sporting goods industry with long operating history and strong production capabilities

The history of our Predecessor Group can be traced back to over 50 years ago when it was established in 1970. We have been applying our material technology accumulated for decades in manufacturing a great variety of composite products, which are mainly sports equipment, such as bicycles and rackets, and have extensive industry experience in respect of design, research and development of carbon composite products. We have established strong reputation in the carbon composite application industry and sporting goods industry as a result of the long operating history and establishment of our Predecessor Group in the industry. Such reputation has attracted various renowned brand owners (including their distributors) to procure our products directly or indirectly, including Colnago, Tecnifibre and Groupe Magellan SA, the distributor of Prince in France. According to the industry report commissioned by us and prepared by Frost & Sullivan, we are one of the major global leading players in the carbon fiber bicycle parts industry and the carbon fiber racket parts industry. Based on our successful track record, we believe we are positioned to capture market opportunities in the future.

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Our production plant in Dongguan, the PRC, is set up with two production lines, which enable us to keep pace with our business development and to satisfy our customers’ demand in terms of product type, volume, customization, timelines and pricing. As at June 30, 2021, our production plant had an aggregate gross floor area of approximately 42,695 square meter and we owned 10 prepreg machines and 27 forming machines and other special equipment including vacuum forming machine, automated painting robotic arm and an EFBE testing machine. The prepreg machines and forming machines are major machines we used in our manufacturing process. We use our prepreg machines to convert our raw material, carbon fiber yam, to carbon fiber sheet by adding our self-engineered resin to enhance the material’s malleability. We then utilize our forming machines to give designated shape, stiffness and strength to our products under high temperature. Further, we are committed to invest in enhancing the automation of our production process with an aim to accommodate the production for a variety of products with high precision, efficiency and consistency. We believe that with our production capabilities, coupled with our product design and development expertise, we are able to offer a comprehensive portfolio of carbon composite products to our customers.

Well-established relationship with customers and diversified customer base

We had established strong and long-standing business relationships with our key customers through our Predecessor Group, which connect us to internationally reputed sports brands (including their distributors), such as Colnago, Tecnifibre and Groupe Magellan SA, the distributor of Prince in France. We believe that our good business relationships connected directly or indirectly with internationally well-known sports brand operators, are recognitions of the high standards of our quality and services. We believe that such relationships help us enhance our reputation in the industry and attract new customers with profile similar to our existing branded customers. We mainly acquire customers by referrals from our existing customers, direct approach by potential customers after learning our industry reputation and our current customer base and direct approach by bicycle assemble houses which connect us to branded customers. We also approach potential customers directly through phone call and email. With our long-standing reputation, we are able to secure numerous new customers from different countries, such as Australia, Russia, Canada, the U.S., Spain and the PRC, which helps us maintain diversified base of customers. We believe these strong and extensive relationships enable us to establish and maintain market leadership in the carbon composite application industry. We believe that other than our reliable and high-quality products, our customers are satisfied with our dedicated customer services. We have adopted return policy on products with manufacturing defects to accommodate our customers. If after any checkup or analysis by our laboratory the defect of a product is found to be manufacturing defect, return and replacement of products will be made.

We also capitalize on our experiences in the current business operation to further expand into the European and US markets. In January 2021, we invested in 19.5% equity ownership of a bicycle assemble house in France, which is a newly established company without revenue or income yet, to enhance our presence in Europe. We believe such measured business expansion strategy will help to further diversify our customer base and market recognition effectively.

Our Strategies

Our principal goal is to offer cutting edge technology and manufacturing expertise in carbon composite to customers in the international market and from different industries.

Enhance our research and development capabilities and enrich our product portfolio

We believe that it is essential for us to continue to strengthen our R&D team in order to improve our product quality, range of product and production efficiency. We intend to expand our research and development capabilities by setting up a R&D center in the U.S. to develop automation of our production process, integrate the most advanced technology to our production and acquire talents from the globe with a view to enhancing our perspective and innovation in research and development. We believe that development on automation of production process would greatly enhance the efficiency of production and minimize occurrence of human errors. We also believe that global talents with extensive industry experience would lead us to explore and develop the continuous innovation in technology research and development. To capitalize on the market opportunities, we intend to enrich our product portfolio to increase our profitability. Hence, we intend to further research and develop our material technology such that our product can be applied to greater variety of industries, such as electric vehicle and aerospace industries. Currently, we are also expanding our scope of products under the sporting goods industry. For instance, we are having upcoming new projects on producing padel rackets for major padel players and we commenced our production in the second half year of 2021 and launching of which will be in the first quarter of 2022. Further, in view of the growing market trend on electric vehicles, we plan to open up separate production line on automobile parts, supported by a local U.S. carbon fiber products manufacturer which we will invest in, in order to extend our production on key structural components for electric motorcycle and electric automobile in support of local U.S. manufacturer. We also intend to expand our business to electric vehicle market once we have developed appropriate scale and manufacturing automation and have established our strong presence in the U.S., so as to open up opportunities in public transport, freight and logistics vehicles. We intend to further improve our production efficiency by developing new production technologies and keeping abreast of latest growth and development of the industry. We also encourage our R&D personnel to participate in training provided by external research institutions in order to maintain our capabilities in developing new technologies and equipment.

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Expand our customer base and extend our sales to global market

We intend to continue to leverage on our experience in carbon composite application industry to expand our market share and continue to identify new customers in these industries to diversify our customer base. In the years ended December 31, 2020 and 2019, our sales were made primarily to the Asia and Europe markets, which accounted for approximately 50.7% and 40.4% of our revenue for the year ended December 31, 2020, and approximately 62.9% and 32.3% of our revenue for the year ended December 31, 2019, respectively. Our strategy is to further increase our market presence in Europe and the U.S. and expand our business in the PRC and other overseas market. In addition to our investment in 19.5% equity ownership of a bicycle assemble house in France, we plan to penetrate the Europe and U.S. markets by investing in other suitable local bicycle assemble house and setting up sales and administration offices in Europe and the U.S., in order to provide total solutions to our existing customers and enhance our presence in the U.S. and Europe markets by having direct access to the market. We also launched a co-owned electric bicycle brand, Ymagine, in Europe in July 2021 and intend to invest in a local electric bicycle brand in the U.S.

In addition, we also plan to build alliance with partners in different nations by firstly building up business relationship with potential customers from different countries progressively and discussing on investment plans on part of these customers’ operation after cooperating with them for certain period of time, in order to enter other overseas markets. In view of the fast growing trend of electric bicycle industry in the PRC, we plan to expand our business in the PRC market by promoting our electric bicycle products under our co-owned brand in Europe to local retail stores in China to attract domestic customers as end-users in the PRC. Further, we plan to expand our customer base and market sales by organizing and participating in different product exhibitions in the U.S. and the PRC. Apart from maintaining our strong and long-standing relationship with existing customers, we also intend to diversify our customer base, with a view to diverting our operational risks and enhance the sustainability of our business.

Vertical expansion of our business by establishing our own brand

We believe that our success is driven by our ability to adapt swiftly to the market demand and seamlessly cater the customers’ need. According to the industry report commissioned by us and prepared by Frost & Sullivan, the global expected CAGR of the carbon fiber bicycle parts industry from 2021 to 2025 is 16.0%. With the anticipation of further growth of demand on bicycles, in particular electric bicycles, in the future, we believe sales of our carbon composite electric bicycle and sporting goods will continue to grow remarkably in the coming years. The industry report prepared by Frost & Sullivan also reveals that the market size by revenue of carbon fiber racket parts will increase from US$243.9 million in 2021 to US$332.4 million in 2025, representing a CAGR of approximately 8.0%. To capitalize on the market opportunities, we established our co-owned electric bicycle brand, Imagine Bikes, in Europe in July 2021. In addition, we also plan to expand our business vertically in the next 1 to 3 years by establishing and launching our own brand in the U.S. by the first quarter of 2022 on carbon composite electric bicycle and sporting goods, ranging from electric bicycle, bicycle crank set, padel racket to mast foil, and intend to offer such products via online stores and distributing agents. Our brand will target end-consumers, who seeks for sporting goods of excellent quality and performance at reasonable price. We aim to set up a sales and administration office in the U.S. for selling products under our electric bicycles and sporting goods brand immediately after listing. We believe that setting up sales and administration office in the U.S. will help us further explore new areas of customer demand and drive the growth of our sales and enhance our brand recognition. We are also in the progress of setting up our sales and administration office in the Netherlands and are currently applying for its company registration.

Expand our production plant and capabilities

We expect the market demand for sports bicycle, electric bicycle, mast foil and padel rackets to increase in the near future, as there are rising number of inquiries on these products from our potential customers. We expect to capture the market growth and also increase our market share through our equipment upgrade and capacity expansion. According to the industry report prepared by Frost & Sullivan, the global carbon fiber bicycle parts market experienced moderate growth in recent years, increasing from approximately US$288 million in 2016 to US$462 million in 2020, registering a CAGR of 12.5%. Driven by improving people’s living standards, transformation of consumers, lifestyle and technology development, the market size of global carbon fiber bicycle parts industry is expected to increase from approximately US$522 million in 2021 to US$945 million in 2025, representing a CAGR of 16.0%. The penetration of carbon fiber professional-grade bicycles is expected to further grow due to its outstanding physical performance, while wider application of carbon fiber composite materials in the market on regular bicycles and electric bicycles is also expected. Referring to the industry report of Frost & Sullivan, the popularity of surfing and padel is increasing around the world and the foil mast made of carbon fiber are coming into people’s spotlight as carbon fiber foil masts enable surfers to maintain stability and avoid damage when riding big waves or immersing in seawater for a long period, which provides protection for surfers. The excellent performance of carbon fiber padel rackets is also widely recognized by athletes and the public as carbon fiber rackets can reduce the load on the arm during long rallies and improve the speed and efficiency when hitting the ball. For the years ended December 31, 2020 and 2019, the utilization rate of the production plant in Dongguan, the PRC, was approximately 80% and 80%, respectively. As a result of the limited production capacity of our existing production plant, we currently outsource certain production processes that require less technical skills, such as painting, cosmetic and sanding. However, we still focus on our competencies on those key production processes, including structure design, lamination, formation and quality control. In order to cater for our expected growth in sales and increase our production capacity, we plan to a construct new production plant in the PRC and set up a micro factory in the U.S. by channeling our know-how from our production plant in China to the U.S. factory. In respect of our plan on new production plant in the PRC, we have already acquired the land use right of a parcel of land in Yangzhou and the expected time for completion of construction and commencement of operation would be in 2022. We also plan to set up our sales and administration office in the U.S. by the first quarter of 2022 and establish our micro factory in the U.S. by 2023.

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Our Products and Services

We are principally engaged in offering cutting edge technology and manufacturing expertise in carbon composite products, focusing on products in electric bicycle industry, sports bicycle industry, sporting goods industry, automobile industry and healthcare industry. Our products include carbon fiber electric bicycle and sports bicycle parts, rackets, automobile parts, medical robotic arms and healthcare products. Carbon fiber composite products are remarkable in their properties of high strength, durability, light weight, high stiffness and corrosion resistance. We aim at offering our customers superior levels of performance and efficiency on our products. Our carbon fiber composite products are also custom-made to meet our customers’ specifications and requirements. The life span and prices of composite products we manufacture varies depending on the specifications of the product.

Bicycle parts

Our bicycle-related products include key structural parts of electric bicycle and sports bicycle, such as bicycle frame, seat post, front fork, paddle, crank and handle bar and so on. As an important underpinning structure, bicycle frames are mostly made of Carbon Fiber Reinforced Polymers (CFRP) or carbon fiber composite materials, which has high rigidity, flexibility, durability and lightweight, determined by the fabric property, which is impregnated with a glue called resin that allows shaping and joining the material. The great advantage is that carbon fiber can be fine-tuned to provide any ride qualities riders desire. A bicycle fork is the part of a bicycle that holds the front wheel, which is commonly made of steel, aluminium, carbon fiber, titanium and other materials. Since the material of the forks can noticeably affect the feel and handling of the bicycle, forks of road bicycles and touring bicycles are usually made of carbon fiber to lessen and absorb vibrations from the road surface. Carbon crank wholly made of carbon fiber can minimize the weight of the bicycle while maintaining a smooth appearance; while handlebar made of carbon fiber can absorb vibrations and deliver outstanding strength-to-weight ratio, which is commonly applied in mountain bicycles and racing bicycles.

The figure below shows the key structural parts of a bicycle:

Source: Frost & Sullivan

We realized revenue of approximately $14.3 million and $14.8 million from our sales of bicycle parts for the years ended December 31, 2020 and 2019, which accounted for approximately 64.4% and 64.9%, respectively, of our revenue for the corresponding periods. In the future, we will continue to engage in and focus on our sales of bicycle parts, in particular electric bicycles, in light of the expected market growth the electric bicycle industry.

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We believe that there is a strong market demand on sports bicycles and electric bicycles in the global market. According to the industry report prepared by Frost & Sullivan, such inclining trend on the demand of bicycle products is mainly attributable to the change in people’s habit on pursuing healthier lifestyle and the implementation of government policies on supporting environmentally friendly transportation or vehicles. Additionally, in the aftermath of the outbreak of COVID-19, the market demand on bicycle products is likely to grow as people are spending more time on outdoor activities domestically owing to the travel restrictions implemented globally. In light of the inclining market demand on bicycle products, in the future, we will focus on sales of bicycle products and continue to enhance the quality and modify the design of our sports bicycle and electric bicycle products. For further details in respect of the industry report prepared by Frost & Sullivan, see the section “Industry” of this prospectus.

With our direction on commercializing and popularizing more bicycle products, including both electric bicycle and sports bicycle, in the future, we continuously design and develop new models of bicycle products. In 2021, we launched 28 new models of bicycle, and in 2022, 24 new models of bicycle are expected to be launched. We combined our competitive strengths on material technology and structural design expertise in the development of our new electric bicycle models under the concerted effort of our R&D team in Taichung and Dongguan, the PRC. Distinguished from other electric bicycles available in the market, our new electric bicycle model adopts minimalistic and stylish structural design, which is able to hide the battery in a less visible manner. Its key components are made of our developed nano resins, which boosts its level of stiffness and weight savings, such that these new models could offer smoother and more cozy commuting experience to customers.

Below are some of the electric bicycle and sports bicycle models that we co-designed with customers and manufactured their carbon fiber parts:

One of the most requested carbon full suspension electric bicycles in market launched under a reputed Swiss-based bicycle brand.

The entire frame of this electric bicycle is constructed of carbon fiber, which keeps its weight down to 20.54kg and it won acclaim internationally for its lightness, agility and directness on trails.

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YMA 2017 B-01

The first carbon electric mountain bicycle open model launched by us.

A lightweight carbon-fiber electric mountain bicycle with the improved vehicle weight to a new level. This open model carbon frame is made with more concise appearance design, pull-up battery extraction and higher frame strength. The geometric design of this bicycle is compatible with 500W & 600W battery.

YMA 2017 S-01

The first carbon electric mountain bicycle open model launched and its carbon fiber frame is manufactured to fulfill the industry standard weight.

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Colnago 2017 V2-R

This racing bicycle is launched by Colnago, a prominent high-end road-racing bicycle brand based in Italy. Seat post clamp of Colnago 2017 V2-R is designed to boost the aero efficiency of the bicycle.

Colnago 2021 V3-R

This racing bicycle is also launched by Colnago and is an upgraded version of Colnago 2017 V2-R. The V3Rs Capsule Collection represents excellence in terms of technological innovation, performance and style. We used a new type of carbon fiber that allows Colnago V3Rs to significantly increase the rigidity to lateral flexions. Tadej Pogacar rode Colnago V3R in winning his championship in Tour de France 2021. The ability to absorb vertical shocks has improved significantly, which translates into greater comfort. Colnago 2021 V3-R is fast on long climbs, in windy plains, on big tours and in stages and its design improves the concepts of lightness and aerodynamics of its road frames.

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A mountain bicycle launched by a reputed Swiss-based bicycle brand that is reliable in all conditions and surfaces and allows world-class performance.

Manufactured with high-strength and modular high-end carbon fibers, the frame is controlled at a light weight combined with the low frame weight give this bicycle an enormous amount of propulsion.

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One of the most desirable urban electric bicycles in the market launched by a reputed Swiss-based bicycle brand. With our carbon fiber frame adopted, this electric bicycle weights lighter than a typical electric bicycle. On the road, this electric bicycle is extremely good-natured and predictable, making it the perfect companion for the next city adventure.

Rackets

Our racket products include carbon fiber tennis rackets, badminton rackets, squash rackets and beach tennis rackets. We also provide racket stringing services upon customers’ requests. Based on our customers’ requirements and specifications, our racket development team provides product design that could enhance products’ efficiency, endurance and functionalities. Mass production of racket products will only be carried out after the prototype has passed our product tests in our test center. Racket products are usually delivered to customers’ warehouse around the world through free on board (FOB) in Hong Kong.

According to the industry report prepared by Frost & Sullivan, driven by the higher requirements on the mechanical properties of rackets and increasing purchasing ability of high-end sports goods customers, the market size by revenue of global carbon fiber applied in rackets has witnessed a steady growth, increasing from US$194.1 million in 2016 to US$242.6 million in 2019. Promoted by the increasing health awareness post-pandemic, encouraging policies of sports activities in developing countries, as well as progressed carbon fiber manufacturing techniques, it is estimated that the demand of carbon fiber applied in rackets will further rise and the market size by revenue of carbon fiber racket parts will increase from US$243.9 million in 2021 to US$332.4 million in 2025, representing a CAGR of approximately 8.0%. In light of the inclining market demand on racket products, in the future, we will focus on sales of racket products and continue to enhance the quality and modify the design of our racket products. For further details in respect of the industry report prepared by Frost & Sullivan, see the section “Industry” of this prospectus.

We generated revenue of approximately $7.9 million and $8.0 million from our sales of racket for the years ended December 31, 2020 and 2019, which accounted for approximately 35.5% and 34.9%, respectively, of our revenue for the corresponding periods. In the future, we will continue to engage in our sales of racket products and we expect that our sales of rackets will increase drastically in the second half of 2021 as we had secured two new customers.

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Below are some of the championship rackets we co-designed with our customers and manufactured their carbon fiber parts:

PRINCE Twistpower X100 Twistpower X100 is a Prince tennis racket distributed by Groupe Magellan S.A. Twistpower X100 is a light and speedy player’s racket that rewards full swings with a great combination of spin, power and precision. It has uniquely good feel and pocketing, which comes in part from a twisted shaft design which helps the racket bend optimally at impact.] |  | TECNIFIBRE CARBOFLEX 125S Carboflex 125S is a squash racket launched by Tecnifibre, a French brand of sporting equipment, specializing in tennis and squash. Carboflex 125S is used by Mohamed El Shorbagy, the world number one squash player in 2020. It offers quick response, great maneuverability and high swing speed.
PRINCE Pro Rebel 950 Pro Rebel 950 is a Prince squash racket distributed by Groupe Magellan S.A. It offers an excellent accuracy and unique maneuverability for players seeking for enhanced performance with lightweight power. Prince Pro Rebel 950 is endorsed by Ramy Ashour, a former worldclass professional squash player. |  | TECNIFIBRE Wall Master 360 PHD Wall Master 360 PHD is the padel paddle dedicated to club players and it has been engineered with a round head shop to optimize precision and control. Its light weight also allows easier maneuverability.

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Other products

Other products include automobile parts, healthcare products, prepreg sheets and carbon fiber boards.

We generated revenue of $22,328 and $28,267 from our sales of other products for the year ended December 31, 2020 and 2019, which accounted for approximately 0.1% and 0.1% of our revenue for the corresponding periods,. Despite that our revenue from our sales of other products accounts for a relatively small portion of our total revenue for the years ended December 31, 2020 and 2019, we intend to expand and develop our products on automobile parts, healthcare products and raw materials. We are currently in discussion with a number of customers concerning new projects on certain healthcare products and motorcycle parts.

(i) | Automobile parts

Our automobile-related products include carbon fiber parts of automobile, such as air intakes, air-collecting hoods, engine rods, seat back, windshield, handlebar, and so on. Similar to the production model of our bicycle products, our automobile parts development team will first discuss with our customers on the design and specification of the automobile parts. Our R&D team will then commence the product development process based on our customers’ specific requirements.

The electric vehicle market is showing a pattern of continued growth and such trend is pushed forward by the favorable government policies on promoting the use of electric vehicles in different countries, such as providing tax incentives and subsidies. Due to the light-weight property, strength and stiffness of carbon composite, it is commonly used as the major material for producing key components of electric vehicles, such as air intake and seatback. In order to seize market opportunities, we have been preparing the know-how to produce carbon fiber automobile parts since 2019 and have expanded our R&D on technology of producing carbon fiber automobile parts. Although our revenue from sales of automobile parts is yet to be significant in the years ended December 31, 2020 and 2019, we received numerous inquiries from customers in the electric vehicle industry and we expect that there will be more upcoming projects on automobile parts in the future.

Below are some of the carbon fiber automobile parts manufactured by us:

Air intake of automobile |  | Air intake of automobile
Air-collecting hoods of automobile |  | Wind shield of motorcycle
cover sets of motor cycle |  | Seat back of automobile
Engine rod of automobile |  | Handlebar of motorcycle

(ii) | Healthcare and other products

We had also manufactured carbon fiber healthcare products and other parts, which include carbon fiber senior walker, wheelchair, medical robotic arm, electric wheelchair robotic arm and drone parts. We adopt the same ODM model in respect of the production of health care and other products.

According to the industry report prepared by Frost & Sullivan, carbon fiber is usually used in the chassis and backrest frame of wheelchairs, featuring lightness, stiffness and exceptional durability. The stability and biocompatibility of carbon fiber materials have attracted extensive attention in medical devices and biomaterials. In addition, with the continuous improvement of carbon fiber production and processing technology, carbon fiber has gained more market share in robotic arms, particularly industrial robots. Compared to traditional robotic arms made of aluminium alloy and alloy steel, carbon fiber robotic arms have higher flexibility, fracture resistance and a longer service life. Also, the vibration dampening of carbon fiber robotic arms allows for precise control and positioning, enhancing working speed and efficiency of robots. With the accelerated automation process and wide application of industrial robotics, carbon fiber is expected to develop further and be favored by downstream customers. Therefore, we intended to further expand our production on healthcare products and we are currently in discussion with a number of customers concerning new projects on certain healthcare products. For further details in respect of the industry report prepared by Frost & Sullivan, see the section “Industry” of this prospectus.

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Below are some of the healthcare products and other products we co-designed with our customers and manufactured their carbon fiber parts:

Rollator | Wheelchair
Medical robotic arm | Electric wheelchair robotic arm
Medical robotic arm | Rollator

Research and Development

From January 2017 to June 2021, our continued expenditure in research and development has amounted to an aggregate of approximately $7.5 million. We had a R&D team of 65 members as of June 30, 2021. The majority of our R&D team members also have over 10 years of experience in industries relevant to our business. We predominately focused on developing know-how for the carbon fiber & resin application technology and carbon fiber & resin processing technology. We obtained a number of patents in this area. For more details on our patents, see the paragraph “Intellectual Property” in this section.

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Our R&D center in Taichung focuses on resin material application, new product development and production process enhancement. We invested approximately NTD72.2 million (approximately $2.6 million) in our R&D in Taiwan to develop our resin technology between January 2017 and June 2021, and we have various resin recipes for applications on different scope of products. Meanwhile, our R&D center in Dongguan, the PRC, focuses on structural design of products, testing on product performance and enhancement on strength and stiffness of products and we invested approximately RMB31.5 million (approximately $4.9 million) from January 2017 to June 2021 in our R&D in Dongguan, the PRC, and we have on-site machinery and equipment for product testing in order to offer more comprehensive services to our customer.

In 2020, we entered into a strategic cooperation with National Chin-Yi University of Technology in Taiwan, which provides us with opportunities in personnel training, technologies sharing and technical supports.

In the future, as part of our use of proceeds, we intend to open up a new R&D center in the U.S. in order to focus on our research and development on automation of production processes. For more details on our use of proceeds, see “Use of Proceeds” section.

Raw Materials and Suppliers

Our major raw materials mainly include carbon fiber yam and resin, which are the major components for manufacturing carbon composite material of our products. Typically, our purchases are made based on the purchase orders we receive from our customers and customer’s forecast for the year after. We mainly purchase top-graded carbon fiber yam and resin from independent suppliers in Japan, Taiwan and PRC. To procure carbon fiber yam from Japan, we are required to obtain Special General Bulk Export License from the Japanese government in order to comply with regulations from the Security Export Control implemented in Japan. In order to avoid over-reliance on a single source of supply, we will continue to maintain more than one supplier for each category of our major raw materials. For instance, we have been sourcing quality carbon fiber yam not only from Japan and Taiwan, but also from certain reliable suppliers in PRC. Save as disclosed above, during the years ended December 31, 2020 and 2019, we had not encountered any material shortage, delay or major difficulty in the procurement of raw materials from our suppliers.

Customers

We supply our products directly or indirectly to reputed branded customers predominantly engaged in the electric bicycle industry, sports bicycle industry, sporting goods industry, automobile industry and healthcare industry, most of which are based in European countries, including Colnago, an international high-end road-racing bicycle manufacturer and trader based in Italy, and Tecnifibre, a well-known French brand of sporting equipment specializing in tennis and squash.

We are currently diversifying our customer base in order to lower our exposure to risks relating to reliance on any one single customer. Leveraging our substantial experience and expertise in the carbon composite application industry and sporting goods industry, we believe we are positioned to maintain our relationship with our current customers, and further expand our customer base in the future.

Sales and Marketing

We primarily acquire our customers by the following means: (i) referrals from our existing customers; (ii) direct approach to potential customers through phone calls or emails; (iii) direct approach by potential customers after learning our industry reputation and our current customer base; and (iv) direct approach by bicycle assemble houses which connect us to branded customers. Our sales and marketing team is responsible for handling purchase orders received from our customers, coordinating with our production plant for execution of purchasing orders, and communicating with customers on their requests and feedbacks and developing relationship with customers. We generally market and tailor-make products for our branded customers. We seek opportunities to expand our customer base while maintain our business relationship with our existing customers. We conduct visits to and meet with our existing major customers from time to time with a view to securing existing business, promoting our scope of business and our range of products, and increasing of their chance of engaging new projects with us. Our customers will also regularly visit our Taichung headquarters and Dongguan production plant to discuss ongoing projects, explore opportunities of new projects and share business and market information. In 2018, we had our anniversary celebrations and we invited our customers, suppliers and connoisseur to attend our celebration, during which we introduced the history and development of our Group, our major products and new products to be launched. In terms of after-sales service, our sales and marketing team gathers feedback from our customers regarding our products from time to time. We visit our customers on a periodic basis to discuss the quality of our products and services.

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Seasonality

Our products and services have no obvious seasonal characteristics. We generally record relatively stable sales revenue around the year. We only experience production declines during the first two months of the year due to the Chinese New Year holidays. To overcome the seasonality effect on production, we encourage our manufacturing employees to take early leave for the Chinese New Year and resume work as soon as possible in February.

Quality Control

We place great emphasis on the quality of our products. We have adopted stringent quality procedures throughout each stage in the entire production processes from the inspection of raw materials, production of prototype, manufacturing processes to finished products. We have our internal quality control room for testing the quality of the incoming raw materials We also have our reliability test laboratory and in-house testing equipment serving a purpose of continuously monitoring the reliability and function stability of our products. Our quality control team is responsible for developing and implementing the quality control policy, which specifies various quality control steps for different products at different stages.

We have a stringent management system to ensure adherence to and consistency in the quality of our products. We obtained ISO9001:2015 certification in 2011 for manufacture of carbon fiber rackets and obtained IATF 16949:2016 certification in 2019 for manufacture of carbon fiber seat fittings. We also adopt the EFBE on certain bicycle and electric bicycle products. EFBE tests offer comprehensive and high-standard tests on bicycle-related products, such as fatigue tests on bicycle parts, maximum load and overload test stands and stiffness test stands. The EFBF are compatible with ISO4210 and European standard EN15194. In consideration of saving time and cost, we have acquired EFBE testing machines in March 2021, so that we are capable of quickly running our own in-house tests and ensure that our bicycle and electric bicycle products adhere to the EFBE. We did not experience any significant quality defects or product claims or refunds or returns from our customers or remedies in respect of our products which materially and adversely affected our business, operations or financial conditions during the two years ended December 31, 2020 and 2019 and up to the date of this prospectus.

