Amendment: SEC Form 20-F/A filed by Tungray Technologies Inc
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report for the transition period from ____________to ____________
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
N/A
(Translation of Registrant’s Name into English)
(Jurisdiction of Incorporation or Organization)
Tel: +65 6636 9820
(Address of principal executive offices)
Tel: +65 6636 9820
Email:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol(s) |
| Name of Each Exchange on Which |
|
|
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of December 31, 2024, the issuer had
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 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.
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
x | 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 13(a) of the Exchange Act.
† | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
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 fi rm 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 which basis of accounting the registrant has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued by the International Accounting Standards Board ¨ | Other ¨ |
* | If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨ |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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. Yes ¨ No x
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
EXPLANATORY NOTE
Tungray Technologies Inc (the “Company”) is filing this amendment (the “Amendment”) to its Annual Report on Form 20-F (the “Annual Report”) for the year ended December 31, 2024, previously filed with the Securities and Exchange Commission (the “SEC”) on May 14, 2025 (the “Original Filing”), to replace the audit report of its previous auditor Marcum Asia CPAs LLP in the Original Filing with an audit report of its current auditor Guangdong Prouden CPAs GP and to include the consolidated financial statements for the years ended December 31, 2023 and 2024 audited by the current auditor.
Except for (x) Part I, Item 5, Operating and Financial Review and Prospects, (y) the consolidated financial statements for the years ended December 31, 2023 and 2024, and (z) the auditor’s report, no other information included in the Annual Report as originally filed is being repeated in this Amendment. This Amendment should be read together with the Original Filing, except for Part I, Item 5, the consolidated financial statements for the years ended December 31, 2023 and 2024, and the auditor’s report. Cross-references within this Amendment to items other than those in Part III are references to those items in the Original Filing. This Amendment does not otherwise update the disclosures set forth in the Original Filing, including the consolidated financial statements for the year ended December 31, 2022.
Exhibits 12.1, 12.2, and 13.1 are being included in this Amendment and have been dated as of the date of this filing but are otherwise unchanged.
TABLE OF CONTENTS
PART I |
|
|
ITEM 5. | 1 | |
PART III |
|
|
ITEM 17. | 16 | |
ITEM 18. | 16 | |
ITEM 19. | 16 | |
|
|
|
F-1 | ||
| ii |
|
Part I
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating Results
Overview
We are a provider of customized industrial manufacturing solutions to Original Equipment Manufacturers (“OEMs”) in the industry sectors of semiconductors, printers, electronics, and home appliances. We mainly generate revenues through three business lines: 1) customized industrial test and tooling solutions, 2) welding equipment manufacturing, and 3) direct drive and linear direct current motors (“DC motors”).
Customized product line
We provide customized industrial test and tooling solutions through our two subsidiaries in Singapore, Tung Resource Pte Ltd and Tungray Singapore Pte Ltd, and one subsidiary in China, Tungray Industrial Automation (Shenzhen) Co., Ltd. Based on the unique requirements of our customers, we offer comprehensive precision engineering expertise to design, build and assemble testing equipment that is used for quality testing purposes for production. Our core activities of design and manufacturing take place mainly in Singapore. Our customized industrial test and tooling solutions cannot be procured directly through standard, off-the-shelf methods. We leverage on our 20 years of experience in motor control, sensor technologies, computer vision and overall product design to provide our customers with unique solutions that meet the needs of our customers. Each of our products is customized to fulfill the needs of our wide range of customers in the printer, electronics, semiconductor manufacturing, and offshore and gas industries. Our products are sold to numerous countries including Singapore, Malaysia, Thailand, Spain, China and Brazil.
Standardized product lines
1) Welding equipment manufacturing
Qingdao Tungray Intelligent Co., Ltd and Qingdao Tungray Electric Machines Co., Ltd, our subsidiaries in Qingdao, China, are specialized in the design and manufacturing of self-contained, high-frequency induction welding equipment. We manufacture manual and automatic induction welding units that can be used in a wide range of copper tube welding assembly lines. For operator-attended lines, our TB, TP, TD and TI series induction welding units have full enclosures that enhances production safety. They also feature programmable logic controllers (PLC) and human machine interfaces for ease of use. Our automatic induction welding units are equipped with patented machine vision technologies to recognize and track the endings of metal tubes, before sending welding commands to the actuators for movement and induction welding. Our induction welding units are used by many Chinese home appliance OEMs in the production of air conditioning units, refrigerators, compressors and washing machines.
2) Direct drive and linear direct current motors (“DC motors”)
Our subsidiaries in Qingdao, China also design and manufacture industrial-grade direct drive and linear DC motors. We also provide customized motor platform solutions to suit the needs of our customers. Our direct drive motors do not require any gears for speed and torque manipulation as they can directly manipulate both parameters over a wide range of values. These motors are used in the solar panel assembly lines to turn and transport semi completed products between processes. Our linear DC motors offer two degrees of freedom to move independently in the X and Y axis, thereby eliminating the need for any belt or gears. These high precision motors are mainly used in the glue application and laser cutting machines in which precise movements in X and Y directions are required. Our team can also design and customize motor platforms and modules that fulfil specific use cases from our customers.
Our revenues for the year ended December 31, 2024 were 80%, 5% and 15% from the above three business lines, respectively. Our revenues for the year ended December 31, 2023 were 82%, 6% and 12% from the above three business lines, respectively.
1
Through our in-house R&D and manufacturing teams, we have accumulated extensive knowledge in direct drive and linear DC motors. We currently have four patented technologies that are used in the design and manufacturing of our motors. We currently offer our customers the following product series – Tungray Drive B (TDB) Series, Tungray Core (TC) Series, Tungray “U” Type (TU) Series, standard linear modules and high precision motion platforms that can be customized. We also offer compatible control modules for our linear motors to maximize its performance and precision.
Our revenues for the year ended December 31, 2024 were approximately $12.8 million, which represents an decrease of $1.6 million, or 10.8%, from Tungray’s total revenues of approximately $14.4 million for the year ended December 31, 2023. Tungray’s gross profit for the year ended December 31, 2024 was approximately $5.6 million, representing a decrease of $1.1 million, or 16.6%, from approximately $6.7 million for the year ended December 31, 2023. Tungray’s net (loss) income for the years ended December 31, 2024 and 2023 was approximately (0.6 million) and $0.8 million, respectively.
Competitive Strengths
Most of our customers are market-leading OEMs in their respective industries that value quality, reliable and cost-effective products. We believe that the following strengths contribute to our success and are the differentiating factors that set us apart from our peers in customized industrial solutions, induction welding and direct drive, linear motors sectors.
1. Customized Industrial Test and Tooling Solutions
| ● | Established Engineering Capabilities Our customers require many unique, customized features such as voltage, leakage, force tests to control product quality. They also require these testing solutions to readily integrate into their production lines. Our engineering capabilities, accumulated through the hundreds of projects we complete each year, enable us to offer our customers tailor-made solutions that address their unique needs. Our expertise in electro-mechanical design, software application and product testing help to create the final product that fulfills the required performance criteria of our customers, including a smooth integration into their current production workflow. |
| ● | High-Cost Effectiveness The internal cost control system that we have established plays a vital role in managing costs. More importantly, our expertise lends us the advantage of providing customized solutions with minimal material and manhour wastage. Being highly cost-effective results in price-competitive solutions. We subsequently pass down the cost savings by offering our customers solutions with attractive prices that are unavailable in the standard, off-the-shelf market. |
| ● | Short Lead Time Many of our customers are market-leading OEMs that are very sensitive to lead time. They value the advantage of providing a functional solution expeditiously. We complement our engineering capabilities advantage with an agile workflow that reduces overall solution lead time. Moreover, our machining and assembly divisions give us full, end-to-end control of our manufacturing activities. Therefore, the time taken to design, prototype, machine, and commission solutions are much faster than our competitors. |
2. Induction Welding Equipment
| ● | Comprehensive product line We offer our customers a comprehensive line of products that covers the semi- and fully automatic welding spectrum. Additionally, our customers can choose from our wide range of self-contained, single welding units to suit their production needs. To further consolidate our market position, we have also developed a new series of fully automated robotic welding stations that increase welding efficiency and reduce manpower. |
2
| ● | Patented welding technology We invented and patented numerous welding technologies that are implemented in our products. Our patented machine vision recognition module can, for example, identify welding points in three-dimensional space to send commands to an integrated robotic manipulator for welding. We have also patented numerous welding tip technologies that enable our welding equipment to weld different types of metal tubes. We believe our accumulated know-how in the field of welding would further increase our patented technologies for the years to come and, hence, make our products even more competitive in the future. |
| ● | Strong customer relationship Over the years, we have built a strong relationship with our customers. Although the core technology of our welding equipment is similar, the needs of our customers may vary. Therefore, we develop strong customer relationships to collaborate and co-develop some products in the form of customized orders. Through such strong relationships, we build trust and maintain direct access to decision-level makers of our customers. This enables us to gain knowledge of potential future orders that drive the future growth of our company. |
3. Direct Drive and Linear DC Motors
| ● | Quality assurance We take the manufacturing and testing of our motors very seriously to ensure high product quality and customer satisfaction. We have full control over the quality of our motors because each motor is designed, manufactured, and tested in-house. |
| ● | Comprehensive product line Our customers deploy our products in manufacturing activities that require high throughput and high precision such as wafer manufacturing and voltaic transports. To ensure that their requirements are met, we offer our customers motors and their customized control units. We believe this comprehensive product offering gives us the advantage over traditional motor manufacturers that only provide stand-alone sales of motors. |
| ● | Service commitment With our deep product knowledge, we help our customers pick motors that best suit their needs. Regardless of linear or rotational motion or torque values, we reduce the project lead time of our customers by providing them with a complete working solution with our motors. We also offer a nationwide quick response service to ensure fast troubleshooting and resolution of any product-related problems. |
Key Factors Affecting Results of Operations
The business, financial condition and results of operations of the Company and its subsidiaries have been and are expected to continue to be, affected by a number of factors, which primarily include the following:
The ability to increase and retain customers
A significant amount of Tungray’s revenues is highly dependent on their ability to retain and increase customers, especially those major customers. For the years ended December 31, 2024 and 2023, Tungray and its subsidiaries had 182 and 163 customers, respectively. The average revenue per customer were approximately $70,000 and $88,000, respectively, for the years ended December 31, 2024 and 2023.
The Company’s management team monitors the number of customers and the number of new customers as indicators of the growth of Tungray’s overall business. Tungray’s ability to increase customers, average revenue per customer will depend on its ability to continue to enhance the quality which enabled Tungray to provide better serve customers. Tungray expects that the number of customers and average revenue per customer will remain stable in the long term as Tungray and its subsidiaries continues to build stable cooperation relationship with its customers.
3
Investment in technology and talent
We expend considerable capital and efforts in the research and development of high-frequency power supply technology to maintain our competitiveness in the intelligent manufacturing industries. In light of the rapid growth of high-tech enterprises, intelligent manufacturing is the key to enterprise development, which requires the advancement of technology related to intelligent manufacturing to newer stages of development. To retain existing customers and attract potential customers, we will continue to innovate to keep pace with the growth of the industry and our business to bring forward new cutting-edge technologies. We spent approximately $1.1 million and $0.8 million on research and development for the years ended December 31, 2024 and 2023, respectively.
Ability to pursue strategic opportunities for growth
Tungray intends to continually pursue strategic acquisitions and investments in selective technologies and businesses in the intelligent manufacturing industries to enhance Tungray’s technology capabilities. Tungray believes that a solid acquisition and investment strategy may be critical for Tungray to accelerate Tungray’s growth and strengthen its competitive position in the future. Tungray’s ability to identify and execute strategic acquisitions and investments will likely affect Tungray’s operating results over time. Please see “Business — Tungray’s Strategies” for more information on Tungray’s growth strategies.
Ability to be competitive, to expand its application fields and to diversify its customer base
The domestic markets in both Singapore and the PRC for customized industrial manufacturing solutions of original equipment manufacturer (“OEMs”) and related products are highly competitive. Our current or potential competitors include major manufactures in Singapore, PRC and other parts in the world. Some of our competitors may have greater brand recognition, larger group of customers or vendors, longer operating histories as well as marketing resources than we do. Customers may weight their experience and resources over us in various ways, therefore increasing our competitor’s respective market shares.
Currently, the primary source of Tungray’s revenue is derived from providing metal thermal equipment and solutions for high-tech enterprises. With increasing awareness and acceptance of this technology, Tungray expects that more applications will be identified to magnify the value of this technology, such as the industry of home appliance, equipment, machinery and other automation manufacturing industries that have strong demand for high-frequency power supply technology. To expand the scenario application of intelligent manufacturing services, Tungray’s ability to expand its application fields and diversify its customer base may affect Tungray’s operating results in the future.
Impact of material fluctuations in the supply of raw materials and energy costs
We are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, aluminum and other oil and metal-based purchased components. Prices for these products, along with costs for transportation and energy, fluctuate with market conditions, and have generally increased over time. We may be unable to offset the impact with price increases on a timely basis due to outstanding commitments to our customers, competitive considerations or our customers’ resistance to accepting such price increases and our financial performance could be adversely impacted. A failure by our suppliers to continue to supply us with certain raw materials, component parts, or at all, could have a material adverse effect on us. To the extent there are energy supply disruptions or material fluctuations in energy costs, our margins could be materially adversely impacted.
