TIANCI INTERNATIONAL, INC. 10-K
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM 10-K
(Mark One)
FOR THE FISCAL YEAR ENDED JULY 31, 2024
For the transition period from _____ to _____
Commission File No. 333-184061
TIANCI INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
(Address of Principal Executive Offices)
Securities Registered Pursuant to Section 12(b)
of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
None None Not Applicable
Securities Registered Pursuant to Section
12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 406 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company. or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated Filer ☐ Accelerated Filer ☐
Non-accelerated Filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 31, 2024 (the last business day of the most recently
completed second fiscal quarter) the aggregate market value of the common stock held by non-affiliates was $4,450,320.
As of October 21, 2024, there were 14,781,803 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED
This Annual Report contains certain forward-looking
statements regarding Tianci International, Inc., its business and financial prospects. All statements that address events or developments
that we expect or anticipate will occur in the future are forward-looking statements. These statements represent Management’s best
estimate of what will happen. Nevertheless, there are numerous risks and uncertainties that could cause our actual results to differ dramatically
from the results suggested in this Report, including the contingencies described in this Report under Item 1A titled “Risk Factors”.
Because these and other risks may cause the Company’s
actual results to differ from those anticipated by Management, the reader should not place undue reliance on any forward-looking statements
that appear in this Report.
i
PART 1
Item 1. Business
The Share Exchange
On March 6, 2023 Tianci International, Inc. (“Tianci”),
which had previously been a shell corporation with no business operations, completed a share exchange with RQS Capital Limited (“RQS
Capital”), in which RQS Capital transferred all of the issued and outstanding capital stock of RQS United Group Limited (“RQS
United”) to Tianci, and Tianci issued to RQS Capital 1,500,000 shares of its common stock and paid a cash price of $350,000
(the “Share Exchange”).
RQS United is a holding company incorporated in
the Republic of Seychelles. RQS United has no operations other than holding 90% of the share capital of its subsidiary, Roshing International
Co., Limited, a company organized under the laws of Hong Kong (“Roshing”). Shufang Gao and Ying Deng,
who are officers and members of Tianci’s Board of Directors are also officers and directors of Roshing. Ying Deng owns the 10% of
Roshing that is not owned by RQS United.
The Share Exchange was accounted for as a “reverse
acquisition” effected as a recapitalization, wherein RQS United was considered the acquirer for accounting and financial reporting
purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized
on Tianci’s financial statements.
Overview
The Company, through Roshing, provides global logistics
services, encompassing booking and transportation arrangement and related logistics solutions. Roshing’s customized logistics solutions
are tailored to meet the diverse needs of its customers.
As a logistics shipping operator, Roshing focuses
on ocean freight forwarding services, including container shipping and bulk goods shipping service.
For the container shipping service, Roshing charters
cargo space from shipping suppliers (such as shipowners, ship carrier or non-vessel operating common carriers) and then sub-charters that
cargo space to its customers (cargo owners or cargo agents). For the bulk goods shipping service, Roshing issues fixture notes to customers,
and then arranges the booking of ships, and signs chartering contracts with suppliers (such as shipowners). Roshing also tailors the selection
of transport options, and arranges to transport the goods from the port of loading to the port of destination, so as to complete the performance
of the contract.
Roshing currently does not own or operate any transportation
assets. By leveraging our senior management’s expertise in the global logistics industry and adopting an asset-light strategy at
the early stage, Roshing has seen a significant growth in logistics revenue during the year ended July 31, 2024. Shufang Gao, our CEO
previously worked for a globally renowned shipping conglomerate, with over 20 years of management experience. His expertise spans shipping
operation management, and logistics transportation. Leveraging this experience, he has provided the Company with the managerial framework
to expand its global logistics business, as well as access to relevant customer and supplier resources in the shipping industry. Roshing’s
business is primarily carried out in Hong Kong and other locations in the Asia-Pacific region, mainly in Japan, South Korea, Vietnam.
Roshing’s logistics services also include the shipment of goods to African countries.
Roshing also generates revenue from the sale of
electronic parts, and certain business and technical consulting services, independent from its global logistics business. This additional
line of business produced 3.4% of our revenues for the year ended July 31, 2024.
Our Mission
Creating Value
As a global logistics enterprise, our primary mission
is to provide customers with efficient, reliable, and safe shipping services that create value.