Intellectual Property

We regard our patents, copyrights, trademarks, trade secrets and other intellectual property rights as critical to our success. We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our intellectual property portfolio as of the date of this prospectus included the following:

Patents: We had 31 registered patents in Taiwan, PRC, Japan, Europe and the U.S., among which 7 of them are invention patents, 14 of them are utility model patents and 10 of them are design patents). The registered patents cover bicycle, racket and manufacturing process of carbon fiber products. Details of the 31 registered patents are as follows:

No. |  | Patent Description |  | Holder |  | Place of Registration |  | Patent Type |  | Patent Number |  | Duration
1 |  | Carbon-fiber product forming device |  | Star Leader Trading |  | Taiwan |  | Utility Model |  | M538875 |  | April 1, 2017 – August 4, 2026
2 |  | Carbon-fiber product forming device |  | Star Leader Trading |  | PRC |  | Utility Model |  | ZL201620845839.X |  | August 5, 2016 – August 5, 2026
3 |  | Carbon-fiber product forming device |  | Star Leader Trading |  | Japan |  | Utility Model |  | 3208329 |  | October 24, 2016 – October 24, 2026
4 |  | Apparatus of manufacturing carbon fiber prepreg |  | TW YMA |  | Taiwan |  | Utility Model |  | M567260 |  | September 21, 2018 – May 17, 2028
5 |  | Carbon fiber prepreg material preparation equipment |  | TW YMA |  | PRC |  | Utility Model |  | ZL201821112561.0 |  | July 13, 2018 – July 13, 2028
6 |  | Twisted bicycle frame |  | TW YMA |  | PRC |  | Utility Model |  | ZL201821587258.6 |  | September 28, 2018 – September 28, 2028
7 |  | Tennis racket with padding material |  | TW YMA |  | Taiwan |  | Utility Model |  | M581924 |  | August 11, 2019 - January 28, 2029
8 |  | Lightweight pike racket |  | TW YMA |  | Taiwan |  | Utility Model |  | M581926 |  | August 11, 2019 - January 28, 2029
9 |  | Lightweight pike racket |  | TW YMA |  | PRC |  | Utility Model |  | ZL201920211539.X |  | February 19, 2019 - February 19, 2029
10 |  | Tennis racket with packing material |  | TW YMA |  | Japan |  | Utility Model |  | 3221292 |  | February 27, 2019 - February 27, 2029
11 |  | Racket frame with shock absorption effect |  | TW YMA |  | PRC |  | Utility Model |  | ZL201921038799.8 |  | July 4, 2019 - July 4, 2029
12 |  | The badminton racket frame has functions of adjusting shock absorption effect and changing gravity center position |  | TW YMA |  | PRC |  | Utility Model |  | ZL201921033514.1 |  | July 4, 2019 - July 4, 2029
13 |  | The racket frame having a vibration absorbing effect |  | TW YMA |  | Japan |  | Utility Model |  | 3223222 |  | July 12, 2019 - July 12, 2029
14 |  | Badminton racket that can adjust vibration absorption effect and change the center of gravity position |  | TW YMA |  | Japan |  | Utility Model |  | 3223277 |  | July 18, 2019 - July 18, 2029

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15 |  | Racket with replaceable grip sleeve |  | TW YMA |  | the U.S. |  | Invention |  | US8579738B2 |  | May 11, 2012 – June 5, 2032
16 |  | Weight changeable racket |  | TW YMA |  | the U.S. |  | Invention |  | US8721478B2 |  | May 11, 2012 – August 9, 2032
17 |  | Weighting device and racket equipped with the same |  | TW YMA |  | the U.S. |  | Invention |  | US8758175B2 |  | May 22, 2012 – January 26, 2033
18 |  | Shock-absorbing seat stay for bicycle |  | TW YMA |  | the U.S. |  | Invention |  | US8894085B2 |  | April 16, 2013 – April 16, 2033
19 |  | Twisted tennis racket frame |  | TW YMA |  | Europe |  | Invention |  | EP3056249B1 |  | December 28, 2015 – December 28, 2035
20 |  | Device method forming carbon-fiber product |  | Star Leader |  | Europe |  | Invention |  | EP3278965 |  | November 7, 2016 – November 7, 2036
21 |  | Method of forming carbon-fiber product and implementation device thereof |  | Star Leader Trading |  | the U.S. |  | Invention |  | US10500798B2 |  | November 16, 2016 – August 25, 2037
22 |  | Racket |  | TW YMA |  | the U.S. |  | Design |  | USD561279S |  | February 5, 2008 – February 5, 2022
23 |  | Squash racket |  | TW YMA |  | Europe |  | Design |  | 005804630-0001 |  | October 23, 2018 - October 23, 2043
24 |  | Squash frame |  | TW YMA |  | PRC |  | Design |  | ZL201830591835.8 |  | October 23, 2018 - October 23, 2028
25 |  | Badminton racket frame |  | TW YMA |  | PRC |  | Design |  | ZL201930062297.8 |  | February 12, 2019 - February 12, 2029
26 |  | Badminton racket frame |  | TW YMA |  | PRC |  | Design |  | ZL201930062298.2 |  | February 12, 2019 - February 12, 2029
27 |  | Squash racket |  | TW YMA |  | the U.S. |  | Design |  | USD876562S |  | February 25, 2020 - February 25, 2035
28 |  | Badminton racket frame |  | TW YMA |  | Japan |  | Design |  | 1643801 |  | January 31, 2019 – January 31, 2039
29 |  | Badminton racket frame |  | TW YMA |  | Japan |  | Design |  | 1643802 |  | January 31, 2019 – January 31, 2039
30 |  | Tennis Racket Frame |  | TW YMA |  | the U.S. |  | Design |  | USD813962S |  | March 27, 2018 – March 27, 2033
31 |  | Tennis Racket Frame |  | TW YMA |  | the U.S. |  | Design |  | USD777859S |  | January 31, 2017 – January 31, 2032

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We had applied for the registration of the following patents in Taiwan, PRC, Vietnam, Cambodia and Germany, covering carbon-fiber products manufacturing, parts manufacturing and prepreg production equipment. Details of the 6 patents are as follows:

No. |  | Patent Description |  | Holder |  | Place of Application |  | Patent Type |  | Application Number |  | Date of Application
1 |  | Manufacturing method of bicycle parts |  | TW YMA |  | Taiwan |  | Invention |  | 109110056 |  | March 25, 2020
2 |  | Manufacturing method of parts |  | TW YMA |  | Taiwan |  | Invention |  | 109144726 |  | December 17, 2020
3 |  | Manufacturing method of parts |  | TW YMA |  | PRC |  | Invention |  | 202011642889.5 |  | December 30, 2020
4 |  | Carbon-fiber prepreg producing equipment |  | TW YMA |  | Vietnam |  | Invention |  | VN 1-2018-05804 |  | December 21, 2018
5 |  | Carbon-fiber prepreg producing equipment |  | TW YMA |  | Cambodia |  | Invention |  | KH/P/2018/00062 |  | December 6,2018
6 |  | Equipment for the production of carbo fiber prepreg materials |  | TW YMA |  | Germany |  | Invention |  | 102018221759.9 |  | December 14, 2018

| ● | Trademarks: We owned a total of 12 registered trademarks in PRC and Taiwan. Our trademarks include the combination of graphs and names for TW YMA:

| ● | Domain name: We have 1 registered domain name in the U.S., which is www.ymaunivers.com/

In addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential information through the use of internal and external controls. For example, for external controls, we enter into non-disclosure agreements or agree to confidentiality clauses with our customers and, for internal controls, we adopt and maintain policies governing the operation and maintenance of our systems and the management of user-generated data, and enter into standard confidentiality and intellectual property agreements with our key employees.

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Competition

According to the industry report commissioned by us and prepared by Frost & Sullivan, at present, there is a fierce competition in the low-end carbon fiber market with low profit margins. There is still a large profit margin in the mid-end and high-end carbon fiber markets. However, in the future, the demands of carbon fiber products for consumption use will continue to be released. With the development of technology, there will be increasing application of carbon fiber for new purpose and usage, and the cost of carbon fiber will be reduced. It is expected that these factors will enable a higher margin for the manufacturers and promote people’s willingness to buy carbon fiber productions sports and leisure products. In the future, long-term low-price competition will force low-end carbon fiber products manufacturers to face business transformation. However, manufacturers who develop mid-end and high-end products will maintain their first mover advantages through resource accumulation and research and development capability and maintain a leading position in the industry.

Our ability to remain competitive will largely depend on our business model, the quality of our products and services, the effectiveness of our sales and marketing efforts and our ability to enhance the features and functionality of our products to satisfy our customers’ needs.

We believe that the principal competitive factors in our market are:

| ● | Core competence in providing high-standard customized products according to customers’ specifications;
| ● | quality of technologies and, as a result, research and development capabilities;
| ● | ability to innovate and respond rapidly to customer needs;
| ● | strategic expansion of production capacity and quality management;
| ● | ability to control costs;
| ● | sufficient capital support; and
| ● | brand awareness and reputation of the Company.

Employees

We had 901 full-time employees as of June 30, 2021. As of the date of this prospectus, our employees are based in Taiwan and the PRC. In order to address the development, attraction and retention of personnel, we made continued and substantial investment in our technical personnel by providing them with training and various types of incentives so as to reward them for their services and contributions.

The following table provides the number of our employees by function, as of June 30, 2021:

Function |  | Number of Full-Time Employees |
R&D |  |  | 65 |
Quality control |  |  | 9 |
Business development |  |  | 24 |
Procurement |  |  | 11 |
Management |  |  | 2 |
Accounting & finance |  |  | 13 |
Production |  |  | 746 |
Human resources, I.T. & Administration |  |  | 31 |
Total |  |  | 901 |

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As required by the laws of the PRC, we participate in various employee social security plans that are organized by municipal and provincial governments for our PRC-based full-time employees, including pension, unemployment insurance, childbirth insurance, work-related injury insurance and medical insurance. We are required under PRC law to make contributions monthly at specified percentages of the salaries, bonuses and certain allowances of our PRC-based full-time employees, up to maximum amounts specified by applicable local governments. For risks relating to our failure to make adequate contributions for social insurance premiums for our employees in accordance with the statutory payment base required by the relevant PRC laws, see “Risk Factors – Risks Related to Conducting Operations in PRC – We may be subject to additional contributions under various employee benefits plans and late payments and fines imposed by relevant government authority.”

We have a defined contribution pension plan under Taiwan’s Labor Pension Act covering all Taiwan employees. We contribute 6% of an employee’s monthly wages to the personal pension account of such employee each month with the Bureau of Labor Insurance of Taiwan.

We enter into labor contracts and standard confidentiality with our key employees. We have been involved in 9 legal proceedings in relation to labor disputes during the years ended December 31, 2020 and 2019, all of which have been duly settled. None of our employees are represented by labor unions.

Inventory

We generally maintain limited inventory. We order materials for our projects on an as-needed basis. Where our proprietary products are needed, we place orders with our suppliers for raw materials and commence our production upon receipt of orders from our customers.

We held total inventory of $8,176,729 and $11,699,660 as of December 31, 2019 and 2020, respectively. The higher level of total inventory in December 31, 2020 as compare to December 31, 2019 was mainly due to increased demand from our customers for shipments to be made in the first half of 2021. As demands from our customers are dependent on, among other things, market conditions, the higher level of inventory in the year ended December 31, 2020 may not be indicative of our future inventory levels.

Properties

Our headquarters are located in 7/F-1, No.633, Sec. 2, Taiwan Blvd., Xitun District, Taichung City 407, Taiwan (the “Taichung headquarters”), and we maintain a R&D center with material laboratory in Taichung and production plant in Dongguan in the PRC. As of June 30, 2021, we have land use right to one property of approximately 64,851 square meters (approximately 698,050.4 square feet) at the development zones for new and high technology industries in Yangzhou, the PRC (the “Yangzhou Property”), which would be used for building our new production plant in Yangzhou under our expansion plan. We currently leased 6 properties with an aggregate of approximately 14,225.3 square meters (approximately 153,119.9 square feet) in Taiwan and PRC, which primarily carry out production function. Saved for our Yangzhou Property, we lease all of our facilities and do not own any real property. We do not expect to experience difficulties in renewing any of the leases when they expire. For the leasing agreement of our production plant located at No. 613, Dongfu Guoyong 2003, No. 128 Industrial Zone, Tangxia Town, Dongguan City, it contains a renewal clause in which we enjoy the right to preferential lease, and therefore, we do not expect to experience difficulties in renewing such lease. If we require additional space, we expect to be able to obtain additional facilities on commercially reasonable terms.

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Address |  | Size |  | Rent |  | Expiration
Flat 1 & 2, 7th Floor, No. 633, Section 2, Taiwan Blvd., Xitun District, Taichung City, Taiwan |  | approximately 696.5 square meters (approximately 7,497.1 square feet) |  | NTD21,714 per month (approximately $7,586) |  | August 16, 2022
No. 18, 1 Shude Lane, South District, Taichung City, Taiwan |  | approximately 696.9 square meters (approximately 7,501.4 square feet) |  | NTD204,336 per month (approximately $7,321) |  | June 15, 2023
Car Park Space B4-72, 73, 74, 75 & 76, No. 633, Section 2, Taiwan Blvd., Xitun District, Taichung City, Taiwan |  | N/A |  | NTD15,000 per month (approximately $537) |  | August 16, 2022
5th Floor, Dongguan Yuantai Sports Equipment Co., Ltd., 128 Industrial Zone, Tangxia Town, Dongguan City, PRC |  | approximately 800 square meters (approximately 8,611.13 square feet) |  | RMB14,400 per month (approximately $2,229) |  | February 25, 2022
No. 613, Dongfu Guoyong 2003, No. 128 Industrial Zone, Tangxia Town, Dongguan City, PRC |  | approximately 12,031.9 square meters (approximately 129,510.3 square feet) |  | RMB700,000 per month (approximately $108,359) |  | February 25, 2022

For risks relating to our failure to fully comply with the land use right assignment contract entered into between Bohong Technology and the PRC government authority in respect of the Yangzhou Property, see “Risk Factors – Risks Related to Conducting Operations in PRC – We have entered into land use right assignment transaction with PRC government authority and we may be subject to penalties for failure to fully comply with the contract thereunder.”

Insurance

We maintain commercial fire insurance for our headquarters, R&D center and warehouse in Taiwan and public general liability insurance in Taiwan. In respect of the production plant, R&D center and warehouses in Dongguan, the PRC, we maintain property all risks insurance. We also maintain credit insurance in respect of debts arising in the course of business activity and from the trading of products and performance of services under TW YMA. In addition, we purchase cargo transportation insurance to insure the risks and liabilities in relation to the shipping of our products and raw materials between our warehouse in Taiwan, production plant and warehouse in the PRC and delivery points designated by customers. We also maintain commercial general liability insurance with products liability coverage in respect of the bicycle parts products, senior walker products, motorcycle handler and pre-preg materials manufactured or distributed by us and exported or sold worldwide. We consider our insurance coverage to be consistent with customary industry standards adopted by other companies in the same industry and of similar size.

Legal Proceedings

Other than the legal proceedings in relation to the labor disputes disclosed in the sub-section above headed “Employees” under the Business section, we are not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.

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REGULATIONS

Our business operations are primarily in Taiwan and the PRC and we are primarily subject to Taiwan and the PRC laws and regulations. This section sets forth a summary of the most significant regulations or requirements that affect our business activities in Taiwan and PRC or our shareholders’ rights to receive dividends and other distributions from us.

Regulations in Taiwan

Regulations Relating to Foreign Exchange

Taiwan Foreign Exchange Control Law and regulations provide that all foreign exchange transactions must be executed by banks designated by Taiwan’s Financial Supervisory Commission and the Central Bank of the Republic of China (Taiwan) to engage in such transactions. Current regulations favor trade-related or service-related foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise and services may now be retained and used freely by exporters, and all foreign currency needed for the importation of merchandise and services may be purchased freely from the designated foreign exchange banks.

Apart from trade-related or service-related foreign exchange transactions, Taiwan companies and individual residents reaching the age of 20 may, without foreign exchange approval, remit foreign currency of up to US$50 million (or its equivalent) and US$5 million (or its equivalent) to and from Taiwan (or such other amount as determined by the Central Bank of the Republic of China (Taiwan) from time to time at its discretion in consideration of Taiwan’s economic and financial conditions or the needs to maintain the order of foreign exchange market in Taiwan), respectively, in each calendar year. The above limits apply to remittances involving either a conversion of NTD into a foreign currency or a conversion of foreign currency into NTD. In addition, a requirement is also imposed on all enterprises to register medium- and long-term foreign debt with the Central Bank of the Republic of China (Taiwan).

Subject to specified requirements but without foreign exchange approval of the Central Bank of the Republic of China (Taiwan), foreign persons may remit to and from Taiwan foreign currencies of up to US$100,000 (or its equivalent) per remittance if the required documentation is provided to the authorities in Taiwan. The above limit applies to remittances involving either a conversion of NTD into a foreign currency or a conversion of foreign currency into NTD.

Regulations Relating to Dividend Distributions

Except under limited circumstances, a Taiwanese company will not be permitted to distribute dividends or make other distributions to shareholders in any given year in which it did not record net income or retained earnings (excluding reserves). The Taiwan Company Act requires that 10% of annual net income (less prior years’ losses, if any, and applicable income taxes) be set aside as a legal reserve until the accumulated legal reserve equals the paid-in capital of the company. The company will be permitted to make distributions to its shareholders in cash or in the form of ordinary shares from legal reserves if it has no accumulated loss, provided that the distribution payable out of the company’s legal reserve can only come from the amount exceeding 25% of the total paid-in capital.

The articles of incorporation of TW YMA provide that its net profit after tax shall be distributed first for making up accumulated losses, and then setting aside 10% as legal reserve, unless the accumulated legal reserve equals the paid-in capital. The remaining earnings along with the undistributed earnings at the beginning of the period are considered as accumulated distributable earnings. The shareholders’ dividends are appropriated based on the accumulated distributable earnings. The dividend payout ratio is proposed by TW YMA’s board of directors and approved by its shareholder(s) at the shareholders’ meeting.

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According to the articles of incorporation of TW YMA, upon the final settlement of accounts, if there is any surplus profit (meaning the net profit before tax before deduction of employees’ remuneration), TW YMA shall set aside at least 10% of the surplus profit as employees’ remuneration, and set aside certain amount as the remuneration of directors and supervisors; provided that if TW YMA has accumulated losses, it shall reserve an amount thereof for making up the losses. Employees’ remuneration may be in the form of cash or shares. Employees (including those of TW YMA’s controlling companies or subsidiaries) entitled to such remuneration or other employee incentive programs shall meet certain requirements, and such requirements shall be determined by the board of directors of TW YMA.

Regulations Relating to Preemptive Rights

Under Taiwan Company Act, when a Taiwan company issues new shares for cash, the company’s employees, whether they are shareholders of the company or not, have rights to subscribe for 10% to 15% of the new issue, and existing shareholders who are listed on the shareholders’ register as of the record date have a preemptive right to acquire the remaining 85% to 90% of the issue; provided that pursuant to the Statute For Investment By Foreign Nationals, such employee preemptive rights may be excluded if 45% or more of the company’s total capital is owned by foreign investors.

Regulations on Taxation

Effective from 2018, Taiwan’s Income Tax Law abolished the imputation system, raised the corporate income tax rate from 17% to 20%, and reduced the rate of surtax imposed on unappropriated earnings from 10% to 5%. Effective from 2020, Taiwan’s Statute for Industrial Innovation extended the tax incentive by 10 years for R&D expenditure. In addition, if a company uses its undistributed earnings to construct or purchase buildings, software or hardware equipment, or technology for use in production or operation, such investment amounts may be deducted from the undistributed earnings in calculation of the current year’s undistributed earnings for assessment of surtax imposed on undistributed earnings from the year 2018.

The alternative minimum tax (“AMT”) imposed under Taiwan’s AMT Act is a supplemental income tax which applies if the amount of regular income tax calculated pursuant to Taiwan’s Income Tax Law and relevant laws and regulations is below the amount of basic tax prescribed under the AMT Act. The taxable income for calculating AMT includes most income that is exempt from income tax under various regulations, such as tax holidays. The prevailing AMT rate for business entities is 12%.

Regulations in PRC

Regulations on Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in 2008. Under PRC foreign exchange regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE, by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.

In 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or Circular 59, as amended in May 2015, which substantially amends and simplifies the foreign exchange procedure. Pursuant to Circular 59, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by an foreign-invested enterprise, or FIE to its foreign shareholders no longer require the approval or verification of SAFE. In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. Instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration.

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In addition, the PRC governmental authorities have gradually relaxed restrictions on the settlement of the foreign exchange capitals of FIEs in recent years. In March 2015, SAFE promulgated SAFE Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of FIEs nationwide. SAFE Circular 19 replaced both the Circular of the SAFE on Issues Relating to the Improvement of Business Operations with Respect to the Administration of Foreign Exchange Capital Payment and Settlement of Foreign- invested Enterprises, or SAFE Circular 142, and the Circular of the SAFE on Issues concerning the Pilot Reform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises in Certain Areas, or SAFE Circular 36. SAFE Circular 19 allows all FIEs established in the PRC to settle their foreign exchange capital on a discretionary basis according to the actual needs of their business operation, provides the procedures for foreign invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments and removes certain other restrictions that had been provided in SAFE Circular 142. However, SAFE Circular 19 continues to prohibit FIEs from, among other things, using Renminbi funds converted from their foreign exchange capital for expenditure beyond their business scope and providing entrusted loans or repaying loans between non-financial enterprises. SAFE promulgated the SAFE Circular 16, effective June 2016, which reiterates some of the rules set forth in SAFE Circular 19. SAFE Circular 16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted foreign listing proceeds, and the corresponding Renminbi capital converted from foreign exchange may be used to extend loans to related parties or repay inter-company loans (including advances by third parties). On October 23, 2019, SAFE further issued Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or SAFE Circular 28, which took effect on the same day. SAFE Circular 28 allows non-investment FIEs to use their capital funds to make equity investments in China as long as such investments do not violate the Negative List and the target investment projects are genuine and in compliance with laws. In addition, SAFE Circular 28 stipulates that qualified enterprises in certain pilot areas may use their capital income from registered capital, foreign debt and overseas listing for the purpose of domestic payments without providing authenticity certifications to the relevant banks in advance for those domestic payments.

Regulations Relating to Dividend Distributions

The principal laws, rules and regulations governing dividend distributions by FIEs in the PRC are the PRC Company Law, promulgated in 1993 and last amended in 2018 and the Foreign Investment Law and its Implementing Regulations, both came into effect on January 1, 2020. Under these requirements, FIEs may pay dividends only out of their accumulated after-tax profit, if any, as determined in accordance with PRC accounting standards and regulations. In addition, a PRC company, including FIEs in the PRC, is required to allocate at least 10% of its accumulated after-tax profit each year, if any, to fund the statutory reserve fund until the aggregate amount of the reserve fund has reached 50% of its registered capital. A PRC company may, at its discretion, allocate a portion of its after-tax profits based on its articles of association and PRC accounting standards to certain reserve funds. These reserves can only be used for specific purposes and are not distributable as cash dividends. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents

In 2014, SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, replacing the SAFE Circular on Issues Concerning the Regulation of Foreign Exchange in Equity Finance and Return Investments by Domestic Residents through Offshore Special Purpose Vehicles, or SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. Under SAFE Circular 37, a “special purpose vehicle” refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in the PRC by PRC residents or entities through special purpose vehicles, namely, establishing FIEs to obtain ownership, control rights and management rights. SAFE Circular 37 provides that, before making a contribution into a special purpose vehicle, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch.

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In 2015, SAFE promulgated SAFE Notice 13, which amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to special purpose vehicles but had not registered as required before the implementation of SAFE Circular 37 must register their ownership interests or control in the special purpose vehicles with qualified banks. An amendment to the registration is required if there is a material change with respect to the special purpose vehicle registered, such as any change of basic information (including change of PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions.

Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentations or failing to disclose the control of the FIE that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant FIEs, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration.

Regulations on Taxation

Enterprise Income Tax

On March 16, 2007, the National People’s Congress promulgated the PRC Enterprise Income Tax Law, which was amended on February 24, 2017 and December 29, 2018. On December 6, 2007, the State Council enacted the Regulations for the Implementation of the Enterprise Income Tax Law, which became effective on January 1, 2008 and was amended on April 23, 2019. Under the Enterprise Income Tax Law and the relevant implementing regulations, both resident enterprises and non-resident enterprises are subject to tax in the PRC. Resident enterprises are defined as enterprises that are established in the PRC in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but are actually or in effect controlled from within China. Non-resident enterprises are defined as enterprises that are organized under the laws of foreign countries and whose actual management is conducted outside the PRC, but have established institutions or premises in the PRC, or have no such established institutions or premises but have income generated from inside the PRC. Under the Enterprise Income Tax Law and relevant implementing regulations, a uniform corporate income tax rate of 25% is applied. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishments or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the established institutions or premises set up by them, withholding income tax is set at the rate of 10% with respect to their income sourced from inside the PRC.

Value-Added Tax

The PRC Provisional Regulations on Value-Added Tax were promulgated by the State Council on December 13, 1993, became effective on January 1, 1994, and were subsequently amended from time to time. The Detailed Rules for the Implementation of the PRC Provisional Regulations on Value-Added Tax (2011 Revision) were promulgated by the Ministry of Finance on December 25, 1993 and subsequently amended in 2008 and 2011. On November 19, 2017, the State Council promulgated the Decisions on Abolishing the PRC Provisional Regulations on Business Tax and Amending the PRC Provisional Regulations on Value-Added Tax. Pursuant to these regulations, rules and decisions, all enterprises and individuals engaged in sale of goods, provision of processing, repair, and replacement services, sales of services, intangible assets, real property, and the importation of goods within the PRC are value-added tax, or VAT taxpayers. On March 20, 2019, the Ministry of Finance, the State Administration of Taxation, or SAT, and the General Administration of Customs jointly issued the Announcement on Relevant Policies on Deepening the Reform of Value-Added Tax. Pursuant to this announcement, the generally applicable VAT rates are simplified as 13%, 9%, 6%, and 0%, which became effective on April 1, 2019, and the VAT rate applicable to the small-scale taxpayers is 3%. If a small-scale taxpayer’s total monthly sales amount does not exceed RMB100 thousand and its quarterly sales volume does not exceed RMB300 thousand, the VAT will be exempted.

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Dividend Withholding Tax

The Enterprise Income Tax Law and its implementation rules provide that since January 1, 2008, an income tax rate of 10% will normally apply to dividends declared to non-PRC resident investors that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.

Tax on Indirect Transfer

On February 3, 2015, SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non PRC Resident Enterprises, or SAT Bulletin 7. Pursuant to SAT Bulletin 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises, may be recharacterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial purpose” in the transaction arrangement, features to be taken into consideration include, inter alia, whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income is mainly derived from China; and whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have a real commercial nature which is evidenced by their actual function and risk exposure. SAT Bulletin 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares are acquired on a public stock exchange. On October 17, 2017, SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non- resident Enterprise Income Tax at Source, or SAT Bulletin 37, which was amended by the Announcement of the State Administration of Taxation on Revising Certain Taxation Normative Documents issued on June 15, 2018 by SAT. SAT Bulletin 37 further elaborates the relevant implemental rules regarding the calculation, reporting, and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of SAT Bulletin 7. SAT Bulletin 7 may be determined by the tax authorities to be applicable to our offshore transactions or sale of our shares or those of our offshore subsidiaries where non-resident enterprises, being the transferors, are involved.

Regulation of Foreign Investment

The PRC Company Law or Company Law was promulgated on December 29, 1993, which became effective on July 1, 1994, and was subsequently revised on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and on October 26, 2018. Limited liability companies and companies limited by shares established in China shall be subject to the Company Law. Each company has the status of a legal person and owns its own assets. Assets of a company may be used in full for the company’s liability. Foreign-invested companies are also subject to the Company Law, except as otherwise provided in the foreign investment laws including the Law of the PRC on Wholly Foreign-owned Enterprise.

Pursuant to the Law of the PRC on Wholly Foreign-owned Enterprise, which was adopted on April 12, 1986, amended on October 31, 2000 and September 2016, and abolished on January 1, 2020, the establishment and subsequent changes of a wholly foreign-owned enterprise is subject to the approval by the authority in charge of commerce or foreign trade and investment and registration with the relevant administration for industry and commerce. The investor of the wholly foreign-owned enterprise must make payment or subscribe for the registered capital according to its articles of association.

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On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 and replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The organization form, organization and activities of foreign-invested enterprises shall be governed, among others, by the Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises established before the implementation of the Foreign Investment Law may retain the original business organization and so on within five years after the implementation of this law. Foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China shall be protected in accordance with the law, and all national policies on supporting the development of enterprises shall equally apply to foreign-invested enterprises. Among others, the state guarantees that foreign-invested enterprises participate in the formulation of standards in an equal manner and that foreign-invested enterprises participate in government procurement activities through fair competition in accordance with the law. Further, the state shall not expropriate any foreign investment except under special circumstances. In special circumstances, the state may levy or expropriate the investment of foreign investors in accordance with the law for the needs of the public interest. The expropriation and requisition shall be conducted in accordance with legal procedures and timely and reasonable compensation shall be given.

The Foreign Investment Law is formulated to further expand opening-up, vigorously promote foreign investment and protect the legitimate rights and interests of foreign investors. According to the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management system. The pre-entry national treatment means that the treatment given to foreign investors and their investments at the stage of investment access shall not be less favorable than that of domestic investors and their investments. The negative list management system means that the state implements special administrative measures for access of foreign investment in specific fields. The Foreign Investment Law does not mention the relevant concept and regulatory regime of contractual arrangement structures. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation.

On December 26, 2019, the State Council promulgated the Implementing Regulations of the Foreign Investment Law of the PRC, or the Implementing Regulations of the Foreign Investment Law, which became effective on January 1, 2020. The Implementing Regulations of the Foreign Investment Law strictly implement the legislative principles and purpose of the Foreign Investment Law, emphasize on promoting and protecting the foreign investment, and refine the specific measures. At the same day, the Supreme People’s Court issued an Interpretation on the Application of the Foreign Investment law, which also came into effect on January 1, 2020. This interpretation shall apply to any contractual dispute arising from the acquisition of the relevant rights and interests by a foreign investor by way of, among other things, gift, division of property, merger of enterprises, or division of enterprises.

Furthermore, foreign investments in China are subject to investment information reporting obligations under the foreign investment laws, which is further stipulated in the Measures for Reporting of Foreign Investment Information, or the Foreign Investment Reporting Measures, that were jointly promulgated by the MOFCOM and the State Administration for Market Regulation on December 30, 2019 and became effective on January 1, 2020. Pursuant to the Foreign Investment Reporting Measures, foreign investors and foreign-invested enterprises are obligated to submit investment information reports in regard with their direct or indirect investment activities in China through the Enterprise Registration System and the National Enterprise Credit Information Publicity System, commencing from January 1, 2020. Such reports include preliminary report relating to establishment, modification report, deregistration report, and annual report.

Negative List of Foreign Investment

The current regulation regime of foreign investment in the PRC, setting aside special arrangements adopted in pilot free trade zones, preliminarily consists of three principal legal documents, i.e. the Catalogue of Industries for Encouraged Foreign Investment (2020 Edition), or the 2020 Encouraged Catalogue, which was promulgated jointly by the Ministry of Commerce and the National Development and Reform Commission (or NDRC), on December 27, 2020 and became effective on January 27, 2021, the Special Administrative Measures for Access of Foreign Investment (Negative List) (2020 Edition), or the 2020 Negative List, which was promulgated jointly by the Ministry of Commerce and the NDRC, on June 24, 2020 and became effective on July 23, 2020, and the Provisions Guiding Foreign Investment Direction, which was promulgated by the State Council on February 11, 2002 and came into effect on April 1, 2002. These three legal documents collectively classify all foreign investment projects into four categories: (1) encouraged projects, (2) permitted projects, (3) restricted projects, and (4) prohibited projects. If the industry in which the investment is to occur falls into the encouraged category, foreign investment, in certain cases, may receive preferential policies or benefits. If it falls into the restricted category, foreign investment may be conducted in accordance with applicable legal and regulatory restrictions. If falls into the prohibited category, foreign investment of any kind will not be allowed.

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The 2020 Encouraged Catalogue and the 2020 Negative List govern investment activities in the PRC by foreign investors and classify industries into three categories with regard to foreign investment: “encouraged,” “restricted” and “prohibited.” Industries not listed in the Catalogue are generally deemed as falling into a fourth category, “permitted,” unless specifically restricted by other PRC laws. For some restricted industries, foreign investors can only conduct investment activities through equity or contractual joint ventures, while in other cases PRC partners are required to hold the majority interests in such joint ventures. In addition, some projects in the restricted category are subject to higher-level governmental approvals. Foreign investors are not allowed to invest in industries in the prohibited category.

Regulations Related to Mergers and Acquisitions and Overseas Listings

On August 8, 2006, six PRC governmental and regulatory agencies, including MOFCOM and the China Securities Regulatory Commission, or the CSRC, promulgated the M&A Rules, governing the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006 and was revised on June 22, 2009. The M&A Rules, among other things, requires that offshore special purpose vehicles that are controlled by PRC companies or individuals and that have been formed for overseas listing purposes through acquisitions of PRC domestic interest held by such PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.