Impact of COVID-19
In March 2020, the World Health Organization declared the COVID-19 as a pandemic. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities in China for the first few months in 2020. Tungray’s business, results of operations, and financial condition were adversely affected during the first half of 2020 because a majority of Tungray’s business operations and workforce are concentrated in China. Tungray’s business and results of operations have resumed to normal levels in the second half of 2020. A majority of the Company’s business is derived from Singapore. The spread of COVID-19 did not have any material impact on the Company’s business during the years ended December 31, 2022 and 2021. However, during the year ended December
4
31, 2023 and 2024, with the end of the COVID-19 pandemic, people’s work mode has changed from work from home during the pandemic to work at office, thus reducing the demand for office equipment such as printers, which also had an impact on our business. The Singapore and Chinese governments have removed all the COVID-19 restrictions starting from February 2023. Significant number of domestic and cross-border business activities in Singapore and China have resumed or recovered.
Results of Operations
The following table summarizes Tungray’s consolidated results of operations for the years ended December 31, 2024 and 2023. This information should be read together with Tungray’s consolidated financial statements, and related notes included elsewhere in this prospectus.
|
| For the Years Ended | ||
|
| 2024 |
| 2023 |
|
| USD |
| USD |
|
|
|
|
|
Revenues |
| 12,810,249 |
| 14,362,502 |
Cost of revenues |
| (7,212,706) |
| (7,651,593) |
Gross profit |
| 5,597,543 |
| 6,710,909 |
Selling expenses |
| (595,995) |
| (421,869) |
General and administrative expenses |
| (4,594,438) |
| (4,397,603) |
Research and development expenses |
| (1,063,210) |
| (791,762) |
(Loss) Income from operations |
| (656,100) |
| 1,099,675 |
Other income, net |
| 362,465 |
| 194,967 |
(loss) income before income taxes |
| (293,635) |
| 1,294,642 |
Income tax expenses |
| (278,082) |
| (537,881) |
Net (loss) income |
| (571,717) |
| 756,761 |
Other comprehensive (loss) income |
| (735,131) |
| 113,999 |
TOTAL COMPREHENSIVE (LOSS) INCOME |
| (1,306,848) |
| 870,760 |
The year ended December 31, 2024 compared to the year ended December 31, 2023:
Revenues
Our total revenues decreased by approximately $1.6 million, or 10.8%, from approximately $14.4 million for the year ended December 31, 2023, to approximately $12.8 million for the year ended December 31, 2024.
Our breakdown of revenues for the years ended December 31, 2024 and 2023, respectively, is summarized below:
|
| For the Years Ended | ||
|
| 2024 |
| 2023 |
|
| USD |
| USD |
Revenues |
|
|
|
|
Customized products |
| 10,128,540 |
| 11,722,295 |
Standardized products |
| 2,681,709 |
| 2,640,207 |
Total revenues |
| 12,810,249 |
| 14,362,502 |
5
We engage in sales of standard products, which are welding equipment manufacturing, and direct drive and linear direct current motors (“DC motors”), and customized solutions, which are customized industrial test and tooling solutions. The duration of the contracts ranges from one month to three months. For standard products with no instalment required, delivery and sales of products are considered as one performance obligation per each contract terms. For other products with instalment required, the installation and sales of products are combined and considered as one performance obligation.
Compared with the revenues for the year ended December 31, 2023, customized products decreased by approximately $1.6 million, or 13.6%, and standardized products increased by approximately $42,000, or 1.6%. For the products sales during the year ended December 31, 2024, the revenue decreased compared with the year ended December 31, 2023, mainly due to gradual end of the COVID-19 pandemic decrease in the demand for home printers and the China-United States trade war. The sales revenue of HP, the major customer, decreased by $0.7 million, during the year ended December 31, 2024 compared with the year ended December 31, 2023.
Cost of Revenues
Our costs include the amounts we pay manufacturers for product, tariffs and duties associated the transporting product and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable.
Our total cost of revenues decreased by approximately $0.4 million, or 5.7%, from approximately $7.7 million for the year ended December 31, 2023 to approximately $7.2 million for the year ended December 31, 2024.
Our breakdown of cost of revenues for the years ended December 31, 2024 and 2023, respectively, is summarized below:
|
| For the Years Ended | ||
|
| 2024 |
| 2023 |
|
| USD |
| USD |
Cost of revenues |
|
|
|
|
Customized products |
| 4,853,680 |
| 5,386,038 |
Standardized products |
| 2,359,026 |
| 2,265,555 |
Total cost of revenues |
| 7,212,706 |
| 7,651,593 |
Compared with the cost of revenues for the years ended December 31, 2023, the cost of customized products decreased by approximately $0.5 million, or 9.9% and standardized products increased by approximately $93,000, or 4.1%, for the years ended December 31, 2024. The decrease of total cost of revenues was in line with the decrease of revenues.
Gross Profit
Our gross profit decreased by approximately $1.1 million, or 16.6%, from approximately $6.7 million for the year ended December 31, 2023, to approximately $5.6 million during the year ended December 31, 2024. For the years ended December 31, 2024 and 2023, our overall gross margin was 43.7% and 46.7%, respectively.
6
Our gross profit and gross profit margin from its major business segments are summarized as follows:
|
| For the Years Ended |
| Variance | ||
|
| 2024 |
| 2023 |
| Amount/% |
|
| USD |
| USD |
|
|
Customized products |
|
|
|
|
|
|
Gross profit |
| 5,274,860 |
| 6,336,257 |
| (1,061,397) |
Gross margin |
| 52.1% |
| 54.1 % |
| (2.0)% |
Standardized products |
|
|
|
|
|
|
Gross profit |
| 322,683 |
| 374,652 |
| (51,969) |
Gross margin |
| 12.0% |
| 14.2 % |
| (2.2)% |
Total |
|
|
|
|
|
|
Gross profit |
| 5,597,543 |
| 6,710,909 |
| (1,113,366) |
Gross margin |
| 43.7% |
| 46.7 % |
| (3.0)% |
Our gross profit for customized products were approximately $5.3 million and $6.3 million for the years ended December 31, 2024 and 2023, respectively, representing a decrease of approximately $1.1 million. Our gross margin for customized products were 52.1% and 54.1% for the years ended December 31, 2024 and 2023, respectively. The decrease of gross profit for customized products was mainly due to the decrease of unit selling prices and the increase of labour costs, which is also indicating increased cost pressure or pricing challenges in this segment.
Our gross profit for standardized products were approximately $0.4 million and $0.4 million for the years ended December 31, 2024 and 2023, respectively, representing a decrease of approximately $52,000. Our gross margin for standardized products were 12.0% and 14.2% for the years ended December 31, 2024 and 2023, respectively. The decrease of gross profit for standardized products was mainly due to the decrease of unit selling prices and the increase of labour costs.
Operating Expenses
For the year ended December 31, 2024, we incurred approximately $6.3 million in operating expenses, representing an increase of approximately $0.6 million, or 11.4%, from approximately $5.6 million for the year ended December 31, 2023.
Selling expenses increased by approximately $174,000, or 41.3%, from approximately $422,000 for the year ended December 31, 2023, to approximately $248,000 for the year ended December 31, 2024. The increase was mainly due to an increase in (i) advertising, traveling, meals and entertainment expenses of approximately $201,000; and (ii) salary and wages expenses of approximately $35,000.
General and administrative expenses increased by approximately $197,000, or 4.5%, from approximately $4.4 million for the year ended December 31, 2023, to approximately $4.6 million for the year ended December 31, 2024. The increase was mainly due to the increase in (i) professional service fee of approximately $244,000 associated with IPO which are not capitalized, (ii) depreciation expense of approximately $152,000 due to new purchase of machines, and (iii) insurance expenses of approximately $89,000 for Directors and Officers Liability insurance during the year ended December 31, 2024. The increase was offset by the decrease of (i) salaries and wages expenses of approximately $173,000 due to our workforce elimination to cut costs during the year ended December 31, 2024, (ii) travel expense, meals and entertainment expense of approximately $72,000 for cost enhancement.
Research and development expenses increased by approximately $271,000, or 34.3%, from approximately $792,000 for the year ended December 31, 2023 to approximately $1.1 million for the year ended December 31, 2024. Our R&D investment has increased to enhance our product offerings, develop innovative solutions, and remain competitive in the market.
7
Other income, net
Total other income, net for the year ended December 31, 2024, was approximately $362,000 compared to other income, net of approximately $195,000 for the year ended December 31, 2023. Our other incomes increased by approximately $167,000 mainly due to the increase of interest income received from bank deposits.
Income tax expense
Our income tax expenses decreased by approximately $260,000, or 48.3%, from approximately $538,000 for the year ended December 31, 2023, to approximately $278,000 for the year ended December 31, 2024. The decrease was mainly due to the decrease in taxable income for the year ended December 31, 2024.
Net (loss) income
As a result of the combination of factors discussed above, we had net loss of $572,000 for the year ended December 31, 2024 and net income of $757,000 for the year ended December 31, 2023. Comprehensive (loss) income attributable to us was approximately ($1.2 million) for the year ended December 31, 2024, compared to approximately $1.0 million for the year ended December 31, 2023.
B. Liquidity and Capital Resources
As of December 31, 2024, Tungray had cash and restricted cash of approximately $9.5 million. Material amounts of cash disaggregated by currency denomination as of December 31, 2024 in each jurisdiction in which Tungray’s subsidiaries are domiciled are as follows:
| USD |
China - subsidiaries | 1,112,666 |
Singapore – subsidiaries | 5,798,297 |
Cayman – parent company | 2,561,395 |
| 9,472,358 |
|
|
Tungray’s working capital was approximately $9.2 million as of December 31, 2024. In assessing Tungray’s liquidity, Tungray monitors and analyses its cash-on-hand and operating and capital expenditure commitments. To date, Tungray has financed its working capital requirements through cash flow generated from operations, debt and equity financings, and capital contributions from its existing shareholders.
Tungray believes its current working capital is sufficient to support its operations for the next twelve months. Tungray may, however, need additional cash resources in the future if it experiences changes in business conditions or other developments or if Tungray finds and wishes to pursue opportunities for investment, acquisition, capital expenditure, or similar actions. If Tungray determines that its cash requirements exceed the amount of cash and cash equivalents Tungray has on hand at the time, Tungray may seek to obtain bank loans, third-party loans and related-party loans, or obtain credit facilities. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict Tungray’s operations. Tungray’s obligation to bear credit risk for certain financing transactions Tungray facilitates may also strain Tungray’s operating cash flow. Tungray cannot assure you that financing will be available in amounts or on terms acceptable to Tungray, if at all.
8
The following table summarizes the key components of Tungray’s cash flows for the years ended December 31, 2024 and 2023.
|
| For the Years Ended | ||
|
| 2024 |
| 2023 |
|
| USD |
| USD |
|
|
|
|
|
Net cash (used in) provided by operating activities |
| (811,889) |
| 451,021 |
Net cash used in investing activities |
| (2,784,052) |
| (81,745) |
Net cash provided by (used in) financing activities |
| 2,792,522 |
| (2,805,308) |
Effect of exchange rate on cash and restricted cash |
| (526,628) |
| 108,141 |
Change in cash and restricted cash |
| (1,330,047) |
| (2,327,891) |
Cash and restricted cash, beginning of year |
| 10,802,405 |
| 13,130,296 |
Cash and restricted cash, end of year |
| 9,472,358 |
| 10,802,405 |
Cash |
| 8,968,814 |
| 10,802,405 |
Restricted cash |
| 503,544 |
| - |
Operating activities
Net cash used in operating activities for the year ended December 31, 2024, was primarily attributable to net loss of approximately $0.6 million with non-cash depreciation and amortization expenses of approximately $0.4 million, provision for credit losses or doubtful accounts of approximately $0.2 million, write-down of inventories of approximately $0.1 million, amortization of lease right-of-use assets of approximately $0.3 million. The cash outflow were mainly due to the increase in prepayments of approximately $0.5 million, the increase in prepayments – related parties of approximately $2.9 million, the increase in inventories of approximately 0.1 million, the increase in other receivables and other current assets of approximately $0.3 million, the decrease in accounts payable – related parties of approximately $0.4 million, the decrease in operating lease liabilities of approximately $0.1 million, the decrease in operating lease liabilities – related parties of approximately $0.1 million, and the decrease in taxes payable of approximately $0.5 million. Cash outflow was partially offset by the decrease in accounts and notes receivable of approximately $1.0 million, the increase in accounts payable of approximately $0.3 million, the increase in contract liabilities of approximately $2.2 million, and the increase in accrued expenses and other payables of approximately $0.2 million.
Net cash provided by operating activities for the year ended December 31, 2023, was primarily attributable to net income of approximately $0.8 million with non-cash depreciation and amortization expenses of approximately $0.3 million, provision for credit losses or doubtful accounts of approximately $0.2 million, amortization of lease right-of-use assets of approximately $0.2 million, and deferred tax expenses of approximately $75,000. Cash inflow was also attributable to the increase in contract liabilities of approximately $2.1 million, the decrease in prepayments of approximately $0.3 million, the increase in accounts payable – related parties of approximately $0.4 million, and the increase in accrued expenses and other payables of approximately $0.3 million. Cash inflow was partially offset by the increase in accounts and notes receivable of approximately $1.4 million, the increase in accounts receivable – related parties of approximately $0.2 million, the increase in prepayments – related parties of approximately $1.0 million, the increase in inventories of approximately $0.9 million, the decrease in operating lease liabilities – related parties of approximately $0.2 million and the decrease in taxes payable of approximately $0.3 million.
Investing activities
Cash used in investing activities for the year ended December 31, 2024 was due to the purchase of property, plant and equipment of approximately $0.5 million, the purchase of intangible assets of approximately $15,000, the prepayment for land use right of approximately $2.0 million, and the loans to related parties of approximately $0.3 million.