Promoting Global Trade & Connectivity
As an important component of global trade, global
logistics enterprises also have a mission to promote the development and connectivity of global trade, and promote the prosperity and
development of the global economy, by facilitating cross-border operations for businesses. We are committed to cultivating a robust global
network, both online and offline. The online part involves connecting with customers and suppliers through social media platforms. The
offline part includes acquiring potential customer through exhibitions, recommendations, and other direct interactions.
Undertaking Social Responsibility
We believe that shipping companies also need to
be socially responsible, pay attention to environmental protection, social welfare, promote sustainable development and contribute to
the prosperity and development of society.
We strive to optimize shipping routes and transportation
plans to reduce energy consumption and emissions. Moreover, we will encourage our supply chain partners to adopt greener transportation
and packaging methods, contributing to the sustainability of the entire industry. We also seek to actively participate in environmental
projects and initiatives and collaborate with government and non-governmental organizations to focus on environmental protection.
Our Services
Our operations conducted through Roshing include
providing the following services to our customers.
1. Global Logistics Services
Our global logistics services provided through
Roshing accounted for 96.6% of our revenue for the year ended July 31, 2024. These services encompass shipping operations and related
logistics solutions. Roshing customizes its logistics solutions to meet the diverse needs of its customers, including the optimization
of shipping routes and the utilization of vessels with different tonnages. As a global logistics enterprise, depending on the type of
cargo, Roshing provides container shipping and bulk goods shipping services. Container shipping is generally for small merchandise which
can be palletized and fit into a container. Bulk goods shipping is generally for bulk commodities, such as lumber, steel, construction
materials, chemicals, and agricultural products.
a. Container shipping
Roshing’s container shipping service includes:
i. Customer Service and Support
ii. Contract and Quotation Management
iii. Financial Management
vi. Risk Management
Implementing strategies to identify, assess, and
mitigate risks associated with cargo transportation.
b. Bulk goods shipping
Roshing’s bulk goods shipping service includes:
i. Customer Service and Communication
Providing ongoing support and clear communication to customers
throughout the shipping process, addressing any queries or issues promptly.
ii. Fixture Note and Quotation Management
iv. Ship Operations Management
Overseeing and supervising the day-to-day operations
of the ships involved in bulk cargo transportation.
v. Cooperation and Coordination
Facilitating collaboration and coordination between
various stakeholders involved in the shipping process, such as port authorities, cargo handlers, and other service providers.
vii. Financial Management
Our General Logistics Service Process
Roshing has a long-term and close cooperation with
ocean shipping suppliers, including the signing of charter contracts, and service contracts. When a customer makes an inquiry to Roshing,
we are usually able to offer competitive quotes and customize shipping solutions quickly.
Roshing begins by thoroughly evaluating the customer’s
logistics needs, including the type of goods being shipped, the destination, and the required transportation time. Based on this information,
Roshing designs an optimal transportation plan tailored to the customer’s specific requirements. This plan includes selecting the
most efficient shipping routes, determining the appropriate container or bulk cargo vessel size and type, and considering any special
handling or regulatory compliance requirements. Roshing then enters into a written contract with the customer for ocean shipping that
can best meet the customer’s needs. This includes selecting a shipment method that aligns with the customer’s timeline and
cargo specifications.
Roshing works with each customer to develop a cost-effective
plan and service terms to meet the client’s specific needs. This involves detailed discussions to ensure that both parties have
a clear understanding of expectations, costs, and responsibilities. Roshing will assign cargo space from the appropriate container or
bulk cargo vessel based on the volume and weight of the shipment, minimize shipping costs, select the shortest route to save on freight,
and choose the port closest to the customer’s destination.
Throughout the entire shipping process, Roshing
maintains close oversight to ensure the safety and timely arrival of goods at the destination port. This involves real-time tracking and
monitoring of the shipment, handling any unforeseen issues that may arise, and providing regular updates to the customer. By doing so,
Roshing ensures that the goods are transported safely and arrive within the agreed timeframe, meeting all customer expectations.
We believe that Roshing stands out in the global
logistics landscape because of its core strengths. First, Roshing’s management’s extensive network and industry relationships
empower us with access to a wide customer base, enabling tailored solutions for an array of logistics requirements. Additionally, our
collaboration with direct shipping suppliers ensures competitive rates and transparent service delivery. Moreover, Roshing’s expertise
in route optimization enables us to efficiently manage logistics routes and secure favorable terms for its clients. These strengths collectively
position us as a competitive player in the industry.