Regulation of the Production of Electric Bicycles

On June 24, 2017, the State Council of the PRC issued the Decision on Adjusting the Catalogue for the Administration of Production Permits for Industrial Products and on Trying out the Simplification of Approval Procedures, or the Decision. Pursuant to the Decision, the production license for electric bicycle was cancelled and was changed to implement mandatory product certification management. On July 2, 2018, the Announcement on the Arrangements for the Transfer of Electric Bicycle Products from Licensing to CCC Certification Management or Announcement was jointly promulgated by the State Administration for Market Regulation and the Certification and Accreditation Administration of the PRC, or the CNCA. According to the Announcement, electric bicycle products without CCC certification shall not be delivered, sold, imported or used in other business activities commencing from April 15, 2019. On July 19, 2018, the CNCA issued the Implementation Rules for Compulsory Product Certification of Electric Bicycles (CNCA-C11-16: 2018) which came into effect on August 1, 2018. On June 23, 2021, the CNCA issued the amended Implementation Rules for Compulsory Product Certification of Electric Bicycles (CNCA-C11-16: 2021), which has become effective on July 1, 2021, replacing the Implementation Rules for Compulsory Product Certification of Electric Bicycles (CNCA-C11-16: 2018).

On May 15, 2018, the New National Standards were promulgated by the State Administration for Market Regulation and the National Standardization Management Committee and became effective on April 15, 2019. The New National Standards replace the General Technical Requirements for Electric Bicycles (GB 17761-1999) which were issued on May 28, 1999.

Regulation of the Registration of Electric Bicycles

Pursuant to the Road Traffic Safety Law of the PRC (revised in 2011), a non-motorized vehicle which ought to be lawfully registered shall be deemed street-illegal until it has been registered with the local traffic administrative department. In addition, the categories of such non-motorized vehicles shall be determined by provincial governments in light of their respective actual local situation and shall consist of technical standards in terms of overall weight, braking performance, overall size and reflectors, which all non-motorized vehicles should abide by. Pursuant to the Circular on Strengthening the Management of Electric Bicycles, promulgated on March 18, 2011, any non-compliant vehicle may not be registered as a non-motorized vehicle, which in turn means it shall be deemed street-illegal.

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Regulations Relating to Production Safety

Pursuant to the Production Safety Law of the PRC, or the Production Safety Law, which took effect on November 1, 2002 and was amended on August 31, 2014, the entities that are engaged in production and business operation activities must implement national industrial standards which guarantee the production safety and comply with production safety requirements provided by the laws, administrative regulations and national or industrial standards. An entity must take effective measures for safety production, maintain safety facilities, examine the safety production procedures, educate and train employees and take any other measures to ensure the safety of its employees and the public. An entity or its relevant persons-in-charge which has failed to perform such safety production liabilities will be required to make amends within a time limit or face administrative penalties. If it fails to amend within the prescribed time limit, the production and business operation entity may be ordered to suspend business for rectification, and serious violations may result in criminal liabilities.

Regulations Relating to Product Quality

The Product Quality Law of the PRC was promulgated on February 22, 1993, amended on July 8, 2000, August 27, 2009 and December 29, 2018, respectively. The Product Quality Law applies to anyone who manufactures or sells any product within the territory of the PRC. It is prohibited from producing or selling counterfeit products in any form, including counterfeit brands, or providing false information about the product manufacturers. Violation of national or industrial standards may result in civil liability and administrative penalties such as compensation, fines, suspension of business and confiscation of illegal income, and serious violations may result in criminal liabilities.

Regulations Relating to Intellectual Property Rights

Patent

Pursuant to the Patent Law of the PRC, which was promulgated by the Standing Committee of the National People’s Congress on March 12, 1984 and became effective from April 1, 1985, and was most recently amended on October 17, 2020, and became effective on June 1, 2021, patents in China are classified into three categories, namely, inventions, utility models and designs. A patentable invention, utility model or design must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation. The Patent Office under the China National Intellectual Property Administration is responsible for receiving, examining and approving patent applications. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application date. After the grant of the patent right for an invention or utility model, except where otherwise provided for in the Patent Law of the PRC, no entity or individual may, without the authorization of the patent owner, exploit the patent, that is, make, use, offer to sell, sell or import the patented product, or use the patented process, or use, offer to sell, sell or import any product which is a direct result of the use of the patented process, for production or business purposes. And after a patent right is granted for a design, no entity or individual shall, without the permission of the patent owner, exploit the patent, that is, for production or business purposes, manufacture, offer to sell, sell, or import any product containing the patented design.

Copyright

Pursuant to the Copyright Law of the PRC, which was first promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and became effective from June 1, 1991, and was last amended on November 11, 2020 and became effective as of June 1, 2021, copyrights include personal rights such as the right of publication and that of attribution as well as property rights such as the right of production and that of distribution. Reproducing, distributing, performing, projecting, broadcasting or compiling a work or communicating the same to the public via an information network without permission from the owner of the copyright therein, unless otherwise provided in the Copyright Law of the PRC, constitute infringements of copyrights. The amended Copyright Law of the PRC extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.

In order to further implement the Computer Software Protection Regulations, promulgated by the State Council on June 4, 1991 and amended on January 30, 2013, the National Copyright Administration issued the Computer Software Copyright Registration Procedures on April 6, 1992 and amended on February 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights. The China Copyright Protection Center shall grant registration certificates to the computer software copyrights applicants which meet the requirements of both the software copyright registration procedures and the computer software protection regulations.

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Trademark

Pursuant to the Trademark Law of the PRC, or the Trademark Law, which was first promulgated by the Standing Committee of the National People’s Congress on August 23, 1982 and became effective from March 1, 1983, and was most recently amended on April 23, 2019 and became effective on November 1, 2019, the right to exclusive use of a registered trademark shall be limited to trademarks which have been approved for registration and to goods and/or services for which the use of such trademark has been approved. The period of validity of a registered trademark shall be ten years, counted from the day the registration is approved, and may be renewed for another ten years provided relevant application procedures have been completed within twelvemonths before the end of the validity period. According to this law, using a trademark that is identical to or similar to a registered trademark in connection with the same or similar goods and/or services without the authorization of the owner of the registered trademark constitutes an infringement of the exclusive right to use a registered trademark.

The Implementation Regulation for the Trademark Law promulgated by the State Council came into effect on September 15, 2002 and was further amended on April 29, 2014. Under the Trademark Law and the implementing regulation, the Trademark Office of the State Administration for Market Regulation, or the Trademark Office, is responsible for the registration and administration of trademarks. The Trademark Office handles trademark registrations. As with patents, China has adopted a “first-to-file” principle for trademark registration. If two or more applicants apply for registration of identical or similar trademarks for the same or similar commodities, the application that was filed first will receive preliminary approval and will be publicly announced. A registrant may apply to renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed registrations are valid for ten years.

In addition to the above, a Trademark Review and Adjudication Board was established for resolving trademark disputes. According to the Trademark Law, within three months since the date of the announcement of a preliminarily validated trademark, if a titleholder is of the view that such trademark in application is identical or similar to its registered trademark for the same type of commodities or similar commodities which violates relevant provisions of the Trademark Law, such titleholder may raise an objection to the Trademark Office within the aforesaid period. In such event, the Trademark Office shall consider the facts and grounds submitted by both the dissenting party and the party being challenged and shall decide on whether the registration is allowed within twelve months upon the expiration of the announcement after investigation and verification, and notify the dissenting party and the person challenged in writing.

Domain Names

Pursuant to the Administrative Measures on Internet Domain Names of China, which was recently amended by the Ministry of Industry and Information Technology on August 24, 2017 and became effective on November 1, 2017, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer on the internet and corresponds to the internet protocol (IP) address of that computer. The principle of “first come, first serve” is followed for the domain name registration service. Applicants for registration of domain names shall provide the true, accurate and complete information of their identifications to domain name registration service institutions. After completing the domain name registration, the applicant becomes the holder of the domain name registered by him/it. Furthermore, the holder shall pay operation fees for registered domain names on schedule. If the domain name holder fails to pay the corresponding fees as required, the original domain name registrar shall write it off and notify the holder of the domain name in written form.

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Regulation of Employment and Social Welfare

Labor Laws

Companies in the PRC are subject to the PRC Labor Law which was promulgated on July 5, 1994, became effective on January 1, 1995 and was further amended on August 27, 2009 and December 29, 2018, PRC Labor Contract Law which was promulgated on June 29, 2007, became effective on January 1, 2008 and was further amended on December 28, 2012, and the Implementation Regulations of the PRC Labor Contract Law which was promulgated by the State Council on September 18, 2008 and became effective on the same date, as well as other related regulations, rules and provisions promulgated by the relevant government authorities from time to time. Compared to previous PRC laws and regulations, the PRC Labor Contract Law imposes stricter requirements in such respects as signing of labor contracts with employees, stipulation of probation period and violation penalties, termination of labor contracts, payment of remuneration and economic compensation, use of labor dispatches as well as social security premiums.

According to the PRC Labor Law and the PRC Labor Contract Law, a labor contract in writing shall be concluded when a labor relationship is to be established between an employer and an employee. An employer shall pay an employee two times of his/her salary for each month in the circumstance where the employer fails to enter a written labor contract with the employee for more than a month but less than a year; where such period exceeds one year, the parities are deemed to have entered an unfixed-term labor contract. Employers shall pay wages that are not lower than the local minimum wage standards to the employees. Employers are also required to establish labor safety and sanitation systems in compliance with PRC rules and standards, and to provide relevant training to the employees.

Social Insurance and Housing Provident Funds

According to the Temporary Regulations on the Collection and Payment of Social Insurance Premium, the Regulations on Work Injury Insurance, the Regulations on Unemployment Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC must provide beneficial plans for their employees, that include basic pension insurance, unemployment insurance, maternity insurance, work-related injury insurance and medical insurance. An enterprise must also provide social insurance by processing social insurance registration with local social insurance agencies, and must pay or withhold relevant social insurance premiums for or on behalf of the employees. The Law on Social Insurance, which was promulgated on October 28, 2010 and came into effect on July 1, 2011 and was amended on December 29, 2018, regulates basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance. The Administrative Regulations on the Housing Provident Funds, which was promulgated and came into effect on April 3, 1999, and was amended on March 24, 2002 and March 24, 2019, provides that housing provident fund contributions paid by an individual employee and housing provident fund contributions paid by his or her employer all belong to the individual employee.

Regulation under PRC Securities Law

The PRC Securities Law was promulgated in December 1998 and was subsequently revised in October 2005, June 2013, August 2019 and December 2019. According to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, the securities regulatory authority of the State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further provides that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council. While there is no detailed interpretation regarding the rule implementation under Article 177, it will be difficult for an overseas securities regulator to conduct investigation or evidence collection activities in China.

Regulations on Loans to and Direct Investment in the PRC Entities by Offshore Holding Companies

According to the Implementation Regulations on Statistics and Supervision of Foreign Debt promulgated by SAFE on September 24, 1997 and the Interim Measures on the Management of Foreign Debts promulgated by SAFE, the NDRC and the Ministry of Finance of the PRC and effective from March 1, 2003, loans by foreign companies to their subsidiaries in China, which accordingly are FIEs, are considered foreign debt, and such loans must be registered with the local branches of the SAFE. Under the provisions, the total amount of accumulated medium-term and long-term foreign debt and the balance of short-term debt borrowed by a FIE is limited to the difference between the total investment and the registered capital of the foreign invested enterprise.

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On January 12, 2017, the People’s Bank of China promulgated the Circular of the People’s Bank of China on Matters relating to the Macro-prudential Management of Comprehensive Cross-border Financing, or PBOC Circular 9, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based constraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign currencies at their own discretion. The total cross-border financing of a company shall be calculated using a risk-weighted approach and shall not exceed an upper limit. The upper limit is calculated as capital or assets multiplied by a cross-border financing leverage ratio and multiplied by a macro-prudential regulation parameter.

In addition, according to PBOC Circular 9, as of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises and during such transition period, FIEs may apply either the current cross-border financing management mode, namely the mode provided by Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt and the Interim Provisions on the Management of Foreign Debts, or the mode in this PBOC Circular 9 at its sole discretion. After the end of the transition period, the cross-border financing management mode for FIEs will be determined by the People’s Bank of China and SAFE after assessment based on the overall implementation of this PBOC Circular 9. However, although the transitional period ended on January 10, 2018, as of the date of this prospectus, neither PBOC nor SAFE has issued any new regulations regarding the appropriate means of calculating the maximum amount of foreign debt for foreign-invested enterprises. Domestic-invested enterprises, have only been subject to the net assets limit in calculating the maximum amount of foreign debt they may hold from the date of promulgation of PBOC Circular 9.

Laws and Regulations on the Protection of Consumer Rights and Interests

Business operators in the business of supplying and selling manufactured goods or services to consumers, shall comply with the Law of the PRC on the Protection of Consumer Rights and Interests, or the Consumer Rights Protection Law, promulgated by the Standing Committee of the National People’s Congress on October 31, 1993, and effective as of January 1, 1994, and revised on August 27, 2009 and October 25, 2013.

According to the Consumer Rights Protection Law, business operators must ensure that the goods or services provided by them meet the requirements for safeguarding personal and property safety. For goods and services that may endanger personal and property safety, consumers should be provided with a true description and an explicit warning, as well as a description and indication of the proper way to use the goods or accept the services and the methods of preventing the occurrence of a hazard. If the goods or services provided by the business operators cause personal injuries to consumers or third parties, the business operators shall compensate the injured parties for their losses.

Laws on Contracts

On May 28, 2020, the Civil Code of the PRC was issued by the National People’s Congress and became effective on January 1, 2021 and replaced the General Principles of the Civil Law of the PRC, the Security Law of the PRC, the Contract Law of the PRC, the Real Right Law of PRC, the General Rules of the Civil Law of the PRC and several other basic civil laws in the PRC. Under the Civil Code of the PRC, a natural person, legal person or other legally established organization shall have full capacity of civil right and civil conduct in order to enter into a valid contract. Except as otherwise required by other laws and regulations, the formation, validity, performance, modification, assignment, termination, and liability for breach of a contract are governed by the Civil Code of the PRC. A contracting party who fails to perform or fails to fulfill its contractual obligation shall bear the responsibility of a continued duty to perform or to provide remedies and compensation as provided by PRC laws.

Standardization Law of the People’s Republic of China

Standardization Law of the People’s Republic of China was passed by the fifth session of the Standing Committee of the Seventh National People’s Congress on December 29, 1988, and revised on November 4, 2017. This law is formulated for the purposes of enhancing standardization work, promoting scientific and technological advancement, improving the quality of products and services, safeguarding personal health and life and property security, protecting state security and ecological environmental security, raising the level of economic and social development. This law applies to technical requirements that need to be unified for agricultural field, industrial field, service industry, social undertakings industry, and others. Enterprises which manufacture, sell, import products or provide services that fail to meet the mandatory standards, and enterprises which manufacture products or provide services that fail to meet the technical requirements under their publicized standardization, shall undertake civil liabilities.

Regulations of the People’s Republic of China on Certification and Accreditation

Regulations of the People’s Republic of China on Certification and Accreditation became effective as of September 3, 2003, and was revised on February 6, 2016 and November 29, 2020. This regulation is formulated for the purposes of standardizing certification and accreditation, improving the quality of products and services and management standard. This regulation applies to all certification agencies, certification services and accreditation services in the PRC, excluding certification on quality management standardization of enterprises engaging in pharmaceutical productions and/or operations, certification on quality of laboratory animals, certification of military products, accreditation on laboratories and personnel engaging in the calibration and testing of military products.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth information regarding our executive officers and directors as of the date of this prospectus:

Directors and Executive Officers |  | Age |  | Position/Title
Jing-Bin Chiang |  | 54 |  | Chairman, Chief Executive Officer and Director
Wan-Tzu Chen |  | 54 |  | Chief Financial Officer
Ting-Pang Sung |  | 65 |  | Director
Ching-Chou Huang |  | 63 |  | Independent Director
Shen-Huei Wang |  | 65 |  | Independent Director
Ping-Hong Lin |  | 61 |  | Independent Director

* | Each of Mr. Ching-Chou Huang, Mr. Shen-Huei Wang and Mr. Ping-Hong Lin has accepted our appointment to be our independent director, effective upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part.

Jing-Bin Chiang has been appointed as our Chief Executive Officer since May 2016 and as our Chairman of the Board since July 2021. Prior to that, Mr. Chiang had been acting as representative of one of our former corporate directors as Chairman from February 2017 to July 2021. For our subsidiary TW YMA, Mr. Chiang has been serving as the chairman of the board since its incorporation date. Mr. Chiang is responsible for the overall strategic planning, corporate management and business development of our day-to-day operation as well as the overall accounting management. Mr. Chiang has approximately 18 years of experience in the composite material application industry. From November 2003 to August 2009, Mr. Chiang worked as chief financial officer and vice president in finance in LCY Elastomers LP, a thermoplastic rubber manufacturer with factory in Houston. From September 2010 to February 2015, Mr. Chiang worked as vice president in Coretronic Corporation (TWO: 5371), a company which develops, manufactures and markets liquid crystal display (LCD). Mr. Chiang received a bachelor’s degree in business administration from Tunghai University in Taiwan in June 1990 and a master’s degree in Accountancy and Financial Information System from Cleveland State University in the United States in March 1995. Mr. Chiang has been admitted as a certified public accountant of Washington State Board of Accountancy since February 1997. Mr. Chiang has also been admitted as a certified internal auditor of The Institute of Internal Auditors since May 2000.

Wan-Tzu Chen has been serving as our Chief Financial Officer since August 2021. Ms. Chen has over 25 years of professional experience in accounting and auditing. Prior to that, Ms. Chen has been acting as sole practitioner in JunYue CPA Firm since March 2013. From July 1994 to August 1995, Ms. Chen served as an auditor in PwC Taiwan. From August 1996 to February 2013, Ms. Chen served as financial controller in Per Aarsleff A/S (CPH: PAAL-B), a Danish civil engineering and construction company, in Taiwan. Ms. Chen obtained her bachelor’s degree in accounting from Tunghai University in Taiwan in June 1990 and master’s degree in accountancy and financial information systems from Cleveland State University in December 1992. Ms. Chen also received her master’s degree of science in finance from Temple University in August 1994 and master’s degree in law from Tunghai University in Taiwan in June 2009. Ms. Chen also obtained her master’s degree in law from University of Washington in June 2018. Ms. Chen has been admitted as a certified public accountant in Illinois, the U.S. in February 1994 and in Taiwan in September 2005. Ms. Chen has also been admitted as an attorney in Washington, the U.S., in June 2020.

Ting-Pang Sung has been serving as our Director since July 2021. Mr. Sung is responsible for our formulation of business strategies and supervision on daily operation. Mr. Sung holds various management positions in different companies, and among others, he served as the Methanol/Solvent Business Unit Vice President of LCY Chemical Corp., a company engaged in manufacturing various chemical products, including but not limited to TPE and copper foil, from May 2012 to November 2016, and has subsequently been serving as the Performance Plastics Business Unit Senior Vice President since November 2016. He has been serving as the director of LCY Technology Corp. (TW: 4989), a company engaging in the manufacturing of copper foil used in electronic products, such as computer, since June 2020. Mr. Sung has also been serving as a director of Global Rubber Corp., a company engaging in the manufacture and export of conveyor belts, transmission belts and rubber hoses, since December 2019. He served as a chairman of Zhenjiang LCY Warehousing & Storage Co., Ltd., a company providing import or export storage, blending packaging and transportation services from August 2015 to February 2017, and has subsequently been serving as a director since then. From August 2015 to February 2017, Mr. Sung also served as a chairman of Zhenjiang Lee Chang Yung General Chemical Co., Ltd, a company engaging in the manufacture and distribution of chemical products, and has then been serving as a director since February 2017. Mr. Sung received a bachelor’s degree of science from Tamkang University in June 1982 and an executive master of business administration from National Chengchi University in March 2012.

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Ching-Chou Huang is our independent Director and will be the chairman of the compensation committee and nominating and corporate governance committee effective upon the SEC’s declaration of effectiveness of our registration statement on Form F-1. Mr. Huang has been serving as our independent director since February 2017. Since June 2015, Mr. Huang has been serving as the Chairman of Young Optics, Inc. (TW: 3504), a company which develops, designs and retails optical engineering parts. From November 2008 to November 2013, Mr. Huang served as the director of Chung Tsen Investment Corp., an investment company, and he subsequently served as the chairman from November 2013 to June 2020. From February 2011 to June 2020, he also served as a director of Coretronic Venture Capital Co., Ltd. an investment company. Mr. Huang is a graduate of Chien Hsin University of Science and Technology (formerly known as Chien Hsin Industrial Specialized Private School) in electrical engineering in June 1978 and he also obtained a master’s degree in industrial engineering from National Tsing Hua University in January 2005.

Shen-Huei Wang is our independent Director and will be the chairman of the audit committee effective upon the SEC’s declaration of effectiveness of our registration statement on Form F-1. Mr. Wang has been serving as our independent director since February 2017. Since June 2020, Mr. Wang has been serving as an independent director of Welldone Company (TWO: 6170), a company engaging in foreign workers’ internet fund transfers and shopping services, including pre-paid phone card and wifi machine leasing service at the airport. From October 2001 to May 2016, Mr. Wang worked as general manager in the assets management department of Coretronic Corporation, a company providing innovative display solution. Mr. Wang received a bachelor’s degree in electrical engineering from National Taiwan University in June 1977 and a master’s degree in science from Virginia Polytechnic Institute and State University in December 1981.

Ping-Hong Lin will serve as our independent Director effective upon the SEC’s declaration of effectiveness of our registration statement on Form F-1. Since February 2012, Mr. Lin has been serving as the general manager of Taiwan Copper Foils Co., Ltd., an electrodeposited copper foil manufacturer to supply for the printed circuit board industry. Mr. Lin served as finance manager in Qatar Fuel Additives Co., Ltd., a company engaged in production and export of methanol and other chemicals. Mr. Lin obtained a master of business administration from the University of Akron in January 1991.

Family Relationships

There is no family relationship among any of our directors or executive officers.

Employment Agreements, Director Agreements and Indemnification

We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for an initial term of three year. The executive officers are entitled to a fixed salary and other company benefits, each as determined by the Board from time to time. We may terminate an executive officer’s employment under Cayman Law and under other applicable laws and regulations.

Each executive officer has agreed to hold, at all times during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information, or the confidential or proprietary information disclosed to the executive officer by or obtained by the executive officer from us either directly or indirectly in writing, orally or otherwise, if specifically indicated to be confidential or reasonably expected to be confidential.

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We have also entered into director agreements with each of our directors which agreements set forth the terms and provisions of their engagement.

Under the employment agreements and director agreements, we have agreed to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.

Board of Directors

Duties of Directors

Under Cayman Islands law, our board of directors has the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:

| ● | convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings;
| ● | declaring dividends and distributions;
| ● | appointing officers and determining the term of office of the officers;
| ● | exercising the borrowing powers of our company and mortgaging the property of our company; and
| ● | approving the transfer of shares in our company, including the registration of such shares in our share register.

Under Cayman Islands law, directors owe the following fiduciary duties: (i) duty to act in good faith in what the director believes to be in the best interests of the company as a whole; (ii) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (iii) directors should not improperly fetter the exercise of future discretion; (iv) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and (v) duty to exercise independent judgment. In addition to the above, directors also owe a duty to act with skill, care and diligence. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience which that director has. As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by way of permission granted in the amended and restated memorandum and articles of association or alternatively by shareholder approval at general meetings. You should refer to “Description of Securities—Differences in Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law.

Composition of our Board of Directors

Our board of directors will consist of 5 directors upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part. A director is not required to hold any shares in our Company to qualify to serve as a director. Subject to making appropriate disclosures to the board of directors in accordance with our post-offering amended and restated memorandum and articles of association, a director may vote with respect to any contract, proposed contract, or arrangement in which he or she is interested, in voting in respect of any such matter, such director should take into account his or her directors duties. A director may exercise all the powers of the company to borrow money, mortgage its business, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party.

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Committees of the Board of Directors

We plan to establish an audit committee, a compensation committee and a nominating and corporate governance committee under the board of directors upon the effectiveness of the registration statement of which this prospectus forms a part. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.

Audit Committee. Our audit committee consists of Ching-Chou Huang, Shen-Huei Wang and Ping-Hong Lin and is chaired by Shen-Huei Wang. We have determined that each of these director nominees satisfies the “independence” requirements of the Nasdaq Listing Rules and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Ping-Hong Lin qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. The audit committee is responsible for, among other things:

| ● | selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm;
| ● | reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;
| ● | reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;
| ● | discussing the annual audited financial statements with management and the independent registered public accounting firm;
| ● | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures;
| ● | annually reviewing and reassessing the adequacy of our audit committee charter;
| ● | meeting separately and periodically with management and the independent registered public accounting firm;
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and
| ● | reporting regularly to the board.

Compensation Committee. Our compensation committee consists of Ching-Chou Huang, Shen-Huei Wang and Ping-Hong Lin, and will be chaired by Ching-Chou Huang. We have determined that each of these directors satisfies the “independence” requirements of the Nasdaq Listing Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which their compensation is deliberated upon. The compensation committee is responsible for, among other things:

| ● | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers;
| ● | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;
| ● | reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; and
| ● | selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.

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Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Ching-Chou Huang, Shen-Huei Wang and Ping-Hong Lin and is chaired by Ching-Chou Huang. We have determined that each of these directors satisfies the “independence” requirements of the Nasdaq Listing Rules. The nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things:

| ● | recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;
| ● | reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us;
| ● | selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself;
| ● | developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and
| ● | evaluating the performance and effectiveness of the board as a whole.

Terms of Directors and Officers

Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of shareholders) serving a three-year term. The term of office of the first class of directors, consisting of Ching-Chou Huang, will expire at our first annual meeting of shareholders. The term of office of the second class of directors, consisting of Shen-Huei Wang and Ping-Hong Lin, will expire at the second annual meeting of shareholders. The term of office of the third class of directors, consisting of Jing-Bin Chiang and Ting-Pang Sung, will expire at the third annual meeting of shareholders.

Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our post-offering amended and restated memorandum and articles of association as it deems appropriate.

Compensation of Directors and Executive Officers

For the years ended December 31, 2020 and 2019, we paid an aggregate of $490,841 and $381,241, respectively, in cash and benefits in-kind granted to or accrued on behalf of all of our directors and members of senior management for their services, in all capacities, and we did not pay any additional compensation to our directors and members of senior management. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each full-time employee’s salary for his or her pension insurance, medical insurance, unemployment insurance, work-related injury insurance and maternity insurance and a housing provident fund.

Equity Compensation Plan Information

We have not adopted any equity compensation plans.

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Outstanding Equity Awards at Fiscal Year-End

On August 28, 2020, New Moon Corporation (New Moon), a shareholder of the Company, an employee of the Company and the Company signed a tripartite talent award agreement. Under the agreement, the Company provides NT$10,000,000 (US$327,600) to the employee for the purchase of 1,000,000 shares of the Company owned by New Moon at NT$10 per share. The employee should return the payment to the Company if the acquisition of the shares could not be completed in thirty days after the payment. Also, the employee should return the shares to New Moon if the employee resigned within five years from the date of the agreement. New Moon should also return the consideration received from the employee to the Company.

The aforementioned bonus shares settled by a shareholder of the Company cannot be transferred during the vesting period, but voting right and dividend right are not restricted. The employee is required to return the shares to the shareholder but not required to return the dividends received if she resigns during the vesting period.

The Company accounted for the shares contributed by New Moon as share-based payment arrangement settled by equity. The NT$10,000,000 (US$327,600) contributed by the Company is accounted for as prepaid cash incentive to the employee and is amortized over the contract period which is five years.

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PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of this prospectus by our officers, directors, and 5% or greater beneficial owners of ordinary shares. There is no other person or group of affiliated persons known by us to beneficially own more than 5% of our ordinary shares. The following table assumes that none of our officers, directors or 5% or greater beneficial owners of our ordinary shares will purchase shares in this offering. In addition, the following table assumes that the over-allotment option has not been exercised. Holders of our ordinary shares are entitled to one (1) vote per share and vote on all matters submitted to a vote of our shareholders, except as may otherwise be required by law.

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all shares shown as beneficially owned by him, subject to applicable community property laws. Unless otherwise noted, the business address for each of our directors and executive officers is 7F-1, No. 633, Sec. 2, Taiwan Blvd., Xitun District, Taichung City407, Taiwan (R.O.C.).

|  | Ordinary Shares Beneficially Owned Prior to The Offering(1) |  |  | Ordinary Shares Beneficially Owned After The Offering(2) |
Name of Beneficial Owners |  | Number |  |  | % |  |  | Number |  |  | % |
Directors, Executive Officers and over 5% Shareholders: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Chiang Jing-Bin(3) |  |  | 8,468,310 |  |  |  | 38.68 |  |  |  | [●] |  |  |  | [●] |
Sung Ting-Pang |  |  | - |  |  |  | - |  |  |  | [●] |  |  |  | [●] |
Chen Wan-Tzu |  |  | - |  |  |  | - |  |  |  | [●] |  |  |  | [●] |
Huang Ching-Chou |  |  | - |  |  |  | - |  |  |  | [●] |  |  |  | [●] |
Wang Shen-Huei |  |  | - |  |  |  | - |  |  |  | [●] |  |  |  | [●] |
Lin Ping-Hong |  |  | - |  |  |  | - |  |  |  | [●] |  |  |  | [●] |
NEW MOON CORPORATION(4) |  |  | 6,789,017 |  |  |  | 31.01 |  |  |  | [●] |  |  |  | [●] |
Lee Bo-Wei(5) |  |  | 4,210,929 |  |  |  | 19.23 |  |  |  | [●] |  |  |  | [●] |
RADIANT FAITH LIMITED(6) |  |  | 3,750,000 |  |  |  | 17.13 |  |  |  | [●] |  |  |  | [●] |
STAR CENTURION LIMITED(7) |  |  | 2,388,660 |  |  |  | 10.91 |  |  |  | [●] |  |  |  | [●] |
Barium Glory Financial Ltd.(8) |  |  | 2,084,513 |  |  |  | 9.52 |  |  |  | [●] |  |  |  | [●] |

* Less than 1%

(1) | Applicable percentage of ownership is based on 21,892,899 ordinary shares outstanding as of the date of this prospectus.
(2) | Applicable percentage of ownership is based on [●] ordinary shares outstanding immediately after the offering.
(3) | Chiang Jing-Bin is the sole shareholder of NEW MOON CORPORATION and holds the voting and dispositive power over the ordinary shares held by such entity. Chiang Jing-Bin also directly holds 1,679,293 ordinary shares of J-Star.