Cash used in investing activities for the year ended December 31, 2023 was due to the loan payments to related parties of approximately $0.7 million, the purchases of property, plant and equipment of approximately $43,000, and
9
the purchases of intangible assets of approximately $38,000. The cash outflow was offset by the repayments from related parties of approximately $0.7 million.
Financing activities
Cash provided by financing activities for the year ended December 31, 2024 was mainly due to the borrowings from related parties of approximately $0.2 million, the capital contribution from noncontrolling interest shareholder of approximately $50,000, the proceeds from issuance of shares upon IPO of approximately $5.0 million, and the proceeds from issuance of shares pursuant to exercise of over-allotment of approximately $0.4 million. Cash inflow in financing activities was offset by the repayments to bank loans of approximately $0.8 million, the repayments of finance lease liabilities of approximately $0.1 million, the dividends payments of approximately $0.5 million, and the payments of initial public offering costs of approximately $1.4 million.
Cash used in financing activities for the year ended December 31, 2023 was mainly due to the repayments to related parties of approximately $1.5 million, the repayments to bank loan of approximately $1.2 million, the repayments to third party loans of $0.2 million, the dividends payments of approximately $1.3 million, and the prepaid IPO costs of approximately $0.5 million. Cash outflow in financing activities was offset by the borrowings from related parties of approximately $1.6 million and the proceeds from bank loan of approximately $0.3 million.
Commitments and Contingencies
In the normal course of business, Tungray is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance with ASC No. 450-20, “Loss Contingencies”, Tungray will record accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
Off-Balance Sheet Arrangements
Tungray has no off-balance sheet arrangements, including arrangements that would affect Tungray’s liquidity, capital resources, market risk support, and credit risk support, or other benefits.
Contractual Obligations
As of December 31, 2024, the future minimum payments under certain of Tungray’s contractual obligations were as follows:
|
| Payments Due In | ||||||||
|
| Total |
| Less than |
| 1 – 2 |
| 3 – 5 |
| Thereafter |
|
|
|
| 1 year |
| years |
| years |
|
|
Banking facilities |
| $1,241,762 |
| $80,588 |
| $87,914 |
| $263,742 |
| $809,518 |
Operating leases obligations |
| 1,329,150 |
| 357,229 |
| 361,083 |
| 610,838 |
| - |
Financing leases obligations |
| 127,591 |
| 127,591 |
| - |
| - |
| - |
Total |
| $2,698,503 |
| $565,408 |
| $448,997 |
| $874,580 |
| $809,518 |
10
Quantitative and Qualitative Disclosures about Market Risks
Inflation risk
Inflationary factors, such as increases in personnel and overhead costs, could impair Tungray’s operating results. Although Tungray does not believe that inflation has had a material impact on Tungray’s financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on Tungray’s ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues do not increase.
Interest rate risk
Tungray is exposed to interest rate risk while it has short-term banking and third-party facilities outstanding. Although interest rates for Tungray’s short-term loans are about fixed for the terms of the loans, the terms are typically twelve (12) months, and interest rates are subject to change upon renewal.
Foreign Exchange Risk
Four of Tungray’s operating entities’ functional currency are RMB, and two of Tungray’s operating entities’ functional currency are SGD. As a result, Tungray is exposed to foreign exchange risk as Tungray’s results of operations may be affected by fluctuations in the exchange rate among SGD, USD, and RMB. If the RMB and SGD depreciates against the USD, the value of Tungray’s SGD or RMB revenues, earnings, and assets as expressed in Tungray’s USD financial statements will decline. Tungray has not entered into any hedging transactions in an effort to reduce Tungray’s exposure to foreign exchange risk.
C. Research and development, patents and license, etc.
See “Item 4. Information on the Company—B. Business Overview.”
D. Trend information
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2023 and December 31, 2024 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Critical Accounting Estimates
We prepare financial statements in conformity with U.S. GAAP, which requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our significant accounting policies includes revenue recognition, inventory and costs of goods sold, accounts and notes receivable, net, property and equipment, net, income taxes, leases, and related party transactions. While our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements, we believe that there were no critical accounting policies that affect the preparation of financial statements. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.
11
Estimates are used when accounting for items and matters including the critical accounting estimates as follows:
Allowance for credit losses
Allowance for credit loss represents management’s best estimate of probable losses inherent in the portfolio. Commencing January 1, 2023, we adopted ASC 326, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. Because expected credit loss can vary substantially over time, estimating expected credit losses requires a number of assumptions about matters that are uncertain.
We considered various factors, including nature, historical collection experience, the age of the accounts receivable balances, credit quality and specific risk characteristics of its customers, current economic conditions, forward-looking information including economic, regulatory, technological, environmental factors (such as industry prospects, GDP, employment, etc.), reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. The Company have adopted loss rate method to calculate the credit loss and considered the reverent factors of the historical and future conditions of the Company to make reasonable estimation of the risk rate. Because estimating expected credit losses requires a number of assumptions about matters that are uncertain, expected credit losses can vary substantially over time.
Financial assets are presented net of the allowance for credit losses in the Consolidated Balance Sheets. The measurement of the allowance for credit losses is recognized through current expected credit loss expense. Current expected credit loss expense is included as a component of general and administrative expenses in the consolidated statements of income and comprehensive income (loss). Write-offs are recorded in the period in which the asset is deemed to be uncollectible.
Impairment for long-lived assets
Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. Significant judgment is required to determine whether unfavorable events or changes in circumstances exist and to determine key assumptions adopted in the cash flow projections. Changes to key assumptions can significantly affect these cash flow projections and the results of the impairment tests. For the years ended December 31, 2024 and 2023, no impairment of long-lived assets was recognized.
Valuation of deferred tax assets
Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Valuation allowance is provided against deferred tax assets when we determine that it is more-likely-than-not that the deferred tax assets will not be utilized in the future. We consider positive and negative evidence to determine whether some portion or all of the deferred tax assets will more-likely-than-not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of future profitability. These
12
assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimates we are using to manage the underlying businesses.
We believe that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. Changes in these estimates and judgements may result in material increase or decrease in our provision for income tax expenses, which could be material to our financial position and results of operations.
13
Part III
Item 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
Item 18. FINANCIAL STATEMENTS
The consolidated financial statements of Tungray Technologies Inc, and its subsidiaries are included at the end of this Amendment.
Item 19. EXHIBITS
EXHIBIT INDEX
Exhibit |
| Exhibit title |
1.1 |
| Amended and Restated Memorandum and Articles of Association (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
1.2 |
| Second Amended and Restated Memorandum and Articles of Association |
2.1 |
| Specimen Class A Ordinary Share Certificate (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
2.2 |
| Form of Representative’s Warrant (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
2.3 |
| Description of Securities registered under Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference to the identically named exhibit filed with the Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed on April 26, 2024) |
4.1 |
| Form of Executive Employment Agreement between Tungray Technologies Inc and Wanjun Yao, dated as of March 29, 2023 (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
4.2 |
| Form of Executive Employment Agreement between Tungray Technologies Inc and Lei Yao, dated as of March 29, 2023 (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
4.3 |
| Employment Agreement between Tungray Singapore Pte. Ltd. and Lei Yao, dated as of July 1, 2022 (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
4.4 |
| Employment Agreement between Tungray Singapore Pte. Ltd. and Nina Qian, dated as of September 1, 2024 (Incorporated by reference to the identically named exhibit filed with the Annual Report on Form 20-F for the fiscal year ended December 31, 2024, filed on May 14, 2025) |
4.5 |
| Form of Director Offer Letter (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
4.6 |
| |
8.1 |
| List of Subsidiaries of the Registrant (Incorporated by reference to the identically named exhibit filed with the Annual Report on Form 20-F for the fiscal year ended December 31, 2024, filed on May 14, 2025) |
11.1 |
| Code of Conduct and Ethics (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
11.2 |
| Insider Trading Policy (Incorporated by reference to the identically named exhibit filed with the Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed on April 26, 2024) |
12.1 |
| |
12.2 |
|
14
13.1 |
| |
97.1 |
| Clawback Policy (Incorporated by reference to the identically named exhibit filed with Registration Statement on Form F-1 (File No. 333- 270434)) |
101.INS |
| Inline XBRL Instance Document |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
| Tungray Technologies Inc | |
|
|
|
| By: | /s/ Wanjun Yao |
| Name: | Wanjun Yao |
| Title: | Chief Executive Officer |
|
|
|
| Dated: | October 14, 2025 |
15
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TUNGRAY TECHNOLOGIES INC AND SUBSIDIARIES
For the Years Ended December 31, 2024 and 2023
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Tungray Technologies Inc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tungray Technologies Inc (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive (loss) income, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Guangdong Prouden CPAs GP
Guangdong Prouden CPAs GP
We have served as the Company’s auditor since 2025.
October 14, 2025
F-2
Tungray Technologies Inc and Subsidiaries
Consolidated Balance Sheets
(Stated in U.S. Dollars)
|
| As of |
|
| As of |
| ||
| December 31, 2024 |
|
| December 31, 2023 |
| |||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash |
| $ |
|
| $ |
| ||
Restricted cash |
|
|
|
|
|
| ||
Accounts and notes receivable, net |
|
|
|
|
|
| ||
Accounts receivable - related parties |
|
|
|
|
|
| ||
Inventories, net |
|
|
|
|
|
| ||
Prepayments, net |
|
|
|
|
|
| ||
Prepayments - related parties, net |
|
|
|
|
|
| ||
Other receivables and other current assets, net |
|
|
|
|
|
| ||
Other receivables - related parties |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
Prepaid expenses and deposits |
|
|
|
|
|
| ||
Prepayment for land use right |
|
|
|
|
|
| ||
Long-term investment |
|
|
|
|
|
| ||
Operating right-of-use assets |
|
|
|
|
|
| ||
Finance right-of-use assets |
|
|
|
|
|
| ||
Intangible assets |
|
|
|
|
|
| ||
Deferred initial public offering (“IPO”) costs |
|
|
|
|
|
| ||
Property and equipment, net |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
| ||
Accounts payable - related parties |
|
|
|
|
|
| ||
Contract liabilities |
|
|
|
|
|
| ||
Accrued expenses and other payables |
|
|
|
|
|
| ||
Other payables - related parties |
|
|
|
|
|
| ||
Current portion of banking facilities |
|
|
|
|
|
| ||
Current portion of operating lease liabilities |
|
|
|
|
|
| ||
Current portion of operating lease liabilities - related party |
|
|
|
|
|
| ||
Current portion of finance lease liabilities |
|
|
|
|
|
| ||
Taxes payable |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
OTHER LIABILITIES |
|
|
|
|
|
|
|
|
Banking facilities |
|
|
|
|
|
| ||
Operating lease liabilities |
|
|
|
|
|
| ||
Operating lease liabilities - related party |
|
|
|
|
|
| ||
Total other liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
Class A ordinary shares, $ |
|
|
|
|
|
| ||
Class B ordinary shares, $ |
|
|
|
|
|
| ||
F-3
Additional paid-in capital |
|
|
|
|
|
| ||
Retained earnings |
|
|
|
|
|
| ||
Statutory reserves |
|
|
|
|
|
| ||
Accumulated other comprehensive loss |
|
| ( |
|
|
| ( |
|
Total Tungray Technologies Inc's equity |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NONCONTROLLING INTERESTS |
|
| ( |
|
|
| ( |
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ |
|
| $ |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Tungray Technologies Inc and Subsidiaries
Consolidated Statements of Operations and Comprehensive (Loss) Income
(Stated in U.S. Dollars)
|
| For the Years Ended December 31, |
| ||||||||
| 2024 |
|
| 2023 |
|
| |||||
|
|
|
|
|
|
|
| ||||
Revenue - third parties |
| $ |
|
| $ |
|
| ||||
Revenue - related parties |
|
|
|
|
|
|
| ||||
Total revenues |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||
Cost of revenue - third parties |
|
|
|
|
|
|
| ||||
Cost of revenue - related parties |
|
|
|
|
|
|
| ||||
Total cost of revenues |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||
Selling expenses |
|
|
|
|
|
|
| ||||
General and administrative expenses |
|
|
|
|
|
|
| ||||
Research and development expenses |
|
|
|
|
|
|
| ||||
Total operating expenses |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||
(Loss) income from operations |
|
| ( |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Other income (expense) |
|
|
|
|
|
|
|
|
| ||
Other income, net |
|
|
|
|
|
|
| ||||
Lease income - related party |
|
|
|
|
|
|
| ||||
Financial income (expenses), net |
|
|
|
|
| ( |
|
| |||
Total other income, net |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||
(Loss) income before income taxes |
|
| ( |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Income tax expense |
|
| ( |
|
|
| ( |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Net (loss) income |
|
| ( |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Less: net loss attributable to noncontrolling interests |
|
| ( |
|
|
| ( |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Net (loss) income attributable to Tungray Technologies Inc |
| $ | ( |
|
| $ |
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Net (loss) income |
| $ | ( |
|
| $ |
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Foreign currency translation adjustment |
|
| ( |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Comprehensive (loss) income |
|
| ( |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Less: comprehensive loss attributable to noncontrolling interests |
|
| ( |
|
|
| ( |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Total comprehensive (loss) income attributable to Tungray Technologies Inc |
| $ | ( |
|
| $ |
|
| |||
|
|
|
|
|
|
|
|
|
| ||
Weighted average number of common shares outstanding - basic and diluted |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||