1. Container shipping process
Roshing has a large network of international container
shipping resources to provide customers with flexible booking services and personalized logistics solutions to meet the different needs
of customers.
a. Long-term cooperation service agreements
b. Customer source and inquiry quotation
c. Contract signing and fee collection
· Roshing issues an invoice and debit note to the customer for fee collection.
d. Container freight payment
e. Transportation arrangements
f. Follow up work
2. Bulk goods shipping process
Roshing’s bulk shipping operator services
encompass a broad range of bulk merchandise, including steel, building materials, and engineering materials. Roshing provides customized
maritime logistics solutions for customers. At present, Roshing’s main bulk shipping route covers: Japan, South Korea and Vietnam.
To ensure that its customers receive customized shipping plans, Roshing closely follows shipping industry development trends, analyzes
the characteristics of its customer’s goods, the port of destination, and timing requirements. Roshing also constantly optimizes
the route layout to improve transportation efficiency and ensure that the goods arrive at the destination safely and on time.
a. Customer development
b. Customer inquiry and quotation
c. Contract signing and payments
d. Supplier’s selecting and chartering
e. Transportation arrangement and payment
i. Most of Roshing’s bulk cargo logistics
are carried out on a Free In and Out (“FIO”), which means that the shipper is responsible for loading the cargo onto the vessel,
the shipowner is responsible for the transport and the consignee is responsible for the unloading process. The FIO process for international
shipping includes:
ii. Customs clearance, delivery of goods, and delivery
of shipping documents are usually completed by agencies in different ports. In most shipping scenarios, the consignment arrangement is
made by the consensual shipping supplier. In some transport scenarios, Roshing directly assigns the agency for customers.
iii. Transportation Fee payment: Roshing usually
pays the transportation fee to the shipping supplier in 3-4 days. If there are other fees, such as processing fees, port fees, commission,
agency fees and other related fees, the fees are be settled according to the customer’s contract with Roshing.
f. Follow up service
i. File Organizing
Transportation records: After the shipping process, Roshing
will organize and keep all documents and records generated during transportation for record.
ii. Customer Feedback
Customer feedback: Roshing pays great attention to its customer
experience. It collects customer feedback on transportation services and addresses any problems or complaints that may arise.
Other Product & Services
INDUSTRY AND MARKET OPPORTUNITIES
Logistics Market
The classification of the logistics service providers
in the global logistics industry
Global logistics includes: Air Transport Logistics,
Land Transport Logistics, Marine Transport Logistics, Terminal Operator etc. Among them, the Marine Transport Logistics is usually divided
into shipping owner (holding ship assets) and shipping operator (not holding ship assets). The shipping operator includes Container Shipping
Operator/ Bulk Shipping Operator/ Liquid Shipping Operator/ Others Shipping Operator. The main business of Roshing belongs to Container
Shipping Operator and Bulk Shipping Operator categories.
Shipping operators, such as Roshing, play a key
role in the global logistics industry. Their efficient operation management and services not only ensure the safety and punctual delivery
of goods, but also play an important role in optimizing the logistics efficiency of global trade.
We believe the outlook for the shipping industry
is strong. According to BIMCO (BIMCO is the world’s largest international shipping association, with over 2,000 members in more
than 130 countries, representing 62% of the world’s tonnage.), ship supply is expected to grow on average 9.1% in 2024 and 4.1%
in 2025. Ship deliveries are expected to hit a new record high in 2024, beating the record set in 2023. The fleet is expected to grow
14.9% between the end of 2023 and the end of 2025. Cargo volumes are expected to grow 3-4% in both 2024 and 2025.
Macro Economy Growth
According to the International Monetary Fund’s
(IMF) estimates, the global economy should grow 3.1% in 2024 and 3.2% in 2025, slightly higher than the 3.0% estimated for 2023, indicating
a modest but positive trend in global economic expansion. In our primary area of operations in East and Southeast Asia, the growth is
expected to be 4.0% in 2024 and 3.8% in 2025.