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(4) | The registered address of NEW MOON CORPORATION, a British Virgin Islands company, is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. 6,789,017 ordinary shares directly held by NEW MOON CORPORATION of which Chiang Jing-Bin is the sole shareholder and holds the voting and dispositive power over the ordinary shares held by such entity.
(5) | Lee Bo-Wei is the sole shareholder of Barium Glory Financial Ltd., which directly holds 2,084,513 shares of J-Star, and he holds the voting and dispositive power over the ordinary shares held by such entity. Lee Bo-Wei is also the sole shareholder of Sendai Investments Company Inc., which directly holds 876,416 ordinary shares of J-Star, and he holds the voting and dispositive power over the ordinary shares held by such entity. Lee Bo-Wei also directly holds 1,250,000 ordinary shares of J-Star.
(6) | The registered address of RADIANT FAITH LIMITED, a Samoa company, is Offshore Chambers, P.O. Box 217, Apia, Samoa. 3,750,000 ordinary shares directly held by RADIANT FAITH LIMITED of which Chiang Yu-Ning is the sole shareholder and holds the voting and dispositive power over the ordinary shares held by such entity.
(7) | The registered address of STAR CENTURION LIMITED, a Republic of Seychelles company, is P.O. Box 1239, Offshore Incorporations Centre, Victoria, Maché, Republic of Seychelles. 2,388,660 ordinary shares directly held by STAR CENTURION LIMITED of which Yu Li-Hsin is the sole shareholder and holds the voting and dispositive power over the ordinary shares held by such entity.
(8) | The registered address of Barium Glory Financial Ltd., a British Virgin Islands company, is Nerine Chambers, P.O. Box 905, Road Town, Tortola, British Virgin Islands. 2,084,513 ordinary shares directly held by Barium Glory Financial Ltd. of which Lee Bo-Wei is the sole shareholder and holds the voting and dispositive power over the ordinary shares held by such entity.

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RELATED PARTY TRANSACTIONS

Transactions with Certain Related Parties

Set forth below are our related party transactions that occurred since the beginning of our preceding two fiscal years up to the date of December 31, 2020. The “related party transactions” are transactions identified in accordance with the rules prescribed under Part I, Item 7B of Form 20-F.

Under Part I, Item 7B of Form 20-F, the Company is required to disclose any transaction occurring since the beginning of the Company’s preceding two financial years, with respect to transactions or loans between the Company and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual’s family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of companies and close members of such individuals’ families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.

Before the completion of this offering, we intend to adopt an audit committee charter, which will require the committee to review all related party transactions on an ongoing basis and all such transactions be approved by the audit committee. In determining whether to approve a related party transaction, the audit committee shall consider, among other factors, the following factors to the extent relevant to the related party transaction:

| ● | whether the terms of the related party transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party;
| ● | whether there are business reasons for the Company to enter into the related party transaction;
| ● | whether the related party transaction would impair the independence of an outside director;
| ● | whether the related party transaction would present an improper conflict of interest for any director or executive officer of the Company, taking into account the size of the transaction, the overall financial position of the director, executive officer or the related party, the direct or indirect nature of the director’s, executive officer’s or the related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the audit committee deems relevant; and
| ● | any pre-existing contractual obligations.

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During the years ended December 31, 2019 and 2020, we had the following material related party transactions:

|  |  |  |  | For the years ended December 31, |
Related Parties |  | Nature |  |  | 2019 |  |  | 2020 |
New Moon Corporation |  |  | Interest expense from a related party loan |  |  | $ | 138,682 |  |  | $ | 102,337 |
Key management including Chiang, Jing-Bin and Chiang, Yu-Ning |  |  | Interest expense from a related party loan |  |  | $ | 189,177 |  |  | $ | 203,900 |
Key management including Chiang, Jing-Bin and Chiang, Yu-Ning |  |  | Compensation including salaries and other short-term benefits, post-employment benefits and share-based payment |  |  | $ | 381,241 |  |  | $ | 490,841 |

As of December 31, 2019 and 2020, we had the following material related party balances:

|  | As of December 31, |
|  | 2019 |  |  | 2020 |
Amounts due from related parties-current |  |  |  |  |  |  |  |
New Moon Corporation |  | $ | 1,800 |  |  | $ | - |
Bohong Technology Jiangsu Co., Ltd |  | $ | 48,030 |  |  | $ | - |
Total |  | $ | 49,830 |  |  | $ | - |
Amounts due to related parties - current |  |  |  |  |  |  |  |
Key management including Chiang, Jing-Bin and Chiang, Yu-Ning |  | $ | 1,723,440 |  |  | $ | 442,473 |
New Moon Corporation |  | $ | 202,800 |  |  | $ | - |
Total |  | $ | 1,926,240 |  |  | $ | 442,473 |
Amounts due to related parties - non-current |  |  |  |  |  |  |  |
Key management including Chiang, Jing-Bin and Chiang, Yu-Ning |  | $ | 645,369 |  |  | $ | - |
New Moon Corporation |  | $ | 1,280,220 |  |  | $ | - |
Total |  | $ | 1,925,589 |  |  | $ | - |
Endorsements and guarantees provided to related parties: |  |  |  |  |  |  |  |
Key management including Chiang, Jing-Bin and Chiang, Yu-Ning |  | $ | 647,000 |  |  | $ | 6,756,265 |
Total |  | $ | 647,000 |  |  | $ | 6,756,265 |

Share Based Payment

a) For the year ended December 31, 2020, the Group’s share-based payment arrangements was as follows:

|  |  |  | Quantity granted |  | Fair value |  | Contract |  | Vesting
Type of arrangement |  | Grant date |  | (shares) |  | per unit |  | period |  | conditions
Bonus shares |  | August 28, 2020 |  | 1,000,000 |  | 1.02 |  | 5 years |  | 5 years’ service

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On August 28, 2020, New Moon Corporation (New Moon), a shareholder of the Company, an employee of the Company and the Company signed a tripartite talent award agreement. Under the agreement, the Company provides NT$10,000,000 (US$327,600) to the employee for the purchase of 1,000,000 shares of the Company owned by New Moon at NT$10 per share. The employee should return the payment to the Company if the acquisition of the shares could not be completed in thirty days after the payment. Also, the employee should return the shares to New Moon if the employee resigned within five years from the date of the agreement. New Moon should also return the consideration received from the employee to the Company.

The aforementioned bonus shares settled by a shareholder of the Company cannot be transferred during the vesting period, but voting right and dividend right are not restricted. The employee is required to return the shares to the shareholder but not required to return the dividends received if she resigns during the vesting period.

The Company accounted for the shares contributed by New Moon as share-based payment arrangement settled by equity. The NT$10,000,000 (US$327,600) contributed by the Company is accounted for as prepaid cash incentive to the employee and is amortized over the contract period which is five years.

b) The expenses incurred on share-based payment transactions for the year ended December 31, 2020 was $46,944.

Share Swap

On December 25, 2020, the Board of Directors resolved to issue 838,053 shares (3.4% of the total ordinary share capital issued) of the treasury shares repurchased in 2019 (with book value of $1,344,734) to the shareholders of Bohong Technology to obtain 100% of its ordinary shares through a share swap. On December 30, 2020, the Group signed the share swap agreement with the shareholders of Bohong Technology. The ordinary shares issued have the same rights as other shares in issue. Bohong Technology was a company that only held land use right without any operation, did not have an organized workforce and manufacturing equipment. As a result, the Group treated this transaction as an asset acquisition. The fair value of the land use right amounted to $1,415,559. As of December 31, 2020, the issued shares were shown as other non-current assets as long-term prepayments for investments since the share swap registration of the shareholders of Bohong Technology was not yet completed.

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DESCRIPTION OF SECURITIES

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands and our affairs are governed by our memorandum and articles of association, as amended from time to time and the Companies Act, and the common law of the Cayman Islands.

The share capital of the Company consists of ordinary shares. As of the date hereof, our authorized share capital is US$12,600,000 divided into 35,000,000 ordinary shares of par value US$0.36 each. As of the date of this prospectus, ordinary shares were issued and outstanding. We will issue ordinary shares in this offering. The following are summaries of material provisions of our [post-offering] amended and restated memorandum and articles of association (which will become effective immediately prior to completion of this offering) and the Companies Act insofar as they relate to the material terms of our ordinary shares.

Ordinary Shares

General. Upon the completion of this offering, our authorized share capital is US$[●] divided into [●] ordinary shares of par value US$[●] each and [●] shares of a par value of US$[●] each of such class (however designated) as our board of directors may determine in accordance with our [post-offering] amended and restated articles of association. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders, whether or not they are non-residents of the Cayman Islands, may freely hold and transfer their ordinary shares in accordance with our [post-offering] amended and restated memorandum and articles of association.

Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our [post-offering] amended and restated articles of association provide that our board of directors may declare and pay dividends if justified by our financial position and permitted by law.

Voting Rights. Holders of our ordinary shares vote on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. In respect of matters requiring shareholders’ vote, each ordinary share is entitled to one vote. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless voting by poll is required by NASDAQ rules/ or demanded by the chairman of the meeting or by shareholder(s) together holding not less than 10% of the total voting rights of all our shareholders having the right to vote at such general meeting. A quorum required for a meeting of shareholders consists of one shareholder who holds at least one-third of our issued voting shares. Shareholders’ meetings may be held annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting. Extraordinary general meetings may be called by a majority of our board of directors or upon a requisition of any one or more shareholders holding at the deposit of the requisition not less than 10% of the aggregate share capital of our company that carries the right to vote at a general meeting, in which case on advance notice of at least 7 clear days is required for the convening of our annual general meeting and other general meetings by requisition of our shareholders.

Any ordinary resolution to be made by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the ordinary shares cast in a meeting.

A special resolution will be required for important matters such as amending our memorandum and articles of association or changing the name.

There are no limitations on non-residents or foreign shareholders in the memorandum and articles of association to hold or exercise voting rights on the ordinary shares imposed by foreign law or by the charter or other constituent document of our company. However, no person will be entitled to vote at any general meeting or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting and unless all calls or other sums presently payable by the person in respect of ordinary shares in the Company have been paid.

Winding Up; Liquidation. Upon the winding up of our company, after the full amount that holders of any issued shares ranking senior to the ordinary shares as to distribution on liquidation or winding up are entitled to receive has been paid or set aside for payment, the holders of our ordinary shares are entitled to receive any remaining assets of the Company available for distribution as determined by the liquidator.

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Calls on Ordinary Shares and Forfeiture of Ordinary Shares Our directors may from time to time make calls on our shareholders in respect of any moneys unpaid on their shares including any premium in a notice served to such shareholders at least 14 clear days prior to the specified time of payment. Any ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption of Ordinary Shares. The Companies Act and our [post-offering] amended and restated memorandum and articles permit us to purchase our own shares. In accordance with our [post-offering] amended and restated articles of association, provided the necessary shareholders or board approval have been obtained and requirements under the Companies Act have been satisfied, we may issue shares on terms that are subject to redemption at our option on such terms and in such manner as may be determined by our board of directors.

Inspection of Books and Records. Holders of our ordinary shares have no general right under our [post-offering] amended and restated articles of association to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where You Can Find Additional Information.”

Issuance of Additional Shares. Our [post-offering] amended and restated memorandum and articles of association authorize our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares. Issuance of these shares may dilute the voting power of holders of ordinary shares.

Anti-Takeover Provisions. Some provisions of our [post-offering] amended and restated memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable. Our authorized, but unissued ordinary shares are available for future issuance without shareholders’ approval and could be utilized for a variety of corporate purposes, including future offerings to raise addition capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved ordinary shares could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:

| ● | does not have to file an annual return of its shareholders with the Registrar of Companies;
| ● | is not required to open its register of members for inspection;
| ● | does not have to hold an annual general meeting;
| ● | may not issue negotiable or bearer shares, but may issue shares with no par value;
| ● | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
| ● | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
| ● | may register as a limited duration company; and
| ● | may register as a segregated portfolio company.

“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.

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Anti-Money Laundering — Cayman Islands

In order to comply with legislation or regulations aimed at the prevention of money laundering, we are required to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to verify their identity and source of funds. Where permitted, and subject to certain conditions, we may also delegate the maintenance of our anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.

We reserve the right to request such information as is necessary to verify the identity of a subscriber. In some cases the directors may be satisfied that no further information is required since an exemption applies under the Anti-Money Laundering Regulations (Revised) of the Cayman Islands, as amended and revised from time to time (the “Regulations”) or any other applicable law. Depending on the circumstances of each application, a detailed verification of identity might not be required where:

| (a) | the subscriber makes the payment for their investment from an account held in the subscriber’s name at a recognized financial institution; or
| (b) | the subscriber is regulated by a recognized regulatory authority and is based or incorporated in, or formed under the law of, a recognized jurisdiction; or
| (c) | the application is made through an intermediary which is regulated by a recognized regulatory authority and is based in or incorporated in, or formed under the law of a recognized jurisdiction and an assurance is provided in relation to the procedures undertaken on the underlying investors.

For the purposes of these exceptions, recognition of a financial institution, regulatory authority or jurisdiction will be determined in accordance with the Regulations by reference to those jurisdictions recognized by the Cayman Islands Monetary Authority as having equivalent anti-money laundering regulations.

In the event of delay or failure on the part of the subscriber in producing any information required for verification purposes, we may refuse to accept the application, in which case any funds received will be returned without interest to the account from which they were originally debited.

We also reserve the right to refuse to make any payment to a shareholder if our directors or officers suspect or are advised that the payment to such shareholder might result in a breach of applicable anti-money laundering or other laws or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure our compliance with any such laws or regulations in any applicable jurisdiction.

If any person in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct or money laundering or is involved with terrorism or terrorist financing and property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority (“FRA”) of the Cayman Islands, pursuant to the Proceeds of Crime Act (Revised) of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the FRA, pursuant to the Terrorism Act (Revised) of the Cayman Islands, if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.

Data Protection in the Cayman Islands – Privacy Notice

This privacy notice explains the manner in which the company collects, processes and maintains personal data about investors of the company pursuant to the Data Protection Act, 2017 of the Cayman Islands, as amended from time to time and any regulations, codes of practice or orders promulgated pursuant thereto (“DPA”).

The company is committed to processing personal data in accordance with the DPA. In its use of personal data, the company will be characterized under the DPA as a ‘data controller’, whilst certain of the company’s service providers, affiliates and delegates may act as ‘data processors’ under the DPA. These service providers may process personal information for their own lawful purposes in connection with services provided to the company.

This privacy notice puts our shareholders on notice that, by virtue of making an investment in the company, the company and certain of the company’s service providers may collect, record, store, transfer and otherwise process personal data by which individuals may be directly or indirectly identified.

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Your personal data will be processed fairly and for lawful purposes, including (a) where the processing is necessary for the company to perform a contract to which you are a party or for taking pre-contractual steps at your request (b) where the processing is necessary for compliance with any legal, tax or regulatory obligation to which the company is subject or (c) where the processing is for the purposes of legitimate interests pursued by the company or by a service provider to whom the data are disclosed. As a data controller, we will only use your personal data for the purposes for which we collected it. If we need to use your personal data for an unrelated purpose, we will contact you.

We anticipate that we will share your personal data with the company’s service providers for the purposes set out in this privacy notice. We may also share relevant personal data where it is lawful to do so and necessary to comply with our contractual obligations or your instructions or where it is necessary or desirable to do so in connection with any regulatory reporting obligations. In exceptional circumstances, we will share your personal data with regulatory, prosecuting and other governmental agencies or departments, and parties to litigation (whether pending or threatened), in any country or territory including to any other person where we have a public or legal duty to do so (e.g. to assist with detecting and preventing fraud, tax evasion and financial crime or compliance with a court order).

Your personal data shall not be held by the company for longer than necessary with regard to the purposes of the data processing.

We will not sell your personal data. Any transfer of personal data outside of the Cayman Islands shall be in accordance with the requirements of the DPA. Where necessary, we will ensure that separate and appropriate legal agreements are put in place with the recipient of that data.

The company will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.

If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation to your investment into the company, this will be relevant for those individuals and you should inform such individuals of the content.

You have certain rights under the DPA, including (a) the right to be informed as to how we collect and use your personal data (and this privacy notice fulfils the Company’s obligation in this respect); (b) the right to obtain a copy of your personal data; (c) the right to require us to stop direct marketing; (d) the right to have inaccurate or incomplete personal data corrected; (e) the right to withdraw your consent and require us to stop processing or restrict the processing, or not begin the processing of your personal data; (f) the right to be notified of a data breach (unless the breach is unlikely to be prejudicial); (g) the right to obtain information as to any countries or territories outside the Cayman Islands to which we, whether directly or indirectly, transfer, intend to transfer or wish to transfer your personal data, general measures we take to ensure the security of personal data and any information available to us as to the source of your personal data; (h) the right to complain to the Office of the Ombudsman of the Cayman Islands; and (i) the right to require us to delete your personal data in some limited circumstances.

If you consider that your personal data has not been handled correctly, or you are not satisfied with the company’s responses to any requests you have made regarding the use of your personal data, you have the right to complain to the Cayman Islands’ Ombudsman. The Ombudsman can be contacted by calling +1 (345) 946-6283 or by email at info@ombudsman.ky.

Differences in Corporate Law

The Companies Act is modeled after that of English law but does not follow many recent English law statutory enactments. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of some of the significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.

Mergers and Similar Arrangements. The Companies Act permits merger and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, a “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.

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In order to effect a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of the shareholders of each constituent company, and such other authorization, if any, as may be specified in such constituent company’s articles of association. A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman Islands subsidiary if a copy of the plan of merger is given to every member of that Cayman Islands subsidiary to be merged unless that member agrees otherwise. For this purpose, a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.

The plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger and consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures under the Companies Act subject to certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors (as the case may be) with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

| ● | the statutory provisions as to the required majority vote have been met;
| ● | the shareholders have been fairly represented at the meeting in question;
| ● | the arrangement is such that an intelligent and honest man of that class acting in respect of his interest would reasonably approve; and
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.

When a takeover offer is made and accepted by holders of not less than 90.0% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, give notice to require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands by a dissenting shareholder within one month from the date on which the notice was given but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

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Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoing principle, including when:

| ● | a company acts or proposes to act illegally or ultra vires and is therefore incapable of ratification by the shareholders;
| ● | the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and
| ● | those who control the company are perpetrating a “fraud on the minority.”

Indemnification of Directors and Executive Officers and Limitation of Liability. The Companies Act does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our [post-offering] amended and restated memorandum and articles of association permit, in the absence of fraud or wilful default, indemnification of officers and directors for costs, losses, damages and expenses, which such director or officers may incur or become liable in respect of by reason of any contract entered into or act or thing done by him as such director and officer in any way in or about the execution of his duties incurred in connection with legal, administrative or investigative proceedings incurred in their capacities as such. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. Insofar as indemnification for holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of a procedure for obtaining an exemption from backup withholding in their particular circumstances.

Directors’ Fiduciary Duties. Under Delaware General Corporation Law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.

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Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

Cayman Islands law does not provide shareholders any right to put proposals before a meeting or requisition a general meeting. However, these rights may be provided in articles of association. Our articles of association allow our shareholders holding not less than one-tenth of all voting power of our share capital in issue to requisition a shareholder’s meeting. Other than this right to requisition a shareholders’ meeting, our articles of association do not provide our shareholders other right to put proposal before a meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the Companies Act but our articles of association do not provide for cumulative voting.

Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.

Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

The Cayman Islands has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.

Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the Companies Act, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Act and our articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.

Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under the Companies Act and our [post-offering] amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the three-fourths of the issued shares of that class or with the sanction of a resolution passed by not less than three-fourths of such holders of the shares of that class.

Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by the Companies Act, our memorandum and articles of association may only be amended with a special resolution of our shareholders.

Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our [post-offering] amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our [post-offering] amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there was no established public trading market for our ordinary shares. We cannot assure you that a liquid trading market for our ordinary shares will develop on Nasdaq or be sustained after this offering. Future sales of substantial amounts of ordinary shares in the public market, or the perception that such sales may occur, could adversely affect the market price of our ordinary shares. Further, since a large number of our ordinary shares will not be available for sale shortly after this offering because of the contractual and legal restrictions on resale described below, sales of substantial amounts of our ordinary shares in the public market after these restrictions lapse, or the perception that such sales may occur, could adversely affect the prevailing market price and our ability to raise equity capital in the future.

Upon completion of this offering and assuming the issuance of [_____] ordinary shares offered hereby, we will have an aggregate of [_____] ordinary shares outstanding. Upon completion of this offering and assuming the exercise of the Underwriter’s over-allotment option and the issuance of [_____] ordinary shares offered hereby, we will have an aggregate of [_____] ordinary shares outstanding. All of the ordinary shares sold in this offering will be freely transferable by persons other than our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our ordinary shares in the public market could adversely affect prevailing market prices of our ordinary shares. Prior to this offering, there has been no public market for our ordinary shares, and while we intend to submit application for the ordinary shares to be listed on Nasdaq, we cannot assure you that a regular trading market will develop in the ordinary shares.

Lock-Up Agreements

We, our directors and executive officers, and our existing shareholders have agreed, subject to some exceptions, not to transfer or dispose of, directly or indirectly, any of our ordinary shares, or any securities convertible into or exchangeable or exercisable for our ordinary shares, for a period of twelve (12) months after the date of this prospectus. After the expiration of the twelve (12) months period, the ordinary shares held by our directors, executive officers and our existing shareholders may be sold subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.

Regulation S

Regulation S under the Securities Act provides an exemption from registration requirements in the United States for offers and sales of securities that occur outside the United States. Rule 903 of Regulation S provides the conditions to the exemption for a sale by an issuer, a distributor, their respective affiliates or anyone acting on their behalf, while Rule 904 of Regulation S provides the conditions to the exemption for a resale by persons other than those covered by Rule 903. In each case, any sale must be completed in an offshore transaction, as that term is defined in Regulation S, and no directed selling efforts, as that term is defined in Regulation S, may be made in the United States.

We are a foreign issuer as defined in Regulation S. As a foreign issuer, securities that we sell outside the United States pursuant to Regulation S are not considered to be restricted securities under the Securities Act, and are freely tradable without registration or restrictions under the Securities Act, unless the securities are held by our affiliates. Generally, subject to certain limitations, holders of our restricted shares who are not our affiliates or who are our affiliates solely by virtue of their status as an officer or director of us may, under Regulation S, resell their restricted shares in an “offshore transaction” if none of the seller, its affiliate nor any person acting on their behalf engages in directed selling efforts in the United States and, in the case of a sale of our restricted shares by an officer or director who is an affiliate of us solely by virtue of holding such position, no selling commission, fee or other remuneration is paid in connection with the offer or sale other than the usual and customary broker’s commission that would be received by a person executing such transaction as agent. Additional restrictions are applicable to a holder of our restricted shares who will be an affiliate of us other than by virtue of his or her status as an officer or director of us.

We are not claiming the potential exemption offered by Regulation S in connection with the offering of newly issued shares outside the United States and will register all of the newly issued shares under the Securities Act.

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Rule 144

All of our ordinary shares outstanding prior to this offering are “restricted shares” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirements. Under Rule 144 as currently in effect, a person who has beneficially owned our restricted shares for at least six months is generally entitled to sell the restricted securities without registration under the Securities Act beginning 90 days after the date of this prospectus, subject to certain additional restrictions.

Our affiliates may sell within any three-month period a number of restricted shares that does not exceed the greater of the following:

| ● | 1% of the then outstanding ordinary shares of the same class, which will equal approximately [●] ordinary shares immediately after this offering assuming the over-allotment option is not exercised and [●]ordinary shares assuming the over-allotment option is exercised in full; or
| ● | the average weekly trading volume of our ordinary shares on Nasdaq during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.

Affiliates who sell restricted securities under Rule 144 may not solicit orders or arrange for the solicitation of orders, and they are also subject to notice requirements and the availability of current public information about us.

Persons who are not our affiliates are only subject to one of these additional restrictions, the requirement of the availability of current public information about us, and this additional restriction does not apply if they have beneficially owned our restricted shares for more than one year.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory stock or option plan or other written agreement relating to compensation is eligible to resell such ordinary shares 90 days after we became a reporting company under the Exchange Act in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However, these shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.

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TAXATION

The following discussion of material Cayman Islands, Taiwan, PRC and United States federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws. Unless otherwise noted in the following discussion, this section is the opinion of Loeb & Loeb LLP, our U.S. counsel, insofar as it relates to legal conclusions with respect to matters of U.S. federal income tax law, and of Lee and Li, Attorneys-at-Law, insofar as it relates to legal conclusions with respect to matters of Taiwan tax law, and of L&L-Leaven, Attorneys-at-Law, insofar as it relates to legal conclusions with respect to matters of PRC tax law, and of Ogier, insofar as it relates to legal conclusions with respect to matters of Cayman Islands tax law.

Cayman Islands Taxation

The following is a discussion on certain Cayman Islands income tax consequences of an investment in our securities. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.

Payments of dividends and capital in respect of our securities will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the securities nor will gains derived from the disposal of the securities be subject to Cayman Islands income or corporation tax.

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands. No stamp duty is payable in respect of the issue of our securities or on an instrument of transfer in respect of our securities.

Taiwan Taxation

The following is a general summary of the principal Taiwan tax consequences of the ownership and disposition of our ordinary shares by and to a non-resident individual or non-resident entity holder (referred to herein as a “Non-Taiwan Holder”). As used in the preceding sentence, a “non-resident individual” is a foreign national who owns our ordinary shares and is not physically present in Taiwan for 183 days or more during any calendar year, and a “non-resident entity” is a corporation or a non-corporate body that owns our ordinary shares and is organized under the laws of a jurisdiction other than Taiwan.

Holders should consult their tax advisors concerning the Taiwan tax consequences of holding our ordinary shares and the laws of any relevant taxing jurisdiction to which they are subject.

Capital gains from the sale or disposal of our ordinary shares

Sale or disposal of our ordinary shares is not regarded as the sale of Taiwan securities; thus, any gains generated therefrom by Non-Taiwan Holders are not subject to Taiwan income tax.

Securities Transaction Tax

Sale of our ordinary shares by Non-Taiwan Holders is not subject to Taiwan securities transaction tax.

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People’s Republic of China Taxation

According to the Enterprise Income Tax Law of the PRC (the “Income Tax Law”) and the Implementation Regulations of Enterprise Income Tax Law of the PRC, the enterprise income tax for both domestic and foreign-invested enterprises are unified at 25%.

According to the Income Tax Law, income such as dividends, rental, interest and royalty from the PRC derived by a non-resident enterprise which has no establishment in the PRC or has establishment but the income has no relationship with such establishment is subject to a 10% withholding tax, which may be reduced if the foreign jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement, unless the relevant income is specifically exempted from tax under the applicable income tax laws, regulations, notices and decisions which relate to foreign invested enterprises and their investors.

According to the Notice of the State Administration of Taxation on Issues Relating to the Administration of the Dividend Provision in Tax Treaties, the corporate recipients of dividends distributed by PRC enterprises must satisfy the direct ownership thresholds at all times during the twelve (12) consecutive months preceding the receipt of the dividends.

Certain United States Federal Income Tax Considerations

The following discussion is a summary of U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the ownership and disposition of our ordinary shares. This summary applies only to U.S. Holders that hold our ordinary shares as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This summary is based on U.S. tax laws in effect as of the date of this prospectus, on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this prospectus, and judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which could apply retroactively and could affect the tax consequences described below. Moreover, this summary does not address the U.S. federal estate, gift, backup withholding, and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations, relating to the ownership and disposition of our ordinary shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:

| ● | financial institutions or financial services entities;
| ● | insurance companies;
| ● | pension plans;
| ● | cooperatives;
| ● | regulated investment companies;
| ● | real estate investment trusts;
| ● | broker-dealers;
| ● | traders that elect to use a mark-to-market method of accounting;
| ● | governments or agencies or instrumentalities thereof;
| ● | certain former U.S. citizens or long-term residents;
| ● | tax-exempt entities (including private foundations);
| ● | persons liable for alternative minimum tax;

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| ● | persons holding stock as part of a straddle, hedging, conversion or other integrated transaction;
| ● | persons whose functional currency is not the U.S. dollar;
| ● | passive foreign investment companies;
| ● | controlled foreign corporations;
| ● | persons that actually or constructively own 5% or more of the total combined voting power of all classes of our voting stock; or
| ● | partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ordinary shares through such entities.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF U.S. FEDERAL TAXATION TO THEIR PARTICULAR CIRCUMSTANCES, AND THE STATE, LOCAL, NON-U.S., OR OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES.

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes:

| ● | an individual who is a citizen or resident of the United States;
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;
| ● | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions, or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ordinary shares.

Taxation of Dividends and Other Distributions on Our Ordinary Shares

Subject to the discussion below under “Passive Foreign Investment Company Rules,” any cash distributions (including the amount of any PRC tax withheld) paid on our ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. A non-corporate U.S. Holder will be subject to tax on dividend income from a “qualified foreign corporation” at a lower applicable capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period requirements are met. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States that the U.S. Secretary of Treasury determines is satisfactory for purposes of this provision and includes an exchange of information program, or (ii) with respect to any dividend it pays on stock that is readily tradable on an established securities market in the United States, including Nasdaq. It is unclear whether dividends that we pay on our ordinary shares will meet the conditions required for the reduced tax rate. However, in the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, we may be eligible for the benefits of the United States-PRC income tax treaty. If we are eligible for such benefits, dividends we pay on our ordinary shares, would be eligible for the reduced rates of taxation described in this paragraph. You are urged to consult your tax advisor regarding the availability of the lower rate for dividends paid with respect to our ordinary shares. Dividends received on our ordinary shares will not be eligible for the dividends-received deduction allowed to corporations.

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Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive category income. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit not in excess of any applicable treaty rate in respect of any foreign withholding taxes imposed on dividends received on our ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which such U.S. Holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and their outcome depends in large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Taxation of Sale or Other Disposition of Ordinary Shares

Subject to the discussion below under “Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize capital gain or loss upon the sale or other disposition of ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. Holder’s adjusted tax basis in such ordinary shares. Any capital gain or loss will be long term if the ordinary shares have been held for more than one year and will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of non-corporate taxpayers are currently eligible for reduced rates of taxation. In the event that gain from the disposition of the ordinary shares is subject to tax in the PRC, such gain may be treated as PRC-source gain under the United States-PRC income tax treaty. The deductibility of a capital loss may be subject to limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ordinary shares, including the availability of the foreign tax credit under their particular circumstances.

Passive Foreign Investment Company Rules

A non-U.S. corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and cash equivalents are categorized as passive assets and the company’s goodwill and other unbooked intangibles are taken into account as non-passive assets. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.