F-5
(Loss) earnings per share - basic and diluted |
| $ | ( |
|
| $ |
|
| |||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Tungray Technologies Inc and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
| Additional |
| Retained earnings |
| Accumulated other |
|
|
|
| |||||||||||
| Class A ordinary shares |
| Class B ordinary shares |
| paid-in |
| Statutory |
|
|
| comprehensive |
| Noncontrolling |
|
| ||||||||||||
Shares | Par Value |
| Shares | Par value |
| capital |
| reserves |
| Unrestricted |
| income (loss) |
| interests |
| Total | |||||||||||
BALANCE, December 31, 2022 |
| $ |
|
| $ |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | ||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( |
|
| |||||||||
Statutory reserves |
|
|
|
|
|
|
|
|
|
|
| ( |
|
|
|
|
|
| |||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( |
|
| ||||||||
BALANCE, December 31, 2023 |
| $ |
|
| $ |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | ||||||||
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( |
|
|
|
|
| ( |
|
| ( |
Share issuance upon initial public offering (“IPO”) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Issuance of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Share issuance pursuant to exercise of over-allotment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Offering cost incurred for IPO and over-allotment |
|
|
|
|
|
|
| ( |
|
|
|
|
|
|
|
|
|
| ( | ||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
| ( |
|
| ( |
|
| ( | |||||||
Capital contribution from noncontrolling shareholder |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
BALANCE, December 31, 2024 |
| $ |
|
| $ |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Tungray Technologies Inc and Subsidiaries
Consolidated Statements of Cash Flows
(Stated in U.S. Dollars)
|
| For the Years Ended December 31, |
| |||||
| 2024 |
|
| 2023 |
| |||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | ( |
|
| $ |
| |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
| ||
Amortization expense |
|
|
|
|
|
| ||
Provision for credit losses or doubtful accounts |
|
|
|
|
|
| ||
Write-down of inventories |
|
|
|
|
|
| ||
Deferred tax expense |
|
|
|
|
|
| ||
Amortization of operating lease right-of-use assets |
|
|
|
|
|
| ||
Amortization of finance lease right-of-use assets |
|
|
|
|
|
| ||
Loss from disposal of property and equipment |
|
|
|
|
|
| ||
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
|
|
| ( |
| |
Accounts receivable - related parties |
|
| ( |
|
|
| ( |
|
Prepayments |
|
| ( |
|
|
|
| |
Prepayments - related parties |
|
| ( |
|
|
| ( |
|
Inventories |
|
| ( |
|
|
| ( |
|
Other receivables and other current assets |
|
| ( |
|
|
| ( |
|
Prepaid expenses and deposits |
|
| ( |
|
|
| ( |
|
Operating lease receivable - related party |
|
|
|
|
|
| ||
Accounts payable |
|
|
|
|
| ( |
| |
Accounts payable - related party |
|
| ( |
|
|
|
| |
Contract liabilities |
|
|
|
|
|
| ||
Accrued expenses and other payables |
|
|
|
|
|
| ||
Operating lease liabilities |
|
| ( |
|
|
| ( |
|
Operating lease liabilities - related parties |
|
| ( |
|
|
| ( |
|
Other payables – related parties |
|
|
|
|
|
| ||
Taxes payable |
|
| ( |
|
|
| ( |
|
Net cash (used in) provided by operating activities |
|
| ( |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| ( |
|
|
| ( |
|
Purchase of intangible assets |
|
| ( |
|
|
| ( |
|
Prepayment for land use right |
|
| ( |
|
|
|
| |
Loans to related parties |
|
| ( |
|
|
| ( |
|
Repayments from related parties |
|
|
|
|
|
| ||
Net cash used in investing activities |
|
| ( |
|
|
| ( |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings from related parties |
|
|
|
|
|
| ||
Repayments to related parties |
|
|
|
|
| ( |
| |
Proceeds from bank loan |
|
|
|
|
|
| ||
Repayments to bank loan |
|
| ( |
|
|
| ( |
|
Repayments to third party loans |
|
|
|
|
| ( |
| |
Repayments of finance lease liabilities |
|
| ( |
|
|
|
| |
Dividends payments |
|
| ( |
|
|
| ( |
|
Capital contribution from noncontrolling interest shareholder |
|
|
|
|
|
| ||
Proceeds from issuance of shares upon IPO |
|
|
|
|
|
| ||
Proceeds from issuance of shares pursuant to exercise of over-allotment |
|
|
|
|
|
| ||
Payments of initial public offering costs |
|
| ( |
|
|
| ( |
|
Net cash provided by (used in) financing activities |
|
|
|
|
| ( |
| |
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and restricted cash |
|
| ( |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Net change in cash and restricted cash |
|
| ( |
|
|
| ( |
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash - beginning of the year |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash and restricted cash - end of the year |
| $ |
|
| $ |
| ||
Cash |
|
|
|
|
|
| ||
Restricted cash |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ |
|
| $ |
| ||
Income tax paid |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental non-cash information: |
|
|
|
|
|
|
|
|
Finance lease right-of-use assets obtained in exchange for finance lease liabilities |
| $ |
|
| $ |
| ||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities |
| $ |
|
| $ |
| ||
Termination of operating lease right-of-use asset with lease liability |
| $ | ( |
|
| $ |
| |
Other receivables - related party offset with other payables - related party upon execution of offset agreement |
| $ |
|
| $ |
| ||
Deferred IPO costs transfer to additional paid-in capital upon IPO |
| $ | ( |
|
| $ |
| |
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Note 1– Nature of business and organization
Tungray Technologies Inc (“Tungray”) was incorporated and registered as an exempted company with limited liability under the laws of Cayman Islands on June 1, 2022. Tungray is a holding company and has no substantive operations other than holding all of the outstanding shares of its subsidiaries through various recapitalizations. Tungray and its subsidiaries are hereafter referred as the “Company.”
The Company, through its wholly-owned subsidiaries in Singapore and China, is engaged in the field of industrial automation. The Company is an engineer-to-order company that has provided its customers with tooling solutions and customized industrial manufacturing solutions to Original Equipment Manufacturers (“OEMs”) in the semiconductors, printers, electronics, and home appliances sectors.
Reorganization
On June 21, 2022, Tungray established three wholly-owned subsidiaries under the laws of the British Virgin Island (“BVI”), Tungray Motion Ltd (“Tungray Motion”), Tungray Electronics Ltd (“Tungray Electronics”) and Tungray Intelligent Technology Ltd (“Tungray Intelligent”), which are three investment holding companies (collectively, the “BVI Holding Companies”) with limited liability.
Tungray completed various recapitalizations under common control of its then existing shareholders, who collectively owned all of the equity interests of those three BVI Holding Companies prior to the Reorganization, through the following transactions (together with the foregoing, the “Reorganization”):
| ● | On November 22, 2022, Tungray acquired |
| ● | On November 22, 2022, Tungray acquired |
| ● | On July 14, 2022, Tungray Intelligent established a wholly-owned subsidiary Tungray Technology Pte Ltd (“Tungray Technology”), a Singapore limited company, which established Tongsheng Intelligence Technology Development (Shenzhen) Co., Ltd (“Tongsheng Development”) on August 22, 2022 under the laws of the PRC. On September 28, 2022, Tungray acquired |
Before and after the Reorganization, the Company, together with its subsidiaries (as indicated above), is effectively controlled by the majority shareholders, and therefore the Reorganization is considered as a recapitalization of entities under common control in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.
F-9
On April 18, 2024, the Company completed its initial public offering ("IPO") of
In connection with the IPO, the Company granted US Tiger Securities, Inc. ("US Tiger"), the sole book-running manager, a 45-day option to purchase up to an additional 187,500 Class A ordinary shares at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any. On April 30, 2024, US Tiger partially exercised this option, purchasing an additional
The accompanying consolidated financial statements reflect the activities of the Company and each of the following entities:
Name |
| Background |
| Ownership |
Tungray Motion Ltd (“Tungray Motion”) |
| ● A BVI holding company ● Incorporated on June 21, 2022 |
| |
Tungray Electronics Ltd (“Tungray Electronics”) |
| ● A BVI holding company ● Incorporated on June 21, 2022 |
| |
Tungray Intelligent Technology Ltd (“Tungray Intelligent”) |
| ● A BVI holding company ● Incorporated on June 21, 2022 |
| |
Tungray Singapore Pte. Ltd. (“Tungray Singapore”) |
| ● A Singapore Company Limited by Shares ● Incorporated on June 21, 2007 ● Installation of industrial machinery and equipment, mechanical engineering works |
| |
Tung Resource Pte Ltd (“Tung Resource”) |
| ● A Singapore Company Limited by Shares ● Incorporated on July 9, 1996 ● Installation of industrial machinery and equipment, mechanical engineering works |
| |
Tungray Industrial Automation (Shenzhen) Co., Ltd (“Tungray Industrial”) |
| ● A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”) ● Incorporated on May 27, 2010 ● Design, development and manufacture of non- standard equipment such as automated assembly equipment, precision testing equipment, tooling fixtures, etc. |
| |
Tongsheng Intelligent Equipment (Shenzhen) Co., Ltd (“Tongsheng Intelligent”) |
| ● A PRC limited liability company ● Incorporated on October 25, 2021 ● Research and development of intelligent robots; sales of intelligent robots; sales of intelligent storage equipment |
|
F-10
Qingdao Tongri Electric Machines Co., Ltd (“Tongri Electric”) |
| ● A PRC limited liability company and deemed a WFOE ● Incorporated on December 26, 2001 ● Design, R&D and manufacturing of induction brazing equipment, induction hardening equipment, automatic welding equipment, linear motors, DD motors |
|
F-11
Qingdao Tungray Intelligent Technology Co., Ltd (“Qingdao Tungray Intelligent”) |
| ● A PRC limited liability company and deemed aWFOE ● Incorporated on September 30, 2017 ● Design, R&D and manufacturing of induction brazing equipment, induction hardening equipment, automatic welding equipment, linear motors, DD motors |
| |
Tungray Technology Pte Ltd (“Tungray Technology”) |
| ● A Singapore Company Limited by Shares ● Incorporated on July 14, 2022 ● Installation of industrial machinery and equipment, mechanical engineering works |
| |
Tongsheng Intelligence Technology Development (Shenzhen) Co., Ltd. (“Tongsheng Development ”) |
| ● A PRC limited liability company and deemed a WFOE ● Incorporated on August 22, 2022 ● Research and development of intelligent robots; sales of intelligent robots; sales of intelligent storage equipment |
| |
Xi’an Tongri Intelligent Industrial Technology Co., Ltd. |
| ● A PRC limited liability company and deemed a WFOE ● Incorporated on June 25, 2023 ● Manufacturing, Research and development of intelligent robots; sales of intelligent robots |
|
Note 2– Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for a fair presentation of the financial statements, have been included.
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
F-12
Segment Information
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s business segments.
In November 2023, the FASB issued Accounting Standards Updates (“ASU”) No. 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)”. This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The Company adopted this ASU commencing January 1, 2024 and the adoption of the ASU does not have a material effect on its consolidated financial statements.
The Company applies the management approach to determine its reportable operating segments. This approach considers the internal organization and the reporting provided to the CODM for the purpose of resource allocation and performance evaluation. The CODM has been identified as the Chief Executive Officer, who reviews financial results and makes strategic decisions. Based on this structure and internal reporting, management has determined that the Company operates as a single operating segment under ASC 280. This conclusion reflects the integrated nature of the Company’s operations, which share resources across research and development, product design, marketing, operations, and administrative functions to deliver a unified suite of products and services. The CODM considers year-over-year fluctuations and budget-to-actual variances of these consolidated results when assessing performance and making operating decisions. The Company manages assets on a consolidated basis as reported on the consolidated balance sheets.
The Company’s CODM use consolidated net (loss) income as the measures of segment profit or loss. Significant segment expenses are consistent with those reported on the consolidated statements of operations and comprehensive (loss) income and include cost of revenues, selling expenses, general and administrative expenses and research and development expenses. For significant segment expenses incurred during the years ended December 31, 2024, and 2023, refer to consolidated statements of operations and comprehensive (loss) income.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period covered by the financial statements and accompanying notes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but not limited to, allowance for credit losses, estimated useful lives and impairment of property and equipment, valuation of deferred tax assets, fair value of warrant, net realizable value of inventory and other provisions and contingencies. As future events and their effects cannot be determined with precision, actual results could differ from those estimates.
Foreign currency translation and transaction
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statements of operations and comprehensive (loss) income.
The reporting currency of the Company is United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. The Company’s subsidiaries in Singapore and the People’s Republic of China (“PRC”)
F-13
conduct their businesses and maintain its books and record in the local currency, Singapore Dollars (“SGD”) and Chinese Renminbi (“RMB”), as their functional currency, respectively.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income (loss) within the statements of changes in shareholders’ equity. Cash flows are also translated at average translation rates for the periods; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Translation of foreign currencies into US$1 have been made at the following exchange rates for the respective years:
|
| As of and for the Years Ended December 31, |
| |||||||
|
| 2024 |
|
| 2023 |
|
|
| ||
|
|
|
|
|
|
|
|
| ||
Year-end SGD: US$1 exchange rate |
|
|
|
|
|
|
|
| ||
Year-end RMB: US$1 exchange rate |
|
|
|
|
|
|
|
| ||
Year-average SGD: US$1 exchange rate |
|
|
|
|
|
|
|
| ||
Year-average RMB: US$1 exchange rate |
|
|
|
|
|
|
|
| ||
Fair value measurements
Fair value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities, we consider the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The following summarizes the three levels of inputs required to measure fair value, of which the first two are considered observable and the third is considered unobservable:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value for certain assets and liabilities such as cash, restricted cash, accounts and notes receivable, prepayments, other receivables, and other current assets, short-term loans, accounts payable, contract liabilities, accrued expenses and other payables, and tax payables have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its long-term loan from a bank approximates the fair value based on current yields for debt instruments with similar terms. Warrants were measured at fair value using unobservable inputs and categorized in Level 3 of the fair value hierarchy. The Company and its subsidiaries did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of December 31, 2024 and 2023.