According to BIMCO: Iron ore shipments are estimated
to grow 2.5% from 2023 to 2025. BIMCO estimates that iron ore shipments will grow by 1-2% in 2024 and 0.5-1.5% in 2025. They will benefit
from a 1.7% and 1.2% increase in global steel demand in 2024 and 2025 respectively as forecast by the World Steel Association.
Global Logistics Business Strengths
Our Growth Strategies
Our growth plan includes a continued focus on the
global logistics service as our primary business segment. As our capital resources increase, we intend to scale up our shipping operations,
including chartering additional vessels. We believe that the expansion of shipping operations will allow us to provide more cost-effective
shipping options to our clients, particularly those with large load needs.
Not only have we increased the size of our shipping
business, we intend to continue to grow our shipping operation business by expanding global routes in addition to focusing on maritime
shipping in the Asian region.
Global Logistics Business
Market Positioning and Route Optimization
Capacity Management and Cooperative Alliances
Service Innovation and Quality Enhancement
Strict Control of Service Quality: Strengthen internal
management, improve employee quality, ensure that service quality and safety levels meet international standards, and build a good corporate
image.
Sustainable Development
Formulation of Sustainable Development Strategies:
Integrate environmental protection concepts into the Company’s long-term development plans and achieve sustainable development goals
through measures such as optimizing routes and reducing emissions.
Risk Management and Response Mechanisms
Establishment of Sound Risk Management Systems:
Establish sound risk warning and prevention mechanisms for various risks faced by the shipping market, such as freight rate fluctuations,
exchange rate changes, and policy adjustments.
Formulation of Flexible Response Strategies: Timely
formulate or adjust operational strategies based on market changes and policy adjustments to ensure stable business development.
Our Growth Plan
Our growth plan includes a continued focus on the
global logistics service as our primary business segment. We intend to use capital as it becomes available to scale up our
shipping operations, including chartering additional vessels. We believe that the expansion of shipping operations will allow us to provide
more cost-effective shipping options to our clients, particularly those with large load needs.
Not only have we increased the size of our shipping
business, we intend to continue to grow our shipping operation business by expanding global routes in addition to focusing on maritime
shipping in the Asian region. Our growth plan includes:
Growth plan for container shipping operator
service
a. Increase the number of container shipping customers
b. Increase industry acquisition
We hope to expand the scale of the charter fleet
to support increased operations and market reach.
Growth plan of Bulk shipping operator service
a. Increase the number of bulk shipping customers
b. Increase the number of ship charters and freight
capacity
iii. Increase the number of routes
Competition
Roshing’s container shipping operation faces
competition from global and regional shipping companies such as Maersk, Mediterranean Shipping Company (MSC), and CMA CGM Group. These
companies offer extensive networks and comprehensive services, including advanced tracking technology, competitive pricing, and strong
customer service capabilities. Additionally, logistics companies like DHL and FedEx also provide integrated transportation solutions,
including container shipping.
To maintain competitiveness, Roshing focuses on
providing high-quality, customized services, leveraging expertise, and maintaining strong relationships with customers through dedicated
support and tailored solutions.
Roshing’s bulk shipping operation services
compete with major bulk shipping companies such as Oldendorff Carriers, Pacific Basin, and Star Bulk Carriers. These companies typically
have large fleets and extensive global networks, enabling them to offer competitive pricing and reliable services. Additionally, they
may have long-term relationships with major industry players and ports, enhancing their operational efficiency.
To compete effectively, Roshing emphasizes efficient
operational management, strong collaboration and coordination with stakeholders, and transparent financial management. By offering personalized
customer service and flexible chartering options, Roshing strives to stand out in the market and build long-term customer loyalty.
Marketing and Promotion Activities
For the year ended July 31, 2024, Roshing maintained
its marketing and sales team in its corporate office with four employees. Roshing implements the following strategies when engaging in
marketing and customer acquisition:
For consulting service clients, Roshing’s
future plans include increasing customer acquisition through social media, community marketing, website content, and participation in
thematic exhibitions.
Customers
For the year ended July 31, 2024, three customers
accounted for 48%, 25% and 11% of the Company’s total revenues. Each of them belongs to the logistics business section. For the
year ended July 31, 2023, two customers accounted for 41% and 11% of the Company’s total revenues. As of July 31, 2024 and July
31, 2023, no customer accounted for over 10% of the Company’s total accounts receivable.