Based on our current composition of assets, subsidiaries and market capitalization (which will fluctuate from time to time), we do not expect to be or become a PFIC for U.S. federal income tax purposes. However, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. Under circumstances where our revenue from activities that produce passive income significantly increase relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. In addition, because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming a PFIC for the current or subsequent taxable years. If we were classified as a PFIC for any year during which a U.S. Holder held our ordinary shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held our ordinary shares even if we cease to be a PFIC in subsequent years, unless certain elections are made.

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If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the ordinary shares), and (ii) any gain realized on the sale or other disposition of ordinary shares. Under these rules,

| ● | the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares;
| ● | the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income;
| ● | the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals or corporations, as appropriate, for that year; and
| ● | an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each prior taxable year, other than a pre-PFIC year, of the U.S. Holder.

If we are treated as a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, or if any of our subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of any lower-tier PFICs for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to such stock, provided that such stock is “regularly traded” within the meaning of applicable U.S. Treasury regulations. If our ordinary shares qualify as being regularly traded, and an election is made, the U.S. Holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ordinary shares held at the end of the taxable year over the adjusted tax basis of such ordinary shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ordinary shares over the fair market value of such ordinary shares held at the end of the taxable year, but such deduction will only be allowed to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ordinary shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. Holder will not be required to take into account the gain or loss described above during any period that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ordinary shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.

Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

Furthermore, as an alternative to the foregoing rules, a U.S. Holder that owns stock of a PFIC generally may make a “qualified electing fund” election regarding such corporation to elect out of the PFIC rules described above regarding excess distributions and recognized gains. However, we do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.

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If a U.S. Holder owns our ordinary shares during any taxable year that we are a PFIC, the U.S. Holder must generally file an annual Internal Revenue Service Form 8621 and provide such other information as may be required by the U.S. Treasury Department, whether or not a mark-to-market election is or has been made. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you.

You should consult your tax advisors regarding how the PFIC rules apply to your investment in our ordinary shares.

Non-U.S. Holders

Cash dividends paid or deemed paid to a Non-U.S. Holder with respect to the ordinary shares generally will not be subject to U.S. federal income tax unless such dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States).

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of the ordinary shares unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale or other disposition and certain other conditions are met (in which case, such gain from U.S. sources generally is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).

Cash dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates as applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

Information Reporting and Backup Withholding

Certain U.S. Holders are required to report information to the Internal Revenue Service relating to an interest in “specified foreign financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds $50,000 (or a higher dollar amount prescribed by the Internal Revenue Service), subject to certain exceptions (including an exception for shares held in custodial accounts maintained with a U.S. financial institution). These rules also impose penalties if a U.S. Holder is required to submit such information to the Internal Revenue Service and fails to do so.

In addition, dividend payments with respect to our ordinary shares and proceeds from the sale, exchange or redemption of our ordinary shares may be subject to additional information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on IRS Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information. We do not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.

THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR ORDINARY SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

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UNDERWRITING

Under the terms and subject to the conditions of an underwriting agreement dated , 2021, the underwriters named below, for whom ViewTrade Securities, Inc. is acting as the representative and sole book-running manager, have severally agreed to purchase, and we have agreed to sell to them, the number of our ordinary shares at the initial public offering price, less the underwriting discounts and commissions, as set forth on the cover page of this prospectus and as indicated below:

Underwriters |  | Number of Shares
ViewTrade Securities, Inc. |  |
Total |  |

The underwriters are offering the shares subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the ordinary shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to other conditions. The underwriters are obligated to take and pay for all of the ordinary shares offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ option to purchase additional shares described below.

We have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to additional ordinary shares at the initial public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering contemplated by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of the additional ordinary shares as the number listed next to the underwriter’s name in the preceding table bears to the total number of ordinary shares listed next to the names of all underwriters in the preceding table.

The underwriters will offer the shares to the public at the initial public offering price set forth on the cover of this prospectus and to selected dealers at the initial public offering price less a selling concession not in excess of $ per share. After this offering, the initial public offering price, concession and reallowance to dealers may be reduced by the representative. No change in those terms will change the amount of proceeds to be received by us as set forth on the cover of this prospectus. The securities are offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part.

Discount, Commissions and Expenses

The underwriting discounts and commissions are equal to 8.0% of the initial public offering price set forth on the cover of this prospectus.

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The following table shows the per share and total initial public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional ordinary shares.

|  | Per Share |  |  | Total Without Exercise of Over-allotment Option |  |  | Total With Full Exercise of Over-allotment Option |
Initial public offering price |  | $ |  |  |  | $ |  |  |  | $ |  |
Underwriting discounts and commissions to be paid by us |  | $ |  |  |  | $ |  |  |  | $ |  |
Proceeds, before expenses, to us |  | $ |  |  |  | $ |  |  |  | $ |  |

We will also pay to the representative by deduction from the net proceeds of the offering contemplated herein, a non-accountable expense allowance equal to one and one half percent (1.5%) of the gross proceeds received by us from the sale of our ordinary shares.

We have agreed to reimburse the representative up to a maximum of $175,000 for out-of-pocket accountable expenses (including the legal fees and other disbursements as disclosed below).

We paid an expense deposit of $35,000 to the representative, within three days of the execution of the letter of intent between us and the representative, and will pay an additional $35,000 upon receipt of the SEC’s first comments to the registration statement of which this prospectus forms a part, for the representative’s anticipated out-of-pocket expenses; any expense deposits will be returned to us to the extent the representative’s out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).

We have agreed to reimburse the representative’s accountable expenses of the offering, up to $175,000, including, but not limited to : (i) the legal and due diligence fees and expenses incurred by the representative; (ii) translation costs for due diligence purposes; (iii) the reasonable cost for road show meetings and preparation of a power point presentation; and (iv) all reasonable travel and lodging expenses incurred by the representative or its counsel in connection with visits to, and examinations of, our company. In addition, we have agreed to pay the costs associated with “tombstone” advertisements, not to exceed $8,000.

We estimate that the total expenses of the offering payable by us, excluding the underwriting discounts and commissions and non-accountable expense allowance, will be approximately $ , including a maximum aggregate reimbursement of $175,000 of representative’s accountable expenses.

In addition, we agreed, until the effectiveness of the registration statement in connection with this offering, not to negotiate with any other broker-dealer relating to a possible private and/or public offering of the securities without the written consent of the representative. If, prior to the 12 month period following the effective date of our letter of intent with the representative, we (i) do not complete the offering and listing of the securities on a national securities exchange and enter into discussions regarding a letter of intent or similar agreement with a third party broker-dealer and enter into a new engagement letter, and/or (ii) effect a private and/or public offering of the securities with another broker-dealer or any other person without the written consent of the representative, we will be liable to the representative for its accountable expenses of up to $175,000 and a breakup fee in the amount of $250,000; provided, however, that such fees shall be subject to FINRA Rule 5110(f)(2)(D)(ii) and shall not apply if and to the extent the representative has advised us of the representative’s inability or unwillingness to proceed with this offering.

We have applied to list our ordinary shares on the Nasdaq Capital Market under the symbol “YMAT.” There is no assurance that such application will be approved, and if our application is not approved, this offering may not be completed.

For a period of one year from the effective date of the registration statement of which this prospectus forms a part, the representative shall have the right to send a representative to observe each meeting of our board of directors; provided, that (i) such representative shall sign a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the representative and its counsel; and (ii) upon written notice to the representative, we may exclude such representative from meetings where, upon the written opinion of our counsel, such representative’s presence would compromise an attorney-client privilege.

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Representative’s Warrants

In addition, we have agreed to issue warrants to the representative of the underwriters to purchase a number of ordinary shares equal to 10% of the total number of ordinary shares sold in this offering (including any ordinary shares sold pursuant to an exercise of the over-allotment option). Such warrants shall have an exercise price equal to 110% of the offering price of the ordinary shares sold in this offering. The representative’s warrants may be exercised in cash or on a cashless basis, will be exercisable for five years from the commencement of sales in this offering and will terminate on the fifth anniversary of the commencement of sales. The representative’s warrants and the underlying shares will be deemed compensation by FINRA, and therefore will be subject to FINRA Rule 5110(g)(1). In accordance with FINRA Rule 5110(g)(1), and except as otherwise permitted by FINRA rules, neither the representative’s warrants nor any of our shares issued upon exercise of the representative’s warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days immediately following the commencement of sales in this offering. In addition, although the representative’s warrants and the underlying ordinary shares will be registered by the registration statement of which this prospectus forms a part, we have also agreed that the warrants will provide for registration rights in certain cases. These registration rights apply to all of the securities directly and indirectly issuable upon exercise of the representative’s warrants. The piggyback registration right provided will not be greater than seven years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(v).

We will bear all fees and expenses attendant to registering the ordinary shares issuable upon exercise of the warrants. The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation.

Indemnification; Indemnification Escrow

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.

Concurrently with the execution and delivery of the underwriting agreement, the Company will set up an escrow account with a third-party escrow agent in the United States and will fund such account with $600,000 from this offering that may be utilized by the underwriters to fund any bona fide indemnification claims of the underwriters arising during the 12 month period following the closing of the offering. The escrow account will be interest bearing, and we will be free to invest the assets in securities. All funds that are not subject to an indemnification claim will be returned to us after the applicable period expires. The Company will pay the reasonable fees and expenses of the escrow agent.

Lock-Up Agreements

Our officers, directors and principal shareholders (5% or more shareholders, provided that the representative may in its discretion require a lower percentage threshold) have agreed, subject to certain exceptions, to a twelve (12) month “lock-up” period from the effective date of the registration statement of which this prospectus forms a part with respect to the ordinary shares that they beneficially own, including the issuance of shares upon the exercise of convertible securities and options that are currently outstanding or which may be issued. This means that, for a period of twelve (12) months following the closing of the offering, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the representative.

The representative has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up agreements may be waived at its discretion. In determining whether to waive the terms of the lock-up agreements, the representative may base its decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the trading pattern of, and demand for, our securities in general.

Pricing of the Offering

Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price of the shares has been negotiated between us and the underwriters. Among the factors considered in determining the initial public offering price of the shares, in addition to the prevailing market conditions, are our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.

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No Sales of Similar Securities

We have agreed not to offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or any securities convertible into or exercisable or exchangeable for ordinary shares or enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our ordinary shares, whether any such transaction is to be settled by delivery of ordinary shares or such other securities, in cash or otherwise, without the prior written consent of the representative, for a period of days from the effective date of the registration statement of which this prospectus forms a part.

Electronic Offer, Sale and Distribution of Securities

A prospectus in electronic format may be made available on the websites maintained by the underwriters or selling group members, if any, participating in this offering and the underwriters may distribute prospectuses electronically. The underwriters may agree to allocate a number of ordinary shares to selling group members for sale to their online brokerage account holders. The ordinary shares to be sold pursuant to internet distributions will be allocated on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or the underwriters, and should not be relied upon by investors.

Price Stabilization, Short Positions and Penalty Bids

In connection with this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our ordinary shares. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under option to purchase additional shares. The underwriters can close out a covered short sale by exercising the option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the option to purchase additional shares. The underwriters may also sell shares in excess of the option to purchase additional shares, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing our ordinary shares in this offering because such underwriter repurchases those shares in stabilizing or short covering transactions.

Finally, the underwriters may bid for, and purchase, our ordinary shares in market making transactions, including “passive” market making transactions as described below.

These activities may stabilize or maintain the market price of our ordinary shares at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the Nasdaq Capital Market, in the over-the-counter market, or otherwise.

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Passive Market Making

In connection with this offering, the underwriters may engage in passive market making transactions in our ordinary shares on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.

Potential Conflicts of Interest

The underwriters and their affiliates may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of their various business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own accounts and for the accounts of their customers and such investment and securities activities may involve securities and/or instruments of our Company. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Other Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Some of the underwriters and certain of their affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us and our affiliates, for which they may in the future receive customary fees, commissions and expenses.

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Right of First Refusal

For a period of twelve months from the completion of this offering, we have granted the representative of the underwriters the right to act as a manager in any public or private offering or placement of our securities.

Nasdaq Listing

We intend to apply to have our ordinary shares listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “YMAT.” We cannot guarantee that we will be successful in listing our ordinary shares on the Nasdaq; however, we will not complete this offering unless we are so listed.

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EXPENSES RELATING TO THIS OFFERING

Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the Nasdaq listing fee and the filing fee payable to Financial Industry Regulatory Authority, Inc., or FINRA, all amounts are estimates.

SEC Registration Fee |  | $ | [●] |
Nasdaq Listing Fee |  | $ | [●] |
FINRA filing fee |  | $ | [●] |
Legal Fees and Expenses |  | $ | [●] |
Accounting Fees and Expenses |  | $ | [●] |
Printing and Engraving Expenses |  | $ | [●] |
Miscellaneous Expenses |  | $ | [●] |
Total |  | $ | [●] |

LEGAL MATTERS

We are being represented by Loeb & Loeb LLP, New York, with respect to certain legal matters as to United States federal securities and New York State law. The validity of the ordinary shares offered by this prospectus and legal matters as to Cayman Islands law will be passed upon for us by Ogier. Legal matters as to PRC, law will be passed upon for us by L&L-Leaven, Attorneys-at-Law. Legal matters as to Taiwan law will be passed upon for us by Lee and Li, Attorneys-at-Law. Loeb & Loeb LLP may rely upon Ogier with respect to matters governed by Cayman Islands law, L&L-Leaven, Attorneys-at-Law with respect to matters governed by PRC law and Lee and Li, Attorneys-at-Law with respect to matters governed by Taiwan law. Ellenoff Grossman & Schole LLP is acting as U.S. counsel for the underwriter.

EXPERTS

The consolidated financial statements as of December 31, 2019 and 2020 and for each of the two years in the period ended December 31, 2020 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers, Taiwan, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The registered business address of PricewaterhouseCoopers, Taiwan is 27F, No. 333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan.

The registered business address of Deloitte & Touche, our previous accountant in 2019 (details set out below), is 22F, CTBC Taichung Financial Plaza, No. 88, Huizhong Road, Sec. 1, Xitun District, Taichung 407025, Taiwan.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Deloitte & Touche, Taiwan was removed as our independent auditor on September 1, 2020. The registered address of Deloitte & Touche, Taiwan is 22/F, CTBC Taichung Financial Plaza, No. 88, Huizhong Road, Sec. 1, Xitun District, Taichung 407025, Taiwan.

The removal of Deloitte & Touche, Taiwan was approved by our board of directors.

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During the fiscal years ended December 31, 2019 and 2018 and the subsequent interim period through September 2020, there were no (1) disagreements with Deloitte & Touche, Taiwan on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events as described in Item 16F of Form 20-F.

The audit report of Deloitte & Touche, Taiwan on the consolidated financial statements of J-Star Holding Co., Ltd. as of and for the fiscal years ended December 31, 2019 and 2018 did not contain any adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.

On September 21, 2020, we engaged PricewaterhouseCoopers, Taiwan as our independent registered public accounting firm to audit our consolidated financial statements as of and for the fiscal year ended December 31, 2019 and 2020. During the fiscal years ended December 31, 2019 and 2018 and the subsequent interim period through September 21, 2020, we did not consult with PricewaterhouseCoopers, Taiwan with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that PricewaterhouseCoopers, Taiwan concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement,” as defined in Item 16F(a)(1)(iv) of Form 20-F (and the related instructions thereto), or a “reportable event” as defined in Item 16F(a)(1)(v) of Form 20-F.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the ordinary shares described herein. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. We anticipate making these documents publicly available, free of charge, on our website at [www.ymaunivers.com] as soon as reasonably practicable after filing such documents with the SEC. The information on our website is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus. We have included our website address as an inactive textual reference only.

You can read the registration statement and our future filings with the SEC, over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document that we file with the SEC at its public reference room at 100 F Street, N.E., Washington, DC 20549.

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room.

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J-STAR HOLDING CO., LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

J-STAR HOLDING CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2020

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of J-Star Holding Co., Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of J-Star Holding Co., Ltd. and its subsidiaries (the “Company”) as of December 31, 2019 and 2020, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for each of the two years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Change in Accounting Principles

As discussed in Note 40 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers, Taiwan

Taipei, Taiwan

Republic of China

September 30, 2021

We have served as the Company’s auditor since 2020.

F-2

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2019 and 2020

Expressed in United States dollars

|  |  |  |  | December 31, 2019 |  |  | December 31, 2020 |
Assets |  | Notes |  |  | AMOUNT |  |  | AMOUNT |
Current assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 5 |  |  | $ | 1,563,058 |  |  | $ | 1,336,820 |
Current financial assets at amortized cost |  |  | 6 |  |  |  | 66,816 |  |  |  | 771,592 |
Accounts receivable, net |  |  | 7 |  |  |  | 5,455,635 |  |  |  | 5,118,874 |
Other receivables |  |  | 11 |  |  |  | 2,752,788 |  |  |  | 858,556 |
Other receivables due from related parties |  |  | 31 |  |  |  | 49,830 |  |  |  | - |
Inventories |  |  | 8 |  |  |  | 8,176,729 |  |  |  | 11,699,660 |
Prepayments |  |  | 9 |  |  |  | 2,799,130 |  |  |  | 1,670,669 |
Other current assets |  |  |  |  |  |  | 106,228 |  |  |  | 201,510 |
Current assets |  |  |  |  |  |  | 20,970,214 |  |  |  | 21,657,681 |
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |
Property, plant and equipment |  |  | 10 |  |  |  | 3,874,823 |  |  |  | 3,955,568 |
Right-of-use assets |  |  | 11 |  |  |  | 387,710 |  |  |  | 505,034 |
Intangible assets |  |  |  |  |  |  | 37,051 |  |  |  | 21,816 |
Deferred tax assets |  |  | 27 |  |  |  | 311,300 |  |  |  | 368,009 |
Other non-current assets, others |  |  | 17 |  |  |  | 414,261 |  |  |  | 2,084,651 |
Non-current assets |  |  |  |  |  |  | 5,025,145 |  |  |  | 6,935,078 |
Total assets |  |  |  |  |  | $ | 25,995,359 |  |  | $ | 28,592,759 |

(Continued)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2019 and 2020

Expressed in United States dollars

|  |  |  |  | December 31, 2019 |  |  | December 31, 2020 |
Liabilities and Equity |  | Notes |  |  | AMOUNT |  |  | AMOUNT |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Short-term loans |  |  | 12 |  |  | $ | 667,120 |  |  | $ | 2,743,646 |
Current contract liabilities |  |  | 20 |  |  |  | 986,139 |  |  |  | 601,351 |
Notes payable |  |  |  |  |  |  | 7,364 |  |  |  | 9,046 |
Accounts payable |  |  |  |  |  |  | 2,899,710 |  |  |  | 3,749,984 |
Other payables |  |  | 13 |  |  |  | 7,647,101 |  |  |  | 7,481,911 |
Other payables to related parties |  |  | 31 |  |  |  | 1,936,422 |  |  |  | 442,473 |
Current tax liabilities |  |  |  |  |  |  | 1,408,314 |  |  |  | 1,786,265 |
Current lease liabilities |  |  |  |  |  |  | 1,268,381 |  |  |  | 1,199,345 |
Other current liabilities |  |  | 14 |  |  |  | 699,764 |  |  |  | 605,216 |
Current liabilities |  |  |  |  |  |  | 17,520,315 |  |  |  | 18,619,237 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Long-term loans |  |  | 14 |  |  |  | - |  |  |  | 429,000 |
Deferred tax liabilities |  |  | 27 |  |  |  | 7,755 |  |  |  | 34,405 |
Non-current lease liabilities |  |  |  |  |  |  | 1,432,903 |  |  |  | 218,827 |
Long-term notes and accounts payable to related parties |  |  | 31 |  |  |  | 1,925,589 |  |  |  | - |
Guarantee deposits received |  |  |  |  |  |  | 67,510 |  |  |  | 72,239 |
Non-current liabilities |  |  |  |  |  |  | 3,433,757 |  |  |  | 754,471 |
Total Liabilities |  |  |  |  |  |  | 20,954,072 |  |  |  | 19,373,708 |
Equity |  |  |  |  |  |  |  |  |  |  |  |
Equity attributable to owners of parent |  |  |  |  |  |  |  |  |  |  |  |
Share capital |  |  | 17 |  |  |  |  |  |  |  |  |
Ordinary share |  |  |  |  |  |  | 7,770,896 |  |  |  | 6,805,098 |
Capital surplus |  |  | 18 |  |  |  |  |  |  |  |  |
Capital surplus |  |  |  |  |  |  | 9,520,046 |  |  |  | 8,397,244 |
Retained earnings |  |  | 19 |  |  |  |  |  |  |  |  |
Accumulated deficit |  |  |  |  |  |  | (4,165,476 | ) |  |  | (5,751,639 | )
Other equity interest |  |  |  |  |  |  |  |  |  |  |  |
Other equity interest |  |  |  |  |  |  | (62,101 | ) |  |  | (231,652 | )
Treasury shares |  |  | 17 |  |  |  | (8,022,078 | ) |  |  | - |
Total Equity |  |  |  |  |  |  | 5,041,287 |  |  |  | 9,219,051 |
Total liabilities and equity |  |  |  |  |  | $ | 25,995,359 |  |  | $ | 28,592,759 |

The accompanying notes are an integral part of these consolidated financial statements.

F-4

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2019 and 2020

Expressed in United States dollars

|  |  |  |  | Year ended December 31 |
|  |  |  |  | 2019 |  |  | 2020 |
|  | Notes |  |  | AMOUNT |  |  | AMOUNT |
Operating revenue |  |  | 20 |  |  | $ | 22,786,951 |  |  | $ | 22,178,572 |
Cost of revenue |  |  | 8,25,26 |  |  |  | (18,203,126 | ) |  |  | (14,816,905 | )
Gross profit from operations |  |  |  |  |  |  | 4,583,825 |  |  |  | 7,361,667 |
Operating expenses |  |  | 25,26 |  |  |  |  |  |  |  |  |
Selling expenses |  |  |  |  |  |  | (1,927,635 | ) |  |  | (1,386,309 | )
Administrative expenses |  |  |  |  |  |  | (3,152,487 | ) |  |  | (2,517,208 | )
Research and development expenses |  |  |  |  |  |  | (1,744,141 | ) |  |  | (1,689,817 | )
Expected credit losses |  |  | 37 |  |  |  | (230,471 | ) |  |  | (81,947 | )
Gains on disposals of non-current asset held for sale |  |  | 11 |  |  |  | 6,859,542 |  |  |  | - |
Gains arising from sale and leaseback transactions |  |  | 11 |  |  |  | 6,948,966 |  |  |  | - |
Other income and expenses |  |  | 21 |  |  |  | (205,804 | ) |  |  | 13,691 |
Net operating income (loss) |  |  |  |  |  |  | 11,131,795 |  |  |  | 1,700,077 |
Non-operating income and expenses |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 22 |  |  |  | 9,502 |  |  |  | 2,802 |
Other gains and losses |  |  | 23 |  |  |  | 514,890 |  |  |  | 180,463 |
Finance costs |  |  | 24 |  |  |  | (490,581 | ) |  |  | (417,923 | )
Non-operating income and expenses |  |  |  |  |  |  | 33,811 |  |  |  | (234,658 | )
Profit before income tax |  |  |  |  |  |  | 11,165,606 |  |  |  | 1,465,419 |
Income tax expense |  |  | 27 |  |  |  | (159,807 | ) |  |  | (355,273 | )
Profit after income tax |  |  |  |  |  | $ | 11,005,799 |  |  | $ | 1,110,146 |
Components of other comprehensive income that will be reclassified to profit or loss |  |  |  |  |  |  |  |  |  |  |  |
Exchange differences on translation of foreign operations |  |  |  |  |  |  | 5,309 |  |  |  | (169,551 | )
Total comprehensive income |  |  |  |  |  | $ | 11,011,108 |  |  | $ | 940,595 |
Basic and diluted |  |  |  |  |  |  |  |  |  |  |  |
Earnings per share |  |  | 28 |  |  | $ | 0.44 |  |  | $ | 0.06 |

The accompanying notes are an integral part of these consolidated financial statements.

F-5

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

Years Ended December 31, 2019 and 2020

Expressed in United States dollars

|  |  |  |  | Equity attributable to owners of the parent |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Other equity interest |  |  |  |  |  |  |
Year 2019 |  | Notes |  |  | Ordinary share |  |  | Capital surplus |  |  | Accumulated deficit |  |  | Financial statements translation differences of foreign operations |  |  | Treasury shares |  |  | Total equity |
Balance at January 1, 2019 |  |  |  |  |  | $ | 7,770,896 |  |  | $ | 9,520,046 |  |  | $ | (15,171,275 | ) |  | $ | (67,410 | ) |  | $ | - |  |  | $ | 2,052,257 |
Profit for the year |  |  |  |  |  |  | - |  |  |  | - |  |  |  | 11,005,799 |  |  |  | - |  |  |  | - |  |  |  | 11,005,799 |
Other comprehensive loss |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,309 |  |  |  | - |  |  |  | 5,309 |
Total comprehensive income |  |  |  |  |  |  | - |  |  |  | - |  |  |  | 11,005,799 |  |  |  | 5,309 |  |  |  | - |  |  |  | 11,011,108 |
Stock reacquisition |  |  | 17 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (8,022,078 | ) |  |  | (8,022,078 | )
Balance at December 31, 2019 |  |  |  |  |  | $ | 7,770,896 |  |  | $ | 9,520,046 |  |  | $ | (4,165,476 | ) |  | $ | (62,101 | ) |  | $ | (8,022,078 | ) |  | $ | 5,041,287 |
Year 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at January 1, 2020 |  |  |  |  |  | $ | 7,770,896 |  |  | $ | 9,520,046 |  |  | $ | (4,165,476 | ) |  | $ | (62,101 | ) |  | $ | (8,022,078 | ) |  | $ | 5,041,287 |
Profit for the year |  |  |  |  |  |  | - |  |  |  | - |  |  |  | 1,110,146 |  |  |  | - |  |  |  | - |  |  |  | 1,110,146 |
Other comprehensive income |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (169,551 | ) |  |  | - |  |  |  | (169,551 | )
Total comprehensive income |  |  |  |  |  |  | - |  |  |  | - |  |  |  | 1,110,146 |  |  |  | (169,551 | ) |  |  | - |  |  |  | 940,595 |
Share-based payments |  |  | 16,18 |  |  |  | - |  |  |  | 46,944 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 46,944 |
Treasury shares reissue |  |  | 17,18 |  |  |  | - |  |  |  | 153,780 |  |  |  | - |  |  |  | - |  |  |  | 3,036,445 |  |  |  | 3,190,225 |
Treasury shares retirement |  |  | 17,18 |  |  |  | (965,798 | ) |  |  | (1,323,526 | ) |  |  | (2,696,309 | ) |  |  | - |  |  |  | 4,985,633 |  |  |  | - |
Balance at December 31, 2020 |  |  |  |  |  | $ | 6,805,098 |  |  | $ | 8,397,244 |  |  | $ | (5,751,639 | ) |  | $ | (231,652 | ) |  | $ | - |  |  | $ | 9,219,051 |

The accompanying notes are an integral part of these consolidated financial statements.

F-6

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended December 31, 2019 and 2020

Expressed in United States dollars

|  |  |  |  | Year ended December 31 |
|  | Notes |  |  | 2019 |  |  | 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Profit before tax |  |  |  |  |  | $ | 11,165,606 |  |  | $ | 1,465,419 |
Adjustments |  |  |  |  |  |  |  |  |  |  |  |
Adjustments to reconcile profit (loss) |  |  |  |  |  |  |  |  |  |  |  |
Depreciation expenses |  |  | 10,25 |  |  |  | 556,779 |  |  |  | 643,003 |
Depreciation expenses-Right-of-use assets |  |  | 11,25 |  |  |  | 223,769 |  |  |  | 222,821 |
Amortization expenses |  |  | 25 |  |  |  | 36,851 |  |  |  | 29,534 |
Expected credit losses |  |  | 37 |  |  |  | 230,471 |  |  |  | 81,947 |
Cost of share-based payment |  |  | 16,26 |  |  |  | - |  |  |  | 46,944 |
Interest income |  |  | 22 |  |  |  | (9,502 | ) |  |  | (2,802 | )
Interest expense |  |  | 24 |  |  |  | 490,581 |  |  |  | 417,923 |
Loss on disposal of property, plant and equipment |  |  | 21 |  |  |  | 221,065 |  |  |  | 71,801 |
Gains on disposals of non-current asset held for sale |  |  | 11 |  |  |  | (6,859,542 | ) |  |  | - |
Gains arising from lease modifications |  |  | 11,21 |  |  |  | - |  |  |  | (1,557 | )
Gains arising from sale and leaseback transactions |  |  | 11 |  |  |  | (6,948,966 | ) |  |  | - |
Changes in operating assets and liabilities |  |  |  |  |  |  |  |  |  |  |  |
Changes in operating assets |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  |  |  |  |  | 1,417,142 |  |  |  | 240,728 |
Other receivables |  |  |  |  |  |  | (2,611,063 | ) |  |  | 237,967 |
Other receivables – related parties |  |  |  |  |  |  | (49,818 | ) |  |  | 49,830 |
Inventories |  |  |  |  |  |  | (2,000,366 | ) |  |  | (3,522,931 | )
Prepayments |  |  |  |  |  |  | (815,807 | ) |  |  | 1,109,801 |
Other current asset |  |  |  |  |  |  | 574,630 |  |  |  | (95,282 | )
Other non-current assets |  |  |  |  |  |  | - |  |  |  | (276,697 | )
Changes in operating liabilities |  |  |  |  |  |  |  |  |  |  |  |
Current contract liabilities |  |  |  |  |  |  | 986,139 |  |  |  | (384,788 | )
Notes payable |  |  |  |  |  |  | (7,463 | ) |  |  | 1,682 |
Accounts and payable |  |  |  |  |  |  | (102,941 | ) |  |  | 850,274 |
Other payables |  |  |  |  |  |  | 1,780,811 |  |  |  | 17,469 |
Other current liabilities |  |  |  |  |  |  | 307,097 |  |  |  | (328,548 | )
Cash (outflow) inflow generated from operations |  |  |  |  |  |  | (1,414,527 | ) |  |  | 874,538 |
Interest received |  |  |  |  |  |  | 9,502 |  |  |  | 2,802 |
Interest paid |  |  |  |  |  |  | (706,936 | ) |  |  | (537,994 | )
Income tax paid |  |  |  |  |  |  | (195,548 | ) |  |  | (99,938 | )
Net cash flows (used in) from operating activities |  |  |  |  |  |  | (2,307,509 | ) |  |  | 239,408 |

(Continued)

The accompanying notes are an integral part of these consolidated financial statements.