F-14
Cash
Cash represents cash on hand and demand deposits placed with banks or other financial institutions which are unrestricted as to withdrawal or use and have original maturities less than three months.
Restricted cash
Cash that is restricted as to withdrawal for use or pledged as security is reported as “Restricted cash” in the consolidated balance sheets. The Company’s restricted cash mainly represents the proceeds received through IPO deposited in the escrow account. It has been released to the company’s account in May 2025.
Accounts and notes receivable, net
Accounts receivable includes trade accounts due from customers. Accounts receivables are recorded at the invoiced amount less an allowance for expected credit losses and do not bear interest, which are due after 30 to 90 days, depending on the credit term with its customers. Notes receivable represents trade accounts receivable due from various customers where the customers’ banks or customers have guaranteed the payments. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and a processing fee. As of December 31, 2024 and 2023, the allowance for credit losses of accounts and notes receivable was $
Other receivables and other current assets, net
Other receivables and other current assets primarily include receivable from employee advance, and refundable deposits from third party service providers. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of December 31, 2024 and 2023, the Company provided allowance for credit losses of other receivable and other current asset $
Allowance for credit losses
Allowance for credit losses represents management’s best estimate of probable losses inherent in the portfolio. On January 1, 2023, the Company adopted ASC 326, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.
Under ASU 2016-13, the Company has exposure to credit losses for financial assets, which are accounts and notes receivable, and other receivables and other current assets. The Company considered various factors, including nature, historical collection experience, the age of the accounts receivable balances, credit quality and specific risk characteristics of its customers or other third parties, current economic conditions, forward-looking information including economic, regulatory, technological, environmental factors (such as industry prospects, GDP, employment, etc.), reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. The Company have adopted loss rate method to calculate credit loss and considered the reverent factors of the historical and future conditions of the Company to make reasonable estimation of the risk rate.
Financial assets are presented net of the allowance for credit losses in the consolidated balance sheets. The measurement of the allowance for credit losses is recognized through current expected credit loss expense. Current
F-15
expected credit loss expense is included as a component of general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. Write-offs are recorded in the period in which the asset is deemed to be uncollectible.
Prepayments
The Company makes prepayments to suppliers in advance of receiving goods or services in accordance with underlying contractual terms with suppliers. Generally, prepayments are intended to expedite the delivery of required inventory as needed and to help ensure priority and preferential pricing on such goods or services.
These prepayments are unsecured and are reviewed periodically on an individual basis by considering aging history, specific risk characteristics of vendors and other factors to determine whether the prepayment will be timely realized through the receipt of inventories, services, or refunds. If any amounts are deemed unrealizable, the Company will recognize an allowance account to reserve for such balances. Management reviews its prepayments on a regular basis to determine if the valuation allowance is adequate and adjusts the allowance when necessary. As of December 31, 2024 and 2023, the Company provided a valuation allowance for prepayments of $
Long-term investment
The Company’s long-term investment consists of an equity investment without readily determinable fair value. For equity securities without readily determinable fair value and do not qualify for the existing practical expedient in ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) to estimate fair value using the net asset value per share (or its equivalent) of the investment, the Company elected to use the measurement alternative to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any.
For those equity investments that the Company elects to use the measurement alternative, the Company makes a qualitative assessment of whether the investment is impaired at each reporting date. If a qualitative assessment indicates that the investment is impaired, the entity has to estimate the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less than the investment’s carrying value, the entity has to recognize an impairment loss in net income / (loss) equal to the difference between the carrying value and fair value. No event had occurred and indicated that other-than-temporary impairment existed, and therefore the Company did not record any impairment charges for its investments for the years ended December 31, 2024 and 2023.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with no residual value. The estimated useful lives are as follows:
|
| Expected useful lives |
Buildings |
| |
Office equipment |
| |
Operation equipment |
|
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the Consolidated Statements of Operations and Comprehensive (Loss) Income. Expenditure for maintenance and repairs is charged to earnings as incurred, while additions, renewals and betterments,
F-16
which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Intangible assets, net
Intangible assets are stated at cost, less accumulated amortization. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in the PRC is owned by the government; however, the government grants “land use rights.” The Company has obtained rights to use various parcels of land for
Impairment for long-lived assets
Long-lived assets, including property and equipment with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. For the years ended December 31, 2024 and 2023,
Revenue recognition
The Company follows the revenue accounting requirements of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The core principle underlying the revenue recognition of this ASU allows the Company to recognize - revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange.
To achieve that core principle, the Company applies five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good to the customer and is the unit of account in ASC Topic 606. A contract’s transaction price is recognized as revenue when the performance obligation is satisfied. Each of the Company’s contracts have distinct performance obligations, which are the promises to designs, manufactures, sells and installs individual goods or the promise to deliver services. The Company treats the distinct performance obligations as a single performance obligation as they are necessary and consecutive steps to complete a contract.
Assurance-type Warranty. An assurance-type warranty guarantees that the product will perform as promised and is not a performance obligation. This type of warranty promises to repair or replace a delivered good or service if it does
F-17
not perform as expected. Since an assurance-type warranty guarantees the functionality of a product, the warranty is not accounted for as a separate performance obligation, and thus no transaction price is allocated to it. Rather, to account for an assurance-type warranty the vendor should estimate and accrue a warranty liability when the promised good or service is delivered to the customer.
The Company’s revenue recognition policies are effective upon the adoption of ASC 606. The Company has identified two primary revenue streams: revenue from standard products and revenue from customized products.
The company recognizes revenue from standard products using following 5 steps model: 1) Identify the contract with a customer: each sale is supported by a legally enforceable purchase order or sales agreement outlining the product, pricing, delivery terms, and payment terms. 2) Identify the performance obligations: the Company’s performance obligation is to deliver the standard product to the customer. Shipping, handling, are considered fulfilment activities, not separate performance obligations. 3) Determine the transaction price: The transaction price is fixed and stated in the contract. Historically, the Company has not provided significant discounts or experienced significant returns. Any variable consideration such as allowances is estimated and constrained appropriately. 4) Allocate the transaction price: as there is a single performance obligation, the entire transaction price is allocated to the delivery of the product. 5) Recognize revenue when the performance obligation is satisfied: revenue is recognized at a point in time when control of the product is transferred to the customer. This typically occurs when the customer obtains physical possession, legal title, and the risks and rewards of ownership, which may be when goods are delivered and or when they are on board at customs, depending on the type of contractual terms.
Customized products are specially designed and manufactured automatic testing or welding equipment tailored to specific customer requirements.
The company recognizes revenue from customized products using following 5 steps model: 1) Identify the contract with a customer: contracts are established with enforceable terms and pricing, often including technical specifications, milestone obligations, and acceptance provisions. 2) Identify the performance obligations: the contract typically includes a single performance obligation to design, manufacture, deliver, and install a customized product. Installation and acceptance are integral to the performance obligation and not treated separately. 3) Determine the transaction price: the transaction price is fixed and agreed upon in the contract. As with standard products, the Company does not typically provide significant discounts or experience returns. Variable consideration is estimated and constrained.4) Allocate the transaction price: since the contract includes a single performance obligation, the entire transaction price is allocated to the customized product. 5) Recognize revenue when the performance obligation is satisfied: revenue is recognized at the point only after the product is delivered, installation is completed (if specified), and the customer provides formal acceptance, particularly when substantive acceptance criteria are defined in the contract.
If substantive completion inspection or acceptance clauses are present, revenue recognition is deferred until all such criteria are fulfilled.
Since the contract price and term is fixed and enforceable and assurance-type warranty guarantees the functionality of a product and the warranty is not accounted for as a separate performance obligation, no transaction price is allocated to it. The Company recognizes the full amounts of sales at the point in time as the products are delivered or accepted by the customers according to the acceptance term included in the contract.
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Depending on the nature of the transaction and the Company's role in the transaction, revenue is recognized on either a gross or net basis. Gross Method – Self-Manufactured Products: for sales of products that are designed, developed, and
F-18
manufactured by the Company, revenue is recognized on a gross basis. The Company acts as the principal in these transactions, bearing inventory risk and having control over the product prior to transfer to the customer. Accordingly, the full amount of consideration received from customers is recorded as revenue at the point in time when control of the goods transfers to the customer, typically upon delivery or acceptance, depending on the contract terms. Net Method – Trading Products: for certain trading transactions where the Company procures finished goods from third-party suppliers and resells them to customers without significant modifications or added value, the Company acts as an agent rather than a principal. In these cases, revenue is recognized on a net basis, representing only the amount of the fee or commission that the Company expects to retain. This presentation reflects that the Company does not obtain control of the goods prior to transfer to the customer. Judgment is applied in determining whether the Company is acting as principal or agent based on indicators including inventory risk, discretion in establishing pricing, and primary responsibility for fulfillment.
The determination of whether revenue should be presented gross or net requires careful assessment of the nature of the Company’s performance obligations in each transaction type.
The Company’s revenues by geographic location are summarized below:
|
| For the Years Ended December 31, |
|
| |||||||
|
| 2024 |
|
| 2023 |
| |||||
China revenues |
| $ |
|
| $ |
|
| ||||
Singapore revenues |
|
|
|
|
|
|
| ||||
Total revenues |
| $ |
|
| $ |
|
| ||||
The company’s revenues by timing of revenue recognition are summarized below:
|
| For the Years Ended December 31, |
|
| |||||||
|
| 2024 |
|
| 2023 |
| |||||
At a point in time |
| $ |
|
| $ |
|
| ||||
Over time |
|
| - |
|
|
| - |
|
| ||
Total revenues |
| $ |
|
| $ |
|
| ||||
The Company’s revenues by gross vs net method are summarized below:
|
| For the Years Ended December 31, |
|
| |||||||
|
| 2024 |
|
| 2023 |
| |||||
Gross method |
| $ |
|
| $ |
|
| ||||
Net method |
|
|
|
|
|
|
| ||||
Total revenues |
| $ |
|
| $ |
|
| ||||
The Company’s revenues by revenue streams are summarized below:
|
| For the Years Ended December 31, |
|
| |||||||
|
| 2024 |
|
| 2023 |
| |||||
Customized products |
| $ |
|
| $ |
|
| ||||
Standardized products |
|
|
|
|
|
|
| ||||
Total revenues |
| $ |
|
| $ |
|
| ||||
F-19
Contract liabilities
The Company recognizes a receivable when it has an unconditional right to receive consideration from a customer. The right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due. If revenue has been recognized before the Company has an unconditional right to receive consideration, the amount is presented as a contract asset. The Company recognizes accounts receivable when it completes performance obligation of receiving consideration and it has the unconditional right to receive consideration. As of December 31, 2024 and 2023, the Company did not record contract assets.
Contract liabilities are cash payment received from customers in advance of the Company satisfying performance obligations under contractual arrangements, including those with performance obligations to be at a point in time. Contract liabilities are derecognized when or as revenue is recognized. Due to the generally short-term duration of the relevant contracts, all the performance obligations are expected to be satisfied within one year and are classified as current liabilities. The amount of revenue recognized that was included in the contract liabilities at the beginning of the year were $
Chinese value-added tax (“VAT”)
The products sold in the PRC are subject to a Chinese value-added tax (“VAT”). The products sold to the customers outside of China are not subject to a Chinese VAT. VAT taxes are presented as a reduction of revenue.
Goods and services taxes (“GST”)
The products sold in the Singapore are subject to a goods and services tax (“GST”). The products sold to the customers outside of Singapore are not subject to a GST. GST taxes are presented as a reduction of revenue. The GST is calculated based on gross sales price. GST rate was generally 8% in Singapore, which was further increased to 9% with effect from January 1, 2024. Entities that are GST-registered taxpayers are allowed to offset qualified input GST paid to suppliers against their output GST liabilities. Net GST balance between input GST and output GST is recorded in tax payable.
Inventory and cost of goods sold
Inventory is stated at the lower of cost or net realizable value with cost determined under the moving average method. Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.
The Company’s costs include the amount it pays manufacturers for products, labor costs, lease and utility expenses for factories, tariffs and duties associated with the transporting product and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable.
Research and development expenses
Research and development expenses include salaries and other compensation-related expenses to the Company’s research and product development personnel, and related expenses for the Company’s research and product development team.
Selling expenses
Selling expenses include expenses include salaries and other compensation-related expenses to the Company’s sales personnel and expenses relating to marketing and brand promotion activities.
F-20
General and administrative expenses
General and administrative expenses include salaries and other compensation-related to the Company’s general corporate functions, professional service fee, costs associated with use by these functions of facilities and equipment, such as depreciation expenses, rental and other general corporate related expenses.
Employee benefits
The full-time employees of the Company are entitled to the government mandated defined contribution plan. The Company is required to accrue and pay for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant government regulations, and make cash contributions to the government mandated defined contribution plan. Total expenses for the plans were $
Deferred IPO costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Deferred IPO costs consist of underwriting, legal, accounting and other professional expenses incurred through the balance sheet date that are directly related to the IPO and that will be charged to shareholders equity upon the completion of the IPO. Should the IPO prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations.