Employees
We have 11 full time employees and 1 part time
employee. The following table classifies our employees by function as of July 31, 2024:
Senior Management 7
Human Resources and Administration 1
Finance 1
Sales and Marketing 2
Insurance
We participate in employee social security plans
for our full-time employees.
Intellectual Property
As of the date of this report, we have two domain
names: roshing.com and tianci-ciit.com. We do not own or have rights to any other IP, such as patents, copyrights and trademarks.
Environmental Matters
We strictly comply with laws and regulations relating
to environmental protection in Hong Kong since our main operation is in Hong Kong. It has not had a material adverse effect upon our capital
expenditures, earnings, and we do not anticipate any material adverse effects in the future based on the nature of our future operations.
We do not have any relevant records of being penalized for violating environmental protection regulations.
REGULATIONS
Regulations Related to our Business Operation
in Hong Kong
Roshing is Tianci’s subsidiary established
in Hong Kong through which Tianci conducts its operations. As of the date of this report, there was no statutory or mandatory licensing
and qualification system in Hong Kong governing the global logistics services, electronic device hardware components products sales, technical
service of the software and website development and business consulting services provided by Roshing.
Below sets out a summary of certain aspects of
the Hong Kong laws and regulations which are relevant to our operation and business.
Business Registration Ordinance (Chapter
310 of the Laws of Hong Kong)
The Business Registration Ordinance requires every
person carrying on any business to make an application to the Commissioner of Inland Revenue in the prescribed manner for the registration
of that business within one month after the commencement of business. The Commissioner of Inland Revenue must register each business for
which a business registration application is made and as soon as practicable after the prescribed business registration fee and levy are
paid and issue a business registration certificate or branch registration certificate for the relevant business or the relevant branch,
as the case may be. Any person who fails to apply for business registration shall be guilty of an offence and shall be liable to a fine
of HK$5,000 and to imprisonment for 1 year.
Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong), or the PDPO
The PDPO imposes a statutory duty on data users
to comply with the requirements of the six data protection principles (the “Data Protection Principles”) contained in Schedule
1 to the PDPO. The PDPO provides that a data user shall not do an act, or engage in a practice, that contravenes a Data Protection Principle
unless the act or practice, as the case may be, is required or permitted under the PDPO. The six Data Protection Principles are:
· Principle 1—purpose and manner of collection of personal data;
· Principle 2—accuracy and duration of retention of personal data;
· Principle 3—use of personal data;
· Principle 4—security of personal data;
· Principle 5—information to be generally available; and
· Principle 6—access to personal data.
Non-compliance with a Data Protection Principle
may lead to a complaint to the Privacy Commissioner for Personal Data (the “Privacy Commissioner”). The Privacy
Commissioner may serve an enforcement notice to direct the data user to remedy the contravention and/ or instigate prosecution actions.
A data user who contravenes an enforcement notice commits an offense which may lead to a fine and imprisonment.
The PDPO also gives data subjects certain rights,
inter alia:
· if the data user holds such data, to be supplied with a copy of such data; and
· the right to request correction of any data they consider to be inaccurate.
The PDPO criminalizes, including but not
limited to, the misuse or inappropriate use of personal data in direct marketing activities, non-compliance with a
data access request and the unauthorized disclosure of personal data obtained without the relevant data user’s consent. An
individual who suffers damage, including injured feelings, by reason of a contravention of the PDPO in relation to his or her
personal data, may seek compensation from the data user concerned.
Tortious Duty Under Common Law
Apart from contractual liability, under common
law, services providers also owe a duty of care to customers and may be liable for damage resulting from defects in services caused by
their negligent acts or for any fraudulent misrepresentation made in the provision of services. Any person who undertakes to provide a
service and who negligently performs his work and causes damage to another person or property, will also attract civil liability.
Trade Description Ordinance (Chapter 362
of the Laws of Hong Kong), or the TDO
The TDO aims to protect customers against unfair
trade practices by regulating businesses to sell products and services in a truthful manner. It prohibits false trade descriptions in
respect of services supplied in the course of trade.
Section 7A of the TDO provides that a trader who
applies a false trade description to a service supplied or offered to be supplied to a consumer or supplies or offers to supply to a consumer
a service to which a false trade description is applied, commits an offence.