F-7

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended December 31, 2019 and 2020

Expressed in United States dollars

|  |  |  |  | Year ended December 31 |
|  | Notes |  |  | 2019 |  |  | 2020 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |  |  |  |
Acquisition of financial assets at amortized cost |  |  |  |  |  | $ | - |  |  | $ | (704,776 | )
Acquisition of property, plant and equipment |  |  | 29 |  |  |  | (1,080,399 | ) |  |  | (659,266 | )
Proceeds from disposal of property, plant and equipment |  |  |  |  |  |  | - |  |  |  | 138,188 |
Acquisition of intangible assets |  |  |  |  |  |  | (9,107 | ) |  |  | (12,827 | )
Proceeds from sale and leaseback transactions and disposal of non-current asset held for sale |  |  |  |  |  |  | 11,457,760 |  |  |  | - |
Increase in guarantee deposits received |  |  |  |  |  |  | (155,678 | ) |  |  | - |
Net cash flows from (used in) investing activities |  |  |  |  |  |  | 10,212,576 |  |  |  | (1,238,681 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from short-term bank loans |  |  | 30 |  |  |  | 323,500 |  |  |  | 2,752,858 |
Payments on short-term loans |  |  | 30 |  |  |  | - |  |  |  | (741,075 | )
Proceeds from long-term bank loans |  |  | 30 |  |  |  | - |  |  |  | 676,000 |
Payments on long-term bank loans |  |  | 30 |  |  |  | - |  |  |  | (37,556 | )
Increase(decrease) in other payables to related parties |  |  |  |  |  |  | 770,250 |  |  |  | (1,137,495 | )
Payment on lease liabilities |  |  | 30 |  |  |  | (192,213 | ) |  |  | (155,052 | )
Increase (decrease) in long-term notes and accounts payable to related parties |  |  | 30 |  |  |  | 73,916 |  |  |  | (498,894 | )
Treasury shares acquired |  |  | 17 |  |  |  | (8,022,078 | ) |  |  | - |
Net cash flows (used in) from financing activities |  |  |  |  |  |  | (7,046,625 | ) |  |  | 858,786 |
Effect of foreign exchange rate changes |  |  |  |  |  |  | 117,877 |  |  |  | (85,751 | )
Net increase (decrease) in cash and cash equivalents |  |  |  |  |  |  | 976,319 |  |  |  | (226,238 | )
Cash and cash equivalents at beginning of year |  |  |  |  |  |  | 586,739 |  |  |  | 1,563,058 |
Cash and cash equivalents at end of year |  |  |  |  |  | $ | 1,563,058 |  |  | $ | 1,336,820 |

The accompanying notes are an integral part of these consolidated financial statements.

F-8

J-Star Holding Co., Ltd. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2019 and 2020

Expressed in US dollars, except as otherwise indicated

1. | Corporate and group information

J-Star Holding Co., Ltd. (the “Company”) was incorporated in the Cayman Islands in May 2016. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in manufacturing and trading business of bicycle parts, sports accessories and carbon fiber composite products.

2. | The authorization of the consolidated financial statements

The accompanying consolidated financial statements were authorized for issuance by the Board of Directors on September 30, 2021.

3. | Application of new and revised International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), International Financial Reporting Interpretations Committee (“IFRIC”) Interpretations and Standing Interpretations Committee (“SIC”) Interpretations issued by the International Accounting Standards Board (“IASB”), (collectively, “IFRSs”)

| a) | Amendments to IFRSs and the new interpretation that are mandatorily effective for the current year

New Standards, Interpretations and Amendments |  | Effective date issued by IASB
Amendments to IAS 1 and IAS 8, “Disclosure Initiative－Definition of Material” |  | January 1, 2020
Amendments to IFRS 3, “Definition of a Business” |  | January 1, 2020
Amendments to IFRS 9, IAS 39 and IFRS 7, “Interest Rate Benchmark Reform” |  | January 1, 2020
Amendment to IFRS 16, “Covid-19-Related Rent Concessions” |  | June 1, 2020

Based on the Group’s assessment, the above standards and interpretations have no significant impact to the Group’s financial position and financial performance.

| b) | New standards, interpretations and amendments in issue but not yet effective

New Standards, Interpretations and Amendments |  | Effective date issued by IASB
Amendments to IFRS 4, “Extension of the Temporary Exemption from Applying IFRS 9” |  | January 1, 2021
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, “Interest Rate Benchmark Reform-Phase 2” |  | January 1, 2021
Amendments to IFRS 3, “Reference to the Conceptual Framework” |  | January 1, 2022
Amendments to IFRS 10 and IAS 28, “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” |  | To be determined by IASB
IFRS 17, “Insurance Contracts” |  | January 1, 2023
Amendments to IFRS 17, “Insurance Contracts” |  | January 1, 2023
Amendments to IAS 1, “Classification of Liabilities as Current or Non-current” |  | January 1, 2023
Amendments to IAS 1, “Disclosure of Accounting Policies” |  | January 1, 2023
Amendments to IAS 8, “Definition of Accounting Estimates” |  | January 1, 2023
Amendments to IAS 16, “Property, Plant and Equipment:Proceeds before Intended Use” |  | January 1, 2022
Amendments to IAS 37, “Onerous Contracts—Cost of Fulfilling a Contract” |  | January 1, 2022
Annual Improvements to IFRS Standards 2018–2020 |  | January 1, 2022

F-9

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

| (a) | Amendments to IAS 1, ‘Classification of liabilities as current or non-current’
|  | The amendments clarify that classification of liabilities depends on the rights that exist at the end of the reporting period. An entity shall classify a liability as current when it does not have a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. Also, the amendments define ‘settlement’ as the extinguishment of a liability with cash, other economic resources or an entity’s own equity instruments.
| (b) | Amendments to IAS 16, ‘Property, plant and equipment: proceeds before intended use’
|  | This amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended use (for example, the proceeds from selling samples produced when testing a machine to see if it is functioning properly). The proceeds from selling such samples and the costs relating to items produced are now recognized in profit or loss. This amendment also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment.

4. | Summary of significant accounting policies

The significant accounting policies applied in the preparation of these accompanying consolidated financial statements are set out below. These policies have been consistently applied during the reported periods, unless otherwise stated.

| a) | Statement of compliance
|  | The consolidated financial statements of the Group have been prepared in accordance with IFRSs as issued by the IASB.
| b) | Basis of preparation

| (a) | The consolidated financial statements have been prepared under the historical cost convention:
| (b) | The preparation of the consolidated financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4 bb).
| (c) | These consolidated financial statements are presented in U.S. dollars (“US$”), which is the Company’s functional currency.

| c) | Basis of consolidation

| (a) | Basis for preparation of consolidated financial statements:
|  | i) | All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries Transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
|  | ii) | Transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
|  | iii) | In 2016, the Company, through a series of transactions which is accounted for as a reorganization of entities under a common control, became the ultimate parent entity of its subsidiaries. The Group accounted for the transactions using the book value method of accounting and is retrospectively applied. Difference between consideration paid and the net assets acquired is adjusted to shareholders’ equity.

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| (b) | Subsidiaries included in the consolidated financial statements:

|  |  |  |  |  |  |  | Percentage of Ownership (%) |  |  |
|  |  |  |  |  |  |  | December 31, |  |  |
Name of investor |  | Name of investee |  | Main business |  | Location |  | 2019 |  |  | 2020 |  |  | Note
The Company |  | GOAL BEYOND LIMITED(GOAL BEYOND) |  | Holding company |  | Samoa |  |  | 100 |  |  |  | 100 |  |  |
The Company |  | STAR LEADER TRADING LIMITED (STAR LEADER) |  | Sales of bicycle,sporting goods,and otheer carbon composite products |  | Hong Kong |  |  | 100 |  |  |  | 100 |  |  |
GOAL BEYOND |  | YMA CORPORATION (YMA) |  | Product development,design,manufacturing and sales of carbon fiber composite products |  | Republic of China (“ROC”) |  |  | 100 |  |  |  | 100 |  |  |
GOAL BEYOND |  | TIME YIELD LIMITED (TIME YIELD) |  | Purchasing |  | Samoa |  |  | 100 |  |  |  | 100 |  |  |
GOAL BEYOND |  | Forwell Sports Equipment Co., Ltd. (Forwell) |  | Manufacturing of bicycle,sporting goods and carbon fiber composite |  | Dongguan, People’s Republic of China (“PRC”) |  |  | - |  |  |  | 100 |  |  | ii
GOAL BEYOND |  | YMA Composite Materials (DG) Co., Ltd. (YMA DG) |  | Manufacturing of bicycle,sporting goods and carbon fiber composite |  | Dongguan, People’s Republic of China (“PRC”) |  |  | 100 |  |  |  | 100 |  |  |
GOAL BEYOND |  | SKYFORT INTERNATIONAL PTE. LIMITED (SKYFORT) |  | Holding company |  | Singapore |  |  | 100 |  |  |  | - |  |  | i
SKYFORT |  | Forwell |  | Manufacturing of bicycle,sporting goods and carbon fiber composite |  | Dongguan, People’s Republic of China (“PRC”) |  |  | 100 |  |  |  | - |  |  | ii

| (a) | Subsidiaries not included in the consolidated financial statements: None.

| (b) | Adjustments for subsidiaries with different balance sheet date: Not applicable.

| (c) | Significant restrictions

As of December 31, 2020, cash and short-term deposits of $41,718 deposited in mainland China are under local foreign exchange control which restricts the capital to be remitted outside the borders except for normal dividend distribution.

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| (d) | Subsidiaries that have non-controlling interests that are material to the Group: None.

| (e) | Note:

| i) | SKYFORT was liquidated in February 2020.

| ii) | There was a change of shareholder in Forwell in January 2020. Forwell was held by SKYFORT before the change and held by GOAL BEYOND after the change.

| d) | Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in US$, which is the Company’s functional currency and the Group’s presentation currency.

| (a) | Foreign currency transactions and balances

| i) | Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Therefore, foreign exchange differences resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.
| ii) | Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation are recognized in profit or loss on the balance sheet date.
| iii) | Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their exchange differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their exchange differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the initial dates of the transactions.
| iv) | All foreign exchange differences are presented in the statement of comprehensive income under “Other gains and losses” by the nature of transactions.

| (b) | Translation of foreign operations

The operating results and financial position of all the group entities, associates that have different functional currency and presentation currency are translated into the presentation currency as follows:

| i) | Assets and liabilities for each balance sheet presented are translated at the exchange rates prevailing at the balance sheet date;
| ii) | Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
| iii) | All exchange differences are recognized in other comprehensive income.

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| e) | Classification of current and non-current assets and liabilities

| (a) | Assets that meet one of the following criteria are classified as current assets:

| i) | Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
| ii) | Assets held mainly for trading purposes;
| iii) | Assets that are expected to be realized within 12 months from the balance sheet date;
| iv) | Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than 12 months after the balance sheet date.

All assets that do not meet the above criteria are classified as non-current assets.

| (b) | Liabilities that meet one of the following criteria are classified as current liabilities:

| i) | Liabilities that are expected to be settled within the normal operating cycle;
| ii) | Liabilities arising mainly from trading activities;
| iii) | Liabilities that are to be settled within 12 months from the balance sheet date;
| iv) | Liabilities for which the repayment date cannot be unconditionally extended to more than 12 months after the balance sheet date. Liabilities bearing terms that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All liabilities that do not meet the above criteria are classified as non-current liabilities.

| f) | Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value (including time deposits with less than 3 months contract period from date of acquisition). Time deposits that meet the above definition and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

| g) | Financial assets at amortized cost

| (a) | Financial assets at amortized cost are those that meet all of the following criteria:

| i) | The objective of the Group’s business model is achieved by collecting contractual cash flows.

| ii) | The financial assets’ contractual cash flows represent solely payments of principal and interest.

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| (b) | The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

| (c) | At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognized in profit or loss when the asset is derecognized or impaired.

| h) | Accounts and notes receivable

| (a) | Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

| (b) | The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

| i) | Impairment of financial assets

For financial assets at amortized cost, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime expected credit losses.

| j) | Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

| k) | Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The item by item approach is used in raw materials. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The reversal of inventory valuations should not be more than historical cost.

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| l) | Non-current assets (or disposal groups) held for sale

Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use, and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

| m) | Property, plant and equipment

| (a) | Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.

| (b) | Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

| (c) | Property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

| (d) | The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8 “Accounting Policies, Change in Accounting Estimates and Errors”, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Leasehold improvement |  | 3 years
Machinery and equipment |  | 3 to 10 years
Molding equipment |  | 2 years
Others |  | 2 to 10 years

| n) | Leasing arrangements (lessee)－right-of-use assets / lease liabilities

| (a) | Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of low value assets, lease payments are recognized as an expense on a straight-line basis over the lease term.

| (b) | Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate.

Lease payments are fixed payments, less any lease incentives receivable.

The Group subsequently measures the lease liability at amortized cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

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| (c) | At the commencement date, the right-of-use asset is stated at the amount of the initial measurement of lease liability. The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.

| o) | Intangible assets

Computer software

Computer software is stated at cost and amortized on a straight-line basis over its estimated useful life of 3 to 5 years.

| p) | Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been recognized.

| q) | Loans

Loans comprise long-term and short-term bank loans. Loans are recognized initially at fair value, net of transaction costs incurred. Loans are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in profit or loss over the period of the loans using the effective interest method.

| r) | Accounts and notes payable

| (a) | Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

| (b) | The short-term accounts and notes payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

| s) | Derecognition of financial liabilities

| (a) | A financial liability is derecognized when the obligation specified in the contract is either discharged or cancelled or expires.

| (b) | Where the terms of a financial liability are renegotiated and the Group issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognized in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.

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| t) | Employee benefits

| (a) | Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees and should be recognized as expenses when the employees render service.

| (b) | Pensions

Defined contribution plans

For defined contribution plans, the contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in future payments.

| (c) | Employees’ compensation and directors’ remuneration

Employees’ compensation and directors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

| u) | Employee share-based payments

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognized is based on the number of equity instruments that eventually vest.

| v) | Income tax

| (a) | The income tax expense for the period comprises current and deferred tax. Income tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the income tax is recognized in other comprehensive income or equity.

| (b) | The current income tax expense is calculated on the basis of the tax laws enacted or substantially enacted at the balance sheet date in the countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional income tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the profit generated. There were no additional taxes levied on unappropriated retained earnings in any of the periods presented.

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| (c) | Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet date. However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
| (d) | Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.
| (e) | Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.
| (f) | A deferred tax asset shall be recognized for the carry forward of unused tax credits resulting from equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.
| (g) | If a change in tax rate is enacted or substantively enacted, the Group recognizes the effect of the change immediately in the period in which the change occurs. The effect of the change on items recognized outside profit or loss is recognized in other comprehensive income or equity while the effect of the change on items recognized in profit or loss is recognized in profit or loss.

| w) | Capital stock

| (a) | Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction.

| (b) | Where the Company repurchases the Company’s shares that have been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

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| x) | Revenue recognition

| (a) | The Group manufactures and sells spare parts such as bicycle frame and racket. Sales are recognized when control of the products has transferred, being when the products are delivered to the customers. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customers, and either the customers accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

| (b) | A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

| (c) | Sales revenue was recognized based on the contract price net of sales discount. Accumulated experience is used to estimate and provide for the sales discounts and allowances. The sales usually are made with a credit term of 30 to 90 days after monthly billings. which is consistent with market practice. As the time interval between the transfer of committed goods and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the time value of money.

| y) | Government grants

Government grants are recognized at their fair value only when there is reasonable assurance that the Group will comply with any conditions attached to the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes expenses for the related costs for which the grants are intended to compensate. Government grants related to property, plant and equipment are recognized as non-current liabilities and are amortized to profit or loss over the estimated useful lives of the related assets using straight-line method.

| z) | Business combinations – determination of business

The Group shall determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. A business consists of inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. If the assets acquired are not a business, the Group shall account for the transaction or other event as an asset acquisition. If the assets acquired are a business, the Group shall account for each business combination by applying the acquisition method.

| aa) | Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Group’s chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

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| bb) | Critical accounting judgments, estimates and key sources of assumption uncertainty

Evaluation of inventories

As inventories are stated at the lower of cost and net realizable value, the Group must determine the net realizable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value. The evaluation of inventories is principally based on the unit price of the sales order as the basis of the estimate. Therefore, there might be material changes to the evaluation.

As of December 31, 2020, the Group’s cost of inventories and allowance for inventory valuation losses amounted to $12,713,025 and $1,013,365, respectively. For the years ended December 31, 2020, the amounts of reversal of inventory valuation was $159,460.

5. | Cash and cash equivalents

|  | December 31, 2019 |  |  | December 31, 2020 |
Cash on hand and petty cash |  | $ | 86,285 |  |  | $ | 1,870 |
Checking accounts and demand deposits |  |  | 1,476,773 |  |  |  | 1,334,950 |
|  | $ | 1,563,058 |  |  | $ | 1,336,820 |

| a) | The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
| b) | No cash and cash equivalents of the Group were pledged to others.

6. | Financial assets at amortized cost

|  | December 31, 2019 |  |  | December 31, 2020 |
Current items: |  |  |  |  |  |  |  |
Restricted time deposits |  | $ | - |  |  | $ | 701,282 |
Restricted bank deposits |  |  | 66,816 |  |  |  | 70,310 |
|  | $ | 66,816 |  |  | $ | 771,592 |

| a) | Without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortized cost held by the Group is the carrying amount at the end of each reporting period.

| b) | Information about the financial assets at amortized cost that were pledged to others as collateral is provided in Notes 12 and 32.

| c) | Information relating to credit risk of financial assets at amortized cost is provided in Note 37 c).

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7. | Accounts receivable

|  | December 31, 2019 |  |  | December 31, 2020 |
Accounts receivable |  | $ | 5,686,588 |  |  | $ | 5,445,860 |
Less: Loss allowance |  |  | (230,953 | ) |  |  | (326,986 | )
|  | $ | 5,455,635 |  |  | $ | 5,118,874 |

| a) | The Group’s credit term granted to customers is 30~90 days. Receivables do not bear interest. The loss allowance is determined based on the credit quality of customers. Information relating to credit risk is provided in Note 37 c).

| b) | The ageing analysis of accounts receivable that were past due but not impaired is as follows:

|  | December 31, 2019 |  |  | December 31, 2020 |
Not past due |  | $ | 4,568,628 |  |  | $ | 4,843,098 |
Up to 30 days |  |  | 346,861 |  |  |  | 167,147 |
31 to 90 days |  |  | 147,087 |  |  |  | 28,675 |
91 to 180 days |  |  | 297,811 |  |  |  | 12,317 |
Over 180 days |  |  | 326,201 |  |  |  | 394,623 |
|  | $ | 5,686,588 |  |  | $ | 5,445,860 |

| c) | As of December 31, 2019 and 2020, accounts receivable were all from contracts with customers. And as of January 1, 2019, the balance of accounts receivable from contracts with customers was $7,103,248.

| d) | Without taking into account of any collateral held or other credit enhancements, the amount that best reflects the Group’s maximum exposure to credit risk in respect of the accounts receivable is the carrying amount at the end of each reporting period.

| e) | No accounts receivable of the Group were pledged to others.

| 8. | Inventories

|  | December 31, 2019 |
|  | Cost |  |  | Allowance for valuation loss |  |  | Book value |
Raw materials |  | $ | 4,405,622 |  |  | $ | (439,255 | ) |  | $ | 3,966,367 |
Work in progress |  |  | 3,780,594 |  |  |  | (628,199 | ) |  |  | 3,152,395 |
Finished goods |  |  | 823,175 |  |  |  | (37,819 | ) |  |  | 785,356 |
Inventory in transit |  |  | 272,611 |  |  |  | - |  |  |  | 272,611 |
|  | $ | 9,282,002 |  |  | $ | (1,105,273 | ) |  | $ | 8,176,729 |

|  | December 31, 2020 |
|  | Cost |  |  | Allowance for valuation loss |  |  | Book value |
Raw materials |  | $ | 3,807,079 |  |  | $ | (323,804 | ) |  | $ | 3,483,275 |
Work in progress |  |  | 8,172,868 |  |  |  | (519,528 | ) |  |  | 7,653,340 |
Finished goods |  |  | 733,078 |  |  |  | (170,033 | ) |  |  | 563,045 |
|  | $ | 12,713,025 |  |  | $ | (1,013,365 | ) |  | $ | 11,699,660 |

The cost of inventories recognized as an expense for the year:

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Cost of goods sold |  | $ | 17,957,717 |  |  | $ | 14,817,898 |
Loss on physical inventory observation |  |  | 485,891 |  |  |  | 158,467 |
Reversal of inventory valuation |  |  | (240,482 | ) |  |  | (159,460 | )
|  | $ | 18,203,126 |  |  | $ | 14,816,905 |

| a) | Reversal of allowance for inventory valuation was recognized due to disposal of certain inventories which were previously provided with allowance for price decline.

| b) | No inventories of the Group were pledged to others.

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9. | Prepayments

|  | December 31, 2019 |  |  | December 31, 2020 |
Prepayment for purchases |  | $ | 309,843 |  |  | $ | 644,713 |
Prepaid sales tax |  |  | 1,990,334 |  |  |  | 787,652 |
Other prepayments |  |  | 498,953 |  |  |  | 238,304 |
|  | $ | 2,799,130 |  |  | $ | 1,670,669 |

10. | Property, plant and equipment, net

|  | 2019 |
|  | Machinery and equipment |  |  | Leasehold improvement |  |  | Molding equipment |  |  | Others |  |  | Construction in progress and equipment to be inspected |  |  | Total |
January 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  | $ | 4,187,284 |  |  | $ | 559,517 |  |  | $ | 141,835 |  |  | $ | 905,653 |  |  | $ | - |  |  | $ | 5,794,289 |
Accumulated depreciation |  |  | (1,212,733 | ) |  |  | (233,035 | ) |  |  | (25,691 | ) |  |  | (721,837 | ) |  |  | - |  |  |  | (2,193,296 | )
|  | $ | 2,974,551 |  |  | $ | 326,482 |  |  | $ | 116,144 |  |  | $ | 183,816 |  |  | $ | - |  |  | $ | 3,600,993 |
January 1 |  | $ | 2,974,551 |  |  | $ | 326,482 |  |  | $ | 116,144 |  |  | $ | 183,816 |  |  | $ | - |  |  | $ | 3,600,993 |
Additions |  |  | 47,512 |  |  |  | 71,641 |  |  |  | 949,266 |  |  |  | - |  |  |  | 12,471 |  |  |  | 1,080,890 |
Disposals |  |  | (139,626 | ) |  |  | - |  |  |  | - |  |  |  | (81,439 | ) |  |  | - |  |  |  | (221,065 | )
Depreciation expenses |  |  | (386,317 | ) |  |  | (70,352 | ) |  |  | (39,995 | ) |  |  | (60,115 | ) |  |  | - |  |  |  | (556,779 | )
Exchange adjustment |  |  | (16,906 | ) |  |  | (215 | ) |  |  | (12,095 | ) |  |  | 92 |  |  |  | (92 | ) |  |  | (29,216 | )
December 31 |  | $ | 2,479,214 |  |  | $ | 327,556 |  |  | $ | 1,013,320 |  |  | $ | 42,354 |  |  | $ | 12,379 |  |  | $ | 3,874,823 |
December 31 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  | $ | 3,746,634 |  |  | $ | 638,900 |  |  | $ | 1,078,929 |  |  | $ | 276,525 |  |  | $ | 12,379 |  |  | $ | 5,753,367 |
Accumulated depreciation and impairment |  |  | (1,267,420 | ) |  |  | (311,344 | ) |  |  | (65,609 | ) |  |  | (234,171 | ) |  |  | - |  |  |  | (1,878,544 | )
|  | $ | 2,479,214 |  |  | $ | 327,556 |  |  | $ | 1,013,320 |  |  | $ | 42,354 |  |  | $ | 12,379 |  |  | $ | 3,874,823 |

|  | 2020 |
|  | Machinery and equipment |  |  | Leasehold improvement |  |  | Molding equipment |  |  | Others |  |  | Construction in progress and equipment to be inspected |  |  | Total |
January 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  | $ | 3,746,634 |  |  | $ | 638,900 |  |  | $ | 1,078,929 |  |  | $ | 276,525 |  |  | $ | 12,379 |  |  | $ | 5,753,367 |
Accumulated depreciation and impairment |  |  | (1,267,420 | ) |  |  | (311,344 | ) |  |  | (65,609 | ) |  |  | (234,171 | ) |  |  | - |  |  |  | (1,878,544 | )
|  | $ | 2,479,214 |  |  | $ | 327,556 |  |  | $ | 1,013,320 |  |  | $ | 42,354 |  |  | $ | 12,379 |  |  | $ | 3,874,823 |
January 1 |  | $ | 2,479,214 |  |  | $ | 327,556 |  |  | $ | 1,013,320 |  |  | $ | 42,354 |  |  | $ | 12,379 |  |  | $ | 3,874,823 |
Additions |  |  | 162,832 |  |  |  | 82,992 |  |  |  | 430,473 |  |  |  | - |  |  |  | - |  |  |  | 676,297 |
Disposals |  |  | (130,608 | ) |  |  | (79,381 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (209,989 | )
Depreciation expenses |  |  | (416,556 | ) |  |  | (50,890 | ) |  |  | (154,732 | ) |  |  | (20,825 | ) |  |  | - |  |  |  | (643,003 | )
Exchange adjustment |  |  | 148,351 |  |  |  | 18,995 |  |  |  | 87,729 |  |  |  | 1,494 |  |  |  | 871 |  |  |  | 257,440 |
December 31 |  | $ | 2,243,233 |  |  | $ | 299,272 |  |  | $ | 1,376,790 |  |  | $ | 23,023 |  |  | $ | 13,250 |  |  | $ | 3,955,568 |
December 31 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost |  | $ | 3,880,445 |  |  | $ | 497,465 |  |  | $ | 1,610,749 |  |  | $ | 249,990 |  |  | $ | 13,250 |  |  | $ | 6,251,899 |
Accumulated depreciation and impairment |  |  | (1,637,212 | ) |  |  | (198,193 | ) |  |  | (233,959 | ) |  |  | (226,967 | ) |  |  | - |  |  |  | (2,296,331 | )
|  | $ | 2,243,233 |  |  | $ | 299,272 |  |  | $ | 1,376,790 |  |  | $ | 23,023 |  |  | $ | 13,250 |  |  | $ | 3,955,568 |

The property, plant and equipment were not pledged to others as collaterals.

F-22

11. | Leasing arrangements－lessee

| a) | The Group leases various assets including land use right and buildings. Rental contracts are typically made for periods of 2 to 3 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

| b) | The carrying amount of right-of-use assets and the depreciation charge are as follows:

|  | December 31, 2019 |  |  | December 31, 2020 |
|  | Carrying amount |  |  | Carrying amount |
Land use right |  | $ | 123,847 |  |  | $ | 71,379 |
Buildings |  |  | 263,863 |  |  |  | 433,655 |
|  | $ | 387,710 |  |  | $ | 505,034 |

|  | Year ended December 31, |
|  | 2019 |  |  | 2020 |
|  | Depreciation expenses |  |  | Depreciation expenses |
Land use right |  | $ | 51,260 |  |  | $ | 57,679 |
Buildings |  |  | 172,509 |  |  |  | 165,142 |
|  | $ | 223,769 |  |  | $ | 222,821 |

| c) | For the years ended December 31, 2019 and 2020, the additions to right-of-use assets were $409,516 (including addition from sale-and-leaseback transaction $334,348) and $416,641, respectively.

| d) | The information on profit and loss accounts relating to lease contracts is as follows:

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Items affecting profit or loss |  |  |  |  |  |  |  |
Interest expense on lease liabilities |  | $ | 75,696 |  |  | $ | 62,589 |
Expense on short-term lease contracts |  |  | 376,390 |  |  |  | 52,889 |
Gain on lease modification |  |  | - |  |  |  | 1,557 |
Gain on sale and leaseback transactions |  |  | 6,948,966 |  |  |  | - |

| e) | For the years ended December 31, 2019 and 2020, the Group’s total cash outflow for leases were $644,299 and $270,530 respectively.

| f) | In order to effectively utilize the assets and strengthen the Group’s financial structure, the Group signed a share transfer agreement (“The Agreement”) dated August 14, 2018, to dispose its 100% owned subsidiary, Dongguan Yuantai Sports Equipment Co., Ltd. (“Yuantai”) to Shenzhen Meishangsheng Technology Ltd. (“Meishangsheng”) with a total consideration of RMB $142 million (USD $20,390,631), of which RMB $12 million (USD $1,723,152) were agreed to be paid to certain independent third parties as agency commission fee under a separate undertaking dated May 29, 2018. Yuantai was a company that only held land use right and buildings without any operation, did not have an organized workforce and manufacturing equipments. The Group sold the land use right and buildings, consisting Plant I and Plant II, to Meishangsheng and leaseback Plant II with a lease term of 3 years. The fair value of these two plants amounted to RMB$ 129.7 million (USD $18,623,251). Valuations were made using the market approach and replacement cost method which are categorized within Level 3 in the fair value hierarchy. The aforementioned transaction was completed in April 2019 and the Group recognized a gain on disposals of non-current asset held for sale of $6,859,542 for Plant I and a gain from the sale-and-leaseback transaction of $6,948,966 for Plant II. As of December 31, 2019, other receivable of the aforementioned transaction amounted to $2,039,702. In December 2020, the Group agreed with Meishangsheng to offset the other receivable against lease liabilities of sale-and-leaseback and other payables to Meishangsheng. The monthly lease payment for Plant II is RMB $700,000 (USD $103,516), based on the current market rents for similar comparable properties in the same location and condition. The annual lease payment for Plant II is RMB $8,400,000 (USD $1,242,199).

F-23

12. | Short-term loans

|  |  |  |  | Period and |  | Interest rate range |  |
Type of loans |  | December 31, 2019 |  |  | repayment term |  | ( Floating rate ) |  | Collateral
Bank loans |  |  |  |  |  |  |  |  |  |
Bank secured loans |  | $ | 567,120 |  |  | Principal is repayable in June 2020 at maturity. |  | 2.473%~2.85% |  | Restricted bank deposit
Bank unsecured loans |  |  | 100,000 |  |  | Principal is repayable in March 2020 at maturity. |  | 2.473% |  | -
|  | $ | 667,120 |  |  |  |  |  |  |

|  |  |  |  | Period and |  | Interest rate range |  |
Type of loans |  | December 31, 2020 |  |  | repayment term |  | ( Floating rate ) |  | Collateral
Bank loans |  |  |  |  |  |  |  |  |  |
Bank secured loans |  | $ | 2,041,646 |  |  | Principal is repayable in April 2021 at maturity. |  | 1.69%~2.60% |  | Restricted bank deposit Restricted time deposit
Bank unsecured loans |  |  | 702,000 |  |  | Principal is repayable in July 2021 at maturity. |  | 1.75%~2.325% |  | -
|  | $ | 2,743,646 |  |  |  |  |  |  |

| a) | Interest expense recognized in profit or loss amounted to $9,502 and $45,625 for the years ended December 31, 2019 and 2020, respectively.

| b) | All short-term loans were guaranteed by key management.