Warrants
Upon the closing of IPO in April 2024 and the exercise of over-allotment in April 2024, the Company issued to the lead underwriter warrants for 67,674 Class A ordinary shares and are exercisable on a cashless basis. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB Accounting Standards Codification ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The Company accounts for its warrants as equity that meet all of the criteria (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement), the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance and subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity.
Income taxes
The Company accounts for income taxes in accordance with U.S. GAAP. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is calculated using the balance sheet assets and liabilities method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be utilized with prior net operating loss carried forwards using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be utilized. Current income taxes are provided for in accordance with the laws of the relevant tax authorities.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination,
F-21
income tax are classified as income tax expenses in the period incurred. As of December 31, 2024 and 2023, the Company had unrecognized uncertain tax benefits of $
Noncontrolling interests
Noncontrolling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. The noncontrolling interests are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Noncontrolling interests in the results of the Company are presented on the face of the consolidated statement of operations as an allocation of the total income or loss for the year between non-controlling interest holders and the shareholders of the Company.
Comprehensive (loss) income
Comprehensive (loss) income consists of two components, net (loss) income and other comprehensive (loss) income. Other comprehensive (loss) income refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive (loss) income consists of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
Statutory reserves
Leases
The Company accounts for leases in accordance with ASC 842. The Company entered into certain agreement as a lessor under which it leased its office building for a long-term period (more than 12 months) to the thirty parties. The Company also entered into one agreement as lessee to lease equipment to for one of its subsidiaries ‘operation. If any of the following criteria are met, the Company classifies the lease as a finance lease (as a lessee) or as a direct financing or sales-type lease (both as a lessor):
| · | The lease transfers ownership of the underlying asset to the lessee by the end of the lease term; |
|
|
|
| · | The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise; |
|
|
|
| · | The lease term is for 75% or more of the remaining economic life of the underlying asset, unless the commencement date falls within the last 25% of the economic life of the underlying asset; |
|
|
|
| · | The present value of the sum of the lease payments equals or exceeds 90% of the fair value of the underlying asset; or |
|
|
|
F-22
| · | The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. |
Leases that do not meet any of the above criteria are accounted for as operating leases.
The Company combines lease and non-lease components in its contracts under Topic 842, when permissible.
Lessor
The Company entered into lease agreements as a lessor under which it leased its office building for a long-term period (more than 12 months) to third parties and one lease agreement to a related party. The Company accounts for these leases in accordance with ASC 842. Pursuant to ASC 842-30, a lessor would classify a lease as an operating lease when not of the sales-type lease or direct financing lease classification criteria are met. The Company’s underlying building property was classified as operating lease. The Company will maintain the underlying building asset and recognizes lease income on the straight-line basis over the lease term in other income.
Lessee
The Company entered into lease agreements as lessee to lease equipment from the third party and buildings from the related parties and third parties for its subsidiaries’ operations.
The Company accounts for those equipment leases in accordance with ASC 842. The primary accounting provisions the Company uses to classify transactions as financing leases or operating leases are (i) the lease transfers ownership of the underlying asset to the lessee by the end of the lease term and (ii) the lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise. The equipment leases included those two terms, and the Company believes that the equipment leases should be classified as finance leases.
The Company accounts for those building leases in accordance with ASC 842. The Company believes that the building leases agreements do not contain nor meet any of the five primary accounting provisions the Company uses to classify transactions as finance leases. The building leases are classified as operating leases.
Finance and operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value of lease payments generally include periods covered by options to extend, or renew the lease, as the Company has reasonable certainty at lease inception that these options will be exercised, and periods covered by options to terminate the lease, as the Company has reasonable certainty at lease inception that these options will not be exercised. The Company generally considers the economic life of its finance or operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The finance or operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognizes the finance leases ROU assets and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on an accretion basis as amortization expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate of the office equipment on the remaining balance of the liability.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows
F-23
of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and includes the associated operating lease payments in the undiscounted future pre-tax cash flows. For the years ended December 31, 2024 and 2023, the Company did not recognize impairment loss on its finance and operating lease ROU assets.
Related party transactions
A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the company’s securities (ii) the Company’s management and or their immediate family, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities. Transactions involving related parties cannot be presumed to be carried out on an arm’s –length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
(Loss) earnings per share
(Loss) earnings per share (“EPS”) is computed by dividing net (loss) income attribute to the ordinary shareholders by the weighted average number of ordinary shares outstanding. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the years ended December 31, 2024 and 2023, there were no dilutive shares.
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024 for public business entities, and December 15, 2025 for entities other than public business entities. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company has evaluated that the potential impact of adopting this new guidance on its consolidated financial statements and considered the adoption will result in the required additional disclosures being included in the Group's consolidated financial statements.
In November 2024, the FASB issued Accounting Standards Update 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). The objective of ASU 2024-03 is to improve disclosures about a public entity’s expenses, primarily through additional disaggregation of income statement expenses. In January 2025, the FASB further clarified the effective date of ASU 2024-03 with the issuance of Accounting Standards Update 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2025-01”). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and may be applied either on a prospective or retrospective basis. The Company is currently evaluating the impact ASU 2024-03 will have on its financial statement disclosures.
F-24
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of operations and comprehensive (loss) income and statements of cash flows.
Note 3 – Accounts and notes receivable, net
|
| As of |
|
| As of |
| ||
|
| December 31, |
|
| December 31, |
| ||
| 2024 |
|
| 2023 |
| |||
|
|
|
|
|
|
| ||
Accounts receivable |
| $ |
|
| $ |
| ||
Notes receivable |
|
|
|
|
|
| ||
Allowance for credit losses |
|
| ( |
|
|
| ( |
|
Total accounts and notes receivable, net |
| $ |
|
| $ |
| ||
Movements of allowance for credit losses of accounts and notes receivables are as follows:
|
| For the Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ |
|
| $ |
| ||
Addition |
|
|
|
|
|
| ||
Exchange rate effect |
|
| ( |
|
|
| ( |
|
Ending balance |
| $ |
|
| $ |
| ||
Note 4 – Other receivables and other current assets, net
|
| As of |
|
| As of |
| ||
|
| December 31, |
|
| December 31, |
| ||
| 2024 |
|
| 2023 |
| |||
Due from third parties |
| $ |
|
| $ |
| ||
Deductible value-added tax |
|
|
|
|
|
| ||
Refundable deposits |
|
|
|
|
|
| ||
Allowance for credit losses |
|
| ( |
|
|
| ( |
|
Total other receivables and other current assets, net |
| $ |
|
| $ |
| ||
Movements of allowance for credit losses of other receivables and other current assets are as follows:
|
| For the Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ |
|
| $ |
| ||
Addition |
|
|
|
|
|
| ||
Exchange rate effect |
|
| ( |
|
|
| ( | ) |
Ending balance |
| $ |
|
| $ |
| ||
F-25
Note 5 – Inventories, net
As of December 31, 2024 |
|
| As of December 31, 2023 | |||
|
|
|
|
| ||
Raw materials | $ |
|
| $ | ||
Finished goods |
|
|
|
| ||
Work in process |
|
|
|
| ||
Subtotal | $ |
|
| $ | ||
Less: impairment loss |
| ( |
|
|
| ( |
Total inventories, net | $ |
|
| $ | ||
The Company recorded $
Note 6 – Prepayment for land use right
During the year ended December 31, 2024, the Company made a payment of $
Note 7 – Long-term investment
The Company’s subsidiary, Qingdao Intelligent, signed a long-term investment agreement with Qingdao Hangtianhuineng Dynamical System Co., Ltd. (“Hangtianhuineng”) on March 29, 2021, under which it will invest RMB
Note 8 – Property and equipment, net
Property and equipment, net consist of the following:
|
| As of |
|
| As of |
| ||
|
| December 31, |
|
| December 31, |
| ||
| 2024 |
|
| 2023 |
| |||
|
|
|
|
|
|
| ||
Buildings |
| $ |
|
| $ |
| ||
Office equipment |
|
|
|
|
|
| ||
Operation equipment |
|
|
|
|
|
| ||
Subtotal |
|
|
|
|
|
| ||
Less: accumulated depreciation |
|
| ( |
|
|
| ( |
|
Total |
| $ |
|
| $ |
| ||
Depreciation expense for the years ended December 31, 2024 and 2023 amounted to $
F-26
As of December 31, 2024 and 2023, the information of the Company’s buildings, which were pledged as collateral under a maximum mortgage agreement, is as below:
| Asset Category | Gross Amount | Accumulated Depreciation | Net Book Value | Useful Life | Method |
2024-12-31 | Buildings | ( | 20 years | Straight line | ||
2023-12-31 | Buildings | ( | 20 years | Straight line |
Note 9 – Intangible assets, net
Intangible assets consisted of the following:
|
| As of December 31, 2024 |
|
| As of December 31, 2023 |
| ||
|
|
|
|
|
|
| ||
Land use rights* |
| $ |
|
| $ |
| ||
Software |
|
|
|
|
|
| ||
Technology knowhow |
|
|
|
|
|
| ||
Less: Accumulated amortization |
|
| ( |
|
|
| ( |
|
Total intangible assets, net |
| $ |
|
| $ |
| ||
The land use rights granted to the Company are amortized using the straight-line method over a term of fifty years.
The Company’s subsidiary, Tongri Electric, has obtained the right to use two parcels of land for its factories from the Qingdao local government for 50 years. The land use rights are to expire in the years 2055 and 2062. The acquisition costs of the land use rights were amortized with the building over 50 years. The use of land will be based on the specific requirement by the local government who has the right to direct how and for what purpose the land is used.
Amortization expense for the years ended December 31, 2024 and 2023 amounted to $
The following table sets forth the Company’s amortization expense for the next five years ending as of December 31, 2024:
| Amortization |
| ||
|
| expenses |
| |
Twelve months ending December 31, 2025 |
| $ |
| |
Twelve months ending December 31, 2026 |
|
|
| |
Twelve months ending December 31, 2027 |
|
|
| |
Twelve months ending December 31, 2028 |
|
|
| |
Twelve months ending December 31, 2029 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
F-27
As of December 31, 2024 and 2023, the Company’s land information which were pledged as collateral under a maximum mortgage agreement as below:
| Asset Category | Gross Amount | Accumulated Depreciation | Net Book Value | Useful Life | Method |
2024-12-31 | Land | ( | 50 years | Straight line | ||
2023-12-31 | Land | ( | 50 years | Straight line |
Note 10 – Credit facilitates
Banking facilities
Outstanding balance of banking facilities consisted of the following:
Lender |
| Term |
| Interest rate |
| Collateral/Guarantee |
| As of December 31, 2024 |
|
| As of December 31, 2023 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
United Overseas Bank Limited (“UOB”) |
|
|
|
| $ |
|
| $ |
| |||||
DBS Bank, Ltd. (“DBS”) |
|
|
|
|
|
|
|
|
| |||||
F-28
Standard Chartered Bank |
|
|
|
|
|
|
|
|
| |||||
Total |
|
|
|
|
|
|
|
|
|
|
|
| ||
Total current portion of banking facilities |
|
|
|
|
|
|
|
| ( |
|
|
| ( |
|
Total noncurrent portion of banking facilities |
|
|
|
|
|
|
| $ |
|
| $ |
|
Interest expense pertaining to the above loans for the years ended December 31, 2024 and 2023 amounted to $
F-29
Note 11 – Accrued expenses and other payables
|
| As of December 31, 2024 |
|
| As of December 31, 2023 |
| ||
|
|
|
|
|
|
| ||
Accrued expenses (i) |
| $ |
|
| $ |
| ||
Accrued payroll |
|
|
|
|
|
| ||
Estimated warranty liabilities (ii) |
|
|
|
|
|
| ||
Intercourse funds payable (iii) |
|
|
|
|
|
| ||
Total accrued expenses and other payables |
| $ |
|
| $ |
| ||
(i) | Accrued expenses |
The balance of accrued expenses represented amount due to third parties service providers which include marketing consulting service, IT related professional service, legal, audit and accounting fees, and other miscellaneous office related expenses.
(ii) | Estimated warranty liabilities |
The assurance-type warranties are accounted for as warranty obligations and are accrued in accordance with ASC 460-10, which details the accounting for guarantees. The warranty liability estimate is based on the average historical defect and replacement rate of each major product category and multiplied by the total sale amount of the category for each year.
(iii) | Intercourse funds payable |
The intercourse funds payable are those nontrade payables arising from transactions between the Company and certain third parties, such as related deposits and outstanding payment for a vehicle. Intercourse funds payable are due on demand.