Sections 13E, 13F, 13G, 13H and 13I of the TDO
provide that a trader who engages in relation to a consumer in a commercial practice that (a) is a misleading omission; or (b) is aggressive;
(c) constitutes bait advertising; (d) constitutes a bait and switch; or (e) constitutes wrongly accepting payment for a product, commits
an offence.
A person who commits an offence under sections
7A, 13E, 13F, 13G, 13H or 13I shall be subject, on conviction on indictment, to a fine of HK$500,000 and to imprisonment for five years,
and on summary conviction, to a fine at HK$100,000 and to imprisonment for two years.
The Supply of Services (Implied Terms) Ordinance
(Chapter 457 of the Laws of Hong Kong), or the SOSO
The SOSO which aims to consolidate and amend the
law with respect to the terms to be implied in contracts for the supply of services (including a contract for the supply of a service
whether or not goods are also transferred or to be transferred, or bailed or to be bailed by way of hire under the contract) provides
that:
Where a supplier is dealing with a party to a contract
for supply of service who deals as a consumer, the supplier cannot, by reference to any contract term, exclude or restrict any liability
of his arising under the contract by virtue of the SOSO. Otherwise, where any right, duty or liability would arise under a contract for
the supply of a service by virtue of the SOSO, it may (subject to the Control of Exemption Clauses Ordinance (Chapter 71 of the Laws of
Hong Kong)) be negatived or varied by express agreement, or by the course of dealing between the parties, or by such usage as binds both
parties to the contract.
The Control of Exemption Clauses Ordinance
(Chapter 71 of the Laws of Hong Kong), or the CECO
The CECO, which aims to limit the extent to which
civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise,
among others, provides that:
Sections 7, 8 and 9 of the CECO do not apply to,
among others, any contract so far as it relates to the creation or transfer of a right or interest in any patent, trademark, copyright,
registered design, technical or commercial information or other intellectual property, or relates to the termination of any such right
or interest.
In relation to a contract term, the requirement
of reasonableness for the purpose of the CECO is satisfied only if the court or arbitrator determines that the term was a fair and reasonable
one to be included having regarded to the circumstances which were, or ought reasonably to have been, known to or in the contemplation
of the parties when the contract was made.
Regulations related to employment and labor
protection
Employment Ordinance (Chapter 57 of the Laws
of Hong Kong), or the EO
The EO is an ordinance enacted for, amongst other
things, the protection of the wages of employees and the regulation of the general conditions of employment and employment agencies. Under
the EO, an employee is generally entitled to, amongst other things, notice of termination of his or her employment contract; payment in
lieu of notice; maternity protection in the case of a pregnant employee; not less than one rest day in every period of seven days; severance
payments or long service payments; sickness allowance; statutory holidays or alternative holidays; and paid annual leave depending on
the period of employment.
Employees’ Compensation Ordinance (Chapter
282 of the Laws of Hong Kong), or the ECO
The ECO is an ordinance enacted for the purpose
of providing for the payment of compensation to employees injured in the course of employment.
The ECO establishes a no-fault and non-contributory
employee compensation system for work injuries and lays down the rights and obligations of employers and employees in respect of injuries
or death caused by accidents arising out of and in the course of employment, or by prescribed occupational diseases.
As stipulated by the ECO, no employer shall employ
any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an
amount not less than the applicable amount specified in the Fourth Schedule of the ECO in respect of the liability of the employer. According
to the Fourth Schedule of the ECO, the insured amount shall be not less than HKD100,000,000 (approximately $13,000,000) per event if a
company has no more than 200 employees. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction
to a fine and imprisonment. An employer who has taken out an insurance policy under the ECO is required to display a prescribed notice
of insurance in a conspicuous place on each of its premises where any employee is employed.
Mandatory Provident Fund Schemes Ordinance
(Chapter 485 of the Laws of Hong Kong), or the MPFSO
The MPFSO is an ordinance enacted for the purposes
of providing for the establishment of non-governmental mandatory provident fund schemes, or the MPF Schemes. The MPFSO requires every
employer of an employee of 18 years of age or above but under 65 years of age to take all practical steps to ensure the employee becomes
a member of a registered MPF Scheme within the first 60 days of employment. Subject to the minimum and maximum relevant income levels,
it is mandatory for both employers and their employees to contribute 5% of the employee’s relevant income to the MPF Scheme. Any
employer who contravenes the requirement of enrolling eligible employees in a registered MPF Scheme or the requirement of paying mandatory
contributions to the MPF Schemes commits a criminal offence and is liable on conviction to a fine and imprisonment.