13. | Other payables

|  | December 31, 2019 |  |  | December 31, 2020 |
Professional service fees payable |  | $ | 1,793,200 |  |  | $ | 1,844,400 |
Social security and provident fund payable |  |  | 1,288,664 |  |  |  | 1,379,340 |
Salaries and bonuses payable |  |  | 827,917 |  |  |  | 821,937 |
Processing cost payable |  |  | 2,259,885 |  |  |  | 735,119 |
Mold and toolings payable |  |  | 442,568 |  |  |  | - |
Employees’compensation payable |  |  | 41,857 |  |  |  | 63,861 |
Other expense payable |  |  | 993,010 |  |  |  | 2,637,254 |
|  | $ | 7,647,101 |  |  | $ | 7,481,911 |

The Company corrected its opening balance of shareholders’ equity account on January 1, 2019 and reversed the dividend payable to one of its former shareholders in the amount of $108,182 as the Company has settled the liability with the former shareholder in prior periods and has no obligation to make the payment.

F-24

14. | Long-term loans

|  |  |  | Interest rate range |  |  |
Type of loans |  | Period and payment term |  | ( Floating rate ) |  | December 31, 2020 |
Long-term bank loans |  |  |  |  |  |  |  |
Unsecured loans |  | Borrowing period is from October 12, 2020 to October 12, 2023; interest is repayable monthly；principal is repayable monthly |  | 0.66%～0.94% |  | $ | 663,000 |
Less: Current portion |  |  |  |  |  |  | (234,000 | )
|  |  |  |  |  | $ | 429,000 |

All long-term loans were guaranteed by key management.

F-25

15. | Pensions

Defined contribution plans

| a) | The Company’s subsidiaries in Taiwan have established a defined contribution pension plan (the “Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the Plan, the Company’s Taiwan subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

| b) | The subsidiaries in mainland China have defined contribution pension plans and contribute monthly an amount equal to 13% of employees’ monthly salaries and wages to an independent fund administered by a government agency. The plan is administered by the government of mainland China. Other than the monthly contributions, the Group does not have further pension liabilities.

| c) | The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2019 and 2020 were $685,529 and $106,369, respectively. As a result of the coronavirus epidemic in China in early 2020, the local government exempted the pension insurance premiums for a period of eleven months from February 2020.

16. | Share-based payment

| a) | For the year ended December 31, 2020, the Group’s share-based payment arrangements was as follows:

Type of arrangement |  | Grant date |  | Quantity granted (shares) |  |  | Fair value per unit |  |  | Contract period |  | Vesting conditions
Bonus shares |  | August 28, 2020 |  |  | 1,000,000 |  |  |  | 1.02 |  |  | 5 years |  | 5 years’ service

On August 28, 2020, New Moon Corporation (New Moon), a shareholder of the Company, an employee of the Company and the Company signed a tripartite talent award agreement. Under the agreement, the Company provides NT$10,000,000 (US$327,600) to the employee for the purchase of 1,000,000 shares of the Company owned by New Moon at NT$10 per share. The employee should return the payment to the Company if the acquisition of the shares could not be completed in thirty days after the payment. Also, the employee should return the shares to New Moon if the employee resigned within five years from the date of the agreement. New Moon should also return the consideration received from the employee to the Company.

The aforementioned bonus shares settled by a shareholder of the Company cannot be transferred during the vesting period, but voting right and dividend right are not restricted. The employee is required to return the shares to the shareholder but not required to return the dividends received if she resigns during the vesting period.

The Company accounted for the shares contributed by New Moon as share-based payment arrangement settled by equity. The NT$10,000,000 (US$327,600) contributed by the Company is accounted for as prepaid cash incentive to the employee and is amortized over the contract period which is five years.

| b) | The expenses incurred on share-based payment transactions for the year ended December 31, 2020 was $46,944.

F-26

17. | Share capital

| a) | As of December 31, 2020, the Company’s authorized capital was $10,879,254, consisting of 35,000,000 shares of ordinary stock, and the paid-in capital was $6,805,098 with a par value of $10 in New Taiwan dollars ($0.31 in US dollars) per share, consisting of 21,892,899 shares of ordinary stock. All proceeds from shares issued have been collected except for the share swap transaction in e).

Movements in the number of the Company’s ordinary shares outstanding are as follows:

|  | 2019 |  |  | 2020 |
January 1 |  |  | 25,000,000 |  |  |  | 20,000,553 |
Stock reacquisition |  |  | (4,999,447 | ) |  |  | - |
Treasury shares reissue |  |  | - |  |  |  | 1,892,346 |
December 31 |  |  | 20,000,553 |  |  |  | 21,892,899 |

| b) | Treasury shares

| i) | Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

|  | 2019 |
|  | Shares |  |  | Amount |
January 1 |  |  | - |  |  | $ | - |
Stock reacquisition |  |  | 4,999,447 |  |  |  | 8,022,078 |
December 31 |  |  | 4,999,447 |  |  | $ | 8,022,078 |

|  | 2020 |
|  | Shares |  |  | Amount |
January 1 |  |  | 4,999,447 |  |  | $ | 8,022,078 |
Treasury shares reissue |  |  | (1,892,346 | ) |  |  | (3,036,445 | )
Treasury shares retirement |  |  | (3,107,101 | ) |  |  | (4,985,633 | )
December 31 |  |  | - |  |  | $ | - |

| c) | To enhance the best interest of shareholders, the Company repurchased the shares (treasury shares) amounting to $8,022,078, consisting of 4,999,447 shares at carrying amount in 2019.

| d) | On December 25, 2020, the Board of Directors resolved to issue 1,054,293 shares (4.2% of the total ordinary share capital issued) of the treasury shares it repurchased in 2019 (with book value of $1,691,712) to one of the Group’s key management as consideration for repaying the loans from the key management. The book value of the loans from the key management amounted to $1,779,502. The ordinary shares issued have the same rights as other shares in issue.

| e) | On December 25, 2020, the Board of Directors resolved to issue 838,053 shares (3.4% of the total ordinary share capital issued) of the treasury shares repurchased in 2019 (with book value of $1,344,733) to the shareholders of Bohong Techonology Jiangsu Co., Ltd. (Bohong) to obtain 100% of its ordinary shares through a share swap. On December 30, 2020, the Group signed the share swap agreement with the shareholders of Bohong. The ordinary shares issued have the same rights as other shares in issue. Bohong was a company that only held land use right without any operation, did not have an organized workforce and manufacturing equipment. As a result, the Group treated this transaction as an asset acquisition. The fair value of the land use right amounted to $1,410,724. Valuation for land use right was made using market approach which is categorized within Level 3 in the fair value hierarchy. As of December 31, 2020 and September 30, 2021 (the date the consolidated financial statements is authorized for issuance), the issued shares were shown as other non-current assets since the share swap registration of the shareholders of Bohong was not yet completed.

F-27

| f) | To enhance the Company’s capital structure, the Board of Directors resolved to retire all treasury shares amounting to $4,985,633 thousand (3,107,101 shares) on December 25, 2020. The retirement was approved by the regulatory authority and the capital change registration was completed on December 30, 2020.

18. | Capital surplus

Pursuant to the Cayman Islands Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

|  | 2019 |
|  | Share premium |
January 1 and December 31 |  | $ | 9,520,046 |

|  | 2020 |
|  | Share premium |  |  | Share-based payments |  |  | Total |
January 1 |  | $ | 9,520,046 |  |  | $ | - |  |  | $ | 9,520,046 |
Employee bonus shares |  |  | - |  |  |  | 46,944 |  |  |  | 46,944 |
Treasury shares reissue |  |  | 153,780 |  |  |  | - |  |  |  | 153,780 |
Treasury shares retirement |  |  | (1,323,526 | ) |  |  | - |  |  |  | (1,323,526 | )
December 31 |  | $ | 8,350,300 |  |  | $ | 46,944 |  |  | $ | 8,397,244 |

19. | Accumulated deficit / retained earnings

| a) | In accordance with the Articles of Incorporation of the Company, the Directors may, in their absolute discretion, declare dividends and distributions on Shares in issue and authorize payment of the dividends or distributions out of the funds of the Company lawfully available therefor. The Board of Directors may from time to time declare interim dividends to the shareholders. Before the declaration of an additional dividend distribution, the Board of Directors may set aside provision from the earnings as it deems appropriate to pay any unforeseen expense or to adjust dividends or for any other purpose to be met by using the earnings based on its discretion, and before such use, the provision may, at the same discretion, be used temporarily in the business of the Company or to invest in such investments as the Board of Directors may at any time as it deems appropriate.

| b) | As of December 31, 2019 and 2020, the Company had accumulated deficit and thus had no earnings for distribution.

20. | Operating revenue

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Revenue from contracts with customers |  |  |  |  |  |  |  |
Goods sales |  | $ | 22,640,669 |  |  | $ | 22,178,572 |
Processing |  |  | 146,282 |  |  |  | - |
|  | $ | 22,786,951 |  |  | $ | 22,178,572 |

F-28

| a) | Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services at a point in time in the following major product lines and geographical regions:

|  | US |  |  | Asia |  |  | Europe |  |  |  |  |  |  |
2019 |  | Bicycle frame |  |  | Racket |  |  | Bicycle frame |  |  | Racket |  |  | Bicycle frame |  |  | Racket |  |  | Others |  |  | Total |
Revenue from external customer contracts |  | $ | 164,354 |  |  | $ | 906,651 |  |  | $ | 10,273,365 |  |  | $ | 4,048,547 |  |  | $ | 4,356,930 |  |  | $ | 3,008,837 |  |  | $ | 28,267 |  |  | $ | 22,786,951 |

|  | US |  |  | Asia |  |  | Europe |  |  |  |  |  |  |
2020 |  | Bicycle frame |  |  | Racket |  |  | Bicycle frame |  |  | Racket |  |  | Bicycle frame |  |  | Racket |  |  | Others |  |  | Total |
Revenue from external customer contracts |  | $ | - |  |  | $ | 1,935,333 |  |  | $ | 8,063,891 |  |  | $ | 3,186,704 |  |  | $ | 6,211,839 |  |  | $ | 2,758,477 |  |  | $ | 22,328 |  |  | $ | 22,178,572 |

| b) | Contract assets and liabilities

i.) The Group has recognized the following revenue-related contract assets and liabilities:

|  | January 1, 2019 |  |  | December 31, 2019 |  |  | December 31, 2020 |
Contract liabilities – receipts in advance |  | $ | 197,546 |  |  | $ | 986,139 |  |  | $ | 601,351 |

ii) Revenue recognized that was included in the contract liability balance at the beginning of the period:

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Contract liabilities – receipts in advance |  | $ | 197,546 |  |  | $ | 852,642 |

21. | Other income and expenses

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Losses on disposals of property, plant and equipment |  | $ | (221,065 | ) |  | $ | (71,801 | )
Gains arising from lease modifications |  |  | - |  |  |  | 1,557 |
Government grants |  |  | 22,645 |  |  |  | 30,783 |
Others |  |  | (7,384 | ) |  |  | 53,152 |
|  | $ | (205,804 | ) |  | $ | 13,691 |

22. | Interest income

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Interest income from bank deposits |  | $ | 9,502 |  |  | $ | 2,802 |

23. | Other gains and losses

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Foreign exchange gains |  | $ | 514,890 |  |  | $ | 180,463 |

| 24. | Finance costs

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Interest expense |  |  |  |  |  |  |  |
Bank loans |  | $ | 12,946 |  |  | $ | 49,097 |
Lease liabilities |  |  | 75,696 |  |  |  | 62,589 |
Loans from related parties |  |  | 401,939 |  |  |  | 306,237 |
|  | $ | 490,581 |  |  | $ | 417,923 |

F-29

25. | Expenses by nature

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Raw materials and supplies used |  | $ | 11,009,762 |  |  | $ | 7,944,086 |
Employee benefit expenses |  |  | 10,056,780 |  |  |  | 8,388,842 |
Fuel and utility expense |  |  | 1,247,762 |  |  |  | 1,214,071 |
Short-term rent expenses |  |  | 376,390 |  |  |  | 52,889 |
Freight expenses |  |  | 613,933 |  |  |  | 931,768 |
Professional service expenses |  |  | 299,058 |  |  |  | 322,783 |
Expected credit losses |  |  | 230,471 |  |  |  | 81,947 |
Loss on physical inventory observation |  |  | 485,891 |  |  |  | 158,467 |
Reversal of inventory valuation |  |  | (240,482 | ) |  |  | (159,460 | )
Depreciation expenses |  |  | 780,548 |  |  |  | 865,824 |
Amortization expenses |  |  | 36,851 |  |  |  | 29,534 |
Other expenses |  |  | 360,896 |  |  |  | 661,435 |
|  | $ | 25,257,860 |  |  | $ | 20,492,186 |

26. | Employee benefit expenses

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Wages and salaries |  | $ | 8,464,283 |  |  | $ | 7,637,368 |
Labour and health insurance fees |  |  | 800,819 |  |  |  | 307,441 |
Pension |  |  | 685,529 |  |  |  | 106,369 |
Share-based payments |  |  | - |  |  |  | 46,944 |
Other personnel expenses |  |  | 106,149 |  |  |  | 290,720 |
|  | $ | 10,056,780 |  |  | $ | 8,388,842 |

27. | Income tax

| a) | Income tax expense

Components of income tax expense:

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Current income tax: |  |  |  |  |  |  |  |
Current income tax on profits for the period |  | $ | 14,387 |  |  | $ | 387,528 |
Tax on unappropriated retained earnings |  |  | 872 |  |  |  | - |
Prior year income tax under (over) estimation |  |  | 97,333 |  |  |  | (2,196 | )
Total current income tax |  |  | 112,592 |  |  |  | 385,332 |
Deferred income tax: |  |  |  |  |  |  |  |
Origination and reversal of temporary differences |  |  | 47,215 |  |  |  | (30,059 | )
Income tax (benefit) expense |  | $ | 159,807 |  |  | $ | 355,273 |

Tax expenses were computed based on the rates applicable in the respective countries where the Group entities operate.

F-30

| b) | Reconciliation between income tax expense and accounting profit

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Tax calculated based on profit before tax and statutory tax rate |  | $ | 2,563,130 |  |  | $ | 42,792 |
Effects from adjustments based on tax regulation |  |  | (3,057,370 | ) |  |  | 314,677 |
Taxable loss not recognized as deferred tax assets |  |  | 555,842 |  |  |  | - |
Prior year income tax under (over) estimation |  |  | 97,333 |  |  |  | (2,196 | )
Tax on unappropriated retained earnings |  |  | 872 |  |  |  | - |
Income tax (benefit) expense |  | $ | 159,807 |  |  | $ | 355,273 |

Effect from adjustments based on tax regulation for the year ended December 31, 2019 was mainly due to non-taxable gain of the share transfer agreement in Note 11 f).

Effect from adjustments based on tax regulation for the year ended December 31, 2020 was mainly due to non-taxable income and expenses disallowed by tax regulation.

| c) | Amounts of deferred tax assets or liabilities as a result of temporary differences, tax losses and investment tax credits are as follows:

|  | 2019 |
|  | January 1 |  |  | Recognized in profit or loss |  |  | December 31 |
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |
Unrealize exchange losses |  | $ | 4,909 |  |  | $ | (4,909 | ) |  | $ | - |
Loss on inventories |  |  | 339,999 |  |  |  | (50,521 | ) |  |  | 289,478 |
Deferred employee benefits |  |  | 5,852 |  |  |  | (1,849 | ) |  |  | 4,003 |
Tax losses |  |  | - |  |  |  | 17,819 |  |  |  | 17,819 |
|  | $ | 350,760 |  |  | $ | (39,460 | ) |  | $ | 311,300 |
Deferred tax liabilities |  |  |  |  |  |  |  |  |  |  |  |
Unrealized exchange gain |  | $ | - |  |  | $ | (7,755 | ) |  | $ | (7,755 | )
|  | $ | 350,760 |  |  | $ | (47,215 | ) |  | $ | 303,545 |

|  | 2020 |
|  | January 1 |  |  | Recognized in profit or loss |  |  | December 31 |
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |
Unrealize exchange losses |  | $ | - |  |  | $ | 55,724 |  |  | $ | 55,724 |
Loss on inventories |  |  | 289,478 |  |  |  | (37,447 | ) |  |  | 252,031 |
Deferred employee benefits |  |  | 4,003 |  |  |  | (1,897 | ) |  |  | 2,106 |
Tax losses |  |  | 17,819 |  |  |  | (17,819 | ) |  |  | - |
Disaster loss |  |  | - |  |  |  | 408 |  |  |  | 408 |
Allowance for bad debts |  |  | - |  |  |  | 55,640 |  |  |  | 55,640 |
Unused vacation bonus |  |  | - |  |  |  | 2,100 |  |  |  | 2,100 |
|  | $ | 311,300 |  |  | $ | 56,709 |  |  | $ | 368,009 |
Deferred tax liabilities |  |  |  |  |  |  |  |  |  |  |  |
Unrealized exchange gain |  | $ | (7,755 | ) |  | $ | (26,650 | ) |  | $ | (34,405 | )
|  | $ | 303,545 |  |  | $ | 30,059 |  |  | $ | 333,604 |

F-31

| d) | Expiration dates of unused tax losses and amounts of unrecognized deferred tax assets are as follows:

December 31, 2019
Year incurred |  | Unused amount |  |  | Expiry year |
2019 |  | $ | 2,990,425 |  |  |  | 2024 |
2018 |  |  | 40,884 |  |  |  | 2023 |

| e) | The Company has not recognized deductible temporary differences associated with investment in subsidiaries as deferred tax assets. As of December 31, 2019 and 2020, the amounts of temporary difference unrecognized as deferred tax assets were $7,758,627 and $7,508,950, respectively.

| f) | The Company has not recognized taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2019 and 2020, the amounts of temporary difference unrecognized as deferred tax liabilities were $146,647 and $1,879,742, respectively.

| g) | The Company’s foreign subsidiaries file income tax returns in the countries where their operations are located. Generally, these countries have statutes of limitations ranging from 5 to 6 years. The statute of limitations has closed through the following years in these major jurisdictions: China (2014), Taiwan (2014) and Hong kong (2013).

| h) | The Group principally operates business in Taiwan, China and Hong Kong. The tax rate for above countries was 20%, 25% and 16.5%, respectively.

28. | Earnings per share

|  | Year ended December 31, 2019 |
|  | Amount after income tax |  |  | Weighted average number of ordinary shares outstanding |  |  | Earnings per share (in dollars) |
Basic and diluted earnings per share |  |  |  |  |  |  |  |  |  |  |  |
Profit attributable to the parent |  | $ | 11,005,799 |  |  |  | 25,000,000 |  |  | $ | 0.44 |

|  | Year ended December 31, 2020 |
|  | Amount after income tax |  |  | Weighted average number of ordinary shares outstanding |  |  | Earnings per share (in dollars) |
Basic and diluted earnings per share |  |  |  |  |  |  |  |  |  |  |  |
Profit attributable to the parent |  | $ | 1,110,146 |  |  |  | 20,000,553 |  |  | $ | 0.06 |

| a) | The weighted average numbers of ordinary shares outstanding in 2019 and 2020 have been calculated weighted averagely by considering acquisition, reduction and retirement of treasury shares. Refer to Note 17.

| b) | There were no potentially dilutive instruments in 2019 and 2020.

F-32

29. | Supplementary cash flow information

| a) | Investing activities with partial cash payments

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Purchase of property, plant and equipment |  | $ | 1,080,890 |  |  | $ | 676,297 |
Less: Opening balance of prepaid on equipment |  |  | (36,350 | ) |  |  | (35,859 | )
Add: Ending balance of prepaid on equipment |  |  | 35,859 |  |  |  | 18,828 |
Cash paid during the year |  | $ | 1,080,399 |  |  | $ | 659,266 |

| b) | Financing activities with no cash flow effects

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Other payables being converted to capital stocks- treasury shares reissue |  | $ | - |  |  | $ | 1,691,712 |
Asset acquisition through share swap |  |  | - |  |  |  | 1,344,733 |
|  | $ | - |  |  | $ | 3,036,445 |

30. | Changes in liabilities from financing activities

|  | 2019 |
|  | Short-term loans |  |  | Other payables to related parties |  |  | Long-term notes and accounts payable to related parties |  |  | Lease liabilities |  |  | Total liabilities from financing activities |
January 1 |  | $ | 325,100 |  |  | $ | 1,130,594 |  |  | $ | 1,838,255 |  |  | $ | 170,308 |  |  | $ | 3,464,257 |
Changes in cash flow from financing activities |  |  | 323,500 |  |  |  | 770,250 |  |  |  | 73,916 |  |  |  | (192,213 | ) |  |  | 975,453 |
Changes in additions to right-of-use assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 75,168 |  |  |  | 75,168 |
Change in sale-and-leaseback transaction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,189,240 |  |  |  | 3,189,240 |
Offset lease liabilities against sale-and-leaseback transaction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (494,899 | ) |  |  | (494,899 | )
Exchange difference |  |  | 18,520 |  |  |  | 25,396 |  |  |  | 13,418 |  |  |  | (46,320 | ) |  |  | 11,014 |
December 31 |  | $ | 667,120 |  |  | $ | 1,926,240 |  |  | $ | 1,925,589 |  |  | $ | 2,701,284 |  |  | $ | 7,220,233 |

|  | 2020 |
|  | Short-term loans |  |  | Other payables to related parties |  |  | Long-term loans (including current portion) |  |  | Long-term notes and accounts payable to related parties |  |  | Lease liabilities |  |  | Total liabilities from financing activities |
January 1 |  | $ | 667,120 |  |  | $ | 1,926,240 |  |  | $ | - |  |  | $ | 1,925,589 |  |  | $ | 2,701,284 |  |  | $ | 7,220,233 |
Changes in cash flow from financing activities |  |  | 2,011,783 |  |  |  | (1,137,495 | ) |  |  | 638,444 |  |  |  | (498,894 | ) |  |  | (155,052 | ) |  |  | 858,786 |
Changes in debt for equity swap |  |  | - |  |  |  | (356,464 | ) |  |  | - |  |  |  | (1,423,038 | ) |  |  | - |  |  |  | (1,779,502 | )
Changes in additions to right-of-use assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 416,641 |  |  |  | 416,641 |
Changes in lease modification |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (45,376 | ) |  |  | (45,376 | )
Offset lease liabilities against sale-and-leaseback transaction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,656,265 | ) |  |  | (1,656,265 | )
Exchange difference |  |  | 64,743 |  |  |  | 10,192 |  |  |  | 24,556 |  |  |  | (3,657 | ) |  |  | 156,940 |  |  |  | 252,774 |
December 31 |  | $ | 2,743,646 |  |  | $ | 442,473 |  |  | $ | 663,000 |  |  | $ | - |  |  | $ | 1,418,172 |  |  | $ | 5,267,291 |

F-33

31. | Related party transactions

| a) | Parent and ultimate controlling party

The Group is controlled by Jing-Bin Chiang and his family who directly and indirectly owns 74.50% and 55.81% equity interest in the Company as of December 31, 2019 and 2020, respectively.

| b) | Names of related parties and relationship

Names of related parties |  | Relationship with the Company
NEW MOON CORPERATION (NEW MOON) |  | The Chairman of NEW MOON is key management of the Company.
Bohong Techonology Jiansgu Co., Ltd. (Bohong) |  | The Chairman of Bohong is key management of the Company.
Jing-Bin Chiang |  | Key management
Yu-Ning Chiang |  | Key management

| c) | Significant related party transactions

| i) | Receivables from related parties:

|  | December 31, 2019 |
Other receivables |  |  |  |
NEW MOON |  | $ | 1,800 |
Bohong |  |  | 48,030 |
|  | $ | 49,830 |

| ii) | Payables to related parties:

|  | December 31, 2019 |
Other payables |  |  |  |
Key management |  | $ | 10,182 |

| iii) | Loans from related parties:

| 1. | Outstanding balance:

|  | December 31, 2019 |  |  | December 31, 2020 |
Other payables |  |  |  |  |  |  |  |
NEW MOON |  | $ | 202,800 |  |  | $ | - |
Key management |  |  | 1,723,440 |  |  |  | 442,473 |
|  | $ | 1,926,240 |  |  | $ | 442,473 |

|  | December 31, 2019 |
Long-term other payables |  |  |  |
NEW MOON |  | $ | 1,280,220 |
Key management |  |  | 645,369 |
|  | $ | 1,925,589 |

| 2. | Interest expense

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Key management |  | $ | 189,177 |  |  | $ | 203,900 |
NEW MOON |  |  | 138,682 |  |  |  | 102,337 |
|  | $ | 327,859 |  |  | $ | 306,237 |

| 1) | The loans from Key management are repayable in August 2021 at the maturity and carry interest at 5% to 10% per annum for the years ended December 31, 2019 and 2020, respectively.

| 2) | The loans from NEW MOON are repayable in December 2021 at the maturity and carry interest at 10% per annum for the years ended December 31, 2019 and 2020, respectively.

| d) | Provision of guarantees by related parties:

|  | December 31, 2019 |  |  | December 31, 2020 |
Key management |  | $ | 647,000 |  |  | $ | 6,756,265 |

| i) | Refer to Note 12 and 14 for the provision of guarantees by the Group’s key management.

| ii) | The provision of guarantees by key management as of December 31, 2020 was inclusive of unused credit lines from bank loans.

| e) | Key management compensation

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Salaries and other short-term employee benefits |  | $ | 376,315 |  |  | $ | 415,503 |
Post-employment benefits |  |  | 4,926 |  |  |  | 9,734 |
Share-based payments |  |  | - |  |  |  | 46,944 |
|  | $ | 381,241 |  |  | $ | 472,181 |

| f) | Refer to Note 17 d) for the issuance of treasury shares to one of the Group’s key management.

F-34

32. | Pledged assets

The Group’s assets pledged as collateral are as follows:

|  | Book value |  |  |
Pledged asset |  | December 31, 2019 |  |  | December 31, 2020 |  |  | Purpose
Financial assets at amortized cost |  | $ | 66,816 |  |  | $ | 771,592 |  |  | Short-term bank loans

33. | Significant contingent liabilities and unrecognized contract commitments

None.

34. | Significant events after the reporting period

On February 28, 2019, Bohong entered into the State-Owned Construction Land Use Right Assignment Contract (the “Assignment Contract”) with Hanjiang Branch of Yangzhou Land and Resource Bureau (the “Hanjiang Land Bureau”) for a land parcel in Yangzhou. According to the Assignment Contract, Bohong shall commence construction prior to August 28, 2020 or such later date as agreed by Hanjiang Land Bureau and complete the construction project on or prior to August 28, 2022 without granting any extension. Pursuant to the Assignment Contract, if Bohong fails to commence construction or complete the construction project on the scheduled date or a later date as agreed by Hanjiang Land Bureau, for each day of delay, Bohong shall pay Hanjiang Land Bureau a liquidated damage equivalent to 0.1% of the total purchase price for the right to use the state-owned construction land. Bohong has not been able to commence construction as a result of the coronavirus epidemic and may be exposed to a liquidated damage in the amount of approximately RMB $4.3 million (USD $670,822) calculated as of September 30, 2021. Refer to Note 17 e) for more discussion on the acquisition of Bohong.

35. | Restrictions and parent company financial information

Under existing foreign exchange regulations of the People’s Republic of China (“PRC”), payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. However, approval from or registration or filings with competent government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.

Considering that such Restriction on the flow of cash from the Subsidiaries in China to J-Star Holding Co., Ltd., the stand-alone condensed balance sheets, condensed statements of comprehensive income, and condensed statements of cash flows of J-Star Holding Co., Ltd. are included below.

Condensed balance sheets:

|  | December 31, 2019 |  |  | December 31, 2020 |
|  | Amount (USD) |  |  | Amount (USD) |
ASSETS |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 2,798 |  |  | $ | 83,624 |
Other receivables-related parties |  |  | 3,200 |  |  |  | 473,705 |
Prepayments |  |  | 9,557 |  |  |  | 79,757 |
Total current assets |  |  | 15,555 |  |  |  | 637,086 |
Non-current assets: |  |  |  |  |  |  |  |
Investment in subsidiaries |  |  | 8,060,319 |  |  |  | 9,334,781 |
Prepayments for investments |  |  | - |  |  |  | 1,410,724 |
Long-term prepayments |  |  | - |  |  |  | 257,400 |
Total non-current assets |  |  | 8,060,319 |  |  |  | 11,002,905 |
Total assets |  |  | 8,075,874 |  |  |  | 11,639,991 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Other payables |  |  | 7,005 |  |  |  | 30,489 |
Other payables-related parties |  |  | 2,615,701 |  |  |  | 2,390,451 |
Total current liabilities |  |  | 2,622,706 |  |  |  | 2,420,940 |
Non-current liabilities: |  |  |  |  |  |  |  |
Amounts due to key management |  |  | 411,881 |  |  |  | - |
Total liabilities |  |  | 3,034,587 |  |  |  | 2,420,940 |
Shareholders’ equity |  |  |  |  |  |  |  |
Ordinary share (US$0.31 par value per share; 25,000,000 and 35,000,000 shares authorized as of December 31, 2019 and 2020, respectively; 20,000,553 and 21,892,899 shares issued and outstanding as of December 31, 2019 and 2020, respectively) |  |  | 7,770,896 |  |  |  | 6,805,098 |
Capital surplus |  |  | 9,520,046 |  |  |  | 8,397,244 |
Accumulated deficit |  |  | (4,165,476 | ) |  |  | (5,751,639 | )
Other equity interest |  |  | (62,101 | ) |  |  | (231,652 | )
Treasury shares |  |  | (8,022,078 | ) |  |  | - |
Total shareholders’equity |  |  | 5,041,287 |  |  |  | 9,219,051 |
Total equity and liabilities |  | $ | 8,075,874 |  |  | $ | 11,639,991 |

F-35

Condensed statements of comprehensive income:

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
|  | Amount (USD) |  |  | Amount (USD) |
Operating expenses: |  |  |  |  |  |  |  |
Administrative expenses |  | $ | (58,373 | ) |  | $ | (184,149 | )
Other income and expenses |  |  | 1,087 |  |  |  | (21,816 | )
Net operating loss |  |  | (57,286 | ) |  |  | (205,965 | )
Interest income |  |  | 4 |  |  |  | 1 |
Interest expenses |  |  | (153,300 | ) |  |  | (127,903 | )
Share of profit of subsidiaries |  |  | 11,216,381 |  |  |  | 1,444,013 |
Net income attributable to ordinary shareholders |  | $ | 11,005,799 |  |  | $ | 1,110,146 |
Exchange differences on translation of foreign operations |  |  | 5,309 |  |  |  | (169,551 | )
Comprehensive income |  | $ | 11,011,108 |  |  | $ | 940,595 |

Condensed statements of statements of cash flows:

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
|  | Amount (USD) |  |  | Amount (USD) |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |
Profit before tax |  | $ | 11,005,799 |  |  | $ | 1,110,146 |
Adjustments: |  |  |  |  |  |  |  |
Adjustments to reconcile profit (loss): |  |  |  |  |  |  |  |
Cost of share-based payment |  |  | - |  |  |  | 46,944 |
Interest income |  |  | (4 | ) |  |  | (1 | )
Interest expenses |  |  | 153,300 |  |  |  | 127,903 |
Share of profit of subsidiaries accounted for under the equity method |  |  | (11,216,381 | ) |  |  | (1,444,013 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Prepayments |  |  | (4,807 | ) |  |  | - |
Other payables-related parties |  |  | 54,904 |  |  |  | 116,362 |
Other payables |  |  | 7,005 |  |  |  | 23,484 |
Cash outflow generated from operations |  |  | (184 | ) |  |  | (19,175 | )
Interest received |  |  | 4 |  |  |  | 1 |
Net cash flows used in operating activities |  | $ | (180 | ) |  | $ | (19,174 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Increase in other payables to related parties |  |  | - |  |  |  | 100,000 |
Net cash flows from financing activities |  |  | - |  |  |  | 100,000 |
Net (decrease) increase in cash and cash equivalents |  |  | (180 | ) |  |  | 80,826 |
Cash and cash equivalents at beginning of year |  |  | 2,978 |  |  |  | 2,798 |
Cash and cash equivalents at end of year |  | $ | 2,798 |  |  | $ | 83,624 |

Supplementary cash flow information

Financing activities with no cash flow effects

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Other payables being converted to capital stocks- treasury shares reissue |  | $ | - |  |  | $ | 629,055 |

Business activity –

J-Star Holding Co., Ltd. is the holding company of the J-Star Group (the “Group”). The principal activities of J-Star Holding Co., Ltd. is the holding of investments in entities involved mainly in manufacturing and trading business in China, Hong Kong and Taiwan.