F-30
Note 12 – Related party balances and transactions
The table below sets forth the major related parties which have balances or transactions during the years presented and their relationships with the Company:
Name of related parties | Relationship with the Company |
FDT (Qingdao) Intellectual Technology Co., Ltd | |
Tungray (Kunshan) Industrial Automation Co., Ltd | |
Tungray (Kunshan) Robot Intelligent Technology Co., Ltd | |
Qingdao Tungray Technology Development Co., Ltd. | |
Shanghai Tongrui Investment Management Co., Ltd. | |
Hefei CAS Dihuge Automation Co. Ltd | |
Kunshan Tungray Intelligent Technology Co., Ltd. | |
Qingdao Tungray Biology Technology Co., Ltd. | |
Shanghai Tongrui Industrial Automation Equipment Co., Ltd | |
Wanjun Yao | |
Jingan Tang | |
Liling Du | |
Gang Wang | |
Demin Han | |
Lei Yao | |
Mingxing Gao |
Related party balances
Account Receivable – related parties
Name of Related Party |
| As of December 31, 2024 |
| As of December 31, 2023 |
| ||
|
|
|
|
|
| ||
FDT (Qingdao) Intellectual Technology Co., Ltd |
| $ |
| $ |
| ||
Tungray (Kunshan) Industrial Automation Co., Ltd |
|
|
|
|
| ||
Tungray (Kunshan) Robot Intelligent Technology Co., Ltd |
|
|
|
|
| ||
Kunshan Tungray Intelligent Technology Co., Ltd. |
|
|
|
|
| ||
Total |
| $ |
| $ |
| ||
F-31
Account payable, related parties
Name of Related Party |
| As of December 31, 2024 |
| As of December 31, 2023 |
| ||
|
|
|
|
|
| ||
FDT (Qingdao) Intellectual Technology Co., Ltd. |
| $ |
| $ |
| ||
Qingdao Tungray Technology Development Co., Ltd. |
|
|
|
|
| ||
Shanghai Tongrui Industrial Automation Equipment Co., Ltd |
|
|
|
|
| ||
Shanghai Tongrui Investment Management Co., Ltd. |
|
|
|
|
| ||
Kunshan Tungray Intelligent Technology Co., Ltd. |
|
|
|
|
| ||
Hefei CAS Dihuge Automation Co., Ltd. |
|
|
|
|
| ||
Total |
| $ |
| $ |
| ||
Other receivables – related parties
Other receivables – related parties are those nontrade receivables arising from transactions between the Company and certain related parties, such as advances made by the Company on behalf of related parties, and advance to related parties. These balances are unsecured and non-interest bearing. Current receivables are due on demand.
Name of Related Party |
|
| As of December 31, 2024 |
| As of December 31, 2023 | ||
Qingdao Tungray Biology Technology Co., Ltd. |
|
| $ |
| $ | ||
FDT (Qingdao) Intellectual Technology Co., Ltd |
|
|
|
|
| ||
Du Liling |
|
|
|
|
| ||
Total |
|
| $ |
| $ | ||
F-32
Other payable– related parties
Other payables – related parties are those nontrade payables arising from transactions between the Company and certain related parties, such as advances made by the related party on behalf of the Company, dividend payables and related accrued interest payable on the advances. These balances are unsecured and non-interest bearing. Current payables are due on demand.
Name of Related Party |
| As of December 31, 2024 |
| As of December 31, 2023 | ||
FDT (Qingdao) Intellectual Technology Co., Ltd |
| $ |
| $ | ||
Tungray (Kunshan) Industrial Automation Co., Ltd. |
|
|
|
| ||
Qingdao Tungray Technology Development Co., Ltd. |
|
|
|
| ||
Jingan Tang |
|
|
|
| ||
Liling Du |
|
|
|
| ||
Gang Wang |
|
|
|
| ||
Demin Han |
|
|
|
| ||
Lei Yao |
|
|
|
| ||
Mingxing Gao |
|
|
|
| ||
Total |
| $ |
| $ | ||
Prepayment-related parties
Name of Related Party |
| As of December 31, 2024 |
| As of December 31, 2023 | ||
|
|
|
|
| ||
Shanghai Tongrui Investment Management Co., Ltd. |
| $ |
| $ | ||
FDT (Qingdao) Intellectual Technology Co., Ltd |
|
|
|
| ||
Tungray (Kunshan) Robot Intelligent Technology Co., Ltd |
|
|
|
| ||
Qingdao Tungray Technology Development Co., Ltd. |
|
|
|
| ||
Tungray (Kunshan) Industrial Automation Co., Ltd. |
|
|
|
| ||
Provision of doubtful accounts |
|
| ( |
|
| |
Total |
| $ |
| $ | ||
F-33
Movements of provision of doubtful accounts of prepayments-related parties are as follows:
|
| For the Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ | |
|
|
| |
|
Addition |
|
| |
|
|
| - |
|
Exchange rate effect |
|
| ( |
|
|
| - |
|
Ending balance |
| $ | |
|
|
| |
|
Operating lease liabilities- related parties
The Company entered into three lease agreements as a lessee under which it leased three operation buildings for 5-7 years from two related parties. The Company accounts for the leases in accordance with ASC 842. The Company’s underlying building properties were classified as operating leases, and the related lease liabilities were recorded under operating lease liabilities – related parties (see Note 17).
Name of Related Party |
| As of December 31, 2024 |
| As of December 31, 2023 | ||
|
|
|
|
| ||
Tungray (Qingdao) Technology Development Co., Ltd |
| $ |
| $ | ||
Jingan Tang |
|
|
|
| ||
Total |
|
|
|
| ||
Current portion of operating lease liabilities - related parties |
|
| ( |
|
| ( |
Noncurrent portion of operating lease liabilities - related parties |
| $ |
| $ | ||
Related party transactions
Revenue from related parties
|
|
| For the Years Ended December 31, |
| |||||||
Name of Related Party | Nature |
| 2024 |
|
| 2023 |
|
| |||
|
|
|
|
|
|
|
|
| |||
Tungray (Kunshan) Industrial Automation Co., Ltd. | Sales of products |
| $ |
|
| $ |
|
| |||
Tungray (Kunshan) Robot Intelligent Technology Co., Ltd. | Sales of products |
|
|
|
|
|
|
| |||
FDT (Qingdao) Intellectual Technology Co., Ltd. | Sales of products |
|
|
|
|
|
|
| |||
Kunshan Tungray Intelligent Technology Co., Ltd. | Sales of products |
|
|
|
|
|
|
| |||
Total |
|
| $ |
|
| $ |
|
| |||
F-34
Purchase from related parties
|
|
|
|
| For the Years Ended December 31, | |||||
Name of Related Party |
| Nature |
|
| 2024 |
|
| 2023 | ||
FDT (Qingdao) Intellectual Technology Co., Ltd. |
| Products and services purchase |
|
| $ |
|
| $ | ||
Tungray (Kunshan) Industrial Automation Co., Ltd. |
| Products and services purchase |
|
|
|
|
|
| ||
Total |
|
|
|
| $ |
|
| $ | ||
Non-operating income- related parties
|
|
|
|
|
| For the Years Ended December 31, | |||||
Name of Related Party |
| Nature |
|
|
| 2024 |
|
| 2023 | ||
Qingdao Tungray Biology Technology Co., Ltd |
| Lease income |
|
|
| $ |
|
| $ | ||
Rental expenses- related parties
|
|
|
|
|
| For the Years Ended December 31, |
| ||||||
Name of Related Party |
|
| Nature |
|
| 2024 |
|
| 2023 |
|
| ||
Qingdao Tungray Technology Development Co., Ltd |
|
| Lease expense |
|
| $ |
|
| $ |
|
| ||
Jingan Tang |
|
| Lease expense |
|
|
|
|
|
|
|
| ||
Total |
|
|
|
|
| $ |
|
| $ |
|
| ||
Advances to related parties
|
|
|
|
|
| For the Years Ended December 31, |
| ||||||
Name of Related Party |
|
| Nature |
|
| 2024 |
|
| 2023 |
|
| ||
Qingdao Tungray Biology Technology Co., Ltd. |
|
| Cash advance |
|
| $ |
|
| $ |
|
| ||
Shanghai Tongrui Investment Management Co., Ltd. |
|
| Cash advance |
|
|
|
|
|
|
|
| ||
FDT (Qingdao) Intellectual Technology Co., Ltd. |
|
| Cash advance |
|
|
|
|
|
|
|
| ||
Liling Du |
|
| Cash advance |
|
|
|
|
|
|
|
| ||
Total |
|
|
|
|
| $ |
|
| $ |
|
| ||
F-35
Borrowings from related parties
|
|
|
|
|
| For the Years Ended December 31, |
| ||||||
Name of Related Party |
|
| Nature |
|
| 2024 |
|
| 2023 |
|
| ||
FDT (Qingdao) Intellectual Technology Co., Ltd. |
|
| Borrowings |
|
| $ |
|
| $ |
|
| ||
Kunshan Tungray Intelligent Technology Co., Ltd. |
|
| Borrowings |
|
|
|
|
|
|
|
| ||
Demin Han |
|
| Borrowings |
|
|
|
|
|
|
|
| ||
Lei Yao |
|
| Borrowings |
|
|
|
|
|
|
|
| ||
Jingan Tang |
|
| Borrowings |
|
|
|
|
|
|
|
| ||
Total |
|
|
|
|
| $ |
|
| $ |
|
| ||
Note 13 –Equity
Ordinary shares
Tungray was incorporated under the laws of Cayman Islands on June 1, 2022. As of June 1, 2022, the authorized shares capital of Tungray was USD
On April 18, 2024, the Company completed its IPO of
In connection with the IPO, the Company granted US Tiger, the sole book-running manager, a 45-day option to purchase up to an additional 187,500 Class A ordinary shares at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any. On April 30, 2024, US Tiger partially exercised this option, purchasing an additional
As of December 31, 2024,
Warrants
On April 23, 2024 and April 30, 2024, the Company issued
F-36
In accordance with ASC 815, the Company determined that the warrants meet the conditions necessary to be classified as equity because the consideration is indexed to the Company’s own equity, there are no exercise contingencies based on an observable market not based on its stock or operations, settlement is consistent with a fixed-for-fixed equity instrument, the agreement contains an explicit number of shares and there are no cash payment provisions.
The fair value of the warrants was estimated at $
The following table provides quantitative information regarding Level 3 fair value measurements inputs for the Company’s warrants at their measurement dates:
|
|
| April 23, 2024 |
|
Exercise price |
| $ |
| |
Stock price |
| $ |
| |
Expected life of the warrants (years) |
|
|
| |
Risk free rate |
|
|
| |
Dividend yield |
|
|
| |
Volatility |
|
|
|
The following table summarizes the Company’s activities and status of the warrants:
| Number of warrants |
| Weighted average exercise price |
| Weighted average remaining term (years) |
|
Outstanding as of December 31, 2023 |
|
| - |
| ||
Issued | $ |
|
| |||
Exercised | - |
| - |
| - |
|
Forfeited or expired | - |
| - |
| - |
|
Outstanding as of December 31, 2024 | $ |
|
|
Statutory reserves
The PRC entities are required to set aside at least
F-37
company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange. During the years ended December 31, 2024 and 2023, the PRC entities collectively attributed $
Restricted assets
The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws and regulations permit payments of dividends by the PRC Entities only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the PRC entities.
As a result of the foregoing restrictions, the PRC entities are restricted in their ability to transfer their assets to the Company. Foreign exchange and other regulations in the PRC may further restrict the PRC entities from transferring funds to the Company in the form of dividends, loans and advances. As of December 31, 2024 and 2023, amounts restricted are paid-in-capital and statutory reserve of the PRC entities, which amounted to $
Note 14 – (Loss) earnings per share
The following table sets forth the computation of basic and diluted (loss) earnings per share for the fiscal years ended December 31, 2024 and 2023:
|
| For the Years Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Tungray Technologies Inc’s shareholders | $ | ( |
| $ |
|
|
| |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
(Loss) earnings per share |
|
|
|
|
|
|
|
|
Basic and diluted |
| ( |
|
|
|
|
| |
For the year ended December 31, 2024, the
Note 15 – Income taxes
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, no Cayman Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.
British Virgin Islands
Tungray Motion BVI, Tungray Electronics BVI and Tungray Intelligent BVI are incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.
F-38
Singapore
The Company’s subsidiaries incorporated in Singapore and are subject to Singapore Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Singapore tax laws. The applicable tax rate is 17% in Singapore, with 75% of the first approximately $7,500 (SGD 10,000) taxable income and 50% of the next approximately $142,000 (SGD 190,000) taxable income are exempted from income tax.
PRC
The Company’s subsidiaries incorporated in the PRC are governed by the income tax laws of the PRC and the income tax provisions in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified
The components of the Company’s income tax provision were as follows for the years indicated:
|
| For the Years Ended December 31, |
|
| |||||||
|
| 2024 |
|
| 2023 |
|
|
| |||
|
|
|
|
|
|
|
|
| |||
Current |
| $ |
|
| $ |
|
|
| |||
Deferred |
|
|
|
|
|
|
|
| |||
Total income tax provision |
| $ |
|
| $ |
|
|
| |||
(Loss) income before provision for income taxes is attributable to the following geographic locations for the years indicated:
|
| For the Years Ended December 31, | ||||||||
|
| 2024 |
|
| 2023 |
|
|
| ||
|
|
|
|
|
|
|
|
| ||
Singapore |
| $ |
|
| $ |
|
|
| ||
PRC |
|
| ( |
|
|
| ( |
|
|
|
Cayman |
|
| ( |
|
|
|
|
|
| |
Total (loss) income before income taxes |
| $ | ( |
|
| $ |
|
|
| |
F-39
The following table reconciles Singapore statutory rates to the Company’s effective tax rate:
| For the Years Ended December 31, | ||||
2024 |
| 2023 | |||
|
|
|
| ||
Computed tax expense with statutory tax rate |
|
|
| ||
Tax rebate in Singapore |
|
|
| - | |
Additional R&D deduction |
|
|
| - | |
Permanent difference |
| - |
|
| |
Change in valuation allowance |
| - |
|
| |
Impact of different tax rates in other jurisdictions |
|
|
| - | |
Effect of preferential tax rates |
| - |
|
| |
Effect of true-up on NOL |
|
|
| ||
Interest on uncertain tax position |
| - |
|
| |
Effective tax rate |
| - |
|
| |
| (1) | Permanent differences mainly consisted of expenses which are non-deductible and income exemption under local tax laws. |
The following table sets forth the significant components of the deferred tax assets and liabilities of the Company as of:
|
| As of |
|
| As of | ||
|
| December 31, |
|
| December 31, | ||
| 2024 |
|
| 2023 | |||
|
|
|
|
|
| ||
Deferred tax assets |
|
|
|
|
|
|
|
Net operating loss carry forwards |
| $ |
|
| $ | ||
Bad debt allowance |
|
|
|
|
| ||
Inventory provision |
|
|
|
|
| ||
Unpaid accrued bonus |
|
|
|
|
| ||
Lease liabilities |
|
|
|
|
| ||
Total deferred tax assets |
|
|
|
|
| ||
Less: Valuation allowance |
|
| ( |
|
|
| ( |
Net deferred tax assets |
|
|
|
|
| ||
F-40
|
| As of |
|
| As of | ||
|
| December 31, |
|
| December 31, | ||
| 2024 |
|
| 2023 | |||
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
Property and equipment |
|
| ( |
|
|
| ( |
Right-of-use assets |
|
| ( |
|
|
| ( |
Total deferred tax liabilities |
|
| ( |
|
|
| ( |
Total deferred tax assets, net |
|
|
|
|
| ||
The roll-forward of valuation allowance of deferred tax assets were as follows:
|
| For the Years Ended December 31, | |||||
|
| 2024 |
|
| 2023 | ||
|
|
|
|
|
| ||
Balance at beginning of the year |
| $ | |
|
| $ | |
Additions |
|
| |
|
|
| |
Utilization |
|
| ( |
|
|
| |
Reversal |
|
| |
|
|
| ( |
Exchange rate effect |
|
| ( |
|
|
| ( |
Balance at end of the year |
| $ | |
|
| $ | |
According to PRC tax regulations, the PRC enterprise net operating loss can generally carry forward for no longer than five years, and HNTE’s net operating losses can be carried forward for no more than 10 years, starting from the year subsequent to the year in which the loss was incurred. Carryback of losses is not permitted. The Company will re-apply for the HNTE certificate when the prior certificate expires in the foreseeable future.