Minimum Wage Ordinance (Chapter 608 of the
Laws of Hong Kong), or the MWO
The MWO provides a prescribed minimum hourly wage
rate (currently at HK$40 per hour) during the wage period for every employee engaged under a contract of employment under the EO. Any
provision of the employment contract which purports to extinguish or reduce the right, benefit or protection conferred on the employee
by the MWO is void.
Failure to pay minimum wage amounts to a breach
of the wage provisions under EO. An employer who willfully and without reasonable excuse fails to pay wages to an employee when it becomes
due commits a criminal offence and is liable on conviction to a fine and imprisonment.
Occupational Safety and Health Ordinance
(Chapter 509 of the Laws of Hong Kong), or the OSHO
The OSHO aims to ensure the safety and health of
employees when they are at work. Under the OSHO, an employer must ensure the safety and health of his workplace by (i) providing and maintaining
plant and work systems that are safe and without risks to health, (ii) making arrangement for ensuring safety and health in connection
with the use, handling, storage or transport of plant or substances, (iii) providing all necessary information, instruction, training
and supervision for ensuring safety and health, (iv) providing and maintaining safe access to and egress from the workplace, and (v) providing
and maintaining a safe and healthy work environment. An employer who fails to comply with the above may be liable on conviction to a fine
and imprisonment, if he did so intentionally, knowingly or recklessly.
Occupational Safety and Health Regulation
(Chapter 509A of the Laws of Hong Kong)
The Occupational Safety and Health Regulation (Chapter
509A of the Laws of Hong Kong) further sets out basic requirements for accident prevention, fire precaution, workplace environment control,
hygiene at workplaces, first aid, as well as what employers and employees are expected to do in manual handling operations.
Occupiers Liability Ordinance (Chapter 314
of the Laws of Hong Kong)
The Occupiers Liability Ordinance regulates the
obligations of a person occupying or having control of premises on injury resulting to persons or damage caused to goods or other property
lawfully on the land. The Occupiers Liability Ordinance imposes a common duty of care on an occupier of premises to take such care as
in all the circumstances of the case is reasonable to see that the visitors will be reasonably safe in using the premises for the purposes
for which he is invited or permitted by the occupier to be there.
Regulations related to Hong Kong Taxation
Inland Revenue Ordinance (Chapter 112 of
the Laws of Hong Kong)
Under the Inland Revenue Ordinance, where an employer
commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall
give a written notice to the Commissioner of Inland Revenue not later than three months after the date of commencement of such employment.
Where an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any
married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than one month before such individual
ceases to be employed in Hong Kong, provided that a shorter notice may be accepted if deemed reasonable.
Tax on dividends
Based on the current practice of the Inland Revenue
Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Roshing.
Capital gains and profits tax
The Inland Revenue Ordinance provides, among other
things, that profits tax shall be charged on every person carrying on a trade, profession or business in Hong Kong in respect of his or
her assessable profits arising in or derived from Hong Kong. Roshing is currently subject to the two-tiered profits tax regime according
to Hong Kong tax rules and regulations.
The two-tier profits tax rates system of Hong Kong
became effective since the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first HKD2
million (approximately US$260,000) of assessable profits of a corporation will be subject to the lowered tax rate, 8.25%, while the remaining
assessable profits will be subject to the legacy tax rate, 16.5%.
No tax is imposed in Hong Kong in respect of capital
gains from the sale of shares. However, trading gains from the sale of shares by persons carrying on a trade, profession or business in
Hong Kong, where such gains are derived from or arise in Hong Kong, will be subject to Hong Kong profits tax.
Stamp Duty Ordinance (Chapter 117 of the
Laws of Hong Kong)
Under the Stamp Duty Ordinance (Chapter 117 of
the Laws of Hong Kong), a total of 0.2% of the higher of the consideration for or market value of the shares is currently payable on a
typical sale and purchase transaction of Hong Kong shares. In addition, a fixed duty of HKD5 is currently payable on any instrument of
transfer of Hong Kong shares. If no stamp duty is paid on or before the due date, a penalty of up to ten times the duty payable may be
imposed.
* * * * *
Item 1A. Risk Factors
Investing in our common stock involves risk.