Basis of preparation –

Accounting policies adopted in the preparation of this condensed parent company only financial information are the same as those adopted in the consolidated financial statements and described in Note 4 - Summary of significant accounting policies, except that the equity method has been used to account for investments in subsidiaries.

F-36

Investments in subsidiaries –

J-Star Holding Co., Ltd. records its investment in its subsidiaries under the equity method of accounting, such investment is presented on the condensed balance sheets as “Investment in subsidiaries” and share of the subsidiaries’ income as “Share of income in subsidiaries” on the condensed statements of comprehensive income.

As at 31 December 2020 there were no material contingencies at J-Star Holding Co., Ltd.

Distribution to shareholders –

In 2019 and 2020, J-Star Holding Co., Ltd. did not distribute any dividends to its shareholders.

Dividends from subsidiary –

In 2019 and 2020, J-Star Holding Co., Ltd. did not receive any dividends from subsidiary.

36. | Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total loans (including ‘current and non-current loans’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt.

The Company’s strategy, which is unchanged for the reporting periods, is to maintain a reasonable ratio in order to raise capital with reasonable cost. The debt to capital ratios as of December 31, 2019 and 2020 were as follows:

|  | December 31, 2019 |  |  | December 31, 2020 |
Total borrowings |  | $ | 4,518,949 |  |  | $ | 3,849,119 |
Less: Cash and cash equivalents |  |  | (1,563,058 | ) |  |  | (1,336,820 | )
Net debt |  |  | 2,955,891 |  |  |  | 2,512,299 |
Total equity |  |  | 5,041,287 |  |  |  | 9,219,051 |
Total capital |  |  | 7,997,178 |  |  |  | 11,731,350 |
Gearing ratio |  |  | 37 | % |  |  | 21 | %

37. | Financial instruments

| a) | Financial instruments by category

|  | December 31, 2019 |  |  | December 31, 2020 |
Financial assets |  |  |  |  |  |  |  |
Financial assets at amortized cost |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,563,058 |  |  | $ | 1,336,820 |
Financial assets at amortized cost |  |  | 66,816 |  |  |  | 771,592 |
Accounts receivable |  |  | 5,455,635 |  |  |  | 5,118,874 |
Other receivables |  |  | 2,752,788 |  |  |  | 858,556 |
Other receivables due from related parties |  |  | 49,830 |  |  |  | - |
Guarantee deposits paid |  |  | 374,147 |  |  |  | 392,844 |
|  | $ | 10,262,274 |  |  | $ | 8,478,686 |
Financial liability |  |  |  |  |  |  |  |
Financial liabilities at amortized cost |  |  |  |  |  |  |  |
Short-term loans |  | $ | 667,120 |  |  | $ | 2,743,646 |
Notes payable |  |  | 7,364 |  |  |  | 9,046 |
Accounts payable |  |  | 2,899,710 |  |  |  | 3,749,984 |
Other payables |  |  | 7,647,101 |  |  |  | 7,481,911 |
Other payables to related parties |  |  | 1,936,422 |  |  |  | 442,473 |
Long-term loans (including current portion) |  |  | - |  |  |  | 663,000 |
Long-term other payables to related parties |  |  | 1,925,589 |  |  |  | - |
Guarantee deposits received |  |  | 67,510 |  |  |  | 72,239 |
|  | $ | 15,150,816 |  |  | $ | 15,162,299 |
Lease liabilities |  | $ | 2,701,284 |  |  | $ | 1,418,172 |

| b) | Financial risk management policies

| i) | The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

| ii) | Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

F-37

| c) | Significant financial risks and degrees of financial risks

| i) | Market risk

Foreign exchange risk

| 1. | The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD and HKD. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities.

| 2. | Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. Exchange rate risk arising from the difference between various functional currencies and the reporting currency in the consolidated financial statements is centrally managed by the Group’s finance department.

| 3. | The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: USD; other certain subsidiaries’ functional currency: NTD, RMB and HKD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

|  | December 31, 2019 |
|  | Foreign currency amount |  |  | Exchange rate |  |  | Book value (USD) |
(Foreign currency: functional currency) |  |  |  |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
EUR:NTD |  | $ | 37,810 |  |  |  | 33.59 |  |  | $ | 42,363 |
USD:NTD |  |  | 11,813,774 |  |  |  | 29.98 |  |  |  | 11,813,774 |
USD:RMB |  |  | 16,899,439 |  |  |  | 6.96 |  |  |  | 16,899,439 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
EUR:NTD |  | $ | 10,106 |  |  |  | 33.59 |  |  | $ | 11,324 |
USD:NTD |  |  | 9,313,659 |  |  |  | 29.98 |  |  |  | 9,313,659 |
USD:RMB |  |  | 12,682,713 |  |  |  | 6.96 |  |  |  | 12,682,713 |

|  | December 31, 2020 |
|  | Foreign currency amount |  |  | Exchange rate |  |  | Book value (USD) |
(Foreign currency: functional currency) |  |  |  |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
RMB:HKD |  | $ | 235,070 |  |  |  | 1.19 |  |  | $ | 36,127 |
EUR:NTD |  |  | 38,416 |  |  |  | 35.02 |  |  |  | 47,237 |
USD:NTD |  |  | 10,775,247 |  |  |  | 28.48 |  |  |  | 10,775,247 |
USD:RMB |  |  | 23,444,169 |  |  |  | 6.51 |  |  |  | 23,444,169 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
EUR:NTD |  | $ | 10,106 |  |  |  | 35.02 |  |  | $ | 12,427 |
USD:NTD |  |  | 5,004,385 |  |  |  | 28.48 |  |  |  | 5,004,385 |
USD:RMB |  |  | 9,380,725 |  |  |  | 6.51 |  |  |  | 9,380,725 |

| 4. | Total exchange gain (loss), including realized and unrealized, arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2019and 2020, amounted to gain $514,890 and $180,463, respectively.

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| 5. | Analysis of foreign currency market risk arising from significant foreign exchange variation:

|  | Year ended December 31, 2019 |
|  | Sensitivity analysis |
|  | Degree of variation |  |  | Effect on profit or loss |  |  | Effect on other comprehensive income |
(Foreign currency: functional currency) |  |  |  |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
EUR:NTD |  |  | 5 | % |  | $ | 2,118 |  |  | $ | - |
USD:NTD |  |  | 5 | % |  |  | 590,696 |  |  |  | - |
USD:RMB |  |  | 5 | % |  |  | 844,972 |  |  |  | - |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
EUR:NTD |  |  | 5 | % |  | $ | 566 |  |  | $ | - |
USD:NTD |  |  | 5 | % |  |  | 465,689 |  |  |  | - |
USD:RMB |  |  | 5 | % |  |  | 634,136 |  |  |  | - |

|  | Year ended December 31, 2020 |
|  | Sensitivity analysis |
|  | Degree of variation |  |  | Effect on profit or loss |  |  | Effect on other comprehensive income |
(Foreign currency: functional currency) |  |  |  |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
RMB:HKD |  |  | 5 | % |  | $ | 1,806 |  |  | $ | - |
EUR:NTD |  |  | 5 | % |  |  | 2,362 |  |  |  | - |
USD:NTD |  |  | 5 | % |  |  | 538,762 |  |  |  | - |
USD:RMB |  |  | 5 | % |  |  | 1,172,208 |  |  |  | - |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |
Monetary items |  |  |  |  |  |  |  |  |  |  |  |
EUR:NTD |  |  | 5 | % |  | $ | 621 |  |  | $ | - |
USD:NTD |  |  | 5 | % |  |  | 250,219 |  |  |  | - |
USD:RMB |  |  | 5 | % |  |  | 469,036 |  |  |  | - |

Cash flow Interest rate risk

| 1. | The Group’s main interest rate risk arises from short-term loans and long-term loans with variable rates, which expose the Group to cash flow interest rate risk. During 2019 and 2020, the Group’s loans at variable rate were mainly denominated in NTD and USD.

| 2. | The Group’s loans are measured at amortized cost. The loans are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

| 3. | If the borrowing interest rate had increased/decreased by 1% with all other variables held constant, profit, before income tax for the years ended December 31, 2019 and 2020 would have increased/decreased by $6,671 and $34,066, respectively. The main factor is that changes in interest expense result in floating-rate loans.

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| ii) | Credit risk

| 1. | Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of debt instruments stated at amortized cost.

| 2. | The Group manages their credit risk taking into consideration the entire group’s concern. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilization of credit limits is regularly monitored.

| 3. | In line with credit risk management procedure, when the contract payments of the counterparty was past due over 180 days and after repeatedly asking for payment over 180 days, the default has occurred.

| 4. | The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:

If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

| 5. | The Group classifies customer’s accounts receivable in accordance with credit risk on trade and customer type. The Group applies the modified approach using a provision matrix based on the loss rate methodology to estimate expected credit loss under the provision matrix basis.

| 6. | The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.

| 7. | The Group used the forecastability of Taiwan Institute of Economic Research boom observation report to adjust historical and timely information to assess the default possibility of accounts receivable; accounts receivable that are significantly past due are assessed individually for their expected credit losses. On December 31, 2019 and 2020, the loss rate methodology is as follows:

|  | Not past due |  |  | Up to 30 days past due |  |  | 31~90 days past due |  |  | 91~180 days past due |  |  | Over 180 days |  |  | Total |
At December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected loss rate |  |  | 0.00 | % |  |  | 0.04 | % |  |  | 0.14 | % |  |  | 2.28 | % |  |  | 68.60 | % |  |  |  |
Total book value |  | $ | 4,568,628 |  |  | $ | 346,861 |  |  | $ | 147,087 |  |  | $ | 297,811 |  |  | $ | 326,201 |  |  | $ | 5,686,588 |
Loss allowance |  | $ | 62 |  |  | $ | 129 |  |  | $ | 201 |  |  | $ | 6,776 |  |  | $ | 223,785 |  |  | $ | 230,953 |
At December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected loss rate |  |  | 0.02 | % |  |  | 0.21 | % |  |  | 0.44 | % |  |  | 18.36 | % |  |  | 81.96 | % |  |  |  |
Total book value |  | $ | 4,843,098 |  |  | $ | 167,147 |  |  | $ | 28,675 |  |  | $ | 12,317 |  |  | $ | 394,623 |  |  | $ | 5,445,860 |
Loss allowance |  | $ | 832 |  |  | $ | 347 |  |  | $ | 125 |  |  | $ | 2,262 |  |  | $ | 323,420 |  |  | $ | 326,986 |

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| 8. | Movements in relation to the Group applying the modified approach to provide loss allowance for accounts receivable, contract assets and lease payments receivable are as follows:

|  | 2019 |
|  | Accounts receivable |
At January 1 |  | $ | - |
Provision for impairment |  |  | 230,471 |
Effect of foreign exchange |  |  | 482 |
At December 31 |  | $ | 230,953 |

|  | 2020 |
|  | Accounts receivable |
At January 1 |  | $ | 230,953 |
Provision for impairment |  |  | 81,947 |
Effect of foreign exchange |  |  | 14,086 |
At December 31 |  | $ | 326,986 |

| 9. | For investments in debt instruments at amortized cost, the credit rating levels are presented below:

|  | December 31, 2019 |
|  |  |  |  | Lifetime |  |  |  |
|  | 12 months |  |  | Significant increase in credit risk |  |  | Impairment of credit |  |  | Total |
Financial assets at amortized cost |  | $ | 66,816 |  |  | $ | - |  |  | $ | - |  |  | $ | 66,816 |

|  | December 31, 2020 |
|  |  |  |  | Lifetime |  |  |  |
|  | 12 months |  |  | Significant increase in credit risk |  |  | Impairment of credit |  |  | Total |
Financial assets at amortized cost |  | $ | 771,592 |  |  | $ | - |  |  | $ | - |  |  | $ | 771,592 |

| iii) | Liquidity risk

| 1. | Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs.

| 2. | Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

| 3. | The unused credit lines from bank loans of the Group as of December 31, 2019 and 2020 are $0 and $3,349,619, respectively.

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
Floating rate: |  |  |  |  |  |  |  |
Expiring within one year |  | $ | - |  |  | $ | 3,310,619 |
Expiring beyond one year |  |  | - |  |  |  | 39,000 |
|  | $ | - |  |  | $ | 3,349,619 |

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| 4. | The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

December 31, 2019 |  | Less than 1 year |  |  | Between 1 year and 2 year |  |  | Over 2 years |  |  | Total |
Non-derivative financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term loans |  | $ | 671,159 |  |  | $ | - |  |  | $ | - |  |  | $ | 671,159 |
Notes payable |  |  | 7,364 |  |  |  | - |  |  |  | - |  |  |  | 7,364 |
Accounts payable |  |  | 2,899,710 |  |  |  | - |  |  |  | - |  |  |  | 2,899,710 |
Other payables |  |  | 7,647,101 |  |  |  | - |  |  |  | - |  |  |  | 7,647,101 |
Other payables to related parties |  |  | 1,936,422 |  |  |  | - |  |  |  | - |  |  |  | 1,936,422 |
Long-term notes and accounts payable to related parties |  |  | - |  |  |  | - |  |  |  | 1,925,589 |  |  |  | 1,925,589 |
Lease liabilities |  |  | 1,389,659 |  |  |  | 1,277,949 |  |  |  | 205,899 |  |  |  | 2,873,507 |

December 31, 2020 |  | Less than 1 year |  |  | Between 1 year and 2 year |  |  | Over 2 years |  |  | Total |
Non-derivative financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term loans |  | $ | 2,754,470 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,754,470 |
Notes payable |  |  | 9,046 |  |  |  | - |  |  |  | - |  |  |  | 9,046 |
Accounts payable |  |  | 3,749,984 |  |  |  | - |  |  |  | - |  |  |  | 3,749,984 |
Other payables |  |  | 7,481,911 |  |  |  | - |  |  |  | - |  |  |  | 7,481,911 |
Other payables to related parties |  |  | 442,473 |  |  |  | - |  |  |  | - |  |  |  | 442,473 |
Lease liabilities |  |  | 1,068,268 |  |  |  | 358,724 |  |  |  | 35,861 |  |  |  | 1,462,853 |
Long-term loans (including current portion) |  |  | 238,613 |  |  |  | 236,669 |  |  |  | 195,739 |  |  |  | 671,021 |

38. | Fair value information

| a) | The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

| b) | Financial instruments not measured at fair value

The carrying amounts of cash and cash equivalents, current financial assets at amortized cost, accounts receivable, other receivables, other receivables due from related parties guarantee deposits paid, short-term loans, current contract liabilities, notes payable, accounts payable, other payables, other payables to related parties, long-term loans (including current portion), long-term notes and accounts payable to related parties and guarantee deposits received are approximate to their fair values.

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39. | Segment Information

| a) | General information

Management has determined the reportable operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Group considers the business from a product perspective. The Group’s business is segregated into bicycle business, racket business and other business.

| b) | Measurement of segment information

The Board of Directors evaluates the performance of the operating segments based on a measure of profit before income tax.

| c) | Information about segment profit or loss

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

Year ended December 31, 2019 |  | Bicycle frame |  |  | Racket |  |  | Others |  |  | Total |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External customers |  | $ | 14,794,649 |  |  | $ | 7,964,035 |  |  | $ | 28,267 |  |  | $ | 22,786,951 |
Inter-segment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total revenue |  | $ | 14,794,649 |  |  | $ | 7,964,035 |  |  | $ | 28,267 |  |  | $ | 22,786,951 |
Profit before income tax |  | $ | 11,969,151 |  |  | ($ | 567,260 | ) |  | ($ | 236,285 | ) |  | $ | 11,165,606 |
Depreciation expenses |  | $ | 524,707 |  |  | $ | 255,392 |  |  | $ | 449 |  |  | $ | 780,548 |
Interest income |  |  | 4,347 |  |  |  | 5,148 |  |  |  | 7 |  |  |  | 9,502 |
Finance costs |  |  | 324,327 |  |  |  | 165,828 |  |  |  | 426 |  |  |  | 490,581 |

Year ended December 31, 2020 |  | Bicycle frame |  |  | Racket |  |  | Others |  |  | Total |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External customers |  | $ | 14,275,730 |  |  | $ | 7,880,514 |  |  | $ | 22,328 |  |  | $ | 22,178,572 |
Inter-segment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total revenue |  | $ | 14,275,730 |  |  | $ | 7,880,514 |  |  | $ | 22,328 |  |  | $ | 22,178,572 |
Profit before income tax |  | $ | 1,893,547 |  |  | ($ | 436,219 | ) |  | $ | 8,091 |  |  | $ | 1,465,419 |
Depreciation expenses |  | $ | 619,488 |  |  | $ | 245,996 |  |  | $ | 340 |  |  | $ | 865,824 |
Interest income |  |  | 1,807 |  |  |  | 993 |  |  |  | 2 |  |  |  | 2,802 |
Finance costs |  |  | 304,374 |  |  |  | 113,230 |  |  |  | 319 |  |  |  | 417,923 |

| d) | Reconciliation for segment income

Revenue from external customers and profit before income tax reported to the chief operating decision maker are measured using the same method as for revenue and profit before income tax in the financial statements. Thus, no reconciliation is needed.

| e) | Information on products

Please refer to Note 20 for the related information.

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| f) | Geographical information

The Group’s revenue from external customers by location of operations and information about its

non-current assets by location of assets are detailed below.

|  | Year ended December 31, 2019 |  |  | Year ended December 31, 2020 |
|  | Revenue |  |  | Non-current assets |  |  | Revenue |  |  | Non-current assets |
Taiwan |  | $ | 9,857,197 |  |  | $ | 730,501 |  |  | $ | 8,086,376 |  |  | $ | 725,586 |
China |  |  | 636,599 |  |  |  | 3,965,673 |  |  |  | 176,822 |  |  |  | 4,155,603 |
Germany |  |  | 2,351,428 |  |  |  | - |  |  |  | 3,725,203 |  |  |  | - |
France |  |  | 2,562,968 |  |  |  | - |  |  |  | 2,293,421 |  |  |  | - |
USA |  |  | 869,247 |  |  |  | - |  |  |  | 1,888,433 |  |  |  | - |
Japan |  |  | 807,556 |  |  |  | - |  |  |  | 1,783,544 |  |  |  | - |
Singapore |  |  | 2,103,160 |  |  |  | - |  |  |  | 1,181,380 |  |  |  | - |
Australia |  |  | 386,729 |  |  |  | - |  |  |  | 926,126 |  |  |  | - |
Others |  |  | 3,212,067 |  |  |  | 17,671 |  |  |  | 2,117,267 |  |  |  | 1,685,880 |
|  | $ | 22,786,951 |  |  | $ | 4,713,845 |  |  | $ | 22,178,572 |  |  | $ | 6,567,069 |

| g) | Major customer information

Major customer representing at least 10% of net revenue of the Group for the years ended December 31, 2019 and 2020 is as follows:

|  | Year ended December 31, 2019 |  | Year ended December 31, 2020
|  | Revenue |  |  | Segment |  | Revenue |  |  | Segment
A |  | $ | 3,913,508 |  |  | Bicycle frame |  | $ | 3,523,444 |  |  | Bicycle frame
B |  |  | 2,466,519 |  |  | Racket |  |  | 2,071,955 |  |  | Racket
C |  |  | 3,254,970 |  |  | Bicycle frame |  |  | 1,506,534 |  |  | Bicycle frame
|  | $ | 9,634,997 |  |  |  |  | $ | 7,101,933 |  |  |

40. | Effects on initial application of IFRS 16

| a) | IFRS 16, supersedes IAS 17 “Leases” (“IAS 17”) and the related interpretations issued by the Standing Interpretation Committee. The standard requires lessees to recognize a right-of-use asset and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

| b) | The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the “simplified retrospective approach”) when applying IFRSs effective in 2019. Accordingly, the Group increased right-of-use assets and lease liabilities by $170,308 and $170,308, respectively.

| c) | The Group has adopted the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

| i) | Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4 “Determining whether an Arrangement contains a Lease”.

| ii) | The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

| iii) | The accounting for operating leases whose period will end before December 31, 2019 as short-term leases and accordingly, rent expense of $162,299 was recognized for the year ended 2019.

| d) | The Group calculated the present value of lease liabilities by using the incremental borrowing interest rate 2.85%.

| e) | The reconciliation between operating lease commitments for the remaining lease payments under IAS 17 and lease liabilities recognized as of January 1, 2019, measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate is as follows:

Operating lease commitments disclosed by applying IAS 17 as of December 31, 2018 |  | $ | 245,613 |
Less: Short-term leases |  |  | (13,544 | )
Less: Low-value assets |  |  | (57,300 | )
Total lease contracts amount recognized as lease liabilities by applying IFRS 16 on January 1, 2019 |  | $ | 174,769 |
Incremental borrowing interest rate at the date of initial application |  |  | 2.85 | %
Lease liabilities recognized as of January 1, 2019 by applying IFRS 16 |  | $ | 170,308 |

F-44

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

We are a Cayman Islands company. Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against willful default, willful neglect, civil fraud or the consequences of committing a crime. Our articles of association will provide for indemnification of our officers and directors to the maximum extent permitted by law, including for any liability incurred in their capacities as such, except through their own actual fraud, willful negligence or default.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.

During the past three years, we have issued the following securities. We believe that each of the following issuances was exempt from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No underwriters were involved in these issuances of securities and no underwriting commissions were paid in connection therewith.

Purchaser |  | Date of Issuance |  | Number of Securities |  | Consideration |  | Underwriting Discount and Commission
NEW MOON CORPORATION |  | September 30, 2019 |  | 10,251,947 |  | Nil |  | -
NEW MOON CORPORATION |  | January 10, 2020 |  | 5,252,500 |  | Nil |  | -
NEW MOON CORPORATION |  | August 12, 2020 |  | 2,863,840 |  | Nil |  | -
NEW MOON CORPORATION |  | August 20, 2020 |  | 1,856,598 |  | Nil |  | -
NEW MOON CORPORATION |  | September 30, 2020 |  | 856,598 |  | Nil |  | -
NEW MOON CORPORATION |  | December 30, 2020 |  | 377,124 |  | USD585,000.00 from total paid-in capital of USD1,300,000.00 in Bohong Technology |  | -
CHIANG Jing-Bin |  | November 6, 2020 |  | 1,054,293 |  | NTD51,133,251 |  | -
CHIANG Jing-Bin |  | December 18, 2020 |  | 375,000 |  | Nil |  | -
STAR CENTURION LIMITED |  | August 15, 2020 |  | 2,388,660 |  | Nil |  | -
RADIANT FAITH LIMITED |  | August 20, 2020 |  | 2,500,000 |  | Nil |  | -
GLITTER GROUP CO., LTD |  | August 12, 2020 |  | 2,388,660 |  | Nil |  | -
ABICO ASIA Capital Corporation |  | December 18, 2020 |  | 975,000 |  | Nil |  | -
Sendai Investments Company Inc. |  | December 30, 2020 |  | 251,416 |  | USD390,000.00 from total paid-in capital of USD1,300,000.00 in Bohong Technology |  | -
Barium Glory Financial Ltd. |  | December 30, 2020 |  | 209,513 |  | USD325,000 from total paid-in capital of USD1,300,000.00 in Bohong Technology |  | -
J-Star Holding Co., Ltd. |  | January 10, 2020 |  | 4,999,447 |  | Nil |  | -
J-Star Holding Co., Ltd. |  | November 6, 2020 |  | 3,945,154 |  | Nil |  | -
J-Star Holding Co., Ltd. |  | December 30, 2020 |  | 3,107,101 |  | Nil |  | -
HSU Chung-Haw |  | August 20, 2020 |  | 100,000 |  | Nil |  | -
CHEN Chu-Jhen |  | August 20, 2020 |  | 1,000,000 |  | Nil |  | -
CHAN CHIH LIMITED |  | September 30, 2020 |  | 1,000,000 |  | Nil |  | -

ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

See Exhibit Index of this registration statement.

The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading.

(b) Financial Statement Schedules

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.

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ITEM 9. UNDERTAKINGS.

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i. To include any prospectus required by Section 10(a)(3) of the Securities Act;

ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement;

iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) To file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F” at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.

(5) That, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(6) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(7) That, for the purpose of determining liability under the Securities Act to any purchaser:

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Each prospectus filed by the registrant pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(8) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the placement method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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EXHIBIT INDEX

Exhibit No. |  | Description of document
1.1* |  | Form of Underwriting Agreement
3.1 |  | Memorandum and Articles of Association, as currently in effect
3.2* |  | Amended and Restated Memorandum and Articles of Association (effective upon closing of the offering)
4.1* |  | Registrant’s Specimen Certificate for Ordinary Shares
4.2* |  | Form of Representative’s Warrants
5.1* |  | Opinion of Ogier as to the legality of the shares
5.2* |  | Opinion of Loeb & Loeb LLP as to the legality of the underwriter’s warrants
5.3* |  | Opinion of L&L-Leaven, Attorneys-at-Law, as to certain PRC Legal Matters
5.4* |  | Opinion of Lee and Li, Attorneys-at-Law, as to certain Taiwan Legal Matters
10.1 |  | Unofficial English Translation of Joint Investment Agreement dated April 23, 2021, by and among Mr. Frédéric Sallet, Christophe Quiniou, Le Gallion, Star Leader Trading Limited and 6ème Sens Immobilier – Investissement.
10.2 |  | Unofficial English Translation of Leasing Agreement, dated August 7, 2020, by and among Farglory Life Insurance Inc. and TW YMA.
10.3 |  | Unofficial English Translation of Leasing Agreement, dated April 21, 2020, by and among Feng-Yuan Jiang and TW YMA.
10.4 |  | Unofficial English Translation of Leasing Agreement, dated February 26, 2019, by and among Dongguan Yuantai and Dongguan YMA.
10.5 |  | Unofficial English Translation of Leasing Agreement, dated February 26, 2019, by and among Dongguan Yuantai and Dongguan YMA.
10.6 |  | Unofficial English Translation of State-owned Land Use Assignment Contract, dated February 28, 2019, by and among Bohong Technology and Yangzhou Bureau of Land and Resources.
10.7 |  | Unofficial English Translation of Comprehensive Credit Loan Agreement, dated May 10, 2021, by and among Mega International Commercial Bank Co., Ltd. and TW YMA, in respect of a loan in the amount of NTD10 million.
10.8* |  | Unofficial English Translation of Credit Agreement, dated March 29, 2021, by and among Taishin International Bank and TW YMA, in respect of a loan in the amount of NTD30 million.
10.9 |  | Unofficial English Translation of Letter of Guarantee, dated March 29, 2021, by and among Taishin International Bank and Mr. Jing-Bin Chiang, in respect of a loan in the amount of NTD30 million granted to TW YMA.
10.10 |  | Unofficial English Translation of Collateral Provision Agreement, dated March 29, 2021, by and among Taishin International Bank, Mr. Jing-Bin Chiang and TW YMA.
10.11 |  | Bank Facility Letter, dated March 4, 2021, by and among Taishin International Bank Co., Ltd., Star Leader, J-Star, TW YMA and Mr. Jing-Bin Chiang, in respect of a loan in the amount of US$1.2 million.
10.12 |  | Unofficial English Translation of Deed of Guarantee, dated February 11, 2020, by and among King’s Town Bank Co. Ltd. and Mr. Jing-Bin Chiang, in respect of a loan in the amount of NTD10 million granted to TW YMA.
21.1 |  | List of Subsidiaries of the Registrant
23.1* |  | Consent of PricewaterhouseCoopers Taiwan.
23.2* |  | Consent of Ogier (included in Exhibits 5.1).
23.3* |  | Consent of Loeb & Loeb LLP (included in Exhibit 5.2).
23.4* |  | Consent of L&L-Leaven, Attorneys-at-Law (included in Exhibit 5.3).
23.5* |  | Consent of Lee and Li, Attorneys-at-Law (included in Exhibit 5.4).
24.1* |  | Power of Attorney (included in signature page hereto)
99.1* |  | Consent of Ching-Chou Huang.
99.2* |  | Consent of Shen-Huei Wang.
99.3* |  | Consent of Ping-Hong Lin.

* | To be filed by amendment.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Taichung City, Taiwan, on [______], 2021.

| J-Star Holding Co., Ltd.

| By: |
| Name: | Jing-Bin Chiang
| Title: | Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jing-Bin Chiang and [ ] [his or her] true and lawful attorney-in-fact, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his or her substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this amended Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature |  | Title |  | Date
|  | Chairman, Chief Executive Officer |  | , 2021
Jing-Bin Chiang |  | (Principal Executive Officer) and Director |  |
|  | Chief Financial Officer |  | , 2021
Wan-Tzu Chen |  | (Principal Financial and Accounting Officer) |  |
|  | Director |  | , 2021
Ting-Pang Sung |  |  |  |
|  | Independent Director |  | , 2021
Ching-Chou Huang |  |  |  |
|  | Independent Director |  | , 2021
Shen-Huei Wang |  |  |  |
|  | Independent Director |  | , 2021
Ping-Hong Lin |  |  |  |

SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of J-Star Holding Co., Ltd. has signed this registration statement or amendment thereto in City of Newark, State of Delaware on [______], 2021.

| PUGLISI & ASSOCIATES

| By: |
| Name: |
| Title: |

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