Total net operating losses (NOLs) carryforwards of the Company’s subsidiaries in mainland China are $
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2024 and 2023, the Company had unrecognized uncertain tax benefits of $
The Company recognizes accrued interest related to unrecognized tax benefits in income tax expenses. For the years ended December 31, 2024 and 2023, the Company had accrued interest of $
As of December 31, 2024, the tax years ended December 31, 2019 through 2023 for the Company’s subsidiaries in the PRC are generally subject to examination by the PRC tax authorities. The tax years ended December 31, 2019 through 2023 for the Company’s subsidiaries in the Singapore is generally subject to examination by the Singapore tax authorities.
Taxes payable consist of the following:
F-41
| As of December 31, 2024 |
|
| As of December 31, 2023 |
| |||
|
|
|
|
|
|
| ||
Income tax payable |
| $ |
|
| $ |
| ||
VAT payable |
|
|
|
|
|
| ||
Other tax payable |
|
|
|
|
|
| ||
Totals |
| $ |
|
| $ |
| ||
Note 16 – Concentrations of risks
(a) Major customers
For the year ended December 31, 2024,
As of December 31, 2024,
(b) Major vendors
For the years ended December 31, 2024 and 2023,
As of December 31, 2024,
(c) Credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. In China, the insurance coverage for cash deposits of each bank is RMB 500,000. As of December 31, 2024, cash balance of RMB 8,114,184 ($1,111,639) was deposited with financial institutions located in China. The Singapore Deposit Insurance Corporation Limited (SDIC) insures deposits in a Deposit Insurance (DI) Scheme member bank or finance company up to approximately $57,000 (SGD 75,000) per account. As of December 31, 2024, the Company had cash balance of SGD 7,920,617 ($5,797,553) was maintained at DI Scheme banks in Singapore. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.
The Company is also exposed to risk from its accounts and notes receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable amounts which have been determined by reference to past default experience and the current economic environment.
(d) Foreign currency exchange rate risk
Tongri Electric, Qingdao Tungray Intelligent and Tungray Industrial have operations, and their functional currency is RMB. Tungray Singapore and Tung Resource have operations and their functional currency is SGD. As a result, the Company is exposed to foreign exchange risk as the Company’s results of operations may be affected by fluctuations in the exchange rate between USD and RMB/SGD. If the RMB/SGD depreciates against the USD, the value of the
F-42
Company’s RMB/SGD revenues, earnings, and assets as expressed in the Company’s USD financial statements will decline. The Company has not entered any hedging transactions in an effort to reduce the Company’s exposure to foreign exchange risk.
Note 17 – Leases
Lessor
The Company’s subsidiary in Qingdao entered into a lease agreement as a lessor under which it leased its building for
Lessee
Equipment leases- third parties
One of the Company’s subsidiaries in PRC had one operation equipment leases which were classified as finance lease in accordance with ASC 842. This finance lease would expire in February 2025. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company recognized the finance leases ROU assets and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on an accretion basis as amortization expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate of the equipment on the remaining balance of the liability.
The ROU assets and lease liabilities are determined based on the present value of the future minimum rental payments of the lease as of the adoption date, using an effective interest rate of
Finance lease expenses are as follows:
|
| For the Years Ended December 31, | |||||||
| 2024 |
|
| 2023 |
|
| |||
|
|
|
|
|
|
|
| ||
Amortization of leased asset |
| $ |
|
| $ |
|
| ||
Interest on lease liabilities |
|
|
|
|
|
|
| ||
Total income before income taxes |
| $ |
|
| $ |
|
| ||
F-43
Supplemental cash flow information related to finance leases are as follows:
|
|
|
| For the Years Ended December 31, | |||
|
|
|
| 2024 |
|
| 2023 |
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities |
|
| $ |
| $ | ||
Right-of-use assets obtained in exchange for finance lease liabilities |
|
|
|
|
| ||
Weighted-average remaining term and discount rate related to finance leases were as follows:
|
| As of December 31, 2024 |
|
| As of December 31, 2023 |
| ||
|
|
|
|
|
|
| ||
Weighted-average remaining term in number of months |
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
| |
Weighted-average discount rate |
|
|
|
|
|
|
|
|
Finance leases |
|
| % |
|
|
|
| |
Building leases – related parties and third parties
The Company entered related-party or third-party operating leases for building leases.
The Company accounts for those building leases in accordance with ASC 842. The Company believes that the building leases agreements do not contain nor meet any of the five primary accounting provisions the Company uses to classify transactions as finance leases. The building leases are classified as operating leases.
Those building leases were classified as operating at inception of the leases. Operating leases result in recognition of ROU assets and lease liabilities on the balance sheet. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease terms of the adoption date of January 1, 2020 or commencement date, whichever is earlier. The leases did not provide an explicit or implicit rate of return, the Company determined incremental borrowing rate based on the local banks in PRC at the commencement date in determining the present value of lease payments on the individual lease basis. The incremental borrowing rate for a lease was the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term. The lease does not contain any residual value guarantees or material restrictive covenants. Lease expense for the lease is recognized on the straight-line basis over the lease term which this Company estimated to be
For the purchased operation building, the Company does not have the property right, and it can only use the property for
F-44
an explicit or implicit rate of return, the Company determined incremental borrowing rate based on the local banks in PRC at the commencement date in determining the present value of lease payments on the individual lease basis. The incremental borrowing rate for a lease was the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms. The lease does not contain any residual value guarantees or material restrictive covenants. Lease expense for the lease is recognized on the straight-line basis over the lease term which this Company estimated to be
Operating lease expenses consist of the following:
|
|
|
| For the Years Ended December 31, | |||||
| Classification |
| 2024 |
|
| 2023 | |||
|
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
|
|
|
|
Amortization of leased asset |
|
|
| $ |
|
| $ | ||
Interest on lease liabilities |
| Other expense - Rental expenses |
|
|
|
|
| ||
Total lease expenses |
|
|
| $ |
|
| $ | ||
There are no short-term lease expenses for the years ended December 31, 2024 and 2023.
Supplemental cash flow information related to operating leases are as follows:
|
|
|
| For the Years Ended December 31,
| ||||
|
|
|
| 2024 |
|
| 2023 |
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities |
|
| $ |
| $ |
| ||
Right-of-use assets obtained in exchange for operating lease liabilities |
|
|
|
|
|
| ||
Weighted-average remaining term and discount rate related to operating leases were as follows:
|
| As of |
|
| As of | ||
| December 31, 2024 |
|
| December 31, 2023 | |||
|
|
|
|
|
| ||
Weighted-average remaining term in number of months |
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
| ||
Weighted-average discount rate |
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
| ||
F-45
The following table sets forth the Company’s minimum lease payments in future periods as of December 31, 2024 for both operating lease and financing lease:
|
| Lease payments | |
Twelve months ending December 31, 2025 |
| $ | |
Twelve months ending December 31, 2026 |
|
| |
Twelve months ending December 31, 2027 |
|
| |
Twelve months ending December 31, 2028 |
|
| |
Twelve months ending December 31, 2029 |
|
| |
Total lease payments |
|
| |
Less: discount |
|
| ( |
Present value of lease liabilities |
|
| |
Current lease liabilities |
|
| ( |
Noncurrent lease liabilities |
| $ | |
Note 18 – Commitments and contingencies
Contingencies
Legal
From time to time, the Company is party to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements. Subsequent to the reporting period, a litigation has arisen, the details of which are disclosed in Note 19.
Note 19 – Subsequent events
The Company has evaluated the impact of events that have occurred subsequent to December 31, 2024, through the issuance date of the consolidated financial statement and concluded that no material subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements, except as disclosed below.
Putative Class Action
On August 7, 2025, Mohammed Alshubrumi (the “Plaintiff”), on behalf of himself and those similarly situated, brought a putative class action (the “Action”) before the New York Supreme Court, against the Company, Wanjun Yao, its Chairman, CEO and Director, Alex Gong, its former Chief Financial Officer, and the representative of the underwriters of the Company’s IPO, alleging that the financial statements disclosed in the Company’s registration statement and prospectus relating to the IPO were materially false in violations of Sections 11 and 15 of the Securities Act. The Plaintiff sought statutory damages and injunctive relief under the Securities Act. The Company denies any and all wrongdoing alleged in the Action, and intends to vigorously defend itself in the Action.
F-46
As the case is currently at an early stage of legal proceedings, the Company does not expect this matter to have a material impact on its operations or consolidated financial statements.
Note 20 – Condensed financial information of the parent company
The Company performed a test on the restricted net assets of the consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company.
The subsidiary did not pay any dividend to the Company for the years presented. For the purpose of presenting parent-only financial information, the Company records its investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income of the subsidiary is presented as “share of income of subsidiary”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.
The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2024 and 2023.
PARENT COMPANY BALANCE SHEETS
|
| As of |
|
| As of | ||
| December 31, 2024 |
|
| December 31, 2023 | |||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
Cash |
| $ |
|
| $ | ||
Restricted cash |
|
|
|
|
| ||
Prepayments, net |
|
|
|
|
| ||
Other receivables and other current assets, net |
|
|
|
|
| ||
Loans to subsidiaries |
|
|
|
|
| ||
Total current assets |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
Investment in subsidiary |
|
|
|
|
| ||
Total non-current assets |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Class A ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 11,793,485 and 10,440,000 shares issued and outstanding as of December 31, 2024 and 2023, respectively |
|
|
|
|
| ||
Class B ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 4,560,000 shares issued and outstanding as of December 31, 2024 and 2023 |
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
| ||
Retained earnings |
|
|
|
|
| ||
Accumulated other comprehensive loss |
|
| ( |
|
|
| ( |
Total shareholders’ equity |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
| $ |
|
| $ | ||
F-47
PARENT COMPANY STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
| For the Years Ended December 31, | ||||||
| 2024 |
|
| 2023 |
| |||
|
|
|
|
|
|
| ||
OTHER (EXPENSE) INCOME |
|
|
|
|
|
|
|
|
General and administrative expenses |
| $ | ( |
|
| $ |
| |
Other income, net |
|
|
|
|
|
| ||
Equity (loss) income of subsidiaries |
|
| ( |
|
|
|
| |
Total other (loss) income, net |
|
| ( |
|
|
|
| |
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME |
|
| ( |
|
|
|
| |
FOREIGN CURRENCY TRANSLATION ADJUSTMENT |
|
| ( |
|
|
|
| |
COMPREHENSIVE (LOSS) INCOME |
| $ | ( |
|
| $ |
| |
PARENT COMPANY STATEMENTS OF CASH FLOWS
|
| For the Years Ended December 31, | ||||||
| 2024 |
|
| 2023 |
| |||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | ( |
|
| $ |
| |
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Equity loss (income) of subsidiaries |
|
|
|
|
| ( |
| |
Changes in prepayments and other receivables |
|
| ( |
|
|
|
| |
Net cash used in operating activities |
|
| ( |
|
|
|
| |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Loans to subsidiaries |
|
| ( |
|
|
|
| |
Net cash used in investing activities |
|
| ( |
|
|
|
| |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of shares upon IPO |
|
|
|
|
|
| ||
Proceeds from issuance of shares pursuant to exercise of over-allotment |
|
|
|
|
|
| ||
Payments of initial public offering costs |
|
| ( |
|
|
|
| |
Repayments to subsidiaries |
|
| ( |
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and restricted cash |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Changes in cash and restricted cash |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash and restricted cash, beginning of year |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash and restricted cash, end of year |
| $ |
|
| $ |
| ||
Cash |
|
|
|
|
|
| ||
Restricted cash |
|
|
|
|
|
| ||
F-48