You should carefully consider the risks described below together with all of the other information contained in this Report, including
the financial statements and the related notes, before deciding whether to purchase any shares of our common stock. If any of the following
risks is realized, our business, financial condition or operating results could materially suffer. In that event, the trading price of
our common stock could decline and you may lose all or part of your investment.
RISKS RELATED TO OUR
BUSINESS
Risks Related to the
Global Logistics Services
Geopolitical conditions, such as political
instability or conflict, terrorist attacks and international hostilities can affect the Maritime transportation industry, which could
adversely affect our business.
We conduct most of our operations outside
of the United States and our business, results of operations, cash flows, financial condition and ability to pay dividends, if any, in
the future may be adversely affected by changing economic, political and government conditions in the countries and regions where we operate.
Moreover, we operate in a sector of the economy that has been and is likely to continue to be adversely impacted by the effects of geopolitical
developments, including political instability or conflict, terrorist attacks or international hostilities.
Currently, the world economy faces a number
of challenges, including tensions between the United States and China, new and continuing turmoil and hostilities in Russia, Ukraine,
the Middle and other geographic areas and countries, continuing economic weakness in the European Union and slowing growth in China and
the continuing threat of terrorist attacks around the world.
Trade barriers to protect domestic industries
against foreign imports depress shipping demand. Protectionist developments, such as the imposition of trade tariffs or the perception
they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover,
increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required
to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of
goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our charterers’
business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us
and to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, financial
condition and operating results. Further, protectionist policies in any country could impact global markets, including foreign exchange
and securities markets. Any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn
adversely impact our business, results of operations, financial condition and cash flows.
Any reduction in international commerce
or disruption in global trade may adversely impact our business and operating results.
The
Company primarily provides services to customers engaged in international commerce. Everything that affects international trade has the
potential to expand or contract our primary markets and adversely impact our operating results. For example, international trade is influenced
by:
· currency exchange rates and currency control regulations;
· interest rate fluctuations;
· wars, strikes, civil unrest, acts of terrorism, and other conflicts;
· changes in labor and other costs, including the impacts of inflation;
· changes in availability of credit; and
Our
industry is highly competitive, and failure to compete or respond to customer requirements could damage our business and the results of
operations.
The
global logistics services industry is intensely competitive and is expected to remain so for the foreseeable future. There are a large
number of companies competing in one or more segments of the industry, but the number of firms with a global network that offer a full
complement of logistics services is more limited. Nevertheless, many of these competitors have significantly more resources than the Company
and may pursue acquisition opportunities and are developing new technologies to gain competitive advantages. Depending on the location
of the shipper and the importer, we must compete against niche players, larger entities including carriers, and emerging technology companies.
The primary competitive factors are price and quality of service. Many larger customers utilize the services of multiple logistics providers.
Customers regularly solicit bids from competitors in order to improve service and to secure favorable pricing and contractual terms such
as: longer payment terms; flexible-price arrangements; and performance penalties. Increased competition and competitors’ acceptance
of expanded contractual terms coupled with customers’ dissatisfaction with elevated rates, scarce capacity, and extended transit
times could result in loss of business, reduced revenues, reduced margins, higher operating costs or loss of market share, any of which
would damage our results of operations, cash flows and financial condition.
Difficulty
in forecasting timing or volumes of customer shipments or rate changes by carriers could adversely impact our margins and operating results.
We are
not aware of any accurate means of forecasting short-term customer requirements. However, long-term customer satisfaction depends upon
our ability to meet these unpredictable short-term customer requirements. Personnel costs, one of our larger costs, are always less flexible
in the very near term as we must staff to meet uncertain demand. As a result, short-term operating results could be disproportionately
affected.
The
timing of our revenues is, to a large degree, impacted by factors out of our control, such as a sudden change in consumer demand for goods,
changes in trade tariffs, product launches and/or manufacturing production delays. Additionally, many customers ship a significant portion
of their goods at or near the end of a quarter, and therefore, we may not learn of a shortfall in revenues until late in a quarter. To
the extent that a shortfall in revenues or earnings was not expected by securities analysts or investors, any such shortfall from levels
predicted by securities analysts or investors could have an immediate and adverse effect on the trading price of our stock.
Volatile
market conditions can create situations where rate increases charged by carriers and other service providers are implemented with little